The Money Faucet: Overspending In Reykjavík City Council

In a capitalist society, budget deficits are a common part of government expenditure. Projects slated for next year go beyond the allocated funds of the current year, year after year, but this is usually not cause for alarm, so long as the missing revenue can be made up for in a timely manner. However, a scandal that has struck the City of Reykjavík, making Mayor Dagur B. Eggertsson’s position vulnerable, sheds light on spending practices within the city that are not only avoidable, but also take money away from far more crucial projects.

The tipping point

To understand how this happens, it is important to understand how Reykjavík handles many municipal projects. Not everything is managed by the city and brought into being by city workers; some projects are contracted out to private entities, with the city footing the bill. While in theory, this should save money in terms of the number of city workers to employ, in practice, it often means the city gets milked for millions of krónur beyond the agreed budget.

Last month, it came to light that renovations of a WWII-era bunker at Nauthólsvík went over budget by a whopping 257 million ISK; the agreement with the city was to abide a budget of 158 million ISK. When the invoices came in, however, the grand total was 415 million ISK—with over 3.3 million ISK of that spent on design alone.

“First of all, I don’t understand why we even got involved in this project in the first place,” Independence Party councilperson Eyþór Arnalds told the Grapevine. “There’s no need for the city to do this. Second, the agreement was too uneconomical for the city, as it put all the risk on the city. I think that’s in general not OK.”

Independence Party councilperson Eyþór Arnalds

Eyþór, who was the frontrunner against Dagur during municipal elections earlier this year, raised the point that this overspending is especially egregious when one considers all the areas under the city’s power that are in dire need for improvement.

“We need money for our playschools,” he says. “People who have made numerous formal remarks to City Council that the playschools need more staff. Social apartments need repairs and renovations, we need more money for food for the elderly. There’s no money for that.” The city majority, Eyþór believes, has not paid enough attention to these issues.

In power too long

Vigdís Hauksdóttir, a councilperson for the Centre Party and also a member of the city council opposition, believes the siuation is a natural result of being in power for too long. The Social Democrats, from where Dagur hails, were a party of the council majority when comedian and writer Jón Gnarr was elected mayor in 2010. Dagur has been mayor since 2014.

“These people have sat too long in City Hall,” she says. “When a majority is in power for more than eight years, then the corruption begins. That’s when people start thinking, ‘I own this, I can do as I please.’ They miss their connection with the people.”

“When a majority is in power for more than eight years, then the corruption begins. That’s when people start thinking, ‘I own this, I can do as I please.’ They miss their connection with the people.”

Dóra Björt Guðjónsdóttir, a councilperson for the Pirate Party and a member of the majority coalition, makes no bones about the importance of the issue, which she sees as a kind of wake-up call.

“It is extremely important that we don’t mess around with public funds, that the budget aims stand, and that our system works as it should,” she told Grapevine, admitting that the case does undermine public trust in the majority. She believes that reforming the system by increasing its transparency could go a long way in restoring that trust.

The straw that broke the camel’s back

When the story about the Nauthólsvík bunker first broke, Eyþór told reporters that he believed Dagur ought to resign. When asked if he is still of this opinion, he clarified his position.

“I am of the opinion that [Dagur] shouldn’t be the managing director for the city,” he explained. “I’m not saying he shouldn’t be a councilperson; he was elected to that position. But it seems to me it hasn’t gone well to have Dagur as managing director. A mayor is a managing director, and in this case, something went wrong. This is just my opinion that people bear responsibility for their actions. There’s an incredible amount that went wrong.”

The bunker case, as Eyþór tells it, was simply “the straw that broke the camel’s back.”

Doing it right

Vigdís believes that preventing overspending on city projects is a daunting task, but not an impossible one. When asked what she would do differently if she were mayor, she told us: “I would do a general audit of all city projects. Going over all the books, see where it’s possible to save money, turn off this faucet of corruption which is obviously open. It would take something like two to three months to do this, with the right people. Put all contracting projects up for public advertisement.”

In the meantime, Dagur has emphatically stated that he will not be resigning over this matter. While it is unlikely that the city council majority will collapse over this issue, Reykjavík may be overdue for some much-needed soul searching going forward.