1. Local finance and taxes Reform Strategic Planning Week, Kyiv May 30 - June 03, 2016 Christian Weiser 20161

2. 2 Contents of the presentation „Local finance and taxes“ Principles and problems Budget plan Supervision and auditing Special aspects (participatory budget, public procurement, economic activities)

3. Eppstein within the organizational structure of the Federal Republic of Germany Hessen15 other federal states Main-Taunus-Kreis (county) Counties und municipalities 11 other Cities Eppstein 5 Communes Christian Weiser 20163

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5. 5 Principles of budgetary policy Continuous fulfillment of public tasks Thrift / Economic adjustment Efficiency Maximum effectiveness Proportionality Proper accountancy and transparency / verification Balance Decision as a statute No claims and obligations towards the citizens

6. Christian Weiser 2016 6 Principal problems of budgetary policy large fluctuations in revenues to little revenues high charges for the county (administration costs of the county, costs for schools) high social expenditure To many expensive wishes/requirements of citizens and of political parties

7. Christian Weiser 2016 7 Approaches to budgeting Until 2004: Budget position for each individual expenditure item Since 2005: Budget positions for products (i.e. museum, support for associations, road construction) Distribution of the expenditures within the products in responsibility of the administration

8. Christian Weiser 2016 8 In German municipalities two budgets Administrative budget: profit and loss account of the administrative operations Financial budget: cash-flow statement including the investments

9. Christian Weiser 2016 9 Elements of a budget plan Revenues Expenditures Loan admission for investments Obligations with charges for future budget Table of employees Financial planning for the next five years

10. Christian Weiser 2016 10 Procedures to draw up a budget plan (1) Classical procedure: top-down City treasurer demands the leaders of the departments, to announce the prospective income, expenditures and commitment authorisations of their departments for the coming year on a data sheet which contains the financial datas of the actual year. Internal discussion of the approaches by city treasurer, mayor and leaders of the departments - Cancellations, shortenings, restackings/shifts Creation of a first draft for the budget plan by the city treasurer Discussion of this draft with the party leaders

11. Christian Weiser 2016 11 Procedures to draw up a budget plan (2) Modern procedure: bottom-up Leaders of the departments estimate income and expenditures of their departments for the next year Discussion among the leaders of the departments about the subdivision of the finance mass on the single offices; at the end: available financial amount for each department Creation of drafts for the departmental budget plans by the leaders of the departments City treasurer puts the departmental budget plans together to a draught for the whole city Discussion of this draft with the party leaders

12. Christian Weiser 2016 12 Procedures to draw up a budget plan (3) Mixed procedure, practised in Eppstein: in summer: Leaders of the departments reflect which financial resources they need in the next year to fulfil the tasks of their departments (expenditures of the last years and of the current year, requirements of the council, requirements of citizens etc.) City treasurer works out financial targets for the departments Discussion of the requirements with mayor, deputy mayor and city treasurer Preliminary draft of the administration

13. Christian Weiser 2016 13 Formation of the budget plan (1) In autumn: Discussion of the preliminary draft with the leaders of the political parties Discussion of the preliminary draft within the administrative council Further discussion of the preliminary draft with leaders of the political parties and with interested citizens Adoption of the draft by the administrative council

14. Christian Weiser 2016 14 Formation of the budget plan (2) Submission of the draft adopted by the administrative council to the council Discussion of the draft in the committee for general matters and finance of the council Public announcement of the public disclosure of the draft Public disclosure of the draft for 7 days at least 12 days before the decision of the council Discussion and adoption of the draft by the council Submission of the adopted budget statutes to the supervisory authority; If required authorisation of some aspects of the statutes Publication of the budget statutes Public disclosure of the budget plan for 7 days

15. Christian Weiser 2016 15 Authorisation by the supervisory authority is necessary for: Total amount of commitment appropriations (commitment to investment expenditures in future years) Total amount of loans Guarantees, warranties If the budget is not balanced: council has to present a budget safeguard concept to the supervisory authority

16. Christian Weiser 2016 16 Unforeseen developments (1) - If a deficit occurs during the financial year despite use of every savings possibility or - if payments for not foreseen investments are urgently necessary or - if the recruitment of additional staff is indispensable supplementary budgetary statutes have to be decided by the council. - Procedure as for the creation of the regular budget plan

17. Christian Weiser 2016 17 Unforeseen developments (2) Unscheduled and higher than targeted expenditures, covered by revenues: Decision of the administrative council is necessary. < 2.500 Euro: decision by the deputy mayor 2.501 to 25.000 Euro: decision by the executive council 25.01 to 39.999 Euro: decision by the committee for general matters and finance of the council > 39.999 Euro: decision by the council -

18. Distribution of taxes in Germany Corporation Tax and revenue Tax: 50% federal state 50% states Personal Income Tax: 42.5% federal state 42.5% states 15.0% municipalities VAT: 53.9% federal state 44.1% states 2 % municipalities Christian Weiser 201618

19. Christian Weiser 2016 19 Revenues Tax transfers from the federal state to the municipalities - 15 % of income tax - 2 % of VAT

20. Christian Weiser 2016 20 Revenues of the municipality of Eppstein Taxes17,2 M Euro68 % Transfers 4,3 M Euro17 % Fees 3,1 M Euro12 % Others (festivals) 0,8 M Euro 3 % Sum:25,4 M Euro 100 %

21. Tax Revenues of the municipality of Eppstein Income Tax11,2 M Euro 64 % VAT 0,6 M Euro 3 % Business Tax 3,5 M Euro20 % Real Estate Tax 1,9 M Euro11 % Gambling Tax 0,1 M Euro 1 % Dog Tax 0,1 M Euro 1 % 17,4 M Euro 100 % Christian Weiser 201621

22. Christian Weiser 2016 22 Budget 2016 of Eppstein Expenditures, divided by type (rounded) Personnel expenses6,4 M Euro 24 % Goods and services5,3 M Euro 19 % Depreciation 2,2 M Euro 8 % Grants3,1 M Euro 11 % Levies Business tax 0,8 M Euro, County 6,2 M Euro, Schools 2.4 M Euro9,4 M Euro 35 % Interests0,9 M Euro 3 % Sum: 27,3 M Euro 100 %

23. Christian Weiser 2016 23 Budget 2016 of Eppstein Expenditures, divided by products (rounded) Main Office 4,5 M Euro 26 % Office for public order and social affairs 6,2 M Euro 35 % Building Office/Waste M. 5,5 M Euro 33 % Office for town planning and environment 0,4 M Euro 2 % Finance Office 0,8 M Euro 4 % Sum: 17,4 M Euro 100 %

24. Christian Weiser 2016 24 Unconventional methods to balance a budget Speculation in currencies Purchase of businesses Participation in lottery Call for donations from citizens Initiation of a citizens’ foundation Public private partnerships (Use of private capital to provide public administration services)

25. Christian Weiser 2016 25 Participatory budget New development in some German cities Broad discussion of the budget by the people Expectations: - cost savings - solve problems together - understand the budget - identification with the city - dialogue between politicians and citizens

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27. Christian Weiser 2016 Questions ? 27

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