With Growing Debts, Árborg Municipality Nears Bankruptcy

Selfoss - Suðurland - Ölfusá

The municipality of Árborg in South Iceland is facing financial difficulties due to inflation and a decline in real estate revenues.

Following an assessment of the municipality’s financial situation by international accounting firm KPMG, the municipal council has called a meeting with residents to discuss the town’s financial position, which is reportedly extremely challenging compared to other municipalities.

The town has taken out loans with increasing interest rates in recent years, and the council fears that they may be on the verge of bankruptcy, with a negative net worth of ISK 76,000 [$550, €509] per resident. In contrast, other comparable towns like Reykjanesbær, Mosfellsbær, Akureyri, and Akranes have positive net worth per resident.

See also: No Gender Pay Gap in Árborg

The town has been in financial trouble for a long time, with a negative net worth per resident of ISK 20,000 in 2020. The COVID-19 pandemic cannot be entirely blamed for the financial situation, but the town invested heavily in infrastructure and construction in recent years, including new schools, sports facilities, and a kindergarten, which have contributed to the financial issues. The council is concerned that they may have to resort to layoffs and selling off assets to address their financial problems.

Mayor of Árborg Municipality, Fjóla Kristinsdóttir, stated to Vísir: “I expect there will be some streamlining. Unfortunately, that’s just the way it is. But of course, we are not going to pay off the municipality’s debts by just streamlining operations. There needs to be more done.”

Árborg’s debt is approximately ISK 28 billion [$205 million, €188 million], with increasing debt-to-income ratios. The council is currently discussing possible solutions, including raising taxes, reducing spending, or selling assets. However, the town’s mayor notes that many of the investments made in recent years have been necessary due to the town’s growing population, and it is challenging to balance the needs of the community with the financial constraints they now face.

Reykjavík Municipal Archives to Be Closed Down

Yesterday, the City Council of Reykjavík approved the mayor’s proposal to close down the Reykjavík Municipal Archives. The operations of the Municipal Archives would be incorporated into the National Archives of Iceland. Historians and archivists have criticised the decision, RÚV reports.

Operations to be transferred to the National Archives

Yesterday, Reykjavík City Council approved Mayor Dagur B. Eggertsson’s proposal to close down the Reykjavík Municipal Archives. The mayor’s proposal was presented at a city council meeting six months ago, although its formal processing was postponed until yesterday.

The proposal was predicated on a summary authored by KPMG, which reviewed the operation of the Municipal Archives and assessed three possible options to cut down costs: one, to continue running the Municipal Archives in its current form; two, to increase cooperation with the National Archives of Iceland, which would imply the construction of a new archive; and three, to close down the Municipal Archives and transfer its operation to the National Archives. The last option was considered, by far, the cheapest.

Mayor Dagur told RÚV that the city council had made “a policy decision,” but that the matter would go before the city executive council. “The [path] that was chosen was to start discussions with the National Archives about joint digital preservation and, in effect, the merging of these institutions. That would mean that the Municipal Archives, in its current form, would no longer be an independent entity.”

According to available analyses, operational changes will not be felt over the next four years, Dagur noted. “It will depend on the progress made during discussions, on the outcome of those discussions, and the overall outcome regarding these preservation issues in the country as a whole.” On this latter point, Dagur referred to the global discussion concerning the digital preservation of documents. He hopes that museums in Iceland will unite to ensure safe and accessible document storage.

“Our discussions have solely been positive and constructive,” Dagur said of his relationship with the state. “The National Archives is, in many ways, facing the same challenges as the Municipal Archives and the city itself. If we look to other countries, we see that they’re facing similar challenges, as well.”

Dagur observed that there was no reason to believe that ensuring access to archives would not improve if matters were handled properly. The goal was to translate a lot of data into digital form so that individuals weren’t forced to look to a single place in order to access documents.

A misguided decision based on limited understanding

As noted by RÚV, the proposal to close down the Reykjavík Municipal Archives surprised Svanhildur Bogadóttir, an archivist employed at the institution, when the media reported the proposal in the middle of last month. National Archivist Hrefna Róbertsdóttir further commented that, to the best of her knowledge, this would be the first time that a municipality’s archives were closed.

Sigurður Gylfi Magnússon, professor of history at the University of Iceland, told RÚV that the proposal was misguided and showed a limited understanding of museum issues.