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. Last Updated: 07/27/2016

City Budget Reaches $30Bln on Petrotaxes

Moscow City Hall intends to boost spending by 14 percent next year in a budget heavily dependent on oil and gas revenues.

City legislators on Thursday presented a draft budget of 805 billion rubles ($29.9 billion) that aims to nearly double the municipal salaries and includes investments in metals in Smolensk and land in Bulgaria.

The city expects to collect 700 billion rubles ($26 billion) in revenues, largely from oil and gas companies such as Gazprom and LUKoil, and from banks, Igor Antonov, chairman of the City Duma's budget and finance committee, said at a news conference.

Gazprom alone will contribute some 60 billion rubles ($2.23 billion) to the city coffers next year through profit tax, a tax on its real estate, and its Moscow employees' income tax, said Antonov, a member of United Russia.

Payments from oil and gas companies, and by their employees, will account for 40 percent of the city budget, he said.

Such dependence on crude reserves is "exceptionally high" and shows lack of economic diversification in the city, said Sergei Mitrokhin, a budget committee member from Yabloko.

"It is incorrect that many people talk about the success of Moscow's economy," he said by telephone.

Bank revenues are also up largely due to an influx of oil and gas money, said Vladimir Ulas, a Communist member of the budget committee.

In what also irked opposition lawmakers, the city plans to take out bank loans and sell property to cover the 105 billion rubles in deficit.

Ulas said Moscow would spend 17 billion rubles ($632 million) on servicing its existing debt next year. The amount is nearly double of what the city will spend to support families with children, he said.

City debt is expected to grow from this year's 88 billion rubles ($3.27 billion) to 190 billion rubles ($7.06 billion) in 2007, Antonov said. The growth may be less substantial if projected revenues increase, he said, adding that legislators were looking for ways to boost revenues by 50 billion rubles ($1.86 billion).

One way to boost revenues would be to reconsider the performance of Gazprom, Mitrokhin said. Budget revenues are now based on the assumption that Gazprom's profit will be 10 percent lower than this year, he said.

The budget stipulates a 40 percent raise in the salaries of municipal-paid workers, including those of bureaucrats, teachers and doctors, Antonov said.

This year's budget also funded large salary hikes, but next year's increase would be slightly higher.

It may, in part, be an attempt to please voters ahead of next fall's State Duma elections, Mitrokhin said.

He and Ulas, however, said the increase should be even higher.

Spending will increase little for Moscow's 2.5 million pensioners, Ulas said. About 1.9 million of them will scrape by with as little as 3,500 rubles ($130) per month, he said.

Mitrokhin questioned proposed city investments into milk and cattle farms in the Kaluga region, metal works in the Smolensk region and granite pits in other regions. The plan to buy a land plot in Bulgaria is also puzzling, he said.

Further details about the investments were not immediately available. The city, however, does own property in other countries, including in Georgia.

Liberals in the City Duma supported the budget in its first reading last week, while Communists voted against it. The second reading is expected on Oct. 25.

The budget is one-seventh the size of the federal budget, whose spending is to increase by more hefty 28 percent next year. Moscow's proposed $29.9 billion budget is half of New York's budget of $52.9 billion for next year.

Moscow's revised 2006 budget has expenditures of 704 billion rubles and revenues of 614 billion rubles, Mitrokhin's office said.