Speeches by the Lord Mayor of Chemnitz Sven Schulze
Ladies and Gentlemen, Councillors,
Dear Mayors
Dear residents of Chemnitz,
Today we are presenting the two-year budget for 2021 and 2022 under difficult circumstances:
After years of growth, increasing investment and new, additional services, this budget was created under the economic conditions of a global pandemic that is far from over.
Until late summer last year, many experts were still assuming that Germany would probably get off lightly in economic terms thanks to generous aid programmes, significantly improved short-time working regulations and a severe but comparatively short lockdown.
Meanwhile, many scholars are no longer sure about this and it is more likely that we will be dealing with the consequences of this crisis for some years to come.
Sure - there is a lot of aid from the federal and state governments. However, the fact that this aid is reaching those who urgently need it so late and inadequately must be criticised. It is up to the politicians to finally follow up their promises with action!
We as a city have also tried - with your approval - to help overcome the situation by, for example, deferring upcoming tax payments or providing targeted support for creative artists with the "Staying visible during the crisis" programme.
And yet the economic consequences of the pandemic are also clearly noticeable in our municipal budget:
- Declining tax revenues and declining other revenues,
- stagnating state allocations
- with simultaneously rising costs in the social sector, youth welfare, at some municipal companies and also for municipal staff
are forcing us to critically scrutinise tasks, set priorities and, yes, even do without things that we would gladly afford under other circumstances. Compared to the previous financial planning, which dates back to 2018, income has fallen significantly in some cases and expenses have risen just as sharply.
And yet the budget for this year and next is not an austerity budget! Contrary to what some might assume, the draft budget was not about achieving a "black zero" at all costs.
No - it was about acting responsibly and drawing up a plan that allows us to
- advance important urban development projects,
- continue to promote sporting, social and cultural activities at a high level and, above all, maintain club life in our city
- but also to continue investing in good daycare centres and modern schools
In short: to not only maintain the quality of life in our city, but to continuously improve it.
This task was anything but easy in view of the financial framework conditions.
And yet I am convinced that the budget we are presenting to you today provides a good basis for moving our city forward in the coming years.
This budget is a budget of stability and responsibility that pushes the limits of our financial capacity. We can maintain the current level of expenditure for key items, safeguard important tasks and continue to make targeted investments. And yet we are not acting as if we have a money-printing machine in the basement that can finance all our wishes.
It is about striking a balance between what is desirable and what is feasible. It is about the city as a whole and not about vested interests.
Ladies and gentlemen,
I would like to take this opportunity to outline the key points of our budget planning:
We are planning for income of around € 1.68 billion in 2021 and 2022. This contrasts with planned expenses of € 1.76 billion. Compared to the past two years, the budget volume has increased once again.
This means that the income budget already shows a planned deficit of almost €79 million for these two years. And this trend will unfortunately continue in the coming years, as there is only a slow improvement in sight over the entire financial planning period. Overall, we expect a deficit of around 144 million euros in the period up to 2025.
The financial budget, i.e. the actual flow of income and expenditure, does not look much better:
Here, we anticipate a funding requirement of more than a quarter of a billion euros over the entire planning period. It should be noted that this already assumes a considerable amount of borrowing for investments and the full utilisation of the available liquidity. But more on this later.
The reduction in income from taxes, which at 30 per cent make up the largest share of our municipal income, has had a significant impact. While we are assuming comparatively low additional income from property tax, the slump in trade tax is clearly noticeable.
We are currently expecting just under 106 million this year and 108 million next year. In comparison: in 2019, we generated almost 114 million euros in income from this type of tax alone. We will not reach this level again until 2024 at the earliest.
In contrast, we expect only a slight reduction or even moderate increases in the municipal share of income tax and sales tax compared to previous years.
I would like to emphasise at this point that, despite the tight budget situation, we do not intend to raise the assessment rates for property tax and trade tax.
This is a very conscious decision, especially in view of the challenges facing companies in our city, but also out of consideration for the social consequences of a tax increase in this area.
The effects of the pandemic are also being felt in the second important source of income for local authorities, the state allocations:
Although the general key allocations of around €214 million each can probably be maintained at last year's level after very tough FAG negotiations with the state, the investment-related key allocations are set to collapse to just €18 million this year and next.
The figures for the state subsidy for childcare and reimbursements in the area of asylum also had to be reduced compared to the original financial planning. The reasons for this are a slower increase in the number of children and a decline in the number of people entitled to benefits under the Asylum Seekers Benefits Act.
In addition, the effects of the double lockdown and the resulting closure of numerous municipal facilities are also reflected in the planned user fees and charges.
However, additional income due to the pandemic will result from the federal government's funding programme for the digitalisation of schools.
We are expecting around € 3 million per year until 2024, which will be channelled into improving the digital infrastructure and purchasing mobile devices.
