Beyond the limelight Poland’s municipal self-governance for democratic public services

There are 3070 municipal companies in Poland,1 one of the highest numbers in Europe2. However, they have so far gone unnoticed in the international (re)municipalisation debates. It is worth giving these companies a closer look for they offer inspiration, alongside some cautionary insights, for activists, scholars and policy-makers concerned with the democratic ownership of public services. 

While remunicipalisation scholarship and activism tend to focus on reclaiming public services from private owners, Polish municipal companies emerged in a different way. During the country’s transition from communism to capitalism, assets and services previously managed by the state administration controlled by the Polish United Workers' Party became municipal. We therefore saw widespread municipalisation in the form of municipalities claiming state assets and subsequently establishing new municipal enterprises. Polish municipalities then withstood attempts at privatisation of these companies amid the Washington Consensus-based economic reforms and Poland’s warm embrace of capitalism in the 1990s. These companies have been providing municipal services, mostly successfully, for some 30 years and are interesting case studies because of their resilience not only to privatisation but also to centralisation.

To draw inspiration from Polish local government, one of the country’s most trusted public institutions,3 we should first trace the trajectory of its revival. Understanding its history will help us make sense of its current successes, shortcomings, and struggles.4

A good way to start unravelling Polish local government is with the very term – samorząd lokalny. Translated literally it means local self-government. The ‘self’ prefix is important. It reflects the constitutional definition of a municipality as a self-governing community. Poland is strongly decentralised, underpinned by the subsidiarity principle, but a unitary state, making it a rare hybrid (akin to Denmark). For many politicians and experts, Polish democracy is equivalent to local self-government. Clashes between the Law & Justice (LJ) Party, which ruled between 2015–2023 with coalition partners and had centralising ambitions, and local government representatives attest that. Centralisation of municipal water tariffs implemented by LJ was seen by mayors as undemocratic. Local democracy is cherished because Polish people, especially those involved in local governance, remember living without it. Poland did not have any institutions of local democracy for the large part of the twentieth century. How did this situation, and the return to local governance, come about?

Let’s start in 1950, when the Polish United Workers' Party officially abolished local government. From then until 1990 all local matters were managed by the central administration. However, a group of opposition-leaning scholars worked on potential changes to this system. They claimed that only through municipal autonomy could the totalitarian communist regime be displaced.5 This required a revived local government that is accessible to everyone and is a supportive to civic activity. Making that happen would involve democratic local elections, transferring a major share of state property to municipalities, granting them autonomy in defining how to exercise their responsibilities, and giving them legal protection.6

After a fierce political struggle during the transition period,7 these ideas were incorporated in the bills which restored local self-government bodies in the 1990. Their newly granted autonomy enables local government bodies to determine ‘public action in their jurisdiction, to set policy priorities, to decide upon organisational matters and to manage their resources’.8 The scope of restored municipal governance ‘extends to all public matters not reserved in laws for other entities’9 and comprises various types of public services.10 

During the tumultuous decade since their revival, notwithstanding economic difficulties and the expedited neoliberal privatisation promoted by the International Monetary Fund and the World Bank, municipal governments gradually entrenched their status within the emergent democratic framework. Municipal autonomy has also been reinforced by the new constitution of 1997.

It is worth noting that the people who were staffing and elected to these newly created local government bodies had no previous experience in that line of work. These were ordinary citizens and opposition activists, often connected to the Solidarity labour union and movement, trying to learn and to advance local democracy by doing it. They were aided by the Foundation in Support of Local Democracy (FSLD), an NGO established in 1989 to support civic society and self-governance.11 FSLD provided training, organised study visits abroad, and served as a platform for an exchange of good practices, ideas and issues. 

With the process of the restoration of local autonomy sketched, we can now explore how it engendered municipal companies.

The newly created municipalities took over large amounts of assets and institutions previously owned and run by the state administration. Many of these assets were quickly sold to private actors, sometimes without proper oversight by councils and mayors and with little participation of local communities,12but a considerable part, especially of utilities, remained under municipal control. 

