Area Based Service Delivery: CID Unit

Introduction to City Improvement DistrictsAugust 2018

Constitution - Section 152 – Objects of local government

(1) The objects of local government are –(a) To provide democratic and accountable government for local

communities;(b) To ensure the provision of services to communities in a

sustainable manner;(c) To promote social and economic development;(d) To promote a safe and healthy environment; and(e) To encourage the involvement of communities and community

organisations in the matters of local government.(2) A municipality must strive, within its financial and administrative

capacity, to achieve the objects set out in subsection (1).

CID vs SRA

• Council determines a Special Rating Area ito legislation• SRA functions as a CID (City Improvement District)• Also called BIDs, UIPs, TIDs etc.• CIDs are an organ of state and external service provider

What is a CID?

• Geographically bound area determined by the Steering Committee, and

• The Business Plan is supported by majority of property owners within the area

• Who are willing to pay additional rates on their property• To fund additional municipal services to improve/upgrade the area

CID ModelPurpose

• Enhance and supplement municipal services• Facilitate investment• Facilitate a co-operative approach between the City and private

sector• Halt degeneration and facilitate upliftment of distressed business and

mixed use areas• Promote economic growth and sustainable development• Promote urban regeneration through sustainable urban

management• Upgrades and improves areas• Create safe, clean, socially responsible and sustainable environments

CID Model Serves to:

• Create a mechanism for property owners / tenants to participate in sustainable development

• Recognise unique needs and challenges facing different commercial / mixed-use/residential precincts

• Facilitate recognition of defined geographic districts to enhance / supplement provision of municipal services

• Upgrade and improve areas• Create employment opportunities• Facilitate joint ventures with the City/NGOs/PBOs/SAPS/WCG etc

CIDs improve and upgrade areaBy:

• Improving SAFETY - making the public area SAFE for its community and visitors

• Combatting GRIME – making the area CLEAN• Initiating ENVIRONMENTAL improvements – making the area greener

in all aspects, recycling, energy saving etc.• Accepting SOCIAL RESPONSIBILITY – dealing with the homeless,

HIV/AIDs, vagrants prostitution, adopt a charity as a project etc.• Regenerating the environment through urban management

Impact of CIDs

• Supports objectives of SA Constitution• Supports objectives of National Development Plan and Integrated Urban

Development Framework• Aligned with City’s IDP• Alternative funding solution for urban management• Aligns community safety institutions• Facilitates integration of social service delivery• Allows the City to use resources optimally to ensure better value for money• Builds integrated communities

Documentation

• SRA By-law• SRA Policy• Frequently Asked Questions• Establishment Timelines• Presentation: Introduction• Finance Agreement• List of existing CIDs• Generic MOI

Legal framework

• SRA By-Law

- MPRA (Section 22 – guides establishment)- MFMA (Fiscal governance)- MSA (Ability to determine cent-in-the-rand and collect)- Constitution (Schedules 4 & 5 – municipal functions)- Comp Act (Governance and accountability)• MOI (meeting protocols, operational structure)

Legal framework / continued…

• SRA Policy- Establishment criteria- Institutional arrangements- Establishment principles- Business Plan content- Dissolution- Financial control (fiscal governance)

• Rates Policy (Relief)• Credit Control and Debt Collection Policy (Billing, arrears)• Finance Agreement (Financial reporting and responsibilities)• MATR (Municipal Asset Transfer regulations)• Any other Act, By-law, Policy and Regulation applicable to CCT

Typical CID Services

• Provide additional municipal services to:- Enhance public safety and security- Supplement cleansing services- Create environmental awareness- Expand social/community involvement

• Provide urban management by:- Combatting urban decay/degeneration- Upgrading/improving the environment

- Create joint ventures with Council / NGOs / PBOs / SAPS etc.

Typical Benefits

• Focussed management of area• Pride in communal achievements• Create social responsibility• Environmental awareness (recycling, greening, energy efficiency,

conservation)• Low vacancy rates• Attract new capital investments • Marketing / promoting of area• Increase in property values• All contribute to Budget• Creates confidence in property prices• Decreases the need for private security thus lowers insurance

premiums

Advantages for the communities

• Control over own money• To be spent in own CID only as per approved BP• Appoint own service providers• Everybody contributes (extensive financial modelling to ensure

affordability)• Contributions are capped• Weighted votes and capping• Set own standards / service levels• Pool resources (CCT / NGOs / CIDs etc.)• CCT support (Political representation as observers and officials)• Sub Council ward allocations• No debt management• No administrative fee payable to City• Public money – monitored by CCT• CCT collect additional rates and pay over on budget to ensure

sustainability

Benefits for the Municipality

• Enhanced service delivery• Better relations with the communities• Protection of the rates base• Shifting the rates burden• Combats degeneration of CBD and other areas• Upgrades and improves the area at the cost of the property owners• Attracts investments• Improves cash flows• Creates job opportunities• Improved and sustainable urban management• Stimulates local economy• Can have management contracts with CIDs

