The City of Cape Town’s proposed Drought Charge is an inequitable and socially divisive solution to the water crisis. Divisive because it targets only a sector of the residential population. It appears to be an illegal charge as it takes the form of a wealth tax linked to property value and is not based on consumption. A water availability charge or review of the water tariff structure that prioritizes consumption is not unreasonable. However the proposed Drought Charge is unacceptable as it targets only a sector of consumers, namely so-called middle to upper income rate payers, the same group that recently started paying for the previously free 6000 litres of monthly consumption. Inflated Cape Town property values means that property value is an inequitable indicator of income and is certainly not a measure of consumption. Furthermore in the event that the proposed Drought Charge is legally challenged, then the City may not be able to generate the additional income it is looking for to pay for new sources of potable water. An equitable option linked to consumption needs to be found.
The table below gives an indication of the proposed monthly drought charges (City of Cape Town -published in community newspapers).
Reducing consumption has to be the first priority.
We hear figures that 36 to 50% of households, presumably suburban, have reduced their consumption to less than the prescribed 87 litres per person per day. The City needs to deal immediately with the remaining 50 to 64% of households who are still using too much water. With many Capetonians still using more than the restricted limit of water, Mayor Patricia de Lille announced on Tuesday (9 January) that Day Zero had been brought forward by seven days to April 22. https://mg.co.za/article/2018-01-09-only-197-of-usable-water-left-in-cape-dams.
The City should already be implementing Phase 2 of the Disaster Restrictions. This phase recognizes the need to reduce consumption to ensure that the dam levels do not drop below 10% before the scheduled onset of winter rains. Urgent action to reduce consumption and delay the probability of Day Zero needs to come before considering an additional tax on ratepayers.
Citizens need support for – not drought charges – for private initiatives to reduce demands on potable water. Funding models or city loans for rain water harvesting need to be considered.
Many households have invested in reducing their demand on the City’s potable water supply by installing rain water harvesting and grey water systems. The proposed Drought Charge is a slap down to these private initiatives and investments in water saving.
Using our household as an example: We invested in 21 000 litres of rain water tanks and have replumbed our toilets to use rain water and grey water. This was an investment over years to avoid a financial and water crisis. The current value of our rain water tanks, installation and plumbing amounts to R30 000. When divided into monthly payments to correspond to the proposed three years of the Drought Charge our investment translates into R833 per month. Having invested heavily in reducing our demand on the City’s potable water resource we object strongly to the proposed Drought Charge.
Private boreholes are also an example of investment although controversial because they tap into a common resource and are often not managed conservatively.
Who will own the new City water infrastructure? Alternatively will the City repay the Drought Charge? Assuming optimistically that the City will be able to implement significant new infrastructure in time who will own it? The drought charge is based on the rateable property value and not on consumption and does not acknowledge households that have invested considerable sums in water efficiency and harvesting. It is proposed to run for 3 years which places the burden on existing ratepayers to fund capital development for all into the future. The City cannot claim that this is ethical or equitable. It is a crisis tax to fast track new water infrastructure. This begs the question – how does the City compensate for what should effectively be a loan? This is an NB issue as it potentially sets a precedent for dealing with any future service crises in a way that is inequitable. This is made more pertinent by the fact that it is a National Government responsibility to provide sufficient potable water resources.
It does appear that the water tariff is low and needs to be reviewed!
What percentage of the water tariff covers water costs and filtration and what percentage covers the water reticulation infrastructure? It appears that water consumption/ volume is a small percentage of the total cost to the city – which means that low water consumers may not be paying a fair share of the infrastructure costs.
A public participation process is needed to look at appropriate creative solutions including funding models, shared use and management of `private’ boreholes and city wide water harvesting initiatives.
Is there a limit to growth in Cape Town based on water availability? The City is ignoring this question? Approval of development on a third of the PHA, an important aquifer and local vegetable basket, does not engender confidence in the City’s understanding of future water needs or sustainable development. Reduced access to water also threatens local food security. In addition, the Agricultural Water share from dams that also supply the Paarl /Stellenbosch/ CT Metro etc. is to be drastically cut. The farmer’s response (heard on Cape Talk) is that for them to stay economically viable they need to focus on high value crops – presumably the ones that yield an export return rather than basic vegetables for locals. So no water and now less food and less jobs as well. Assuming that water demand is going to continue to place pressure on supply – even in a non-drought year because of the City’s population growth – then Philippi ground water and vegetables are a strategic asset. Remember Chief Seattle who prophesied that we can’t eat or drink money!
