ABOUT SPECIAL RATING AREAS (SRAs)
Do you have questions about Special Rating Areas? Here are answers to some of the questions we’re most frequently asked.
What is an SRA?
A Special Rating Area (SRA), also referred to as an Improvement District (ID) or Central Improvement District (CID), is a clearly defined geographical area, approved by the City of Cape Town, in which property owners can raise levies to fund top-up services for the area. It recognises the unique needs and challenges facing commercial and mixed-use precincts and enables property owners and tenants to contribute towards sustainable development in the area.
What is the regulatory framework governing SRAs?
SRAs are governed by Section 22 of the Municipal Property Rates Act (MPRA), the Municipal Finance Management Act (MFMA), Section 21 of the Companies Act, the SA Constitution, and Cape Town’s City Improvement District By-law of 2004.
Why establish an SRA?
According to sections 152 and 153 of the South African Constitution, the objective of a local authority is to provide all its residents with certain basic services e.g. water, electricity, sanitation and refuse removal up to an equitable standard. An SRA gives communities who wish to enjoy municipal services of a higher level the option of paying for these additional services.
Are there different types of SRAs?
No, but an SRA can consist of industrial, commercial and residential components or a combination of all three.
How many SRAs are there in Cape Town?
There are currently 39 SRAs in the City of Cape Town.
What types of top-up services are provided in an SRA?
Typically, these top-up services deal with ‘crime and grime’ issues like additional public safety measures, cleansing services, the maintenance of infrastructure, the upgrading of the environment, and social services to deal with vagrancy.
How is an SRA established?
An SRA is initiated by a community, not the City and typically conforms to the following process:
- Community ‘champions’, who feel the need to upgrade the environment within the boundaries of a certain area, compile a business plan, proposing improvements and outlining a plan of action.
- The plan is presented to the community at a public meeting.
- Property owners are lobbied for their support. In commercial areas, 51% of property owners’ support is required to establish an SRA. In residential areas, 61% is required.
- The steering group submits the business plan, motivation report and implementation plan as an application to the City.
- The proposal is advertised in the media and affected parties have at least 30 days to submit comments or objections.
- The City considers the application and objections and guides the process to ensure legal compliance.
- Once the City has approved the application, a board is elected and a Section 21 company is set up with VAT registration, a bank account and Tradeworld accreditation. This needs to be in place before the City bills the property owners and pays over the levies to the SRA.
- Once the SRA has been established, participation is mandatory. Additional rates are collected by the City, with the municipal valuation of a property determining how much the member will contribute to the budget.
How does an SRA make a difference?
An SRA works towards creating a safe, clean and friendly public environment in which to work, invest and do business by:
- Enhancing and supplementing municipal services.
- Facilitating investment.
- Facilitating a co-operative approach between the City and the private sector.
- Halting degeneration and facilitating the upliftment of distressed business and mixed-use areas.
- Promoting economic growth and sustainable development.
How do SRAs improve and upgrade geographical areas?
SRAs typically provide services which enhance public safety and security and supplement existing cleaning services. IDs work to create environmental awareness, expand social/community involvement and provide urban management.
- Combating crime to make the area safe for its community and visitors.
- Combating grime to make the area clean.
- Initiating environmental improvements to make all aspects of the area greener.
- Accepting social responsibility by dealing with the homeless, HIV/AIDS vagrants, prostitution, adopting a charity as a project, and more.
SRAs work closely with city councils, NGOs (non-government organisations), PBOs (public benefit organisation) and SAPS (South African Police Services), among others. They do this by setting up joint ventures with key stakeholders.
Who funds SRAs?
The business plan for an SRA is supported by the majority of property owners in the area who are willing to pay additional rates on their property in order to improve and/or upgrade the area. These additional rates are paid to the municipality as a top-up fee which is paid over to the ID and is used only in the area controlled by the ID.
What are the benefits of an SRA?
Research shows that SRAs add to property values through the investment of property owners in their communities. Other benefits include:
- Focused management of the area
- Pride in communal achievements
- Social responsibility
- Environmental awareness (recycling, greening, energy efficiency, conservation)
- Low vacancy rates
- New capital investments
- Marketing/promoting of the ID
What are the advantages of joining an SRA?
By pooling their resources in an SRA, individual property owners are able to enjoy the collective benefits of a well-managed area, a shared sense of communal pride, safety and social responsibility, and access to joint initiatives such as waste recycling and energy-efficiency programmes, all of which result in improved property values and capital investments.
SRAs control their own money, which is spent in accordance with the approved ID business plan. This allows them to appoint their own service providers, set their own standards/ service levels and pool resources with the City, non-profit organisations (NPOs) and other SRAs in order to invest directly into their district.
Every property owner contributes to the SRA (extensive financial modelling is used to ensure affordability), contributions are capped and votes are weighted and also capped.
SRAs have the support of the City with political representation and officials and sub-council ward allocations. There is no debt management and no administrative fee payable to the City. SRA funds are monitored by the City, which collects additional rates and pays them over on budget to ensure sustainability.
Are there any disadvantages to establishing an SRA?
There is a financial impact on individual property owners and it is possible that there may be political interference. If approved by council, the additional rates are mandatory for all – it is a democratic process.
How long does it take to establish an SRA?
It takes approximately two years to establish.
How long does an SRA last?
An SRA has a five-year term and an application must be made to renew the term. This ensures the credibility of the model. Rules are stringently applied to protect the Council, community and steering committee against potential litigation.
- A unique application for each area, driven by property owners
What happens after an SRA has been established?
The City of Cape Town plays an active role which includes financial reporting and responsibilities, as well as compliance:
- Extending the SRA’s boundaries
- Renewing the SRA’s term
- Ensuring legislative compliance
- Preparing annual reports and the implementation plan
- Preparing expenditure reports (actual vs budget)
- Reviewing annual budgets
- Preparing annual financial statements
- Preparing a mid-year performance report