People In The Know: No Free Space Left

In October the federal government held a session where property disputes between the federal authorities and the Moscow city government over some of the historic monuments flared up anew. What is the long-standing conflict about?

In 2002 the federal law on the protection of historic and cultural heritage was adopted. Article 42 of that law reads that regardless of the degree of protection monuments enjoy, they can be federally, regionally, municipally or privately owned.

Today the federal authorities cite decree No. 3020 of the Supreme Council of the RSFSR, signed in its time by the Presidium of the Supreme Council then headed by Boris Yeltsin. The decree outlined a list of properties the Russian Federation would inherit from the Soviet Union, with what was hastily defined as monuments of federal importance included in that list.

That document was then forgotten only to be remembered by the Property Ministry and the Ministry of Culture of the Russian Federation in 2000. By that time the titles to monuments were already held by regional authorities; many buildings were partially restored and generally put in order. It became clear [to the federal authorities] that they could take back those monuments and use them. And that was when the conflicts began.

By that time the titles to those architectural monuments, despite their federal importance, had been registered by the Justice Ministry, and they were transferred to our agency – the Main Directorate for Protection of Monuments – for day-to-day management. The owner – the city of Moscow – was allocating funds for the restoration and maintenance of those buildings, because the owner bears responsibility.

You see, they have started confusing the importance of a monument with its ownership. Importance means the category, cultural and historic value of a monument. Ownership can be held by a certain region of the federation as stipulated by Article 42 of the federal law.

At the moment the issue remains unresolved. The Constitutional Court is currently examining the lawfulness and expediency of the [Supreme Council’s] decree. It is at odds with several articles of the effective Constitution, the Civil Code, and a number of recently adopted legal acts. By the way, for many Russian regions this issue is even more sensitive than for Moscow.

And why is that?

At a government session Finance Minster Aleksei Kudrin and Culture Minister Aleksandr Sokolov were asked how many monuments of federal importance there are in Russia. There are 36-38,000 such monuments in the country. But the federal government, according to Kudrin, cannot afford to maintain more than 1,000 to 1,500 monuments. Moreover, budget funds would only be sufficient to conserve those properties, not to restore them.

Each day several monuments in this country perish. Aleksei Komech, the author of the Black Book [containing a list of historic buildings already destroyed], claims that about three disappear daily, though some believe that figure is less. All that is the result of a lack of financing.

The Minister of Culture said that monuments should be transferred to the regional authorities, so that, for example, the Arkhangelsk Museum Preserve should be taken care of by the authorities of the region where it is situated, not by some Moscow official. And then, only 5 per cent of the monuments could be privatized.

Why only 5 per cent?

The rest is of no interest to anyone. I will cite an example. 40 kilometers outside Moscow there is the Otradnoye estate that belongs to the city. We have been trying to lease it out for two years now, inviting bids, offering preferential terms… All in vain.

In Moscow, too, there a large number of monuments, which are of no interest to anyone even though they have undergone reconstruction. All the tasty morsels have already been sold. After that it is absolutely impossible to sell archeological, cultural monuments, churches or small properties of 100 to 150sqm.

The St. Petersburg authorities, too, originally planned to privatize their monuments. But the project failed because very few took an interest in such properties. At any rate, the maintenance of such buildings ought to be financed by the government – either from the federal or regional budget.

The federal government does not claim ownership of all the monuments of federal importance. Which monuments do they want to take over?

They claim only those that can be leased out. Of course, they are not interested in any encumbrances. They are not interested in archeology, museums, the Sklifosovsky Institute or city hospitals that are also included in the list of monuments, or the hospital of Doctor Roshal, currently being restored by the city government.

Does that mean the federal authorities have carried out a kind of audit?

They have picked out about 840 monuments that can be leased out, sold and thus make a profit. That figure was announced at the government session. The Minister of Culture said: “If we sell everything that we are trying to sell, budget revenue will, at best, be an amount equivalent to a 5-year rental payment.” Incidentally, in Moscow when monuments were privatized the city budget only received an amount equal to a 2-year rental payment.

How many historic buildings in Moscow can still be sold?

About 150 monuments out of the existing 7,000 have been privatized. We believe it is possible to find owners for another 200 or 300. But nobody seems to be especially keen on that.

Have you managed to find investors for the Durasov Palace in Lyublino?

The palace was put up for tender twice, but no one is interested. No one is even interested in taking it for free.

Is that because of the expensive maintenance costs?

Yes. Land, rent, maintenance costs, etc. It has to be permanently maintained, and those costs are so high that only some major oil or gas firm could afford it. But those types of companies want central locations.

What is happening to the Petrovsky Palace?

