Nizhny Novgorod Mayor’s Office Selling Municipal Property for a Song

Nizhny Novgorod Mayor’s Office Selling Municipal Property for a Song


Residents of Nizhny Novgorod, Russia’s fifth-largest city, had barely emerged from the long New Year vacation when a yet another scandal started unfolding around a resolution of the city mayor, Vladimir Panov.

The local authorities published the resolution signed by Panov that grants priority rights to ООО Pokrovka in buying out twelve of twenty-five shares in the right of shared ownership of a nonresidential premise with the floor space of 235.9 sq.m, located at 14, Nizhne-Volzhskaya Embankment. The aforesaid legal entity is leasing the facility at present.

It looks like everything has been done properly and lawfully. The problem is the Mayor’s Office has estimated the value of shares belonging to the city at 5,579,120 rubles (around $ 88,557). In other words, OOO Pokrovka, a limited liability partnership, is about to get the ownership right for almost as little as 19,400 rubles (around $ 308) per sq.m. Note that the site is located in  the very downtown of the highly picturesque city, by the foot of the hill on which the Nizhny Novgorod kremlin stands, on a busy street. The real estate sold off by the city authorities is listed among the assets of the N.A. Bugrov House regional cultural heritage site. Nothing similar to it is on sale in the neighborhood. Add to it that the price of a sq.m of floor space for the premises of this type in Nizhny Novgorod ranges from 50,000 to 60,000 rubles.

Vladimir Bulanov, a deputy of the Nizhny Novgorod legislative assembly, is puzzled by this show of sporadic largesse. “It’s important to understand what OOO Pokrovka is in reality, but anyway there is no such price as 20,000 rubles per sq.m,” he says, adding that he hopes to get answers to his questions and to scrutinize the situation. Bulanov admits along with it that the business people based in Nizhny Novgorod are no moneybags, but still there is no reason to sell municipal real estate for a song. He recalls the case of the regional minister for ownership Alexander Makarov, who was sentenced for selling properties dirt-cheap, and he believes the incumbent city officials risk finding themselves behind bars, too, unless they revise their stance on the issue.

Nizhny Novgorod region’s Industry, Trade and Entrepreneurship Minister, Maxim Cherkassov, said the list of municipal properties to be offered to small and medium-sized businesses on the territory of the region included 1,337 positions as of the beginning of 2020, and 18 percent of them were land plots.

“Properties are leased at discounted rates for no less than five years,” he said. “Besides, the businessmen have an opportunity to buy them out. A relevant decision should be taken by the authorities of a municipal district or urban district where the facility is located.”

The municipal and urban district administrations upload the lists of such facilities on their websites, while the list of objects owned by the regional government can be found at the website of the regional ministry of ownership and land relations.

And what about the lucky one, OOO Pokrovka? Inquiries have helped find out that its sole founder and digector general is Ms. Lyudmila Podvolodskikh. She does not stand out from the crowd, and the only peculiar fact is that Pokrovka is the only operational business entity out of the four she has organized and been director general of. The other three companies have engaged in variegated activities from the removal and treatment of wastewaters to the leasing of overland vehicles.

If you trust the information for 2018 from the regional branch of Russia’s Federal Tax Service, Pokrovka’s business operations are not especially successful. Its budget payments of the profit tax were zero rubles and payments of the single tax on imputed income were zero as well. This is a stark result, considering that the spheres of the company’s business activity registered at the Russian National Classifier of Types of Economic Activity embrace tourism, manufacturing of paper and cardboard products, hospitality industry, household appliances repairs, laundry, textiles and furs cleaning, in addition to the leasing and management of its own and rented nonresidential properties.

Pokrovka’s registered capital, which is 10,000 rubles ($ 159), also conforms to law. Neither the company itself nor its owner Ms. Podvolodskikh have any wrongdoings on record. Nor does she have any high-rank family members. Just a middle-of-the-road business owned by a rank-and-file businessperson.

Still, the question of why these special preferences have been bestowed on her remains unanswered, especially since there was no bidding contest. Something prompts that, in spite of the knotty economic situation in the country in general and in Nizhny Novgorod specifically, those willing to obtain the obviously captivating piece of property for more than 19,500 rubles per sq.m could be found somehow. Another question is, does the city budget not need any revenues from the sales of municipal properties at all? Especially on the background of the 2019 budget deficit of 1.735 billion rubles ($ 27.5 million).