When Boris Yeltsin said it was time to stop experimenting on Russians, Mayor Yury Luzhkov either wasn't listening or figured Muscovites were an exception.
On Sept. 4, Luzhkov unveiled his latest experiment the privatization of land management functions in the Vykhino-Zhulebino neighborhoods of southeastern Moscow. While it may not sound as exciting as the city's first-ever land sale, slated to take place in Zelenograd next month, it may in fact be much bolder.
Whoever wins the tender will receive all the rights and responsibilities of managing city- and state-owned property in Vykhino-Zhulebino, including residential and non-residential buildings, parks, roads, sidewalks and sanitation infrastructure, with the exception of police and public-safety duties, which the city will keep for itself.
Those who have paid extra close attention over the last decade will remember that this whole idea isn't new, according to Marc Bartholomy, an attorney specializing in real estate at Clifford Chance Puender in Moscow. Back in 1993, the city government unveiled the legal basis for this kind of tender; in 1995 it issued an order saying that such tenders for the entire city were to have been held by 1998. Obviously, that didn't happen.
Among the responsibilities to be handed over are:
managing and organizing technical documentation;
maintaining all of the property, including roads, sidewalks and infrastructure;
negotiating rental contracts;
representing the city in negotiations with condominiums and neighboring landlords;
collecting rents and fees and organizing and paying for communal services;
bringing new buildings into use.
Excited? Well, maybe you should be. After all, when the Zelenograd sale goes through, Russia will finally have done something others have been doing for ages. But when this tender happens, Russia will be forging into territory most of the world hasn't yet explored.
People, especially U.S. conservative people, have suggested privatizing land management for years. The cries have been loudest in major cities, like New York and Chicago, where city-run public housing projects are cesspools of poverty and crime. But it mostly hasn't happened because there's very little profit to be made maintaining a slum, and very few companies that want to try.
There's another reason things like this haven't been tried, which is that private companies often have not delivered on their promises of free-market efficiencies, even in the freest of markets. Many American cities, for example, have tried privatizing garbage collection, only to find that fees went up and service went down.
Indeed, the closest the West has come to something like this may have been an obscure experiment in the British town of Croydon about six years ago. At the time, the local council was selling off about 50 million pounds worth of property, all to one buyer. Simultaneously, it decided to hand over some of its property management functions for some of its remaining non-residential buildings over to the same company, according to Ian Bingham, associate director of DTZ in Croydon.
"It's probably a fairly modest thing in global terms," Bingham said. "There have been no major problems with it. The council seems to be satisfied with it. They just renewed the contract."
But that experiment wasn't nearly as broad as Luzhkov's, in which nearly everyone who lives or runs a business in the neighborhood will spend a fair amount of time dealing with this company, even if only waiting for them to fix a leaky roof. And, as DTZ Moscow's Amanda Spring points out, this isn't Croydon. It's Moscow.
"I think it would be very, very difficult to privatize those functions here," she said. "It would need to be so well monitored to avoid corruption and so on. I'm sure land management could be made more efficient, but unfortunately self-interest is still a major problem in Russia."
An 11-person commission of city officials will keep an eye on the winner, making monthly reports back to the city. Whether that is enough to keep things honest is unclear, though that's not to say that things are honest now.
Exactly when this will all take place is also unclear. Luzhkov's decree calls on the local administration to draw up a potential contract for handing over its duties within a month. Presumably it could be signed by a lucky winner soon after that. But officials at the Moscow International Tender Center said the contest hasn't yet hit their calendars.
In the meantime, some food for thought: The preamble to the mayor's decree on this issue says that this is part of an effort to increase competition through the city's program to reform its property system. But that begs the question: What else may soon be up for grabs?
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