Voters have got used to the fact that once in every four years their opinion becomes extremely important, yet some decisions that should be made purely on professional grounds just do not make any sense to them. It is unclear whether the city and the district do their business having economical issues in mind... ... (obviously not entirely, because their income mainly comes from taxes paid by citizens and local entreprenours) or they operate just as a redistribution office. There were two real estate development decisions in 2009 that certainly deserve to be recorded in the annuals in this respect, and both of these `Gordian knot` issues are related to Budapest, Zugló district.
One of the two cases was the building of an international-quality congress centre, where there is a standstill for 10-15 years. Last year it seemed that there would be some progress in Zugló. Interestingly though, and contrary to international practice, neither the city nor the municipality nor the state wanted to take part in this development – a development that is justified on professional grounds- , regardless the fact that the majority of the income would go to the city and to the state, and not to the actual congress centre. Unfortunately, the case did not show any progress on the administrative side either. There is a nearly one-and-a-half years delay in the legal process which resulted in pushing the whole project into much less favourable financial circumstances due to the economic recession.
Financial estimates show that the yield would be four times as much as the investment, meaning that the Hungarian state budget could enjoy a surplus of 340 Bn HUF from this project each year. This amount is one third of the current total tourism income paid by foreign visitors. VAT in itself would amount to 68 Bn HUF. It is a usual international practice that 10 per cent of this amount is re-invested in the marketing of the congress activity. It is wroth to be noted that this 6.8 Bn HUF would be more than Hungary`s total national marketing budget for tourism.
We do not have to travel very far to find our second example: Bosnyák square, the heart of the third wealthiest district in Budapest. According to the latest surveys the area surrounding the Bosnyák market is the most littered place in the district, and is causing endless problems for the Emergency Information Centre of Public Area Supervisory and the District Protection Authority.
The district - as a recently published analysis points out as well – has an unusual opportunity by having access to three of the four underground lines of Budapest (the fourth line is already in the building phase). The 4th underground line is a much needed development as there were plans since the 1970s that Bosnyák square (earlier even Újpalota was included in the plans) would be integrated to the `pulse` of the city.
It is a most unpleasant turn of the events therefore that by the end of October some rumours in the press suggested an alternative that the East Railway Station (Keleti pályaudvar) could be the last station and the new 4th underground line would never reach Bosnyák square. This alternative was based on an analysis that seemed to come to the conclusion that the investment would not be profitable, so analysts believed that the EU would not support the project with a subsidy. However, Bosnyák square plays a very important role in the development plans of the municipality.
There was an open tender, and the land was bought - not by a Bosnian (`Bosnyák` in Hungarian) but a Polish developer – with the aim of building a new town centre there. Regardless of the crisis, the company made significant investments in the Hungarian market (the value of the owned real estate is exceeding 1 Bn EUR).
It was the 4th underground line that raised the interest of the developer in this project in the first place, especially that the planned final station was close to Bosnyák square. If the underground will not reach the planned new district centre indeed, it would mean that the estimated figures of value increase that were calculated 3-4 years ago during the valuation of the sites and other properties associated with the planned development are not realistic.
Based on a recently ordered new valuation, real estate professionals point out that these properties would worth approximately 30 per cent less without the underground. The question remains, how would voters accept this decrease in value, or more precisely, how would they accept the lost profits. (The same question relates to the real estate developers and other interested parties, as well).
The developer of the Zugló district centre has gradually become the target of political and media attacks. It seems that winning the EU open tender in 2006 and the continual behind-the-scenes efforts to reach an agreement were in vain, the 50 Bn HUF development suffers further delays, Zugló could lose several hundred million HUF tax income, not to mention the nearly 1,000 new jobs.
The above list is not complete obviously but there is is an interesting question from the viewpoint of the voters and taxpayers: who will reimburse the city and the district for the missing income that resulted from these hard-to-justify (professional) decisions, and who will fill these gaps in the budget? Voters, the taxpayers and local entreprenours have a suspicion...
One of the two cases was the building of an international-quality congress centre, where there is a standstill for 10-15 years. Last year it seemed that there would be some progress in Zugló. Interestingly though, and contrary to international practice, neither the city nor the municipality nor the state wanted to take part in this development – a development that is justified on professional grounds- , regardless the fact that the majority of the income would go to the city and to the state, and not to the actual congress centre. Unfortunately, the case did not show any progress on the administrative side either. There is a nearly one-and-a-half years delay in the legal process which resulted in pushing the whole project into much less favourable financial circumstances due to the economic recession.
Financial estimates show that the yield would be four times as much as the investment, meaning that the Hungarian state budget could enjoy a surplus of 340 Bn HUF from this project each year. This amount is one third of the current total tourism income paid by foreign visitors. VAT in itself would amount to 68 Bn HUF. It is a usual international practice that 10 per cent of this amount is re-invested in the marketing of the congress activity. It is wroth to be noted that this 6.8 Bn HUF would be more than Hungary`s total national marketing budget for tourism.
We do not have to travel very far to find our second example: Bosnyák square, the heart of the third wealthiest district in Budapest. According to the latest surveys the area surrounding the Bosnyák market is the most littered place in the district, and is causing endless problems for the Emergency Information Centre of Public Area Supervisory and the District Protection Authority.
The district - as a recently published analysis points out as well – has an unusual opportunity by having access to three of the four underground lines of Budapest (the fourth line is already in the building phase). The 4th underground line is a much needed development as there were plans since the 1970s that Bosnyák square (earlier even Újpalota was included in the plans) would be integrated to the `pulse` of the city.
It is a most unpleasant turn of the events therefore that by the end of October some rumours in the press suggested an alternative that the East Railway Station (Keleti pályaudvar) could be the last station and the new 4th underground line would never reach Bosnyák square. This alternative was based on an analysis that seemed to come to the conclusion that the investment would not be profitable, so analysts believed that the EU would not support the project with a subsidy. However, Bosnyák square plays a very important role in the development plans of the municipality.
There was an open tender, and the land was bought - not by a Bosnian (`Bosnyák` in Hungarian) but a Polish developer – with the aim of building a new town centre there. Regardless of the crisis, the company made significant investments in the Hungarian market (the value of the owned real estate is exceeding 1 Bn EUR).
It was the 4th underground line that raised the interest of the developer in this project in the first place, especially that the planned final station was close to Bosnyák square. If the underground will not reach the planned new district centre indeed, it would mean that the estimated figures of value increase that were calculated 3-4 years ago during the valuation of the sites and other properties associated with the planned development are not realistic.
Based on a recently ordered new valuation, real estate professionals point out that these properties would worth approximately 30 per cent less without the underground. The question remains, how would voters accept this decrease in value, or more precisely, how would they accept the lost profits. (The same question relates to the real estate developers and other interested parties, as well).
The developer of the Zugló district centre has gradually become the target of political and media attacks. It seems that winning the EU open tender in 2006 and the continual behind-the-scenes efforts to reach an agreement were in vain, the 50 Bn HUF development suffers further delays, Zugló could lose several hundred million HUF tax income, not to mention the nearly 1,000 new jobs.
The above list is not complete obviously but there is is an interesting question from the viewpoint of the voters and taxpayers: who will reimburse the city and the district for the missing income that resulted from these hard-to-justify (professional) decisions, and who will fill these gaps in the budget? Voters, the taxpayers and local entreprenours have a suspicion...
Source: O|G|H
