RIO DE JANEIRO, BRAZIL – Entrepreneur Wilson Poit, director of São Paulo’s SEBRAE (Brazilian service of assistance to micro and small enterprises), has already lost count of how many mayoral candidates have come to him this year in search of advice. With the election looming, mentoring sessions have increased.
In recent months alone, Poit has been involved in over 30 videoconferences, with dozens of candidates, on a topic he specialized in his years of government administration, after a successful career in the private sector: the mapping and sale of municipal real estate. “Many city governments are sitting on a gold mine and don’t know it,” says Poit, who headed the privatization and concessions programs at the São Paulo City Hall between 2013 and 2018, in the administrations of Fernando Haddad (PT) and João Doria (PSDB).
Another mentor in demand in the months leading up to the November elections is Paulo Hartung, former governor of Espírito Santo, who weekly participates in virtual meetings with candidates for Mayor and City Council of the widely differing political hues. What do they want to know? How to make bankrupt city halls offer better services to citizens. “Never has the financial situation of city halls been so difficult, but there are opportunities that, if well exploited, can make management more efficient,” says Hartung, with eight terms to his name.
The non-governmental organization Comunitas, specialized in public administration, has created a series of more than 60 hours of video classes that address topics such as public finance and economic development. “The demand has been tremendous,” says Thiago Milani, director of Comunitas projects. More than 650 people, mostly candidates for mayor, from almost 90 cities, have already attended the course.
For those who are running for office for the first time, as well as trying to be reelected, there are no secrets. With their finances strained, a substantial number of the 5,570 Brazilian municipalities are unable to invest. In the first four months of 2020, according to a survey by the National Confederation of Municipalities, 806 had exceeded the limit imposed by the Fiscal Responsibility Law, which demands that they spend less than 54 percent of net current revenue with staff, including payroll tax contributions.
Another 1,300 cities were in an emergency situation or about to breach the legal limit. “The payroll of active and inactive (retired) employees crushed most municipalities’ ability to invest or expand public policy,” says Hartung, who is involved in political renewal efforts such as RenovaBR.
In the pandemic, the situation has worsened. The increase in expenses, mainly in health and social assistance, should reach almost R$20 billion (US$4 billion) this year in cities with over 100,000 inhabitants, according to calculations by the National Mayors Front. At the other end, revenue dropped 20 percent because of social isolation and the closing of businesses. “Certainly, the pandemic has brought new challenges to future mayors, but most problems are already well known,” says Jonas Donizette (PSB), mayor of Campinas, in the interior of São Paulo, and chair of the National Mayors Front.
As most of the problems revolve around the lack of resources, the solution has been to look for new income sources – often forgotten within city hall. In Ribeirão Preto, in the interior of São Paulo, Mayor Antônio Duarte Nogueira (PSDB) decided to clean up the city’s real estate stock. He found 3,000 properties without title deeds or irregular documentation.
The City then decided to hire a company specialized in land tenure in order to proceed with the operation. To date, 33 properties have been sold, raising R$40 million. On one of the plots already sold, over 10,000 square meters in size, 82 low-income houses are being built. A building company paid R$4 million for the plot. The sale of these assets was crucial to balance the municipality’s accounts, which should end 2020 with a positive balance. More than a dozen properties have the documentation ready to be put on the market next year. “This task demands time and patience, but it yields excellent results,” says Duarte Nogueira, who is running for reelection.
The Mayor of Ribeirão Preto was inspired by the experience of São Paulo’s capital. At the São Paulo City Hall, Poit and his team succeeded in mapping dozens of properties and legalizing the documents for auction. “The deeds are often scattered throughout several offices. Some are so old that they date back to the Empire”, says Poit. This year, the sale of an abandoned lot of villas of over 500 square meters in one of São Paulo’s toniest neighborhoods, Itaim Bibi, yielded more than R$11 million to the public coffers.
On future mayors’ agenda, new rules should also encourage public-private partnerships (PPPs) and concessions projects. A survey by Radar PPP consultancy shows that partnerships between municipalities and the private sector have gained ground in recent years. In 2015, before the 2016 municipal elections, there were 321 initiatives announced, works in progress and contracts signed throughout Brazil; this figure rose to 1,718 by September 16th this year, representing 64 percent of the total in the country. A new increase is expected with the mandates starting in 2021.
Currently, public lighting PPPs are on the rise. Cities like Campinas and Petrolina (Pernambuco) are undergoing public consultation processes. They want to replicate the models of Vila Velha, in Espírito Santo, and Uberlândia, in Minas Gerais, which signed a contract earlier this year to modernize the public lighting network. The French group Engie will replace 87,000 sodium-vapor lamps with LED lamps. The first replacements began in April, at the peak of the pandemic, and should be completed over two years.
The municipality will pay approximately R$1 million per month during the 20-year contract, but not a single real will be paid out of the municipal treasury. All the money will come from the so-called CIP (Contribution on Public Lighting), a tax introduced by the 1988 Constitution that allows municipalities to charge for public road lighting services. Once collected by energy distributors, in 2015 the tax began to be administered by municipalities, which are exchanging simple network maintenance contracts for PPPs with more modern systems.
In Uberlândia, CIP of R$15 on average is charged per residence. With the network renewal, energy consumption by the lampposts is expected to be reduced by 43 percent and these gains will be shared with the population in the future, allowing for a reduction in the fee charged on the electricity bill. “Municipalities all over Brazil are coming to us to find out how to do this,” says João Batista Ferreira Junior, Municipal Secretary of the Environment and Urban Services.
