Method of evaluating property rates must be changed
By Kim Lucas
Stabroek News
June 3, 2003
Municipalities across the country have been given an ultimatum to push ahead with changes to the valuation component of the Urban Development Programme (UDP) or face the cancellation of an Inter-American Development Bank (IDB) grant.
The Local Government Reform Process dictates that there should be a change and harmonisation of the rating mechanisms for properties throughout the country based on capital valuation. How-ever, during a consultation last Wednesday at the Minis-try of Local Government, representatives from the various municipalities told Local Government Minister, Clinton Collymore that they were uncertain what was required of them.
Collymore explained that the IDB was funding 80 per cent of the US$25M programme and as one of its benchmarks, the UDP must make progress in its valuation component. Of the three components of the UDP - infrastructure, valuation and capacity building - the foreign bank has found that the latter two are lagging behind.
“In other words, the building of dams, roads, etc is moving ahead rapidly at high velocity and the other two components are lagging behind at a snail’s pace. The IDB is lending us US$20M and they want to see how we [are] spending the money... so there are benchmarks,” the minister told the representatives at the meeting.
According to Minister Collymore, what the IDB is asking for is not out of tune with what the government wants, which includes the standardisation of municipal by-laws; divesting the reporting of the municipality to the ministry; and the change from the rental to capital mode for valuing properties in the city. Reviewed legislation is earmarked to be submitted to parliament, which would among other things protect taxpayers from rate increases, the minister said.
“What is of concern to us is that...a non-compliance with these benchmarks will result in cancellation of phase two of the projects...the development projects have two phases and they are now in the closing stage of the first phase. The IDB (is) saying that since the valuation and (capacity building components) are lagging, bring them up to the velocity of infrastructure and then (they) would approve to disburse sums of money for the phase two.”
Minister Collymore said the projects in jeopardy are those in Georgetown to the value of $460M; New Amsterdam, $500M; Corriverton, $100M; Rose Hall, $186M; Anna Regina, $150M; and Linden $270M. He emphasised that the government could not allow these sums worth of projects to lapse.
As such, last Wednesday’s meeting was primarily aimed at reaching a consensus on the valuation mode for the urban area.
“I want to stress that this change is not to facilitate the increase in rates. Already I have received concerns from the Guyana Consumers Association saying that this will be used as an excuse by the City Council to jack up rates. When the modes are equalised, it does not mean that there will be an increase in the rates...the law [will be fixed] to prevent this from happening in the first instance,” the minister said.
Justifying the reason for converting to the capital value, the minister said property owners would be able to use recent sale prices as evidence to gauge how correct the rates were. He added that the capital mode was more readily understood by the taxpayer; was simpler and cheaper to administer; and the Inland Revenue Department (IRD) would be able to use the method to measure market value for tax purposes and capture the “free loaders” in its dragnet.
According to Minister Collymore, because of the magnitude of the assessed value and capital value, taxpayers would tend to believe that their taxes would be increased above their ability to pay. He reiterated that this would not really be the case. To counter this perception, he said a public education campaign would be needed.
Deputy Mayor of George-town, Robert Williams said since a large sum of money was at stake, municipalities should work towards the November deadline to meet IDB requirements.
“With over $1.6B at stake, if the desire of the IDB is to have the capital mode, I recommend we go with the capital mode. Just that we put in place, the mechanisms to make this thing work...the public awareness part, the physical implementation part.”
Williams said he was not convinced on why the change from rental to capital mode was necessary, since, “the people who were identified to be carriers of the message, too, had difficulties showing justification...”
He said during a recent meeting with his field people, he was told that they were also confused about what they had to do to facilitate the transition.
“The report from some of the people was that all they are doing is walking about like errand boys and writing down lot numbers...they themselves don’t seem to understand what is required of them...So we are trying to meet IDB requirements, but when you would have met IDB requirements and you say capital mode, I am not sure you are going to achieve anything on the ground. I am not sure that you would be able to achieve what you have in mind on paper, and with no frustration on the part of the taxpayer.”
He also expressed fear of an impending ultimatum for the capacity building component. “Without money, it can’t be a reality... and therefore without adjustment to the taxes...We are convinced that the amount of defaulters out there - people with properties for business, [but who are] paying residential [rates]; people who have expanded on their properties and not paying any additional taxes; people who are using buildings when they are only paying for land. We are satisfied that we don’t need to increase any individual person’s tax, we need to catch those escaping our network all along.”
However, Hugo Curtis, the UDP Valuation Systems Specialist expressed surprise at the misunderstanding. He pointed out that one of the functions of the new valuation was data collection and that involved inspection of properties, measurement of properties and taking digital photographs of those properties. The second aspect of that function would be classification.
“The second question is the one about the rental value and the capital value and I think one of the big problems that we are having is people not understanding the function of the mode...The mode is really a measure of liability. It is a measurement of how much one person should pay vis a vis another person. Now the local authority predetermines the total amount of rates that is collected in any district and what the mode does is to divide that amount up into uniform acts among the taxpayers. For us to uniformly divide that amount, we have to choose the valuation system that has enough information that will enable the valuer to come up with a fair assessment.”
In the city, most dwellers are using the rental value because most of the properties were rented. However, the capital value is applied to the rural areas, since more persons managed their own properties.
