The 2024 budget

In the first part of our presentation of our draft budget for 2024, we offer you an insight into the city's handling of the trade tax surpluses for the years 2021 to 2023.

One of the first steps was to use the enormous trade tax surpluses to pay off debts and build up reserves.

In addition, provisions were formed for the expected charges from the municipal financial equalization scheme.

Reducing the burden on citizens was another key point with regard to the use of available funds.

To this end, property tax was reduced in 2022 and contributions for meals for children in municipal daycare centers and schools were waived in 2022 and 2023.

Relief for companies was also considered in order to strengthen Idar-Oberstein as a business location.

An increase in funding for associations was also particularly important to us in order to strengthen voluntary work.

In order to continue to position ourselves as a city in the best possible way in the future, it was very important for us to continue investing in the digitalization of schools and the expansion of our nursery places .

Here, too, we have made necessary investments throughout the city: Playgrounds.

In Part 2, we get an initial overview of the situation:

Half a billion in income from trade tax in the years 2021 to 2024, huge apportionment sums and the necessary debt relief for the city.

To do this, we will take a closer look at the question: "Why has the town of Idar-Oberstein run out of money? It is 'rich'...".

Facts:

Revenue from trade tax from 2021 to 2024 around 510 million euros.

This will result in levies (charges) of around 310 million euros by 2024.

Money remaining with the city of Idar-Oberstein: around 200 million euros.

Of these 200 million euros, debt was reduced by 133 million euros and 55 million euros were transferred to pension funds.

Conclusion: According to this, of the trade tax revenue of around 510 million euros, only around 12 million euros remain as available financial resources for the 2021 to 2024 budgets.

The chart shows that while trade tax revenue in 2021 was still around 228 million euros, it is now falling sharply: trade tax revenue of just 32 million euros is calculated for 2024.

In comparison: in 2018, income from trade tax amounted to 15 million euros, in 2019 to 12 million euros.

Note: All figures are rounded to the nearest million.

In Part 3, we go into more depth and look at municipal financial equalization, levies and the resulting very high payment obligations for the city.

Following a sharp rise in income from trade tax, this is now in sharp decline.

The city's fiscal strength is still high compared to the years before the pandemic.

...however, the system of post-year effects of municipal financial equalization (levies) entails immense payment obligations.

A huge sum: 68 million euros, or 46.3% of the total expenditure in the 2024 municipal budget, is made up of levies.

• Apportionments are funds that a city has to pay to its district (district apportionment) and to its respective federal state (financial equalization and trade tax apportionment).

Note: All figures are rounded to the nearest million.

The chart shows: After 15 million euros each in 2021 and 2022, the district levy has increased almost tenfold to 148 million euros in 2023. 56 million euros will have to be paid in 2024.

Note: All figures are rounded to the nearest million.

The financial equalization & trade tax levy to be paid has also more than doubled to EUR 41 million in 2022 and 2023.

In 2021 and 2022 it was still 19 million euros each, in 2024 it will be 14 million euros.

Note: All figures are rounded to the nearest million.

The chart shows: While income from trade tax is continuously declining over the years 2021 to 2024, the levies to be paid in 2023 exceeded the income from trade tax (for 2023).

With levy obligations of around EUR 70 million and forecast income from trade tax of around EUR 32 million for 2024, the levy obligations for 2024 are also higher than the income.

In Part 4, we will discuss the correlation between the sharp rise in trade tax revenues and the equally sharp rise in payment obligations under the municipal financial equalization scheme.

Here we take a closer look at what all this information means for the 2024 municipal budget.

The consequences are drastic in two respects:

On the one hand, the city has less money available because...

• Subsidies to the city will now not be forthcoming
• There is no longer any income from key allocations
• The city no longer participates in the Rhineland-Palatinate state debt relief programs for municipalities

On the other hand, the city has to cope with higher expenses because...

• financial equalization and the trade tax levy to the state of Rhineland-Palatinate as well as
• The district levy to finance the expenditure of the Birkenfeld district has risen dramatically

Due to the sharp rise in trade tax revenue in 2021 and 2022, the city of Idar-Oberstein went from being a recipient to a donor of financial compensation payments virtually "overnight".

As a result, while allocations and debt relief programs have been discontinued, for example, the levies to the Birkenfeld district and the state of Rhineland-Palatinate have increased.

Against the backdrop of this overall situation, the problem can be clearly identified: The threat of renewed debt.

In the fifth and, for the time being, final part of our comments on the preparation of the 2024 budget, we take a final look at the overall situation.

We will explain to you what we as an administration have to pay attention to when drawing up a budget and what we are required to do by law. We also talk about savings measures and real tax rates.

Finally, here is a quote from our Lord Mayor Frank Frühauf, which makes us confident about the tasks ahead of us.

One key point: as an administration, we are obliged by law to draw up an approvable budget.

The budget must be balanced, which means that we are not allowed to plan for a deficit.

Loans for investments are only permitted if no other financing is possible and the loan obligations do not jeopardize the city's future performance.

It follows from this: Cost-saving measures and an improvement in the revenue situation - such as an adjustment of the real tax rates - must be examined.

As the administration, we have reviewed all expenditure in recent weeks and reduced it to a justifiable minimum. This means that further cost-cutting measures are no longer possible.

Against this backdrop, it will be necessary to improve the revenue situation, which is why we have calculated the 2024 draft budget with the old real tax assessment rates prior to 2022.

This would reduce the deficit from around 68 million euros to 57 million euros by around 11 million euros.

What should not be forgotten with the high trade tax income: the municipal debt mountain was still at a comparable level of around 139 million euros in 2022. Thanks to a comprehensive debt reduction, investment loans now only amount to 5.5 million euros.

Despite the deficit in the 2024 budget, this means that as a city we are now standing on our own two feet.

In view of the administration's draft budget, it will now be the task of politicians and our city council to avert new debt and choose a path that is feasible for the city.

"I am convinced that we are on the right path so that we can continue to invest and make our city fit for the future in a responsible manner!"

With these words full of confidence from Lord Mayor Frank Frühauf, we conclude the explanations on the preparation of the 2024 budget for the time being.

We will inform you as soon as there are any new developments.