Regev strikes deal with Treasury on congestion charge

Disagreements between Transportation Minister Miri Regev and Finance Minister Bezalel Smotrich tend to arise when they come to negotiate the state budget. In the government meeting on the budget last week, they exchanged blows over the decision to raise public transportation tariffs, but in closed negotiating rooms they actually reached understandings.

These understandings are based not only on the budget, but also in the budget memorandum signed by officials of the Budgets Department of the Ministry of Finance and the relevant ministry, which contains promises for the future, explanations and conditions. In the past, this document was considered confidential, and in response to court petitions, the Ministry of Finance insisted that it not be published. But over time, the memos began to leak to the press and media, revealing the promises and deals between the two parties.

Therefore, at least with regard to negotiations with the Ministry of Transport, in recent years a controversial practice of informal negotiations and verbal agreements has developed, in order to prevent leaks. So, while the two sides announced a series of agreements, such as raising prices, blocking cuts in infrastructure projects, and urban transport powers, in completely different corridors of government, exciting and secret negotiations took place, the main elements of which are: Revealed here, what concerns the deal between the two ministries: Imposing congestion fees in the Tel Aviv area despite Regev’s opposition, and setting a future budget for the railway line to Kiryat Shmona despite the Finance Ministry’s opposition.

Confrontations with Regev

In 2021, when the previous government approved the two-year budget, the two ministries (headed by Avigdor Lieberman as Finance Minister and Merav Michaeli as Transportation Minister) agreed to impose a congestion fee on vehicles entering Gush Dan (Greater Tel Aviv) starting in 2025. In exchange for the congestion fee, the Ministry rained Billions of shekels in funding for various transportation projects: public transportation routes, stations, bicycle paths, light rail lines, and a huge addition to support public transportation.

But with the change of government, Regev expressed vocal opposition to congestion fees and even instructed Ayalon Highways to halt the bidding process for their operation. In response, the Ministry of Finance turned off the tap, and budgets for additional bus services were frozen.

Last year, as Globes revealed, the Ministry of Finance began promoting the implementation of the congestion charge without the Ministry of Transport and despite the minister’s objections. The Ministry of Finance expects revenues of NIS 1.7 billion from tolls in 2027. But according to the law, in order to formulate regulations and determine the terms of the tender for the construction of payment gates on the roads leading to the city, the Minister of Finance must consult the Minister of Transport. Therefore, for this measure to take effect, Regev must at least not actively oppose it.

Another reason for disagreement between Regev, her people, and the Finance Ministry is the financing of the railway from the center of the country to Kiryat Shmona in the north and Eilat in the south. At the height of the standoff, Regev did not agree to sign the compulsory purchase orders needed to build the Tel Aviv-area metro until the government made a decision on the construction of these two lines. But the only budget they received was NIS 2.4 billion for route planning, an amount that was transferred from other Ministry of Transport projects and was not given as an add-on.

Now, along with efforts to implement congestion charges, the two sides have discussed a decision that will be presented to the government to build a railway line to Kiryat Shmona at a cost of NIS 20 billion. Such a decision will not oblige the Ministry of Finance to allocate a budget immediately, or even provide it in the 2025 budget, but it will enable the Ministry of Transport to request the budget in the future.

If Regev succeeds in obtaining full funding for the project, it will be portrayed as her project, unlike other projects promoted under her predecessors for which she seeks to take credit. All this despite the fact that the economic justification for building a railway to Kiryat Shmona is hotly contested.

Necessary cooperation

Industry sources who spoke to Globes say Finance Ministry officials believe the current government is here to stay, so it is better to reach understandings with politicians rather than pile on unwinnable conflicts. It is also believed that in Regev’s close circle, the realization dawned that without the cooperation of the Finance Ministry no achievements could be achieved. Thus, the rhetoric of deal-making replaced the loud confrontations that received widespread media coverage over the past two years, and the climate changed from an atmosphere of anger, screaming, and threats to an atmosphere described by sources involved in the negotiations as “statesmanlike.”

As long ago as the 1990s, various reports in Israel and by the OECD pointed out the need to reduce local government powers in the field of public transportation and transfer them to urban authorities, but successive Israeli governments have only made public decisions on this issue. No action was taken on it. Behind the step to include this measure in the draft economic arrangements law accompanying the state’s general budget, lies an agreement between the Ministry of Transport and the Ministry of Finance to transform the Public Transport Authority into an agency affiliated with the Ministry, making it larger and more independent. The Ministry of Transport will also have a foothold in urban authorities.

The two ministries were quick to try to pass this reform, even though its formulation was incomplete, to say the least. The language of the bill is full of different conditions, making it likely that disagreements between the Ministry of Finance and the Ministry of Transportation will continue even if the bill passes the Knesset (where objections can be expected) as is, and the road to establishing urban authorities is still a long way off.

Discounts and price increases

The budget includes a significant increase in public transportation prices, with the price of a single bus trip rising from NIS 6 to NIS 8, and thus the price of a monthly ticket. At the same time, the scope of the cuts will be expanded, in addition to demobilized soldiers, periphery residents, people with disabilities, recipients of National Insurance benefits, who already pay reduced wages, and those from low socio-economic groups. He will also get discounts, and retirees will travel for free. The Ministry of Transport also received a budget of 250 million shekels for additional services and lines.

The planned cut in infrastructure spending was reduced by NIS 700 million annually until 2028, and a budget was allocated for new projects. Thus, in 2025, projects worth NIS 700 million will be postponed; In each of the following two years, the value of the deferrals will reach NIS 500 million; In the fourth year, it will reach only 100 million shekels. Among the new projects that will be included in the budget is a NIS 1.5 billion investment in establishing high-capacity Metronit bus lines throughout Israel, and dealing with Route 40, where many fatal accidents occur. It was also agreed that the ministries would work to find a budget to expand the red line of the light rail system to Rishon LeZion, after the budget allocated for this was withdrawn last year to fund road construction. At that time, the Ministry of Transport denied the “Globes” report, which confirmed that the budget had not been actually delivered.

The Ministry of Transport stated in response to this article: “Contrary to what was stated in the report, there is no agreement as described.” The Ministry of Finance also issued a denial, saying: “Contrary to what was stated 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 Globes Publisher Itonut (1983) Ltd., 2024.