Tampere continues its efforts to balance the city’s finances

Published 25.10.2018 17.04

The key areas in the 2019 budget of the City of Tampere are related to tackling the challenges posed by urbanisation and the economy. The city’s population is estimated to exceed 239,000 during next year, and this will increase the need for services and create financial pressure. The programme for achieving financial balance will continue, with the objective of balancing the city’s finances by 2020.

Mayor Lauri Lyly presenting the budget proposal for the year 2019.
 

“The city’s income and expenditure are not yet in balance. The current amount of services will not be sufficient for the increasing population. However, our income will not increase in the same proportion. We must continue to strengthen employment and business activities as well as balance our economy. In addition, investments will be required in relation to housing, traffic connections, schools and kindergartens. Climate change and sustainable development must be taken into account when developing the city. This will be reflected, for example, in the investments in the tramway and public transport," says Lauri Lyly, Mayor.

Mayor Lauri Lyly presented his budget proposal for next year on 22 October 2018. The City Council will approve next year’s budget on 19 November.

“Increasing employment has been and continues to be a key measure for balancing the city’s finances. Reducing unemployment is extremely important not only for economic reasons, but also from the human perspective," says Lauri Lyly.

For this reason, after the employment trial, the city is preparing for cooperation based on the new vitality and growth service alliance, together with the related development programme, which is planned to continue until the regional government reform in 2021. All municipalities in Pirkanmaa can be included in the development programme.

The net expenditure of the City of Tampere is estimated to increase by EUR 16.1 million (1.3%) compared to the estimates regarding the financial statements for this year. The budget’s annual contribution margin is estimated to be EUR 86.4 million, with the estimated deficit for the financial year being EUR 30.5 million.

The strong increase in the need for services requires great efforts from the City of Tampere in the field of service production. In particular, this will be reflected in expenditure growth in services related to social welfare, health, education and learning.

According to the budget, personnel costs will decrease by EUR 19.6 million next year, the main drivers for this being organisational changes and the balancing measures related to the economic programme. The decrease in employer’s contributions will reduce personnel costs by EUR 5 million. The number of personnel is planned to decrease next year by nearly one thousand to approximately 12,382 person-years. The share of employees subject to wage support is 300 person-years. Each year, approximately 250 people reach the retirement age.

Investment levels will decrease compared to 2018

In the last few years, the City of Tampere has made investments that were record-breaking, and investment levels will remain high in the growing city. The figure for 2019 is EUR 190.6 million. The city is prepared to take out new loans in the amount of EUR 90 million, which will increase the city’s debt per capita to EUR 3,336. The investments made by the city, its companies and organisations will amount to over EUR 400 million.

“Despite the tight finances, we will take care of our basic tasks, including the level and quality of services for senior citizens, early childhood education and basic education. In addition, we will be creating new pull factors. We are a candidate for the European Capital of Culture 2026 together with Mänttä-Vilppula and 10 other municipalities in Pirkanmaa. Hobby and leisure time opportunities will be increased. For example, Sorsapuisto will have an artificial skating rink, and once the construction of the Tammela stadium starts, a modern stadium for Finnish baseball and football field will be built in Kauppi," says Lauri Lyly.

The economic programme approved by the City Council is the means to reach balanced finances. In order to have the investment level better match the city’s financial resources, the level of the annual contribution margin must be improved in relation to investments. According to Juha Yli-Rajala, Group Chief Executive Officer, the growth of debt will be curbed, for example, by selling assets that are of lesser strategic importance, by implementing structural changes in service production and by ensuring moderate growth of operational expenses.

“However, investments are not paid by reducing the financing for services, but they are an essential requirement for ensuring and expanding the city’s income base. Responding to urban development and global competition over private investments and experts require us to have courage and take proactive decisions concerning the implementation of our investments," says Juha Yli-Rajala.

Upcoming renovations and construction of new areas

For next year, the City of Tampere will allocate a total of EUR 49.1 million to building investments, construction of new buildings and extensions and renovation projects. The building investments for early childhood education and basic education amount to approximately EUR 26 million. The schools in Pispala, Tammela, Hyhky and Olkahinen will undergo modernisation. In addition, the kindergartens of Hippos, Mustamäki and Olkahinen will be renovated, and the Atala health centre will be converted into a kindergarten.

The largest investment expenditures include the EUR 49.8 million building investments of the Housing and Real Estate Committee, the EUR 47.1 million basic investments of the Committee for City Planning and Infrastructure Services and the EUR 29.6 million investments of the municipal corporation Tampere Water related to improving the reliability of water supply and quality and the renovation of water supply and sewerage networks.

Most of the budget of the Committee for City Planning and Infrastructure Services will be used for the renovation of the existing community structure and on new construction. Starting the construction of the Ojala–Lamminrahka area in cooperation with the City of Kangasala is one of the major investments. In addition, the construction of the Hervantajärvi area and the business district in the southern part of Lahdesjärvi will be started. Furthermore, the construction of Santalahti, Ranta-Tampella and Vuores will continue. The most important site for bridge repair is the renovation of Hämeensilta bridge. Approximately EUR 7 million has been reserved for projects related to the tramway.

The investments of the Committee for City Planning and Infrastructure also include EUR 19.3 million investments in land and water areas. The budgeted funds will be used for relocating cables, cleaning contaminated land and pre-construction of land in specified areas in accordance with the confirmed city plans and the commitments made by the city. In 2019, cable relocation work will be carried out in Santalahti, the Sammonkatu area and in the Taimisto area in Ikuri. Contaminated land areas will be cleaned, for example, in Sulkavuori in Lakalaiva, Ranta-Tampella, the Hatanpää hospital area and along the tramway route that is being constructed.

EUR 25.8 million has been budgeted for investments in the Hiedanranta and Five-star City Centre development programmes. These investments are related to the building of urban environment and pre-construction of land areas.

Regarding the tramway implementation, the objective for next year is that the construction of the first part and the planning of the second part will proceed. In addition, the plan is to create an overall understanding of the regional expansion and phasing of the tramway.

The 2019 budget of the City of Tampere in figures
Population 31 December 2019 239,100
Income tax rate 19.75%
Change in operating margin 1.3%
Change in tax income 4.8%
Annual contribution margin EUR 86.4 million
Budget balance
EUR -30.5 million
Total investments (net)
EUR 190.6 million
City’s debt per capita EUR 3,336

More detailed information on the budget proposal by Mayor Lyly is available online at webpage Talousarvio (in Finnish).


Further information

Group Chief Executive Officer Juha Yli-Rajala Tel. 040 743 6356

Financial Director Jukka Männikkö Tel. 050 576 7539