Stable operations, enhanced service and development ahead

The 2018 budget for the City of Hafnarfjörður will be presented to the city council for its first reading on Wednesday. The plan clearly shows that the financial improvements made by the municipality in recent years are beginning to benefit its residents. The development of services across various council departments is on the horizon, maintenance of the town's assets will be significantly increased, and spending will be higher than it has been for a long time. The rates for property taxes are being lowered for residents and businesses, and council charges are generally not being increased. The debt ratio will continue to fall, and investment will be funded from the council's own capital and the proceeds of land sales. A strong emphasis is placed on improvements in the town's nursery and primary schools, both in terms of professional practice and the buildings, facilities, and environment for pupils and staff. The family is a priority in the current budget.

Strong positive performance by the local council

The municipality has been successful in turning its operations around from a deficit in 2015, with the year 2016 yielding a positive operating result for the City of Hafnarfjörður of 538 million króna. The operating result for the first half of 2017 was a positive 907 million króna. The forecast anticipates a positive operating result of 554 million króna for the end of 2017. Operating cash flow is estimated at approximately 3.4 billion króna, which is over 141% of total revenue. The forecast indicates that this will be met, and possibly even better than the plan assumes.

Operational optimisation is paying off, to the benefit of residents.

On this basis, the budgeting process for 2018 and the three-year plan for the following years has been built. The 2017 operations and the 2018 budget reflect the objectives that the town council set for itself with the reform work carried out in 2015.

Interest rates fall and nursery fees remain unchanged

The 2018 budget provides for the council tax to remain at 14.48%, having been reduced from 14.52% in 2017. Furthermore, the tax rates for property tax and sewerage and water charges are expected to fall year-on-year, with the rates in krónur increasing only in line with inflation, despite a significant rise in property valuations. For the fifth consecutive year, fees at nurseries will remain the same. Furthermore, it is anticipated that fees paid to the municipal treasury will not increase year-on-year, with the exception of fees for the Environmental and Planning Service, rent for social housing, and harbour fund charges, which will rise in line with the projected increase in the index.

Key findings in the 2018 Draft Budget

• The operating result of Sectors A and B is a surplus of approximately 742.3 million króna, and the operating result of Sector A is a surplus of approximately 156.6 million króna.
• The Group's total assets are estimated at approximately 52.4 billion króna at the end of 2018, liabilities and obligations are estimated at approximately 41.7 billion króna, and equity at approximately 10.7 billion króna.
• Projected operating cash flow from the A-section is approximately 2.5 billion króna, or 10.31%, and combined for the A and B sections 3.5 billion króna, or approximately 13.61% of total revenue.
• The sale of plots in Skarðshlíð is estimated at 1,620 million króna, and the sale of industrial plots at 650 million króna.
• The total planned investments amount to 5,020.5 million króna. This includes various new projects, totalling 1,749.5 million króna, which will be financed with operating cash flow. The construction of a new primary school in Skarðshlíð, at a cost of 1,800 million króna, will be financed by the sale of plots of land in Skarðshlíð, the Housing Office's purchase of social housing to the value of 500 million króna will be financed by borrowing, and the construction of a care home on the Sólvangsreitur site to the value of 971 million króna will be partly financed by borrowing, or approximately 400 million króna, and partly with operating cash. The care home is a project for the state treasury, which will pay for the use of the facility through lease payments.

• It is generally expected that the tariff for 2018 will remain unchanged.

Increased funding for nursery and primary schools, maintenance and cultural affairs

The budget also provides for increased expenditure above general price rises, totalling approximately 588 million króna. This includes increased funding for nursery and primary schools, family services, property maintenance, cultural affairs and environmental services.

Debt ratio down to 132.1% at the end of 2018

Hafnarfjörður's debt ratio is forecast to be around 163% at the end of 2018, down from 170% at the end of 2016. The forecast predicts that the debt ratio will be below 140% by the end of 2017. According to the 2018 budget, the debt ratio will be around 132% at the end of that year.

Increased collaboration between sectors, guided by prevention and family welfare

In 2018, the emphasis will be on increased cooperation between family services and education and leisure services for the benefit of children and young people in the municipality, with a special focus on prevention. The emphasis will be on support and services for children with complex needs and their families. In addition, work will be undertaken on a new approach to handling child protection cases, and opportunities for employment for disabled individuals will be increased in the local area. 

General financial assistance increases above inflation

Financial assistance is budgeted at 180 million krónur in the 2018 budget. The municipality's regulations provide for an annual increase in the financial scale in line with the consumer price index. In 2018, the threshold increases above inflation, rising from 165,600 krónur to 177,600 krónur.

Development and implementation without borrowing

This is a summary, but further information can be found on pages 69 to 74 of the statement of accounts accompanying the budget, which is attached as an appendix to this press release:

• The proceeds from the sale of the plots in Skarðshlíð will be used for the construction of a school in Skarðshlíð..
• Work on Ásvallabraut and Kaldárselsveg is scheduled to begin in 2018 and be completed in 2019. The total cost is 1,050 million króna.
• Construction of a new teaching and training centre at Ásvellir will be completed in 2018, with 340 million krónur allocated to the project in 2018.

• It is anticipated that a similar amount will be spent on sports facility projects in the coming years, as has been the case in recent years, or 450 million krónur per year. The first phase of the proposal is the construction of a ball sports hall at Fimleikafélag Hafnarfjarðar. 200 million króna will be allocated to the project in 2018. The works are expected to be completed in 2019, by which time a total of 450 million króna will have been spent on the project. In total, the plan estimates the project will cost around 720 million króna.

Construction of care home completed

The 2018 budget provides for a loan of 400 million króna for the construction of a care home. To date, no loans have been taken out for the project, but it has been assumed that the project will be financed by loans, as it is a project for the national treasury. A loan of 1,200 million króna is planned for 2019 for the care home, bringing the total loan for the care home in 2018 and 2019 to 1,600 million króna.

500 MILLION KRÓNUR FOR THE PURCHASE OF SOCIAL HOUSING

Furthermore, borrowing of 500 million króna is planned for 2018 and 200 million króna for 2020 for the purchase of social housing. It is planned to allocate 500 million króna per year from 2018 to 2021 to purchase social housing, totalling 2,000 million króna. Of this, a total of 700 million króna will be financed through borrowing, while the remainder will be financed with the municipality's own funds. No further borrowing is planned for the period 2018 to 2021.

General Information

• On 1 October 2017, the town's population was 29,217.
• The town's population has grown steadily, and the 2018 plan forecasts a 2.01% increase in the population. The Municipality of Hafnarfjörður is the third largest municipality in the country, with total expenditure of around 24.8 billion króna, an estimated wage bill of around 12.6 billion króna and an estimated financing cost of around 1.7 billion króna, or equivalent to 6.5% of the municipality's total revenue.
• The municipality employs around 1,800 people, making the City of Hafnarfjörður one of the largest companies in the country, if one can liken a municipality to a company. The pension liability at the end of 2018 is estimated at 12.8 billion króna, compared with total wage costs for the year estimated at 12.6 billion króna.