Cynical politicians exploit “loopholes” in the regulations to save money in the short term, but incur massive debt in the municipality in the long term.
The comments expresses the writer’s opinions.
For several years, the municipalities have been able to save money on postponing maintenance of buildings, and rather borrow “free” money to build new ones. The result is unnecessary resource use and enormous debt growth.
Imagine that you are a politician in a Norwegian municipality where the children are sitting in classrooms with ventilation systems that are about to smoke.
If you spend money on maintenance of the ventilation system, it will be deducted operating budget to the municipality immediately. There are few shortcuts here – the budget must be balanced every year, so you have to scrape together money by increasing taxes, cutting spending elsewhere, or taking away savings. A municipality cannot borrow money to finance normal operations.
In the short term, the debt is “free”
A cynical politician, on the other hand, has a trick up his sleeve: let the ventilation system collapse, and let the children cough and sneeze for a few years, until the school building is considered to be so bad that regular maintenance cannot solve the problem. Then you can instead build a new school that is financed over the investment budget which you can borrow fresh money for!
In the short term, the debt is “free” when the interest rate is lower than inflation (as it has been), you avoid maintenance costs for a few years, and you do not have to cut spending elsewhere.
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Does it sound conspiratorial that cynical politicians exploit “loopholes” in the regulations to save money in the short term, but the municipality incurs massive debt in the long term?
«It is a well-known phenomenon that the municipalities spend too little money on the operating budget for maintenance and that they neglect neglected maintenance in the form of rehabilitation that is financed from the investment budget. This often happens in combination with rebuilding / development and / or extensions » it was written in a report for the Ministry of Local Government already in 2005.
Uses half of what is recommended
On good master’s thesis written by Endre Friestad and Kristian Malerød Larsen at the University of Agder summarizes recent research that shows the same, and claims that the municipalities on average spend half as much money on maintenance in relation to what is recommended.
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The figures also show how extensive the municipalities’ loan-financed investments are. From 2015 to 2020, Norwegian municipalities have increased theirs net debt from 311 to 446 billion, and on top of this come interest rate increases such as Norges Bank now wants to.
That they suggest that the interest rate should be raised by just over one percentage point does not sound dramatic, but for municipalities that have initially paid around 1 percent, this could mean a 4-5-fold increase in interest costs from 2015 to 2025.
Lack of resources?
In few places has the phenomenon of postponing renovations, and then building new ones, become as clear as in Oslo municipality. “The parent group for better schools at Ellingsrud” has this summer run a campaign to get attention around Ellingsrud ungdomsskole, which was promised rehabilitation due to poor indoor climate already in 2015. “The classrooms smell of mold and the students must have blankets indoors”, wrote Avisa Oslo in August.
But according to Oslo Municipality’s latest school needs plan 38 of the 44 planned renovation projects in the Oslo School must be postponed due to lack of resources. Only in 2029 (!) Does the municipality now say that the students at Ellingsrud ungdomsskole will escape mold and blankets.
At the same time, Oslo Municipality chooses to pay 1.35 billion tax kroner to buy the property of the former Veterinary College, among other things to build schools. Lack of resources? This is where the difference between operating and investment budget comes in!
The purchase of the Veterinary College can in fact be financed through the investment budget by taking out new loans, something Oslo Municipality has really gained a sense of. The loan debt, which was NOK 25 billion in 2017 (then below the national average in relation to the population) is intended to increase to 61 billion as early as 2024.
Read more opinions from the Norwegian debate
Shouldn’t it be a major environmental issue?
And what sets limits on the investment budget? The sky is no limit! At least not as long as the state-owned Kommunalbanken is part of the fun, which they mostly are, and as long as foreign investors assume that the municipalities will be able to make up for it. Something they will also be able to do as long as they get the loans refinanced elsewhere.
Oh repay In any case, the loans are out of the question when the newly built building stock also requires maintenance in a few years, at the same time as interest costs have multiplied.
And shouldn’t the throw-and-throw mentality around public buildings be a bigger environmental issue?
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