Challenges

• Financial impact on individual property owners - model affordability and sustainability

• Possible political interference• If approved by Council then mandatory for all (Democratic process)• Gentrification• Explore models for poorer areas including alternate funding• Guard that Departments do not abdicate services/responsibilities thus

CIDs become primary rather than top-up service providers• Gain co-operation from Service Departments to include CID related

interventions in their SDBIPs iro extended service delivery• Develop suitable SLAs indicating benchmarks for primary service delivery

including turn around times for repairs and maintenance• Educating CID directors on their roles and responsibilities as prescribed in

legislation to ensure compliance and to allow them to focus on service delivery

• Ensuring that CIDs operate ito their mandates and within the law

Establishment principles

• Arrears Profile• Services are specific to the needs of the area (urban management

survey)• Majority support (Area classified as Commercial >50% and classified

as Residential >60%) so mandatory participation• One property = one vote for establishment• NPC will be the management structure• Municipal valuation determines members’ portion (CID additional

rates) of CID budget• CID additional rates collected by the City • Additional rates to be spent in CID only as per approved Business

Plan• Dissolution mechanism (50% plus 1 vote per property)

Establishment Process

• + 2 years to establish• Has 5 year term (apply to renew)• Stringent application of “rules” to protect Council, Community and

Steering Committee against potential litigation• Ensure credibility of model as applied• Each area unique• Driven by property owners• Facilitated by CCT:

- who guides / advises process- Ensures legal compliance

City of Cape Town Role: Pre-establishment

• Compliance- Ensure adherence to establishment process- Includes vetting of Business Plans iro IDP- Submission of application to establish

• Audit consent/objection submissions• Process objections• Compile comprehensive report for Council consideration

Post establishment approval requirements

• 5 year Business Plan (Motivation, Implementation Plan and Budget)• Non-Profit Company (Company and Intellectual Property

Commission registration) • Tax Clearance Certificate• VAT registration• Apply for tax exemption• Board of Directors (portfolios)• Supplier registration• Bank account• Website• Political representation on Board (Observer so no voting rights)• Board meetings and keep minutes• Annual General Meetings

Role of City of Cape Town

Post Establishment

• Compliance- Extension of boundaries- Renewal of term- Legislative Compliance (refer legal framework)- Annual reports- Monthly Expenditure Reports (Actual vs Budget)- Review annual budgets- Annual Financial Statements- Mid year performance review

Relationships

MEMBER

CCT

CID• Mandate to implement Business Plan• NPC membership• Annual approval of Implementation Plan & Budget• AGM (AFS, directors, Annual Reports etc.• Ongoing Communication

• Billing• Receipting• Debt management• Account enquiries / Queries

• Guide establishment process

• Finance Agreement• Compliance• Political representation• Service depts.• Oversight

Realities

• @ risk! (urban management survey prior to pursuing CID)• High arrears profile could mean NO CID• Majority support ≠ Automatic approval• No funding from CCT• No Flat rate / Contributions based on valuations• Municipal top up services only• Can divide community• Can dissolve anytime• Relief (Residential CIDs)• Objections• Stringent establishment timelines• Process must be inclusive of community, transparent and legally

compliant

Role of CID Boards

• Implementation of Business Plan• Compliance with Companies Act (MOI)

- Board meetings- AGM- Audited AFS- Appointment of Directors- Appointment of Auditors- Chairman’s Report / Annual Report- Keep minutes of meetings

• Compliance with SCM Policy- Vendor registration- Appointment of service providers- Renew Tax Clearance Certificate annually

Role of CID Boards continued/…

• Compliance with SARS requirements- VAT and Tax registration- Apply for Tax exemption

• Compliance with SRA By-law and SRA Policy- Financial reporting- Annual budgets with implementation plan- Term renewal applications- Interaction with politician(s) as observers on CID Board- Interaction with Council service departments- Submit Annual Report and audited AFS to Subcouncil- Provide input to IDP and Council budget

• Allocate portfolios to directors• Governance ito KING IV

Role of Service Departments

• Review Business Plan of pending CID iro feasibility and alignment with SDBIPs / IDP

• Review Business Plan of CIDs extending term of existence• Interact with CIDs in respect of services (co-operation, co-ordination

and synchronisation)• Oversight and monitoring of ‘top-up’ services provided by CIDs

Role of CID Unit

• Provide strategic leadership and corporate direction• Co-ordinate, guide, advise and monitor CID functions and processes to

ensure legal compliance• Establish, renew, extend CID boundaries, financial

oversight/modelling/reporting• Review and maintain legislative framework• Point of entry for all matters relating to CIDs- facilitates corporate involvement• Research and develop current and alternative models to include poorer

areas• Catalyst in fast tracking good governance to create safe, clean and

sustainable environment for CIDs to focus on urban management and service delivery

