“Pandemic lifters” on site: municipalities urgently need financial resources

„Cities cannot close the gap alone,” says Markus Lewe, Vice-President of the German Association of Cities and Mayor of Münster in an interview with SWR-Aktuell. The municipalities lack the necessary financial resources. The German Association of Towns and Municipalities also knows that a bailout is needed for 2021 and 2022.

9 billion in tax revenue will be missing from the coffers of the municipalities this year and next year. This is the assumption of the German Association of Cities. But it is precisely at this time that financial resources are all the more important to solve the effects of the pandemic on the ground. The German Association of Cities is therefore calling for the federal government to compensate for the shortfall in tax revenues. The Federal Minister of Finance, Olaf Scholz, has so far said “no”.

For the municipalities, which are accompanying people through and out of the pandemic, this answer could have serious consequences: They are threatened with the cancellation of voluntary services that are so groundbreaking for the future. Especially the support of sports clubs, holiday and leisure activities and the cultural scene are important for families and children who have suffered most from the pandemic.

You can listen to the SWR interview with Markus Lewe and presenter Andreas Böhnisch here.

Securing future benefits

Last year, not only the federal government helped out the cities and municipalities, but the states were also very cooperative. The municipalities expect the same in the future, especially since the legal entitlement to primary school care will again generate costs that are the responsibility of the cities and municipalities. The principle for the distribution of financial burdens is actually “he who orders, pays”.

The uncertainty remains

In a position Paper, German Association of Towns and Municipalities also calls for a second bailout and underlines the importance of municipal investments as an economic driver. According to the paper, municipal investments account for about two-thirds of the state’s total investment activity.

Will there be another decision on the bailout fund before the federal election? Probably not. It remains to be seen to what extent the new government will respond to the demands of the German Association of Cities and Towns and the German Association of Municipalities.

Happy Birthday Direct loan!

Happy Birthday Direct loan!

One year ago, Loanboox and Deutsche Kreditbank AG (DKB) launched the “Direct Loan”. The summary: With more than 200 loans totalling 2.5 billion euros, we were able to support municipalities in obtaining liquidity quickly and unbureaucratically.

A product that turns classic processes around

On 31 March 2020, Loanboox and DKB will jointly launch a fundamentally new, digital solution for taking out and granting municipal liquidity loans. What exactly is so new about this solution? It is no longer the municipality or the municipal corporation that obtains the offers in the traditional ways by telephone or in writing. With the direct loan, it is the other way round. The lenders proactively post their offers, i.e. loan conditions with different terms and corresponding interest rates, on a daily basis. The municipality can compare the offers directly online. After selecting the desired volumes and terms, the loan is bindingly concluded on the platform. This is quick and, above all, transparent.

Positive resonance

53 municipalities have already used the direct loan, including cities such as Frankfurt am Main or Mönchengladbach. They all benefit from the advantages. “The direct loan ensures market transparency. The daily updated offers are comparable at a glance and can be concluded directly online if required,” says Rainer Lohse, treasurer of the city of Frankfurt am Main. Smaller municipalities such as Wipperfürth have also had positive experiences. Michael Berger from the municipal treasury: “The direct loan product gives me a direct, daily updated overview of the conditions available on the market”.

 

Keeping up with current developments

Is everything really online? No, because the direct exchange with our customers is and remains important. Thanks to their feedback – from both investors and municipalities – the functions of the online direct loan are constantly being optimised. And above all, the support we offer in case of questions remains personal.

If you would like to contact us, we are available by phone (+49 221 9865420) or via Mail (direktdarlehen@loanboox.de).

Challenge and Opportunity: Theses on Municipal Development after the Pandemic

Once a quarter, the members of Loanboox’s Market Industry Board exchange views on current topics related to municipal financing. In the virtual March meeting, Norbert Portz from the  German Association of Cities and Municipalities was a guest. He shared his knowledge and experience and presented inspiring trends on the possible development of cities and municipalities after Corona.

There are about 11,000 cities and municipalities in Germany, large and small, structurally weak and structurally strong. What unites them all – despite the differences – is the question of the “aftermath” and what effects the pandemic will have.

Thesis 1: Inner cities develop new structures

It is foreseeable that online retail, which has increased by 20% in 2020, will remain at a high level. This has an enormous impact on local retailers and on the structure of city centres.

Inner cities are the mirror of society and represent its change spatially. They are home, offer identification, are points of attraction for residents and tourists. Much of this is lost through the closure of department stores and retail outlets as a source of footfall. New concepts of use and adapted structures are needed.

The future lies in functional mixing

Some medium-sized cities are setting a good example – and did so even before Corona. In Chemnitz, for example, a former department stores’ was turned into a museum and in Neuss into a theatre. Others are opting for a mix of uses for the department stores’ property, including retail, gastronomy, education, housing and parking. Potential new tenants for retail shops in the shopping malls could be craft businesses, kindergartens and creative people, for whom the inner city location is becoming attractive due to falling rents. Falling prices also offer opportunities for affordable living in the city and new work concepts.

