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Fiscal Transparency Report
2nd Quadrimester 2014
October / 2014
MUNICIPAL FINANCE SECRETARY Marco Aurelio Santos Cardoso
SUBSECRETARY OF TAXATION AND AUDIT Ricardo de Azevedo Martins
MANAGEMENT SUBSECRETARY Rodrigo Fernandes Barbosa
BUDGETARY SUPERINTENDENT Carlos Evandro Viegas
MUNICIPAL TREASURY SUPERINTENDENT Márcia Cristina de Lima Aldy
ADVISOR FOR EXTERNAL FUND RAISING Eliane Almeida de Vilhena Totti
COMMUNICATIONS ADVISOR Charbelly Imaculada de Almeida Estrella
ECONOMIC ADVISOR José Marcelo Souza Boavista
FISCAL TRANSPARENCY REPORT TEAM Alexandre da Costa Corrêa
Ana Cláudia Tavares Mendes Andre Azevedo de Albuquerque
André Gustavo Medeiros de Souza Lima Cláudia Rebordões Carauta Pombal
Eduardo da Cunha Vianna Ricardo Silveira Barros
Simone Karasawa Soêmia Jurelevicius Marcello
Waldo de Andrade
Total or partial reproduction of the contents of this publication is allowed only if the source is mentioned.
Municipal Finance Secretariat of Rio de Janeiro Rua Afonso Cavalcanti, nº 455, Anexo - Centro Administrativo São Sebastião, Cidade Nova Rio de Janeiro, RJ, CEP 20.211-900 http://www.rio.rj.gov.br/web/smf
ABBREVIATIONS, INITIALS and ACRONYMS
IDB Inter-American Development Bank BNDES Brazilian Development Bank
CDURP Urban Development Company of the Port Region of Rio de Janeiro
CGM Municipal General Controller's Office COMLURB Municipal Urban Cleaning Company COSIP Contribution to Fund the Public Lighting Service EDI Children's Development Space FASS Server's Health Assistance Fund FGTS Guarantee Fund for Length of Service FINCON Accountability and Budget Execution System FPE States' Participation Fund FPM Cities' Participation Fund FUNDEB Brazilian National Education Development Fund FUNPREVI Special Pension Fund of the City of Rio de Janeiro ICMS Value-Added Tax on Sales and Services of interstate, intercity
transportation, and of communication IPI-Exp Tax on Industrial Products IPM City's Participation Index IPTU Property Tax IPVA Motor Vehicle Ownership Tax IRRF Withheld Income Tax ISS Tax on Services ITBI Tax on Real Estate Transfer ITCMD Tax on Causa Mortis Succession and Donation ITR Rural Property Tax LC Complementary Law LFT Financial Treasury Bill LOA Annual Budget Law LRF Fiscal Responsibility Law LTN National Treasury Bill MCidades Ministry of the Cities MP Provisional Measure MRJ City of Rio de Janeiro NTN-C National Treasury Notes - Series C OGU General Budget of Federal Government PAC Growth Acceleration Plan PCRJ Rio de Janeiro's City Hall PMAT Programa de Modernização da Administração Tributária Municipal
PNAFM National Support Program to Administrative and Fiscal Management of Brazilian Cities
PPI Carioca Carioca Payment Incentive Program of tax debts, registered in active debt or not
Previ-Rio Social Security and Assistance Institute of the city of Rio de Janeiro
Pró-Moradia Federal Government Program of housing access
Pró-Transporte Federal Government Program for funding to the public and private sector, implementation of infrastructure systems of the urban collective transportation and to urban mobility
RCL Current Net Revenue RLR Actual Net Revenue RREO Salário Educação
Summary Report of Budget Execution Contribution intended to the funding of programs, projects, and actions aimed at the funding of the public basic education
SELIC Special System of Settlement and Custody SIG Managerial Information System SMF Municipal Finance Secretariat SUS National Health System TCDL Garbage Collection Fee TransCarioca BRT from Barra to Galeão UPA Health Emergency Unit UPP Pacifying Police Unit
ANALYTICAL INDEX I) INTRODUCTION .................................................................................................................... 3II) FISCAL RESULT .................................................................................................................... 3II.1) BUDGETARY RESULT .............................................................................................................. 3 II.2) PRIMARY RESULT .................................................................................................................. 5 II.3) NOMINAL RESULT ................................................................................................................. 6 III) MUNICIPAL REVENUE ............................................................................................................. 6III.1) CURRENT REVENUES .......................................................................................................... 8 III.1.1) TAX REVENUE .................................................................................................................. 8 III.1.1.1) TAX ON SERVICES – ISS ..................................................................................................... 9 III.1.1.2) PROPERTY TAX – IPTU ...................................................................................................... 9 III.1.1.3) TAX ON REAL ESTATE AND REAL ESTATE REAL RIGHTS TRANSFER – ITBI .......................................... 9 III.1.1.4) WITHHOLDING INCOME TAX ............................................................................................. 10 III.1.2) CURRENT TRANSFERS ....................................................................................................... 10 III.1.3) OTHER CURRENT REVENUES ............................................................................................... 13 III.1.3.1) CONTRIBUTION REVENUES ............................................................................................... 13 III.1.3.2) PATRIMONIAL REVENUE .................................................................................................. 13 III.1.3.3) INDUSTRIAL AND SERVICE REVENUE .................................................................................... 14 III.1.3.4) OTHER CURRENT REVENUES ............................................................................................. 14 III.2) CAPITAL REVENUES .......................................................................................................... 15 III.2.1) CREDIT OPERATIONS ........................................................................................................ 15 III.2.2) SALE OF ASSETS .............................................................................................................. 15 III.2.3) LOANS AMORTIZATION ...................................................................................................... 16 III.2.4) CAPITAL TRANSFERS ........................................................................................................ 16 IV) MUNICIPAL EXPENSES ........................................................................................................... 16IV.1) EXPENSES BY ECONOMIC CATEGORY ..................................................................................... 16 IV.2) EXPENSES BY GOVERNMENT FUNCTION .................................................................................. 17 V) FUNDRAISING .................................................................................................................... 18V.1) EXTERNAL RESOURCES - CREDIT OPERATIONS AND TRANSFER .......................................................... 18 VI) FINANCIAL ADMINISTRATION OF CASH AND DEBT.......................................................................... 20VI.1) FINANCIAL INVESTMENT OF CASH ......................................................................................... 20 VI.2) FINANCIAL DEBT ............................................................................................................. 21 VII) MANAGEMENT OF REAL ESTATE ASSETS ..................................................................................... 23VIII) CONCLUSION ..................................................................................................................... 24
PRESENTATION
The Fiscal Transparency Report is a quadrimesterly publication of the Finance Secretariat of the
Municipality of Rio de Janeiro - SMF, where the Municipality’s revenue and expenses are analyzed.
Regarding the figures presented throughout the report, the notes below apply:
• All figures presented – unless when expressly specified – are nominal and accumulated
until the quadrimester in question.
• All figures comparisons refer to the same period as last year – unless when expressly
specified.
This initiative of Rio's Municipality, by SMF, aims to ensure transparency in the financial
management of public resources, since the entry into Municipal Treasury coffers until application,
based on budget planning, and considering current legislation and the limits defined by the Fiscal
Responsibility Law - LRF (Complementary Law No. 101/2000).
The data used were taken mainly from the Fincon System of the General Controller of the
Municipality - CGM. There were considered all intrabudgetary revenues and expenses and all
indirect administration entities (except CDURP - Urban Development Company of the Port Region
of Rio de Janeiro), including the pension fund for the public workers, the FUNPREVI, in order that
the data hereby presented are consistent with the LRF statements published by CGM. In this sense,
the CDURP numbers are not consolidated as although it is fully controlled by the Municipality, it
has budgetary independence given its nature of a not dependent state company, in accordance
with current legislation.
The report is divided into the following sections:
i. In the first one, a general overview of the public accounts is presented;
ii. In the second one, the budgetary results, primary and nominal, are presented;
iii. In the third section, the municipal revenues are analyzed by economic categories;
iv. In the fourth, the expenses figures committed by economic category, by government
function and by result area are presented;
v. In the fifth, a presentation is made on the financing sources and the transfer contracts;
vi. The last three bring considerations on the applications of the Municipal cash balances, public
debt management, and management of the real estate assets of direct administration.
