Rates Action Group v City of Cape Town

• Jurisdiction: South Africa
• Judge: Moosa J and Budlender AJ
• Judgment Date: 22 June 2004
• Citation: 2004 (5) SA 545 (C)
• Docket Number: 10295/03
• Hearing Date: 24 May 2004
• Counsel: J L Abel for the applicant. A G Binns-Ward SC (with A M Breitenbach) for the respondent.
• Court: Cape Provincial Division

Budlender AJ: I

Introduction

[1] The applicant is a voluntary association that represents a number of ratepayer associations in the southern suburbs and Atlantic seaboard areas of Cape Town. The respondent is the City of Cape Town, which is an organ of state in the local sphere of government constituted in terms J

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of chap 2 of the Local Government: Municipal Structures Act 117 of 1998 (the Structures Act). I refer to the respondent as the A City.

[2] The cause of this application is the moneys which the City levied in the 2002/3 financial year, and then in the 2003/4 financial year, in respect of the sewerage services and refuse removal services which it provides. In this judgment, I use the term 'charge' to describe the moneys which ratepayers and residents are required to pay. B One of the issues in this case is the meaning of words such as 'rates', 'fee', 'charge' or 'tariff', as used in the applicable legislation. I use the term 'charge' in a neutral and non-technical sense except where I am referring to a specific section of a statute. C

[3] The applicants in an earlier case in this Court (Robertson and Another v City of Cape Town and Another; Truman-Baker v City of Cape Town 2004 (5) SA 412 (C)) challenged the validity of the property valuation roll currently used by the City. This case does not deal with that issue. It deals with the use of the property valuation roll to determine the payments which the City D requires ratepayers to make to cover the cost of sewerage and refuse removal services.

The factual background

[4] The City was formed on 5 December 2000, by the amalgamation of the Cape Metropolitan Council and six transitional Municipal Local E Councils. These Councils had administered local government in the Cape Metropolitan area from 1996 to November 2000, during the 'interim phase' of local government transition created by the Local Government Transition Act 209 of 1993. F

[5] The six transitional Municipal Local Councils had used different methods of recovering their expenses in relation to sewerage and refuse removal services. In the former Cape Town and South Peninsula Local Council areas, the refuse and sewerage services were funded entirely from the revenues derived from property rates. No user or consumption charges were made. In certain of the other former municipalities, the services were funded either on a consumption charge G basis or on a flat rate, which was determined irrespective of consumption, service use or property value.

[6] On 29 May 2002, the municipal council approved a budget and, for the first time, determined uniform charges across the whole of the 'unicity', as it was then sometimes called. The charges in H respect of sewerage and refuse removal services were determined as follows:

[6.1]

The sewerage funding provisions in the 2002/3 budget consisted of two elements. The first element was a range of user I charges which were based on estimated consumption, but were capped at 35 kl per month in the case of single residential properties. The second element in the case of single residential properties (which is what is in dispute here) was described in the Council resolution as a 'Basic Charge' of R38 per residential property. This second element of the charge was J

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subject to a rebate which was based on the value of the property concerned. The rebates ranged from a full rebate for A properties valued at less than R50 000, to an R8 rebate for properties valued at more than R1 million and less than R1,5 million.

[6.2]

The refuse funding provisions in the 2002/3 financial year also consisted of two elements. The first element was, again, a range of user charges. These were subject to various rebates, depending upon B the value of the property in question. The second element was directly based on the value of the property, at a rate of 0,038154298 cents in the rand of rateable value above R50 000. It was not capped. A rebate of 30% applied in respect of most or all improved residential properties. C

[7] The fixed charge per property generated 20% of the income in respect of sewerage charges, with the remainder (80%) coming from user or consumption charges.

[8] During October 2002, there was a change in political control of the municipal council. In her inaugural speech, the new mayor D indicated that the City would prioritise combating poverty and, to that end, formulate and implement an indigent policy.

