Keep the ATTP subsidy system as it is

Plan to verify recipients

THE Herald reported on a mayoral committee decision to “verify” all households that in July last year were given access to a package of free basic municipal services and thereafter to exclude from these benefits those households whose total income was above R3 000 per month (“Alarm over officials’ free services”, January 28).

This is a bad decision and I would like to spell out why.

The July last year intake was the result of a change in council’s system of ATTP (Assistance to the Poor).

The old system allowed households to qualify for ATTP if total household income was below R3 000 per month.

This system required households to apply, with “proof” of poverty, to be followed by verification by municipal officials, both initially and thereafter annually.

This all takes time and the waiting list was always approaching 10 000 households, each of which had been summonsed to court for bills they patently couldn’t pay.

There they met council’s attorneys, then got told to present proof that they had applied for ATTP, then had their letter stamped and were told to return in a month’s time, and every month, until they were registered, which was mostly about a year.

Then their debt would be written off and their free services would commence.

This system rewarded attorneys fabulously, gave the courts unnecessary work, required a massive verification staff (with vehicles) and had fraud embedded within it (not one household, in 20 years, had ever voluntarily surrendered these benefits when their financial circumstances improved).

Furthermore it punished applicants by requiring them to miss a day’s work a month, month after month. The system was wasteful of resources and community patience.

There was an even bigger problem attached to the old system.

Should a few households get together with a sharp lawyer and approach the courts, it is quite conceivable that the courts would not favour bureaucratic tardiness and give the metro three months to enrol all who qualified – census data suggests that this could be another 100 000 households – which would overwhelm the metro both administratively and financially.

The “old system” of ATTP was thus an uncapped liability waiting to explode.

Thus we cast about for ways to improve this system.

In Cape Town, all properties valued at less than R450 000 qualified automatically for, and got, ATTP benefits. Others could apply on grounds of hardship.

We did our sums, and concluded that we could afford to extend ATTP benefits to households valued at R100 000 or less, immediately, and thereafter, over five years, remove more valuable households from the system and move up to R200 000 as a base.

This proposed process is much more efficient, costs a fraction of the old system to administer and, most importantly, caps the metro’s liability, for the metro knows exactly its property roll.

The previous council spent much time debating the proposed changes and eventually the new system based on property valuations was agreed unanimously by council (yes, the DA then supported it).

The reports circulated at the time set out clearly the increased costs and the exact size of the bad debt write-off.

Now the DA is abandoning its “yes” vote and is determined to go back to the old system, following a report put to the budget and treasury committee, and to the council.

This report is a catalogue of confusion and basic factual errors, held together by prejudice towards the poor.

This report presents apocalyptic conclusions (“threatening to destroy the financial stability of the metro”, etc), and backs them up with the normal six-monthly financial report. This report includes tables of financial data of the six months to December, and none of this data backs up the apocalyptic conclusions of the report:

“Even some councillors and officials are now getting ATTP.” Council’s indigence policy specifically precludes municipal officials from getting ATTP;

“Council’s revenue is plummeting . . . by about R100-million in the first half of the year.” The annexed tables show that council’s billed income for these months was in fact higher, as a percentage of the budget, than it was last year;

“Council’s cash holdings are dropping by R100-million in the first six months.” The tables show that council’s cash holdings increased by R33-million over the six months.

Two cash flow statements were presented, one being factually wrong in its statement of council’s cash position at the beginning and the end of the period.

The correct one shows that operating cash receipts for property rates, service charges and other income is R360-million greater than budget for the period, while payments for employees and suppliers were R258-million up – this is explained as VAT issues;

“There has been an additional bad debt write-off attached to the change of ATTP systems that will throw the budget into deficit.” In the last financial year, we had an excess of R247-million in bad debts and an additional R80-million in write-offs for the Housing Revolving Fund to cope with – together, more than the bad debt budget increase for July last year.

We did it and the audited financial statements show a modest surplus for the year;

“The stress of financing this municipal package now rests on the small revenue base remaining.” The cost of council’s ATTP programme is met from a government grant called equitable share.

In this financial year, this grant is R798-million and the estimated cost of delivering council’s free basic services package is R488-million, or 61% of this.

This report is a catalogue of confusion and basic factual errors.

Incredibly, the DA is using it to justify returning to the old system of ATTP.

To return to this system is to put the metro into financial peril.

Rory Riordan, ANC councillor, Port Elizabeth