The development of municipalities property management as a financial tool. An empirical investigation
| Date | 28 January 2014 |
| Pages | 78-93 |
| DOI | https://doi.org/10.1108/JPIF-09-2013-0054 |
| Published date | 28 January 2014 |
| Author | Christos Pallis,Petros Pallis |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
The development of
municipalities property
management as a financial tool
An empirical investigation
Christos Pallis
Business Administration, TEI of Piraeus, Egaleo, Greece, and
Petros Pallis
Maritime Studies, University of Piraeus, Piraeus, Greece
Abstract
Purpose – The concept was that municipal real estate was an asset which consisted of a combination
of measurable and hard-to-estimate returns (including social benefits) rather than a public good. Many
local government organizations attempted to capitalize and assess real estate, with a view to
generating revenue for local authorities. Others proceeded to use direct private sector financing for the
construction of municipal infrastructure, in exchange for the right to use public land for commercial
development purposes. In Greece, the institutional framework for local government organizations
prevented local government from playing an essential role, because of their limited powers and
financial resources. There are two key questions coming up within this context, which are the main
subject of the research: What are the financing instruments used by municipalities today? What are
the financing instruments that municipalities would like to use today? No research has been done so
far on the above questions at such sample level as used in the research, i.e. all the municipalities in the
territory of Greece. The paper aims to discuss these issues.
Design/methodology/approach – The paper presents the literature review of the property
management and the methodology of an empirical research through structured questionnaire that was
sent to the entire population of Greek municipalities.
Findings – The main findings regard the financial instruments used by the Greek municipalities and
funding schemes from various sources. Apart from these funding sources which Greek cities actually
use, the present research has investigated the sources of funding that municipalities would like to use.
Practical implications – The paper consists a detailed road map for practical public management.
Originality/value – The questionnaire was sent to the entire population of Greek municipalities,
characterized in this way with considerable heterogeneity. The sample equals the whole population,
which has been investigated for the first time, regarding the Greek Paradigm.
Keywords Greece, Real estate,Finance, Property management, Empirical investigation,Municipality
Paper type Research paper
1. Introduction
The real estate development is not new to the international local government
experience. Until the 1980s, public property was considered a public good. There was no
systematic assessment of the return on its use, or its financial performance.
A new concept came up in early 1980. The concept was that municipal real estate
was an asset which consisted of a combination of measurable and hard-to-estimate
returns (including social benefits) rather than a public good. In the USA, the new
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1463-578X.htm
Received December 2012
Accepted September 2013
Journal of Property Investment &
Finance
Vol. 32 No. 1, 2014
pp. 78-93
qEmerald Group Publishing Limited
1463-578X
DOI 10.1108/JPIF-09-2013-0054
JPIF
32,1
78
concept emerged when many local authorities started facing deficient budgets due to
reductions in federal grants.
In an effort to deal with the situation, local government organizations adopted a
number of measures that treated public real estate as a productive asset, or at least a
neutral, with regard to costs, asset.
Consequently, many local government organizations attempted to capitalize and
assess real estate, with a view to generating revenue for local authorities. Others
proceeded to use direct private sector financing for the construction of municipal
infrastructure, in exchange for the right to use public land for commercial development
purposes. At the same time, certain local government organizations started to manage
property owned by local authorities more effectively (Gekas and Mitsou, 2010).
In Greece, the institutional framework for local government organizations
prevented local government from playing an essential role, because of their limited
powers and financial resources.
There are two key questions coming up within this context, which are the main
subject of the research:
RQ1. What are the financing instruments used by municipalities today?
RQ2. What are the financing instruments that municipalities would like to use
today?
No research has been done so far on the above questions at such sample level as used in
our research, i.e. all the municipalities in the territory of Greece.
The following chapter will present an overview of literature dealing with the current
utilization of municipal real estate. The third chapter will present the methodology used,
including a description of the sampling and data collection process, determination of the
population, specification of the scope of the sample, definition of the sampling unit, etc. The
fourth chapter will present the results of the methodology used and of the data analysis
performed. Finally, the fifth chapter will set out the overall conclusions of the research.
2. Utilization of municipal real estate
2.1 Management of municipal real estate
Approximately 80 percent of the municipalities of Greece are unaware of the real estate
they own, which is often not negligible at all; for example, the value of the real property
of the Municipality of Athens is approximately EUR 360,000,000.00, and that of the
Municipality of Thessalonica is approximately EUR 214,000,000.00. In a sample of
216 municipalities in Greece, the municipal real estate consists of more than
37,530 individual properties.
The central government’s inability to effectively utilize real estate has had a very
negative impact on Greece, in particular with regard to the management of “orphan”
properties which will not be declared during the cadastral registration pro cess.
Municipal real estate management involves numerous, and yet different, objectives.
Important are the social, cultural and public interest objectives.
In this case, real estate management need not generate revenues or cover the costs it
creates. What is more important is assessing the added value provided and comparing
it against social costs, as it helps reduce those costs.
The targets set may also be financial, e.g. where a local government organization
manages a company with a view to deriving revenue there from (pharmacies owned by
Municipalities
property
management
79
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