[9] The City commissioned an extensive study in order to obtain advice on how it should recover the cost of the services which it provides. The study had a particular focus on policy with regard to E people described as indigent. Approximately one third of the people living in the area of the City are not in a position to make any contribution at all to the expenses which the City incurs in relation to sewerage and refuse removal services. A major focus of the study was therefore on how these expenses should be recovered. The outcome was an extensive report setting out the options and their consequences, and F making various recommendations. The detail of those options and recommendations is not relevant here.

[10] In due course, the Council considered that report, the options it identified and the recommendations it made. The result was a decision with regard to 2003/4 charges which reflected a G change - referred to by office-bearers of the City as a 'fundamental shift' - in the funding of the services. The goal was to achieve a situation in which 50% (as opposed to the previous 20%) of the revenue in respect of sewerage charges would be received from the fixed charges, based on the value of the property in question. The other half would be made up by user or H consumer charges. Pursuant to this decision, the charges imposed by the City for the 2003/4 year were as follows:

[11] The sewerage provision again had two elements. The first element was a range of user charges or consumption charges based on estimated water consumption, but capped at 28 kl per month in the case of single residential properties. The second element was a charge based I on the value of the property in question. In the case of single residential properties, this was charged at the rate of 0,153 cents in the rand of rateable value above R50 000, subject to a 30% rebate. It was not capped. This change from the 2002/3 flat rate of R38 per property J

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(subject to a value-based rebate) resulted in an increase in that element of the sewerage charge in respect of all properties A with a rateable value of R128 509,80 or higher.

[12] The refuse provisions again included two elements. Again, there was a range of user or consumer charges, plus a charge based on the property value. In the case of residential properties, the charge based on the property value was 0,041588185 cents in the rand of B rateable value above R50 000. This was not capped.

[13] During 2000, the City had compiled a general valuation roll incorporating all of the properties which fell within the new unified city. This led to a substantial increase in the valuations of a significant number of properties which had not been valued for many years. Up to and including the 2002/3 financial year, this revaluation C had only a limited impact on the charges which were made in respect of sewerage and refuse removal. The reason for this was the 'cap' which was imposed in respect of that element of the sewerage charges which was based on property values. D

[14] The removal of the 'cap' in the 2003/4 year, taken together with the increased rate in the rand at which the sewerage charge was made, resulted in, in some instances, a dramatic increase in the property value based element of the charges. No reliable statistical information was made available to enable the Court to E determine the full extent of these increases. However, the evidence showed that there were cases where the sewerage charges increased as much as sixfold or by other multiples of a similar value. It was not suggested that these were 'freak' cases. There must have been a significant number of them. It is clear that the new sewerage charges caused hardship in some cases. The sewerage charges are, of course, F only part of the overall municipal bill which ratepayers must pay.

[15] As one would expect, the substantial increases generated opposition on the part of a significant number of ratepayers, although how widespread this was cannot be determined on the papers. It must be G accepted, however, that there was significant dissatisfaction amongst people living in the areas represented by the associations which constitute the applicant.

[16] These proceedings are the consequence of that dissatisfaction. The applicant brought this application, in which it H sought the following order:

'1.

Declaring the levying and recovery from ratepayers of the city of Cape Town of that portion of:

(a)

sewerage charges based solely of the value of a ratepayer's property and unrelated to the volume of water supplied, used or disposed of, as imposed by respondent since 1 July I 2002; and

(b)

refuse charges based solely on the value of a ratepayer's property, as imposed by the respondent since 1 July 2002

to be unlawful, alternatively, unconstitutional, in terms of the provisions of the Local Government: Municipal Systems Act 32 of 2000 and hence invalid and of no force and effect from the respective dates; J

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2.

That, subject to the granting of the declaratory order in terms A of 1 above, respondent be directed:

2.1

to credit all such ratepayers of the city of Cape Town with such amounts, and interest accruing thereon, paid by such ratepayers, as from the date of the imposition of such charges; or

2.2

to reverse the...