Although Riga’s total debts for previously implemented projects continue to decrease, their return annually requires about 80 million euros from the municipality’s approximately one billion euros. Most of them – 54 million euros – go every year for the Southern Bridge, built in the “fat years”.
“It is clear that the South Bridge payments are a big burden for the city, but manageable. And in the next three years, we can have no influence on these commitments, ”says Uldis Rakstiņš, Director of the City Council’s Finance Department.
He explains that payments for the South Bridge will decrease from 2025. This means that the city will be able to start implementing larger investment projects in two to three years without worsening the overall balance of liabilities.
Artis Lapiņš, one of the city’s temporary administrators, confirms the statement of the director of the finance department and notes that one of the largest upcoming projects for the municipality will be Rail Baltica.
The annual reports of international credit rating agencies mention Riga’s large debts and the high costs of servicing them. Standart & Poors estimates that the city’s debt will increase to 110% of operating income in the coming years.
Riga needs investments in many areas. Funds are requested, for example, by “Rīgas satiksme”, which annually receives a grant of 130 million euros. This year, “Rīgas satiksme” has been able to save 11 million euros by reviewing various expenses, but the head of the company Gīneta Innus says that the carrier will need money not only to cover losses, but also for investments.
This is the second year that Rīgas satiksme is not making major investments in infrastructure or vehicles, and unfortunately this is bad news, because without renewing both the fleet and repair shops in a regular cycle, it will all wear out. And much more investment will be needed afterwards, ”explains Innusa.
The company must first complete the purchase of 20 trams from Škoda Transportation for EUR 50 million. This procurement, among others, was stopped in 2018 by a corruption scandal. Seven trams have been delivered but are not in use. “Rīgas satiksme” is still discussing technical problems with the manufacturer, but the company also does not have the money to pay for the trams, because domestic banks do not want to lend money.
Secondly, Rīgas satiksme also mentions the need for new buses, as half of the park is at risk of non-compliance with emission standards.
It should be noted, however, that currently, overcoming the consequences of Covid-19, various funds are more easily available, which would also allow Riga to invest more.
However, Riga’s problem is not only that there may be more money for investments, but also that the money already allocated is not used in time. Year after year, the investment plan is longer than is being fulfilled.
“If we look at it from the point of view of the population, then the lack of investment means that there is no infrastructure or it is later when it should be. If we delay something and postpone it to the next year, then other projects will be postponed to the next years, ”says Lapiņš.
One of the rating agencies regularly accuses Riga of poor financial management, citing poor planning. For a couple of years, the city tried to prepare a budget for three years, but then gave up because the forecasts turned out to be too inaccurate.
This year, Covid-19 had a visible impact on the budget revenues of the city of Riga for several months, however, last year and at the beginning of this year the municipal budget had performed unprecedentedly well, therefore in seven months this year the city revenue plan has been fulfilled by 104%.
Although uncertainty over Covid-19 remains, the city’s financial planners are looking to the second half of the year without much concern. The government’s promise to compensate for lost personal income tax revenues also serves as security.
