Positive annual financial statements 2021 increases reserves
17.06.2022 – The City of Offenbach's 2021 annual financial statements have been approved by the municipal council and will now be submitted to the audit office for review. As in the three previous years, the budget closes with a positive annual result.
"In the 2021 ordinary result, a plus of 5.7 million euros was already expected in the planning for which my predecessor Peter Freier was responsible. In fact, the result is now significantly better again at 27.4 million euros," explains City Treasurer Martin Wilhelm. "The surplus is primarily the result of higher tax revenues and key allocations - both important sources of income for the city, which were comparatively high in 2021."
However, the good result should not obscure the fact that the city's financial situation remains extremely tight, emphasizes City Treasurer Wilhelm and counters any hopes or expectations: "Unfortunately, the surplus in the annual financial statements does not open up any new financial leeway for the city. The economic outlook is very uncertain and municipal expenditure will continue to rise in the coming years. We must therefore continue to work on increasing revenue and at the same time strengthen our reserves in order to get through the next very difficult economic years," emphasizes Wilhelm.
City Treasurer Martin WilhelmMunicipal expenditure will continue to rise in the coming years. We must therefore continue to work on increasing revenue and strengthening reserves at the same time.
With the help of the surplus, the city was able to increase its ordinary revenue reserves to 97 million euros in 2021. The liquid reserves total €127 million, of which €84.1 million is tied up - in other words, these tied-up reserves are reserved for the utilization of provisions or trust funds. The unrestricted liquidity of €42.9 million is also required to cover losses expected in the 2022 and subsequent budgets. "The reserves were already very important in previous years in order to offset the city's rising costs. It is only with the help of these reserves that the city will be able to draw up approvable budgets in the coming years without raising taxes while continuing to pursue a strict austerity policy. What we still need, however, are economically stable framework conditions," says Wilhelm.
High tax revenues and key allocations
Ordinary income in the 2021 budget amounts to 590.9 million euros (2020: 518.6 million euros). This is offset by ordinary expenses of 563.5 million euros (2020: 484.5 million euros). "The past few years show just how much the city's expenditure is increasing: in 2016, the city's expenditure was still at 422 million euros and has risen steadily since then. This makes it all the more important that income, i.e. the city's revenue, continues to rise." The background to the positive result is, among other things, the 15.2 million euro increase in income from trade tax (85.2 million euros) and a 5.9 million euro increase in income tax (62.9 million euros). In total, the city recorded around 208.4 million euros in tax revenue (2020: 174.1 million euros). Key allocations from the state of Hesse also rose to a new record level. 206.5 million euros were transferred to the city from the pot of municipal financial equalization in Hesse (2020: 175.8 million). However, these key allocations from the state will fall again by 15.5 million euros in 2022.
Rising expenditure on social welfare and families
The coronavirus pandemic has also led to additional expenses in Offenbach. However, the costs for the vaccination center in the Stadthalle (around 24.1 million euros) in particular were largely covered by the state of Hesse. The positive development on the labor market and in the wage sector also had a positive effect. As a result, the city had to spend around 4.3 million euros less on accommodation costs (KdU; also known as housing benefit), for example. Nevertheless, the so-called transfer expenses for benefits according to SGB II (basic security), SGB XII (social welfare), youth welfare and accommodation costs increased by a total of almost 10 million euros to 147 million euros. Personnel and pension costs also increased noticeably to 108.6 million euros (2020: 98.1 million euros). Material and services (e.g. maintenance and repair of equipment, vehicles and buildings as well as costs for water, energy and rent) also became more expensive - costs here rose from 83.9 million euros in the previous year to 120.6 million euros.
The ordinary result (the difference between income and expenditure) is important when it comes to the question of what the city can afford: "For many areas, such as the very high family and social expenditure, we are obliged by federal legislation to carry out tasks that we as a municipality have to finance ourselves to a large extent. The expenditure that we have to make here makes it necessary to make savings elsewhere in the voluntary services provided by the municipality. This is nothing new in Offenbach, but it is very unpleasant every year," explains Wilhelm. He is particularly concerned about the declining key allocations from the KFA: "For the current year, we only expect to receive around 190 million euros and in subsequent years, we must also expect fewer allocations than in the record year 2021. We will have to maintain very strict budgetary discipline for the foreseeable future and continue to make savings," says Wilhelm, also with a view to the economic outlook: "In view of the exploding energy prices and globally disrupted supply chains, we run the risk of entering a prolonged period of high inflation. This harbors high risks for the municipal budget. If economic conditions deteriorate, this always has a negative effect on the city's finances."
High investment in education and infrastructure
Despite all the austerity measures, which the municipal financial supervisory authority at the Darmstadt Regional Council is also keeping an eye on, the city of Offenbach continues to invest heavily in infrastructure - especially in schools, daycare centers and transport. In 2021, investments amounting to €70.14 million (2020: €62.66 million) were made in the new construction of the Bieber-Nord elementary school and daycare center as well as in the renovation and expansion of the Edith-Stein-Schule, Mathildenschule and Geschwister-Scholl-Schule. The top investments also included digital equipment for the schools, the conversion of the Kaiserlei traffic circle and the market square as well as the acquisition of land for residential construction. "In view of the population growth, the city continues to invest a lot of money in order to offer all children and young people in Offenbach modern classrooms and thus equal opportunities for a good education and vocational training," said City Treasurer Wilhelm. "The city is also investing in transport infrastructure, climate protection and adaptation as well as in upgrading the city center to pave the way for a bright future for the city."
Further major projects and investments are planned for the coming years, which will place an additional burden on the budget. These include, for example, the development of the innovation campus to attract new tax-paying companies and jobs and the development of the city center. The financing of local public transport remains a major issue. Only recently, the city council decided on a savings concept to cap the city's subsidies for the ever-increasing public transport deficits at 13 million euros per year. Further increases in expenditure are also to be expected for the needs-based provision of nursery and daycare places as well as for the implementation of the new statutory requirement for all-day care in elementary school from 2026.