2
I) INTRODUCTION
The second quadrimester of 2014 continues to show a favorable balance between Revenue and
Expenditure. The Primary and Budgetary results remains in surplus, and the reductions verified
follow the expected trajectory. The revenues behavior reflects an accommodation of the
economic cycle, the basis for comparison (2013) inflated by the proceeds of the PPI Carioca, and
the strong credit operations entries linked to the extensive schedule of public investments in
progress in the City – embodied in a budget allocation of 21% for improvement of urban
infrastructure. The trajectory of the expenditure arises basically from spending on personnel,
investments and costing, and the debt service expenditure have maintained its low participation
shown since the debt exchange operation with the World Bank.
It is important to highlight the evolution of the costing expenditures (Other Current Expenditures),
which showed a variation of only 2.8% - a value well below the 14.5% showed by the sum of
Personnel and Debt Service, and signs the Administration's concern with the fiscal sustainability of
the Municipality.
TABLE I - EXPENSES PROFILE - 2nd Quadrimester of 2014 - Millions of R$
Description CURRENT BUDGET RESULT 2nd QUADRIMESTER
LOA 2014 Current Appropriation
% of Current Appropriation
Expenses already engaged
% of Expenses Engaged
Expenses already settled
Personnel and Social Charges 12,032.4 12,210.7 43.3% 8,343.8 41.0% 7,378.6 Debt Interest and Services 669.7 669.7 2.4% 665.0 3.3% 413.0 Other Current Expenses 8,027.3 8,224.0 29.2% 6,885.1 33.8% 4,336.2 Current Expenses 20,729.4 21,104.4 74.9% 15,893.9 78.1% 12,127.9 Investments 5,628.7 5,908.2 21.0% 3,873.0 19.0% 1,085.0 Financial Inversions 396.2 484.9 1.7% 198.7 1.0% 196.0 Debt Amortization 378.5 378.2 1.3% 377.5 1.9% 226.6 Expenses of Capital 6,403.3 6,771.2 24.0% 4,449.1 21.9% 1,507.5
Contingency Re 40.7 309.6 1.1% 0.0 0.0% 0.0 TOTAL EXPENDITURE 27,173.4 28,185.3 100.0% 20,343.1 100.0% 13,635.4
II) FISCAL RESULT
This section presents the fiscal result for the 2nd quadrimester of 2014 – showing that the Total
Income presented a growth of 5.0% while the Total Expenses increased in 10.5%.
The budget, primary and nominal results are presented below, in more details.
II.1) BUDGETARY RESULT
The Budgetary Result is determined by the difference between the Total Revenue collected and
the Total Expenses committed or settled. A Surplus Budget Result reflects revenues above
expenses (thus generating cash accumulation), while a Deficit Budget Result comprises the reverse
situation, in which the cash accumulated in previous periods is consumed.
3
In the 2nd quadrimester of 2014, the Budgetary Result had a surplus of R$ 1.8 billion, considering
the R$ 15.4 billion of Total Revenue collected, and the R$ 13.6 billion of Total Expense settled, as
seen in Table II below. It is noteworthy that, in view of the concentration of the collection of
property tax (IPTU) in February (due date for the single installment payment) and the slower pace
of settlement costs at the beginning of each year, the first two quadrimesters tend to be surplus
to a budgetary standpoint.
It is noteworthy that in the 2nd quadrimester of the previous year, inflows of revenue from PPI
Carioca were already being computed, especially those cases of receipts in cash, both for Tax
Revenue and to the Fines and Interest on Arrears and Debts for ISS and property taxes.
TABLE II - BUDGETARY RESULT In Millions of R$
DESCRIPTION JANUARY TO AUGUST
DESCRIPTION JANUARY TO AUGUST
2013 2014 2013 2014
CURRENT REVENUES [I] 14,118.6 14,134.7 CURRENT EXPENSES [IV] 11,020.7 12,127.9
Tax Revenue 5,801.5 6,103.9 Personnel and Social Charges 6,442.7 7,378.6
Contributions Revenue 1,594.6 1,817.3 Debt Interest and Services 358.4 413.0
Equity Revenue 430.8 549.1 Other Current Expenses 4,219.7 4,336.2
Industrial Revenue 3.9 4.2
Services Revenue 260.8 222.5
Current Transfers 4,412.6 4,631.5
Other Current Revenues 1,614.5 806.2
CURRENT BUDGET RESULT [I]-[IV]
3,097.9 2,006.8
CAPITAL REVENUE [II] 562.4 1,287.0 CAPITAL EXPENSES [V] 1,315.7 1,507.5
Credit Operations 348.0 925.4 Investments 991.7 1,085.0
Sale of Assets 14.7 86.9 Financial Inversions 79.8 196.0
Loans amortization 53.2 56.4 Debt Amortization 244.2 226.6
Capital Transfers 146.4 218.2
Other Capital Revenue - -
CAPITAL BUDGETARY RESULT [II]-[V] (753.3) (220.5)
TOTAL REVENUE [III]=[I]+[II] 14,681.0 15,421.6 TOTAL EXPENSES [VI]=[IV]+[V] 12,336.4 13,635.4
BUDGETARY RESULT [III]-[VI] 2,344.6 1,786.3
Source: RREO - 4th Bimester 2014
Although revenues and expenses are analyzed in more detail in the respective sections of this
report, it is worth mentioning the main factors that make up the variation of the budgeting result.
On the side of Total Revenue collected, the growth of 5.0% was originated basically from the
virtual stability of Current Revenues and strong Capital Revenue increase (128.8%) - in which was
highlighted the Credit Operations linked to the extensive schedule of investments from the City
Hall. 4
Also, it is worth mentioning that Current Revenues suffered from the negative performance of
Other Current Revenues (R$ 808.3 million), because the values of 2013 were strongly influenced by
the collection of PPI Carioca.
The 10.5% increase in Expenses combined 10% of Current Expenses with 14.6% of Capital Expenses.
The highlights were the 14.5% variation in Personnel and Social Charges – related to career plans in
some public servants categories – and the elevation of 19.6% on investments and inversions. In this
context, it is important to mention the growth of just 2.8% in Other Current Expenses, which
shows the concern of the City Hall with the evolution of its costing.
II.2) PRIMARY RESULT
The Primary Result is the difference between the Primary Revenue (Total Revenue minus Financial
Revenue) and Primary Expense (Total Expense minus Financial Expense).
TABLE III - PRIMARY RESULT
In Millions of R$ In Millions of R$
In Millions of R$ In Millions of R$
Source: RREO - 4th Bimester 2014 Source: Budget Law No. 5687 of January 10, 2014. Settled costs.
The Primary Result of the 2nd quadrimester of 2014 totaled R$ 909.8 million, 59.1% lower than the
R$ 2.2 billion in the same period of 2013 – a result, as pointed out before, of the increase of
investments and inversions, and real wage increases. The Primary Result is lower than the Budget
Result once purged, as shown in Table III, the revenues of a financial nature - which grew 108.4%.
ANNUAL FISCAL TARGET 2013 2014 Primary Result Target Fixed on the Fiscal Targets Appendix
(1,686.9) (2,564.9) DESCRIPTION
JANUARY TO AUGUST 2013 2014
PRIMARY RESULT [XI]=[V]-[X] 2,223.5 909.8
DESCRIPTION JANUARY TO AUGUST 2013 2014
CURRENT EXPENSES [VI] 11,020.7 12,127.9 Personnel and Social Charges 6,442.7 7,378.6 Debt Interest and Services 358.4 413.0 Other Current Expenses 4,219.7 4,336.2
CAPITAL EXPENSES [VII] 1,315.7 1,507.5 Investments 991.7 1,085.0 Financial Inversions 79.8 196.0 Debt Amortization 244.2 226.6
TOTAL EXPENSES [VIII]=[VI]+[VII] 12,336.4 13,635.4
Debt Interest and Services 358.4 413.0 Grant of Loans 4.7 1.5 Acquisition of Capital Securities already Paid - - Debt Amortization 244.2 226.6
FINANCIAL EXPENSES [IX] 607.3 641.1
TOTAL PRIMARY EXPENSES [X]=[VIII]-[IX] 11,729.1 12,994.3
DESCRIPTION JANUARY TO AUGUST
2013 2014 CURRENT REVENUES [I] Tax Revenue Contributions Revenue
Equity Revenue
Industrial Revenue Services Revenue Current Transfers Other Current Revenues
CAPITAL REVENUE [II] Credit Operations
Sale of Assets
Loans amortization
Capital Transfers
Other Capital Revenue
14,118.6 5,801.5 1,594.6
430.8 3.9
260.8 4,412.6 1,614.5
562.4 348.0
14.7 53.2
146.4 -
14,134.7 6,103.9 1,817.3
549.1 4.2
222.5 4,631.5
806.2
1,287.0 925.4
86.9 56.4
218.2 -
TOTAL REVENUE [III]=[I]+[II] 14,681.0 15,421.6
Securities Revenues 269.4 413.8 Loans Interests 42.9 35.0 Credit Operations 348.0 925.4 Sale of Assets 14.7 86.9 Loans amortization 53.2 56.4 FINANCIAL REVENUES [IV] 728.3 1,517.5
TOTAL PRIMARY REVENUE [V]=[III]-[IV] 13,952.7 13,904.1
5
II.3) NOMINAL RESULT The Nominal Result reached a negative amount (surplus) of R$ 2.0 billion, representing a decrease
of 23.2% in the balance of the Net Fiscal Debt in relation to the remaining balance on December
31st, 2013.
