TALLINN - Key elements of the 2004 Tallinn city budget are not likely to be repeated in next year's budget if the Reform Party succeeds in forging an alliance with the opposition Res Publica and People's Union and throwing out the Center Party.
Experts who have consulted the city government on the 2005 budget strategy pointed out that money received from the sale of municipal property should not be put into the regular revenue section of the budget; rather it should be considered as extraordinary income.
Opponents of the current Center-Reform coalition have criticized the city government in the past for presenting confusing data about the city's cash flow and accounting system. For instance, a 500 million kroon (32 million euro) loan from a German bank was added to the line of planned budget revenue to keep a positive balance though it should have been kept as a separate item.
Earlier this year Finance Minister Taavi Veskimagi, a fiscal conservative, described Tallinn's budget as "living at the expense of tomorrow," and noted that the risks imposed by possible financial losses of a municipality as big as Tallinn put extra pressure on the national government, which would have to allocate more funds to a reserve account in order to cover such risks.
Heido Vitsur, Tallinn mayor's economic adviser and member of the Center Party, said that the national government has pinched municipalities by rushing into the eurozone. In that kind of environment, financial risk management rules becomes especially difficult.
"Estonia is trying to be a better Catholic than the pope," he said, defending the current administration's privatization record.
"Tallinn does not need to keep certain buildings and land plots in its balance. Property sale corresponds with the nation-wide trend of getting rid of the state and municipal property by selling it to private investors," said Vitsur, noting that the privatization of Tallinn Water, a monopoly provider, took place while the Center Party was not a member of the coalition.
As to the city's loan burden, Vitsur confirmed that Tallinn had reached its limit, or 60 percent of the annual budget after a state financial aid deduction. Tallinn's loan burden slightly exceeds 2 billion kroons, while the 2004 revenues comprise 4.7 billion kroons.
"I think the 60 percent limit is ridiculous because the total loan cost is important - not the total loan burden. In my opinion, the current loan burden conditions are not of a threat to Tallinn. Banks would agree to give us up to 50 percent more loans if necessary," said Vitsur.
"Other countries in Europe allow taking more loans and have better developed infrastructures. We have what we have - bumpy roads," he added.
However, the opposition representatives disagree and said that taking new loans to refinance the existing ones should be abandoned. Kaupo Reede, chairman of the City Council's Res Publica faction, said that although it was always possible to reconsider the loan contracts, they should only be used for concrete investments.
Reede added that in the last two years under Savisaar's rule, Tallinn has taken more loans than before. "Former Mayor Tonis Palts lost his job over the plan to take a major loan for road repair. And now we have a situation when Savisaar has himself exhausted loan limits and spent all that money imprudently," he said.
Still, Reede added that the coalition of the Reform Party, Res Publica and People's Union would possibly take loans in the future.
The Center-Reform coalition expected city expenses to grow about 3.5 percent in 2005, mainly due to a salary raise for culture and education workers, the improvement of sport and leisure facilities and road repair.
Mayor Savisaar stated earlier that the state should give Estonian municipalities a larger share of collected taxes. In an August interview with The Baltic Times, Savisaar said the distribution of taxes in Estonia should develop according to the West European model, where state and municipality taxes are almost equal.
Out of the 18 road construction projects slated in the 2002 coalition agreement - signed by the Center Party and the Reform Party after the elections - only three have been completed. Three more are scheduled to begin this year. Fulfilled promises include the canceled motor vehicle tax, the construction of municipal apartment houses, the creation of a municipal police force and the 5,000 kroon lump-sum child allowance, to name a few.
Meanwhile, the capital's financial results for the first nine months of 2004 show a total of 3.6 billion kroons in revenues and 3.4 billion kroons in expenditures. The total balance stood at 239 million kroons, according to Tallinn city government.
The much-criticized property sale plan finally sped up in August, when the city sold property worth 376 million kroons out of the planned 401 million kroons.
The budget strategy for 2005-2006, approved by the City Council in June 2004, set the annual investment sum at 800 million - 900 million kroons, a level to be achieved in 2005. But to maintain that investment pace the city would have to borrow 450 million kroons in 2005 and 250 million kroons in 2006. Although no loans are scheduled for 2007, it was unclear on Oct. 12 as to whether the new coalition - should it take control of the city administration - would follow this strategy.
Personal income tax, the main source of city inflow, caters to about 10 percent of the total budget revenue.
About one-third of the country's population lives in Tallinn, and approximately 47 percent of commercial companies are registered in the city. The capital contributes to a little over 50 percent of the country's GDP.
