Extent and dynamics of the remunicipalisation of public services

ABSTRACT

Remunicipalisation of local public services has attracted the interest of scholars from different fields of the social sciences in recent years. Whereas earlier studies into this phenomenon were dominated by case-based analysis, there has been a noteworthy increase in quantitative studies in recent years. There is now, abundant evidence on the drivers of remunicipalisation especially the influence of pragmatic and political motivations. Other topics, such as the effects of remunicipalisation, however, remain underdeveloped. We provide an overview of the scope and dynamics of remunicipalisation, recent advances in its research, and discuss where future research should be directed.

KEYWORDS:

• Remunicipalisation
• pragmatism
• politics
• empirical studies; reverse privatisation; public services

Introduction

At the beginning of this century, the failure of concessions to private companies for water supply in large cities in Argentina (Baer and Montes-Rojas 2008) and Bolivia (Nickson and Vargas 2002) attracted much attention. The remunicipalisation of these concessions led to a debate about the apparent reversal of the privatisation wave that had been unleashed in previous decades (for example, Kohl 2006). In Europe. this debate intensified following high-profile remunicipalisations such as that of the water service in Paris and energy utilities in several German cities (for example, Hall, Lobina, and Terhorst 2013).

Parallel to the early reversals of privatisation in Latin America, Warner and Hebdon (2001) published a highly influential US-based study of privatisation and its alternatives including reverse privatisation (that is, the contracting back-in of previously outsourced services). Subsequently, Hefetz and Warner (2004) focused on reverse privatisation to explain the dynamics of the government contracting process, in which reversal of privatisation was seen primarily as a management reaction to disappointment with the results of private delivery of public services.

As the frequency of remunicipalisation cases increased worldwide in the second decade of the century, there was an expansion in the academic literature on public sector reform covering aspects such as the incidence, varieties, causes, and impacts of remunicipalisation. This special issue is devoted to recent developments at the municipal level.¹

Clifton et al. (2021) draw attention to a lack of definitional clarity around remunicipalisation and a tendency to conflate the term remunicipalisation with other shifts in the delivery mode of service provision such as municipalisation (that is, creating a new municipal company to deliver a public service), corporatisation (that is, shifting in-house delivery to various government controlled corporate forms) and inter-municipal co-operation. Policymakers choose between these and other modes of service delivery and changes from one mode to another can be towards privatisation or towards public delivery. Remunicipalisation is therefore just one of several shifts to alternative modes and this invites questions about trends over time in different jurisdictions and the motivation for choices made by decision makers. The following section presents an up-to-date analysis of the extent of remunicipalisation and its dynamics.

Extent and dynamics of remunicipalisation

The Transnational Institute (TNI) provided comprehensive international data on remunicipalisation experiences in two consecutive reports (Kishimoto and Petitjean 2017; Kishimoto, Steinfort, and Petitjean 2020). Since then, the Public Futures collaboration project has been developed between TNI and the University of Glasgow. This project, led by Andrew Cumbers (University of Glasgow), has expanded the number of organisations and associations around the world that provide regularly updated information concerning cases of remunicipalisation. The coverage of the database is certainly not spatially homogeneous, with the global south seemingly underrepresented. Nevertheless, it remains the most comprehensive international database providing evidence on the remunicipalisation phenomenon (Albalate, Bel, and Reeves 2022).

The Public Futures database includes information on different aspects of de-privatisation including municipalisation and remunicipalisation as well as the re-nationalisation of state-owned enterprises. The data covers de-privatisation at all levels of government (country, region, and local). We are particularly interested in cases of remunicipalisation; that is, changes at the local level that involve a return to public management of a service that was previously delivered by a private actor. For this reason, we have selected cases that involve either a municipal government or inter-municipal cooperation recovering the management of a service. We do not therefore consider cases involving national or regional governments, nor do we consider the introduction of new services even if they are provided by municipal governments (that is, municipalisation).²

Table 1 provides detailed information on the incidence of remunicipalisation operations implemented in different countries and involving different sectors. Urban water services is by far the leading sector in terms of number of remunicipalisations. This is consistent with the controversial history of water privatisation both in terms of its drivers and outcomes, a feature that was recognised at the early stages of the privatisation phenomenon even in evaluations that were generally favourable towards privatisation (for example, Megginson 2005). France is the country where the remunicipalisation of water services has been most prevalent, which is consistent with the historically high level of private management of French water services (Bel, 2020). Appreciable levels of water service remunicipalisation have also been recorded (albeit to a lesser degree) in Spain and the US.

