The City Council approved Kotka City Strategy 2035

17.2.2025 | The City Council has approved Kotka’s new urban strategy, which runs until 2035.

At Monday night’s meeting, the council made only two minor textual changes to the city government’s proposal, both of which were approved after voting.
The word “quality” was added to the sentence “We value families with children: ensuring the quality, safety and diversity of the services we provide for families with children” by 15-26 votes (9 abstentions).

In addition, the word ‘quality’ was added to the heading ‘We ensure a functional, safe and quality everyday life for all ages’ by 12 to 29 votes (9 abstentions).

In all other respects, the City Council’s proposal was adopted as it stood.

According to the Municipal Act, the city strategy must be reviewed once during the council term, so future city councils will have the opportunity to influence the content of the strategy before 2035.

The City Strategy 2035 approved by the City Council is attached.

City Strategy 2035, available only in finnish.

The Karhula school centre will be financed as a balance sheet investment

The City Council also decided that the school centre to be built in Karhula will be financed and implemented as a balance sheet investment with loan financing. This decision reverses previous decisions on the use of real estate leasing financing.
The change of financing and implementation does not change the timetable for the project. The school centre is scheduled for completion in 2027.
In the market dialogues preceding the call for tenders for the financing of the school centre, it has become clear that the cost of money is always at least 8 percentage points higher for real estate leasing financing than for traditional loan financing.
Over a sample of several years, the difference has hovered around the 10 basis point level and the final difference will be determined at the time of the tender. The difference is also independent of the level of market interest rates and whether the interest rate is fixed or variable.

In relation to the total cost of the project, which is around EUR 35 million, a difference of 8 interest rate points means at least EUR 28 000/year in favour of traditional loan financing and balance sheet investment, which will change with the financial amortisation scheme.

The typical lease term for a real estate leasing model is 20 years at 33% residual value, while for a balance sheet investment the depreciation period for a stone-built school centre is 40 years.

The differences between balance sheet investment and real estate leasing and the profitability of implementation have been studied in more detail, e.g. in a financial comparison by Inspira Oy for the Katariina swimming pool in 03/2024. The results of this study can be used for the Karhula school centre and support the implementation of the project as a balance sheet investment.

In real estate leasing, the maintenance and servicing costs of the facility are the responsibility of the user in the same way as in a balance sheet investment. Furthermore, the potential interest rate advantage of ‘green financing’ is not linked to whether the project is financed by a lease or a loan. There are no obvious advantages to be gained from the use of leasing financing and the change in the form of financing has no impact on the project timetable or on the tenders.

In summary, as explained above, the financing costs of a balance sheet investment are lower than those of leasing financing, so that the choice of a traditional balance sheet investment is justified.
The estimates for the construction of the Karhula school centre are as follows, in terms of timeframe and amount:
2023-2024 site design
tendering 1/2025-3/2025
Construction 5/2025-5/2027
school commissioning 8/2027
2024 = €2 million
2025 = €10 million
2026 = €15 million
2027 = €8 million
Total approx. = €35 million