Background
The Epping City Improvement District (ECID) is a community initiative approved by Council for the delivering of supplementary municipal services within a strictly regulated legal framework. The ECID is a Non-Profit Company (NPC) and is managed by a non- remunerated board which is held accountable for delivering on its mandate by the members of the NPC (property owners within ECID). The City remains responsible for delivering primary municipal services and also has to perform oversight on all supplementary municipal services delivered by the ECID. The ECID has a 5 year lifespan with an option to apply to Council for a further 5 year term should the property owners approve another 5 year term and a new business plan at the AGM held in the 4th year of the current term.
The City funds this initiative through additional property rates levied on all property owners within ECID in terms of:
- the Municipal Systems Act (MSA) for the billing and collection of the additional rates; and
- the Municipal Property Rates Act (MPRA) which allows the Council to approve a special rating area and levy additional rates onto those property owners solely for the funding of improvements and upgrades in that area.
Calculation of the ECID Additional Rate
The ECID 5 year budget approved by Council is reviewed annually by the ECID board and presented to the NPC members at the AGM for approval. At the last AGM the NPC members approved a budget which increased with 8% from R9 112 998 in 2017/18 to R9 842 038 in 2018/19. In terms of the City`s mandate we have to fund this budget with additional rates levied on property owners within ECID. The City by legislation is not allowed to use normal property rates to fund the ECID as this will be considered as the creation of elitist areas.
When the City determines the additional rate required for the collection of a CID budget the two variables that impact most on the percentage increase / decrease of the additional rate, are the budget increase of the CID and the change in the total property valuation of properties in the CID.
In a confined environment like the ECID the municipal valuation for individual properties fluctuates due to Supplementary Valuations (SV), successful objections, valuation court rulings, subdivisions, redevelopment and new developments which impacts the total municipal valuation and ultimately the additional rate.
The increase in the Improvement District charge will only be equal to the ECID budget increase if the total municipal property valuation remained unchanged. Unfortunately in Epping this was not the case.
In March 2017 the total municipal valuation was R7 242 107 369 which was used to calculate the 2017/18 ECID additional rate. In March 2018 the total municipal valuation decreased with 3.2% to R7 013 142 293. When the 2018/19 ECID additional rate was calculated this valuation reduction impacted on the final additional rate.
The impact of the two biggest variables:
- ECID budget increase: 8.0%
- ECID municipal valuation decrease: 3.2%
The Special Rating Areas Policy dictates that the CID additional rate may not exceed 25% of the applicable rates rate.
The ECID additional rate of R0.001403 for 2018/19 expressed as a percentage of the non-residential rates rate of R0.014308 = 9.8%
The ECID additional rate is far below the average of 15% for commercial CIDs and the 25% capping and therefore complies with the policy requirement.
What is the impact per R1 million municipal valuation of the 11.5% increase compared with an 8% increase?
If the municipal valuation remained unchanged and the additional rate increased with 8% iso 11.5%, from R 0.001258 in 2017/18 to R0.001359 in 2018/19 property owners would have paid R44 per year per R1 million valuation or an average of R3.67 per month more.