Table 1. Distribution of remunicipalisation cases by country and sector.

Country	Total Cases	Water	Energy	Waste	Health Care & Social Services	Transport	Other
Germany	257	21	175	12	20	1	28
France	168	116	3	3	0	21	25
Spain	117	39	2	12	13	2	49
United Kingdom	105	2	1	15	11	10	66
United States	91	75	5	0	2	0	9
Australia	49	8	1	1	14	7	18
Norway	39	0	0	19	15	0	5
Canada	35	8	0	7	1	3	16
Denmark	29	0	0	12	5	1	11
Japan	17	0	3	0	2	0	12
Argentina	14	8	0	1	2	0	3
The Netherlands	14	0	0	3	0	3	8
Italy	13	4	0	0	2	0	7
Austria	12	0	1	0	0	4	7
Other (40)	92	52	17	9	4	5	5
Total	1052	333	208	94	91	57	269

18 cases still to be implemented by the beginning of 2024.

Source: Adapted from Álvarez-Verdugo and Bel, (forthcoming) and updated with Public Futures Database.

The second sector in which remunicipalisation has been most frequent is energy services, with Germany accounting for 84% of observed cases. This can be explained by the high incidence of local energy services in Germany compared to other large countries in which energy suppliers are owned or regulated at higher jurisdictional levels. One of the main motivations for remunicipalisation in this sector was the necessary (and costly) restructuring required to address environmental and climate change concerns (Stiel 2023). The international data also show that remunicipalisation has occurred in other services such as waste management, health and social services, and transportation, for which greater diversity is observed between countries.

Recent literature has been characterised by intense debate about the structural effects of remunicipalisation processes. On the one hand, a stream of the literature, mainly based on case studies (most notably covering water in cities such as Paris, Berlin and Grenoble), suggested that remunicipalisation is a transformative process through which private delivery is reversed and governments take more direct control of public services delivery in response to opposition to the privatisation wave of the last decades of the last century (Cumbers 2013; Cumbers and Becker 2018; Hall, Lobina, and Terhorst 2013; Lobina, Kishimoto, and Petitjean 2015; D. McDonald 2018). On the other hand, analysis that is largely based on quantitative studies, suggests that remunicipalisation has mainly been a reaction to disappointment with the outcomes of private delivery. Moreover, decisions to remunicipalise represent a pragmatic approach to public service management rather than one guided by ideological views about the superiority of public provision and control (Albalate and Bel 2021; Clifton et al. 2021; Voorn, Van Genugten, and Van Thiel 2021; Warner and Aldag 2021).

Although analyses of the drivers of remunicipalisation find that politics have some relevance (for example, Campos-Alba et al. 2021; Gradus and Budding 2020; Lu and Hung 2023) the degree of influence tends to be mild, a finding that is compatible with the importance of pragmatic motivations.³ The dynamics of remunicipalisation experiences at the global level therefore effectively rule out the interpretation that it represents a structural reversal of private intervention in the provision of public services.

Figure 1 shows the number of cases recorded in the Public Future database since 2000. The data gathered over the last two decades show a gradual increase in the number of remunicipalisations during the first decade of the century. In 2009, at the start of the Great Recession, the incidence of remunicipalisation increased significantly which heralded a period of growth that continued until 2016. The literature has identified two important factors that contributed to the increase in remunicipalisations between 2009 and 2106. First, the financial crisis triggered by the Great Recession put enormous stress on many companies including those that delivered public services, which may have increased the frequency of concessions failure.⁴ In addition, the aftermath of the Great Recession undermined the belief in private solutions to public problems and encouraged an increase in the role of the state (Albalate, Bel, and Reeves 2020; Levy 2017).

Figure 1. Based on Álvarez-Verdugo and Bel, (forthcoming) and updated with data in ‘public futures’.

There are 18 additional cases in which remunicipalisation has been formally decided and that are expected to be implemented after 2023.

