I don't know how it works in Germany, but here in Canada, one of the big issues with that is that income taxes are only collected at the provincial and federal level. Now, a chunk of that money gets sent down to lower levels of government— Waterloo region where I live recently received $600M from upper levels of government for a light rail system that is now built and operating, and the current budget shows 27% of revenue coming from "provincial and federal grants".

The thing is, that money which comes from the upper levels is extremely subject to the whims of those governments; it can fluctuate wildly depending who comes into power and what their priorities are. So without some guarantees around it, I can understand the municipalities wanting a stable source of income over which they have some agency, and out of which they can reap immediate benefit from growing the local economy.

Anyway, I'd love to hear from someone in Germany how this is resolved there; but I'd assume there'd need to be some pretty structured, long-term agreements around minimum amounts, percentages of new growth, and so on.

Schools are funded from the federal, state and local level, plus non-government sources (churches etc.). Police is state level, AFAIK. Fire department is paid for by an extra tax on fire insurance (so, I guess you could argue it's a property tax via extra steps), and state funds. For streets, it depends, cities pay for city streets. Autobahn is mostly federal, others are state, federal.

For the taxes, it's complicated, because there are some taxes for which the cities and states can decide the amount, and others (for example VAT), from which they get a certain fraction, but the amount is decided on the federal level.

Edit: Let me add: Property taxes are very strangely regressive. You pay it whether you rent or own, and there is a minimum apartment cost, so you'll always pay, while a low income might not be taxed at all. Then, often, there is a sudden jump from apartment complex to SFH.