Real Estate news – Property tax mooted to finance transport

WITH its Rea Vaya rapid bus transit system on the point of starting operations, the City of Johannesburg is now looking at ways to finance the continuing provision of public transport.

The city was reviewing a study it would make public before the end of the year that outlined some of the options for revenue-raising, mayoral committee for transport member Rehana Moosajee said yesterday.

The study looked at “all possible sources of revenue towards public transport at the moment like lane charges, carbon trading,” Moosajee said at a Rea Vaya briefing. “There are a range of options.”

Public transport networks such as Rea Vaya, due to begin operations at the end of next month, rely on public subsidy to function. They rarely make a profit. Municipal bus and train services are heavily subsidised, while taxis are not.

“Rea Vaya, despite earning a projected R158m in its first year, will move commuters in large numbers from unsubsidised taxis — it will take an initial 575 minibus taxis off the road — to cheaper buses, so it will need financial support.”

Moosajee, who declined to say how much the city was seeking to raise in a year, said the funding would not solely be for Rea Vaya, but for public transport generally.

One proposal is a tax on properties that have risen in value because of their proximity to the newly created transport infrastructure. “The public purse is contributing to the massive increase in property values” around the new Rea Vaya stations and along the Gautrain rapid rail route, said Deputy Transport Minister Jeremy Cronin at the briefing.

“Whether it’s a dedicated transport infrastructure tax or a more imaginative way of rating properties and putting the money into public transport, these are all discussions. We’ve spent R27bn on Gautrain and made some property owners very, very rich, and isn’t there an issue there?”

Organised business is less enthusiastic .

“The cost of doing business in Jo’burg is too high,” said Keith Brebnor, CEO of the Johannesburg Chamber of Commerce and Industry. “We’ve got to bring the cost down. If it’s a good public transport system, it should fit into the budget of the city. ”

Rea Vaya, which will charge R5 on the trunk route between Regina Mundi in Soweto and Ellis Park, should rather be run as a profitable business, Brebnor said. “Our feeling is that they’ve got to run the thing, outsource it to people who can make a profit.”

Ring-fencing revenue to support public transport is unusual in SA, says Tony Twine, a director of Johannesburg consultancy Econometrix. “Certainly in terms of national government, there is a colossal aversion to dedicated revenue sources. I think it’s because it constrains political choice.”

There used to be petrol tax of about 4c/l dedicated to roads, but that no longer existed, Twine said.

“The only transport-dedicated levy doesn’t actually buy a means of transport. It pays for being killed by it. And that’s the Road Accident Fund. It doesn’t buy you a bus ride. If you get killed by a bus you might get something out of it!”

Article from: www.businessday.co.za