16. What is a Special Rateable Area (SRA),and How Does it Work?

16.1. What is an SRA?

A Special Rating Area (SRA) refers to a clearly defined geographical area, approved by a regional municipality or City, in which property owners can raise levies to fund “top-up” services for that specific area. Marloth Park is currently implementing this for security and garbage collection and has full authority to act as an SRA.

16.2. What is the difference between an SRA and a CID?

The true answer is nothing. A Special Rating Area (SRA) refers to the defined geographical area and the CID often considers the intent for the area. But for all intents and purposes, management and definitions are one and the same.

16.3. What is the regulatory framework that governs SRA’s?

SRA’s are governed by;

  1. Section 21 & 22 of the Municipal Properties Rates Act (MPRA).
  2. Section 76 of the Local Government Municipal Systems Act, 2000.
  3. The Municipal Finance Management Act (MFMA)
  4. Section 21 of the Companies Act,
  5. The South African Constitution, and OTHERS.

16.4. Why Establish an SRA?

According to the SA Constitution (Sections 152 & 153), the objective of a local authority is to provide all its residents with certain basic services such as water, electricity, sanitation and refuse removal, etc. but only up to an equitable standard.

For communities that wish to enjoy municipal services of a higher level, an SRA provides them the option of paying for these additional services, which should still be affordable and sustainable.

16.5. What types of Top-up services can be provided by SRA’s?

Typically, these would-be services dealing with issues of “crime and Grime” such as additional public safety measures, cleansing services, maintenance and infrastructure, upgrading or improving the environment and social services to deal with vagrancy, etc.

In a Marloth Park type environment, this may also include ecological management and management of common tourism assets to ensure that benefit is secured for the local residents and non-residents contribute for use.

16.6. What are the benefits to SRA members?

By pooling their resources in an SRA, individual property owners can enjoy the collective benefits of a well-managed area, a shared sense of communal pride, safety and security, social responsibility and access to joint initiatives such as waste recycling, energy efficiency programmes, ecological and environmental programmes to common property and parks and these all translate into a tangible boost in property values and capital investment.

16.7. Are there different types of SRAs?

No. All SRA’s are managed in the same manner and can consist of industrial, commercial, residential and ecological components or a combination of all 4.

16.8. Are there examples of SRA's operating in South Africa?

There are many SRA’s. In Cape Town alone there are 16 SRA's in the City of Cape Town. Four additional communities have applied for establishment, and another 25 have expressed interest in establishing an SRA. In greater South Africa there are well over 300 and these SRA's  include Industrial, Commercial, Residential, ecological districts or mixtures of these.

16.9. Who manages an SRA?

An SRA is a Section 21 company managed by a board elected by members and operated by a management team appointed by that board. The City is not involved in their day-to-day operations but merely exercises financial oversight to ensure legal compliance.

16.10. Who monitors the Finances?

An SRA manages its own finances and appoints its own auditors. The audited financial statements form part of the City’s consolidated accounts, which are reviewed by the auditor-general.

In addition, monthly financial reports are submitted to the city to monitor that expenditure is incurred according to the business plan.

16.11. How is an SRA funded?

An SRA is funded entirely from the levies paid by its membership. It does not receive any subsidies from the City. It does have the powers to raise additional levies and sponsorships.

16.12. How is the SRA levy calculated?

The SRA management confirms the details of the database of property owners within the boundaries of the SRA, which is then linked by the city to the municipal valuations according to the most recent general valuations roll.

The SRA Management prepare an overall budget for the year based on specific needs of the zone. The individual levies are then calculated by dividing up the budget total according to the municipal valuations of each SRA members proportional to the valuation of the SRA.

The budget formula allows differentiation in levies for the different types and sizes of properties.  – be it residential, commercial or industrial.

This levy is then expressed as a cent in the rand and is applicable over the financial year. Conventionally the financial years run 1 July to 30 June.

The SRA proposed budget and proposed levy have to be approved at city level and advertised for comments and objections prior to implementation on the 1st July.

16.13. How is the SRA levy collected?

The city collects the levy on behalf of the SRA. The levy income goes to the SRA for the services it provides. It does not go to the city, although they share an invoice to save collection cost. The levy appears as a separate item on the monthly municipal account of each SRA member.

Each month the city pays over one-twelfth (1/12) of the SRA budget less a % of the budget as a provision for bad debt. This provision is determined based on the municipal non-recovery rate but should not be more than 3%.

16.14. Is the SRA levy mandatory for all properties within the SRA?

Yes. Once the city has approved an SRA, the participation of all property owners within the boundaries of the SRA is mandatory.

16.15. How does the SRA budget work?

The SRA sets its own 3-year budget according to input from its members. The city does not get involved in this process. The 3-year plan is reviewed annually – with consideration of;

  1. the past year
  2. the current planned forecast for the next 2 years ahead, and
  • any anticipated changes to the current plan with a provision for the next “year 3”.

Each year, the SRA board must submit a detailed budget to the city. Conventionally no less than 5 months prior to the start of the next financial year.

The proposed budget may not deviate materially from the approved business plan and the long-term 3-year budget.

If there is a material deviation, an application in terms of Section 11 of the SRA bylaw is required.

16.16. The valuation base – and what if it changes during a year?

The valuation base is a snapshot at a point in time (usually end February) and is used to calculate the cent-in-the-rand for the following financial year.

Municipal valuations can change within a financial year due to interim valuations, valuation court rulings, sub-divisions, rezoning or other technical adjustments,

Should the valuation base increase (or decrease) substantially, the City must inform the SRA in order for them to review and if necessary recalculate the levy.

16.17. Can an SRA be spent anywhere in the City?

No. Levy income is ring-fenced to be ploughed back exclusively into the SRA.

16.18. How does the City resolve arrears?

The city provides the SRA board with a regular update of levy payments so that the board can assist in pursuing those who are in arrears/ default. Defaulters are subject to the City’s credit control and debt collection policies. As such, they can have their water and electricity services suspended or Rates Clearance certificates withheld.

16.19. Does the formation of an SRA mean the Municipality can reduce the level and quality of its service?

No. The City is obliged to sustain existing service levels.

The Municipality and SRA have to conclude a Memorandum of Understanding with the respective SRA indicating the level of services to be provided by the Municipality. This enables the SRA and Municipality to decide and identify the “Top-up” services to be provided by the SRA.

16.20. Do members have a say in the SRA?

Absolutely! Every property owner should register for membership of the Section 21 Company once it has been established, attend annual general meetings, get involved in the election of board members and provide input into the SRA.

16.21. Management of relationships between the City, SRA and member?

The SRA will set up an enquiry desk to manage the interaction between the three parties in relation to all services provide by the Municipality and the SRA. Issues can then be managed through the respective channels as required.

16.22. How does one establish an SRA?

An SRA is always initiated by the community, and not by the city. It usually starts with “champions” within the community who feel the necessity to upgrade the environment within the boundaries of a certain area.

They then compile a business plan indication how the improvements are to be achieved and present this to the community at a public meeting. Thereafter, property owners are lobbied for their support. A majority of more than 50% has to give written consent to the formation of an SRA.

Most of this process has already been achieved in Marloth Park as it is already in all effects an SRA and has the Municipality collecting additional levies for security and garbage collection2.

What Marloth Park does not have is a Section 21 company managing the funds collected and ensuring the services paid for are being affected to achieve the City Improvement efforts.