Local authority budgets are being stretched to the limit. More and more towns and districts are having to cope with the task of mastering growing challenges whilst simultaneously cutting their costs. Supply and waste management services are also being affected by this pressure on the public purse. The latest motto: to provide top quality services without increasing charges.
The financial situation of German local authorities worsened last year, even though many towns and districts had been sticking to a strict policy of cutbacks. According to the ‘DStGB’ (German Association of City and District Authorities), total debt increased by a further 2.2 billion euros compared to 20131. One tried and tested method could help relieve their problem of having to provide more services with diminishing funds: public private partnerships (PPP), i.e. a business collaboration between the public and private sectors.
PPPs have been around for more than 100 years and have proven many times over that they can be a success.
PPPs have been around for more than 100 years and have proven many times over that they can be a success. They were able to demonstrate their strengths back when industrialisation began and local authorities had to set up an extensive infrastructure in their region within as short a time as possible. The advantages offered by PPPs at that time remain the same today. PPPs are still an ideal way of creating advantages for all those involved – for the councils, for their employees and for their local inhabitants. This can also be seen by the approx. 100 PPP companies, in which REMONDIS owns a share.
One of the most important advantages of a PPP is that it creates diverse financial benefits for local authorities – for example at the beginning of the cooperation, when the private sector partner purchases a share in the municipal company and this money flows into the municipal coffers. This is then normally followed by a period of reorganisation when more efficient and more cost-effective structures are introduced into the business – often thanks to models developed by the privately owned companies over the years in response to the competition they have had to face. These measures enable the PPP to operate more efficiently and to make savings – effectively cutting costs and improving the quality of the services at the same time. Sometimes, PPPs can collaborate together to create additional business and sales opportunities which means greater profits that directly benefit the public purse.
A PPP with REMONDIS can make the very most of the whole of the group’s network of over 250 treatment and recycling facilities.
Being a shareholder in the business, the private sector partner invests their own capital in the PPP. This is a really important aspect for local authorities as they would find it very difficult to find the money needed for the necessary investments by themselves. This opens up new avenues for them, from which they clearly benefit. And they have a sound financial basis, as they are able to rely on the financial strength of REMONDIS as their partner.
In addition, REMONDIS can contribute to the PPP with their extensive financial expertise that can procure and release additional funds – especially for large-scale projects such as building a plant or modernising a region’s infrastructure. On top of this, the company is well-known as being one of the pioneers in its field and all its innovations and technological know-how can be put to very good use.
The company’s years of experience and wide range of expertise help to improve operations. As far as the everyday work is concerned, local authorities can use the comprehensive know-how and skills of one of the leading water and recycling companies. Moreover, they have access to the group’s logistics and plant network. A PPP with REMONDIS, therefore, can make the very most of the whole of the group’s network of over 250 treatment and recycling facilities.
Twice the expertise and more scope for investments: PPPs create a host of advantages – not only cost savings.
By the way, the official tasks, rights and fundamental responsibilities of local authorities are not affected by a PPP. This is all stipulated in detail in the various types of contract which are adjusted to meet the exact needs of the local authority and the precise tasks of the PPP. Even the question of the workforce is answered: REMONDIS guarantees to take on all the employees.
1 ‘DStGB’ [German Association of City and District Authorities], ‘Gemeindefinanzen – Situation der Kommunen verschärft sich weiter’ [Local Government Finances – The situation faced by local governments continues to worsen], March 2015