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Resolution of the Presidium of the German Association of Towns and Municipalities of 1 December 2009

Rescue system for cities and municipalities - Boost investment power to allow growth

The impacts of the financial and economic crisis are increasingly being felt in the cities and towns. Tax revenues heavily drop (or "plummet"), while social expenditure is exploding. Municipalities are to look after children and ensure security, rehabilitate schools and eliminate waste water, pay social welfare benefit and strengthen local crafts - in short, provide an attractive environment.

These benefits are imposed by the federal government and the federal states, while the citizens are always promised more benefits: As part of a legal right, hundreds of thousands of nursery places should to be created within a few years, local authorities should do more in education, invest and contribute to climate protection. At the same time, state and society demand citizen-friendly municipalities and a reorganization of municipalities for an aging society.

Considering the dramatic financial situation it remains an open question how can this be achieved.

The gap between the collapsing revenues and skyrocketing costs of the municipalities will become wider in the next few years. The financial crisis is already determined policy decisions. Obligatory tasks and labour costs could often only be financed through cash advances/credits.

Alone during the first six months of this year alone, the cash lending rose by +2.8 billion Euros to 32.6 billion Euros. Meanwhile, the share of cash loans sums 41 percent of the total debt of the municipalities! Thus, the present quality of life will be funded by the following generations - an irresponsible development.

The local government is acutely in danger! The increased statutory duty assignment by federal and state governments as well as increasing quality requirements without adequate financial compensation lead to a dramatic overload of the municipalities. Attractiveness and quality of life for citizens and companies are put into question. Because in future, municipalities can no longer fulfil their public duties and responsibilities on the same scale and quality. This also has serious implications for government and society.

Given this precarious situation, German cities and municipalities are calling for a recue system and sustainable municipal consolidation package. These include:

  • Significantly increase federal participation in the cost of accommodation for SGB II (social welfare benefit) recipients.
  • Compensation of the reduced tax revenues of cities and municipalities under the Growth Acceleration Act.
  • Short-term bridging support for at least two years, to keep cities and municipalities capable of acting in the crisis in the interests of state and society.
  • Short-term introduction of a federal money participation for people with handicap.
  • Financially backed commitment of the central government that dealing with basic security in old age and disability is a overall societal task.
  • A sustainable approach, which ensures the financing of the statutory duties of local authorities without more new debt, this includes a strong business tax.

The Bureau of the German Association of Cities and Municipalities calls to jointly walk the way out of crisis and at short notice to convene a summit of central state, federal states, and local authorities. “The summit is to solve the urgent problems and putting in place a rescue system that strengthens the investment power of local authorities, enables growth and ensures the capacity to act of cities and municipalities.