There are also significant changes to expenses compared to the budget estimates for 2020 and the previous financial planning:
Personnel expenses remain the largest item within the municipal budget, accounting for around 28 per cent or around € 248 million in 2021.
This high proportion is due to the increase in staff in recent years, which was not only due to the rising number of children in the daycare centres, but also to the collective wage agreements in the public sector. To illustrate: since 2016, 532 full-time positions have been created in the city administration, 272 of which are in the daycare centre sector.
In order to at least slow down the further increase in personnel costs and thus support the City of Chemnitz's financial capacity to act, we have decided in favour of a moratorium on job cuts - with the exception of a few positions in the Youth Welfare Office and at the Capital of Culture.
It is also planned that, in addition to the elimination of almost 50 positions, some of which are temporary, vacant positions or parts of positions that become vacant due to part-time work or retirement will not be filled for the time being. All of this will be done in a socially responsible manner, i.e. without compulsory redundancies.
Overall, this will result in planned savings totalling around 10 million euros, which would otherwise have to be financed additionally.
I and my fellow mayors are well aware that this savings target will involve restrictions in some areas. And yet there is no way around reducing the increase in personnel costs if we do not want to jeopardise the city's financial performance.
Ladies and gentlemen,
There have also been some significant increases in other expenses.
For example, the budgets for the maintenance of schools and daycare centres have been increased by around €9 million compared to 2020 and around €1.6 million more has been budgeted for road maintenance, including winter road maintenance. Significantly more money has also been earmarked for the management of the city's green spaces - almost €1 million more than in 2019.
In addition to higher expenses for personnel and the cleaning of facilities, the commissioning of the new swimming complex in Bernsdorf, which is scheduled for the fourth quarter of 2022, will also have an impact on the municipal sports facilities.
The expenses for school transport are a special feature: Compared to 2020, costs in this area will increase by almost € 2 million by 2022. The main reasons for this are rising pupil numbers, an increase in the number of medical certificates issued for individual transport and price increases by transport companies.
There will also be additional funds for public participation. In accordance with your city council resolution, five additional citizens' platforms have been set up alongside the existing three and provided with personnel and material resources. A total of €696 thousand is available for this in 2021 - 2025. We are thus stabilising these platforms.
In addition, funds totalling €50 thousand have been earmarked for the "Youth participation in Chemnitz" framework concept from 2021 onwards. The financial resources for the localities will also be increased.
Grants for independent cultural organisations will increase by around €400 thousand this year and next year compared to the 2020 plan. In the case of institutionally funded organisations, the funding level, which was already increased in 2020 by a city council resolution, is to be maintained in order to avoid cuts in subsidies for important international programmes such as the Saxon Mozart Society and the Saxon Children's and Youth Film Service.
In addition, €100 thousand has been included in the budget from 2021 to promote industrial culture, which will benefit the railway museum. We assume that the Free State of Saxony will contribute the same amount as in previous years.
Around €1.4 million and €1.5 million more will be available for youth work and family education in 2021 and next year than was settled in 2019.
Grants to daycare centres run by independent providers will increase by €4.6 million in 2020 and €5.7 million in 2022. The newly created place capacities this year and next year have already been taken into account, as has the increased administrative cost allowance that the providers will receive from 1 July.
Overall, the subsidy requirement for the operation of daycare centres in Chemnitz will increase by around €11 million compared to the 2020 plan, or around €12.5 million by 2022.
The current draft plan therefore assumes a moderate increase in parental contributions from 31 August 2021 for the first time in more than ten years.
The free pre-school year originally decided by the city council, which was initially only to apply for 2019 and 2020, could only be taken into account in the planning until 31 August 2021.When preparing the budget, we discussed this point in particular intensively because we are aware of the importance of the free pre-school year for you as city councillors and also for many parents.
Despite everything, we decided against continuing it after weighing up the financial framework conditions, because continuing this offer would mean additional expenditure of €2.3 - 2.5 million per year, depending on the number of daycare places concerned, which would then have to be saved elsewhere.
Around € 6 million has been earmarked for subsidies in the area of sports promotion in each of the next two years.
The budget includes both rising subsidies for personnel costs - in particular due to an increase in the number of coaches and groundsmen - as well as increased funding for the management and maintenance of club sports facilities. In addition, subsidies for the organisation of major sporting events such as the basketball "Final Tour" and the German Figure Skating Championships have been slightly increased. Subsidies for the promotion of youth sports work remained almost unchanged in the budget.
However, the demand from clubs for the refurbishment of club sports facilities continues to exceed our financial resources. The planned measures therefore had to be stretched over the entire financial planning period until 2025.
The grants from the municipal funding programme "Local Action Plan for Democracy, Tolerance and a Cosmopolitan Chemnitz" remain unchanged at € 80,000 per year in accordance with the city council's decision from 2008. A further €175,000 from the federal "Live Democracy!" programme will be added until the end of 2024.
