The South African Property Owners Association (Sapoa) says it is consulting with its senior counsel with the intention of instituting a legal challenge against the City of Johannesburg (CoJ) regarding its stance on the Development Contributions Policy.
Sapoa has in the meantime called on investors and developers to hold off on further investments in the city, as it believes the financial implications of the policy in its current state will be significant.
According to a 2020 CoJ policy draft document, the Development Contributions Policy is meant to “simplify and integrate the development contributions process and charges for roads and stormwater, water and sewerage, electricity and public transport services across the city”.
Effectively, the policy proposes “a once-off charge levied by municipalities on the landowner, as a condition for approving a land development application, to cover the capital costs incurred by the municipality.”
Sapoa says it has found aspects of the draft policy objectionable, adding that some are not only contradictory but also unfriendly to investors.
“We find that the underpinnings of the policy are self-contradictory: on the one hand, the policy states that its principle is that the Development Contribution (DC) must be used on existing or planned infrastructure impacted by that development. Yet at the same time it provides that a DC can be used on infrastructure anywhere else in the municipality,” Sapoa says in a statement.
“In addition, it states that there cannot be duplicated cost recovery, but it also provides for a DC where capacity exists in infrastructure already paid for.”
City actions ‘extortionary’
Sapoa has likened parts of the policy to extortion.
“Consultation with our members has revealed their concern that the city has endowed itself with an ability, by withholding various consents, to force developers into paying the DC,” it says.
“This represents nothing less than a form of extortion.”
CoJ has in the past month been on a controversial revenue collection drive with the launch of ‘Operation Buya Mthetho’ which it says has a “focus on aggressively collecting monies owed” to it by government at all levels, residents and businesses.
It says it aims to collect about R38 billion in unpaid bills in an effort to raise funds to address the city’s infrastructure and service delivery problems.
‘Acting beyond its scope’
One of Sapoa’s gripes relates to the city’s insistence on pushing for the implementation of the policy, despite the fact that doing so is beyond its scope.
It says the city cannot institute the DC policy until the Fiscal Powers Amendment Bill is passed.
“On 31 January 2022 our attorneys submitted a letter to the Mayor and City Manager of the CoJ stating that the Municipality currently has no power at all to implement a development charge regime,” Sapoa says.
“Further, even if it did have the power to implement such a policy, there are no bylaws in place to give effect to it.”
According to Sapoa’s statement, the city has stated its intention to continue with its policy implementation despite its limited powers to do so.
The association says it has made representations to National Treasury to demand regulatory clarity on certain parts of the Fiscal Powers Amendment Bill, some of which relate to understanding municipalities’ powers.
Sapoa says the city “cannot force developers to contribute” to infrastructure that has already been paid for from other sources of revenue.
“Doing so would constitute an impermissible tax, which is illegal and not a service recovery charge at all.”
Moneyweb has sent questions to the City of Johannesburg and the city has said it will respond.