Reykjavík City Council Approves Extensive Budgetary Measures

City of Reykjavík strike

At a meeting yesterday, Reykjavík City Council approved measures intended to save over ISK 1 billion in operational costs over the coming year, RÚV reports. Among the measures are the expansion of paid-parking zones and decreased subsidies for electric-vehicle charging stations located by apartment buildings.

92 budgetary items

At a City Council meeting yesterday, the majority submitted an amendment to Reykjavík’s 2023 budget. The amendment comprises a total of 92 items, which are expected to save over ISK 1 billion ($7.1 million / €6.7 million) over the coming year.

As noted in the meeting’s minutes, City Council deems that the measures reflect “sensible financial management,” noting that the pandemic has impacted municipalities all over the country. “The reaction is natural and befitting the occasion, serving to protect front-line services and vulnerable groups.”

Among the measures are amendments to meal purchases for preschools; reduced opening hours for youth centres (which will close at 9.45 PM as opposed to 10 PM), museums, and swimming pools (during holidays); expansion of paid parking zones; and decreased subsidies for electric-vehicle charging stations near apartment buildings; among other things.

In an interview with RÚV on Wednesday, Einar Þorsteinsson, Chair of City Council, stated that the residents would “feel these changes.” These budgetary cuts were not fun but necessary in order to improve Reykjavík’s finances.

Operational losses of over ISK 11 billion

During its meeting yesterday, the City Council also reviewed an interim financial statement for the city’s operations during the first nine months of the year. The statement revealed that the city’s “A Section” – primarily funded by taxpayer money – was operated at an ISK 11.1 billion ($7.1 million / €6.7 million) deficit.

In a press release published yesterday, City Council stated that numerous factors had impacted its finances: “A new variant of COVID-19 at the beginning of the year put temporary pressure on operations, especially on the school and welfare system. The war in Ukraine, in addition to the pandemic, led to a shortage of raw goods and slowed down production time, which has negatively impacted global markets and led to increased inflation among our trading partners. The Central Bank, owing to rising real-estate prices, high inflation, and overheating of the domestic economy, raised key interest rates; all of this has had an impact.”

As noted in a press release on the City’s interim financial statement, however, the City’s A and B sections – the “B” section includes businesses in part or whole ownership of the city, such as Reykjavík Energy (OR), Associated Icelandic Ports (Faxaflóahafnir), Sopra bs. and Strætó bs., among others – produced a surplus of ISK 6.8 billion ($48 million / €46 million).

This article was updated at 11 AM.

City Will Not Make Cuts Despite Deficit, Says Reykjavík Mayor

Dagur B Eggertsson Reykjavík Mayor

Reykjavík Mayor Dagur B. Eggertsson told RÚV the city will not resort to service cuts or price hikes as a result of its operational deficit. He adds that construction and urban consolidation in Reykjavík will yield profits in the coming years. Socialist Party councillor Sanna Magdalena Mörtudóttir says the city’s new budget does not address poverty or the ongoing housing crisis while other councillors say the city’s debt is too large.

The City of Reykjavík will be operated with an ISK 3.4 billion [$26.1 million, €22.6 million] deficit next year, according to the budget presented by city authorities earlier this week. This is the third year in a row the city runs on a deficit. Its debt is expected to increase by ISK 24 billion [$185 million, €160 million] and will be almost ISK 174 billion [$1.34 billion, €1.16 billion] by the end of next year. That applies to the city’s operations that are funded by taxes, or the so-called “A” section of city operations. The “B” section, which includes businesses in part or whole ownership of the city, such as Reykjavík Energy (OR), Associated Icelandic Ports (Faxaflóahafnir), Sopra bs. and Strætó bs., among others, is projected to produce a surplus of ISK 8.6 billion [$66.1 million, €57.2 million].

Long-term loans for construction projects

“We are going to grow out of this problem and our plans allow for that. We have low tariffs [compared to other municipalities], especially for those who have less, and we intend to keep it that way,” stated Dagur. He added that the city’s debt was nothing to worry about. “As a percentage of revenue, it is far south of something to be concerned about and we are in good standing compared to other municipalities.” According to Dagur, part of the city’s debt is due to long-term construction projects including the building of new neighbourhoods. “We take part of it as a loan and the development pays for it over a long period. That’s just sensible economic management and responsible financial management, as we have done here in recent years.”

Social housing and public transit overlooked

Socialist Party councillor Sanna Magdalena Mörtudóttir wants the city to increase its revenue by taxing capital income, “to ensure that we can build up the good service that people have the right to receive.” She criticised the budget’s housing plan, which she stated did not address the waiting list for social housing, which was around 850 people long. “This budget does not account for eradicating poverty, eradicating this housing crisis that people are experiencing here. And that’s something that is unacceptable.”

Both People’s Party councillor Kolbrún Baldursdóttir and Independence Party councillor Eyþór Arnalds expressed concern at the city’s rising level of debt, with Eyþór stating that the budget did not account for funding the Borgarlína rapid bus transit line, though its construction is scheduled to begin soon.

Priests Alarmed by Proposed Continuation of Budgetary Cuts

Priests in Iceland are alarmed by the proposed continuation of budgetary cutbacks within the Evangelical Lutheran Church, according to the Director of the Minister’s Association, Ninna Sif Svavarsdóttir. Budgetary cuts will be discussed at an annual Church Assembly, which begins tomorrow.

Reduction of full-time equivalent units

In an interview with Mbl.is, Ninna Sif Svavarsdóttir – pastor at the Hveragerði parish and Director of the Minister’s Association – stated that priests were “alarmed” by the proposed continuation of budgetary cutbacks passed at an extraordinary Church Assembly in January of this year. The proposed continuation, which will be submitted to the Church Assembly (Kirkjuþing) beginning this weekend, involves the temporary cessation of new hires within the Evangelical Lutheran Church of Iceland and the Bishop’s Office, along with continued retrenchment of church’s staff (e.g. a decrease in the number of salaried priests and the consolidation of parishes).

According to a memorandum published on Mbl.is on October 20, the Evangelical Lutheran Church hopes to reduce the number of full-time equivalent units from 169.7 to 157.7 – the number originally proposed in the church agreement from 1997 – and thereby save approximately ISK 180-190 million ($1.4-1.5 million / €1.2-1.25 million) annually.

No replacements for retired priests

According to Ninna, January’s budgetary cutbacks had an immediate impact on church services: “Several priests retired, and no replacements were hired. More priests are expected to retire in the coming weeks, and there will probably be no new hires to replace them either,” Ninna remarked. “Priests worry that they’ll be asked to take on more responsibility for the same wages and that they’ll be unable to maintain the same level of religious services.”

Priests are dependent on the national church for employment, Ninna notes: “They are, of course, worried about these positions; we can’t apply anywhere else … the church agreement – which is the basis for the financial relationship between the church and state – stipulates that the lion’s share of the church’s budget be dedicated to the salary of priests.”

In addition to budgetary proposals, the priest and mediator Kristinn Ágúst Friðfinsson has proposed that lay representatives at the Church Assembly, which constitute the majority of those assembled, be chosen at random.