TABLE IV - NOMINAL RESULT
December 31, 2013 X August 31, 2014 In Millions of R$
ON 12/31/2013
[A]
ON 08/31/2014
[B]
Absol.Var. [B]-[A]
Var. % [B]/[A]
CONSOLIDATED DEBT 11,781.0 12,479.6 698.6 5.9%
(-) AVAILABLE ASSETS 4,221.6 5,498.3 1,276.7 30.2%
(-) FINANCIAL RECEIVABLES 132.2 444.7 312.5 236.4%
(+) BALANCE PAYABLE PROCESSED (Except mandatory order)
1,095.0 34.7 (1,060.3) -96.8%
NET CONSOLIDATED DEBT 8,522.2 6,571.3 (1,950.9) -22.9% LIABILITIES RECOGNIZED 105.5 110.2 4.7 4.4% NET FISCAL DEBT 8,416.7 6,461.1 (1,955.6) -23.2% NOMINAL RESULT ON 08/31/2014 (1,955.6) TARGET OF NOMINAL RESULT FOR THE YEAR OF 2014 (LOA 2014) 2,353.4
Source: RREO - 4th BIMESTER 2014.
It is worth reminding that the positive nominal result is considered a deficit, that is, an increase of
the net cash debt and financial receivables; while a negative result is considered a surplus, that is,
a reduction of the net debt.
III) MUNICIPAL REVENUE
This section presents the values actually collected (Table V), using as data source the Budged
Balance published in the Summary Report of Budget Execution (RREO).
6
TABLE V - BUDGETARY REVENUES BY ECONOMIC CATEGORY AND ORIGIN (ALL FUNDING SOURCES)
In Millions of R$
DESCRIPTION
CURRENT VALUES
JANUARY TO AUGUST
2013 2014 Nominal Var.
Var. %
CURRENT REVENUES 14,118.6 14,134.7 16.0 0.1% Tax Revenue 5,801.5 6,103.9 302.4 5.2%
Contributions Revenue 1,594.6 1,817.3 222.7 14.0%
Equity Revenue 430.8 549.1 118.4 27.5%
Industrial Revenue 3.9 4.2 0.3 7.4%
Services Revenue 260.8 222.5 -38.3 -14.7%
Current Transfers 4,412.6 4,631.5 218.9 5.0%
Other Current Revenues 1,614.5 806.2 -808.3 -50.1%
CAPITAL REVENUES 562.4 1,287.0 724.6 128.9%
Credit Operations 348.0 925.4 577.4 165.9%
Sale of Assets 14.7 86.9 72.2 491.4%
Loans amortization 53.2 56.4 3.2 6.1%
Capital Transfers 146.4 218.2 71.8 49.0%
Other Capital Revenue - - - -
TOTAL REVENUE 14,681.0 15,421.6 740.6 5.0%
Source: RREO - 4th BIMESTER OF 2013 AND 2014. 1 Values updated by the IPCA-E (IBGE) as of 08/31/2014.
Composition of Total Revenue
Total Revenue is comprised of Current Revenues and Capital Revenues. In Chart I below, it is
possible to see the composition of Total Revenue, considering the revenue estimates of the 2014
Budget Law.
CHART I - COMPOSITION OF TOTAL REVENUE BY ECONOMIC CATEGORIES IN THE FISCAL YEAR OF 2014
ESTIMATES OF BUDGET LAW (ALL FUNDING SOURCES)
Chart II shows a further breakdown of Total Revenue provided for in the 2014 Budget Law. The
main contributions are the Tax Revenues and Current Transfers, which together account for 60.1%.
Current Revenues
83.5%
Capital Revenues
16.5%
7
CHART II - COMPOSITION OF TOTAL REVENUE BY ECONOMIC CATEGORY AND ORIGIN FOR THE YEAR 2014
ESTIMATES OF BUDGET LAW (ALL FUNDING SOURCES)
III.1) CURRENT REVENUES
The R$ 22.7 billion in Current Revenues estimated in the LOA in 2014 comprise the Revenues from
Tax, Contribution, Equity, Industrial, Services, Current Transfers and Other Current Revenues,
representing 83.5% of the Total Revenue.
The Current Revenues held on the 2nd quadrimester of 2014 amounted to R$ 14.1 billion, remaining
virtually at the same level from 2013 – it is worth remembering the effect of the PPI collection on
the basis of comparison.
III.1.1) TAX REVENUE
Chart III below disaggregates the percentage composition of the Tax Revenues.
CHART III - COMPOSITION OF TAX REVENUE ESTIMATES OF
BUDGET LAW (ALL FUNDING SOURCES)
The table below shows the values of the components of the Tax Revenue.
Tax Revenue
33.0%
Equity Revenue
5.1%Industrial
Revenue0.0%
Services Revenue
1.4%
Other Current Revenues
6.5%
Capital Revenues
16.5%
Current Transfers
27.1%
Contributions Revenue
10.4%
Contributions Revenue
10.4%
Equity Revenue 5.1%
Current Transfers
27.1%ISS
19.3%
IPTU 6.8%
ITBI 3.1%
IRRF 2.3%
TCDL 1.1%
Tax Revenues
33.0%
Industrial Revenue 0.0%
Services Revenue
10.4%
Capital Revenues 16.5%
Other Current Revenues
6.5%
Other Rates 0.4%
8
TABLE VI - TAX REVENUE BY ECONOMIC CATEGORY AND ORIGIN (ALL FUNDING SOURCES)
In Millions of R$
Description
CURRENT VALUES
JANUARY TO AUGUST
2013 2014 Nominal Var.
Var. %
Tax Revenue
IPTU
IRRF
ITBI
ISS
TCDL
Other Rates
5,801.5 6,103.9 302.4 5.2%
1,539.1 1,562.3 23.2 1.5%
318.3 402.2 83.9 26.4%
504.6 462.5 (42.1) -8.3%
3,139.8 3,363.3 223.5 7.1%
232.0 247.5 15.5 6.7%
67.8 66.2 (1.6) -2.4%
Source: RREO, and ORCAMENTO and FINCON Systems.
III.1.1.1) TAX ON SERVICES – ISS
Up to the 2nd quadrimester of 2014, revenues from ISS have reached R$ 3.4 billion, against R$ 3.1
billion collected in the same period of 2013, an increase of 7.1%, equivalent to R$ 223.5 million. If
the extraordinary effects of ISS collection, via PPI Carioca, are removed (debts of ISS not
registered as an overdue tax liability), the growth is of 10.8%, equivalent to about R$ 340 million,
a fairly robust result, considering the national scenario of reduced economic growth.
III.1.1.2) PROPERTY TAX – IPTU
In the first eight months of 2014, Property Tax has raised R$ 1.6 billion, against R$ 1.5 billion in
the same period of the last year, a growth of 1.5%, equivalent to an increase of R$ 23.2 million. It
is worth noting that Property Taxes reflects mostly past inflation, that is, in 2014 the Property Tax
base value was corrected by the inflation of 2013 (5.85%, by the IPCA-E). The variation of IPTU in
2014 in relation to 2013, if the PPI Carioca entries for 2013 are disregarded, reached 6.9% above
the inflation for the period, due to the additions of new built-up areas and other recovery actions.
III.1.1.3) TAX ON REAL ESTATE AND REAL ESTATE REAL RIGHTS
TRANSFER – ITBI
The collection of ITBI reached R$ 462.5 million in the 2nd quadrimester, against R$ 504.6 million in
the same period of 2013 (a decrease of 8.3%). ITBI is a 2% tax levied on the value of real estate
transactions, and its behavior reflects, therefore, the market dynamics. The slowdown signals in
the growth of such item reflect a accommodation of this market after years of strong price
increase.
