Financial Sustainability of Municipalities and Local Governments in Small-Sized Cities; a Case of Shabestar Municipality
DOI:
https://doi.org/10.4335/10.4335/16.1.77-106(2018)Keywords:
Shabestar municipality, sustainable revenues, financial sustainability, urban sustainable development, small-sized cities, urban economyAbstract
Lack of a comprehensive approach to municipalities’ revenue sources in the form of macro-economic system, changes and interventions, self-reliance and self-sufficiency policy enforcement have put financial sector of municipalities in unsustainable situation. Continuing of this situation will have undesirable consequences on cities and urban management. Access to favorable and sustainable revenue sources leads municipalities to play a more active role in urban environment and properly meet the needs of citizens. In this regard, this research intends to analyze Shabestar Municipality’s revenue sources in terms of sustainability measures during 2004-2014. Type of the research is applicable and the method is descriptive-analytic and exploratory. Data collection has been carried out either documentary or field survey by using scoring forms and interviews with Municipality officials. Data analysis has been conducted by using Excel, Shannon Entropy and TOPSIS techniques. The results obtained showed that the trend toward financial independence of municipalities and decentralization of sub-national authorities has had some trouble and now municipalities need financial support from central government to fulfill their obligations. Shabestar Municipality like many other municipalities in Iran depends strongly on low favorable and unsustainable revenue sources such as sale of municipal immovable properties, charges on surplus density, charges on removing parking etc.
References
Abbasi Kashkoli, M. A. & Bagheri Kashkoli, A. (2009) Ways of providing sustainable revenues for Iranian municipalities, Monthly Journal of Municipalities, 98(10), pp. 18-27.
Abedin Dorkosh, S. (2011) Introduction to Urban Economics (Tehran: University Publication Center).
Access Economics (2006) Local Government Finances in Western Australia: Research Report for the Western Australian Local Government Association (Perth: Access Economics).
Ahadi Nia, H., Ali Madadi, A. & Fattahi, A. (2011) Evaluation and analysis of Qom Municipality’s revenue, identifying factors influencing its development, National Conference on identifying and explaining strategies for fulfillment Economic Jihad in Municipalities, Shiraz, Shiraz Municipality, available at: http://www.civilica.com/Paper-CIESAEJM01 CIESAEJM01_002.html.
Akbari Nasab, S. Y., Bayat, M., Rajabi, A. M. (2015) Sustainable financing of municipalities with pathological approach (Case study: Qom Municipality District 1), 3th International Conference on Accounting and Management, Tehran, Hamayeshgaran Mehre Eshraq Institute, available at: http://www.civilica.com/Paper-MOCONF03-MOCONF03_127.html.
Akbari, N., Moazen Jamshidi, H. (2013). VAT as sustainable revenue source for urban management; Case study: Esfahan Megalopolis, 5th Conference on Urban Planning and Management, Mash’had, Ferdowsi University of Mash’had, available at: http://www.civilica.com/Paper-URBANPLANING05 URBANPLANING05_078.html
Andalib, A. & Sabet Qadam, S. M. A. (2009) The role of sustainable revenues of urban development in spatial-physical planning, Hoviatshahr, 5(3), pp. 85-98.
Aristovnik, A., & Berčič, B. (2006) Sustainability of general government and local government financial balances in selected transition countries, In: Sevic, Ž. (2007) Debt Management in Transition Countries: Experience and Perspectives (Bratislava: NISPAcee Press).
Atakpa, M., Ocheni, S., & Nwankwo, B. C. (2012) Analysis of options for Maximizing Local Government internally generated Revenue in Nigeria, International Journal of Learning and Development, 2(5), pp. 94-104.
Azad Armaki, T., Mobaraki, M. & Shahbazi, Z. (2012) Analyzing and identifying practical indicators of social development using Delphi technique, Quarterly Journal of Socio-Cultural Development Studies, (1)1, pp. 7-30.
Bahl, R., & Linn, J. F. (1992) Urban Public Finance in Developing Countries (New York: Oxford University Press).
Bailey, S., P. Valkama &. Salonen, S. (2014) The EU’s Public Finance Crisis: Causes, Consequences and Cure, Public Money & Management, 34 (2): pp. 83–90, https://doi.org/10.1080/ 09540962.2014.887514.
