Determining the Optimal Structure of Tehran Municipality Income Basis Based on Risk and Returns

The financial health of municipal budgets is of great importance, and its feedback is the ability of the municipality to provide optimal and continuous services to citizens. In recent decades, due to the lack of financial resources of municipalities, the key problem in the development of the cities of the country was the non-compliance of municipal expenditures and income from the structure of the city economy. The metropolitan municipality, unlike the state that is dependent on oil revenues, has no source of income but urban economy (sales of congestion, dues, etc.) Moreover, the survival of the organization and its services depend on the dynamism and reliability of its economy. Given the importance of municipal revenue structure, in this study, the income and expenditure structure of Tehran Municipality was compared with selected municipalities, then, using Tehran Municipality data during the period of 2001-2015 and Markowitz’s model, the share of each income code based on minimizing risk, maximizing expected returns, and Sharp’s benchmark in the income portfolio of Tehran Municipality was estimated. The results showed that Tehran Municipality’s revenue structure is not suitable and has a significant difference with estimated weights based on the maximization criteria of expected returns, risk minimization and Sharp’s benchmark.