Back in the future: Essen is once again threatened by new financial gaps

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Corona, war and inflation are destroying the financial planning of the city. If no countermeasures are taken, there will be a 12 million hole in the budget at the end of the year.

All this must come to an end: this budget is under the supervision of the municipality, eternal life is beyond one’s means, the ever-increasing mountain of debts, the depleted reserves of the city. But now, the city’s chief financial officer, Gerhard Grabenkamp, ​​has an unexpected experience with “deja vu”. New forecasts appear by city council financial experts: there is a risk of a return to bad shape, minus 12.5 million euros at the end of the year.

No one should look away for reasons: Corona came first, then war and inflation, and the high expectations of continuing successfully on the path out of the financial crisis are gone. Six years earlier, Essen ran the first balanced budget in a quarter century, and in 2021 the path led out of overindebtedness, and the state had already promised to put in place a regulation of old debt. But this did not happen, which, given the impending rise in interest rates and the still huge mountain of debt of the city, causes the treasurer to resort to the image of an old crisis – the image of a time bomb.

Rurban and disposal companies are calculated at a diesel price of 1.10 euros

With 1.8 billion euros in cash loans, Essen is one of the most heavily indebted cities in the republic, despite recent repayments in the millions. There is also 1.3 billion euros in investment loans, and we’re not talking about city property yet.

They still have some risks, as a quick look at the waste disposal companies or Rurban shows: they calculated diesel prices around 1.10 euros – and now they are amazed at prices at gas stations of just under 2 euros. Such price jumps with losses in the millions manifest themselves in the balance sheets of municipal property, and there is also a rise in the costs of spare parts and repairs.

Nine million euros to rent and operate new housing for refugees

Elsewhere, too, yesterday’s good calculations are crumbling: the city currently has to significantly increase prices for energy and building materials for its construction projects – in the order of more than nine million euros. According to the city, the market-related shortage of building materials for the real estate industry also carries an additional dimension: buildings can no longer be maintained within agreed schedules.

In addition, there are expenses, of course, which no one had on their radar before February 24, the attack on Ukraine: almost nine million euros for rent and the operation of new housing for refugees, and another 15 million euros for previously unplanned costs. In the social budget for the accommodation and care of Ukrainian refugees.

The costs of the Corona pandemic are “isolated” and are not deducted until later

Despite all this, the Corona pandemic is far from over, especially in financial terms: the city has managed to reduce its burden in the current budget from the initially planned 92 million euros to 59 million euros. However, like patients, the costs are also “isolation bound”: they are calculated from current figures and subsequently discounted over several decades.

No wonder the city treasurer Grabenkamp has already tightened the financial brakes: at the beginning of April, he ordered stricter budget management in order to prevent red figures at the end of the year. It remains to be seen if this will work. Reaching the recent net income target of €3.9 million appears to be a long way off. No one knows what year will come.

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