City imposes budget freeze for 2024

The city administration will cut the existing budget by around 18 million euros in the 2024 financial year by means of a budget freeze. With this measure, which Lord Mayor Florian Janik has implemented as an emergency decree in consultation with the city council, the city is reacting to the threat of a loss of trade tax revenue. At 170 million euros, the city of Erlangen's trade tax income this year is forecast to be 50 million euros lower than previously planned.

Where savings are being made

The budget freeze relates to the so-called material cost budgets of the departments, investment funds and personnel expenditure. "We asked all departments to provide us with a list of measures that have not yet been started and can be postponed," explains Konrad Beugel, Head of Economics and Finance. The list of savings was then compiled from this list in consultation with the parliamentary groups and political groups. In the personnel area, the procedure is such that newly created positions that have not yet been advertised will only be filled in the coming year with the 2024 job plan. "Furthermore, for every position that becomes vacant, we will check whether the associated task still needs to be performed," explains Thomas Ternes, Head of Legal Affairs, Human Resources and Digitalization.

The biggest changes to the material resources budget concern the funds for ongoing maintenance in building management. Of the 31.6 million euros originally budgeted, 3 million euros will be cut here. At the Civil Engineering Department, 775,000 euros will be cut from the 7.7 million euros budgeted for ongoing road maintenance. At Eigenbetrieb 77, the climate budget, which is used for zero-emission vehicles among other things, will be reduced from 1.6 million to 800,000 euros.

In the area of reduced investment funds, the largest share of around 2.5 million euros is in the area of municipal roads. Here, 6 million euros had been budgeted for this year. Around 500,000 euros will be reduced in the area of playgrounds, partly due to the postponement of the construction of the new playground at Dechsendorfer Weiher. Planning funds for the renovation of the Mönau School and for the construction of science classrooms at the Emmy-Noether-Gymnasium and the Gymnasium Fridericianum are not affected by the cuts. The funds for the necessary land acquisition for the realization of the new district house in Eltersdorf and the fire station in Bruck also remain in the budget. Around 450,000 euros will be saved in personnel costs this year.

"With the planned cuts and savings, we will be able to make less of a dent in the city's reserves," explains Beugel. Without this freeze, there would be a threat of almost complete consumption of free liquid funds. This would also have long-term consequences: In the financial planning for the years 2025 to 2027, negative balances from current administrative activities are reported in each case, meaning that the city's expenditure is set higher than its income. According to the financial planning for 2025, a funding shortfall of 60 million is to be expected. These shortfalls could then no longer be offset by the available cash and cash equivalents (liquidity). Permanent solvency would therefore no longer be guaranteed and it would no longer be possible to prepare an approvable budget for 2025.

What it looks like for 2025

"The budget freeze is the first step towards an approvable budget for 2025," explains Konrad Beugel. The next step will be to restore the permanent ability to pay in the budget planning for 2025, which is now beginning. This means that the balance from current administrative activities in the financial budget must again at least cover the ordinary repayments and, in addition, enable a self-financing share for investments as a "free financial margin". In this context, Ternes already mentioned the restriction that no new jobs are to be created at the city in the coming year. The municipal schools and daycare centers will be exempt from this so-called zero-position plan.

Goal: to maintain a high level of investment

"Over the past four years, the city of Erlangen has experienced exceptionally good financial years. The city's debt level has been halved. This year, too, we still have comparatively high trade tax revenues of 170 million euros. Nevertheless, we have to take tough countermeasures in view of recent developments. Our goal now is to be able to maintain a high level of investment by setting the right priorities," explains Mayor Florian Janik. The prerequisite for this is to ensure the city's long-term solvency.

From when the order applies

The mayor's emergency order comes into force immediately and has the same effect as a city council resolution. Irrespective of this, city council committees can still decide on amendments.

(A short report can be found in the city newspaper "Rathausplatz 1" - July 2024 issue)