The goal is to bring city operations under control
The City Executive Council approved Reykjavík City's interim financial report for the January–June 2026 period today, Thursday, Sept. 10.
The City faces significant operational challenges. Both the consolidated group and the Reykjavík Municipal Treasury are running deficits, prompting new efficiency measures to address the shortfall.
Consolidated operating result negative by 5.5 billion
The combined operating result for Section A – Core Operations and Section B – Autonomous Entities ran a 5.5 billion króna deficit, dropping 10.6 billion króna below the same period in 2025. The budget had projected a 6.7 billion króna operating surplus. A 2.3 billion króna negative adjustment to Félagsbústaðir Social Housing's investment property valuation weighed on the overall operating result.
Net financing costs totaled 19.7 billion króna, up 5.6 billion króna in the first six months of this year compared with the same period last year. The consumer price index has risen faster this year than projected, hitting 3.74% compared with the 1.75% forecast.
Municipal Treasury runs deficit in first six months of the year
Section A – Core Operations posted a 3.2 billion króna deficit in the first six months of the year, dropping 3.2 billion króna below the same period in 2025. Payroll expenditures rose 2.7 billion króna year over year, driven primarily by wage increases under collective wage agreements.
Depreciation exceeded the budget by 2.0 billion króna, largely because of additional write-downs on properties slated for demolition, discontinued projects — including the seal pool at the City Zoo — and nursing homes previously jointly owned by the state and the city but transferred to the state on Jan. 1, with their book value written off under Act No. 40/2025.
Net financing costs reached 3.9 billion króna, coming in 1.9 billion króna above budget primarily because of higher-than-projected inflation. Equity holding dividends amounted to 3.3 billion króna, while interest expenses and inflation adjustments totaled 7.6 billion króna — exceeding the budget by 2.0 billion króna.
Cash flow from operations generated 8.6 billion króna, representing 7.9% of revenues for the period.
Economic outlook remains highly uncertain; bringing operations under control is essential
The economic outlook remains highly uncertain, and domestic labor market conditions are challenging. Inflation expectations continue to exceed the target, creating a risk that inflation could surpass current forecasts.
"These results make it abundantly clear how critical it is to bring city operations under control. Nothing threatens core services more than irresponsible financial management. We are continuing our work in the efficiency working group to improve operations, cut waste and enhance services," said Hildur Björnsdóttir, mayor.