Powers of attorney allow the mayor of Herrischried to react quickly to interest rate developments. With interest rates rising, that can be worth tens of thousands of euros.
The municipality of Herrischried is feeling the effects of rising inflation because it results in rising interest rates. This makes the loans for the community more expensive. For this reason, the Herrischried municipal council granted Mayor Christian Dröse the right for the past financial year to make personal and thus more flexible decisions about borrowing. The committee has now extended this right for the 2022 financial year.
The mayor of Herrischried has long been granted the right to make personal decisions about borrowing. “It can be a good 15 to 20 years since we’ve been doing it this way,” says Treasurer Roland Frank. According to Frank, this approach pays off, especially in the current situation, in which the interest rates on Monday are no longer the same as on the Friday before. Every morning at 10 a.m. there would be the new interest rates, so that a new decision can be made if necessary. And the trend is pointing upwards at the moment, says Frank.
Interest rates tend to go up
It was precisely for this reason that the municipal council of Herrischried came together with the committees from Rickenbach and Murg for a short-term consultation before the joint meeting. In their meetings in October 2021 and January 2022, the councils decided to transfer the decision on taking out loans totaling 1.85 million euros to the head of town hall so that the need for cover can be reacted to flexibly. A total of EUR 1.31 million in loans were taken out as a result, and the remainder of EUR 540,000 was earmarked for budget planning to cover the costs of the broadband project.
However, according to Roland Frank, head of the accounting office, there are currently no programs available for broadband investments from which low-interest loans can be obtained. It therefore makes more sense to allocate the need for liquid funds to other areas in which interest rate reductions are achievable, Frank continued. As examples, he named the remaining financing for the school building projects and measures in the areas of water and sewage. However, these projects are budgeted in the 2022 budget and are therefore not covered by the two municipal council resolutions, which only relate to the financing of the investments budgeted for in the 2021 budget.
Mayor gets even more leeway
The administration had therefore suggested supplementing the two municipal council resolutions that had already been taken so that investments estimated in the 2022 budget could also be financed. The committee followed this recommendation. What’s more: after a motion by Manfred Krüger (free voters), the transfer of decision-making powers to the head of town hall was extended by a further 780,000 euros.
It is now planned to take out the loans immediately because, as the treasurer had made clear at the beginning, given the sudden increase in inflation, rising interest rates are to be expected. And an imminent drop in interest rates is not to be expected. According to the status at the time of the meeting, two low-interest loans for a total of 540,000 euros with terms of 30 years, fixed interest rates of ten and 20 years and interest rates of 2.01 and 1.57 percent are to be taken out.
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