1) Empty town coffers between - say - 2002 and 2005. You could read about towns reducing opening times for public libraries, public swimming pools etc. Even closing some of them. All in an attempt to save some money. It didn´t help that state and federal money for infrastructure also dried up during that period. So lot´s of things were delayed, postponed...
Going from personal observation that only started to change in late 2006 / early 2007 with the higher tax returns.

2) Just to add to 1), there was a tax reform in 2000. Besides lowering taxes it unfortunately (?) included some loopholes that allowed larger companies to drastically reduce their taxes even more for some years. It was even reported that some companies managed to pay practically no local taxes (going to the town/city) and only very reduced state and federal taxes.
I imagine "Deutsche Bank" and all the other large banks in Frankfurt were also benefiting from that "reform". Which might explain some of the problems of Frankfurt even today.

3) During that time some town and city mayors also started to complain about the "solidarity pact" with East Germany (Transfer of money from Western to Eastern Germany). Cities like Dortmund in the Ruhr region for example had to deal with high unemployment, a high rate of immigrants while losing tax paying businesses. And on top of that they allegedly still had to transfer some money east. (I didn´t check that. Just repeating German TV here.)

4) The DB CEO Mehdorn is one of the biggest fans of railway privatization. Of course for that he needs to show profits. Which - I suspect - means that he´d like to concentrate on the profitable ICE and IC routes while getting rid of the non-profitable short-distance and rural routes.
AFAIK at least some rural routes only stay open because local and state money subsidies are paid to the DB.

Your observation probably describes a combination of 1) and 4). And maybe 2)?