Iran's Local Government Stitch-Up, and How to Resolve It

April 9, 2021
Hannah Somerville
13 min read
The reformist government under Mohammad Khatami posited that local councils would usher in a new era of “democratization”
The reformist government under Mohammad Khatami posited that local councils would usher in a new era of “democratization”
“Did the reformists misjudge the ability of local government to overcome the obstacles they had already experienced at the national level? The answer is yes”
“Did the reformists misjudge the ability of local government to overcome the obstacles they had already experienced at the national level? The answer is yes”
In practice local governments have limited autonomy and important decisions are made by central government institutions
In practice local governments have limited autonomy and important decisions are made by central government institutions
"The dominant narrative advanced by disgruntled municipalities is that they are locked into an ‘unsustainable’ and ‘unhealthy’ financial situation"
"The dominant narrative advanced by disgruntled municipalities is that they are locked into an ‘unsustainable’ and ‘unhealthy’ financial situation"

On February 26, 1999, millions of Iranians made their way to polling stations across the country to vote in the Islamic Republic’s first-ever local council elections. Some 600,000 candidates stood for 200,000 seats, across 25,000 villages and more than 900 cities: the culmination of years of work to establish a new tier of governance by politicians and experts of all backgrounds.

The reformist government under Mohammad Khatami posited that local councils would usher in a new era of “democratization”. The reality, however, was different.

One of those present in Iran during that heady period was Kian Tajbakhsh, a scholar of urban planning who had come back to the country in 1997, the year Khatami came to power, after years of working in the housing sector in New York City. “Within two weeks,” he said, “I was advising on the new laws they were putting together. It’s very rare as a social scientist to be somewhere where a brand new institution is at ground zero.”

In 1997, the Khatami administration placed the establishment of local councils to the forefront of its reform program

In the end, Iran’s new municipalities not only failed to bring about a new dawn for democratic accountability, they helped entrench the authoritarian regime had that birthed them. More than two decades later, in lieu of engagement, a measured apathy now appears to reign. Meanwhile, local councils are only partially able to play the role first ascribed to them in the 1979 Iranian Constitution – as “the decision-making and administrative organs of the country” – due to being hamstrung by structural, political and economic factors that have come about partly by accident, but mostly by design.

These constraints are the subject of two academic papers that Professor Tajbakhsh, who today again lives in the United States and is a Senior Advisor to the Executive Vice President for Global Centers and Global Development at Columbia University, has recently published: Authoritarian State Building Through Political Decentralization and Local Government Law and The Political Economy of Fiscal Decentralization under the Islamic Republic of Iran.

The articles, published in prestigious journals, focus on the long trajectory of Iran’s “20-year experiment” in decentralization. Together, they go some way to explain the real role of councils in the eyes of the Islamic Republic, and the bind they find themselves in today.

The Game was Never Liberalization

A widely-held misconception about the creation of councils in Iran, Professor Tajbakhsh explains, was that this was a project conceived and spearheaded by reformists. In fact, the local government law was initiated in 1993 by the conservative-dominated 4th parliament, and came about as a direct response to urban riots over bad management, slum clearance and a lack of job opportunities in the aftermath of the Iran-Iraq War.

The Islamic Republic, as Professor Tajbakhsh sees it, is at its core a regime of “Islamic paternalists”: a dictatorship that still recognizes the need to provide for its people, because not to do so would be dangerous. “The regime,” he says, “wanted to create better local management without opening up the political system. That’s what the original law intended to do. It was a right-wing attempt to respond to grievances about terrible management at the local level. The game was not liberalization.”

In 1997, the Khatami administration placed the establishment of local councils at the forefront of its reform program, with the support of the Supreme Leader – albeit for different reasons. The reformists, Professor Tajbakhsh believes, were “sincere and authentic” in their desire to “fill these new institutional vessels with democratic content”, but overestimated what they could achieve.

“Did the reformists misjudge the ability of local government to overcome the obstacles they had already experienced at the national level? The answer is yes.”

Candidates Vetted as a Matter of Course

From the very beginning, the regime limited the scope of political participation by qualifying local election candidates. Secular, monarchical or communist parties were banned, as were individuals calling for friendly relations with Israel or the United States. Oversight committees at the city level approved or weeded out candidates based on information received from the judiciary, the Intelligence Ministry, the police and the civil registration office.

