Municipally Owned Corporations in Israel: Local Initiative and the Pursuit of Flexibility in a Centralised Context

Municipally owned corporations (MOCs) advanced to the forefront of Israel’s municipal arena in the late twentieth century, in a context of diminishing effectiveness of central state action that enhanced local entrepreneurialism. Infrastructure and economic development have been dominant tasks among municipal companies, including engagement in public-private partnerships (PPP) and inter-municipal cooperation, whereas social services predominated among municipal non-profits. Increased activity of MOCs has been accompanied by a simultaneous shift, from a regulatory vacuum to the formation of an extensive dual regulatory system based on private and municipal laws, eroding the flexibility of MOCs. These parallel trends highlighted the contradiction between the aim of MOCs to be flexible project-oriented municipal arms and the public concern to avoid using MOCs as inappropriate regulatory bypasses. These tensions are at the heart of the policy pursuit for a regulatory framework that balances the desire for local autonomy and the path-dependent centralisation embedded in Israeli politics. Despite tightening regulation, MOCs have remained an essential municipal tool. Inevitable public sector budget deficits and financing difficulties in the years following the Covid-19 crisis will make municipal companies crucial because of the need to resort to public-private partnerships and to develop income-generating municipal properties.