Drought Charge for Cape Town
Proposed imposition of a Drought Levy in Cape Town
Faced with the need to finance all the additional initiatives and interventions to produce extra potable and recycled water, City of Cape Town Mayor De Lille has proposed introduction of a special water levy that would be in effect for three years, commencing 1 February 2018.
Paraphrasing the Mayor (in the interests of brevity) about the imposition of a Drought Levy:
The City administration has already diverted a total of R473 million away from other departments to fund new water augmentation projects and assist with their immediate operating needs but given the reduction in revenue due to water consumption savings, the projected water budget will reportedly suffer a deficit in the region of R1,7 billion for 2017/2018. This shortfall would prevent funding many of the proposed water augmentation programmes, and also negatively impact basic operations required to provide water and sanitation services to the people of Cape Town.
Therefore a temporary additional drought charge to help pay for these vital projects for 2018 is proposed based on existing property valuations. It will raise approximately R420 million in the 2017/18 financial year and approximately R1 billion per year over the next 3 years. The funds will mainly be used for the day-to-day provision of drinking water and also to ensure that there is sufficient budget available to spend on emergency water augmentation projects.
A fixed charge based on property valuations has been deemed the most progressive option, while being the most equitable and fair to poor households. The drought charge will only apply to residential properties with a valuation of R400 000 and above, and to all commercial properties with a valuation of R50 000 and above. As an example, the proposed drought charge will work as follows: for a residential property with a valuation of R800 000, this household could pay a monthly drought charge of R45 and for a property with a valuation of R1 million, the proposed charge would be R60.
Putting this into context (my views).
- It is scientifically almost certain that progressive climate change will cause greater variability in rainfall, higher temperatures and will generally increasingly imperil water security in the SW Cape ‘Mediterranean’ climate zone.
- This apparently irreversible situation requires a firm, long-term strategic response by building fresh water production facilities that would meet the area’s future basic water needs even in times of extreme, sustained drought.
- Due to the fact that almost all available natural catchment areas are already dammed, only relatively minor increases in central water storage facilities can still be achieved. Therefore, long-term projects must be pursued to “produce” extra fresh water through desalination, exploiting groundwater, rainwater harvesting and recycling. If done properly, the SW Cape will become insulated from the effects of future droughts on the availability of surface (rain) water.
- Massive funding is needed for such large developmental projects and it seems that the SW Cape is on its own given the reported effective bankruptcy of the Department of Water and Sanitation as well as the squandering of a large portion of the country’s disaster funds by Treasury forlornly propping up the failing State Owned Enterprises (SEOs). I.e meaningful central government funds are unlikely to be available to help.
- In the long-run it is the local economy that will benefit from enhanced water security and it’s therefore the local economy that should carry the cost of achieving the enhancements. The City has no profit centres to cross-subsidise from, so each activity should pay its own way.
- Timing makes no real difference to the ultimate cost. Perhaps the City should have acted earlier but if it had then higher costs would also have had to be carried earlier. We are where we are – recriminations based on 20:20 hindsight won’t help and best measures must now be thoughtfully applied. The challenge is ours to solve.
The notion of “progressive taxes” is well understood, but a flat water levy has nothing to do with assessed property values (aka “wealth”) and basing it thereon risks causing substantial injustices. It seems that this may rather be an appropriate time to levy all households equally or based on usage.
Furthermore, regarding the longer term, perhaps it is time to adopt a new water charging model which follows a structure similar to that used by other utility providers, namely a combo of 4 charges, effectively ensuring that as far as possible, savings are constantly encouraged and that “user pays”:
- Suggested water tariff structure to comprise:
- i) a flat monthly charge for any connection to municipal water system, used or not;
- ii) existing tariff for any metered municipal water actually used;
- iii) sewage charge based on Rx/mth/person declared resident on the property;
- iv) stormwater charge of Rz/sqM of registered property size.
- As much of the envisaged spend is long-term infrastructural in nature, instead of a one-way ‘levy’, City could cover investment costs by issuing interest-bearing, tradeable 20-year water bonds (i.e type of loan equivalent to a war bond).
The City invites input on the proposed drought levy until 12th January 2018; have your say! Email your thoughts and comments to drought.charge@capetown.gov.za