Reykjavík City maintains a strong financial position

Reykjavík City presented its 2025 annual financial report to the City Executive Council today, April 27, and referred it for a first reading before the City Council tomorrow, April 28th

Strong financial position continues

The combined operating result for Section A – Core Operations and Section B – Autonomous Entities stayed positive by 8 billion króna, trailing the 2024 result by roughly 2.7 billion króna. A 9.9 billion króna pension liability charge recorded in 2025 largely accounts for the weaker year-over-year performance. Even so, the operating result before taxes, valuation changes, and the effect of associated companies reached a positive 2.5 billion króna. Revaluing Félagsbústaðir Social Housing's investment properties boosted operating results by 8.3 billion króna.

At the consolidated level, operating losses at Norðurál notably affected the City's results, negatively impacting the performance of associated companies, including Reykjavík Energy and Associated Icelandic Ports.

Combined assets of Section A – Core Operations and Section B – Autonomous Entities exceed 1,000 billion króna

The consolidated balance sheet for Dec. 31, 2025, shows total assets for Section A – Core Operations and Section B – Autonomous Entities reaching 1,038 billion króna, with total liabilities and obligations at 560.5 billion króna. The year-end equity ratio for Section A – Core Operations and Section B – Autonomous Entities stood at 46.0%. Combined equity for Section A – Core Operations and Section B – Autonomous Entities grew by 23.5 billion króna year over year, driven by the positive operating result, a revaluation of Reykjavík Energy's production and distribution infrastructure, and increased land valuations that Section A – Core Operations uses to calculate tax revenue.

Operating cash flow totaled 42.9 billion króna, representing 14.6% of revenue. Gross investment reached 64 billion króna, or 21.8% of revenue. The City's consolidated investment spending rose 6 billion króna above 2024 levels. Cash and liquid assets stood at 30.8 billion króna at year-end.

Departmental operations in balance, but external pressures weigh on results

Section A – Core Operations posted a 5.3 billion króna operating deficit in 2025, falling 5.7 billion króna below projections. A 9.9 billion króna pension liability charge related to the R division of Brú Pension Fund primarily drove the operating variance. Core operations—measured as the operating result before financing items and depreciation (EBITDA)—were positive by 7.3 billion króna. Section A – Core Operations departmental results stayed balanced against the specialized departments' annual budgets.

Operating cash flow totaled 14.3 billion króna, representing 6.9% of revenue—a year-over-year increase of 0.6 percentage points. The Section A – Core Operations year-end debt ratio stood at 80%. Excluding the impact of pension liabilities on the operating balance, all financial policy indicators show a positive trend.

Pension liability index rises 11.7% during the year

An 11.7% rise in the pension liability index—a public sector wage growth metric required for the actuarial assessment of accrued obligations—fueled the sharp increase in pension liabilities. Conversely, actuarially assessed fund assets remained flat year over year—unlike in 2024—because their real rate of return fell below the 3.5% benchmark set by the regulation on mandatory pension insurance.

450 million króna charge related to 2004 agreement with the state

This year's income statement includes an additional 450 million króna charge stemming from a 2004 agreement between Reykjavík City and the Icelandic state regarding the City's cost contributions for developing necessary parking facilities and parking garages on the National University Hospital grounds. Several development matters on the National University Hospital site remain unresolved between Landspítali – The National University Hospital of Iceland hf. and the City, potentially generating revenue to offset this charge.

Development agreements signed in 2025 to generate revenue in future periods

Section A – Core Operations revenue totaled 206.6 billion króna, up 12.1 billion króna, or 6.2%. Municipal tax withholding revenue increased by 9.3 billion króna, or 7%, from 2024. Cash-basis revenue from the sale of building rights totaled 3.4 billion króna for the year. The City signed numerous development agreements in 2025 that remain unrecognized as revenue.

Wages and other operating costs, excluding pension obligations, totaled 189.5 billion króna, climbing 7% year over year. Wage expenditures rose by 8.4 billion króna, or 8.1%, partly driven by new collective wage agreements.

Investment in schools and other infrastructure

As of Dec. 31, 2025, total Section A – Core Operations balance sheet assets amounted to 308.7 billion króna, with total liabilities and obligations at 221.7 billion króna. Equity totaled 87 billion króna. The equity ratio stood at 28%.

Annual investments focused on developing, maintaining, and renewing schools, preschools, and street infrastructure. Reykjavík City's borrowing declined year over year, alongside repayments on long-term loans.

Reykjavík City divides its operations into Section A – Core Operations and Section B – Autonomous Entities.

Section A – Core Operations covers activities fully or partly funded through tax revenue. This includes the Municipal Fund, which oversees specialized department operations, as well as the Real Estate Fund. Section B – Autonomous Entities comprises financially independent companies majority- or half-owned by Reykjavík City and funded primarily through service revenue. Stock Exchange announcement April 27, 2026