Metro residents pay too much

FOR home owners in Nelson Mandela Bay to understand the real reason why their rates are so high, let’s have a quick look at how your monthly rates are calculated.

The market value of each of our properties is multiplied by a “rating factor” to obtain the annual rates and then divided by 12 to obtain your monthly rates (dig out your latest rates bill, you will clearly see the calculation on it).

So, the calculation is composed of two variables: property market value (every homeowner has a good idea what his or her property is worth) and the rating factor (tax rate).

The problem for each of us as property owners is the second variable, the rating factor (the rate at which the tax is calculated).

As a form of explanation, consider the following:

ý NMB rating factors (as you see it on your rates bill):

Residential 0.011129 (with a R15 000 additional exclusion) Business 0.022258 Industrial 0.027823 Vacant land 0.033387 ý City of Cape Town rating factors (as residents see it on their rates bills):

Residential 0.006717 (with a R200 000 additional exclusion) Non-residential 0.013434 ý Plettenberg Bay rating factors (again, as residents see it on their rates bills): Residential 0.00489 Business 0.00818 . . . and so on. So in broad brush strokes, what does this all mean?

Well, here’s a simple example: a house worth R2-million in Port Elizabeth attracts an annual rates bill of approximately R22 091 (2 000 000 - 15 000 x 0.011129), divided by 12 gives the Port Elizabeth home owner a monthly rates payment of R1 840.

The same house in Cape Town, worth R2-million, attracts a rates bill of approximately R12 090 (2 000 000 - 200 000) x 0.006717), divided by 12 gives the Cape Town home owner a monthly rates payment of R1 007.

In simple terms, owning property in Port Elizabeth is way more expensive than in Cape Town or even Plettenberg Bay! A lot more expensive.

But what’s even more alarming is the cost to owners of business properties versus Cape Town or Plett.

Port Elizabeth commercial property owners are effectively double taxed!

Apart from the fact that high property taxes make our properties less attractive to outside investors, which results in lower property values, our lacklustre and struggling local economy simply cannot sustain these property rates at these levels into the future.

I’m of the opinion that since it is possible to prove that we are overpaying on our property taxes, council should urgently review its property taxation policy.

What do you think?