9. Responsible management of finances is the foundation of a prosperous city

Only some of the financial targets set for the strategic planning period have been achieved. The city has succeeded in financing investments without adding to per-capita indebtedness, although indebtedness is expected to increase from 2021 to 2023. The annual productivity target of 0.5% has not been met, and operating expenses have increased at a faster rate than planned. On the other hand, the city has managed to prioritise spending in areas where the link between population growth and rising expenses is the most direct, i.e. education as well as social services and health care. The goal of keeping the share of corporate tax that goes to Helsinki at above 30% was achieved in 2018 and 2019, but the target has been out of reach thereafter. Helsinki has got close to the average unit cost levels of other large cities in respect of some services. In respect of others, unit costs have increased as new elements have been added and standards raised. The city’s investment capacity has remained high despite the coronavirus pandemic.

Challenges are foreseen by keeping total investment at a level that can be funded during the strategy period without adding to the per capita indebtedness of the city.

During the first half of the Council’s term of office, an assessment of land policy will be made, with the principal on land sales decisions being based on the business policy and other strategic goals of the city.

The amount spent on investments increased from 2017 to 2019, and the budget implementation rate has risen.

The goal has been to keep total investment at a level that can be funded without adding to the per-capita indebtedness of the city. The annual contribution margin remained almost unchanged from 2017 to 2020.

The outlook for internal financing beyond 2021 has weakened while investment remains high at least until the end of 2021. Investments will therefore need to be covered by loans and cash-flow financing. The city’s financial statements for 2020 showed per-capita indebtedness at EUR 1,502, which will rise to EUR 1,759 with the increase budgeted for 2021. Indebtedness at the end of 2021 will nevertheless be within the target set for the strategic planning period.

The City Board approved Helsinki’s land policy programme in respect of land sales and leasing on 1 April 2019. The land sales and leasing system has become more transparent, a framework has been created to boost the efficiency of land use, and the city has begun to prioritise leasing over land sales. The impact of the policy is evaluated in connection with every review of the city’s action plan for housing and land use. A comprehensive land policy reform relating to the principles of land acquisitions was finalised in the spring of 2021.

The objective during the Council’s term of office is to increase the share of corporate tax that goes to Helsinki to a level of above 30 per cent.

The enhanced functionality enabled by the recent organizational reform will be harnessed to cover – with a 0.5 per cent annual rise in productivity – a part of the increase in operational expenditure caused by population growth. Helsinki strives to reach the average unit cost levels of other large cities.

The level of renovation investment in the city’s service facilities will be raised in accordance with the Real Estate Strategy so as to ensure the usefulness of an efficient facility network.

The city pursues responsible HR policy and invests in good leadership. Helsinki will not dismiss permanent staff for financial or production-related reasons.

The objective was to increase the share of corporate tax that goes to Helsinki to a level of above 30% during the Council’s term of office. The goal was achieved in 2018 and 2019, but the target has been out of reach thereafter. Corporate tax from the financial sector in particular, which is an important source of revenue for Helsinki, has decreased since 2014–2016. Helsinki’s share of corporate tax is 25.35% in 2021.

The city succeeded in the responsible management of finances during the first part of the Council term, but the strategic productivity target (a 0.5% annual rise in productivity) has not been achievable on a yearly basis. The city’s total operational budget increased by 15.8% between 2017 and 2021; considering population growth, the increase should not have exceeded 8.7%.

The city’s divisions, agencies and utilities have mostly stuck to their budgets. The city has managed to prioritise spending in areas where the link between population growth and rising expenses is the most direct, i.e. education as well as social services and health care. Improving productivity has become more and more important since the coronavirus outbreak of 2020.

The Social Services and Health Care Division’s productivity has improved by 1.0% on average each year, and unit costs are now closer to those of other big cities. Strategic reviews of service production have become an established practice. Steps have been taken to increase coordination in specialised medical care.

The Education Division has succeeded in bringing the unit costs of basic education closer to the average of other big cities. The city’s own day care centres cost less to run than the average of the six largest Finnish cities (EUR 10,265 in Helsinki vs EUR 10,417 on average in the top six cities), and the gap to the average of other big cities has narrowed. The cost of basic education in Helsinki has increased at a slower rate than in other big cities even though Helsinki’s schools run classes beyond the minimum teaching hours (such as first foreign language tuition) and spend 30% of their budget on facilities (EUR 9,606 in Helsinki vs EUR 9,078 on average in the top six cities). The cost of Helsinki’s upper secondary schools has increased only slightly faster than in other big cities even though the curriculum offered in Helsinki is broader and the city has eight upper secondary schools with national responsibilities (EUR 8,043 in Helsinki vs EUR 7,483 on average in the top six cities). The challenge lies in ensuring the standard of services in the post-coronavirus economic climate. Raising the school-leaving age may attract students from outside of Helsinki to the city’s highly competitive upper secondary schools, which would increase costs.

The comparability of Helsinki’s unit costs against those of other municipalities still needs work in all divisions of the city organisation, and some of the city’s productivity indicators are not practical at the moment.

The City Executive Office and individual divisions are working together to improve the city’s budgeting process.