Reorganising these assets and entities proved difficult. The initial legislation was confusing and inconsistent, and while the sale of strictly commercial entities was easy, institutionalisation of public services posed challenges.13 It was unclear what organisational form they should assume: an internal department of local government or a separate legal entity such as a commercial company. Many municipalities decided to wait for coherent regulations and meanwhile relied on outdated communist legislation. Finally, the Municipal Economy Act of 1996 obliged them to take action. This Act urged them to establish companies regulated by the Commercial Code, a message reiterated in 2009 with amendments further reducing the use of other institutional types.14 

As a result, Polish legislation has no specific form for municipal companies, they are simply commercial companies owned by municipalities. It is an ambiguous solution, as such companies are both independent from and inherently linked to local governments and municipal communities, and this causes some tensions. The main one is a clash of priorities. The Commercial Code requires these companies to focus on profits while municipal ownership requires them to maximise public utility15 and these do not always coalesce. 

Another issue is transparency. Citizens, who are de facto owners of municipal companies, should have access to company data, managerial decisions, contracts signed, financial results, salaries paid, remuneration policies, objectives set for the management, and results of audits. Councillors should have free access to corporate premises and board meetings. Watchdog Poland assessed the ease of access to municipal companies’ information in 2021–2022 and concluded that there is inconsistency in what they share on their Public Information Bulletins (i.e. websites) and that councillors are reluctant to use their right to audit municipal companies.16 Even though municipal companies cannot refuse to respond to requests for public information (as some tried, claiming commercial secrecy), the ready availability of the data can be improved.

The third tension is concerned with the range of goods and services municipal companies provide. They enjoy considerable freedom in terms of the scope of their activities. Polish municipalities can run any type of business as long as they can justify that it is needed by a local community and constitutes a broadly understood public service. There have been cases of allegedly overly commercial ventures (e.g. liquor retailing on a municipally owned petrol station)17 but overall, this leeway is generally not abused.

Most companies are in full or majority municipal ownership, but private investors have been interested in takeovers and joint ventures.18 The municipalities I interviewed have rejected numerous privatisation offers. One vice-mayor claimed that in the 1990s his phone was literally hot because of the number of calls he received. Despite this pressure, privatisation of municipal services was not an attractive option for municipalities: ‘You do not sell your crown jewels’, as one of the interviewees put it. It appears that municipal ownership is widely believed to be advantageous. The rare instances of privatisation after state assets became a municipal responsibility occurred due to municipalities’ financial difficulties. Running public services such as water and sewerage single-handedly can be difficult, especially for smaller, rural municipalities.

Local governments appreciate that municipally-owned companies can prioritise social goals over profits, provide important know-how to the local government – knowledge which private companies prefer to keep to themselves – and make it easy to coordinate municipal initiatives across sectors of the economy. For example, the municipality of Szczecin shows that it is relatively easy to arrange for a municipal waste treatment company to use the energy it produces to power electric trams, or to bring together a municipal aquapark, the local education department and a water and sewerage company to design educational activities related to water and ecology.

As of 2017 there were some 3070 companies fully owned or controlled by municipalities.19 Majority of them operate in the water, sewerage and waste treatment.20 Other notable sectors are real estate, heat and energy, transport, culture and recreation, healthcare and construction.

Polish local governments enjoy considerable leeway in terms of creating and running companies and cooperating with each other and with other public institutions, notably county and regional governments. This can be beneficial as they can respond to citizens’ changing needs, local conditions or arising opportunities by, for example, forming flexible intermunicipal companies or expanding the scope of their activity. Case studies below provide illustrative examples and more can be found in the Public Futures database.21

The above examples show that Polish local governments are making good use of the considerable discretion they have in terms of the scope and reach of public services they can provide. But it does not mean that they never go awry. Zofia Dolewka argues that municipal companies may become instruments of local politics.24 Since they are separate legal entities, with their own profit and loss statements and access to lending instruments not available directly to local governments, they may be used to carry the costs incurred by the local government elsewhere.25 Dolewka also argues that the structure and size of municipal companies’ workforce is not strictly analysed and controlled, leading to elevated operational costs. This argument is reinforced by Andrzej Andrysiak, who raises the issue that mayors, especially in small municipalities, can amass too much personal influence through the control of public sector employment and municipal media outlets.26

Poles acknowledge that such misconduct, and other mistakes, can occur, but tend to associate them with incompetence than malevolence.27 Since 2006 local governments have been positively evaluated in public surveys. In 2020 74 per cent of respondents rated local government positively.28 Local governments enjoy not only constitutionally protected autonomy, but also strong support from their constituents compared to the central government. It does not mean however, that they cannot be undermined. In the next section we turn to the challenge of creeping centralisation.

