Riga, April 2 (LETA) - In order to normalize the financial situation of the municipality of Valka, the local government needs a subsidy from the state of a little more than EUR 674,000, Valka Mayor Vents Armands Krauklis (Vidzeme Party) told a press conference on Thursday.

A revision of the debt repayment schedules is also needed, he said. In the future, he said, a coefficient should be included in the calculation of the municipality's budget, which would count those Valka residents who have declared their residence in Estonia.

This is about 17 percent of the population of Valka who have registered their residence in Estonia, because child benefits are higher there and it is possible to receive timely healthcare services, he said.

This would add an extra EUR 1 million to the municipality's budget each year, Krauklis estimated.

This is not a matter for civil servants, but a political decision, he stressed. Therefore, if solutions cannot be agreed on with the Ministry of Finance, he will talk to the political parties.

The Valka mayor rejected the Finance Ministry's accusations of mismanagement. He pointed out that the Valka municipality had organized the school network and that 50 percent of houses in Valka had undergone energy efficiency improvement projects, halving consumption of heating energy.

Other measures and projects have also been successfully implemented, the mayor said. "Valka is now a living city where people want to live," emphasized Krauklis.

As proof of this, he said that several years ago an apartment in Valka cost "nothing" and the municipality had apartments available. Today, however, an apartment costs tens of thousands of euros and there are more than 170 families waiting in line to improve their living conditions.

The municipality's leader believes that the government is not fulfilling the promises it made during the municipal reform, such as additional subsidies or the special municipality model.

He is convinced that financial stabilization measures in the municipality will not solve the problem in principle, but only delay time.

As reported, the Finance Ministry has prepared and submitted to the responsible ministries an informative report on the financial situation of the municipality of Valka and solutions for future actions. If the municipality is unable to put its budget situation in order and continues to default on its obligations, the matter will be dealt with in accordance with the regulation on financial stabilization of municipalities.

The report concludes that the long-standing financial problems of Valka municipality are mainly related to poorly organized provision of municipal services, which causes losses to the municipality. The municipality has not been collecting residents' debts for utilities for a long time - as of February 1, 2026, residents' debts for heating supply exceeded EUR 1 million and are not decreasing significantly. At the same time, heating bills do not cover the actual cost of the service and there has been insufficient control over the provision of water services for years.

These factors have a direct impact on the budget of the municipality and its ability to meet its obligations and ensure the performance of its autonomous functions in a timely manner, explained the Finance Ministry. Despite the fact that in 2025 the revenues of the Valka municipality after the municipal finance equalization increased by EUR 1.26 million or 15.4 percent compared to the 2024 plan, which is the highest percentage increase among municipalities, the municipality regularly defaulted on its payments to creditors, delayed tax payments and periodically extended tax payment deadlines.

Also, the January 2026 tax debt of EUR 362,400 has been granted an extension until January 20, 2027, according to the ministry.

The temporary improvement of the municipality's financial situation at the end of 2025 is only due to one-off proceeds from the sale of immovable property (boiler house), which resulted in the payment of a long-term debt of EUR 150,000 for heating services. The ministry underlined that this approach does not address the root causes of the financial problems and cannot be considered as a sustainable solution.

Although the municipal council has approved a financial optimization plan, which foresees a gradual transfer of the municipal services provided in the territory of the city to the capital company Valkas Namsaimnieks, the ministry noted that the plan does not confirm the long-term financial stability of the municipality.

At the same time, the ministry stressed that there is no reason to believe that the municipality of Valka would be at a disadvantage compared to other municipalities in terms of available funding in 2026, as 11 municipalities have lower per capita revenues than Valka. In the ministry's assessment, this indicates that the problem is not the amount of revenue, but its management.

The Finance Ministry has invited the State Audit Office to carry out an in-depth audit of the Valka municipality in relation to the model of provision of heating supply and water management services and its financing.

However, Krauklis, has previously expressed the opinion that the Finance Ministry stubbornly continues to selectively interpret data and biasedly reflect the causes of the financial situation of Valka municipality, which "are in fact rooted in the political decisions of the Saeima and the government during the municipal reform," as well as the long-standing special situation of Valka-Valga border town, where a significant part of the population declares its residence in Estonia and chooses Estonia as a workplace due to its higher social guarantees.