Candidates for local council elections are vetted in advance

“All candidates are required to pass a religious test and a loyalty test,” writes Professor Tajbakhsh in his first article, which was published in February 2019. “They must have belief and commitment to Islam and Velayat-e Faqih and they must express loyalty to the constitution of the Islamic Republic of Iran… Qualifying candidates remains a tool of political control, even if it doesn’t always have to be wielded explicitly.” At the same time, training for local councils and municipal staff is undertaken by separate central government entities.

In 1999, Professor Tajbakhsh says, Iranians embraced the new two-tiered system but also seemed to be aware of its built-in boundaries after 20 years of Islamic rule.

“By 1999, the regime had a system that was so consolidated it was familiar. People knew the way things worked.” Local politicians in small cities might speak to residents, and residents might express themselves at public meetings, but "these expressions tended to be somewhat inchoate. You began to see at the local level what you saw at the national level.”

The Decision-Making Deficit

Urban government in Iran includes the elected council, the mayor and the municipal bureaucracy. The mayor serves as the “chief executive” and the council is responsible for overseeing a city’s management and operation.

In practice, though, these authorities have only narrow autonomy. Important decisions such as utilities and land planning still lie with the local offices of central government ministries. The decisions they take are also vetted in turn by a handful of unelected officials.

Local governments operate within a framework set out by the Iranian regime

Up until 2016, decisions by local councils were reviewed by the county governor alone: usually a representative of the Islamic Republic’s official and security branches. The volume of complaints against governors finally gave rise, in 2016, to the creation of “Conformance Committees”: one governor, one judge appointed by Iran’s Chief Justice, and one representative from the Provincial Council of Local Councils, a supervisory body appointed by the council. If the Conformance Committee does not object within two weeks, a decision can become law. This means that in 20 years, the oversight of local decisions has gone from one official to a three-member group.

Provincial Planning and Development Councils also set the agenda for elected local councils. They decide how, where, and on what the government’s budget will be spent, in line with the needs of the ministries. Elected representatives sit on these panels as non-voting advisory members only, and have no role in the decision-making process.

Narrowing the Field of Participation

For local councils to be effective, civil society institutions and semi-professional non-governmental organizations need room to operate as mediators between the people and elected decision-makers.

In the early 2000s, many such associations were able to proliferate. But as Professor Tajbacksh notes, “because NGOs were a natural place for secular and radical opponents of the regime to gather and mobilize, they became areas of concern.”

From 2004 onwards, conservative-controlled councils dismantled NGOs in favor of “mosque-based” civic associations. Leading Shia jurisprudents such as Ayatollah Javadi-Amoli and Ayatollah Misbah Yazdi rejected any conception of civil society contradicting Islamic values, and in 2016 a regulation offering an Islamist definition of NGOs was passed.

NGOs and civic associations have been excluded from the decision-making process

Within these bounds, the possibility for civic associations to collaborate with local governments is minor. Many of the networks that once played this key intermediary role – such as the Imam Ali Society, which was dissolved earlier in 2021 – have ceased to exist. “The red lines are clear,” Dr Tajbakhsh tells IranWire, “and they’re very narrow.”

In recent years, Professor Tajbakhsh writes, the Guardian Council has also intervened to position local government as an Islamic project. In 2016 the council law was amended to underline that the Guardian Council was authorized “at any point in time [i.e. even after a law has been in force] to exercise its supervisory powers regarding the conformance of local government laws with the sharia”. This can further exclude “un-Islamic” civil society actors, but also would-be councillors from religious minority backgrounds.

A 2017 letter from the Secretary of the Guardian Council asking for religious minorities to be barred from standing in local elections

Financial Relegation

The second paper, published by Professor Tajbakhsh in Hartford Seminary’s The Muslim World in February this year, examines the financial statements of more than 90 Iranian cities from between 1998 and 2006. It found that the way the system is designed constrains local governments’ “fiscal authority”: citizens’ needs are not reflected in the budget outcomes.

In Iran, only about 5 percent of GDP finds its way into the hands of local government – about average for the Middle East, but far short of global averages of about 20 percent for unitary states and 50 percent for federal states.

The Iranian national treasury and Ministry of Finance control all government funds. The Tax Amalgamation Law of 2003 also recentralized several of the tax assignments back to central government, which sets the base and rate for VAT, fuel tax and import tax, but also construction permits and property tax.

The Ministry of Interior is responsible for redistributing shared taxes to municipalities

Shared taxes are collected by the Ministry of Interior and redistributed to local areas according to a crude formula. This poses immediate problems because VAT and tax-collecting efficiency is very low; Professor Tajbakhsh’s findings suggest municipalities miss out on some 50 percent of what the law specifies because the tax is simply not being collected.