But a change of use entails other adjustments. Noise protection and making opening hours more flexible are just two examples. Other things also need to be considered: a good pedestrian and bicycle infrastructure, public transport connections and accessibility by low-emission private transport. Attractive, safe and clean public paths and squares with seating and sufficient play facilities for children are equally important.

The municipalities, with their economic promotion and city marketing, play a key role in shaping the inner city transformation and are faced with major tasks.

Rathaus Deutschland

Thesis 2: Working from home strengthens the metropolitan hinterland

Working from home will continue to be recognised by many companies as an equivalent form of work in the future. There will be no complete return to compulsory office presence, according to surveys and studies. The resulting effects will be enormous, especially in the conurbations: vacant office space and buildings in the city centres and their conversion are one thing, moving to the countryside is another.

The dream of a house in the countryside – and more seclusion

Whether Cologne, Frankfurt, Hamburg, Berlin, Munich, Stuttgart or Düsseldorf – the rural areas around the major German cities are booming. There, one can combine the advantages of rural life with those of proximity to the big city: larger flats or houses with gardens, better access to childcare places and nature right on the doorstep, coupled with urban cultural offerings and medical care. Working from a home office also means that it is no longer necessary to drive into the congested city centre every day. This creates freedom and leisure.

Rising property prices reflect this trend. With the exception of Düsseldorf and Frankfurt, the prices of condominiums in the surrounding areas have risen more strongly on average since 2017 than in the metropolises themselves, according to a study by the Sparda banks and the Institute of the German Economy (IW) in Cologne. Moreover, it comes as no surprise that demand for the purchase of single-family homes in particular has risen sharply since the beginning of the pandemic.

A good infrastructure without ifs and buts

The small and medium-sized towns and municipalities benefit from the love of the countryside. But here, too, concepts are needed for the further development of structures. The expansion of public transport and connections to the metropolis, broadband internet and fibre optic cables, ensuring medical care and the expansion of kindergartens and primary schools are important criteria when it comes to choosing the right place to live.

In general, the “after” becomes a social and cultural task for society as a whole that goes far beyond commercial points of view.

Talking about commercial viewpoints: If you are interested in open market operations and how municipalities can benefit from the ECB’s cash injection, then continue listening or reading here.

Loanboox.cares. You take out a loan. We make a donation.

Loanboox.cares. You take out a loan. We make a donation.

Loanboox. cares. and supports you with your financing request. At the same time, we donate Euro 100 to a charitable organisation of your choice for your first requested loan.

The financial impact of the Corona-related lockdown is not only hitting municipalities, but also non-profit organisations across Germany.

Loanboox. cares. and supports you with your financing request. At the same time, for your first requested loan via Loanboox, we donate Euro 100 to a non-profit organisation of your choice.

How does this work exactly?

No matter whether investments in infrastructure, digitalisation and education are pending or you need a short-term cash loan: Do it like the city of Königswinter and enter your first financing request here– in just 5 minutes, without obligation and free of charge.

 You decide who should benefit from the donation. Just let the Loanboox team know when you contact them.

This promotion is valid for the first 50 requests until 30 April 2021.

 

Even beyond that, we are always available to assist you with all aspects of the application and use of the platform. Call us (0221 986 5420) or write us an e-mail.

Open market operations: How municipalities benefit from the ECB’s cash injection

Open market operations are among the most important instruments in the central banks’ toolbox – and they help with municipal financing. We talk about the background to this financial policy with Harald Endres, Head of Treasury at Deutsche Kreditbank (DKB).

The basic principle behind the ECB’s open market policy is actually quite simple: to provide banks and credit institutions with liquidity at very good conditions. But if you look at the details, the whole thing is a little more complicated. There are refinancing tenders, volume tenders and interest rate tenders. What is it all about? And how do borrowers – including municipalities – ultimately benefit from this financial policy?

Together with Harald Endres, Head of Treasury at DKB, we take a look at the history of open market operations and what role they play, for example, in the Corona crisis:

Are you interested in the topic of municipal finance? Then you should also read this article.

Interest rates and inflation – Daniel Stelter’s economic forecast

Interest rates and inflation – Daniel Stelter’s economic forecast

How do cities and municipalities get through the Corona crisis? What do capital providers and investors need to be successful? And what advantages does digitalisation bring? In the loanboox.asks. series, we talk to experts about topics like these. Daniel Stelter kicks off our audio talks.

The forecasts for 2021 are mixed. On the one hand, highs on the stock market – on the other hand, dampened economic expectations due to the ongoing Corona pandemic. And on top of that, central banks are pumping massive amounts of money into the markets and keeping interest rates low. We talked to the economic expert and author Daniel Stelter in loanboox.asks. about how all this is connected. He says:

The economic consequences of the Corona crisis will keep us busy for a very long time.

Listen to his assessments in the following audio:

Niedrigzins und Inflation - ein Ausblick auf 2021 mit Daniel Stelter

by Simone Franzke

About the person:

Daniel Stelter is a macroeconomist, strategy consultant and author. In his podcast “Think beyond the obvious” he looks behind the scenes of economic and financial policy and explains important connections.

No time to listen to the audio now? Then simply download the article.