Finally, ratepayers are potentially going to be faced with the double impact of the Home User Electricity tariff and the Drought Charge. The Home User Electricity tariff of just over R8 per day was scheduled for implementation on 1 July 2017 but then postponed. It now appears as an item on the rates accounts of households valued over R400 000, albeit as a nil charge. As the Drought charge is proposed for 3 1/2 years till 30 June 2021 it is likely that the Home User Electricity Tariff will be implemented during the duration of the Drought Charge. These combined charges amount to a considerable increase in overall property tax for the affected households and will place an especially challenging burden on middle income households and pensioners. This reinforces the need for a new approach to charging for services and certainly a new and mutually beneficial relationship between city and citizens.
Your concerns and objections can be addressed to firstname.lastname@example.org until midnight on 15 January 2018. For general queries phone the City call centre on 0860 103 089.
Kim Kruyshaar December 2017
On 19 January 2018 the City Council resolved not to implement the Drought Charge. More than 61 000 comments were received. On 19 February 2018 City emailed its feedback on the comments and objections as follows.
Given consideration to the comments received, Council agreed that:
- In light of the number of comments stating that the proposal for a drought charge is punitive and unaffordable to a community that is already overtaxed, no drought charge be implemented;
- Renewed efforts be made to pursue financial assistance from National Government or the Western Cape or any other relevant authority due to the declared disaster status of the City of Cape Town;
- The reprioritisation of the existing budget when preparing the Adjustment Budget to be considered by Council on 31 January 2018.
After considering the comments received, above resolution was confirmed at the Council meeting held 31 January 2018, together with the approval of level 5, 6 and 7 water and sanitation tariffs with effect 1 February 2018, which involves higher payments based on consumption from the lowest level of water use.
The following deductions were made from the comments received:
Ratepayers were opposed to:
- The methodology of using property value as yardstick to determine the drought charge opposed to water consumption.
- For targeting only certain property owners and excluding others is regarded as unjust as all water users should take some responsibility for the water augmentation programme.
Ratepayers expressed the following opinions:
- The City of Cape Town has ignored warnings in this regard without taking pro-active steps, eg seemingly no provision in its MTREF budget for 2017/18.
- Bad planning by only reacting now with an expansive water augmentation programme which should have been gradually planned for, budgeted for and implemented over the past 5-10 years.
- Shortcoming in the 2017/18 tariffs by not making provision for the loss of revenue as expected from the reduced water consumption.
- It seems that the income planned from the drought charge is substantially higher than the anticipated loss due to reduced consumption.
- The drought charge is punitive for saving water and in some instances incurring costs in alternative methods, including water tanks, bore holes and grey water systems for both residential and commercial properties.
- Not all properties use water and the taxing of these would be disproportionate to the cause.
- The middle-class is yet again burdened with and tax, making it unaffordable, considering the basket of taxes confronted with.
- The drought charge is detrimental to the elderly with shrinking disposable income.
- Households falling in the under R400 000 property value category are also water wasters but are exempted from any contributions.
- The City is wasting money in other areas that should be reprioritised.
- The invite of comments during the festive season is a sign of bad faith and attempt to “push through” the drought charge without proper public participation.
- Negative and potential unaffordable impact on the economy in cases of large retail shopping centres where the tenants will be forced to pass on the drought charge to the customer.
- Exorbitant cost implications for commercial properties beyond R1bn.
- The implementation of a drought tax is incorrect as it undermines the legal requirement of utility services to be cost-reflective by means of their tariffs.
- Temporary taxes are a fallacy – they will remain.
- As a property tax, it will estrange ratepayers and there is no incentive for water savings during the coming dry summer period.
- Expression of retracting political support.
Ratepayers made the following recommendations
- National government should contribute.
- Scrap the proposed drought charge based on property value and to increase the existing water tariffs on the principle of cost-reflective and tariffs based on consumption.
- Institute a minimum flat rate across the board.
- Target visitors and tourists.
- Access funding from the bond market.
- Subsidise ratepayers with water tanks.
- Installation of water restrictors to all properties.
- Education campaign in all communities, about water saving and the dire situation.
- Transparent reporting on the various water augmentation projects, their costs, funding sources and time-lines as well as distinguishing between short-term emergency measures and long-term sustainability plans. This would include the ring-fencing of such funding and expenditure.
- Green buildings should contribute at a lower margin.
- The City should take cognisance of initiatives and measures implemented by individual ratepayers, ie large commercial entities to determine equitable charges.
- Closer attention of the management and reduction of non-revenue water.
- Remodelling of the water and waste water tariff structures by way of a fixed component based on property value and a variable cost based on consumption.
- Public provide partnerships and build operate and transfer projects.
- New developments should be compelled to proof water saving designs and measures.
- The pending of big water intensive developments during the drought period.
- Implementation of a cap on the drought charge for both residential and commercial properties above a certain threshold.
Acting City Manager