The data indicate that remunicipalisation lost momentum after 2016 as the number of cases steadily declined and eventually bottomed out in 2023. The number of remunicipalisations implemented in 2023 may be biased downward due to lags between Public Futures receiving and publishing information. It is worth noting however, that the network of agents collaborating on the Public Futures project has expanded over time, so the data recorded for 2023 in Figure 1 can be taken as reasonably accurate.

Viewing the data over the entire period 2000–2023, it appears that the frequency of remunicipalisation has returned to the ‘normal’ that prevailed at the turn of the century. Thus, while privatisation no longer has the same force and hegemony that it achieved in the last decades of the last century, remunicipalisation has been more of a hype than a trend, as tentatively proposed by Clifton et al. (2021).⁵

Articles in the special issue

The pragmatism versus ideological transformation debate

The papers in this special issue provide fresh perspectives on some of the questions that remain contested in the remunicipalisation literature. For example, the papers by Warner (2023) and Paul (2024) present alternative perspectives on whether remunicipalisation represents a politically transformative re-publicisation of public services or a pragmatic market management process.

Warner’s review of the US experience is mainly based on a review of large-sample empirical evidence which does not support the view that remunicipalisation is driven by a political desire to restore public control of services. Decisions about the mode of delivery are mainly motivated by manager’s desire to find cost savings while maintaining service quality. This objective can drive decisions to either privatise or remunicipalise. The longitudinal evidence suggests that neither contracting out nor remunicipalisation have grown over time. The majority of service delivery arrangements (whether public or contracting out) are stable over time and new contracts or reversals happen at the margin.

The paper also highlights how a range of actors and institutional structures influence service delivery arrangements. Institutions including the courts, regulators and the interplay between government at the local, state and national levels are important. The paper describes how recent federal legislation such as the American Rescue and Recovery Act (ARPA) are favourable towards municipal control and do not privilege private investment. Warner concludes that such shifts in state and federal policy are likely to influence future trends at the local level.

Paul’s paper examines remunicipalisation in Germany where politics and stakeholders play a bigger role compared to the experience in the US. She adopts a qualitative case-based approach to examine the processes of remunicipalisation of waste and transport services in the district of Ilm-Kreis. The paper adopts a critical approach to the study of de-privatisation which highlights the complexity of such processes and emphasises the nature of their embeddedness in wider social, economic, and political contexts and relations. It therefore addresses what the author considers a shortcoming of the pragmatic approach, namely its narrow focus on conditions and actors involved in de-privatisation.

The paper provides rich insights into the complex nature of remunicipalisation. The in-depth case-study approach uncovers the dynamic interactions between proponents and opponents at the political level as well as the role and motivations of other actors including private companies and civil society. By disentangling the motivations and cultural context of remuncipalisation the author highlights the importance of methodology and emphasises the merits of the qualitative approach. In this sense, she argues that a quantitative approach based on large scale survey data cannot ‘adequately capture the diverse landscape of actors (beyond government officials) and the spatial and socio-political contexts they operate in’.

Notwithstanding the differences in methodological approach, the papers by Warner (2023) and Paul (2024) find common ground by emphasising the importance of institutions (including local, regional and specialist press and media, the courts and legal system and local business) as well as stakeholders (including citizens, workers, local parties and trade unions) in shaping the processes of remunicipalisation and shifting the terrain of local democracy.

Remunicipalisation as an option among other alternatives for government reform

The papers by Gradus, Dijkgraaf and Budding (2024), and by Szmigiel-Rawska (2023) examine how governments make regulatory choices (including remunicipalisation) in the Netherlands and Poland respectively. Gradus et al. use a dataset covering most Dutch municipalities and the mode of provision for waste collection for the period 1998–2018. This article examines different shifts between public delivery, private delivery, corporatisation and cooperation and analyses patterns over the entire period and between sub-periods.

Overall, they find that 56% of shifts were towards outside production whereas 44% of shifts were towards inside production. Over time, the relative number of shifts towards outside production dropped and remunicipalisation (labelled inhousesation and cooperatisation) became more important in latter periods. Significantly, almost 40% of the shifts were to corporatisation and there was not much reverse corporatisation. The number of municipalities with a corporation increased substantially from 5% in 1998 to 35% in 2011 and remained stable thereafter.

