A municipality is an urban area, usually a city or town, that governs itself and manages its own income and expenditures. Municipalities must create formal budgets, typically on an annual basis. These are formal plans that outline financial status and account for projected spending on essential services.

Municipal Budget Overview

A municipal budget is the projected financial operating plan. In general, a budget accounts for expected revenues and allocates resources to particular expenditures. In large cities, a municipal budget can be a complex set of documents outlining the means by which resources from many sources will be allocated to a variety of departments and services. The municipal budget of a small town can be a short, concise one-page outline.

Revenues and Expenditures

Generally, a municipal budget contains two broad types of categories: expected revenues and estimated expenditures for the upcoming fiscal year, or six months if the budget is biannual. The number of subcategories that make up the total revenues and expenditures varies according to the size of the municipality, taxes and fees the local government imposes, and the number of services the municipality provides to its residents.

Revenue Sources

The anticipated revenues in municipal budgets will usually include a detailed account of expected income and the sources from which the income will be derived. Common sources of municipal revenue include taxes -- property, occupation (income), motor vehicle usage and hospitality (hotel, restaurant and liquor.) In areas where utilities such as water, sewer, electric and gas are owned or operated by the municipality, residents may pay a utility tax. Fees collected from business licenses and building permits are part of many municipal budgets. In some areas, incorporated towns and cities receive a portion of state-shared revenue.

Expenditure Types

Expenditures in a municipal budget include anticipated expenses for services the local government provides. Common among these expenditures are salaries, wages and benefits for municipal employees, and expenses for supplies and housing to maintain and operate government offices. Larger municipalities may provide schools and fund social agencies for their residents. However, many municipalities, both large and small, provide public safety services such as law enforcement, fire protection and a 911 service. Many urban areas also provide public parks, libraries, swimming pools and other common areas. Maintenance of these public areas, as well as roadways and public transit systems, are other common expenditures.