9
III.1.1.4) WITHHOLDING INCOME TAX
IRRF collected R$ 402.2 million in the 2nd quadrimester of 2014, compared to R$ 318.3 million in
the same period of 2013, with growth of 26.4%, equivalent to R$ 83.9 million. This revenue
comprises mainly the collection of income taxes on the monthly payroll of the Executive Branch
and on the bonus from the Results Agreement (Meritocracy)1. The performance of IRRF in 2014 is
directly related to the above inflation wage increase granted to municipal employees.
III.1.2) CURRENT TRANSFERS
Having the greatest participation in Total Revenue, second only to the Tax Revenue, the Current
Transfers include the inflow of resources coming from the Union, from the State, and from
agreements for current expenses, among others. Most of these transfers are mandatory
(constitutional allocation of tax revenues among federal agencies), being the voluntary transfers
(e.g. agreements) less significant in terms of amount collected.
In the case of federal and state tax transfers, the behavior of tranches transferred to the
Municipality relates to the economic activity reflected in the collection of such entities (Rio de
Janeiro State and Union), in addition to the specific criteria for transferring.
It is worth noting that the Municipality of Rio de Janeiro maintains its independence thanks to its
own collection level, as seen in Chart IV below.
CHART IV - COMPOSITION OF CURRENT TRANSFERS
ESTIMATES OF 2014 BUDGET LAW (ALL FUNDING SOURCES)
The Current Transfers amounted to R$ 4.6 billion in the 2nd quadrimester of 2014 – an increase of
5.0% over the same period last year.
1Whose payment is due in the second quadrimester.
Tax Revenues
33.0%
Contributions Revenue
10.4%
Equity Revenue
5.1%
Other Current Revenues
6.5%
Capital Revenues 16.5%
SUS 5.6%
ICMS (net)
7.7%
IPVA (net) 1.9%
FUNDEB 8.0%
Other 3.9%
Current Transfers
27.1%
Services Revenue
1.4%Industrial Revenue
0.0%
Tax Revenues
33.0%
10
TABLE VII – CURRENT TRANSFERS BY ECONOMIC CATEGORY AND ORIGIN (ALL FUNDING SOURCES)
In Millions of R$
Description
CURRENT VALUES
JANUARY TO AUGUST
2013 2014 Nominal Var.
Var. %
Intergovernmental Current
Transfers
Net FPM
SUS
Net ICMS
IPVA Net
IPI-EXP
Royalties
FUNDEB
Salário-Educação
Other
Private Institutions
Agreements
4,412.6
4,401.9
126.8
935.3
1,135.0
411.4
30.3
140.8
1,332.9
213.6
75.9
-
10.7
4,631.5
4,604.7
140.9
932.4
1,177.1
438.0
32.5
154.8
1,414.4
238.3
76.1
-
26.8
218.9
202.8
14.2
(2.9)
42.1
26.7
2.2
14.0
81.6
24.8
0.2
-
16.0
5.0%
4.6%
11.2%
-0.3%
3.7%
6.5%
7.3%
10.0%
6.1%
11.6%
0.3%
-
149.9%
Source: RREO, and ORCAMENTO and FINCON Systems.
Below are some comments:
FPM ― The collection of FPM - Union transfer made of resources from IPI and the Income Tax –
net of the Municipality portion for the composition of FUNDEB, reached the amount of R$ 140.9
million, against R$ 126.8 million in the same period of 2013 (a variation of 11.2%).
SUS ― The transfer of resources from the SUS is related to the values determined by the
Ministry of Health to the different specialties, being influenced by the number of beds offered
by municipal network of hospitals, family clinics, and UPAs. SUS collection had an increase of
0.3%, being R$ 932.4 million up to the 2nd quadrimester of 2014, against R$ 935.3 in 2013.
ICMS ― The collection of state transfer of ICMS, net of the Municipality’s portion for the
composition of FUNDEB, reached R$ 1.2 billion, against R$ 1.1 billion in the same period of 2013
(growth of 3.7%).
It is worth noting that the Government of the State of Rio de Janeiro calculates annually the
IPM (City's Participation Index) to establish the amount of transfer of the 25% of the ICMS
collection that will fit the municipalities in Rio de Janeiro2.
2 Decree No. 44541, of December 27, 2013. 11
In the case of the Municipality of Rio de Janeiro, as seen in Chart V, IPM had been presenting
successive declines until 2011, when there was a small increase in the index. From 2012, there
was a continuation of the downward trend, but less pronounced. This steady decline has been
generating a negative impact on the share transferred to the Municipality.
CHART V - IPM EVOLUTION OF THE MUNICIPALITY OF RIO DE JANEIRO
2008 to 2014
In % 32
31
30
%
29
28
27 2008 2009 2010 2011 2012 2013 2014
IPVA ― The state transfer of the Motor Vehicle Ownership Tax, net of participation by the
Municipality to form the FUNDEB, reached R$ 438.0 million, against R$ 411.4 million in the first
quadrimester of 2013, a growth of 6.5%.
OIL ROYALTIES ― Transfer of Oil Royalties totaled R$ 154.8 million, compared to R$ 140.8
million in the 2nd quadrimester of 2013 (10.0% growth). It is worth mentioning that the transfer
of oil royalties to the Municipality is due to external factors such as the trajectory of oil prices,
the exchange rate and the physical production in the fields of extraction in which the
Municipality receives such participation, among others.
FUNDEB ― The revenue transfer of FUNDEB reached R$ 1.4 billion, against R$ 1.3 billion in 2013
(6.1% growth). Make up the base of the Fund the quotas-parts of transfers of the FPM, ICMS, IPI-
Ex, Exemption of ICMS on Exports - Law no. 87/96 (Law Kandir), ITR, ITCM and FPE, being that
more than 80% of FUNDEB composition is due to the quota-share of ICMS. The increase in
revenue is directly related to FUNDEB trajectory of increased coverage of the municipal
education, especially regarding to Children's Development Space - EDI.
31.599
30.943
28.791 28.696 28.216
27.831 28.153
12
SALÁRIO EDUCAÇÃO ― The collection from the transfer of the Salário Educação (Education
Salary) reached R$ 238.3 million compared to R$ 213.6 million in the first quadrimester of 2013
(growth of 11.6%). It is worth mentioning that the share of December 2013 was only transferred
to the municipality in January 2014, contributing to the increase in revenues compared with the
incomes in the same period of last year.
III.1.3) OTHER CURRENT REVENUES
III.1.3.1) CONTRIBUTION REVENUES
In the first eight months of 2014, the Contribution Revenue reached R$ 1.8 billion, higher by 14.0%
to the R$ 1.6 billion collected in the same period of the previous year. This revenue consists of:
Social Contributions ― Include the Workers Contribution to fund their own pension system
(11% tax rate), the Employer Contribution (22% tax rate), the Additional Employer Contribution
(Law no. 5300/2011) and the resources provided by the Municipal Treasury and by workers for
the formation of the Worker Healthcare Fund - FASS. This revenue reached R$ 1.7 billion,
higher by 13.9% of the R$ 1.5 billion in the same period of 2013.
Economic Contributions ― Include the Contribution for the Funding of Public Lighting Service
(COSIP) established by Law No. 5132 of December 21st, 2009, charged by the electricity
distribution concessionary based on the consumption and monthly transferred to the
Municipality. Were collected R$ 163.6 million, a growth of 14.1% over the R$ 143.4 million
collected in the same period of 2013.
III.1.3.2) EQUITY REVENUE
Equity Revenue reached R$ 549.1 million up to the second quadrimester of 2014, compared to R$
430.8 million in the same period of the previous year, an increase of 27.5%. This revenue consists
of:
Securities Revenues – Corresponds to the revenue of application of cash and cash equivalents.
There was an inflow of R$ 413.8 million against R$ 269.4 million in the same period of the
previous year (an increase of 53.6%).
This is the result of the increase in the Selic rate and balances applied between the periods
compared. The average Selic rate in the 2nd quadrimester of 2014 (10.7% p.a.) was
considerably higher than the same period of 2013 (7.6% p.a.), in view of the Monetary Policy
adopted by the Central Bank that increased interest to contain inflation.
13
It is also worth recording that there was an increase in the average cash invested of the
Treasury Resources (9.5%), related to the execution of expenditure incurred by the
Municipality.
Other Equity Revenue – Composed of revenues from rents, annual rents, laudemiums,
concessions, and permits, etc., these revenues decreased from R$ 161.3 million in the second
quadrimester of 2013 to R$ 135.3 million in 2014 (decrease of 16.1%). The downturn of the
property market in the city caused reduction in the laudemiums collection, similarly to the
occurred with ITBI.
