TALLINN — Tallinn’s municipal government passed its 2010 budget in the wee hours of Friday morning after 12 hours of discussions, ending up with a 105 million krooni (€6.7 million) in an illusory surplus achieved with more than three times that amount in loans.
The city’s 2010 budget, which stirred protests by establishing a sales and boat tax while removing student discounts on public transportation fares was finally approved just after 2 a.m. with 51-17 votes. The total budget is in 7 billion krooni (€447 million) with a 105 million krooni surplus, although this is achieved only with a 357 million krooni (€22.8 million) loan that could threaten Estonia’s drive to the euro by increasing its debt to gross domestic product ratio closer to the 3 percent cap set by the Maastricht criteria.
The budget discussion stalled to 12-hour torture due to 94 amendments that were proposed to add onto the budget, which ended up increasing the total by 70 million krooni (€4.4 million). Also scheduling two readings on the same day did not help.
The budget faced numerous cuts and even the municipal government officials salaries were not untouched. The salaries of city hall officials were reduced by 12 percent, and the whole payroll fund is decreased by 46 million krooni (€2.9 million), which includes the removed “13th salary” Christmas bonus and other benefits.
Some residents are disgruntled about the cuts but teachers and social workers are happy to see their salaries increased. The city found extra 20 million krooni (€1.2 million) for school psychologists, speech therapists and activity group instructors.
The budget’s share for investments is one billion krooni (€63 million) which includes funds for expensive projects such as waterworks and sewage construction in several city neighborhoods, school renovations, construction of 700 new municipal apartments etc. Road reconstruction received an allocation of 18 million krooni (€1.15 million).
Most of the revenue is derived from income tax, which is almost 50 percent of the budget’s income with 3.2 billion krooni (€204 million). Property taxes add 314.2 million krooni (€20 million).
Tallinn’s relying not only on its own revenue but increasingly European Union structural funds. This year’s use of foreign investments is growing up to 330 million krooni (€21 million) compared to this year’s 91 million krooni (€5.8 million).
Katrin Saks, a Tallinn city council deputy and member of Social Democratic Party said that it’s a budget for tough times but is satisfied that the budget was managed to receive extra 70 million krooni.
“At first the the income prognoses was too pessimistic, now we just changed it to be more optimistic by some changes in budget’s income,” Saks told Baltic Reports. Saks insisted that Tallinn 2010 city budget is roughly balanced and unlikely to the state budget, the city budget has a surplus.
The 20,000 non-city resident students that lost their right for student discount in public transportation fares are not so happy. Saks said that the discount cancellation will not be put in use in January as was planned but is postponed to Feb. 1.
“We’ve postponed the date until February and sent a draft act to Riigikogu to solve the issue at state level,“ told Saks.
How much revenue Tallinn will receive on students’ behalf, Saks said she did not know. Tallinn has largely been criticized for including loans in city income, mostly by Estonian fiscal commission but Saks told that relying on loans was decreased.
“Loans are never positive, it’s always better to live from the money that is available, and it’s positive that the city doesn’t need as much support by loans,” told Saks.
Tallinn’s use of a 357 million krooni loan for investments and to pay back already existing loans. The move also threatens the country’s efforts to keep the fiscal deficit within Maastricht criteria.
The national government has been pointedly critical of the capital city’s loan plans. Minister of Finance Jürgen Ligi called the Tallinn budget one big mess, as it’s not reasonable to consider a loan a source of income.
