The Impact of Municipal Financing Approaches on the Income of Municipalities(Case study: Tehran, British Columbia, and Canada municipalities)

Introduction :

Municipalities, as institutions responsible for providing public services and developing cities, need strong and stable financial resources to finance and operate. Municipalities’ financing approaches are considered one of the basic factors in providing the income of municipalities and affecting their performance. Municipalities are financed in two ways, direct and indirect. Direct municipal financing approaches include public revenues such as taxes, tolls, municipal service fees, and other sources of income that are directly funded by citizens’ contributions and taxes. This approach is used as one of the main methods of financing municipalities, and the amount of income of municipalities depends on the needs and micropower of the population and the financial power of the citizens. Indirect financing approaches of municipalities also include non-public and non-governmental financial sources such as cooperation with the private sector, urban investments, investment in development projects, and investment in the stock exchange. This approach is used as a supplementary source for financing municipalities and can increase the municipality’s income and be developed according to the urban needs and capacities of the region. The impact of municipal financing approaches on the income of municipalities is very important. Using appropriate approaches to finance municipalities can lead to an increase in the income of municipalities and provide the possibility of providing better services and improving the living conditions of citizens. Moreover, choosing appropriate financial approaches and their optimal implementation can help increase investment, urban development and create economic growth in cities. Therefore, according to the importance of the subject, the purpose of the present research is to evaluate the financing methods in municipalities. By examining this issue, it is possible to help make better decisions about choosing appropriate financial approaches for municipalities and facilitate the improvement of their performance and income, since the financial resources of the municipality are the driving engine of the provision of municipal services, and the lack of sufficient resources or the lack of proper planning and forecasting to provide them, make the municipal activities difficult.

In line with the purpose of this article, using available information for three different samples, including a time series sample based on the financial statements of Tehran Municipality in the period 1387-1400 (as an internal sample) and panel samples based on data from the state of British Columbia with 15 municipalities and also, in Canada, with 12 municipalities for the period of 2010-2020 (foreign samples), the impact of financing approaches on the income of municipalities was investigated. According to the type of time series information and panel data used for the aforementioned samples, Ordinary Least Squares (OLS) and Generalized Method of Moments (GMM) have been used as estimation methods for the research model. It should be noted that for the above statistical approaches, reliability, co-accumulation, and Sargan pre-tests have been performed.

Based on the findings of the research, 10 types of financing methods were determined which include partnership financing, investment, bonds, contracts, income from tolls, income from the price of urban services, income from municipal funds and property, grants from the government and government organizations, and other sources. In order to create a statistical research model for the three investigated samples, these methods were defined in the form of five variables, and their effect on the municipal revenues was evaluated. Thus, in the research model, the impact of revenues from tolls, the price of services and revenues of municipal for-profit institutions, revenues from municipal funds and property, grants, grants and gifts, and assets, as well as revenues collected in the field of city protection, on the municipality’s income was investigated. According to the findings of the research, all the methods of providing income, except for the income collected in the protection zone of the cities, have a positive and significant effect on the income of Tehran municipality. Among the effective factors, the income from tolls has a greater effect and was introduced as a sustainable source of income for municipalities in all three stages of the research. According to the coefficient of the importance of the financing method based on collective investment with a positive effect on the income of the municipality of the state of British Columbia (1.468), this method was also identified as a new and sustainable method for municipalities; However, it has not been taken into account in the approaches of financing municipalities in Iran, because basically, there is no figure for it in the financial statements of the municipality.

The results of this research show that tolls, as one of the financing sources of municipalities, play a very important role in providing income and performance to, municipalities. Toll refers to financial amounts e collected from individuals and organizations for using services and public benefits. These duties can be considered taxes, urban development duties, transfer duties, and local taxes. The effect of tolls on municipal income is very important. Receiving tolls as a source of financing can enable municipalities to provide better public services to their citizens and benefit from the development and improvement of urban infrastructure and services. Moreover, the income from tolls can be used to cover the costs of municipalities for the implementation of construction projects and urban development. With the increase in population and urban needs, financing municipalities has become an important challenge. In this context, tolls are considered one of the main means of financing municipalities. However, the direct impact of tolls on the revenue of municipalities depends on the amount and type of tolls, the needs and micropower of the population, and the financial ability of citizens. On the other hand, the methods based on collective participation as one of the new and effective methods of financing municipalities have been widely noticed and used in recent years. These methods aim to collect financial resources through the participation and cooperation of citizens and organizations in urban activities, allowing municipalities to provide the best services to their citizens and advance development projects. Methods based on collective participation include different types of activities and mechanisms. These methods can include direct financial support from citizens and organizations, creating public-private partnerships, forming cooperative funds, creating online platforms for collecting and transferring financial funds, and creating financial systems based on energy consumption units. The effect of methods based on collective participation in financing municipalities is very important. The use of these methods can lead to an increase in the income of municipalities and provide the possibility of providing better services and improving the living conditions of citizens. Furthermore, choosing methods based on appropriate collective participation and their optimal implementation can help increase investment, urban development and create economic growth in cities. Meanwhile, in Iran, this approach and its encouragement and efforts to strengthen and develop it have not received enough attention. Although participation can be hidden in other methods such as collecting fees and providing services, it has a high potential for effective and significant benefits.