The paper also examines the association between shifts in delivery mode and socioeconomic (ethnicity and share of elderly people), political (political parties and fragmentation), and financial characteristics. It finds that conservative liberal councillors are in favour of corporatisation and privatisation, which is in line with earlier studies. Moreover, municipalities with a more political fragmented board are found to be less likely to corporatise or privatise waste collection. Political fragmentation does not appear to lend to difficult budget-related decisions. In terms of economic factors, they find that municipalities with higher unemployment are slower to outsource waste collection, especially to corporatise or cooperatise whereas high debt levels encourage exploration of alternative service delivery modes.

Szmigiel-Rawska (2023) adopts a novel transaction cost approach to analysing the choice of governance structure when Polish local governments externalise service provision. Whereas earlier studies have examined the effect of service characteristics including asset specificity and ease of measurement, this paper focuses on the role of ex-post monitoring service contracts (covering water, daycare for elderly people and transport services).

The author conducted a questionnaire-based national survey of Polish municipalities in 2018. The questionnaire identified fifteen organisational forms which were grouped under three broader categories, namely: (1) where the service is provided by the municipality; (2) in cooperation with other municipalities or (3) with private agents. It examined the perception of transaction (monitoring) costs where the decision concerning the form of service delivery had already been implemented.

The analysis generates some noteworthy results. The paper concludes that local government officials enter different contractual arrangements with an awareness of different types of cost levels (including production and transaction costs). However, they find support for earlier studies that find decisions concerning organisational form are not solely about costs but are also driven by pragmatic considerations (Hefetz and Warner 2004). The examination of different categories of monitoring costs also provides interesting insights. It finds that the highest monitoring costs in contractual relations are not those typically associated with quality monitoring but are instead related to financial management and influencing price as well as influencing decisions made by the contractor.

The analysis also sheds light on the remunicipalisation process. The main tenor of the results is that the transaction costs associated with public-public forms of contracting are higher than those incurred under in-house production and contracting out to private providers. Interestingly, the authors conclude that remunicipalisation is more likely to be towards in-house production instead of public–public arrangements such as municipally owned corporations or inter-municipal cooperation.

Sectors, types of government and the decision to remunicipalise

The paper by Desmaris and Van de Velde (2024) examines the decision to remunicipalise public transport services in French towns and cities. It explores the extent of remunicipalisation and the factors explaining decisions by mobility organising authorities to move from delegated management (by the private sector or semi-public company) to direct management by a public operator.

The authors provide a rich description of the organisational and legal characteristics of the French urban transport sector where 90% of networks operate under outsourced management. An original database is created by drawing from several sources. The data shows that delegated management remains the dominant mode of delivery but remunicipalisation is occurring more frequently especially between 2011 and 2022. Recently, it has also been spreading to larger cities and shifts from delegated private management of services to local public company management accounts for 80% of remunicipalisations to date.

The paper uses a novel qualitative approach to explore the reasons for remunicipalisation. It devises an exploratory and replicable framework to identify factors that trigger (for example, elections) and motivate (for example, the goal of improved efficiency) remunicipalisation. The results, drawn from interviews with public officials, indicate that factors triggering switches to public management are straightforward. The ending of the operator’s contract was cited as a trigger in all the cases whereas the second most frequent trigger was a major change to the bus network.

The results indicate that motivations for remunicipalisation are more complicated as different factors jointly influence decisions. The paper concludes that political factors stand out as key motivations of elected officials. Although economic and transaction cost motives are important, they are dominated by political factors.

Mayol and Saussier (2023) analyse whether the kind of local government in charge of supervising water services significantly influences the probability that they will be remunicipalised. Their analysis uses data from the water services sector in France where concession contracts for water services have been widespread since the 1960s.

To examine the role of type of government on the decision to remunicipalise the authors focus on two distinctive types of inter-municipal cooperation – syndicates and Joint Municipalities Associations (JMAs). A syndicate, ‘is a structure dedicated to managing a local public service and is created on a voluntary basis’. A JMA is an autonomous and federative political entity between municipalities. JMA’s are more formal and less complex to manage. The authors hypothesise that the probability of remunicipalisation is lower for syndicates than JMAs.

