Government resorts to real estate portfolio in ongoing bid to raise cash
The Spanish state is aiming to offload 27 percent of its current assets
Among the 252 pages of administrative reforms that the government so ceremoniously announced recently, there are a lot of good intentions, as well as a few pragmatic proposals that will bring in some much-needed funds in the short run.
One of these proposals is the sale of a sizable chunk of the state's properties and the rental to farmers and local or regional governments of part of the 1.1 million hectares of rural land it owns.
The government has announced that it will put 15,135 properties on the market, which is 27 percent of the state's real estate assets, according to the latest inventory from 2011. The report also states that the authorities want to reduce the physical space used for administrative purposes by as much as 20 percent, bringing the worker-to-office-space ratio closer to the levels of the private sector. By doing so, the state will free up even more square meters, which it can then sell or rent out.
The initiative to sell off state-owned properties could end up like a flea market
The government says that these transactions will "convey confidence and credibility to citizens." The ruling Popular Party (PP) made government reform one of its campaign promises before the November 2011 elections, reflecting an insistent demand by the CEOE employers' association as well as a majority of citizens. Prime Minister Mariano Rajoy has called this effort "the most detailed X-ray ever made of our public sector in the history of democracy."
The head of the government also said he wanted to "put an end to a long-standing myth regarding the size of our public administrations: Spain is one of the euro-zone countries with the lowest public expenditure, 43 percent, which is six points less than our surrounding states. Our main problem is the huge drop in revenues."
Fewer observatories, agencies and foundations
An end to ombudsmen?
The word "elimination" shows up a total of 37 times in the report Reforma de las Administraciones Públicas (Public Administrations Reform), which the government approved at its June 21 Cabinet meeting.
The document includes a long list of proposals aimed at recentralizing the state and thus saving money by dispensing with a great many advisory bodies, foundations and agencies with somewhat vague missions that are not considered crucial to either regional or local government.
Some of the recommendations include getting rid of regional airport inspection bodies, all 15 education center management platforms, agreements with Andalusia and Catalonia over scholarship management, and the regional registries for cattle ranchers.
The report also found little use for the 16 regional employment observatories, as well as the Health Observatory, the Women's Observatory, the Climate Change Observatory, the Madrid and Extremadura Racism Observatories, and the Tourism Observatories of Catalonia, Valencia and the Balearic Islands, which will be merged with the national tourism agency Turespaña. Another 40 energy management agencies will become part of the Institute for Energy Diversification and Savings.
Furthermore, the government wants to get rid of the 11 existing regional ombudsmen, the regional "information society" observatories, the Galician, Catalonian and Basque weather services, the Naval Construction Industry Management Center (and its dependent agencies), and up to 10 foundations that will merge with the appropriate ministries. Chief among these are the Iberoamerican Foundation, the AENA Spanish airports authority Foundation and the Spanish Railroad Foundation (the latter two will become part of the Transportation Foundation). On the artistic front, the National Choir of Spain and the Choir of Teatro de la Zarzuela will join the RTVE choir, and a single group will be tasked with hiring advertising campaigns for all the ministries.
But with a depressed real estate market, which is already being flooded with the banks' enormous housing stock, the initiative to sell off state-owned properties could end up looking more like a flea market than an institutional divestment drive. So in order to avoid disaster, the government is being deliberately vague about just how this operation is going to be conducted. It has given itself a 2020 deadline, but failed to mention whether the properties will be sold through public competition or at auction. It also did not include a basic element in its report: just how much it hopes to make from these transactions. Between January 2012 and May 2013, the state sold properties for a value of 88.5 million euros.
The public agency with the largest real estate portfolio is the Defense Ministry's Housing, Infrastructure and Equipment Institute, which has 8,170 properties to its name. On Thursday, this body will put up for sale 47,000 square meters of the Quartermaster Barracks in Seville, with a price tag of 8.3 million euros. It is also selling a 190,000-square-meter property in Palencia, which is classified as rural land with a protection level that allows leisure activities such as outdoor sports and camping. Additionally, it is trying to get rid of 900,000 square meters' worth of a shooting range in Bando, just a few kilometers from Santiago de Compostela airport, where developers could build homes and hotels.
The properties for sale come in a variety of shapes: there is the Menorca airfield, with a 1,800-meter landing strip and a total surface area of 746,000 square meters; or an estate in Badajoz with no fewer than 1.2 million square meters.
After the department of Defense, the General Directorate of National Heritage, which answers to the Treasury, will take the second-largest amount of assets to market: 5,107 of them. The next biggest sellers are ADIF, the railroad authority, with 1,514 properties; the Social Security Treasury, with 117; and the postal service.
