Tehran Municipality’s Precarious Finances Under Scrutiny

EghtesadOnline: The heavy strain on Tehran Municipality’s budget is to blame on the past extravagant expenditures and the fact that TM is extraordinarily overstaffed.

News ID: ۷۸۰۰۹۸

28 October 2017

This was stated by two former and current members of Tehran City Council, Rahmatollah Hafezi and Hojjatollah Mirzaie, in a meeting held earlier this week on Oct. 22 at Tehran University’s Faculty of Economics.

Out of the municipality’s annual budget of $4.5 billion, revenues realized in the first six months of this Iranian year are estimated at $1.7 billion or 72% of the H1 projected budget.

As for the expenditures in the same period, the figure exceeded revenues by $75 million. Considering that 28% of the revenues were not realized, revenues covered 80% of the expenditures, according to Financial Tribune.

“Based on international standards, the number of workforce in municipalities of cities similar to Tehran should hover around 35,000 while there are over 68,400 people directly or indirectly being paid by the TM,” the Persian daily Donya-e-Eqtesad quoted Mirzaie as saying.

Referring to the defective revenue-generating system of the municipality as the Achilles’ heel of the non-departmental public organization, Mirzaie said, “Citizens, who are the main beneficiaries of public services, bear the lion’s share of the costs of municipal services based on world urban management patterns. This is while about 200,000 economic players engaged in Tehran’s construction industry pay the costs of municipal services through construction tax, duties and fines.

The TM said almost $253 million of its revenues came from issuing construction permits for banks and organizations to whom the municipality is indebted. The rest of the revenues went for paying wages to TM workers and maintenance of the city–$253 million and $101.6 million, respectively.

“TM’s budget is heavily dependent on construction duties. When construction industry moves into recession, budget deficit looms over the municipality. Currently, close to 80% of TM’s revenues rely on unsustainable resources,” Mirzaie said.

“Lack of transparency, accountability and participation on the part of citizens in Tehran Municipality has turned this public body into one of the weakest organizations in the country.”

On the performance of TM in three divisions of urban development, culture and finance, Hafezi said allowing construction within fault zones and orchards is a clear evidence that the municipality has acted against the strategic and comprehensive plan of Tehran in the field of urban development.

Referring to the TM cultural division’s stated goal of “Turning Tehran Municipality into a social institution from a service-providing institution”, the former member of the city council said the rising number of child laborers and suburban residents indicates TM’s failure in this regard despite the fact that around 20 trillion rials ($500 million) are allocated to cultural and social issues annually.

“Another objective of the city has been to reduce the inequality between the upscale parts and the southern end of Tehran. Now the gap is wider than before due to unjust distribution of services,” Hafezi said.

Late last month, the newly-appointed Tehran Mayor Mohammad Ali Najafi said the municipality owes 300 trillion rials ($7.69 billion), mostly to banks and the army of contractors working for it.

“The outstanding debt is 1.7 times more than the municipality’s total budget for the current fiscal year (March 2017-18),” the local print media quoted Najafi as saying.

Noting that Tehran needs to tap into private sector potential and foreign investments, Najafi said, “Some 72% of the projects in Tehran need further funding even after they are completed. The municipality’s local resources are unlikely to be adequate to manage and complete these projects. We are thinking of establishing a so-called city development fund.”