Reykjavík used infrastructure fees to cover operating deficit, mayor says

Reykjavík has used billions of Icelandic krónur collected from new neighbourhoods to cover its operating deficit rather than earmarking the money for infrastructure, the city’s mayor, Hildur Björnsdóttir, told mbl.is.

She said the funds had been collected from developers as entire new neighbourhoods were built, but had not been set aside for infrastructure construction.

“The money was not set aside or earmarked for infrastructure development. Instead, it went into the hole to cover the deficit, and we know that it is simply gone,” Björnsdóttir said.

She said the city still had to build various infrastructure needed by the new neighbourhoods, despite already collecting the fees.

Reykjavík is now considering measures to stimulate the construction market. Earlier this summer, the city granted a 90 percent discount on road construction fees for parking spaces in underground garages. The aim was both to encourage underground parking and reduce fees imposed on development.

Payment deferrals under consideration

The new city majority is also considering development agreements that would allow developers to defer payment of building rights fees. Incentives would be introduced in return to ensure that construction progressed quickly.

Björnsdóttir said building rights fees were imposed early in the development process, forcing developers to finance them long before projects generated revenue. Combined with lengthy planning procedures, this created high financing costs.

She said Reykjavík’s procedures were particularly slow compared with those of other municipalities and needed to be changed. The measures are part of the new majority’s goal of making Reykjavík a service-oriented city, she said.