Bakh’shi, H. & Sahraei, A. (2014) Pathology of Municipalities financial system; Case study: Jouybar Municipality, 6th National Conference on Urban Planning and Management, With an emphasis on the Components of Islamic City, Mash’had, City Council of Mash’had, available at: http://www.civilica.com/Paper-URBANPLANING06-URBANPLANING06_196.html (July 3, 2017).
Balassone, F. & Franco, D. (2000) Assessing Financial Sustainability: A Review of Methods with a View to EMU (Rim: Banca d’Italia).
Bank of Spain (2014) Boletín Estadístico 2014 (Madrid: Bank of Spain).
Bastida, F., Guillamón, M. & Benito, B. (2014) Explaining Interest Rates in Local Government Borrowing, International Public Management Journal, 17(1), pp. 45–73, https://doi.org/10.1080/10967494.2014.874257.
Bath, P. (2001) Resource for Success Series. 2nd ed. (Virginia: USA Nature Conservancy Arlington).
Billand, J. C. (2005) Municipal Finance: Increasing local Government Resources to Fund Multi Sectoral Facilities. Washington, DC: USAID).
Blanchard, O., Chouraqui, J. C., Hagemann, R. P. & Sartor, N. (1990) The Sustainability of Financial Policy: New Answers to an Old Question, OECD Economic Studies, 15, pp. 7–36.
Budina, N., & van Wijnbergen, S. (1997) Fiscal Policies in Eastern Europe, Oxford Review of Economic Policy, 13(2), pp. 47/64, https://doi.org/10.1093/oxrep/13.2.47.
Buiter, W. H. (1985) Guide to Public Sector Debt and Deficits, Economic Policy, 1(1), pp. 13-79.
Buiter, W. (1996) Aspects of financial performance in some transition economies under Fund-supported programmes, Centre for Economic Policy Research, Discussion paper, no. 1535 (Washington DC: IMF).
Burnside, C. (2005) Financial Sustainability in Theory and Practice: A Handbook (Washington, DC: World Bank).
Cabaleiro, R., Buch, E. & Vaamonde, A. (2013) Developing a Method to Assessing the Municipal Financial Health, The American Review of Public Administration, 43(6), pp. 729–751, https://doi.org/10.1177/0275074012451523.
Cianciara, J. (2010) 2006-07 State and Local Government Tax and Revenue Ranking (Madison: Wisconsin Department of Revenue Division of Research and Policy).
CICA (Canadian Institute of Chartered Accountants) (1997) Indicators of Government Financial Condition (Toronto: CICA.
CICA (Canadian Institute of Chartered Accountants) (2009) Public Sector Statements of Recommended Practice (SORP) 4. Indicators of Financial Condition (Toronto: CICA).
CIGU, E. (2014) An Approach of local Financial Autonomy and Implication Over Sustainable Development in the Knowledge Society, Journal of Public Administration, Finance and Law, Issue 6, pp. 44-53.
Chapman, J. I. (2008) State and local financial sustainability: The challenges, Public Administration Review, 68(s1), pp. S115-S131.
Chowdhury, A. I. (2004) Instruments of Local Financial Reform and their Impact on Service Delivery (Dhaka: Centre for Urban Studies, Dhaka).
Clifford, C. (2005) The Road to Financial Sustainability, Government Finance Review, 21(4), pp. 36-41.
Teheran University Comprehensive Plan for Sustainable Revenues and Other Financing (2007) Sources Revenue Recognition and Collection Administration of Tehran University.
Coopers, P. (2006) National financial sustainability study of local government (Sydney: PricewaterhouseCoopers).
Danesh Jafari, D., Baba Jani, J. & Karimi Osboei, S. (2014) Analyzing sustainability of revenue sources in Tehran Municipality, Journal of Urban Economics and Management, (2)7, pp. 15-34.
Danesh Jafari, D. & Karimi, S. (2011) Comparative study of financial and revenue sources of Tehran Municipalities with a number of major cities of the World, Urban Economics, (3)11, pp. 24-38.
Davodi, S. M. (2011) Studying effect of urban services cost economy on sustainability of revenue sources of Tehran Municipality, Urban Economy, (3)10, pp. 31-46.
Dirie, I. (2005) Municipal finance: Innovative resourcing for municipal infrastructure and service provision (Washington, DC: CLG International LLC).
Dollery, B. & Grant, B. (2011) Financial Sustainability and Financial Viability in Australian Local Government, Public Finance and Management, 11(1), pp. 28-47.
Drew, J., Dollery, B. & Kortt, M. A. (2016) Peas in a pod: are efficient municipalities also financially sustainable?, Australian Accounting Review, 26(2), pp. 122-131.
