CORRECTION: Mayor Vapaavuori's 2019 Budget Proposal: Budget meets demands of growing City
Correction: The estimated real estate tax revenue for 2018 is €278 million (NOT €630). In the 2019 proposal, the real estate tax rates remain at the 2018 level.
During the following three years, the estimated population growth of Helsinki will remain rapid, with 7,500–8,000 new citizens annually. Preparation for the needs of a growing City lies at the heart of Mayor Jan Vapaavuori's 2019 budget proposal.
At the city level, the increase in the appropriations for operating expenses is 2.79 per cent, based on the population growth pace and the change of the cost level. The increase in the appropriations is directed especially towards basic public services, where the population growth increases the costs most directly. This is seen in the budget proposal as increased appropriations especially to the Education Division, whose appropriations increase in the Mayor's proposal by €42 million (3.6 %) from the 2018 budget.
– In comprehensive schools and in upper secondary education, the total number of clients will grow by around 2,400 children and young people compared to the current year. This is a sign of the City's growth and dynamic activities, but the substantial growth poses a challenge to the organisation of early childhood education and basic education. Moreover, the Division is initiating several measures rooted in the City Strategy, from the earlier introduction of language education to the doubling of the number of available student places in English. These are necessary investments in a City that is becoming increasingly international, says Mayor Jan Vapaavuori.
Positive development in tax revenue
In 2018, Helsinki's tax revenue development has been better than what was anticipated in the budget for the current year. In the beginning of 2018, the City's local tax rate decreased by half a percentage point to 18 per cent, but the local tax revenue will still equal the figure for 2017. This is a consequence of the better-than-average growth of the total amount of wages and salaries in Helsinki. The 2019 budget proposal is based on the current local tax rate of 18.0 %. The local tax revenue is expected to keep growing in 2019 to about €2,670 million.
The estimated corporation tax revenue for 2019 is €630 million. This constitutes an 8.6 per cent improvement to the estimate for 2018.
The estimated real estate tax revenue for 2018 is €278 million (NOT €630). In the 2019 proposal, the real estate tax rates remain at the 2018 level.
In 2018, the central government transfers to local government are estimated at €196 million. The estimate for 2019 is that the transfers will remain unchanged from 2018. The tax revenue-based equalisation of the central government transfers to local government received by Helsinki is expected to increase from 2018 by around €20 million to €340 million in 2019. Of Helsinki's above domestic average tax revenue development, a little more than a generated 37 per cent is transferred to the factor increasing the central government transfers to local government of municipalities receiving tax-based equalisation.
– As the Capital, Helsinki shoulders an important role as the growth engine of the entire country. The outlook is now decent, but there are considerable risks as well. If the Government's region model is realised, then the tax income transferred to the region would considerably lower the City's accrued tax revenue and endanger the investments required to ensure a sustainable growth. This would be a disastrous reform especially for rapidly growing cities, summarises Vapaavuori.
Loans kept moderate
Due to the uncertainties related to the future, the outstanding amount of loans has to be kept moderate. According to the City Strategy, investments are kept at a level that can be funded without adding to the per capita indebtedness. Acknowledging the population growth, the outstanding amount of loans can grow by around €45 million during the three-year economic plan period. The estimate for the outstanding amount of loans at the end of 2018 is €1,100 million or €1,690 per capita.
The rapid growth of the City shows in Helsinki's investments – volume of repair construction and new replacement construction increases
The City's investment expenditure in 2019 is €774.2 million in total. Out of this, the investments by municipally owned companies amount to €171.5 million. When compared to the 2018 budget, the investment expenditure of the parent City grows by €22.0 million (2.9 %), to €602.7 million. Municipally owned company Helsinki City Transport's investments in the development of public transport are €156.1 million in the 2019 budget.
− The City's investment level is at a historic high. During the last decade, the population of Helsinki has grown by almost as much as the entire population of the smallest region in Central Ostrobothnia as per the Government's proposal. Last year, there were over 8,000 new Helsinkians and the same pace will continue over the next few years. 60 per cent of the municipalities in Finland are smaller than Helsinki's annual population growth. There is an increasing demand for an urban lifestyle and the significance of cities is growing. The intensified urbanisation requires new housing and new schools, day-care centres, health stations, youth and sports premises, but also traffic and transport infrastructure. Financing all this requires a positive development of the tax revenue in the future as well, says Mayor Vapaavuori.
In the investment programme the emphasis has been laid in accordance with the City Strategy. The renovation of constructed assets is taken care of and the maintenance backlog is contained. The prerequisites for the growth of the City are secured by commitments to the investments required by the housing production goal and business life, as well as to the development of the service network. This shows especially as a higher preconstruction investments level and the planned increase in the volume of repair construction and new replacement construction over the next few years. Public transport investments are made to ensure the prerequisites for the implementation of projects that have already been approved and the functionality of connections that have already been mobilised.
The housing production goal increases to 7,000 housing units. In 2019, the emphasis of the housing production is especially in the neighbourhoods of Jätkäsaari, Kalasatama, Kruunuvuorenranta and Kuninkaantammi. The construction of Hernesaari begins. Business premises are constructed especially in Kalasatama and Pasila.
