-The Draft Budget Proposal for next year and the Financial Plan until the year 2023 are characterized by the strong development of the basic activities. It is supported by a major adjustment programme. The City of Turku will strengthen and reinforce its basic structures to make them more agile and more operational than before for present and future residents of the city, says Mayor of the City of Turku, Minna Arve.
The Draft Budget Proposal has been compiled so that the Financial Plan is balanced in 2023, and the annual surplus exceeds the depreciation of assets in the end of the planning period. It has been proposed that the municipal tax of the City of Turku will stay at 19.50 percent.
Uncertainty about the future tax intake and the perspective of a stagnating trend of the Finnish economy and the world economy hinders the financial planning of the City of Turku. Furthermore, the number of residents in the City of Turku continues to grow with about 2,000 inhabitants per year, which will cause pressure to the service offer along with the positive repercussions. Despite the economic situation, the City of Turku will invest in the development of the services and in their quality.
-Services that are produced in a functioning and efficient manner taking the needs of the inhabitants and the customers into account form the basis of all the activities. It is good to build sustainable growth on them taking all the residents of the City of Turku into consideration, describes Mayor Minna Arve.
The strong economic growth in the Turku region as well as deploying it as a permanent competitive factor will demand investments from the City of Turku. The most important investments for the development of the city are done in the spearhead projects of the City of Turku together with several cooperation partners. The spearhead projects of the City of Turku include the Development of the City Centre, Turku Science Park and Smart & Wise Turku.
-The City of Turku has very ambitious objectives in the spearhead projects. Each of them includes several individual projects. We have the emphasis in getting new investments to Turku. We also value the development of the urban environment and deploying the digitalization and the smart solutions, says Mayor Arve.
With the emphasis on the spearhead projects, the City of Turku will strengthen new kind of dynamics which will support the welfare with economically, socially and environmentally sustainable growth. The reached outcome will advance the welfare of the city residents and improve the competitiveness of the city and the productivity of its activities.
The Working Environment Will Develop in a Positive Direction
There has been positive development in the employment, and we have managed to halve the long-term employment in the last three years, for example. This will increase the need for services in the Education Division, for example, but in the same time it increases the taxable incomes and reduces the costs caused by unemployment. The overall balance of the measure will be positive to the City of Turku and to the city residents, but the problem lies in the fact that the service demands come front-loaded growing the city expenditures.
Tax funding (tax incomes and the government contributions to the costs) will grow next year about 5.4 percent and the net expenditures will rise about 2.4 percent according to the Draft Budget Proposal. The tax incomes will be raised by an accumulation deficit. As a result, part of the tax income will be accounted for the city only in the year 2020. The annual contribution margin of the City of Turku will be about EUR 13 million and the amount of the depreciation of the assets will be EUR 57 million in 2020. The budget deficit will be EUR 41.9 million which is about EUR 20 million less than in the forecasts for the current year.
Gross investment rate will be about EUR 106 million and the change in the loan stock will be EUR 106 million. Gross borrowing rate will be EUR 210 million and the total borrowing rate will be about EUR 924 million in the end of the year 2020 which means EUR 4.780 per inhabitant.
There will be an increase in the government contributions to the costs on the municipal services next year. It has been estimated after completing the competitiveness pack and the freezing of indexes that the state financing of the basic services organized by the municipalities will increase in total with slightly over EUR 600 million. The government contributions to the costs of the City of Turku will grow with about EUR 15 million, which has been considered in the Draft Budget Proposal for the next year.
There is also insecurity relating to the government contributions to the costs. There are several additional tasks which have been attributed to the municipalities in the government programme. They include raising the age limit for the compulsory education, various obligations related to the organization of social and health services which have been promised to be fully addressed, either through additional funding or by reducing other tasks. There are uncertainties about the timing, funding and financing of these additional tasks, and thus their impact on the Draft Budget Proposal of the next year has not been considered.
Difficulties in Predicting the Economic Development
The financial planning of all the Finnish municipalities has been complicated by the problems with the income register of the tax administration and with the tax card reform. The problems have reduced the income tax revenue for 2019 and complicated the forecasting of tax revenues for the year 2020.
As far as the City of Turku is concerned, the estimated negative impact of the problems has been EUR 13–20 million for the year 2019. As a result of a cumulative deficit, the Finnish state will advance the one-off compensation based on the competitiveness pact planned for next year as an increase in the state’s share already this year. The impact of the one-off compensation on the City of Turku is estimated at EUR 8 million.
About EUR 59 Million Worth of Savings and Development Measures in the Economic Adjustment Programme
The Turku City Council decided to launch an economic adjustment programme in June 2019, and since then the city has been preparing measures to rebalance its economy.
-The economic adjustment programme will strengthen the financial capacity of the growing city. It will enable us to maintain the services which are related to the residents and to strengthen the attractiveness of the City of Turku, both for new residents and for private investments, describes Mayor Arve.
Adjusting the economy by at least EUR 50 million during the financial planning period 2020–2023 has been a precondition for the preparation. Increase in the net operating expenses is limited to an average of 1.3 percent per year, and the number of employees should not increase.
For the moment, 95 actions have been prepared for the economic adjustment programme which amount over the target rate and is EUR 59 million. Measures have been sought from all the divisions of the city as well as from group companies and from joint municipal authorities. Local government consulting company, Perlacon Oy, has helped in the preparation of the economic adjustment programme.
The measures are subject to several structural changes and reforms. They include, for example, the restructuring of the services for the elderly, which will increase the number of places for the enhanced service housing and the interval care in the next five years, the development of the hospital operations, the optimization of the day care network and the modernisation of the administrative services.
Other proposed measures include, for example, increasing the customer fees, optimising the size of the student groups, finding replacing premises for the Vimma Art and Activity Centre for Youth (located in the city centre), making the disc parking a payable service, and expanding the paid parking area, and lowering the interest rate paid to the city employees.
-The economic adjustment programme is plausible and realizable. I am pleased that we found more measures than we had as the initial target. It is justified to stick to the proposed amount of EUR 59 million in the economic adjustment programme first, because the financial forecasts have got worse during the autumn and second, because a significant part of the programme consists of development measures instead of saving measures whose final and exact economic impact is difficult to assess, says Mayor Arve.
What is essential in preparing the economic adjustment programme is that the proposed adjustment measures will renew the service structure of the City of Turku and the activities will be continuously developed together.
-We have a major project in front of us, but I trust that our competent and committed personnel will take this seriously and do their best. The economic adjustment programme also offers opportunities to make renovations and I believe that we will find new ways to realise our tasks in a smarter way that is more efficient and more influential, says Mayor Minna Arve.
See also:
- A list of the proposals for adjustment measures can be found on the website of the City of Turku (in finnish).
The list of measures in the economic adjustment programme also includes the B and C baskets containing entities that are not currently being explored or which will not be launched. However, they have been considered as possible adjustment measures.
- The Presentation of the Mayor of the City of Turku on the 14th of October as a PowerPoint Presentation (pdf).
The Decisions Concerning the Draft Budget Proposal for the Year 2020 Will Be Made in the Following Schedule:
- 14.10. The Draft Budget Proposal of the Mayor of the City of Turku will be discussed in the seminar of the Turku City Council from noon to 4.30 pm.
- The seminar can be followed on the website of the City of Turku as direct webcast.
- 21.10. The first treatment of the Draft Budget Proposal in the City Board
- 4.11. The second treatment of the Draft Budget Proposal in the City Board
- 11.11. The City Council will make its decision on the matter