The financial crisis affecting many of the local authorities in Israel has a significant influence on their ability to supply municipal services of an appropriate amount and quality. So far, studies have been addressed to the financial crisis from a political approach by discussing aspects such as the problematic interrelation between central and local governments together with resource allocation. In this paper we investigate the financial crisis of many local authorities in Israel from a strategic point of view. However, this is by no means to argue that other approaches such as institutional and political ones are not important. Rather, the paper investigates whether the financial crisis affecting many Israeli local authorities is a result of their own strategies and practices. Specifically, we have used the resource-based approach to explore the nature of their joint crises and the potential strategic responses that the local authorities should adopt in order to move into a more favourable state. In particular, we examine three resource-based systems: customer-oriented, organizational-culture, and human resources, as the strategic roots of this crisis. We also examine the way they could produce a sustainable competitive advantage and could lead local authorities from the present position to a better one. The article recommends that the heads of local authorities should move to a resource-based strategy in order to perform both more efficiently and effectively.