To avoid saturating a flat-lining market, the state will have to tread carefully. To do this, it will have "specialized technical assistance," although the report did not specify which company would be providing this help.
Another stated goal is rent reduction, one of the measures that the Treasury says has yielded the "fastest, most visible" results. Since January 1, 2012, 332 rentals have been renegotiated out of 1,405 existing leases, bringing savings of 61 percent on initial expenses. The ministries, the Audit Court and the Constitutional Court, together with their dependent agencies, have a collective budget of 163.8 million euros this year for building and lot rentals. Other public bodies have 221 million euros more for the same purpose. Better planning could bring significant savings: since 23 percent of buildings used by public agencies for administrative purposes are being rented, it makes no sense for the state to have so many properties sitting empty.
Measuring the same weather
On the outskirts of Sant Pau de Segúries (Girona), near the side of the road, there are two white sticks jutting out of the ground. They might look like lightning rods, but they are actually two weather stations. They are barely 40 meters apart, and both are run by public agencies. One was installed in 1997 by the Catalan weather service, SMC, and the second one went up in 2009 courtesy of the Aemet national weather agency, explains Oriol Puig, director of the Catalan agency.
This is one of the examples of redundancy that Prime Minister Mariano Rajoy was talking about last week when he discussed the need to eliminate superfluous government expenses.
Puig admits to the redundancies, but blames the central government for them.
"In 1997 we began to set up weather stations, and in many cases, like Sant Pau de Segúries, Aemet got here later. So let them take theirs down," he says.
In fact, the Catalan weather service chief has identified 11 spots with dual weather services that represent "a minimum initial cost of between 195,000 and 208,000 euros, and that's without considering all the maintenance costs."
The Catalan weather service existed between 1921 and 1939, and was resuscitated again in 1997. It now employs 70 people and runs on an annual budget of 5.5 million euros. Meanwhile, the national service Aemet has 1,400 people on the payroll and 98.5 million euros to spend each year. This agency has 64 people working in Catalonia, and their tasks include aeronautics projects that the Catalan service does not provide.
Alejandro Lamas, spokesman for Aemet, is in favor of a single national meteorology service. "Even in federal states this [service] is unified, not just to save money but also to ensure that there is a single emergency alert system, and for purposes of international representation."
But it's not just Catalonia. The northwestern region of Galicia has had its own agency, Meteogalicia, since 2000. It employs 25 people and the regional government explains that it provides specific local services such as forecasts for fishermen associations. The network has 149 dedicated weather stations, including buoys and lightning detectors. Regional premier Alberto Núñez Feijóo - also of the Popular Party, like Mariano Rajoy - says he has not yet decided what to do about Meteogalicia following the prime minister's call to streamline these services.
Although issuing extreme weather alerts was not part of its original job description, these days Meteogalicia has taken on this task as well. So has the Catalan agency, SMC. And quite often, the regional agencies' forecasts do not coincide with Aemet's. Sources who participated in the creation of Meteogalicia explain that contact with Aemet has been kept to a minimum because of the national agency's mistrustful attitude.
"At least Meteogalicia answers all calls and it talks to the press; Aemet doesn't even bother picking up the phone," said one source.
Meanwhile, in the Basque Country, Euskalmet has a network of 110 weather stations, 40 employees and an annual budget of 2.5 million euros. "For every euro that the Basque government spends on this public service, thousands of euros are recovered in terms of resource optimization and the minimization of material damage. It is not a regional whim, but an essential management tool, especially in the case of emergencies," writes the service chief, José Antonio Aranda, in an email exchange. He denies there is a duplication of services with Aemet.
All the regional meteorological services were similarly critical of Aemet's slow, opaque ways (not to mention the fact that it is once again charging for a lot of its data). This was cited as one of the reasons for the creation of their own system.
"Aemet is a pachyderm. We have a hard time getting it to provide data to the university, and our alert bulletins are more detailed than theirs," says Puig.
Although Madrid wants to eliminate regional agencies, it will not be an easy task. While the Spanish Constitution establishes that the meteorology service falls exclusively to the state, regional charters say something similar for each particular region, and nobody to date has questioned their constitutionality.
"We have a Meteorology Law from 2001 that was never appealed in the Constitutional Court and that establishes that this [service] falls to the regional authorities," says Puig, who insists that the only solution to prevent the duplication of work is for Aemet to pull out of Catalonia - or at least shut down the weather stations it installed next to the Catalan ones.
An industry source explains that nobody wanted to deal with the legal discrepancy even though they knew it was there. "Now they are asking us technicians to come to an agreement, but this is a political problem."
