It is a key objective of the municipality to make sure it has a funded budget. To do this it taps into various sources of revenue.
Capital budgets can be funded from external loans, savings, government grants and public/private partnerships.
Operational budgets are funded through property rates, service charges on items such as refuse collection, water provisions and electricity, traffic fines and so forth. The municipality is also entitled to a portion of the national fiscus, or equitable share in terms of the Divisions of Revenue Act.
What are Tariffs and Services Charges?
A “tariff”’ is a service fee you pay for a service that the municipality provides.
These tariffs and charges must be reviewed every year as part of the budget cycle and includes items such as:
- Services such as water, electricity, refuse removal, sewerage.
- Specialised services, such as the approval of building plans.
- Fines and penalties, such as for traffic fines or late payments, interest on arrears.
Decisions should take the following into account:
- Tariffs should be reasonable and affordable for the people who use these services.
- Based on a sliding scale, so that everybody gets the basic amount free, then pay increasingly higher tariff amounts for the amount of water or electricity they use. These higher-volume tariffs are essential to cover the free basic supply to those who only use a little to survive.
- Policy to deal with poor households that cannot afford to pay anything.
- Be fair to the municipality to recover most of the costs of providing the service to the people, so that the tariff income can pay for staff salaries, water pipe repairs, and to repay Eskom for their bulk supply of electricity to the municipality.
Why property rates?
Property rates are, and will continue, to be a massive source of revenue for municipalities. They are raised on both residential and business properties.
A property rate is calculated based on the value of your property, which is valued by the municipality through the General Valuation Roll, which your municipality must undertake every four to five years depending on the category of municipality in which you reside. See the section of property valuations.
Operational Budget vs Capital Budget
The operational budget deals with matters such as expenses such as salaries and the day-to-day delivery of services from refuse collection to the maintenance of roads, as well as income-generating functions such as the collection of rates and other municipal taxes.
The capital budget deals with new one-off infrastructure-related expenditures such as building a new bridge, road, or clinic. This is funded through debt, savings or the Municipal Infrastructure Grant funded by the national government. Some capital expenditures are multi-year, such as the building of a new municipal administrative complex, while others are immediate one-off expenditures, such as buying new fire truck equipment.
In a simple example the capital budget is used to build a new tar road in a rural part of the municipality, and the operational budget is used to maintain that road regularly.
A municipality’s capital budget will list the estimated costs of all items of a capital nature that are planned for that year.