The second hypothesis relates to water tariffs which have increased over time and have encouraged remunicipalisation. Water tariffs have two components with one share going to the private operator and the other going to local governments. The authors make a connection between the government’s share of the final tariff and its involvement in supervising water services. They hypothesise that the higher the tariff share received by local government, the higher the probability of remunicipalisation.

Using a dataset covering the period 2009 to 2021 the authors quantitatively estimate the relationship between the type of inter-municipal cooperation and the remunicipalisation decision. The results suggest that joint municipalities are more likely to remunicipalise compared to municipalities alone whereas the opposite result applies to syndicates. These results are noteworthy given the recent (2015) legislation that requires inter-municipalisation especially in rural areas with small municipalities. While inter-municipal cooperation is expected to be more frequent this paper suggests the probability of remunicipalisation will depend on the structure and governance of cooperation.

Conclusion and future research agenda

Remunicipalisation will continue to occur as a pragmatic reaction to disappointment with outcomes from privatisation. Its intensity in any period will however depend on prevailing economic conditions and their impact on social views and preferences about the role of both the government and the private sector in the domain of public service delivery.

The literature on remunicipalisation to date has mainly focused on its frequency, causes and how it should be interpreted. Two important questions remain largely unanswered and point to likely directions for future research which may add to some recent contributions.

First, there is scope for further rigorous quantitative studies of the outcomes of remunicipalisation. Insights into the effects of remunicipalisation are provided in a small number of studies. For example, Stiel (2023) analysed remunicipalisation of energy services and productivity in German cities and found no lower productivity after remunicipalisation. In addition, two yet unpublished papers have analysed the effect on prices in the water sector. Porcher (2012) studied price changes after remunicipalisation in France and found no systematic price difference between remunicipalisations and ‘non-reforming’ municipalities. Albalate et al. (Forthcoming) compared price changes between remunicipalisations and contemporaneous privatisations in Spain. They found lower price increases were associated with remunicipalisation compared to privatisation, although this result was entirely driven by several cases of privatisation where previous prices were abnormally low. More robust empirical research on the effects of remunicipalisation (both on costs and quality) is certainly needed.

Second, remunicipalisation has often been championed as a means of democratising control over the provision of public services. However, Cumbers and Paul (2022) cautioned that it remains unclear whether post-remunicipalisation governance reforms have succeeded in achieving more democratic community participation or have been used to strengthen partisan-political control. This points to the political economy of remunicipalisation as a potentially fertile area for future research into the delivery, control and performance of public services in the 21^st century.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Additional information

Funding

This research is part of the project PID2022-138866OB-I00, funded by MICIU/AEI/ 10.13039/501100011033 and ERDF/EU, and the project 2021 SGR 00261, funded by Generalitat de Catalunya. We appreciate the comments received from the participants in the workshop Frontiers of Local Government Reform (Intermunicipal Cooperation and Remunicipalisation), held in Barcelona, November 2022.

Notes

1. This special issue was planned and developed following a workshop on Frontiers of Local Government Reform (Intermunicipal Cooperation and Remunicipalisation) held at the Faculty of Economics and Business of the University of Barcelona in November 2022, where initial ideas and proposals were presented and discussed. The articles in the special issue were processed through the regular evaluation process of this journal.

2. Municipalisations have been particularly frequent in the telecommunications sector in the US, and in the energy sector in Germany.

3. See Voorn (2021) for a meta-review of the literature that explicitly combines the influence of both pragmatic and political drivers. See McDonald (2024) for a very recent meta-review where multiple strands of the remunicipalisation literature are identified and compared.

4. In fact, related research by Albalate, Bel, and Reeves (2021, 2022) analysed the determinants of the final implementation of remunicipalisation decisions and the delay decisions and their implementation. They also analysed how governments choose between terminating contracts and letting them expire to implement remunicipalisation. They found that the Great Recession positively influenced the frequency of implementation of remunicipalisation decisions and also reduced the delay between decision and implementation.

5. Other alternative reforms, such as corporatisation of public management and intermunicipal cooperation have expanded. These reforms lay beyond the scope of this text.