Talks are due to begin this week on forming a new left-leaning administration in Amsterdam following the local council elections, but officials have warned the capital is facing a major financial crisis.

The Labour party (PvdA), GroenLinks and D66 plan, in principle, to work together but a shortage of funding will force them to take difficult decisions about the next four years, the Parool reported at the weekend.

Last week, senior civil servants warned that the city not only has less money to spend than hoped for, but that the options for cutting costs are limited.

In the short term, income from local taxes is down €65 million on forecasts this year, €50 million in planned savings made by the previous administration did not materialize and rising interest rates will also put up the price of borrowing, the officials say.

In total, the officials say, the city faces a shortfall of some €500 million.

The Parool has identified a range of options open to the next council administration. These include, for example, reducing spending on renovating crumbling canals and bridges – so that cars but not lorries can use them.

But councillors could also cut back on plans to insulate homes and scale down other green ambitions. They could also increase parking fees and tourist and other taxes, and cut spending on measures to alleviate poverty and reduce inequality.

Prestige projects, such as a new bike bridge over the IJ waterway and extending the metro to Schiphol airport may also be put on hold.

Another option on the table, according to the Parool, is that of privatising the city’s water board Waternet to raise cash.

Although GroenLinks and the PvdA are not in favour, the paper points out that both parties did agree last year to sell the city’s waste incineration plant AEB, which is now in Chinese hands.