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. Last Updated: 07/27/2016

City Draws Up Charter for Managing Property




More than three years after deciding that it needed to spell out the what, how and why of managing its massive property portfolio, the City of Moscow has finally created a charter to lay down the rules for managing what it owns.


Moscow City Hall owns a stunning number of properties. The city controls 36 million square meters of commercial real estate in the capital - almost half the official total amount of 89 million square meters - and has a stake in some 540 private companies.


It also has several properties located in other Russian regions and even abroad, officials said Tuesday.


The first step the city needs to take is simply figuring out exactly what it does own. Although different city departments have their own lists of properties, no unified registry exists.


"As of today, we don't even know the market value of the stock we own," said Vladimir Avekov, deputy head of the city property department and one of the authors of the "Concept for Property Management by the City of Moscow Until 2005," a 45-page document presented to a Moscow city government meeting Tuesday.


"This is a primary issue: We obtain all this stock. Why are we doing it?" said Yury Roslyak, head of the city's economic and long-range planning department, which also participated in writing the document.


The concept must now undergo another review and faces a second reading before the city government in a month. If the city government is satisfied with it at that time, it will probably be forwarded to the City Duma.


The document sets four main goals for city property management over the next five years: creating a unified city property registry, establishing a city treasury that would control all the property, building a unified data base describing the city holdings, and managing the holdings so as to increase the income generated for the city from its property.


In 1998, the city budget received 7.5 billion rubles ($308.6 million) from city holdings, Avekov said.


However, money from city properties often flows past the city coffers and straight into bureaucrats' pockets, said several city officials, all of whom declined to be identified.


Despite such concerns, Tuesday's two-hour discussion on the plan went by without a word being said on the need to eliminate graft in order to maximize the city's revenues from its property.


The creation of a registry should increase the city's ability to use its property as collateral for future borrowing, officials said.


"What we need today is not another inventory, but a systematic classification of the property we already have recorded in different uncoordinated balances," Roslyak said.


In the early days of privatization, Moscow Mayor Yury Luzhkov managed to convince President Boris Yeltsin to allow the city to develop and run its own privatization plan. In recent years, the city, which already owns real estate and has been the major player in the Moscow construction boom, has been expanding its industrial holdings.


Among other steps for increasing city property revenues, the concept calls for cutting down on the number of entirely municipally owned companies, such as city-run public transportation company Mosgortrans, many of which gobble up large amounts of city cash in the form of large subsidies.


The city already has 1,200 municipal companies, Roslyak said. In 1998, a total of 166 new municipal companies were formed. City officials said that this was a worrisome tendency because many of these companies are run ineffectively because there are so many of them to be supervised.


"In 1999, we suggest halting the unjustified increase in the number of municipal companies," Roslyak said.


In the future, he said, the city should create municipal companies only for specific projects and set strict financial performance requirements that would make it easy to fire ineffective managers and close down loss-making companies.