The municipality takes out a loan of 500,000 euros for the renovation and expansion of the kindergarten. The majority of the municipal council took this decision after a controversial discussion. There was an offer from the development institute of the Bayerische Landesbank (Bayern Labo), which also supports investments by municipalities, for a loan with a reduced interest rate. The current level on the day of the meeting 1.89 percent. It is to have a term of 30 years with a grace period in the start-up period. Session days: 1.89 percent. The fixed interest rate would expire after ten years.
The treasurer of the administrative community Schmidt considered this offer cheaper than one on the free money market. But it may not be just this loan. Because the funding of the Free State of Bavaria for kindergartens is not lavish at the moment. The question could arise as to whether money would have to be borrowed again for a short period of time for the interim financing until the state subsidies are paid out.
Debate on amortization interest
Council member Reiner Laudenbach wanted to know exactly how high the burden on the community would be. Second Mayor Matthias Ganz, who chaired the meeting, expects 1,300 euros a month – without interest. That would be around 16,000 euros per year. Laudenbach inquired about the interest. The VG treasurer came to 9,000 to 10,000 euros in the first year of the repayment period. Laudenbach also asked what should happen if, after the end of the ten-year commitment period, the interest rate is much higher than it is now.
The treasurer said that what should be done after the end of the commitment period would then have to be decided taking into account the current financial capacity of the municipality. This could be, for example, debt restructuring, extension of the term or, in the best case, extraordinary repayment.
Stop kindergarten project?
Nevertheless, Laudenbach could not get used to the idea of taking out a loan. In view of the small free financial margin of the community, nothing else will be done in the next few years than paying off debts. Then there is no money left for anything else. Matthias Ganz asked him the rhetorical question about the alternative: Would it be better not to raise any money and stop the kindergarten project instead? Chamberlain Schmidt also pointed out that the project was already underway and that a loan was needed right now.
When asked by Armin Bund about a 20-year fixed interest rate, the treasurer replied that there was no such thing in Bayern Labo’s program. Martin Reinhard asked whether there were any offers on the free money market that would make it cheaper to drive over 20 or 30 years. Schmidt said that alternative offers could probably be obtained, but pointed out that the interest rate was recalculated every day. He stuck to his assessment that the present offer was cheap. The municipal council then decided by majority to accept this. Reiner Laudenbach and Martin Reinhard voted against.
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