EC (European Commission) (2011) Council Directive 2011/85/EU of 8th November 2011 on Requirements for Budgetary Frameworks of the Member States (Brussels: EC).
EU (European Union). 2012. Financial Sustainability Report. Brussels: EU.
Fanizza, D. & Mourmouras, A. (1994) Financial indicators.’ Seminar on Financial Policy Management in Economies in Transition (Lecture No. 16) – 7-18 November (Washington D.C.: Financial Affairs Department and IMF Institute, International Monetary Fund).
Faraji Mollaei, A. & Azimi, A. (2011) Analysis of sustainable revenues of municipalities; Case study: Buin Zahra, Urban Economy, (3)12, pp. 59-72.
Financial Sustainability Review Board (FSRB) 2005. Rising to the Challenge (Adelaide: South Australian Local Government Association).
Fisher, Ronald C. (2007) State and Local Public Finance. 3rd ed. Mason (OH: Thomson/South Western).
Fletcher, J. & McArthur, D. (2010) Local Prosperity: Options for Municipal Revenue Growth in British Columbia (Think City).
Gonzalez, L. M. & Mesa Callejas, R. J. (2008) Improved Local Public Finance: The Case of the Municipality of Medellin, Cuadernos de Administracion’s, 21(35), pp. 327-351.
Gorina, E. (2013) Financial Sustainability of Local Governments: Effects of Government Structure, Revenue Diversity, and Local Economic Base, Doctoral dissertation (Tempe: Arizona State University).
Green, C. J., Holmes, M. J. & Kowalski, T. (2000) Poland: A Successful Transition to Budget Sustainability?, Economic Research paper No. 00/5 (Loughborough: Loughborough University).
Groves, S. & Valente, M. (2003) Evaluating Association, Financial Condition. 4th ed. (Washington, DC: International City/ County Management).
Guillamón, M., Benito, B. & Bastida, F. (2011) Evaluación de La Deuda Pública Local En España, Revista Española de Financiación y Contabilidad, XL(150), pp. 251–285, https://doi.org/10.1080/02102412.2011.10779703.
Hasan Zadeh, A. & Khosro Shahi, P. (2008) Efficient financial model for municipalities of metropolitan; Case study: Tehran Municipality, 1th Municipality Finance Conference, Problems and Solutions (Tehran, Technology Research Center of Sharif University).
Heffernon, R., Welch, N. & Melnick, R. (2007) Sustainability for Arizona: The Issue of Our Age (Phoenix: Morrison Institute for Public Policy, Arizona State University).
Hicks, J. R. (1946) Value and capital (2nd Ed.) (Oxford: Clarendon Press).
Hossain, M. (2013). Poor Municipal Spending for Infrastructure Development and Gap for Investment: A Case of Bangladesh, International Journal of Business and Management, 8(11), pp. 27-37.
IFAC (International Federation of Accountants) (2014) Handbook of International Public Sector Accounting Pronouncements (New York: IFAC).
IMF (International Monetary Fund) (2014) Vertical Financial Imbalances and the Accumulation of Government Debt. No.14/209 (Washington, DC: IMF).
Jalali, D. (2009) Analyzing major trends in Tehran Municipality Budget during 2004-2007, Urban Economy, (1)2, pp. 104-115.
Jamshid Zadeh, E. (2003) Analyzing costs and budgets of municipalities of Iran during 1971-77 and 1992-2000, Journal of Management and Country Planning, (4)13, pp. 28-37.
Krejdl, A. (2006) Financial Sustainability-definition, indicators and assessment of Czech public finance sustainability: working paper series (Prague: Czech National Bank).
LGA (212) Financial Sustainability, Information Paper No 1 – Financial Sustainability- Revised January 2012 (Aledaine: LGA).
León P (2001) The four pillars of financial sustainability, Resources for Success Series, Volume 2 (Arlington: The Nature Consevancy).
Mahmoudi, M., Zomorodian, Gh. & Aghaei, M. (2011) Analyzing of Factors related to sustainable revenues of Tehran Municipality and prioritizing them, Journal of Urban Management, (9)27, pp. 259-276.
Malazem Ahhosseini, M. & Faraji Mollaei, A. (2012) Operational strategies to attract foreign direct investment in city, Urban Economy, (4)15, pp. 26-35.