Most of you - if not all - will probably agree with me that these funds are well invested in strengthening our democracy and should continue to be made available in view of the social development in our country, even in financially difficult times.
Ladies and gentlemen,
Youth welfare programmes are a major focus of expenditure in our budget. While our previous financial planning was based on an annual budget of around €31 million, the budgets for the next two years had to be increased to around €46 million in each case. This drastic additional requirement is the result of increased case numbers on the one hand and higher fees for service providers on the other, which are based on increased personnel and material costs.
The increase in the number of cases generally affects all types of assistance, but in particular inpatient educational assistance, i.e. residential care, shared living arrangements for mothers, fathers and children and full-time care.
The increase in costs for youth welfare services is placing an increasing burden on the municipal budget and is restricting the financial scope for voluntary measures such as club funding or the free pre-school year. The Youth Welfare Office has therefore developed a plan to reduce costs in the area of educational assistance.
However, in view of the impact of the pandemic on families, it is by no means certain whether this can be implemented as planned.
Increases in expenditure, albeit not to the same extent, are also expected in the area of social welfare:
An increase of € 1.2 million in 2021 and € 2.8 million in 2022 is planned compared to the 2020 budget. In total, expenses of € 94.6 million are budgeted for the 2021 financial year and € 96.2 million for the 2022 financial year.
The largest share of this budget item is accounted for by accommodation costs at around €45 million in each case, followed by expenses for basic security benefits in old age and in the event of reduced earning capacity at €13 million and just under €14 million per year respectively.
The additional expenditure in the social area is also offset by additional income - mainly from a higher federal contribution to the costs of accommodation. However, this should also be seen in the context of the decreasing needs-based allocations from the federal government to compensate for special burdens.
There is also a very significant increase in the social levy, which has risen by €3.5 million or €6.3 million compared to 2020 and is expected to amount to €43.6 million in 2022.
An equally important, albeit significantly lower, expenditure item is the planned funding for the implementation of the Online Access Act. Starting from this financial year, the corresponding funds will be reported in a separate "Digitalisation" product for the first time. The budget of around 1.3 million euros in each case includes, in particular, measures for the digitalisation of municipal services.
Municipal investments also represent a significant item in the budget. The subsidy requirement is also increasing significantly here:
1 million more subsidy than originally planned is planned for C³ in 2021 due to the effects of the corona pandemic.
To finance public transport, the subsidy to VVHC was increased to EUR 18.5 million in 2021 and EUR 19.5 million in 2022 against the backdrop of constant income from eins energie and the expansion of services included in the local transport plan. By way of comparison: until 2017, the municipal cross-link managed without direct municipal subsidies.
In the transport sector, the additional financial burdens from the city council resolution B-002/2016 of 27 January 2016 on the local transport plan, which included further expansions to local public transport services, must be covered. The constant increase in the required loss compensation for CVAG is caused in particular by personnel costs and depreciation.
Ladies and Gentlemen,
The financial consequences of the coronavirus pandemic can also be seen in municipal investments. Due to the significant decline in key investment allocations, we now have to reduce expenditure on construction measures, the promotion of investment projects and the acquisition of fixed assets after years of continuous growth:
While around €118 million was still available in the 2020 plan, this year it will only be €93 million and in 2022 only €101 million.
However, in this context, we must also consider the approximately €163 million in budget reserves from 2019, which we are putting off for measures that have long been approved and financed but have still not been implemented.
The trend is likely to be similar in 2020. But regardless of this, we are forced to set priorities for the next two financial years. First and foremost, this means implementing essential measures such as the construction of several new schools and completing measures that have already been started.
In the next two years, the focus will therefore be on schools with an investment volume for construction measures of almost €95 million, measures on roads, bridges and hydraulic engineering totalling around €35 million, investments for sport amounting to almost €13 million and broadband expansion totalling around €10 million.
In addition to the new secondary school on Hartmannplatz, which is due to be completed by 2022, the plans also include new buildings and capacity expansions for the Vettersstraße secondary school, the primary school on Südlicher Sonnenberg, the primary schools on Charlottenstraße and Weststraße, the school campus on Sonnenberg and the expansion of Adelsberg primary school.
The planned extension for the Kepler-Gymnasium and the Schmidt-Rottluff-Gymnasium can also be found in the budget. In addition, measures already underway at Reichenhain primary school, André grammar school, the Chemnitz school model, the school for learning support and other schools are to be completed.
Whether the measures planned for the following years after 2022, particularly in the school sector, can actually be implemented depends crucially on whether the Free State of Saxony will once again launch a school construction programme for the independent cities.
