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Funding for Ambitious Transportation Plan Contested

An ambitious 15-year transportation infrastructure plan for the Reykjavík capital area will come with a large price tag of ISK 120 billion ($970m/€890m). The federal government has pledged ISK 45 billion to the project while six local governments will contribute ISK 15 billion. RÚV reports that opposition MPs have criticised the plan’s lack to address where exactly the other 50% of the project’s funding will come from.

Growing traffic, shrinking tax income

The government and six municipalities in the capital area signed an agreement last Thursday to implement a 15-year transportation infrastructure development plan that is the largest in Iceland’s history. The plan includes several new roads and bridges in the capital area, as well as bike lanes and a new bus rapid transit system known as Borgarlína.

Iceland’s road infrastructure is currently financed through taxes on gasoline and diesel. However, the government’s environmental plan includes a ban on the registration of new petroleum and diesel cars starting in 2030. This means that the current source of funding for road maintenance and improvement will inevitably dry up over the next two decades.

Tolls on major routes

A new association jointly owned by the state and municipalities will be founded to implement the project. The organisation will receive the property Keldnaland, which will be sold to help finance the project. Another part of the funding for the new transportation plan, which spans from this year until 2033, is to be financed by the implementation of road tolls on major routes in the capital area. Many opposition MPs criticised the tolls and the plan’s lack to address how they would be implemented. Labour unions have also expressed opposition to tolls in general, arguing they would impact low earners, many of whom drive longer distances to get to work.

“We still have to discuss these toll ideas and we have to prevent them from hurting people who have […] been pushed out into the suburbs,” MP Logi Einarsson of the Social Democratic Alliance stated in a roundtable discussion on national television yesterday. Katrín Gunnarsdóttir, Reform Party chairperson, expressed her concerns that tolls would place a heavier tax burden on capital area residents than those living in the countryside. “It’s all very unclear that the same agreement should apply to the whole country,” she stated.

Systemic change

Minister of Transport Sigurður Ingi Jóhannsson assured reporters that the transportation plan is a “fully funded agreement. How the exact implementation of it will be will come to light and is connected to the fact that we are changing the traffic taxation system.” Sigurður stated: “It is not the government’s goal with this change in the tariff structure, that is to say taxation, or the tolls collected from traffic or cars to result in increased taxes, not at all. We are just changing systems.” Minister of Finance Bjarni Benediktsson has suggested that tolls could be avoided by selling state-owned Íslandsbanki bank.

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