Maleki, S. & Damanbagh, S. (2013) Evaluation of sustainable development indexes with emphasis on physical and social indexes and urban services (A case study of Ahvaz city), Journal of Shahr-Ha, (1)3, pp. 29-54.
Masoum Zadeh, J. (2001) Managerial problems of small-sized cities, Monthly Journal of Municipalities, (3)28, pp. 5-14.
Mehraei, M. & Maharati, Y. (2012) Impact of adopting VAT as a source of sustainable revenue on urban housing economy, Mash’had, 4th Conference on Urban Planning and Management.
Molla Zadeh, A., Rafaat Milani, M. & Khandan, M. (2012) The impact of VAT on sustainable revenues of municipalities, Urban Economy, (4)14, pp. 60-68.
Montazeri, R. & Khodaei, Z. (2012) The role of sustainable revenue sources in revenue sources of municipalities, Urban Economy, (4)13, pp. 25-39.
Mousa Kazemi, S. M. (2013) Spatial distribution of population and hierarchical system of Iran’s cities during 1956-2011, Journal of Physical-Spatial Planning, (1)3, pp. 113-124.
Mousavi, M. N., Sarvar, R. & Begheri Kashkoli, A. (2011) Strategies on improvement of revenue management in small municipalities with an emphasis on budgeting, (Case study: Shehedieh Municipality), Urban Management Studies, 5(3), pp. 109-127.
Nasr Esfehani, R., Akhondi, N., Shahidi, A. & Shiri, H. (2010) Analyzing performance of Esfahan Municipality in terms of sustainable and unsustainable revenues (1996-2011) with providing new solutions, 3th Municipality Finance Conference, Problems and Solutions, Tehran, Technology Research Center of Sharif University, available at http://www.civilica.com/Paper-MUNICIFIN03-MUNICIFIN03_005.html.
Nallathiga, R., & Nicmar, N. (2012) The System of Local Government Finance: A Study of Select Countries, NIMF Journal of Public Financial Management, 4(2), pp. 39-50.
Navarro-Galera, A., Rodríguez-Bolívar, M. P., Alcaide-Muñoz, L. & López-Subires, M. D. (2016) Measuring the financial sustainability and its influential factors in local governments, Applied Economics, 48(41), pp. 1-15.
Negin Taji, Z., Hosseini, H. & Hosseini, F. (2013) Sustainable Revenue, urban management challenges in realizing Vision 1404 (With an emphasis on revenues from investment and participation of citizens in Tehran), Quarterly Journal of Urban Management, (11)32, pp. 197-210.
Noaeen, K. (2012) Formulating Tax System on Estates Revenue with the Aid of Municipalities, Urban Economy, (4)16, pp. 90-97.
Pasinetti, L. L. (1998) The Myth (or Folly) of the 3% Deficits/GDP Maastricht “parameter”, Cambridge Journal of Economics, 22, pp. 103-116.
Pérez-López, G., Plata-Díaz, A. M., Zafra-Gómez, J. L. & López-Hernández, A. M. (2013) Deuda viva municipal en un contexto de crisis económica: análisis de los factores determinantes y de las formas de gestión, Revista de Contabilidad-Spanish Accounting Review, 16(2), pp. 83–93, https://doi.org/10.1016/j.rcsar.2012.12.001.
Qaderi, J. (2006) Evaluation of financial system of Municipalities in Iran, Quarterly Journal of Quantitative Economics, (3)10, pp. 21-48.
Qaleh Dar, H. (2003) Comparison of revenue sources of municipalities in metropolitan areas of Iran and studying its physic, Master thesis (Shiraz: University of Shiraz).
Qanbari, A., Mousavi, M. N., Saeed Abadi, R., Bagheri Kashkoli, A., Hosseini Amini, H. (2011) Strategies of Enabling Municipality's Income Enhancement in Small Cities (Case Study: Zarch), Geography and Environmental Planning Journal, (22)42, pp. 41-58.
Oates, W. E. (1993) Financial Decentralization and Economic Development, National Tax Journal, 46(2), pp. 237-243.
Oates, W. E. (1999) An Essay on Financial Federalism, Journal of Economic Literature, 37(September), pp. 1120-1149, https://doi.org/10.1257/jel.37.3.1120.
Qorbani, R. & Azimi, M. (2014) Studying effect of revenue structure of municipalities on urban development process using correlation coefficient and factor analysis; Case study Mash’had, Research and Urban Planning, (5)18, pp. 115-132.
Resa Qaamat, H. (2012) The role of VAT in municipalities’ financial system, Urban Economy, (4)14, pp. 36-45.