In our current planning, we have assumed that the previous programme will continue from 2024. However, if this does not happen, we will be forced to cancel other investment measures in favour of school construction measures in the next budget planning in order to comply with the requirements of the Education Act regarding class sizes. This is because our scope for utilising loans is completely exhausted with the current planning.
That is why we are making an express request and demand to the Saxon state parliament to advocate a significant improvement in school construction funding for independent towns in the upcoming budget negotiations! Together with my colleagues from Leipzig and Dresden, I have written a letter to the coalition parties in the state parliament.
The focus in the sports sector is on the new construction of the swimming complex in Bernsdorf, including the planning of the renovation of the outdoor pool area, the continuation of the reconstruction of the main stadium and the construction of an athletics facility in the sports forum as well as the new construction of a 1-field hall in Wittgensdorf. Planning for the complete renovation of the sports hall at Schloßteich is also set to begin in 2023.
In addition to the measures mentioned, there are of course other investment projects, for example for roads, bridges and green spaces, which I do not want to go into further at this point due to time constraints.
However, one thing must be mentioned, as it is by far the most important project of the next few years:
Our city's successful bid to become European Capital of Culture 2025 not only offers the opportunity to attract millions of tourists to Chemnitz and put our city on the European map in a positive sense. Above all, it also represents a strong economic stimulus and a sustainable boost for our urban development.
Together, the federal and state governments and we will provide more than €90 million for the cultural programme and overarching projects such as the "City by the River", the development of the "Stadtwirtschaft" business campus, but also for the renovation of the tram museum and for public spaces.
In addition, the people of Chemnitz, as well as the municipalities in the surrounding area and even the Czech Republic, will be actively involved in shaping the programme year. This is a key component of our successful application, which we now want to implement beyond our city limits.
The operational implementation of the entire programme will be handled entirely by Kulturhauptstadt GmbH from 2022. Accordingly, the budget required for this will be planned as a subsidy in the budget from this period onwards. We will be submitting a draft resolution on the establishment of the GmbH to the City Council on 17 March.
We all know that this programme is a very demanding one, both financially and in terms of personnel, especially in view of our tight budget situation. And yet I am convinced that the successful application and what we will do with it will be a great benefit for our city!
Ladies and gentlemen,
You can see from this list that, despite some restrictions, this budget provides a good basis for safeguarding existing programmes, continuing them and, in some areas, developing them further in a targeted manner.
Despite everything, the truth is that all of this is only possible because, for the first time, we will have to take out cash loans to bridge short-term liquidity bottlenecks in addition to investment loans over the entire financial planning period.
Between 2011 and 2019, the City of Chemnitz was able to reduce its debt by more than € 139 million. This has led to a significant reduction in the burden on the operating budget and ultimately to the consistently positive results of recent years.
In contrast, new debt totalling a good €102 million is now planned for the financial planning period up to 2025, which is mainly caused by the borrowing requirements for 2021 and 2022. Per capita debt for investment will therefore rise again.
However - and I do not want to conceal this - the delayed utilisation of budget appropriations observed in previous years could also occur in 2020 and subsequent years. This would mean that the borrowing requirement would actually arise later, which would at least give us some breathing space in terms of debt servicing.
Ladies and gentlemen,
The coronavirus pandemic and its financial consequences are forcing us to act responsibly together.
In contrast to previous years, it can no longer be a question of constantly anchoring new tasks and expenditure in the budget. It is also not enough just to keep pointing the finger at the federal or state governments, even though we will continue to make our justified demands. After all, the federal and state governments are also clearly feeling the effects of the crisis.
Now more than ever, we need to act with a sense of proportion, even if this means postponing cherished projects or saying goodbye to them altogether for the time being. Much of what has been started or initiated must first be prioritised and completed before we can think about new ideas.
Our common goal must be to avoid a further deterioration in the budget situation in order to obtain approval for our budget in the first place.
I know that this will demand a great deal from everyone involved. And please believe me:
Neither I nor my fellow mayors found it easy to make the necessary reductions in the budget applications of the departments, given all the wishes and necessities. And yet we made this decision together, because the supposed alternative of an unauthorised budget would have had much harsher consequences for our city and the people who live here.
Dear city councillors,
You are certainly not in an easy position, because ultimately you have to decide how taxpayers' money should be spent. You have to make this decision in the knowledge that you cannot please everyone.
And you have to make this decision in a comparatively short time under the conditions of a pandemic, which makes intensive personal consultations much more difficult.
All of this is a major challenge for you too. I would therefore like to thank you today for taking on the challenge of working together to achieve a confirmed budget for our city as soon as possible. And I am convinced that this can be achieved through responsible cooperation between the parliamentary groups and the administration.
If you need support or have any questions, the mayors and Mrs Härtel as well as other colleagues and I will of course be happy to help you in the coming weeks until the final discussion here in the City Council!
Thank you very much for your attention!