Regev strikes deal with Treasury on congestion charge

In return for lifting her objection to the charge, Minister of Transport Miri Regev will receive finance for a pet project - a railway to Kiryat Shemona. Both ministries deny the existence of such a deal.

The bad blood between Minister of Transport Miri Regev and Minister of Finance Bezalel Smotrich tends to break forth when they come to negotiate on the state budget. At the government meeting on the budget last week they exchanged blows over the decision to raise public transport fares, but in closed negotiation rooms they actually reached understandings.

These understandings are not only anchored in the budget but also in a budget memorandum signed by officials of the Ministry of Finance Budgets Division and of the specific ministry in question, containing promises for the future, explanations, and conditions. In the past, this document was considered secret, and in response to court petitions the Ministry of Finance would insist that it should not be made public. But over time the memoranda started to leak to the press and media, exposing the promises and deals between the sides.

Therefore, at least as far as negotiations with the Ministry of Transport are concerned, a controversial practice has developed in recent years of unofficial negotiations and oral agreements, in order to prevent leaks. So while the two sides have announced a series of agreements, such as on raising fares, preventing cuts to infrastructure projects, and metropolitan transport authorities, in the corridors of government entirely different, dramatic and secret negotiations took place, the main elements of which are revealed here, relating to a deal between the ministries: the imposition of the congestion charge in the Tel Aviv area, despite Regev’s opposition, and future budgeting of the railway to Kiryat Shemona, despite the opposition of the Ministry of Finance.

The confrontations with Regev

In 2021, when the two-year budget was passed by the previous government, the two ministries (then headed by Avigdor Liberman as minister of finance and Merav Michaeli as minister of transport) agreed on the imposition of a congestion charge on vehicles entering Gush Dan (greater Tel Aviv) from 2025. In exchange for the congestion charge, the Ministry of Finance showered billion of shekels on various transport projects: public transport lanes, terminals, cycling paths, light rail lines, and a huge addition to the public transport subsidy.

With the change of government, however, Regev expressed downright opposition to the congestion charge, and even instructed Ayalon Highways to halt the tender process for operating it. In response, the Ministry of Finance turned off the tap, and budgets for additional bus services were held back.

In the past year, as revealed by "Globes", the Ministry of Finance has begun to promote implementation of the congestion charge without the Ministry of Transport and despite the minister’s objections. The Ministry of Finance even expects revenue of NIS 1.7 billion from the charge in 2027. By law, however, in order to draft regulations and set conditions for the tender for constructing payment gates on roads entering the metropolis, the minister of finance has to consult the minister of transport. Therefore, for the measure to be put into effect, Regev is at least required not to oppose it actively.

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Another bone of contention between Regev and her people and the Ministry of Finance is financing of railways from the center of the country to Kiryat Shemona in the north and Eilat in the south. At the height of the confrontation, Regev would not agree to sign the compulsory purchase orders required for construction of the Tel Aviv area Metro until the government passed a decision on constructing these two railways. The only budget received for them, however, was NIS 2.4 billion for planning the routes, a sum that was diverted from other Ministry of Transport projects and was not given as an addition.

Now, alongside the efforts to implement the congestion charge, the sides discussed a resolution that will be brought before the government that a railway will be constructed to Kiryat Shemona at a cost of NIS 20 billion. Such a decision will not oblige the Ministry of Finance to allocate a budget immediately, or even to provide for it in the 2025 budget, but it will enable the Ministry of Transport to demand the budget in the future.

If Regev does succeed in obtaining full finance for the project, it will be portrayed as hers, unlike other projects that were promoted under her predecessors for which she seeks to take credit for their execution. This is all despite the fact that the economic justification for constructing a railway line to Kiryat Shemona is a matter of fierce dispute.

Necessary cooperation

Industry sources who talked to "Globes" say that Ministry of Finance officials believe that the present government is here to stay, and that it is therefore best to reach understandings with the politicians rather than accumulate unwinnable conflicts. It is also believed that in Regev’s close circle the realization has dawned that without the Ministry of Finance’s cooperation it is not possible to score achievements. So a discourse of doing deals has replaced the loud and widely publicized confrontations of the past couple of years, and the atmosphere has changed from one of bad blood, shouting and threats to one described by sources involved in the negotiations as "statesmanlike".

As far back as the 1990s, various reports in Israel and by the OECD indicated the need to cut back the powers of local government in the realm of public transport and transfer them to metropolitan authorities, but successive Israeli government only made declarative decisions about the matter and took no action on it. Behind the move to incorporate the measure in the Economic Arrangements Bill accompanying the state budget lies a deal between the Ministry of Transport and the Ministry of Finance to turn the Public Transport Authority into an agency of the former, making it larger and more independent. The Ministry of Transport will also have a foothold in the metropolitan authorities.

The two ministries rushed to try to pass this reform even though its formulation is incomplete, to say the least. The language of the bill is full of various conditions, which makes it likely that disputes between the Ministry of Finance and the Ministry of Transport will continue even if the bill passes the Knesset (where objections can be expected) as is, and the road to setting up the metropolitan authorities is still a long one.

Cuts and price rises

The budget includes a substantial rise in public transport fares, with the price of a single bus ride rising from NIS 6 to NIS 8, and the price of monthly passes rising accordingly. At the same time, the scope of discounts will be widened, and in addition to demobilized soldiers, residents of the periphery of the country, disabled people and recipients of National Insurance benefits, who already pay reduced fares, those in low socio-economic groups will also receive discounts, and pensioners will travel for free. The Ministry of Transport has also received a budget of NIS 250 million for additional services and lines.

The planned cut in spending on infrastructure of NIS 700 million a year until 2028 has been reduced, and new projects have been budgeted for. Thus in 2025, projects amounting to NIS 700 million will be postponed; in each of the following two years the postponements will amount to NIS 500 million; and in the fourth year they will amount to only NIS 100 million. Among the new projects that will be budgeted are an investment of NIS 1.5 billion in setting up Metronit high-capacity bus routes throughout Israel, and dealing with Road 40, on which many fatal accidents occur. It was also agreed that the ministries would act to find a budget for extending the light rail system Red Line to Rishon Lezion, after the budget for this was taken away last year to finance road building. At the time, the Ministry of Transport denied the "Globes" report that the budget had not actually been given.

The Ministry of Transport stated in response to this article: "Contrary to the report, no agreement as described exists." The Ministry of Finance also issued a denial, saying, "Contrary to what is described in the article, there is no agreement on this matter between the ministries."

Published by Globes, Israel business news - en.globes.co.il - on November 5, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.