III.1.3.3) INDUSTRIAL AND SERVICE REVENUE
Industrial and Services Revenues comprise mostly resources directly collected by the indirect
administration (autarchies, foundations, public companies, and semi-public companies). Together
they totaled R$ 226.6 million in the 2nd quadrimester of 2014, while revenue in the previous year
totaled R$ 264.7 million (a decrease of 14.4%). Most of these revenues are intrabudgetary in
nature, i.e., amounts paid by the Municipal Treasury for provided services to the indirect
administration in municipal units (e.g. such as cleaning in schools and health facilities, official
media and others).
III.1.3.4) OTHER CURRENT REVENUES
In the 2nd quadrimester of 2014, R$ 806.2 million were collected. This value was 50.1% lower than
the R$ 1.6 billion collected in the same period of 2013.
In Table VIII, we can observe a decline in inflows in the items that make up this item.
TABLE VIII - OTHER CURRENT REVENUES BY ECONOMIC CATEGORY AND ORIGIN (ALL FUNDING SOURCES)
In Millions of R$
Description
CURRENT VALUES
JANUARY TO AUGUST
2013 2014 Nominal Var.
Var. %
Other Current Revenues
Fines and Interest in Arrears
Compensations and Refunds
Outstanding Debt
Miscellaneous Revenue
1,614.5 756.8
58.2
491.5
308.0
806.2 383.0
56.5
216.1
150.5
(808.3) (373.7)
(1.7)
(275.4)
(157.5)
-50.1% -49.4%
-3.0%
-56.0%
-51.1%
It is noteworthy that the main reason for the decrease in revenues compared to the same period of
the previous year stems from the income, in 2013, from cash values regarding PPI Carioca -
Incentive Payment Program of tax debts, established by Law no. 5546 of December 27th, 2012,
and regulated by Decrees no. 36776 and 36777, of February 15th, 2013.
14
Fines and Interest in Arrears – This group includes fines and arrears on debts in administrative
phase (SMF) and also in collection phase of the active debt by the Attorney General of the
Municipality. It is worth highlighting in this group the decrease in the collection of Fines and
Interests in Arrears of the Outstanding Debt of IPTU which decreased from R$ 455.6 million up
to the 2nd quadrimester of 2013 to R$ 144.7 million in 2014 (68.2% decrease);
Outstanding Debt – R$ 216.1 million were raised, compared to R$ 491.5 million in the previous
year, a decrease of 56.0%. The main reason for the reduction in collection in this group was, as
previously mentioned, the high adherence to PPI Carioca in 2013, which allowed the discharge
of numerous installments underway and the cash payment of installment debts. It should be
emphasized that this item does not include penalties and interest charged with the principal of
debts already enrolled in outstanding debt.
Miscellaneous Revenue – R$ 150.5 million were raised, over the R$ 308.0 million in the 2nd
quadrimester of 2013 (decrease of 51.1%). It may be noted, as primarily responsible for the
reduction in income in this group of revenues, the performance of Attorneys' Fees – influenced
by PPI entries in 2013 - (decrease of R$ 63.9 million) and the Counterpart in Regularization of
Works (reduction of R$ 40.1 million), which has reduced gradually as the payments applications
for regularization covered by Complementary Law no. 99/2009 are completed.
III.2) CAPITAL REVENUES
The Capital Revenues (see Table V) held in the end of the second quadrimester of 2014 totaled R$
1.3 billion against R$ 562.4 million in the same period of 2013 (growth of 128.9%). They comprise
revenue from Credit Operations, Sale of Assets, Amortization of Loans, Capital Transfers and Other
Capital Revenues.
III.2.1) CREDIT OPERATIONS
The Credit Operations reached R$ 925.4 million, an increase of 165.9% compared to R$ 348.0
million in the same period of 2013. In this group of Revenues, we highlight the entry of R$ 611.2
million from the credit operation signed in 2014 with BNDES for Improving Urban Mobility
Infrastructure.
III.2.2) SALE OF ASSETS
The revenue from Sale of Assets was R$ 86.9 million, 491.4% higher than the R$ 14.7 million
collected in the 2nd quadrimester of 2013.
15
III.2.3) LOAN AMORTIZATION
The revenue from Loan Amortization was R$ 56.4 million – 6.1% higher than the R$ 53.2 million
collected in the same period of 2013. These revenues are mainly resources from Previ-Rio
regarding loan returns of equity financing programs granted to workers.
III.2.4) CAPITAL TRANSFERS
The amount raised was R$ 218.2 million up to the 2nd quadrimester of 2014, being 49.0% higher
than the R$ 146.4 million collected in the same period of the previous year. These are basically
resources from federal transfers, under item Agreements, where it’s noteworthy highlight the
revenues of Agreements for the PAC to Barra Olympic Park, which totaled R$ 142.3 million up to
August, 2014.
IV) MUNICIPAL EXPENSES
IV.1) EXPENSES BY ECONOMIC CATEGORY
The Table below shows the budget execution of the 2nd quadrimester of 2014, and the following
chart shows the participation of each expense group in the total expenditure paid in this period,
compared to the same period of 2013.
TABLE IX - BUDGETARY EXPENSES BY ECONOMIC CATEGORY 2013 AND 2014
FISCAL YEARS (ALL FUNDING SOURCES)
Economic Category Expense Groups
CURRENT BUDGET RESULT 2nd QUADRIMESTER
2013 2014 Var. Nominal Var. %
(A) (B) B-A (B)/(A)
Current Expenses
Personnel and Social Charges 6,442.7 7,378.6 936.0 14.5% Debt Interest and Services 358.4 413.0 54.7 15.3% Other Current Expenses 4,219.7 4,336.2 116.5 2.8%
Current Expenses 11,020.7 12,127.9 1,107.1 10.0%
Capital Expenses
Investments 991.7 1,085.0 93.3 9.4% Financial Inversions 79.8 196.0 116.2 145.7% Debt Amortization 244.2 226.6 (17.6) -7.2%
Capital Expenses 1,315.7 1,507.5 191.9 14.6% GRAND TOTAL 12,336.4 13,635.4 1,299.0 10.5% Source: Budgetary Result (RREO - Appendix I)
16
CHART VI - PARTICIPATION OF EACH EXPENSE GROUP IN THE TOTAL EXPENSES PAID (ALL FUNDING SOURCES)
As noted earlier, the total amount paid in the first eight months of 2014 was R$ 13.6 billion, a
growth of 10.5%. The main variations – in Personnel and Social Charges, Other Current Expenses
and Investment/Inversions – have already been commented and reflect the City's human resources
policy and the improvement of urban infrastructure. In the context of the extensive schedule of
public investments in progress in the city, the evolution of just 2.8% of Other Current Expenses
shows the concern about the costing dynamics of such investments.
In relation to the Debt Interests and Charges, we observe an increase of R$ 54.7 million (15.3%).
The expansion of debt service payments due to the increase of contracts releases related to the
BRT - TransCarioca, Sanitation for All, and Pró-Moradia programs.
As for the Debt Amortization group, there was a negative variation of 7.2%, from R$ 244.2 million
to R$ 226.6 million. Such negative variation stems from an extraordinary event related to the
judicial deposit effected by the Municipality in the amount of R$ 50.9 million, in 2013, which
affected the basis for comparison.
IV.2) EXPENSES BY GOVERNMENT FUNCTION
The Table below shows that the areas of Education, Health, Social Security and Urbanism (includes
the works of TRANSCARIOCA) represent, at the end of the 2nd quadrimester of 2014, 67.8% of the
budget expenditures. The other functions that showed significant participation in the composition
of expenses were: Administration, with 9.1%, Special Charges, with 5.4%, and Welfare, with 3.6%.
These seven functions totaled 86.0% of the Municipality expenditures.
Debt Interests 2.9%
Investments 8.0%
Inversions 0.6% Debt Amortization 2.0%
Personnel 54.1%
Debt Interests and Charges 3.0%
Investments 8.0%
Other Current Expenses 31.8%
Debt Amortization 1.7% Inversions
1.4%
Personnel 52.2%
Other Current Expenses 34.2%
2013 2014
17
TABLE X - BUDGET EXPENSES BY GOVERNMENT FUNCTION 2nd
QUADRIMESTER OF 2014 - (ALL FUNDING SOURCES)
In Millions of R$
Function
CURRENT BUDGET RESULT 2nd QUADRIMESTER
Settled Composition
ADMINISTRATION 1,246.3 9.1%
SOCIAL ASSISTANCE 485.9 3.6%
SCIENCE AND TECHNOLOGY 16.9 0.1%
TRADE AND SERVICES 92.8 0.7%
CULTURE 89.0 0.7%
SPORTS AND LEISURE 67.1 0.5%
CITIZENSHIP RIGHTS 2.6 0.0%
EDUCATION 2,834.7 20.8%
SPECIAL CHARGES 740.6 5.4%
ENVIRONMENTAL MANAGEMENT 76.2 0.6%
HOUSING 168.1 1.2%
INDUSTRY 4.8 0.0%
JUDICIARY 73.3 0.5%
LEGISLATIVE 402.8 3.0%
SOCIAL SECURITY 2,056.3 15.1%
SANITATION 478.3 3.5%
HEALTH 2,547.1 18.7%
PUBLIC SAFETY 273.4 2.0%
WORK 8.3 0.1%
TRANSPORTATION 159.4 1.2%
URBANISM 1,811.5 13.3%
Grand total 13,635.4 100.0%
We emphasize that the opening of the expenses above are not directly linked to the application of
constitutional provisions of mandatory resources in Education (25%) and Health (15%), whose
computations are based on the spending comparison in these areas with specific items of revenue
not reflected in this Table.
