Unfavourable economic forecasts on the part of the government have obliged Bratislava to increase the property tax

Bratislava is among those cities and municipalities responding to drastic revenue cuts by increasing property tax and other local fees. Despite the fact that the city has been doing everything in its power to cope with serious budget shortfalls by cutting back on its own operations or limiting various investment projects and repairs, Mayor Vallo and the mayors of Bratislava's city districts have jointly announced a decision to increase property tax by an average of 35% and the waste fee by 30%. This is a necessary step to ensure that Bratislava can maintain the basic standards of maintenance and services that have the greatest impact on the residents' quality of life. However, despite the very difficult situation and the need to compensate for huge budget shortfalls, a solution has been found that will ensure that seniors and certain groups of residents will not be affected by the tax increase.

"The proposal to increase the property tax is a joint proposal of the city and its city districts. It's not a popular proposal and it certainly won't score political points for any of us. On the contrary, this is one of the most difficult decisions that local elected officials have to communicate to their residents. However, we have had to go ahead with it because there is no other way to maintain services and the quality of life in our city. That is why we believe it is very important that the public understand all the reasons that have led to us taking this step," says Mayor Vallo. Like other municipalities, for more than a year Bratislava has been struggling with serious budget shortfalls caused by the parliamentary legislative storm in the previous period which, when combined with inflation and rising energy prices, deprived the city of tens of millions of euros. Essentially, there are only three possible ways to deal with such negative impacts: by cutting back on its own operations, cutting back on projects and services, or increasing its other revenues by raising various fees and taxes.

The city's leadership has placed great emphasis on austerity. City Hall has cut dozens of jobs, reduced energy consumption in its buildings and facilities by 15%, put the renewal of the City Hall's fleet on hold, and reduced planned expenditures on the renovation of municipal buildings, saving a total of €2.5 million in 2023 and a further €2.2 million in 2024 on the suppressed jobs. Despite the austerity measures, however, it has not been possible to avoid cutting funding for some services and projects. For road and pavement repairs, renovation of sports grounds, repairs and maintenance to municipal housing and public spaces alone, the city has cut almost €20 million. However, even these savings did not cover the entire revenue shortfall. In addition to the savings, the city has, therefore, had to increase several fees that have not been changed for many years, in some cases for more than ten years.

"No local government likes to increase fees. However, previous political decisions, which have drained huge resources from local government budgets, leave municipalities and cities with no other option. We also want the city to act responsibly about its finances and not to substantially increase its debt for the future. We have, therefore, communicated from the very beginning that, depending on tax collection forecasts and inflation trends, we may also have to take some tough decisions on waste-collection rates and property taxes," adds Vallo.

The reasons for the property tax increase, which is slowly being pursued by many local governments in Slovakia, are due to a combination of three factors - 1) the chaotic limitation of local government revenues by previous governments, 2) high inflation, which is burdening local government spending and making almost all services more expensive, including ongoing renovation and investment projects, and 3) economic forecasts that assume lower revenues from the municipalities' main revenue stream, which is personal income tax, compared to the approved 2023-2025 municipal budgets. In Bratislava, this is expected to be €11-16 million lower in 2024 than the tax forecast of the Ministry of Finance from February 2023, which was the basis for the city's budget. However, even this shortfall is not final, as it does not take into account the funds that will have to be found for other measures already announced by the new government. Moreover, Bratislava, unlike other municipalities, was not even compensated by previous governments for the €30 million loss of revenue of the Transport Company during the pandemic, and the city had to make up this shortfall from its own budget.

The negative economic outlook places local governments in a difficult situation, as it threatens the quality and scope of services provided, including care for the elderly, education and transportation, which are typically the largest expenditures of local governments. For example, Partizánske and Banská Bystrica have already increased the property tax on flats by 100%, Prešov by 50%, as have Dolný Kubín and Spišská Nová Ves. The proposed property tax modification in Bratislava means an increase in the tax rate for houses and flats by an average of 35%, which corresponds approximately to the cumulative increase in inflation from 2020.

"The 35% inflation in recent years means that €1,000 in 2019 is now just worth around €700. So, in reality, we have a third less money and we have to provide the same services as we did four years ago. Actually, not the same, but better and faster, because the demands placed on local governments have grown over time," adds Martin Chren, Mayor of Ružinov and Chair of the Regional Association of Bratislava City Districts.

The current property tax rate for flats and family houses, ranging from €0.90 to €1 per square metre depending on the location, should be increased to €1.20 to €1.35 per square metre under the new proposal. By way of illustration, a flat owner in Dúbravka, for example, with an area of 50sqm. will pay a tax for this flat of €60 per year after the modification (originally €45). This tax rate was last increased in Bratislava in 2020. The increased tax rate will bring the city approximately €19 million per year and the city districts a total of €19 million, which will still not cover the entire shortfall in revenue but will allow the standard of services provided in the city to be maintained. In the case of Bratislava, almost half of the money from the increased tax has to be used to cover the increased personnel and operating costs of the Transport Company. This revenue will also cover the increased allowance for non-public social service providers, increased salaries in social as well as educational institutions, and the increased contribution to the operation of kindergartens.

Despite the difficult situation and the need to address the massive budget shortfall, the tax increase will not affect one of the most vulnerable groups, i.e. the elderly. People over 65 and disabled persons already enjoy a property tax relief of up to 60%. This is currently being increased to 70%, which means that, for example, a senior who now pays €40 for a 100sqm. flat in the Old Town, the most expensive tax zone, will now pay €40.50. Also, a 50% reduction will be applied to buildings and non-residential premises or parts thereof used for sport. The city has also reflected the request of the city districts to mitigate the impact of the property tax increase on the owners of family houses with gardens, of which there are about 20,000 in Bratislava. In such cases, the total tax burden will increase by approximately 26% on average.

Along with the property tax comes an increased waste-collection fee, which has not been changed for 9 years. The fee will also be increased by the cumulative inflation rate of the last 3 years, i.e. by 30%. In figures, the adjustment of these fees will mean that the cost of collecting a 120-litre bin at bi-weekly intervals will increase from the current €86 to €112 per year. However, a reduction model has also been developed, namely that it will be possible to switch to a four-weekly waste-collection interval if desired, optimising household expenditure on waste-collection and disposal. The amount for the collection of a 120-litre waste container at an interval of every 28 days will be €56/year.

City councillors are expected to vote on the proposal to increase property tax as well as the waste-collection fee at the December council meeting. If approved, the proposed change would come into effect at the beginning of next year.