The liveliest infill construction occurs in Herttoniemi and in the development zones of the Jokeri light rail line. During the planning period, the construction of project areas and the preconstruction and construction of streets and parks required by the infill construction take up a share of about one third of the expenses in the investment part.
Street and traffic lane investments are estimated at €135.5 million in the budget. During the planning period, the expected investments amount to €139.6 million in 2020 and to €148.5 million in 2021. The most important ones are the street investments to service the housing production.
The total sum reserved for new and additional construction and renovation projects is €260.1 million in 2019. The figure is almost 20 per cent higher than last year. In 2020 of the economic plan, the estimated sum needed for construction investments is €238.0 million and in 2021 the estimate is set at €230.8 million.
As for the new construction, the emphasis during the programme period 2019–2028 will be placed on the construction of service buildings in new areas and new buildings that replace existing ones. The most important projects in 2019–2021 are Jakomäen sydän (the heart of Jakomäki), which comprises the area's new integrated comprehensive school, youth premises and day-care centre, Jätkäsaaren peruskoulu, the new replacement building for Vuosaaren lukio, the new replacement building for Puotilan ala-aste and the Kalasatama neighbourhood centre.
During the five-year period 2019–2023 of the construction programme for house construction projects, a sum of around €780 million has been reserved for the education division's repair construction and new replacement construction projects.
– The appropriation makes it possible to realise reconstructions or new replacement buildings for around 70 schools and day-care centres. The increased precision in the planning is connected to the comprehensive real estate strategy, a first for the City, whose aim is to ensure healthy and secure premises and make the City's use of premises more efficient. When it comes to the real estate strategy, the objective is to reach the decision-making stage by the turn of the year, says Vapaavuori.
In addition to the big entities, the Mayor's proposal includes small but important investment objects on the way to building the most functional city in the world.
– For years, there has been an intense debate about the City's public toilet premises and the inadequacy of them, for example, for meeting the needs of the growing tourism. The debate has not put Helsinki in a good light. For this reason, my proposal includes the construction of ten new toilet premises instead of the one previously planned during 2019, says Vapaavuori.
Investments in public transport during the economic plan period 2019–2021 around 600 million euros
Municipally owned company Helsinki City Transport's biggest single investment project is the construction and planning of the infrastructure for the Jokeri light rail line, €26.0 million. Other big traffic investment objects are the acquisition of new inner city tram cars, the Jokeri light rail depot and renovations of old metro cars. The planning of the Crown Bridges project continues.
The appropriation for public transport development is used for enabling the start of the trunk bus route 510 between Herttoniemi and Otaniemi in 2019 and the trunk bus route 570 between Mellunmäki and Tikkurila in 2020. In 2020, the appropriation for public transport development is mainly directed towards the construction of the Crown Bridges and the Jokeri light rail line.
Measures of the wages and salaries development plan included in the budget proposal
The Mayor's budget framework proposal, which was published in May, included a proposal for the City's longer-term wages and salaries programme. According to the City Board's decision, the longer-term wages and salaries programme, the wages and salaries development plan, will be initiated now, in the budget phase.
The wages and salaries development plan is based on an analysis of the essential development needs connected to the wages and salaries of the personnel and groups of people as well as on the employer's needs in ensuring the availability of skilled labour. In the 2019 budget, €4 million has been reserved for the implementation of the wages and salaries development plan.
Acknowledging the sectoral allowance of the general collective agreement for municipal personnel, the budget includes a centralised reservation for an appropriation, which is allocated towards the divisions in accordance with what was agreed upon in the local negotiations.
Areas of focus in operational economy in accordance with the City Strategy
The economic framework set in the City Strategy allows a 2.79 per cent growth in the appropriations for operating expenses (excluding municipally owned companies and funds). Included in the Mayor's budget proposal is largely the needs for additions presented by the division committees in their respective budget proposals.
The comparable expenses growths of the divisions from the 2018 budget to the Mayor's 2019 budget proposal are:
- Central administration / City Executive Office 1.5 %
- Education Division 3.6 %
- Urban Environment Division / urban structure 2.3 %
- Rescue Department 3.0 %
- Culture and Leisure Division (excl. Oodi rental costs) 2.4 %
- Culture and Leisure Division (incl. Oodi rental costs) 4.3 %
- Social Services and Health Care Division (without HUS and Apotti) 1.9 %
In accordance with the City Board's framework decision, €13 million have been reserved in the available funds, to be allocated towards the allocation needs deemed most important, among other things with reference to the City Strategy, in the City Board's budget negotiations.
After the City Board's €13 million allocation reservation and the allocation for the collective agreement's sectoral allowance, which is yet to be distributed, as well as the allocation for the reservation in the wages and salaries development plan, the appropriations will grow more than what has been presented above.
Budget enquiries are answered at the City of Helsinki by:
Special Adviser to the Mayor Laura Åvall tel. 050 361 7511
CFO Tuula Saxholm, tel. 050 5110264
Budget Manager Matti Malinen, tel. 050 3809874
Mari-Anne Aronen, Acting Communications Manager, Economic and Business Communications, City Executive Office, tel. 09 310 36684, email@example.com
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