Municipalities Call for EUR75 Billion to Boost Local Infrastructure

In a bid to address the pressing needs of local infrastructure, the Cities and Municipalities Association has called for a minimum allocation of EUR75 billion from the German government. This demand comes as discussions intensify regarding the distribution of EUR100 billion earmarked for infrastructure improvements from a special fund established by the federal government.

Finance Minister Lars Klingbeil is set to introduce legislation in the Bundestag aimed at facilitating the flow of these funds. The upcoming debate will focus on the Infrastructure Financing Act for States and Municipalities (LuKFIG), which is scheduled for its first discussion in the parliamentary assembly.

The allocation of these funds is crucial, as many local governments are grappling with significant investment backlogs across various sectors, including educational facilities, public transport, and recreational infrastructure. The federal government, in collaboration with the Greens, aims to invest a total of EUR500 billion over several years into modernizing infrastructure and supporting climate protection initiatives.

The distribution of the EUR100 billion will follow principles similar to the Königstein key, which determines funding allocations based on population size. For instance, North Rhine-Westphalia is projected to receive the largest share at EUR21.1 billion, while Bremen, the smallest federal state, will receive about EUR941 million.

However, the Federal Court of Auditors has raised concerns regarding the proposed legislation, specifically criticizing the vague criteria for funding allocation. It warns that the lack of clarity could lead to overlapping funding and insufficient accountability. The auditors stress the need for regular evaluations to ensure that the funds are used effectively and that they genuinely contribute to new investments rather than merely offsetting existing budgetary gaps.

The Cities and Municipalities Association has echoed these concerns, emphasizing that the majority of public investments are executed by local governments. They argue that a significant portion of the funding should be directed to municipalities to ensure that local needs are adequately met. The association insists on a binding quota that would guarantee that at least 75% of the allocated funds reach localities.

Municipal leaders have expressed their expectations that the funds will be made available quickly and without excessive bureaucratic hurdles, allowing for immediate investment in essential local infrastructure projects. This urgency is underscored by the deteriorating condition of many public facilities, which require immediate attention.

Some federal states have already taken steps to ensure that a substantial amount of these funds will flow to local governments. For example, Schleswig-Holstein has committed to allocating 62.5% of its share directly to municipalities, while Rheinland-Pfalz has pledged 60%, which could increase when additional state funds are factored in.

As the legislative process unfolds in Berlin, various states have yet to clarify their positions on the fund allocations. Notably, key states like Bavaria and Baden-Württemberg have not disclosed their strategies, as they await the finalization of the legislation. By the end of October, the details of the funding distribution and its implications for local governments should become clearer.