The 2020 budget proposal at the City Council 27 November

Uutta Helsinkiä
28.11.2019
The City Council will discuss the budget for next year and the financial plan for the years 2020–2022 on Wednesday, 27 November. The budget proposal is based on the agreed final result of the negotiations between the council groups represented in the City Board.

The City Council will discuss the budget for next year and the financial plan for the years 2020–2022 on Wednesday, 27 November. The budget proposal is based on the agreed final result of the negotiations between the council groups represented in the City Board.

The negotiation result can be viewed on the City Board's Agenda.

Helsinki City Board approved the 2020 Budget

Press releas October 3rd

Preparationsfor continuous growth of Helsinki in Mayor Jan Vapaavuori’s budgetproposal.  Sustainable growth requirescontinuous investments in the development of the urban structure. Next year,Helsinki’s investment level exceeds one billion euros, a first in the historyof the City.

Thehigh investment level has been made possible by the responsible and perseveringmanagement of the City economy. The forthcoming economic insecuritynecessitates that Helsinki provides for the sustainability of the growth in thefuture as well. 

Helsinkiassumes its responsibility for balancing the public economy and works toimprove the City’s total productivity, while, at the same time, the City’sexpenditure is moderately increased especially in the services where thepopulation growth increases the costs most directly.

The needs of the growing City is acknowledged in the total dimensions of the operating expenses as well. The total expenditure level in the 2020 budget is about 122 million euros higher than the current year. In 2020, the increase in the operating expenses on the entire City level is around 3 percent from 2019.

The overall framework for the operational economy in the City Strategy is jointly defined by the population growth, changes in the level of costs and the 0.5 percent productivity goal. When the budget framework was drafted in spring, the estimated population growth and changes level of costs would have allowed an expenditure growth of 3.47 percent from 2019. All division committee budget proposals were drafted a little above the spring city-level budget framework of 3.47 percent. Based on the proposals of the committees, the combined growth on the city level would be 4.32 percent.

The current estimates concerning both the level of costs and the population growth development are lower than in the spring estimates, which means that the strategy-based expenditure growth according to the most recent estimates is 3.03 percent from 2019. The lowered estimates concerning the level of costs and the population growth lower the pressures on the expenditure of the divisions as well.

Populationgrowth mainly in ageing population groups

In the 2020 budget, the external operating expenses are 4.598 billion euros. The growth percentages of the budget vary between the divisions within the 3.03-percent limit for the City’s total expenditure.

In the allocation of appropriations, special attention has been paid, in accordance with the City Strategy, to services where the population growth adds to the costs most directly, as well as to the unit cost development at the divisions. The two-year growth in the level of appropriations has also been observed in the allocations (from the 2018 financial statements to the 2020 budget per division).

The expenditure growth per division is presented in the table: The operational economy part, income and expenditure per division., (only in Finnish). When it comes to the Urban Environment Division's budget item for buildings and the culture and leisure services, the change in the appropriations for 2020 must be viewed on the operating margin-level.

According to the estimate, the population growth is the highest in elderly population groups and this has been taken into account by directing investments towards the budget proposal of the Social services and health care division. The introduction of the new patient data system Apotti in the upcoming year is going to reshape the courses of action and improve the patient safety, but it will also increase the expenditure.  

Investments are made to further the utilisation of digitalisation and information technology and additional resources are also directed, e.g., towards the improvement of the service standard in the rescue operations. At the City Executive Office’s new Strategy Department, a digitalisation unit will be established to focus on the comprehensive development of digitalisation on the City level.

In its operations, Helsinki accentuates ecological values and emphasises local actions in the implementation of global responsibility. Searching for ecological solutions in new construction, improving the energy efficiency in buildings and implementing emissions reductions by means of urban planning and traffic solutions are Helsinki’s principles of responsible development. In 2020, Helsinki launches the international Helsinki Energy Challenge to find heating solutions that can replace burning coal with as little use of biomass as possible.

Taxbased equalisation paid by Helsinki on the rise

No changes are proposed to Helsinki’s local tax rate for 2020, as the budget proposal is based on a local tax rate of 18.0 percent.

The estimated tax revenue for the upcoming year is 2.74 billion euros. This constitutes a 5.4 per cent improvement to the estimate for the current year. However, the 2019 and 2020 increase in the local tax revenue is affected by the tax administration's tax deduction card reform and the reporting problems of the Incomes Register, which move renderings of accounts of taxes from 2019 to 2020. Due to this, the growth percentage for the tax revenue in 2020 frames the accrual of tax revenue in a more positive light than what it is in reality. The increase of the local tax from 2018 to 2020 is estimated at 6.2 percent in total, which better describes the real growth pace of the tax base.

