(in Finland) Luis Alejandro took over the job as financial manager three months ago, after Tom Erik Lunga took over as manager of Hammerfest Parkering.
Since then, Alejandro has been tearing his hair out over the financial situation the oil and gas municipality has found itself in. On Monday morning, he briefed the politicians on an extraordinary case that was urgently put on the map for the chairmanship.
From rich to broke
– The municipality must never have less than NOK 100 million in its account. Otherwise, we call it a crisis, said Alejeandro.
But when the salary was paid to the municipality’s employees on 12 December 2022, the municipality was left with NOK 10 million in its account. The same thing happened when the employees were paid their salaries late in May. Only now are the politicians informed.
– NOK 10 million! And that includes everything from funds and everything. So there is no more money left. The pockets are empty and Hammerfest municipality is broke. We are in a crisis situation and it is completely irresponsible if we do not immediately cut and restructure the entire operation, says Aljeandro.
The luxury trap
The financial manager gave an account of a stunned chairmanship, part of the reason why the once gilded municipality seems to have ended up in what may be reminiscent of the TV program “luxury trap”
According to Alejandro, this is about a consumption miles beyond the consumption of municipalities that Hammerfest can compare with. This applies to both expenditure on municipal employees, offers to users and to the municipality’s residents. At Hammerfest municipality, the money is loose and the willingness to borrow has been extremely high for years.
Hammerfest municipality currently has a debt of over four billion kroner.
– Within a very short time we will have reached and used all our margins in relation to the interest rate increase. This applies not only to the operation of the municipality, but also to Hammerfest Parking, Hammerfest Harbour, Hammerfest Arena and some other projects. Hammerfest municipality must be responsible for all of this, warns the financial manager.
More loans to the port
At the same time, Alejandro points out that Hammerfest municipal council has chosen to increase the borrowing for the port projects by NOK 25 million.
– This is in addition to loans that have already been taken out in connection with the port. We do not know what this new loan amounts to in terms of increased costs. But what we do know is that the increased expenses for interest and repayments will come.
Hammerfest municipal council has previously decided that the municipality will spend a maximum of eight percent of all income on interest and repayments.
– As of today, we spend 15 per cent of all our income on interest and repayments. And there will be more. Much more. We expect at least three interest rate increases in the near future.
A huge overconsumption
In addition, inflation and price increases have placed a burden of increased and unforeseen expenses on the municipality’s shoulders.
– While inflation in 2022 resulted in additional costs of NOK 10–12 million, we assume that the additional costs in 2023 will be around NOK 25 million. Together with interest, inflation in itself poses a serious problem for the municipality.
The biggest challenge is still overconsumption.
– We have an enormous overconsumption per capita. Far above what is normal. Here we are talking around 50 per cent more than other municipalities, there is no one who can come close to ours in terms of consumption. From 2021 to 2022, we went from an overspend of NOK 118 million to an overspend of NOK 130 million. There is a serious amount of money that is spent on everything that is run by the municipality, employees and residents.
Millions cost in errors
And particularly challenging are the huge expenses for resource-intensive users. Expenses that the municipality nevertheless does not get reimbursed from the state.
Errors can cost the municipality around NOK 60 million: – We have to expect cuts across the board
– In 2021, a refund of NOK 125 million was budgeted for particularly resource-intensive users. Here we have to count on not getting back more than NOK 17 million. In 2022, it was budgeted that we should get NOK 119 million back. Here it is possible that we will not get back more than NOK 65 million. And while we have budgeted NOK 117 million for 2023, it is possible that we will get NOK 50 million back. And that is if we are to be optimistic.
Used the savings
While health accounts for the largest part of the overspending in Hammerfest municipality, the school sector also accounts for a large part of the overspending.
– The administration also has an overspend of NOK 13 million. When at the same time we have less income than expected, all together means that we have been forced to use all of our savings. As you understand: This is a crisis.
The explanation from finance manager Alejandro caused several politicians to demand answers to why the municipality’s financial situation has not been warned about earlier?
Mayor in shock
– We sit here almost as if in shock. What is the value of an adopted budget if it is not followed? If you just continue with the overconsumption and are unable to reduce operations? The chairmanship and municipal council have also only had the tertiary reports to deal with. The signals from there have by far indicated that the situation should be as serious as it actually is. Have you previously been given the correct numbers on the table? asked mayor Terje Wikstrøm (Ap).
He pointed out that during the budget process for 2023, the overall idea was to reduce debt.
– This does not agree at all with the reality we are now presented with? If the chairmanship as a finance committee is to be able to make real decisions, we must be kept informed of the actual situation. We have to go in much earlier. Coming up with this only now is legally late. It could hardly have been worse, Wikstrøm said.
Strong criticism
Aps Berit Hågensen was also strongly critical and asked when the accounts for 2021 and 2022 can be ready.
– I share all the despair we are experiencing here today. I also want to know why we were not notified of the situation when the municipality only had NOK 10 million left in the account on 12 December last year? Why? And I want to know when we can actually expect the accounts to be ready?
Also Kurt Methi from the party North was loudly critical.
– This did not happen a week ago. Why haven’t we received signals earlier about the economic situation? I have to agree with everyone here that I am very concerned. In all the years I have been a politician, the municipality has had around NOK 100 million in surplus every year. The smallest profit I have experienced was NOK 40 million. So what happened?
2023-05-23 05:38:38
#Complete #financial #crisis #Hammerfest #broke
