KfW Municipal Panel 2015: Differences between municipalities growing

Frankfurt am Main (ots) -

- Investment backlog increases to EUR 132 billion
- 69% of all municipalities are pessimistic about the future; few
expect a turnaround (7%)
- Importance of loans to finance investments declines, increase in
the use of own funds

The local authority experts from German cities, municipalities and
districts have estimated the investment backlog for 2014 at around
EUR 132 billion. This represents a significant increase compared to
the previous year (2013: EUR 118 billion). "There is growing
awareness in the municipalities of the accumulated infrastructure
weaknesses and, at the same time, needs continue to pile up, be it
for refugee housing and integration, or inclusive schooling," said Dr
Jörg Zeuner, KfW Chief Economist, today at the presentation of the
KfW Municipal Panel 2015 at KfW's Berlin branch. The slight increase
in capital expenditures reported last year did nothing to change the
situation. "Over the next few years, however, it is possible that
this investment backlog will be reduced because the German Federal
Government will contribute more to social spending," said Dr Zeuner.

The investment volume increased by EUR 3 billion to EUR 28 billion
in 2014 and will continue to rise in 2015 (forecast: EUR 31 billion).
However, this will likely only represent a small part of the
estimated increase in total municipal debt. Despite favourable
overall conditions, only around 22% of the investments are financed
by municipal loans; the municipalities themselves account for 44%,
the German Federal Government and the federal states provide the
rest.

As was also the case in the two previous years, the municipal core
budgets closed out the year with a small surplus; however,
accompanied by signs of growing disparities between municipalities -
while, on the one hand, the share of municipalities (based on their
own estimates) with a currently good or very good financial situation
grew (from 13% to 20%), the number of municipalities not able to
balance their budgets also rose slightly in 2014 (from 26% to 29%).
Among larger cities with populations of more than 50,000, one in two
say that their overall financial situation is less than satisfactory.

Overview of other results:

- Around 7% of German municipalities have had financial
difficulties in the past but are optimistic about the future
(for example, because they expect a decline in social
transfers).

- Around 19% of German municipalities had a solid financial
footing in the past, but are pessimistic about the future (due
to increased costs for human resources, etc.).

- Around 35% of German municipalities are equally pessimistic
about the past and future. They are experiencing a downward
spiral because many are and, in their own estimation, will
remain, heavily indebted. Their tax base is much smaller than
the average. These municipalities cut corners in the upkeep of
their infrastructure, what will create even more problems in the
future.

- Around 15% of German municipalities are equally positive about
the past and future. Their overall positive assessment goes
hand-in-hand with a larger than average tax base.

"I have high hopes for the upcoming reorganisation of fiscal
relations between the German Federal Government and the states. It
creates the opportunity to comprehensively address the structural
problems of municipal finance, increase public investments and
strengthen Germany's potential to grow over the long run without
having to raise taxes even one euro for the taxpayer," explained
Zeuner. But the municipalities also still have a lot of homework to
do. "Supported by concepts for balanced budgets, four out of ten
municipalities which went through a negative financial situation in
the past closed their 2013 budget without a deficit and put an end to
the negative cycle. The aim is to highlight these successful examples
and encourage other municipalities to adopt the same strategy and
become more modern and efficient," Dr Zeuner added.

Note:

A total of 3,791 cities, municipalities and districts were
surveyed in the period from October to December 2014 for the KfW
Municipal Panel 2015; 373 questionnaires were returned by cities and
municipalities and 102 by districts. The survey used a layered random
sample based on the four size categories for municipalities. The
results are representative for the approximately 5,200 cities and
municipalities with a population of more than 2,000 and for the 293
administrative districts in Germany. The survey was conducted by the
German Institute for Urban Affairs (Deutsches Institut für
Urbanistik, Difu) on behalf of KfW Group.

Service:

Further information on this subject (incl. an interview with Dr
Zeuner, charts) is available at our website
www.kfw.de/kommunalpanel2015.

Pressekontakt:
KfW, Palmengartenstr. 5 - 9, 60325 Frankfurt
Kommunikation (KOM), Sonja Hoepfner,
Tel. +49 (0)69 7431 4306, Fax: +49 (0)69 7431 3266,
E-Mail: presse@kfw.de, Internet: www.kfw.de