There’s been a lot of anger lately at Kuala Lumpur City Hall’s (DBKL) decision to increase the assessment rates of property owners and justifiably so, as a 100% to 300% increase on existing rates is a lot and would certainly be a burden to a lot of families.

Most people often forget what exactly these rates are for, why you need to pay it and what are your rights with regards to objecting this ridiculous increase.

Duties of the local council

The local council is a body corporate for all ratepayers within the defined municipality. So, any property within the borders of Kuala Lumpur would automatically make the property owner a ratepayer to DBKL.

As a body corporate, the local council is tasked with the duties of maintaining public properties (roads, street lights, drains), regulate businesses (licensing, zoning, health inspections) and remove rubbish from households.

In essence, the assessment rates are meant to pay for these services, much like how an apartment owner has to pay maintenance fees to a management body to maintain the common properties of the apartment.

Assessment rates

The Local Government Act allows property owners to be charged these rates, which are derived from a valuation exercise on the rentable value of the property. The rates will be a percentage of this total value to be made payable, up to a maximum rate of 35%.

So, say a property is valued at an annual rent value of RM10,000 and the local council decides to charge the maximum 35%, that would work out to RM3,500.

This valuation list must be gazetted and the figures will be officially used for any rates chargeable to ratepayers. So, even if property prices were to soar ten years down the road, the valuation would remain constant. Unless, of course, there’s a physical change in the property like extensions, redevelopment or even land use change which would force a revaluation exercise straight away. If you added a floor to your house and didn’t declare it to the local council, please don’t write to me asking for help.

In most cases, a local council would have done this valuation exercise at the point where the development was completed and subsequently charge between 4% to 10% of the value. In the case of MPPJ, when the council announced an increase in assessment for landed properties back in 2006, the increase was done not by doing a new valuation exercise but by increasing the rateable percentage from 8% of the property value to 8.8%.

Rates can be changed yearly subject to requirements of the budget and approval from the state government, or in the case of DBKL, the Federal Territories and Urban Wellness Ministry.

What DBKL has done in this instance however was to conduct a revaluation exercise and serve notices to the public to allow them to object to this new value. A revaluation exercise however can only be done once every five years.

Obviously, even if the payable percentage was not increased, the value based on rental prices of property today would have increased tremendously from the past 20 years when the exercise was first carried out for many property owners.

While the law does allow the public to object, the valuers would have studied market rental rates and also through surveys asking owners what their property’s rentable rates were. So, whether you live in the said property and don’t intend to rent it out; whether you cannot afford to pay the new rates; or whether the council’s services has not improved and therefore does not justify the new rates are all irrelevant points. You have to prove that the rental rates in the area are below the value ascertained by the local council, which may be impossible since there are so many advertisements out there that would allow the valuers to reach a median value to affix to your property.

In fact, the point of the objection hearing is to allow you to present any evidence that the valuers may not have considered that would actually bring down the value of your property, like having your house located next to a cemetery or a sewerage treatment plant. Only then would the government consider a lower rateable value for your property.

Asking the right questions

Even though it might be pointless to protest against the rentable value, the ratepayer can still argue that the percentage of the rateable value be lowered by the local council. There is nothing stopping DBKL from reducing the chargeable rate to 3% or even 1% of the new property valuation to approximate the previous rate you paid.

But what ratepayers lack to argue for a lower percentage is information on the council’s operations and financial situation. As such, the ratepayers must demand that DBKL justify the need for the increase in revenue.

The problem is, none of the local councils produce annual reports – or even if they did, they do not make it publicly available. Nor are the accounts available for scrutiny.

Yet an idea of what DBKL has been spending on can be found in its annual budget speeches. Since the 2014 budget speech hasn’t been made, we will have to look at the 2013 speech to have an idea of DBKL’s expenses, and that figure is a whopping budget of RM2.19 billion. Of this amount, RM1.406 billion is for management and operation expenses while the remaining RM782.6 million is for development.

These details help frame the questions we need to ask. How much is DBKL expecting to increase its revenue with this increase in assessment rates? Is DBKL planning to do some massive development next year that would necessitate a huge increase in revenue?

Learning from others

I cannot stress the importance of mounting an ongoing campaign to demand for the accounts of DBKL if Kuala Lumpur ratepayers intend to fight this issue. I will share my experience as a reporter working with Petaling Jaya ratepayers when the rates were increased in 2006.

After an ongoing six-month campaign to pressure the then Petaling Jaya Municipal Council (MPPJ) to release the accounts, the council finally allowed the campaign leaders to look at (but not make copies) of the council’s accounts.

In the short two hours ratepayers were allowed access to the accounts, notes were taken with pen and paper. After studying the information, the residents revealed numerous problems with the council’s management.

For example, the MPPJ had invested RM6.8 million in state bonds in 2003. This amount was subsequently written off as a bad investment. Could DBKL have made such similar bad investments and must now make up the shortfall?

MPPJ accounts also showed that a whopping RM38.6 million in unpaid assessment bills were accrued from 1999 to 2004. This has been reduced under Pakatan Rakyat rule, mainly because the main culprits for this debt were various Government Linked Corporations (GLCs) and they were all forced to pay up. What is the amount of unpaid assessment bills for DBKL?

Does DBKL have such skeletons in their closet? We will only be able to tell if ratepayers unite and form a coalition to pressure DBKL to release the accounts to the public.

MAK KHUIN WENG ran for the Bukit Gasing state constituency in 2013. He is an advocate for two major issues: freehold land titles for Petaling Jaya and the implementation of development rules in a transparent and accountable manner.