That project was considered a commercial one, but it attracted no investors. The 50-room deluxe hotel will never pay for itself, nor will the small restaurant that is being built there now. That is why the palace remains city property financed solely from the budget.

Of course, monuments have to be transferred to the city authorities, and the Minister of Culture insisted on that when addressing the government session. The establishment of independent executive agencies in the regions was suggested at the session, with the Culture Ministry delegating powers to them.

Why are such agencies necessary?

And who else will protect monuments in the regions? Who will address archeological issues, coordinate all the work? In Soviet times an effective system was established, but it fell apart. Such a system has to be built, or else our heritage will soon be looted, there will be no restoration, the sector will disappear altogether. The buildings age and just like an old man they cannot become a 15-year-old again; they require support and maintenance.

How much do you earn by leasing out monuments?

The best part of 300 million rubles a year. That is clearly not enough and the city provides most of the amount required for maintenance. Besides, the exorbitant rates would ward off tenants. In other counties the owners and tenants of historic buildings are exempt from many taxes.

Are such privileges offered under Russian law?

We called for the adoption of regulations to that effect, but our initiative was rejected. Minister for Economic Development and Trade German Gref strongly opposed it, in fact, he rejected all our drafts.

What was the essence of your proposals?

The owners or tenants always have to carry out some work, work that creates inconvenience and is costly. Installing standard window panes may be easy, but ordering sophisticated woodwork is quite another matter. The same is true for parquet floors, doors, etc.

We lobbied for legislation granting the owners and tenants tax exemptions and large discounts on rental charges, suggesting that maintenance and restoration costs should be included in the rental charges. But unfortunately, that draft received no backing.

What do you think the chances of the federal government of winning in the Constitutional Court are?

The Constitutional Court will examine two issues. The first one concerns decree No. 3032, the second is about compensating Moscow for the expenses the city incurred while restoring historic monuments. But the federal budget cannot afford that.

Let’s assume the federal authorities take over 40,000 buildings, churches, archeological sites, museums, etc. What will they do with those properties? They will transfer them back to the regions. Some properties they will keep for themselves. Those buildings will already have been leased, with tenants entitled to prior purchase. Or, someone will have to buy a building with leases in place, though few buyers would be willing to do so.

Let us assume that tomorrow GUM [department store] is put up for sale. Who will buy it? It is too large. Plus, reconstruction would require another $100 million. The flooring and communication lines need to be changed. Everything leaks there, because it was built way back when.

The federal government thinks they will take over those properties and sell them all tomorrow. But that is just an illusion. It is difficult to find tenants. GUM is unprofitable; it is a prestigious venue, but the number of visitors is not very high.

So, you think that in the long run all those property disputes will come to nothing?

Yes… The same goes for Passazh and TsUM [retail centers]. And, of course, many monuments cannot be sold. How can you sell a museum? Archeology is federally protected. Once such sites are sold so-called black archaeologists will come along, dig everything out and sell it all abroad.

To begin with, regulations governing the restoration of monuments have to be drawn up. It has to be decided what needs to be protected – a fa?ade, the interior or something else, so that when an investor arrives he is told – you have to protect the interior, the lions at the entrance, the wooden staircase. All the rest you are free to rebuild the way you want. Then the investor signs a pledge of protection and after that he can take over the building.

To begin with, what has to be protected should be defined and only then can privatization be carried out. So far, there are no such registers anywhere in Russia. Moscow is capable of preparing one within two years – we have the documentation.

For example, look at the Loire Valley castles in France. They were all placed under protection and then privatized. There are scores of castles there today. The owners enjoy considerable privileges, and this enables them to maintain those castles and invite tourists. We could follow the same example.

All the properties in Moscow are subject to privatization through tenders. How are tenders for historic buildings organized?

Today finding an empty monument in Moscow is difficult. Most of them are already occupied. For example, an investor wants to build a new property of 50,000sqm on the site. But there are already two buildings occupied by tenants. We offer them to take part in the tender. If they renounce their right, the site is put up for sale and the winner takes over both buildings with the leases in place. Sometimes, investors are obliged to finance the restoration of monuments.

Who finances the restoration of architectural monuments?

For the most part, the investor-tenants.

Are such properties put up for tenders?

Most monuments have been restored, or the process of preparing the necessary paperwork is ongoing. There are no more vacant sites, as such.

Does that mean that all the profitable sites have already been bought up?

They have long been taken over by investors, houses have been built, other facilities. Finding a land plot to build on there is almost impossible.

And what about non-liquid properties? Are they offered for sale through tenders?

They may be included in large investment projects as an additional obligation for investors to assume. For instance, a large shopping center is being built, and there are two historic monuments in the vicinity. As such, they are of little interest to anyone. So they are included in the project, with the investor undertaking to restore them.