The mayor's review of the 2025 budget proposal

An exciting operating environment - a year of changes ahead

Finnish municipalities prepare their budgets again in a very unstable operating environment. The global operating environment is tense, as the threat of a major war in the Middle East has increased as Israel and Iran's spiral of revenge accelerates. Russia's war of aggression against Ukraine continues for the third year already. The US presidential election on November 5 will electrify the international operating environment as well. We have witnessed in recent years that Finnish municipalities are not safe from the ripple effects of global phenomena, such as inflation accelerated by the war, the wave of Ukrainian refugees and the strong fluctuations of the interest rate market.

Next year will be another year of major structural change in the municipalities. The national social and health care reform that was completed almost two years ago will get
followed by another major administrative reform – the transfer of employment services from the state to the municipalities. The city of Riihimäki acts as the responsible municipality for the Etelä-Häme employment area (EHTA). In addition to Riihimäki, the area includes Loppi, Hausjärvi and Janakkala. The preparation work of EHTA has been a big effort, and I would like to thank all parties involved in the preparation for their good cooperation. The year 2025 can also accommodate municipal and regional elections held at the same time for the first time.

Budding growth on the horizon - public finance indebtedness continues to grow

Economists, banks and the Ministry of Finance predict economic growth in Finland for the years 2025–2026, depending on the forecast, around 1,5–2 percent. In spite of the growth, the indebtedness of the public finances continues to be strong. The difficult economic situation of the welfare regions forces the state to invest in social and healthcare services, and probably does so partly at the expense of the municipalities.

According to a survey by the Swedish Confederation of Municipalities, more than half of the financial managers of municipalities and cities estimate the municipality's economic outlook to be bad or very bad in the next 12 months. Correspondingly, 46 percent of the municipalities stated that the pressure to raise taxes is a fact. Statistics Finland's population forecasts announced at the end of October underline the importance of immigration as a key factor in population growth. In Riihimäki, thanks to immigration, we have exceeded our annual population growth target (0,2 percent). The goal for next year is to draw up an international action program for the city, so that we can respond to the challenge in a controlled manner.

The city of Riihimäki made a responsible decision in connection with the preparation of the financial plan for 2024 and prepared a priority-oriented program for a stable economy for the years 2025–
2027 to adjust the economy. In the program for a stable economy, the city government decided on a total savings target of 4,2 million euros for the plan period, of which around 2,2 million euros would target the year 2025. An ambitious framework was set for the growth of operating expenses, which was 0,4 percent compared to the March forecast. At the city level, we did not reach this frame in the preparation of the budget, even though the industries have found operating cost savings in accordance with the goal.

The profit forecast of the parent city is reduced to a deficit, the city of Riihimäki + water supply company to a surplus

The result of the 2025 fiscal year of the city of Riihimäki (including the water supply company) is 1,1 million euros, of which the parent company's result is about a 0,7 million euro deficit and the water supply company has a surplus of 1,8 million euros. The parent city's operating profit for next year will be around 79 million euros and the annual profit will be 7,3 million euros. The annual margin is expected to strengthen to 9,1 million euros in 2026 and 10,9 million euros in 2027. The forecast for state contributions is 10,3 million euros for 2025, a large part of which will be allocated to compensation for the TE reform. The tax revenue forecast for 2025 is approximately EUR 75,7 million.

The cash flow from operations and investments is negative and the city's loan portfolio is growing. The loan portfolio is 92,2 million euros at the end of 2025. The parent city's net investments in 2025 will be 13,7 million euros, of which space investments will be about 5 million euros and municipal technology will be about 8 million euros. As part of the stable economy program, the Itäinen school and kindergarten investment and the housing fair project were abandoned. The price estimate of the Itäinen school rose to just under thirty million euros, and the operating cost effect of the Housing Fair alone would have been closer to four million euros. After the cancellation of the housing fair, the infrastructure investments of Kokonharju, planned as the main area of ​​the fair, can be moved to the future. These decisions have a significant impact on curbing the growth of the city's debt.

