Municipal investment management

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Under municipal investment management activities are grouped by which a municipality secures its role as transport authorities and shareholders of public companies.

Importance and Development

Most of the added value created by municipalities nowadays no longer takes place within the administration, but is provided by municipal companies . In some places - especially in the new federal states - municipal companies such as municipal utilities and transport companies are among the most important employers. In addition, as public clients for the regional private sector and as (commercial) taxpayers, they are of outstanding importance for the municipality and its surrounding area.

The number of municipal companies in Germany has risen sharply since the 1990s. The reasons for this are the outsourcing of tasks from the administration on the one hand and the establishment of subsidiaries and sub-subsidiaries of existing municipal companies on the other.

At the same time, there was a massive change in the framework conditions for the economic activity of municipalities: Today, municipal companies are in greater demand than ever to perform the tasks assigned to them with the highest quality and economically efficiently. At the same time, the local economy is exposed to increasing competition due to EU activities to deregulate and liberalize markets. B. is tightened by regulations on the topics of in-house awarding and subsidies .

One of the most important legal framework conditions for the economic activity of a municipality is the respective municipal economic law of the individual federal states, in particular the applicable municipal code . These regulate, among other things, the conditions of the economic activity of municipalities and thus the municipal investment management.

need

The increasing size and complexity of municipal investment portfolios and the more demanding framework conditions for the public economy result in the risk of municipal companies becoming independent. In response to this new situation, numerous cities have meanwhile set up a participation management system that secures their role as public authorities and shareholders.

The legislature has already imposed certain obligations on the municipalities through the municipal ordinances to control their participations in private legal form. In addition, numerous cities (e.g. Leipzig , Berlin , Hamburg , Munich ) have created a much more differentiated control instrument that ensures holistic management of the investment portfolio based on the principles of sustainability.

tasks and goals

The German Association of Cities defines investment management as follows:

“The investment management is carried out by means of an investment administration. In organizational terms, this term describes the department or unit that supports the administrative management and the decision-makers in their control responsibility and ensures the monitoring and support of the participations under uniform technical, economic and organizational aspects. The content-related tasks of investment management are strategic and operational investment controlling and mandate management. "

This results in the following operational tasks:

  • the administration of the portfolio companies,
  • the support and advice of the mandate holders and the top management,
  • the implementation of investment controlling in the company and information processing for decision support.

In addition, the following strategic tasks arise:

  • Definition of goals for the associated companies based on the individual strategic goals of the municipality,
  • strategic positioning of the individual companies,
  • optimal tailoring of the investment portfolio ("hold" / "sell"),
  • Task criticism and implementation of portfolio adjustments (e.g. establishment or sale of companies).

In terms of organization, investment management can be structured in different ways:

  • by a department of the finance department, e.g. B. in Dresden ,
  • by a staff position at the main election officer (Lord Mayor), e.g. B. in Aachen ,
  • through a matrix organization with responsibilities for both finance and specialist administration, e.g. B. in Berlin or Hamburg ,
  • by an outsourced municipal company, e.g. B. in Leipzig .

Investment management instruments

The main tools of municipal investment management are presented below:

Participation report

The investment report serves to document the municipal investment assets and to inform the public. This instrument looks at data and information retrospectively and is therefore not suitable for future-oriented management.

Investment controlling

The investment controlling evaluates - in the meantime IT-supported - business management company data. This system of instruments is future-oriented as an early warning system. The most important controlling instruments of municipal investment management are:

  • reporting during the year, which is used to identify deviations from plan and actual values,
  • Business plan analyzes that provide information about future business policy,
  • Annual financial statements that provide insight into the asset, financial and earnings position,
  • Benchmarking that enables different companies to be compared with one another on the basis of industry-specific performance and financial indicators.

Mandate support

Mandate support is understood to mean the technical support of the representatives sent by the municipality to the supervisory and control bodies of the associated companies. This includes commenting on resolutions proposed by the supervisory board as well as reviewing resolutions. Further training events for elected officials are often held on specific topics, e.g. B. on the rights and obligations of a supervisory board or the business principles of investment management.

Managing director matters

As shareholders of their associated companies, municipalities are involved in various managing director matters. This includes the search and selection of managing directors or board members, their contractual obligations as well as the conclusion and evaluation of agreements on performance-related remuneration.

Strategic control

In order to remedy the conflicting interests of portfolio companies and local authorities as shareholders, strategic investment management through goals is gaining in importance. For this purpose, as part of the political decision-making process based on the goals of the municipality, goals of the owner vis-à-vis his associated companies are formulated (e.g. "target images" in Hamburg and Berlin or "owner goals" in Leipzig). These determine the corporate strategy, form the basis for the company's economic planning, and serve as the basis for individual royalty agreements with managing directors.

The strategic investment management has the particular task of dissolving the competition of opposing goals through specific definition on the part of the shareholder. It is important to set priorities and operationalize the shareholders' will in order to eliminate the competition of financial goals (e.g. increase in profitability, price stability) with objective goals (e.g. increase in market share, local procurement) in favor of consistent management.

swell

  • Boysen, Siegrid / Neukirchen, Mathias: European State Aid Law and Member State Services of General Interest. Baden-Baden 2007
  • Budäus, Dietrich (Ed.), Vol. 44: Organizational change in the performance of public tasks. Baden-Baden 1998
  • Otto, Raimund et al .: Investment management in municipalities. Stuttgart 2002
  • Barthel, Thomas: Participation controlling in the public sector. Hamburg 2008