A great deal of the money that the government allocates to localities flows into institutions outside of the council’s direct control, such as the Ministry of Interior’s Provincial Office of Development and line ministries. This means elected representatives have no say on how it is spent.

For unexplained reasons, councils are also obligated to spend at least 40 percent of the revenue they receive on capital projects and infrastructure, regardless of local needs. Many are now spending much more – up to 80 percent – due to a growing backlog of incomplete infrastructure projects. 

Property taxes are normally thought to be a cornerstone of local democracy. In most developed states they account for 20 to 30 percent of local government revenue. But in Iran, Professor Tajbakhsh found, they account for as little as one to two percent. Some councils are also extremely inefficient in collecting it — Shiraz municipality, for instance, collects property tax from only 20 percent of registered properties.

Larger councils are spending more and more of their revenues on a backlog of delayed construction projects

Until three years ago, provincial governors had the power to approve new taxes. But these often faced a backlash from individuals, businesses and even central government. The Court of Central Arbitration, Professor Tajbakhsh writes, appears to have often ruled against municipalities trying to generate new sources of income: from Tehran City Council’s charges on land-use changes in 2010, to Kerman City Council trying to add a 10 percent charge on events tickets in 2014. Finally in 2017, the Court asked the Ministry of Interior to issue a new directive blocking municipalities from passing any more legislation with regard to “illegal” taxes, to avoid wasting the Court’s time any further.

Because of the squeeze, councils in Iran have had to get creative about ways to raise cash for themselves and their constituents. Professor Tajbakhsh found, surprisingly, that most of them are now highly reliant – on average above 80 percent – on own-source revenues. But the sources of this money are often “one-off” payments, such as fines and construction permits. Close to half of Tehran City Council’s budget came from building charges in 2018. This is unsustainable, and in turn makes it harder for councils to plan for the long term.

Former Tehran mayor Mohammed Bagher Ghalibaf was linked to numerous corruption scandals in the housing sector

All in all, Professor Tajbakhsh writes, “The degree of local autonomy over local finances is very limited… The dominant narrative advanced by disgruntled municipalities is that they are locked into an ‘unsustainable’ and ‘unhealthy’ financial situation.” Worryingly in the last decade, many councils have begun to take out commercial loans, with unsupervised and apparently unregulated borrowing on the rise in the bigger municipalities, while many smaller ones are already in debt.

Does This Strengthen the Regime?

Local councils, Professor Tajbakhsh argues, have not led to democratization. Instead they have consolidated the Islamic Republic by adding an additional managerial layer that operates broadly in line with top-down regime policies, while integrating the population through carefully-calibrated local elections.

The ability of some bigger cities to demand structural change may increase in the coming years

At the same time, councils are so constrained in their activities that, together with low taxation, they give people little incentive to engage spontaneously or take part in civic life.

This does not mean they have no potential to enact meaningful change. In Professor Tajbakhsh’s view the goal of an effective and productive government, democratic or not, is to “maximise the economic opportunities for as many of the population as possible”.

In larger cities, calls have become louder in recent years for increased autonomy and expenditure responsibilities. “We have 10 cities with above a million population,” says Professor Tajbakhsh. “These cities are becoming actors.” In addition, he points out, “These elections could have been eliminated and they haven’t been. The fact that these institutions exist gives some marginal grounds for optimism. They’re there, and they might be used in the future.”

In principle, he says, more autonomy in urban planning could be delegated to local councils if decision-makers were made as accountable as possible, with rule of law and enforceable penalties through the courts to prevent corruption. Local taxes should also be increased to the international standard, though these discussions would in practice have to be taken at the national level and might create push-back from residents demanding things in return.

At the same time, Professor Tajbakhsh believes there should be a push to improve ordinary Iranians’ awareness of what their local governments can achieve for them. “We are missing political pluralism,” he says. “Political parties should make urban governance part of their platform. I would like to see different parties to be allowed to express different views on what they see their city to be.”

Related coverage:

Your Guide to Local Council Elections in Iran

The Ayatollahs vs. A Zoroastrian City Councillor

Religious Minorities Barred from Running in Local Elections

The Relief Organization that has Angered the Revolutionary Guards

Reformists Turn the Tide in Tehran

The Corrupt Commander is the New Speaker of Parliament



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Iran's Local Government Stitch-Up, and How to Resolve It