Companies are looking for the best projects. “We are looking for opportunities in medium-sized cities, with well-structured projects that extend beyond the simple exchange of light bulbs, but also demand solutions for intelligent cities,” says Leonardo Serpa, president of Engie Solutions.
Another front with great potential came with the approval in June of the federal Legal Sanitation Framework law. Until then, contracts between municipalities and the state water and sewage companies, the main owners of the sanitation market, could be automatically renewed – regardless of the quality of the service offered to the population. Not anymore. The new concessions will need to be put out to tender, which will attract the involvement of private enterprise.
“There are several contracts maturing by 2022,” says Carlos Henrique da Cruz Lima, president of the Council of Águas do Brasil, a sanitation company operating in 14 cities. “The new bids should yield a good volume of resources for the city governments.”
According to the new legislation, only municipalities with 90 percent of their territory served by water supply and 60 percent of sewage treatment will be able to renew contracts with state companies. Currently, only six percent of Brazilian cities meet these requirements. The regulatory framework also provides for the universalization of sanitation by 2033, with targets set for service providers with respect to the extent and the quality of service to the population – another new feature.
Only 50 percent of the Brazilian population has access to sewage collection and 70 percent to drinking water. These are worse indicators than those of Iraq, a country that has experienced several wars over the past 20 years. Federal government estimates suggest that, with the new legal framework for the sector, investments should reach over R$40 billion per year by 2033.
The new legal framework should also help public managers who have tried to act differently in the past but ran into the traditional pressures that plague the public sector. Paula Mascarenhas (PSDB), Mayor of Pelotas in Rio Grande do Sul, tried to establish a PPP for sanitation in her current mandate. The proposal was rejected by the City Council, which yielded to pressure from employees of SANEP (Autonomous Sanitation Service of Pelotas) the agency that manages water, sewage, and garbage collection services in the city.
Although only 18 percent of the sewage collected in Pelotas is treated, the city councilors chose to keep the service under the agency’s management. Mascarenhas also tried to implement a PPP for public lighting, which was also vetoed by legislators. “There was great resistance and, unfortunately, we were unable to move forward with this agenda,” says Mascarenhas, who is seeking reelection in 2020. With a debt of R$200 million in court-ordered debt payments to be settled by 2024 and the deficit of the municipal social security system, Pelotas’ finances are compromised. “There is little left for investments.”
In fact, time plays against most public managers. City governments that try to sell real estate or land waste years preparing the paperwork before the auctions of assets. On the other hand, a PPP or concession project in Brazil takes an average of 24 months between its announcement and the actual signing of the contract – not to mention the risk of suspension due to legal issues along the way. “A Mayor willing to undertake a PPP or public service concession needs to adopt this agenda from the very first day of his/her term,” says Bruno Pereira, a partner at Radar PPP.
While nothing is easy in the public sector, another front that is gaining popularity among mayors is attacking bureaucracy through technology. Cities have found that reducing paperwork and digitizing public services can be a key strategy to cut spending. In the federal government, over half of the 3,549 services provided are now available online, producing annual savings of R$2.3 billion to public coffers. It should be no different for city halls. “But just like the sale of assets, it’s a continuous process that needs committed people and great focus,” says Milani of Comunitas.
In Santos, digitizing public services began six years ago. First, identifying all processes that could waive physical presence, signatures, and paperwork was required. A team of city hall technicians and engineers designed the management model that oversaw the process. Then, the City launched a bidding process to hire a company specialized in the development and maintenance of software for digitizing public services. The funds were raised through a credit line of R$2.7 million from BNDES (National Bank of Economic and Social Development).
So far, 80 percent of services have been digitized, including requests for municipal debt discharge certificates, company licenses, and real estate deeds. As a result, savings of R$2 million have been achieved over five years. Employees formerly assigned to rubber stamping were also reallocated to more useful tasks. “The digitization of services was crucial to face the pandemic without paralyzing the city,” says Adriano Leocádio, Santos Management Secretary. During the isolation period, digital services were developed for companies in distress, such as applying for discounts on municipal taxes.
The chaos caused by the coronavirus pandemic further exposed the shortcomings of the healthcare system and the need for public policies capable of assisting economic rebound. An EXAME/IDEIA survey, with 800 voters in the city of São Paulo, shows that the main actions expected of the next mayor of the country’s largest city are those to improve the healthcare system and restore the local economy and employment.
Despite knowing what they want, voters are still unclear as to who can make their wishes come true. In the survey conducted between September 19th and 22nd, 55 percent of respondents were unable to spontaneously name a candidate they favored. “The electoral race has not yet begun in the voter’s mind,” says Maurício Moura, founder of IDEIA, a research institute focused on public opinion. In the questionnaire in which a list of candidates is offered to the voter, current Mayor Bruno Covas (PSDB) and candidate Celso Russomano (Republicanos) are technically tied in voting intentions of 22 and 21 percent, respectively; they are followed by Guilherme Boulos (PSOL), with 11 percent, and Marcio França (PSB), with 10 percent. In a second-round scenario, Covas leads the way and would beat any of the three other contenders.
With less than two months to go before the elections, candidates will have to rush to persuade voters that their ideas are the best for a city with complex issues. But be it a metropolis or a city in the country’s interior, one thing is certain: without administrative innovation, not much can be achieved.
Source: Exame