V) FUNDRAISING
V.1) EXTERNAL RESOURCES - CREDIT OPERATIONS AND TRANSFER
The main event of the quadrimester May/August was, without a doubt, the contract of credit
operation with BNDES, in the amount of R$ 3.0 billion, being the Financial Agent liable for the
parcel of R$ 2.7 billion, and the local contribution, in the amount of R$ 301,7 million. It enables
the resources necessary for the achievement of works of extreme relevance to the improvement of
urban and road infrastructure in the city, which form part of the legacy from the Olympic Games
and Paralympic Games of 2016. 18
The resources will be invested in the construction of the extension of the Porto Maravilha Tunnel
Expressway, in Lot 0 of BRT TransOeste, which connects Jardim Oceânico to the Alvorada
Terminal, the BRT TransOlímpico and its connection to the BRT TransBrasil, in the works of
revitalization of the surroundings of the Engenhão Stadium, on the Road and bicycle path link in
Joá, in the Niemeyer bicycle path, in addition to urbanization works around the Olympic Park bar
and its connection to the BRT TransCarioca.
Another contract, of less prominence due to its size, but that can add significant value in the
quality of public service, refers to the Rio de Excelência Project. The credit operation, established
with the World Bank (IBRD), proposes actions to promote excellence in public management, with
expertise in the areas of health and education, among others.
TABLE XI – TOTAL OF THE CONTRACTS SIGNED IN THE 2nd QUADRIMESTER OF 2014 In thousands of R$
IMPROVEMENT OF ROAD AND URBAN INFRASTRUCTURE IN RJ - BNDES USES AND SOURCES PCRJ EXTERNAL TOTAL
PURPOSE SUBCREDIT
Implementation of the Lot 0 BRT TransOeste corridor the and BRT TransOlimpica corridor A
215,772 1,599,435 1,815,207
Duplication of the Bandeiras Highway, implementation of the Niemeyer bicycle path, extension of the Porto Maravilha Expressway, and B
85,938 867,964 953,902
Road Improvements and Urbanization of the Engenhão Stadium surroundings C 247,990 247,990
TOTAL 301,710 2,715,389 3,017,099
RIO DE EXCELÊNCIA PROGRAM - IBRD USES AND SOURCES
PCRJ EXTERNAL TOTAL PURPOSE
Medium-term Fiscal Management and Public Investments 0 4,418 4,418
Innovation and Expansion in the Provision of Services 36,272 12,250 48,522
Innovation in Public Management 0 11,234 11,234
Innovation in the Environmental Management of the City 0 8,370 8,370
TOTAL 36,272 36,272 72,544
Source: F/STM/ACR.
Among the works focused on the environmental recovery of the Jacarepaguá Basin, we report the
conclusion of the interventions in Lot 1A, approximately of R$ 130 million, which has its
accountability already approved by Caixa Econômica Federal.
Another operation nearing completion is the BRT-TransCarioca, which reached 90% of its revenues.
The services are in the process of approval of registration and delivery as-built for subsequent
release of the contractual retention.
The table below presents the total number of projects in progress in the Municipality of Rio de
Janeiro that rely on external resources. The values the Cumulative Performed columns refer to
those actually paid to project suppliers, which may be less than the amount already released by
financial institutions, as per deadlines for measurement and validation of expenses.
19
TABLE XII - PAC - TOTAL OPERATIONS IN PROGRESS
In thousands of R$
Modality Situation USES AND SOURCES PCRJ EXTERNAL TOTAL
CUMULATIVE PERFORMED PCRJ EXTERNAL TOTAL
Transfer PAC I - OGU 2007/2008/2009 91,667 493,068 584,735 79,585 451,117 530,702
PAC II - OGU 2011/2012/2013 113,099 2,827,700 2,940,799 74,689 164,943 239,632
PAC FGTS - CEF 329,324 995,848 1,325,172 209,384 547,076 756,460 PAC MOBILIDADE 753,922 2,776,000 3,529,922 464,077 1,071,499 1,535,576
Loan ROADWAY IMPROVEMENTS - BNDES 301,710 2,715,389 3,017,099 0 110,369 110,369 PROAP III - IDB 335,850 335,850 671,700 107,443 6,485 113,928 RIO DE EXCELÊNCIA - IBRD 36,272 36,272 72,544 0 0 0
TOTAL 1,961,844 10,180,127 12,141,971 935,179 2,351,488 3,286,668 Source: F/STM/ACR.
Tables containing the details of the allocation of resources are attached to the end of this
document.
VI) FINANCIAL ADMINISTRATION OF CASH AND DEBT
VI.1) FINANCIAL INVESTMENT OF CASH
The Municipal Treasury keeps the Municipal Direct Administration cash financial investment in
assets with low credit risk, primarily through exclusive investment funds, public government
securities – in such case only through committed operations backed on them and Certificates of
Deposit (CBD) of Caixa Econômica Federal (CEF). Finally, they are still kept in savings deposits in
public government banks for some cases of resources transferred from other entities (State and
Union) where there is mandatory application in this modality. The investment policy of the
Municipality is formalized through the SMF Resolution no. 2672/2011.
The portfolio of Treasury assets, except the savings, presented weighted average yield by daily
balances of 99.80% of Selic from January to August, 2014, and average applied balance of R$ 4.4
billion, while in the same period of 2013 the performance was of 99.42% of SELIC rate with an
average balance of R$ 4.0 billion.
The exclusive investment funds, managed by official institutions and leaders in assets management
market, had average balances of R$ 3.9 million in this quadrimester, and presented an average
yield weighted by daily balances of 99.74% of the SELIC rate in the 1st quadrimester of 2014 while
in the same period of 2013 it was 99.66% of the SELIC – being concentrated in short-term assets.
The main factors that justified this change were:
1. The detachment of CDI over the SELIC rate over 2013 which negatively impacted the
performance of the Financial Bills of federal banks, which are part of the exclusive fund.
Such detachment was reduced in 2014, beneficiating these assets;
20
2. The instability in the external scenario, from March/2013, which contributed to the strong
volatility in the fixed income market in Brazil in 2013;
3. The exclusive funds have scaled administration fee according to the fund's equity, the
higher the balance invested, lower is the administration fee. The balances applied in this
quadrimester were higher than in the same period of 2013, still contributing to a better
performance of the fund.
The financial revenues under the responsibility of the Municipal Treasury (Direct Administration)
made a total of R$ 334 million in the 2nd quadrimester of 2014, while in 2013 they were R$ 221
million.
It is noteworthy that the increase in average interest rates applied in this period (10.71% p.a.),
which was significantly higher than the previous year (7.60% p.a.), also contributed to the increase
in interest income in 2014, in view of the monetary policy adopted by the Federal Government. It
is also worth recording that there was an increase in the average cash invested by Treasury
Resources (9.8%).
The financial resources of companies, autarchies and foundations with their own treasury are
managed by the Financial Boards of each entity, and determined the application in investment
funds used by the Municipal Treasury or even products of the same credit risk. For its part, the
entities managed by Previ-Rio (including Funprevi and FASS) have their own investment policy,
approved by the Board of Directors, given the specificity of the pension sector, which has specific
regulations and prediction of independence in relation to the sponsor management. The set of all
these municipal entities under own treasuries administration generated financial income of R$ 80
million (including R$ 72 million of pension entities), which, together with the R$ 334 million
recorded in the Direct Administration, have amounted to R$ 414 million of financial revenues for
the Municipality from January to August, 2014.