The estimated corporate income tax revenue is 600 million euros, or 1.7 percent more than the 2019 estimate. The estimated real estate tax revenue is 283 million euros and the proposed real estate tax rates in Helsinki are kept at the 2019 level.

- The estimate for the local tax and corporate income tax revenues includes significant uncertainty factors for the next year and in the long-term for the upcoming years as well. The events in the global economy and the general decline in the market conditions affect Helsinki’s economic outlook as well. The economy of the growing City is already being put to the test. A healthy economy is a condition of life for sustainable growth and securing sustainable growth is the City’s most important task, stresses Jan Vapaavuori.

In 2020, the central government transfers for basic public services increase to 280 million euros. A significant part of the increase of around 80 million euros in the central government transfers compensates either the decrease in the tax revenue or the increase that has already occurred in the costs based on the central government transfers.

Preliminary estimates show that the equalisation of the tax revenue base, which is included in Helsinki’s income from central government transfers, is –376 million euros in 2020. The increase in the tax-based equalisations paid by the Helsinki has been steep; in 2017, Helsinki paid -289 million euros in tax-based equalisations.

– The increase in the tax-based equalisations paid by the City of Helsinki shows that an attractive and successful capital is widely beneficial to the entire country. The capital’s investments in sustainable growth work as resuscitation for a favourable development in the entire country in a situation where private investments are expected to decrease. Helsinki’s responsibility for the entire Finland grows and I hope that it adds to the understanding that the best possible operating conditions for the capital to do well in the international competition is an advantage to the entire Finland, says Vapaavuori.

Debtper capita not raised, investment level exceeds one billion euros

According to the City Strategy, investments are kept at a level that can be funded without adding to the per capita indebtedness. The estimate for the loan stock at the end of 2020 is 1,010 million euros, or 1,530 euros per capita. 

Helsinki’s investment level will exceed one billion euros in 2020. The growth in the investment expenditure is 31,3 percent compared to 2019. Municipally owned company Helsinki City Transport’s investments are 217 million euros and the biggest single investment project is the construction and planning of the infrastructure for the Jokeri light rail line.

In the investment programme, the focus is put on maintenance of built assets, reaching the housing production goals and investments required by business life, as well as on the development of the service network. In repair construction, emphasis is laid especially on ensuring safety and healthiness in schools and day-care centres.

– Inaddition to repair construction and investments, beating the challenges relatedto the quality of indoor air calls for a new kind of mind-set with anincreasingly comprehensive approach. Rectifying the City’s premises process isa central priority for the City. In support of this task, the City is currentlyworking on a real estate strategy, the goal of which is to create an inclusivejoint vision of the objectives for the City’s real estate maintenance and realestate ownership, emphasises Vapaavuori.

The City’s growth is also visible in the increasing investments to reach the City’s housing production goal. In 2018, there were 4,843 housing units completed in Helsinki and the estimated number of completed housing units for 2019 is 6,500. In 2020, the estimated number of completed housing units is 6,800, and in 2021 it is as high as 7,000. The areas of focus in the housing construction are in Kalasatama and Länsisatama.

Thegoal for the wage trend is to ensure the availability of skilful labour

In 2020, the City continues to implement the long-term wages and salaries development plan, which is based on an analysis of the essential development needs connected to the wages and salaries of the personnel and personnel groups as well as on the employer's needs in ensuring the availability of skilful labour.

In the 2020 budget, a total of 5 million euros have been reserved for the implementation of the wages and salaries development plan. Personnel organisations have been consulted in the preparation of the wages and salaries development plan.

During the upcoming year, the wages and salaries development plan will put special focus on the situation at the health centre to attract skilful labour especially by developing the wages and salaries of health centre physicians, public health nurses and registered nurses and practical nurses.

The performance bonus system used by the City will also be reworked during 2020 and increased rewarding for a good work performance is encouraged.

Processingschedule for the budget proposal:

3 October, The Mayor's Budget Proposal is published
7 October and 28 October, The City Board processes the budget proposal
13 November and 27 November, The City Council processes the budget proposal.
13 November, The City Council decides on the local tax rate and real estate tax rates.

The Mayor's 2020 Budget Proposal (Finnish-Swedish)