In 2023, the city wants to spend the record sum of 8.49 billion euros for the people of Munich. This is to be offset by administrative income of 8.25 billion euros in ongoing business. This would result in a surplus of 240 million, which can flow into planned investments. These will amount to a total of 2.1 billion euros. The resulting financial gap, which is being reduced by federal and state grants, has to be closed by the city with loans totaling 1.3 billion euros. Treasurer Christoph Frey (SPD) will present these figures on Wednesday at the general assembly in the budget for 2023.
Source: City of Munich.
(Photo: SZ graphics)
Even if there could still be one or the other change, the coalition of the Greens/Pink List and SPD/Volt will by and large decide on the financial framework for the coming year. “We have been able to set up a budget with which we can continue to vigorously address the important concerns of the people in our city,” said Chamberlain Frey. The focus is the same as in previous years: building schools and daycare centers, affordable housing, expanding and renovating local public transport. “Other municipalities already have to put the brakes on future investments. Fortunately, that is not (yet) the case in Munich.”
The Department for Education and Sport and the Department for Social Affairs traditionally make the largest turnover in the city’s current business. However, many items with money from the federal government and the state of Bavaria also run through. In 2023, Munich intends to spend almost 1.9 billion euros on schools and day-care centers (not including the construction of new buildings) and all other forms of education. In a similar dimension, the city only takes care of the social concerns of the citizens: the responsible department is planning expenditures of 1.64 billion euros. In third place in terms of expenses is the building department with almost half a billion euros.
However, Frey has to admit that in times of war in Ukraine, energy shortages and inflation, and uncertainty about federal and state subsidies, forecasts are very uncertain. “The economic development and thus also the tax revenue that is so important for the city are more difficult to estimate than ever,” said Frey. “How the announced tax breaks will affect our budget cannot be reliably predicted today.” As a precaution, he has set a package of 250 million euros to compensate for inflation and austerity measures.
Despite an expected trade tax revenue of well over three billion euros, the coalition will not be able to achieve the goal it has set itself in ongoing business. Chamberlain Frey had set a target of around 400 million euros for the surplus, which is well below the 240 million euros set. Things are hardly looking any better in 2024 either, only in 2025 and 2026 are the surpluses expected to increase to 602 and then 786 million euros. But that will also be necessary because the city will accumulate so much debt by then that it will have to raise a quarter billion a year just to pay off the loans.
The high investments, especially in the construction of schools, daycare centers, apartments and infrastructure for local transport, mean that a debt level of 7.6 billion euros can be expected by 2026. If you convert the liabilities to each resident of Munich, it quickly becomes clear how much money the city spends. In 2019, debt per capita was 408 euros, in 2026 it is expected to be 4705 euros per person. If you look at the city’s plans beyond that, it quickly becomes clear that a municipality alone can no longer manage to make investments in the future. 131 projects are planned without a concrete timetable, which should cost 23.5 billion euros.
Investment backlog is clearing
Source: City of Munich.
(Photo: SZ graphics)
If one sees the debt shooting up this year and in the coming years, the question could quickly arise as to whether the financial policy fuses have been blown. From under one billion in 2019 to well over seven billion within seven years. However, the current high expenditures can also be explained by the extraordinarily low levels of debt between 2010 and 2020. Especially in the first half of this decade, people saved so much that a backlog of investments built up, which is now gradually being cleared.
The result is the largest daycare, school building and housing construction program that a municipality in Germany has ever launched. Much was initiated by the predecessor city government of CSU and SPD, after the long planning, the work is now fully reflected in the accounts. Green/Pink List and SPD/Volt now want to ecologically rebuild and realign the city, and that too cannot be done without the appropriate funds.
There is construction wherever possible
Source: City of Munich.
(Photo: SZ graphics)
Should the city buy houses in which tenants have been pushed out by renovation? Sounds right, and the coalition usually strikes when the legal requirements and finances allow it. But a municipality is also feeling the effects of the overheated market. From 2022 to 2026, the Treasury is budgeting more than one billion euros for this very selective tenant protection. To this end, construction is going on wherever possible: billions are also pouring in for new schools, day-care centers and apartments. The Treasury budgets around 5.7 billion euros for this, more than a billion in 2023 alone.
In addition, the finance department always publishes a list of projects that are already being planned but are not yet included in the medium-term financial forecast up to 2026. For example, the new subway line 9 that has just been discussed, which the city’s financiers estimate at nine billion euros. For this and for many other projects, Munich will need massive subsidies from the federal and state governments.
Record income
Source: City of Munich.
(Photo: SZ graphics)
No matter which crises recently afflicted the city and the republic, the trade tax (almost) always proved to be a source of joy for the financial planners in Munich. The pandemic, the consequences of the war in Ukraine, all of this often gave reason to expect serious slumps, but the city’s economy remained and remains a guarantee that political shaping is still possible in Munich. For 2023, too, the city is hoping for record income of more than three billion euros. And despite the chamberlain’s own caution for professional reasons, he expects constant and noticeable growth for the years to come. The four billion euro limit is within reach in the forecasts by 2026.
But a treasurer would not be a treasurer if he did not recognize that many imponderable factors underlie this foresight. But that also applied to the past few years, in which the trade tax simply didn’t care about the gloomy forebodings of the financial augurs.
The surplus is not enough
Source: City of Munich.
(Photo: SZ graphics)
The finances of the city are based on a very simple calculation. Like every single person and every family, she has to earn more than she spends on her daily needs. Municipalities are even stipulated that, roughly speaking, they are obliged to make this surplus. If they do not achieve this, the supervisory authority cannot approve the budget. Ideally, there is enough left over for the city to be able to use it to at least partially finance special investments and thus require fewer loans.
Such as when buying a car or an apartment in a private household. The 240 million euros that should remain as a surplus in 2023 are far from enough in Munich. The medium-term goal is 400 million euros, which according to current forecasts will not be exceeded until 2025. However, in recent years, the departments have often set their expenses higher than actually required, which is why the result has usually turned out better than expected in the plans.