VI.2) FINANCIAL DEBT
The gross financial debt achieved R$ 11.4 billion, distributed by the creditors below:
TABLE XII – GROSS FINANCIAL DEBT STOCK
Creditor Balance in
thousands of
Average Annual Charges (1) Last due date
Union in R$ (1 contract) 6,155,701 IGP-DI + 6.01% 2029
21
World Bank (1 contract) 2,331,675 US$ + 3.62% 2040
BNDES (3 contracts) 1,584,233 TJLP + 1.65% 2031
BNDES (1 contract) 115,550 IPCA + 1.10% 2024
CEF (53 contracts) 636,087 UPR + 8.30% 2038
Union in US$ (2 contracts) 55,286 US$ + 4.22% 2024
CEF/Union in US$ (1 contract) 38,794 US$ + 5.42% 2029
IDB (4 contracts) 452,189 US$ + 4.36% 2037
Eletrobrás (1 contract - Reluz) 6,705 IPCA-E + 9.50% 2015
Total (67 contracts) 11,376,220 Average Interest Rate = 4.92% Average Duration = 7.0 years
(1) The Average Charges include nominal indexers, interest rate, fees and charges for credit risk.
Were received, until the second quadrimester of 2014, resources of credit operations amounting
to R$ 925.4 million, being R$ 900.4 million from internal operations contracted with two national
public banks, BNDES (TransCarioca, PMAT III, Transportation) and CEF (Sanitation for All, Pró-
Moradia, PNAFM), and R$ 25 million from external operation contracted with the IDB (PROAP III –
Morar Carioca).
Throughout this and the coming years, there will be additional releases of the funds already signed
in at the date of this report, in an approximate total amount of R$ 4.6 billion to be added to the
amount of the gross financial debt. This amount includes pending balances receivable for the
transport corridor TransCarioca (BNDES - R$ 107.5 million); the works of popular urbanization, of
macro-drainage, and sanitation of Jacarepaguá and Santa Cruz, and river dredging (Joana River) in
the Maracanã region (CEF – total of R$ 464 million); US$ 138.7 million of the Urbanization Program
supported by the IDB contract; R$ 1.1 billion for the TransBrasil transport corridor financed by
CEF; Pro-Transport Program (CEF - R$ 500 million); R$ 2.1 billion of the Structuring Program of
Urban Transport (BNDES), signed in May (already released, until Aug-2014, R$ 611 million); and US$
16.2 million of the Rio de Excelência project, signed in August with the IBRD. The financial profile
of all these new operations predicts long-term expiry, with periodic payments and favorable
interest rates in relation to the national market, avoiding concentration of expenditures.
The economy of expenditures with the loan with the World Bank, completed in 2011, that allowed
the reduction in the interests paid to the Union, already makes a total of R$ 1,3 billion since the
disbursement of the first installment by the Bank, occurred in August 2010.
All debt indicators of the Fiscal Responsibility Law (LRF) and MP 2185-35 (which governs the
renegotiation of debts of the municipalities with the Union) showed significant improvement since
the beginning of the current Administration in 2009. As demonstrated by the table below, the
Municipality fulfills with ease the debt thresholds of LRF and of MP 2185-35.
22
TABLE XIII – DEBT INDICATORS
Act Indicator Limit MRJ 2008 MRJ 2013 MRJ 2014 – 2nd Quadrimester
Senate
Resolution
40/2001
Net Consolidated Debt / Current Net
Revenue (RCL) annual
120% 58% / 79%(*) 47.42% 36.88%
Senate
Resolution
Average annual debt service up to
2027 / RCL annual
11.5% 10.49% 6.56% 6.82%
MP 2185-35 Total Gross Contractual Debt /
Actual Net Revenue (RLR)
100% 118% 79% 85%
NOTE: The figures presented on the debt contract with the Union regarded annual interests of 9.0% higher than the IGP-DI until 2009,
an effectively charged level to the City by the National Treasury until 2010. From August 2010, such interest rate was decreased to 7.5%
due to the partial pre-payment made by the City with World Bank resources, and legal actions active at the time (started on previous
fiscal years), with a petition for reduction or such interests to 6.0% per year, were closed. In November 2011, the receipt of the second
part of the World Bank led to a new amortization by the Union and the interest rate is now definitely at 6.0%.
(*) In 2008, the limit was calculated as 58%, but using the total of Cash Availabilities and Financial Receivables of the Social Security
Regime as part of the Total Cash of PCRJ which reduces the Debt. Such practice is not performed anymore in the MRJ. Thus, the figures
of Dec/08, for purposes of comparison with the most recent periods shall be interpreted as 79%.
The table below shows the ratings currently granted by the three main international rating
agencies for the Federal and Subnational governments of the country, showing that the City of Rio
de Janeiro not only has the Investment Grade in all of them, but it is also the only government
that has risk classification higher than the Union’s, as per Standard & Poor's.
TABLE XIV – RATINGS OF GOVERNMENTS IN BRAZIL (INTERNATIONAL SCALE) – AUGUST 2014
FITCH MOODY’S STANDARD AND POOR’S
BBB: Union, City of Rio, state of SP
BBB–: States of Rio, PR, SC
BB+: State of MA
Baa2: Union, City of Rio, state of SP
Baa3: Belo Horizonte, States of MG, MT, PR
Ba1: State of MA
BBB: City of Rio
BBB–: Union, States of RJ, SP, MG, MT, PR, SC
Source: Websites of the respective agencies. The minimum levels for Investment Grade rating are BBB- (Fitch and Standard and Poor's)
and Baa3 (Moody's).
VII) MANAGEMENT OF REAL ESTATE ASSETS
The Superintendent of Real Estate Assets, currently linked to the Special Secretariat of
Concessions and Public-Private Partnerships, manages the real estate assets of the direct
administration (not including the properties of FUNPREVI and PREVIRIO)3, being responsible for the
3 The values reported in the tables of this report refer to the total real estate assets of the Municipality.
23
collection of revenue from use, as well as their selection and sales, as authorized by specific laws.
There are ongoing initiatives of management modernization, financed with resources from PMAT III
(BNDES), including a complete re-registration of municipal buildings, and a new asset management
system, which will bring relevant benefits to this area.
In terms of revenue, in the first two quadrimesters of 2014, the highlights are:
Sale of Assets ― Revenue from the sale of real estate and vesting. The collection reached by the
direct administration was approximately R$ 20.3 million, reaching a real variation of 35.9% over
the same period of last year. Highlights include the approval of Law No. 5771/2014, authorizing
the sale of 19 buildings, responsible for an even greater increment increase in this revenue.
Other Equity Revenue – Group composed of revenues from rents, annual rents, laudemiums,
concessions and permissions of use, etc. The collection by the direct administration reached the
amount of R$ 78.3 million, which represents a real variation of -18.3% over the same period in
2013. Such variation is mainly due to a drop in fundraising with Laudemiums, the payment of
which is due at the time of the sales of buildings that are part of the municipality annual rents. It
is worth noting that proceeds from Laudemiums have an irregular flow, explaining this negative
variation for a greater volume of transactions with real estate annual lessees this year, in relation
to the previous year.
VIII) CONCLUSION
The budget profile of City Hall of Rio de Janeiro remains characterized by a virtuous combination
of reduced spending on costing and increased investment – whose budget participation continues
around 21%.
From the point of view of investments, the main event of the quadrimester May/August was,
without a doubt, the contract of credit operation with BNDES, in the amount of R$ 2.7 billion,
which form part of the legacy from the Olympic Games and Paralympic Games of 2016. The
resources will be invested in the construction of the extension of the Porto Maravilha Tunnel
Expressway, in Lot 0 of BRT TransOeste, the BRT TransOlímpico and its connection to the BRT
TransBrasil, in the works of revitalization of the surroundings of the Engenhão Stadium, on the
Road and bicycle path link in Joá, in the Niemeyer bicycle path, in addition to works of
urbanization around the Olympic Park bar and its connection to the BRT TransCarioca.
Despite the smaller size, we must highlight the loan for the Rio de Excelência Project, since it can
add significant value to the quality of public service. The credit operation, established with the
World Bank (IBRD), proposes actions to promote excellence in public management, focusing in the
areas of health, education, environment, impact assessment of public policies, and financial
management.
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We cannot help but point out that the increase in indebtedness, coupled to this investment cycle,
has the Municipality complying with all the limits provided for in the LRF and MP 2185-35 – which
attests to the concern about the financial sustainability of the City.
The consequence of the concern with the trajectory of public finance is the extremely positive
evaluation of all the major credit rating agencies – Moody's, Fitch, and Standard & Poor’s – which
confers simultaneously the Investment Grade. Finally, regarding risk assessment, it is important to
highlight a fact quite rare around the world: for the first time in the history of the country, the
local government rating surpasses the federal rating.
