Espoon kaupunki - Esbo stad

Mayor’s budget proposal 2025: A sustainable economy ensures a sustainable future

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The uncertainty of economic growth and changes in the financing base of cities caused by the health and social services reform have made it challenging to prepare an economic plan. However, Espoo’s growth generates vitality. Investments in a sustainable future will continue.

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“This autumn, I present my 14th budget proposal to elected officials for review. During these years that I have had the opportunity to prepare budget proposals, the population of Espoo has grown by more than 66,000 residents. As many as 42,600 children have been born here! The growth of Espoo has always been based on the fact that we have a lot of children and young people. In my lifetime, more than 150,000 children have been born in Espoo,” says Mayor Jukka Mäkelä.

“Families move to Espoo for jobs and competence. In my opinion, Espoo's greatest challenge remains to provide all children with good education and hobby paths, not forgetting our nature-oriented and safe environment.”

Health, social services and rescue services reform changed city’s financing base

The general economic situation and changes in the operating environment have been strongly present in the preparation of the financial plan. The uncertainty of economic growth in the current year is reflected in a decrease in tax revenues, and it is challenging to assess how tax revenues and cyclical revenues will develop in the coming years. The health and social services and rescue department reform changed the financing base of cities. This change has been particularly significant for Espoo. As a result of the reform, Espoo’s tax financing has been cut considerably more than what the costs of social and healthcare services were. The oversized municipal tax cut has been partly compensated by an adjustment limiter, which is part of central government transfers for basic services. However, the adjustment limiter is completely static, it is not subject to index increases and does not take into account the growth of uncollected tax revenues.

The financial plan has been prepared responsibly and it takes comprehensively into account the needs related to providing services, such as the increase in service needs and number of clients. EUR 1,605 million will be spent on organising services next year, which is EUR 80 million more than in the previous year. Without the financing for the TE reform, the increase will be EUR 35 million.

The municipal tax rate of Espoo for next year is 5.3%. Tax financing is estimated to increase by EUR 91 million, totalling approximately EUR 1,312 million. In 2025, the annual margin will be approximately EUR 276 million and the result for the financial year will be EUR 64 million. The annual margin and result for the financial year are estimated to increase slightly in the following years, if the general economic development starts to grow. The comparability of the figures to the current year is challenged by the TE reform that enters into force at the beginning of next year and national changes in tax bases.

Espoo invests in schools and day care centres in particular

In 2025, the City of Espoo will invest almost EUR 354 million and during the financial plan period 2025–2027 EUR 1,021 million. In 2025, the Espoo Group will invest approximately EUR 533 million, and the investments will continue to be strong in the coming years as well. The investments will focus on schools and day care centres. The starting point for the investments is the investment programme approved by the City Council and the priority points identified in the spring in the process of preparing the 10-year investment programme.

Espoo plays a major role as an engine for the entire Finnish economy. In relative terms, Espoo is the fastest-growing city in Finland. The nationwide birth rate is falling, but in Espoo, the number of children and young people is growing. This generates vitality and competitiveness for Espoo and

the whole of Finland. In 2022, income taxes received from Espoo amounted to EUR 1.7 billion, or 11.4% of the personal income and corporation tax received by the state. The sum is huge and highlights the importance of Espoo for the entire Finnish economy.

New City Council term to start next year

“Next year, a new City Council term will begin and updating the Espoo Story will become relevant. Next year will also see the end of the TakE programme, which has given good goals and guidelines for the sustainability of our economy,” Mayor Mäkelä says.

The next reform of the municipal financing system has started, and according to the latest information, the reform will be given to cities for commenting next year and enter into force at the beginning of 2027. The reform will have a significant impact on the financing capacity of our growing city's investments and the financing of the organisation of services, especially after the financial plan period 2025–2027.

We will know more about the effects of future changes some time next year. For this reason, the investment programme has been prepared for the financial plan period 2025–2027 and for the years 2028–2034 as a situational picture that takes into account the current investment programme, identified investment needs and separately highlighted day care centre and school targets. It can be seen that there are significant risks in the adequacy of the annual margin in relation to the investment level, and that the investment ceiling of EUR 250 million per year, which is pursuant to the investment programme, would be exceeded.

In 2025 and 2026, the city’s loan portfolio will increase due to the financing needs of investments. The loan portfolio will start to decline in 2027. However, while the level of investment remains high, it is necessary to ensure a sufficient level of annual margin and profit in order to reduce the loan portfolio. Espoo’s loan portfolio is already among the highest in the municipal field.

The share of private service production in early childhood education is not at the target level set by the City Council and we need a strong programme to raise it. We will improve the availability of labour in early childhood education through alliance cooperation between the Finnish government and the six largest cities. This involves the development and piloting of a model for the training of city employees working in early childhood education. Private early childhood education will have a significant impact on our future investment programme, especially for the period 2028–2034. The situational picture of investments in 2028–2034 should therefore be specified, when information about things such as the impact of the central government transfer reform and plans to increase the share of private early childhood education can e utilised in decision-making.

“During my time as mayor, we have invested heavily in a sustainable future: 1,700 infrastructure projects, the most important of which are the West Metro and the light rail line. We have built or renovated 24 day care centres and 29 schools. At the same time, Espoo’s climate emissions have decreased and our goal of being carbon-neutral by 2030 has become quite realistic,” Mayor Mäkelä says.

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