Next year, significant investment provisions include 4 million euros reserved for the construction of Jokikylä's public areas (total project budget 10,8 million euros), 1 million euros reserved for individual teaching small group facilities (total project budget 2,5 million euros) and 1 million euros reserved for the renovation of the old town hall (total project budget 3 million euros).

The investment program for the coming years will continue to put pressure on the city's indebtedness. Managed indebtedness is justified, but the management of the rapid growth of indebtedness and the strategic planning, timing and financing solutions of investments will also remain strongly on the agenda of the new council in the coming years.

Implementation and development of urban strategy

The implementation of the RakasRiksu 25 city strategy approved by the Riihimäki city council at its April 2022, 2035 meeting is progressing as planned. Growth is indicated by three strategic goals, which are an irresistible city of Vart, a home for future creators and a community of sustainable growth. The budget document sets binding targets for the council. The boards follow the more specific goals they have set.

At the city council's budget seminar in Espoo on October 24-25.10.2024, XNUMX, the councilors stated that the city's direction is clear as indicated by the strategy and that a radical reform of the strategy was not needed. Rather, the new council is expected to update the strategy. This also ensures long-term strategic development that extends beyond council terms.

Next, the Riihimäki development program has proven to be a useful tool supporting the implementation of the strategy. The cross-departmental steering group and the city government have monitored the implementation of the program, and also in the council seminar in May 2024, the development program served as a support for the prioritization of projects.

Among the top projects in 2025, it is worth mentioning Häme University of Applied Sciences' campus investment in Matkakeskus. In autumn 2023, the City Council approved a tripartite letter of intent with the city, Hyria and HAMK regarding the campus arrangement. In the letter of intent, the city has committed to participate in HAMK's campus project with support of 7,5 million euros. The euros do not yet appear in the 2025 budget, but the city must take into account the reservation in the plan years 2025–2027.

HAMK's campus planning is progressing towards concreteness during 2025, and the city is expected to be an active partner in the project. HAMK's plan is partially supported by the move of city administration personnel from the office building in Vetur to Matkakeskus. Hyria and HAMK have reached a preliminary agreement on the sale of HAMK's current campus property to Hyria.

Voimala is moving forward with the project planning for Asemanseutu's projects. Riihimäki Tilat ja Kehitys Oy has asked the owner for a preliminary understanding to participate in both Voimala and the Matkakeskus project in accordance with the recording of the stable economy program. There are no final decisions regarding Voimala yet, but as planning progresses, it is hoped that the city council will be able to decide on the project during 2025.

The Lasikaupunki brand work will become concrete next year, when an international biennial event will be piloted in the city. Growth is also expected from the defense sector, when the Define project (Defence Innovation Network Finland) starts an acceleration program for growth companies and startups with the support of EU funding from the ELY Center in Häme.

Personnel, management and the future

The employment area reform will bring about fifty new employees to the city's service, whom we warmly welcome to the energy sector. The change process has already been prepared during 2024. Establishing a new operation always takes its own time, and change management is certainly needed.

It was decided to implement the stable economy program without layoffs or redundancies, but austerity programs always bring their own tension among the personnel. I want to
thanks the representatives of personnel groups for their constructive cooperation in the budget planning process. The chief shop steward's speech at the council's budget seminar was praised and the dialogue should be continued in the future.

Finally, I would like to thank the entire organization and the trustee management for preparing the 2025 budget. We took a "stealth start" on drafting the budget already at the beginning of the year and reached the finish line within the limits of the stable economy program in a challenging municipal financial situation.

The city of Riihimäki has everything it needs to succeed in the competitive situation of municipalities. Belief in a positive future is also created by the results of a brand survey announced at the council seminar, in which the image of Riihimäki by both the people of Riihimäke and other Finns has developed in a positive direction in five years. Let's keep up the positive development momentum in the coming years as well!

Jouni Eho,
mayor

 

The mayor's review serves as a preface to the budget proposal. The entire budget proposal can be found on the City Council's agenda for November 4, 2024 attached.