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APPENDIX
Table I - PAC I and II In thousands of R$
PAC I - OGU USES AND SOURCES PERFORMED IN 2014 CUMULATIVE PERFORMED CEF 2007/2008/2009 PCRJ EXTERNAL TOTAL PCRJ EXTERNAL TOTAL PCRJ EXTERNAL TOTAL Urbanization Areas
Tijuca Complex 13,397 56,695 70,092 157 122 279 12,891 54,499 67,391
Juliano Moreira Colony 25,983 82,000 107,983 11,101 8,432 19,532 20,525 68,137 88,662
SOEICON/Centro I/II 5,308 10,511 15,819 75 147 222 3,133 9,533 12,665
Manguinhos Complex 15,125 83,120 98,245 369 2,803 3,172 15,110 80,886 95,996
Alemão Complex 17,855 90,317 108,172 0 18 18 17,855 88,206 106,061
Vila Catiri - FNHIS 768 3,327 4,095 18 18 36 625 2,893 3,518
Fazenda Coqueiros - FNHIS 300 3,452 3,752 18 205 222 152 1,753 1,906
Tijuca - FNHIS 3,908 25,868 29,776 214 2,171 2,384 2,099 15,375 17,474
SUBTOTAL Urbanization of Areas 82,644 355,290 437,934 11,951 13,915 25,866 72,391 321,283 393,674
Sanitation
Sepetiba 2,508 13,993 16,500 413 930 1,343 2,508 13,992 16,500
Lot 1A Jacarepaguá 6,515 123,785 130,300 2 3,466 3,469 4,687 115,842 120,528
SUBTOTAL Sanitation 9,023 137,778 146,800 415 4,396 4,811 7,194 129,834 137,029
TOTAL PAC I - OGU 91,667 493,068 584,735 12,366 18,311 30,677 79,585 451,117 530,702 In thousands of R$
PAC II - OGU USES AND SOURCES PERFORMED IN 2014 CUMULATIVE PERFORMED CEF 2011/2012/2013 PCRJ EXTERNAL TOTAL PCRJ EXTERNAL TOTAL PCRJ EXTERNAL TOTAL
Canal Mangue/Trapicheiro 22,675 141,720 164,395 0 352 352 11,106 15,826 26,932
Slopes Stabilization 2011 1,870 71,541 73,411 0 22,386 22,386 0 50,031 50,031
Morro da Providência 34,293 87,920 122,213 5,132 16,684 21,817 34,293 48,882 83,175
Chapadão/Chico Mendes 54,262 43,671 97,933 6,365 14,081 20,446 29,291 17,384 46,674
Slopes Stabilization Centro / Tijuca 2012 0 96,474 96,474 0 0 0 0 0 0
Slopes Stabilization Zona Norte (North Zone) 2012 0 123,756 123,756 0 0 0 0 0 0
Slopes Stabilization Alemão / Penha 2012 0 83,490 83,490 0 1,393 1,393 0 1,393 1,393
Slopes Stabilization Zona Oeste (West Zone) 2012 0 45,432 45,432 0 0 0 0 0 0
Works Deployment of VLT Centro * 0 532,000 532,000 0 0 0 0 0 0
Olympic PAC - Handball Gymnasium 0 178,458 178,458 0 234 234 0 234 234
Olympic PAC - Tennis Center 0 182,071 182,071 0 23,438 23,438 0 23,438 23,438
Olympic PAC - Velodrome 0 143,239 143,239 0 4,802 4,802 0 4,802 4,802
Olympic PAC - Aquatic Stadium 0 219,557 219,557 0 2,953 2,953 0 2,953 2,953
Olympic PAC - Deodoro (North Area) 0 659,657 659,657 0 0 0 0 0 0
Olympic PAC - Deodoro (South Area) 0 166,814 166,814 0 0 0 0 0 0
Olympic PAC - Deodoro (Urban Area) 0 51,900 51,900 0 0 0 0 0 0
TOTAL PAC II - OGU 113,099 2,827,700 2,940,799 11,498 86,323 97,821 74,689 164,943 239,632
* The value refers only to the portion of the Union. The portion corresponding to the private sector in PPP VLT was excluded from theaggregation. Source: F/STM/ACR.
.
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Table II - PAC / LOANS CEF
PAC – FGTS CEF
USES AND SOURCES PERFORMED IN 2014 ACCRUED PERFORMED PCRJ EXTERNAL TOTAL PCRJ EXTERNAL TOTAL PCRJ EXTERNAL TOTAL
Urbanization Areas 2007 / 2008
Reg. Fundiária Fernão Cardim 23 445 468 0 0 0 23 445 468 A. Lima / S. Rodrigues 2,691 21,635 24,326 0 0 0 2,644 19,734 22,379 São Carlos 2,001 21,145 23,146 0 73 73 1,951 18,683 20,634 Nova Divineia and others 1,583 16,678 18,262 0 0 0 1,409 12,534 13,943 Guarabu 4,688 27,885 32,573 332 2,063 2,395 4,135 24,486 28,621 Areal 1,306 5,464 6,770 4 0 4 1,175 5,361 6,535 Vila Esperança 1,447 15,083 16,530 10 19 29 970 9,370 10,340 Vila Rica de Irajá 2,275 22,292 24,567 0 53 53 2,032 18,166 20,198 João Lopes 933 5,325 6,258 88 604 691 878 4,966 5,844 Parque Alegria 410 7,796 8,206 0 18 18 391 5,043 5,434 Vila Catiri 1,102 8,639 9,741 0 0 0 1,091 7,696 8,787
Urbanization Areas 2010 / 2011
Juliano Moreira Colony 22,561 39,968 62,529 1,524 2,700 4,224 8,443 14,925 23,368 Babilônia and C. Mangueira 19,121 39,824 58,945 15,055 378 15,434 29,821 19,455 49,276 Jardim do Amanhã - C. Deus 7,813 35,872 43,685 255 1,170 1,425 1,031 4,479 5,510 Alemão Complex 17,408 59,989 77,396 12 41 53 7,629 25,467 33,097 Manguinhos Complex 8,473 29,862 38,336 33 99 133 1,534 3,572 5,106 Morro da Coroa 16,135 22,621 38,756 587 2,919 3,506 14,936 19,824 34,760 Guarabu Community 8,068 19,439 27,507 0 0 0 6,209 14,332 20,541
SUBTOTAL Urbanization of Areas 118,039 399,962 518,001 17,900 10,137 28,037 86,302 228,539 314,841 Sanitation 2007/2008
Parque Linear- Rio Acari 54,716 46,948 101,663 14,890 12,989 27,879 46,139 39,386 85,525 Sanitation 2012/2011
Lots 1B/ and 1C Jacarepaguá 40,388 198,493 238,881 5,346 24,178 29,524 26,629 128,603 155,233 Saneando Santa Cruz 73,456 207,246 280,701 3,394 16,687 20,082 27,762 75,144 102,906 Canal Mangue/Rio Joana 42,725 143,200 185,925 18,644 23,347 41,991 22,552 75,403 97,955
211,285 595,886 807,171 42,274 77,202 119,476 123,082 318,536 441,619 TOTAL PAC - FGTS 329,324 995,848 1,325,172 60,174 87,339 147,513 209,384 547,076 756,460
Source: F/STM/ACR.
Table III - PAC URBAN MOBILITY / BNDES and CEF CREDIT OPERATIONS In thousands of R$
URBAN MOBILITY USES AND SOURCES PERFORMED IN 2014 ACCRUED PERFORMED PCRJ EXTERNAL TOTAL PCRJ EXTERNAL TOTAL PCRJ EXTERNAL TOTAL
PAC - WORLD CUP / BNDES 2010
BRT TransCarioca Corridor - BNDES 524,606 1,179,000 1,703,606 45,449 109,492 154,940 464,077 1,071,499 1,535,576 PRÓ-TRANSPORTE / CEF 2013
BRT TransBrasil Corridor 203,000 1,097,000 1,300,000 0 0 0 0 0 0 PRÓ-TRANSPORTE / 2 STAGE
Road Paving in Sta. Cruz/Vala do Sangue 9,575 181,934 191,509 0 0 0 0 0 0 Road Paving in Sepetiba 2,940 55,857 58,797 0 0 0 0 0 0 Road Paving in Guaratiba 7,548 143,418 150,967 0 0 0 0 0 0 Road Paving in Bairro Maravilha 6,252 118,791 125,043 0 0 0 0 0 0
TOTAL 753,922 2,776,000 3,529,922 45,449 109,492 154,940 464,077 1,071,499 1,535,576 Source: F/STM/ACR.
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