Economy, Business And Markets

Municipalities Should Find New Sources of Income

Municipalities Should Find  New Sources of Income 	Municipalities Should Find  New Sources of Income

The head of an economic think tank has sounded the alarm on municipalities’ growing reliance on unsustainable income and called for alternative sources of revenue to run urban affairs.

Hussein Mohammad Pourzarandi, head of Iran Urban Economics Scientific Association said the housing recession had taken a heavy toll on the municipalities across the country as much of their income is generated from construction taxes and issuing building permits.

“Urban management is only serving the state’s interest” he said, adding that while sustainable earnings account for almost 60% of municipality income in most developed countries, the opposite is true in Iran.

The fact that only 1% of banks’ resources had been used to expand urban projects in the past while the average global share is more than 40% is regrettable, he added.

He proposed alternative methods such as new fees on public services, involving the private sector in urban development and encouraging the people’s contribution to city affairs as well as tapping into the resources of banks to enhance the finances and funding of local governments.

 Judicious Spending

Davoud Daneshjafari, another member the research firm and a notable economist said municipalities should follow in the footsteps of the government to come up with their own five-year development plans.  

He stressed the need for efficiency in local government spending and said, “If municipalities fail to properly manage their expenses, they will always be in deficit territory.”

The former economy minister called for workable fiscal policies in municipalities saying that they need a “suitable mechanism for distributing tasks between the state and the people.”  Municipalities in Iran act independent of the government. According the law, they have six sources of income, namely public revenues, private earnings, public service fees, municipal asset returns, government funds and voluntary donations.