The city of Tartu plans to increase its debt burden by nearly 40 percent over the coming years, with total debt expected to exceed €260 million by 2030.
While the city of Tartu currently has more than €190 million in debt, that figure is expected to rise to nearly €265 million by 2030. According to Tartu Deputy Mayor Martin Bek, the city's debt burden is increasing significantly because expenditures have risen rapidly, while income tax revenue is expected to decline.
"A reform is underway to redistribute revenue, colloquially known as the Robin Hood reform, which has reduced Tartu's funding by €17 million over the strategic planning period. As a compensatory mechanism, the state has provided municipalities with the option of borrowing money if their finances are in good order. We have planned for debt of around €210 million next year rising to €260 million. That means an additional €50 million to €60 million over those years," Bek said.
The city also has major investment plans for the coming years that Bek said cannot be postponed. These include the €26 million renovation of Veeriku School.
"We will invest a total of €290 million over these four years. The largest area of investment is culture, with approximately €100 million going toward the cultural center. Another €60 million will go toward education, including schools, kindergartens and routine repairs. We will also maintain our roads and streets. Nearly €10 million will go toward sustainable mobility to improve the urban environment," Bek said.
The opposition Center Party said it was dissatisfied with the budget strategy and that the city was living beyond its means.
"If we look at the budget strategy, Tartu will have to pay nearly €10 million in interest in 2030. I remember the mayor saying 10 years ago that it would be a sin not to borrow because money was cheap. Back then, Euribor was around zero. Now it is nearly 3 percent and every one-percentage-point increase in Euribor costs the city €1 million a year. And that money ultimately comes at the expense of Tartu's residents," Tartu City Council member Artjom Suvorov said.
According to Suvorov, it would therefore make sense to review the city's planned investments.
Elo Kiivet, who is also in the opposition, said that while the city's debt burden is substantial, the planned investments would be difficult to postpone.
"What we need to keep monitoring is how much we are paying in interest and whether we should adjust our current level of borrowing once Siuru is completed," Kiivet said.
The "Robin Hood" local government funding reform shifts a portion of municipal personal income tax revenue from working-age wages to pensioner income. Because high earners concentrate in affluent urban centers like Tallinn and its suburban "Golden Circle," while rural municipalities have older, declining populations, this mechanism automatically redistributes tax revenues to poorer, sparsely populated regions.
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