Published on March 6, 2014
Slide 1 Annual meeting of Senior PPP Officials – 17-18th February 2014 Budgeting sustainably for PPPs and traditional capital projects in the medium and long term How to align PPP investment and traditional infrastructure investment in a medium/long term planning framework Dr. Gisela Lehmer-Kerkloh Gisela.Lehmer-Kerkloh@bmf.bund.de Federal Ministry of Finance, Germany
Slide 2 2014 draft federal budget: types of expenditure 6% 2% 10% Human resources 2% 8% Operating expenditure Interest 10% Current grants and subsidies (excluding investment) Fixed asset investment 62% Asset transfers Loan guarantees, acquisition of holdings
Slide 3 Capital Budgeting of Infrastructure Investments in Germany 1. No national infrastructure investment budget
Slide 4 Capital Budgeting of Infrastructure Investments in Germany 1. No national infrastructure investment budget 2. Federation/Länder and local authority budgets contain planned investments for their tasks in the area of infrastructure
Slide 5 Responsibilities of different levels of the State in Germany - examples - Federation Federal state • Diplomacy • Supervision of local authorities • Higher education • Postal service • Schools • Armed forces Local authority • Water supply (households & businesses) • Waste disposal (households & businesses) • Fire brigade • Legislation • Further regulation and administrative orders • Road building • Residential building
Slide 6 Capital Budgeting of Infrastructure Investments in Germany 1. No national infrastructure investment budget 2. Federation/Länder and local authority budgets contain planned investments for their tasks in the area of infrastructure 3. National coordination of infrastructure plans launched by Federation, Länder and local authorities together with EU-network plans
Slide 7 Existing Infrastructure plans and network plans in Germany Trans-European Transport Networks EU-Habitats Directive Energy Network Federation Transport Infrastructure Plan Federal Regional Policy Plan 16 Länder-level plans, regional development plans & programmes, regional project plans Sector-specific plans such as energy plan or mining in North Rhine-Westphalia
Slide 9 Capital Budgeting of Infrastructure Investments in Germany 1. No national infrastructure investment budget 2. Federation/Länder and local authority budgets contain planned investments for their tasks in the area of infrastructure 3. National coordination of infrastructure plans and network plans for EU, Federation, Länder and local authorities 4. No complete public snapshot of assets and liabilities
Slide 10 Accounting Systems Federal Budget National Account System Balance Balance Sheets for some Länder/ L.A.
Slide 11 Medium/Long term planning and future expenditure on the federal budget 1. Presentation of annual expenditure/revenue in the budget 2. Five-year medium-term financial planning 3. Overview of PPPs over their life cycle in summary X of the federal budget
Slide 12 Key questions Ensure affordability By means of medium-term financial planning By overview of PPPs over their life cycle in summary X of the federal budget
Slide 13 Key questions Ensure affordability Estimate infrastructure gap Differs depending on ministry and industry sector, partially determined by law, e.g., by the Federal Transport Infrastructure Plan Partially based on estimates and quantity calculations based on statistical and scientific criteria Institute of Federal Real Estate for centralised property management of the federal assets
Slide 14 PPP / conventional procurement by centralised property management Budget dept. FMF tenant spending ministry Property manager Requirement specification budgeting PPP-aptitude test alternativs of realization Economic feasibility examination technical agency rental agreement - construction costs - rental charges
Slide 15 Key questions Ensure affordability Estimate infrastructure gap • Differs depending on ministry and industry sector, partially determined by law, e.g., by the Federal Transport Infrastructure Plan • Partially based on estimates and quantity calculations based on statistical and scientific criteria • Institute of Federal Real Estate Calculation by means of a prescribed procedure
Slide 16 Prescribed Procedures Participation of public-sector bodies and citizens in project and settlement panning Budgeting established by law in accordance with section 24 of the Federal Budget Code The following are required: plans, allocation of costs, explanatory notes on execution, construction-cost estimates, financing, timetable
Slide 17 Federal Budget Code Section 24 – Construction measures, major procurements, major development projects (1) Expenditures and commitment appropriations for construction measures may not be budgeted until plans, cost calculations and explanations are available showing the type of work, the cost of the construction measures, of the land transfer and of the installations, as well as the proposed method of financing and a time schedule. An estimate of the annual burdens on the budget which will be incurred after completion of the measure shall be enclosed with these documents. (2) Expenditures and commitment appropriations for major procurements and development projects may not be budgeted until plans and estimates of the costs and cost sharing are available. Subsection (1), second sentence, above shall apply accordingly. (3) Exceptions to subsections (1) and (2) above shall only be permissible if, in an individual case, it is not possible to complete the documents on time and if the Federation would sustain any disadvantage from a postponement of budgeting. The need for an exception shall be substantiated in the explanatory notes. Expenditures and commitment appropriations relating to measures for which no documents are yet available shall be blocked. (4) Subsections (1) to (3) above shall be applied accordingly to separately budgeted expenditures and commitment appropriations relating to allocations if a total of more than 50 percent of the costs is covered by allocations from the Federation, Länder and municipalities. The Federal Ministry of Finance may permit exceptions.
Slide 18 Key questions Ensure affordability Estimate infrastructure gap Fiscal space availability
Slide 19 New Rule as Centrepiece of Federalism Reform II (2009) Article 109 Basic Law Article 115 Basic Law • guarantees the independence of Federation’s and States’ fiscal policies Revision of Art. 115 to reform the federal budget rules • commits Federation and States (Länder) to fulfill SGP obligations jointly Revision of Art. 109 to get a joint reform of the budget rules closely tied with: • assistance for budget consolidation to individual Länder (Art 143d Basic Law) • establishment of a “stability council” (Art 109a Basic Law)
Slide 20 Core Elements for the maximum permissible net borrowing Basic principles applying to both, the Federation and the Länder • Principle of structurally balanced budgets („anchor“ for sustainability!) Federation limitation of the structural deficits to max. 0,35 % of GDP Länder limitation of (structural) deficits to 0,0 % of GDP • Optional cyclical component: Symmetrical stabilization over the business cycle • Exception for natural disasters and extraordinary emergency situations only possible with a binding amortization plan
Slide 21 Differences between booking PPPs and conventional procurement with construction investments 1400 1200 1000 Amount 800 Haushaltsbelastung ÖPP 600 Haushaltsbelastung Eigenbau 400 200 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Year
Slide 22 Thank you Dr. Gisela Lehmer-Kerkloh Gisela.Lehmer-Kerkloh@bmf.bund.de Unit II B 6 (General issues of PPP) Federal Minstry of Finance, Germany Tel.: +49 3018 / 682 – 4323
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