Austrian Municipalities Face Investment Halt

At a press conference, an increase in property tax and lower hospital payments were particularly demanded. It concerns the levies withheld by the states from the municipalities to finance hospitals. According to Mathias Stadler, Vice President of the Association of Cities, these burdens have increased significantly. He calls for a limitation of the dynamics, as the states can incur higher debts due to the new Stability Pact. Changes in the levies are therefore necessary.

Levies Devour Municipalities' Tax Revenues

Karoline Mitterer, financial expert at the KDZ (Center for Administrative Research), illustrated the difficult situation using the example of 2025. Although the revenues from profit shares for the municipalities have grown by two percent, this is more than offset by the increase in levies by as much as nine percent. Thus, there is even a real decline in funds from profit shares by six percent. While municipalities still retained 51 percent of the tax funds distributed in the financial equalization for municipal services in 2019, the value has now dropped to 42 percent due to the levies and will further shrink to 39 percent by 2029.

The KDZ initially proposes a reduction of the hospital levy by 25 percent, which would immediately save 520 million. In the medium term, municipalities should be completely excluded from hospital financing, Mitterer suggested: "There is no factual reason why municipalities should pay for hospitals."

Property Tax Could Bring Quick Money to Municipalities

The second central point is an adjustment of the property tax, which benefits only the municipalities and has not been adjusted for many years. While there has been a 40 percent increase in profit shares since 2015, revenues from property tax have only increased by 24 percent. As a quick aid, the current maximum rate should be raised from 500 to a maximum of 750 percent in a first step. This would bring municipalities additional revenues of 350 million. This could be achieved with a simple legislative decision, Mitterer explained. In the long term, the entire structure of the property tax should be reworked from her perspective. However, it would take three to five years for such a model to really function.

In addition to financial relief, municipalities should also save on their own, according to the KDZ expert. Examples include municipal cooperation, enabling regional municipalities, and also cross-municipal infrastructure such as kindergartens and building yards. A reduction in personnel is made difficult by the demand for more childcare facilities with longer opening hours. Stadler assured that there is almost no city left that is not implementing a consolidation program from personnel to investments to subsidies.

If the federal and state governments do not accommodate the municipalities, measures that citizens will feel are threatened. Mitterer mentioned, for example, the closure of leisure and sports facilities, the reduction of subsidies, and restricted opening hours at municipal facilities. Overall, around 2.2 billion euros need to be saved by 2029 to return to pre-crisis levels.

(APA/Red)

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