Despite its national success, the LJ party, which came to power in 2015, did not fare so well in elections to local governments. Because of this, and the constitutionally protected autonomy of municipalities, LJ had little direct influence on local affairs.29 To circumvent that it engaged in efforts towards creeping centralisation and weakening local governments.30 Dawid Sześciło claims that it opted for this strategy instead of amending legislation to overtly subjugate local governments (as done in Hungary by Viktor Orbán) because of the widespread support of citizens for their local institutions.31 This creeping strategy entailed:

• gradually limiting municipal revenues
• providing targeted subsidies for politically compliant municipalities
• ignoring the subsidiarity principle and addressing municipal residents directly, bypassing local government
• media propaganda aimed at undermining trust in local institutions.32

The biggest impacts of this covert centralisation were:

• limiting the discretionary power of local governments to manage schools
• profoundly reforming the education system without any public consultations or coordination with local governments
• curtailing regional government’s environmental protection capacities
• centralising municipal water and sewerage tariffs and significantly worsening the financial situation of municipal companies in this sector.33 

Throughout the eight years of LJ’s rule, local government bodies, civic organisations and politicians supportive of municipal autonomy resisted the assault. They ed in the streets (e.g. employees of water and sewerage companies and representatives of their local governments) and formed a nationwide ‘Yes! for Poland” self-government movement, selected members of which ran for parliament.34

In the 2023 elections, which saw the highest turnout in modern Polish history (74 per cent), the LJ was ousted, although it still commands considerable support, and replaced by a coalition of central-liberal, left and Christian-conservative parties. Local governments are hopeful that this change will bring a reversal of the centralising tendency but are wary that the changes implemented by LJ may still be alluring even for the liberal parties. 

Poland’s experience provides a warning that even if municipalities have significant autonomy and operate their companies successfully, democratic control can be threatened not only by privatisation, but also by an assertive, authoritarian and centralising state. And this may have dire consequences for affordable and quality public services. 

Take the example of the water and sewerage sector, where in Poland private ownership is almost non-existent. Since their inception, the municipal companies in this sector did an enormous amount of work of modernising the poorly maintained infrastructure inherited from the communist times. They improved water quality, which in the early 1990s was poor35 and now surpasses EU standards. The companies have been professionalising by training their staff, engaging in educational and environmental initiatives, and providing free access to water in public spaces, but because of the tariff pressure extorted by the LJ’s central institutions they have been brought to the brink of bankruptcy. The hard won transition to democracy and restoration of municipal autonomy has been damaged, but not shattered. It is possible that the water and sewerage companies will recover, but how this will proceed remains to be seen.

The second take-away is an invitation to look at the experiences of numerous municipal and intermunicipal (or municipal-regional) companies for insights and particular solutions. We are often drawn to spectacular and more recent cases of remunicipalisation in the world’s biggest cities (and for a good reason) but interesting things are happening beyond the limelight too. Remunicipalisation can be especially difficult for small municipalities which lack the scale to run public services efficiently on their own. But if granted leeway to cooperate, they can circumvent this limitation, as in the cases of public transport in Brwinów and the Warsaw Commuter Railway, waste management in Kędzierzyn-Koźle, or the intermunicipal dog shelter near Poznań highlighted in this essay.  

Polish municipal companies are not flawless. There are issues such as overly commercial behaviour and lack of transparency. This is another reason why we should have our eye on them. But their experience offers lessons for all those interested in the democratic ownership of public services.

This essay is part of TNI’s Future is Public work, which aims to strengthen social movements to build affordable, democratic and better public services around the world. Their struggles and successes are tracked by Public Futures, the only evidence-based de-privatisation database in existence that TNI has been developing with the University of Glasgow and Public Services International.