Ruhling, M. (2005) Institutional Constraints on Property Tax and Semi-Autonomous Municipal Tax Agencies in Peru, World Bank Urban Research Symposium (Washington DC: World Bank).
Ruiz-Huerta, J., & García, M. A. (2012) El Endeudamiento de Las Comunidades Autónomas: Límites Y Problemas En El Contexto de La Crisis Económica, Revista D’estudis Autonòmics I Federals, 15, pp. 124–162.
Safari, A. H. (2003) Revenue structure and composition of municipalities in Iranian metropolises; Case study: Shiraz Metropolis, Master thesis (Shiraz: University of Shiraz).
Schoeman, N. (2011) Financial performance and sustainability of local government in South Africa–An empirical analysis (No. 201104) (Pretoria: University of Pretoria).
Sepah Vand, R. & Aref Nejhad, M. (2013) Prioritizing indictors of urban sustainable development using hierarchical analysis group; Case study in Esfahan, Journal of Urban Planning Studies, (1)1, pp. 43-60.
Shabestar Municipality (2016) Shabestar Municipality Budgets during 2006-2016 (Shebestar: Shabestar Municipality).
Sharzehei, G. (2008) Identification and Analysis of revenue items of Iran’s municipalities, Quarterly Journal of Urban Management, (6)20, pp. 23-37.
Siddique, K. (2005) Local Government in Bangladesh (Dhaka: The University Press Limited).
Slater, R. (1997) Approaches to Strengthening Local Government: Lessons from Sri Lanka, Public Administration and Development, 17(2), pp. 251-266, https://doi.org/10.1002/(SICI)1099-162X(199705)17:2<251::AID-PAD932>3.0.CO;2-2.
Solé-Ollé, A. & Sorribas-Navarro, P. (2012) The Dynamic Adjustment of Local Government Budgets: Does Spain Behave Differently?, Applied Economics, 44(25), pp. 3203– 3213, Https://doi.org/10.1080/00036846.2011.570723.
Stavins, R., Wagner, A. & Wagner, G. (2003) Interpreting Sustainability in Economic Terms: Dynamic Efficiency plus Intergenerational Equity, Economics Letters, 79(3), pp. 339–343, https://doi.org/10.1016/S0165-1765(03)00036-3.
Solow, R. M. (1974) Intergenerational equity and exhaustible resources, Review of Economic Studies, 41(5), pp. 29-45.
Solow, R. M. (1991) Sustainability: An economist's perspective. The Eighteenth J. Seward Johnson Lecture (Woods Hole, MA: Woods Hole Oceanographic Institution).
The National Audit Office (2014) Financial sustainability of local authorities 201 (London: The National Audit Office).
UN, DESA (2015) World urbanization prospects, the 2014 revision (New York: United Nations Department of Economic and Social Affairs, Population Division).
UNICEF (2010) Bangladesh Statistics (New York), available at: http://www.unicef.org/infobycountry/bangladesh_bangladesh_statistics.html (july 7, 2017).
United Nations Human Settlements Program (2009) Guide to Municipal Finance (Nairobi: UN- HABITAT).
World Commission on Environment and Development (1987) Our Common Future (Oxford: Oxford University Press).
Vaghefi, Sh. (2012) Planning for the Management of Informal Economy: A Financial Resource for the Municipalities, Urban Economy, (4)13, pp. 63-68.
Yeganegi Dastgerdi, V. (2011) Practical Methods of Sustainable Revenue Provision for Municipalities Investment Funds (Part One: Agriculture and Industry Partnership), Urban Economy, (3)9, pp. 54-68.
Zahedi, K. & Dehghan, M. (2010) Tax on land value, a way for achieving sustainable urban revenue, 3th Municipality Finance Conference, Problems and Solutions, Tehran, Technology Research Center of Sharif University, available at: http://www.civilica.com/Paper-MUNICIFIN03-MUNICIFIN03_009.html (July 7, 2017).
Zakeri, M., Shoja, H. & Asghari, H. (2012) Factors affecting local governments to achieve sustainable revenue sources; Case study: Firouz Koh Municipality, Urban Management Studies, (4)11, pp. 47-56.
Ziari, K., Mehdi, A. & Mahdian Behenmiri, M. (2013) Study and identifying of financial resources and strategies for sustainable income for municipalities; A case study municipality of Mahabad city, Urban Management, (11)31, pp. 107-124.
