The financial situation calls for austerity and a review of priorities.
The financial position of the City of Hafnarfjörður was discussed at a city council meeting on Wednesday, 21 October. In his speech at the meeting, Mayor Þórður Þórarinsson reviewed the results of the half-year accounts and the response to a worse-than-expected financial performance. Lower revenues from planning fees and increased operating costs call for restraint in the preparation of the 2027 budget.
Discipline in the preparation of the 2027 budget
The financial position of the City of Hafnarfjörður was discussed at a city council meeting on Wednesday, 21 October. In his speech at the meeting, Mayor Þórður Þórarinsson reviewed the results of the half-year accounts and the response to a worse-than-expected financial performance. Lower revenues from planning fees and increased operating costs call for restraint in the preparation of the 2027 budget. The operations must be brought under control, restraint must be shown, and a balance must be achieved in the operations. At the same time, the municipality's core services must be protected.
Watch the mayor's speech – see at 2:03:55
Minutes of the town council – item no. 9 on the agenda
The A-section financial result for the Municipality of Hafnarfjörður was a deficit of 2.4 billion krónur in the first six months of the year, whereas the budget had provided for a surplus of around 435 million krónur. The variance therefore amounts to 2.8 billion krónur. The largest single variance is due to building rights fees. Revenue from these was over 1.5 billion krónur below forecast, amounting to less than 100 million krónur during the period. The slower pace of the construction market has thus had a significant impact on the town's finances.
Increased cost of services
Alongside lower revenue from development contributions, costs have exceeded the budget, particularly in education and social services. Accommodation charges were approximately 480 million króna over budget, and purchased teaching and special educational services were about 233 million króna over budget. Wage costs were 2.25% over budget. High interest rates and inflation also increase the municipality's financial challenges, partly due to index-linked liabilities and pension liabilities. Council tax and property taxes, however, were over budget. The situation highlights the importance of regular revenues funding operations and core services, and of making the operation less dependent on cyclical revenues from development.
Cautiousness and temporary measures
,Work to analyse the situation and prepare a response began as early as the spring. A financial review and an administrative review, along with analytical work within the town, lay the groundwork for decisions when drawing up the budget for 2027. In that work, the focus will be on significant restraint in operation, a review of priorities and better use of funds. Some measures will be temporary and have a limited duration, while others will involve permanent changes to operations. At the same time, it will be examined how to simplify administration and increase efficiency. It is anticipated that projects which would otherwise have been undertaken will have to be postponed.“, says Thórður Thórarinsson, the mayor.
Realistic assumptions and protection of basic services
The City of Hafnarfjörður has already responded to the situation in the construction market with more flexible payment terms for building rights fees. Although opportunities for development still exist, the budget needs to be based on realistic assumptions rather than uncertain future revenues. The aim of the work is to create a sustainable operational balance, reduce vulnerability to revenue fluctuations and secure core services for the town's residents for the future.