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Judgment on municipal financing: NRW faces a groundbreaking decision!
On November 18th, the Constitutional Court of North Rhine-Westphalia will decide on the controversial municipal financing that is damaging cities like Bottrop.
Judgment on municipal financing: NRW faces a groundbreaking decision!
On November 18, 2025, the Constitutional Court in North Rhine-Westphalia will announce an eagerly awaited ruling on municipal financing. This was announced by Court President Barbara Dauner-Lieb after a more than two and a half hour oral hearing in Münster, which took place on October 28th. At the center of the dispute are eight cities, including Cologne, which are suing the state of North Rhine-Westphalia. This dispute revolves around the question of whether the state has been allowed to differentiate between small towns and larger independent towns in the municipal financing law since 2022 when calculating tax capacity.
The hearing, which took place on the premises of the Higher Administrative Court, brought to light both local constitutional complaints and critical questions about the validity of the existing legal framework. The plaintiffs argue that the regulations for determining the tax strength indicators violate the right to local self-government. In particular, the differentiation in the fictitious assessment rates for trade tax and property tax B leads to incorrectly increased tax strength metrics and thus to reduced key allocations to the cities affected, according to the complainants. The time reports that this regulation caused a total of 500 million euros in revenue to be lost between 2022 and 2024.
The plaintiffs' concerns
The plaintiffs were particularly critical of the financial burden on underperforming municipalities such as Duisburg and Solingen, which are forced to increase their assessment rates in order to restructure their budgets. A lawyer for the affected cities described the situation as a dilemma that was unreasonable from a state policy point of view. The fact that the highest assessment rates are levied in financially weak municipalities is causing additional resentment. The argument goes that district freedom should not be linked to the performance of municipalities. The press release from the Constitutional Court emphasizes that the state government defends the current differentiation as objectively justified and empirically proven.
Outlook on the verdict
The Constitutional Court has already indicated that it is dealing in detail with these fundamental questions of municipal financial equalization. While the hearing raised some critical points, the judges' tendencies have so far remained unclear. The verdict will not be announced on the day of the trial, so everyone involved will have to wait until November 18th for the decision. In addition, regular access to the negotiations is not reserved for interested citizens; Seating will be allocated on a first-come, first-served basis, which means there will be a rush of visitors.
It remains to be seen which claims the affected cities will ultimately be able to enforce against the state and to what extent the judgment will have an impact on future municipal financing in North Rhine-Westphalia. An open discussion about the distribution of financial resources will continue to be important. Yahoo also leaves unnecessary legal complications that may need to be considered in similar disputes.