Study details: How COVID-19 burdens public budgets

A recent study by the Swiss Association of Cities (SSV) and the auditing firm PwC shows how COVID-19 will burden public budgets. According to the study, tax revenues will drop significantly in 2021 and many cities and municipalities will have to take on debt. 

It will be a lean period for cantons and municipalities as far as tax revenues are concerned, with a simultaneous increase in expenditure. At least that is the assessment of the 15 cantons and 77 municipalities or cities that participated in the survey. After a slump in the current year, the crisis is expected to end in 2022, but the question is how long the aftermath will be felt.

Additional costs, especially in the health and social sectors

The study shows that most cities and municipalities will have to bear significant additional costs in the health and care sector as well as in social services in 2020 and 2021. In addition, there are costs arising from the direct pandemic response – for example, crisis teams or personnel for hygiene concepts. And it also shows that these burdens are declining much faster at the cantonal level than at the city and municipal level. There, debt growth of 72 percent is expected.

Another factor, according to the study, is the tax reform (STAF) that came into force last year. For example, corporate tax revenues have already fallen in 2020 compared to 2019. The municipalities would feel this effect differently – due to the varying implementation of the cantons. In principle, however, the effect will be clear everywhere.

General tax increases are not at all expedient. Temporarily, I can imagine an increase in value-added tax. But on a very limited scale.

Ernst Stocker, Cantonal Councillor, Finance Director of the Canton of Zurich and President of the Conference of Finance Directors

Stabilise in the short and medium term

Interesting is the information given by the study participants with regard to their stabilisation measures. The majority of cities and municipalities focus on short- and medium-term stabilisation measures (36% and 51%) – only 11% plan for the long term and pay particular attention to tax rates and investments.

 

Municipal financial planning: “holistic” is the magic word

Municipal financial planning: “holistic” is the magic word

Annual financial and budget planning is a challenge for many municipalities even in ordinary times. The as yet unforeseeable consequences of the COVID 19 pandemic now make it even more difficult. In the Loanboox webinar, the most important basics and examples for a solid financial management of municipalities were shown. The most important insight: The magic word is “holistic”.

The guide produced by the Fachhoschule Graubünden at the request of the Swiss Association of Municipalities shows how it is done: Mission statement, strategy and legislative plan, plus integrated task and financial planning (IAFP) and finally liquidity planning. Dominik Just, professor of finance and accounting at the University of Applied Sciences Graubünden, explains the individual steps. Click on the image to learn more.

Integrated task and finance plan makes it easier

“There are municipalities that don’t have all that,” he explains, referring to the Swiss militia system and the many small municipalities where financial administration is done on a part-time basis. These municipalities have a much harder time with long-term and sustainable planning of larger projects, Just says. That is why at least the minimal version of the IAFP is recommended – and relatively easy to implement with the guide. “You have to look at financial management as a holistic issue,” says Just.

“The IAFP shows what the impact is on us”.

Patricia Bär makes the theory clear with a case study. The head of the finance department of the city of Bern reports on the financial planning for the new 50-metre swimming hall. The cost was 75 million Swiss francs.

In the video she explains how the project was integrated into the budget planning.

Do not postpone investments

Patricia Bär admits that the city of Bern is also struggling with the issue of new debt: “But that doesn’t necessarily have to do with COVID-19.” Tax revenues were already lower than expected in 2020. The city has reacted with a package of savings measures, but this does not affect planned investments – such as new school buildings or the renovation of sports and water facilities. This makes it all the more important to draw up financial and budget plans that are as accurate as possible.

Andi Burri, Co-Founder and Managing Director Loanboox Switzerland, also feels the uncertainties in daily conversations with financial managers. In addition to Corona-related additional expenditures and lower tax revenues, negative interest rates and the threat of a loss of creditworthiness are a concern for municipalities. “We try to support and advise them with our expertise,” says Burri.

Fostering Quality Education – that’s how we do it

Fostering Quality Education – that’s how we do it

Quality education is the basis for equal opportunities and a good quality of life – and one of a total of 17 Sustainable Development Goals established by the UN in 2015. Loanboox also supports and promotes this goal, among other things with trial days for teenagers. Here Silvain and Yannick tell what they have experienced and learned.

What does a computer expert actually do in a company, Silvan wanted to know – being a computer freak by himself. And so he jumped at the chance to spend a day with his uncle, a Loanboox IT manager. “It was exciting! I got insights into the HTML system. It’s a bit complicated, but I still find it very interesting and I like it,” says Silvan and adds: “I also like the team my unlce works with. They are all very nice.” 

Hands on and try it out

The trial apprentices should not only watch, but also do as much as possible themselves. This also appealed to Yannick, who was allowed to accompany our Talent Management & Executive Assistant Chantal for a day. She showed him what is involved in the tasks of a commercial clerc and the marketing team.

“I was very happy about this, because it is currently very difficult to find a KV trial position. It has given me a lot of joy and a good insight,” Yannick described his experience later. He even got to really like working with Excel. His resumé: “I have learnt and seen a lot. Thank you for this great insight.”

Both could well imagine working in these jobs one day. 

What are the UN Sustainable Development Goals?

The Sustainable Development Goals (SDGs) are a collection of 17 interlinked global goals set up by the United Nations (UN) to ensure sustainable development worldwide on an economic, social and ecological level. The SDGs are intended to be achieved by the year 2030.

UN Sustainability Development Goals

Want to know more about Loanboox and job opportunities here? Just click the button below.

“The new normal”. How digital solutions help through the pandemic

What are the biggest challenges for treasurers on the way back after the COVID 19 pandemic? In a multi-part virtual conference, the auditing firm PwC gets to the bottom of this question and sheds light on the various facets behind it.

Is there a new “new normal” with COVID-19? And how might it change the work of treasury staff? Experts from international technology companies and financial service providers will share their views on the development of tax regulations, green finance and cyber security, for example.

In addition, the webinar series will focus on the possibilities of digital transformation and how finance processes can be optimised as a result. Stefan Feller, Head Capital Markets/Bonds, will participate on behalf of Loanboox. Keyword: Digital Treasury. 

Aktuelle Neuigkeiten zu Loanboox Blog Bild digitale Balken

Does that sound exciting? Then register now for the webinars on 01 and 08 June 2021.

Loanboox on SRF: The curse and blessing of negative interest rates

Loanboox on SRF: The curse and blessing of negative interest rates

Negative interest rates are becoming more and more of a nuisance, especially for savers who want to leave their money in the account. Those who take out a loan, on the other hand, benefit from the historically low interest rates.  CEO and co-founder of Loanboox Switzerland Andi Burri explains in an interview with Swiss radio and television SRF what this means for Swiss communities in concrete terms.

Since the introduction of negative interest rates, the average interest costs for cities, municipalities and cantons have dropped significantly. Through Loanboox alone, they have earned 23.2 million Swiss francs through negative interest since the platform was founded four years ago. This corresponds, for example, to the costs for the compulsory schooling of 1,081 pupils – we have already reported on this in detail in our blog. Especially municipalities with a good credit rating benefited from this development, according to Andi Burri in an interview with SRF’s Heute Morgen Journal.

But which municipalities have earned the most from negative interest rates? And how do they benefit the Confederation in its capital procurement? Find out the details in the radio report.

 

 

 

SRF 1 Economy: Municipalities benefit from negative interest rates

Beitrag anhören

You cannot listen to the audio file? You can read the SRF report in text form here.