Municipal debt relief fund

Excerpt from the "Municipal Debt Relief Fund Rhineland-Palatinate" guide

The "Municipal Debt Relief Fund Rhineland-Palatinate (KEF-RP)" is a building block of the
measures effective in the medium to long term as part of the
"Reform Agenda to Improve Municipal Finances" announced on June 8, 2010.
The financial volumes that have to be moved for a debt relief / partial debt relief of the municipal liquidity loans
are enormous. On the other hand, these loans exist, they have to be serviced and they threaten to increase further if no effective countermeasures are taken. Incisive, long-term and sustainable measures are therefore needed which, on the one hand, not only limit and reduce existing liquidity loans, but at the same time also prevent the threatened buildup
of new liquidity loan obligations wherever possible.
As part of the reform agenda, therefore, the agreement
on the "Municipal Debt Relief Fund Rhineland-Palatinate (KEF-RP)" was signed on September 22, 2010 by Minister President
Kurt Beck and the chairmen of the central municipal associations
(see Annex 2). According to this agreement, the debt relief fund will be established as of January 1,
2012. Each municipality decides in principle on its own responsibility
within the framework of municipal self-government whether it will participate in the debt relief fund.
The contract for joining must have been concluded by December 31, 2013 at the latest.
The KEF-RP is intended to help the municipalities to significantly reduce their
liquidity loans accumulated by the cut-off date of December 31, 2009, totaling around EUR 4.6 billion. The fund is to have a maximum total volume of 3.825 billion euros and raise up to 255 million euros annually over a term of 15 years to repay up to two thirds of the municipal liquidity loans existing at the end of 2009 and to reduce the interest charges due (due to the system of the unified treasury, the local municipalities do not show any loans to secure liquidity; the decisive factor
for participation in the KEF-RP here are the liabilities to the association municipality
as of December 31, 2009). One third of the financing of the fund (1.275 billion euros) is to be provided by the municipalities themselves (e.g. through budget savings, tax or levy increases, etc.), another third is raised from the municipal fiscal equalization scheme and thus comes from the solidarity community of the municipal family, and the last third comes from the state budget.
It should be noted that the distribution of municipal liquidity loans varies greatly from region to region and from structure to structure
. In many cases, the KEF-RP will be able to achieve an extensive
debt relief, in other cases this will not succeed, but only a mitigation of the debt development will be achieved. All in all, the KEF-RP is an important instrument which, if designed and applied consistently, can bring about a sustainable improvement of the municipal financial situation, especially if the measures of the KEF-RP are accompanied by a sustainable change of awareness both in municipal and state politics as well as in federal politics. The instruments of the KEF-RP (municipal consolidation measures and debt relief assistance) are not sufficient on their own to ensure a lasting budget balance. However, they are an important step that must be followed by further steps.

According to § 5 of the consolidation agreement to be concluded, both the consolidation agreement and the evidence of the consolidation results are to be published on the website.