Inflation causes prices to skyrocket, energy costs make things difficult for companies and private households – but tax revenue in Munich continues to flow undeterred. In October, the trade tax alone was almost 2.5 billion euros – and thus 300 million euros more than at the same time in the previous year. Treasurer Christoph Frey (SPD) is therefore relatively relaxed about the final bill for 2022 and the planned adoption of the budget for 2023 in December. “The tax is running. There is no bad news, as one might have expected,” said Frey. The costs of the aftermath of the Ukraine war, the housing benefit reform and the higher wage agreements are driving up spending. But the treasurer does not expect the really hard times until 2024.
In the near future, the treasurer does not fear a loss of income, but rather high investment spending, which in the worst case could even paralyze politics. If the city continues to build and invest as planned, but at the same time the federal and state governments do not contribute significantly more, then Munich is heading for a fatal debt trap. “It is not clear to me how this is to be paid for,” says Frey. The balance from ongoing administrative activities will by no means suffice to finance the investments. Investment spending in the coming year will amount to 2.1 billion euros. The experts in the finance department have also extrapolated the expenses for the years 2024 to 2026: the city would then have to pay around 2.5 billion euros. This would require new loans of 1.6 billion euros per year.
With a debt burden of six to seven billion euros and interest rates rising again, the city would have to make an enormous debt service. This is counted towards the day-to-day business of the administration, which must necessarily show a plus so that the budget remains approvable. Despite the record income at the moment, the city could hardly afford a capital service of this magnitude this year without massive cuts. This means that savings would have to be made in the administration’s ongoing business. Then it’s about jobs and the so-called voluntary services with which the city supports people in need, culture, sports or families. About those services with which the majority in the city council can shape politics.
However, the problem is not exclusive to Munich; according to the treasurer, many municipalities and especially large cities in Germany are heading for such problems. Apartments, local transport, climate protection, the municipalities are responsible for a large part of the basics of everyday life. They also receive grants from the federal and state governments, which, in Frey’s opinion, are far from sufficient due to the large renovation backlog. Where should Munich refrain from investing, he asks rhetorically: in the school building program that was once unique in Germany and is already being cut and stretched? When building new apartments that should at least keep the rent within limits? With local public transport, which urgently needs to be renovated and expanded? With climate protection, which should also enable future generations to live a reasonable life?
On a small scale, more economical management will also have to be done in these areas, on a large scale, the money must come from the federal and state governments, Frey demands. The treasury does not want to give the city council a license to spend, and the departments will have to cut costs in the coming year. The chamberlain wants to snag 100 million euros. The finance department normally calculates a 2.5 percent increase in material costs. This time, Frey must and wants to provide a further 100 million euros to compensate for the rising costs, especially for energy prices, inflation and the associated higher wage agreements.
Nevertheless, after two almost zero rounds, the departments should get new jobs – within a reasonable framework. The fine-tuning of the 2023 budget is almost complete, and the draft should be sent to the parliamentary groups by the end of November.