Cities Alliance in dialog with the Ministry of Finance

The city of Offenbach is a member of the campaign alliance "For the dignity of our cities". In the alliance, more than 70 municipalities are committed, among other things, to relieving the burden of old debts that restrict the financial possibilities of cities. At the invitation of the action alliance, Lord Mayor Dr. Felix Schwenke described the impact of the measures announced by the federal government on Offenbach during the most recent virtual municipal conference. He linked this with an overview of the experiences with the Hessenkasse - a similar instrument for debt relief for municipalities was only used in Saarland apart from Hesse, which was represented by Saarland Finance Minister Peter Strobel.

"The program presented by the Federal Ministry of Finance and Olaf Scholz is remarkable in this crisis. Because although the federal government has to reckon with severe financial slumps, it is relieving the municipalities of a large part of the risks, at least for 2020," Schwenke thanked the representative of the Federal Ministry of Finance, State Secretary Dr. Rolf Bösinger, who was present. "Municipalities in particular, which are trapped in high social expenditure and lower income, will benefit from the fact that the federal government will cover up to 25 percent of additional accommodation costs."

The planned compensation for the loss of trade tax is also necessary in Offenbach, as otherwise the successful debt reduction to date would fail because new debt would have to be taken on. "The tax shortfalls in the state of Hesse will lead to dramatic declines in municipal financial equalization in the future. The state wants to approach the municipalities here - but we cannot yet estimate what this will mean in euros," said Schwenke.

In presentations, Prof. Joachim Wieland from the German University of Administrative Sciences in Speyer and Prof. Martin Junkernheinrich from the Technical University of Kaiserslautern pointed out the responsibility of the federal and state governments for the equal living conditions required by the Basic Law. Equivalent living conditions require at least similar financial conditions in the cities, Wieland explained. "Because we have comparatively little business tax due to the structural change from 40 percent jobs in industry in the 1990s to only nine percent jobs in industry today, but at the same time have to cover high costs in the social sector, the new assumption of up to 75 percent of the costs of accommodation will help Offenbach directly and quickly if it comes as announced this year. Equivalent living conditions have not yet been fully achieved, but it is an important step," said Schwenke.

Commenting on the principle of the Hessenkasse, Schwenke explained that 69 percent of the funds come from the municipalities themselves and only 31 percent from the state. "As the city of Offenbach, we had the highest debt reduction per capita in Hesse thanks to this instrument." The moderator of the conference, the city treasurer from Wuppertal, Dr. Johannes Slawig, also wanted to know whether Schwenke could recommend the Hessenkasse as a model for other federal states. "The Hessenkasse is certainly a model for other federal states, especially North Rhine-Westphalia. It is also a redistribution program of the state between poor and rich municipalities due to the financing shares. But it was courageous and the right thing to do. It solves the problem of old debts, at least to a large extent - but not yet definitively, of course. It would have been ideal, for example, if the local authorities had been relieved of their own contribution to the Hessenkasse in the coming years. In Offenbach, this amounts to more than three million euros per year - i.e. almost 1 percent of total expenditure - over 30 years. Therefore, it would also be desirable from Offenbach's point of view if the federal and state governments were to discuss the issue of old debts once again."