Buffalo City Metro has been accused by commercial property owners of clawing an additional R450m in rates – money which it is not entitled to take, according to the ratepayers.
Graham Hardy, chair of the Buffalo City Property Owners Forum (BCPOF) said their claim was based on BCM imposing an illegal rates escalation.
He said their members had calculated that since September last year, BCM has scored the estimated extra R450m in rates.
BCM denies this, and has declined to acknowledge that it might be at fault, or to check its arithmetic.
The recently appointed head of the standing committee on finance, councillor Helen Neale-May, said she was aware of the BCPOF’s challenge to BCM’s calculations.
She has had two meeting with BCPOF.
Hardy said Neale-May promised answers by the end of January, but “a few days of delay” was acceptable.
“We look forward to the explanations, especially the reason BCM has withheld from making its calculations public”.
He said Neale-May would investigate BCPOF's concerns that despite a massive rates hike, BCM’s overall collections are only 10% higher. “This must mean either several properties are no longer on the register, or worse, that some have received huge discounts.”
Neale-May said the delay in meeting BCPOF’s deadline was simply work pressure, not avoidance.
“The [finance] department are working flat out, and they are confident of having an answer early next week. However, before I go public I have to present the outcome to the mayor and city manager. Hopefully I can meet property owners late next week,” she said.
While Neale-May is confident that the calculations are correct, DA councillor Roy Angelbeck, a member of the finance committee, said he cautioned his colleagues about the increases at a meeting in Hogsback last week.
He said: “BCM erred in not adjusting the rates formula, which should take into account the property evaluation increases in 2018. In simple terms if rates increases are way above the CPI, the second factor used in the calculation must be lowered. In addition, no increase can be implemented in a one year that is above CPI.”
Even if BCM is wrong, which Neale-May doubts, instant relief is not possible, because budgets can only be adjusted in June or July, which will further swell BCM’s “illegal”, in BCPOF’s opinion, gains.
Noel Nyemba, of property investment group Grand Select, which has a diversified property book, including properties in the CBD, said: “The increases are ridiculous. One CBD property jumped from R42,172 a month to R112,337. Businesses cannot get away with a 275% increase without even a discussion. It is going to put several of our tenants, who are already struggling to keep the doors open, out of business.”
Andreas Efstratiou, a director of Novate, with one of East London’s largest property portfolios said: “Our largest increase is 196%. In rand terms R43,000 a month is now R115,000.
“BCM might think it has discovered a great new revenue stream, but within a few months businesses will close, and the biggest tragedy will be the resultant job losses.”
He said East London had among the highest rates and electricity prices of any city in SA, coupled with the worst service delivery.
“After the jobs go, so will development. Our new ventures on the drawing board are on hold. As tenants leave, there will be no new renters to take up the space, the value of the properties drop. It’s difficult to understand why BCM has not been treating the problem as a priority, way back in September, when we made them aware of it. They are killing the city for a short-term gain. It would be very worrying if officials were ignorant of the enormity of the catastrophe facing us.”
In October last year Mick Webb, a member of BCPOF, said that the metro was simply stalling.
“I was proved right because this is exactly what they are doing. They are hoping that the commercial owners will eventually give up, and that will not happen.”
Robin Knott, a director of Investpro, which has the city’s biggest book of privately owned property owners, said BCM had them in a squeeze.
“We can’t advocate withholding rates, because ultimately the tenants would suffer.
“We must hope that BCM has a bout of common sense and sticks to the rules.”..