• Facilitate knowledge and best practice sharing between CIDs and City departments via CID/SRA Forum

• Co-ordinate multi-disciplinal approach by including all City role players

Role of Observers (ToR)

• DO’s:– Must receive and review all materials circulated to directors – Attend and participate at meetings subject to ToR– Be familiar with CID Business Plan to ensure alignment with IDP– Serve as link between CID and Administration

• DON’Ts:– Get involved with administration and management of CID– Propose or vote on a motion– Influence CID Board decisions– Chair a Board or sub- committee meeting– Act as proxy for member of the CID Board or sub-committee– Accept any remuneration or re-imbursement of expenses from the CID

• Failure to comply with T0R could cause Observer to be held liable as a director of the CID Board under the Companies Act

CID UNIT acknowledgements

• Acknowledged as national leaders in CID legislative compliance and good governance

• Applies a corporate approach thus breaks down silos• Has a huge customer interface• Enjoys acknowledgement and recognition from existing CID communities in

dealing with them locally and nationally

External interventions

• Other municipalities locally and nationally• USA (Chicago, Milwaukee and Madison), Canada (Toronto), India

(Bangalore), UK (Birmingham), Brazil (Rio de Janeiro) and Germany (Aachen)• Communities (residential and business), Chambers of Commerce• WCG Department of Community Safety• Western Cape Economic Development Partnership• Philippi Economic Development Initiative• International Downtown Association (USA)• World Bank Group• Black Business Chamber- National• C40 Cities• GreenCape• 39 existing CIDs• NT, DCOG, SAPOA (South African Precinct Management Initiative)

Statistics

• 39 existing CIDs, 4 new established 1 July 2017 • CIDs cumulative spend since inception: R1,5Bn• CIDs cumulative arrears since inception: >30 days R15,9m;>60 days R13,1m• CIDs cumulative retention balance (VAT incl) since inception: R40m• CIDs budgets 2017/18 : R199m• 12 months moving average payment ratio: 100,3% as at 30 June 2017• Communities pursuing establishment: 16

Statistics

• 41 existing CIDs, 2new established 1 July 2018• CIDs cumulative spend since inception: R1,5Bn• CIDs cumulative arrears since inception: >30 days R13,1m;>60 days R10,7m• CIDs cumulative retention balance (VAT incl) since inception: R40m• CIDs budgets 2018/19 : R217m• 12 months moving average payment ratio: 99,4% as at 30 June 2017• Communities pursuing establishment: 35

Establishment of CIDs per year

Contact details

• Eddie Scott (Manager: CIDs)– 021 400 1872– 084 244 5824– Eddie.scott@capetown.gov.za

• Joepie Joubert (Head: CIDs)– 021 400 5138– 083 258 4365– Joepie.Joubert@capetown.gov.za

Questions

Thank you

MPRA: Section 22

• Local Authority can determine Special Rating Areas in consultation with local community

• Additional rates for additional services (top up) within that area• The SRA can be administered by Council or community

Section 22- SRA

Part 4: Additional ratesSpecial rating areas22. (1) A municipality may by resolution of its council—

(a) determine an area within that municipality as a special rating area;b) levy an additional rate on property in that area for the purpose of raising funds

for improving or upgrading that area; and(c) differentiate between categories of properties when levying an additional rate

referred to in paragraph (b).(2) Before determining a special rating area, a municipality must—

(a) consult the local community, including on the following matters:(i) the proposed boundaries of the area; and(ii) the proposed improvement or upgrading of the area; and

(b) obtain the consent of the majority of the members of the local community inthe proposed special rating area who will be liable for paying the additional rate.

(3) When a municipality determines a special rating area, the municipality—(a) must determine the boundaries of the area;b) must indicate how the area is to be improved or upgraded by funds derived from the additional rate;

Section 22- SRA continued

(c) must establish separate accounting and other record-keeping systems regarding—

(i) the revenue generated by the additional rate; and(ii) the improvement and upgrading of the area; and

(d) may establish a committee composed of persons representing the communityin the area to act as a consultative and advisory forum for the municipality onthe improvement and upgrading of the area, provided representivity, includinggender representivity, is taken into account when such a committee is

established. Such a committee must be a subcommittee of the ward committeeor committees in the area, if the municipality has a ward committee orcommittees in the area.

(4) This section may not be used to reinforce existing inequities in the developmentof the municipality, and any determination of a special rating area must be consistent

with the objectives of the municipality’s integrated development plan.(5) This section must be read with section 85 of the Municipal Systems Act if this

section is applied to provide funding for an internal municipal service districtestablished in terms of that section of the Municipal Systems Act.