The congestion charge law was passed as part of the economic reform arrangements law accompanying the 2021 budget, and is scheduled to go into effect in 2025, although the transportation minister and finance minister have the authority to delay it until 2026. Globes has now learned that the finance ministry and the Israel Tax Authority are preparing to publish a tender to operate the congestion charge by the end of this year.
The congestion charge law was passed under the previous government, and in exchange for approving the legislation proposed by then-Transportation Minister Merav Michaeli, huge budgets for public transportation were promised, including additional bus services costing billions of shekels and a five-year plan for public transportation infrastructure costing billions more, proposals that now seem like a thing of the past. It was also stipulated that the revenues from the congestion charge would be directed to funding the construction of a metro in Gush Dan — three underground railway lines that would run through 24 local authorities in the greater Tel Aviv area.
When she took office in March last year, current Transportation Minister Miri Regev strongly opposed the law, and a tender by state-owned Ayalon Highways to install toll gates at the city’s entrances and operate toll collection was frozen. In August last year, the Israel Tax Authority published a tender to find staff for a new unit that would set policy on transportation taxes, including travel taxes on electric vehicles and congestion fees.
The year-long delay in publishing the tender is supposed to postpone the imposition of the fees, which are scheduled to go into effect by 2026, even if gradually, according to the law. The Finance Ministry is also counting on the fees being realized, as reflected in the three-year budget plan for 2025-2027. The congestion fees are expected to bring in some NIS 1.3 billion to the public treasury in 2027.
The tender, worth hundreds of millions of shekels, covers the planning, supply, construction, installation, operation and maintenance of everything needed to collect fees, and is open to both Israeli and international companies. The original tender included operating the system for twelve years.
Metro delay
At the Globes Infrastructure Conference in March, Oshrat David-Dakar, deputy accountant general at the Finance Ministry, said: “If the Ministry of Transport does not implement the project, the Finance Ministry will. We are a year behind schedule because of the delay in imposing the congestion charge. There is no other source of funding.” She was referring to the fact that part of the funding for the metro will come from taxes and fees. “The project is being built on the assumption that there will be a congestion charge,” she said. “We must understand that there is a law that is not being adhered to. The Finance Ministry will be obligated to finance the largest project in the State of Israel.”
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Last December, Sapir Ifergan, head of the transportation and aviation team in the Finance Ministry’s budget division, told a conference held by the organization “Transport Today and Tomorrow”: “There will be no relief from traffic congestion in Gush Dan until 2030, so the immediate solution is to impose congestion fees and raise prices in public parking lots. The population growth rate and the number of vehicles per capita make it necessary to find solutions to change the reality.”
Trucks will pay double the price.
According to the law, there will be three loops in the Gush Dan area: an inner, central and outer loop. Congestion charges will apply to vehicles crossing between these loops from 6:30 a.m. to 10:00 a.m. For vehicles heading toward the center, the fee will be NIS 10 for both the central and inner loops, and NIS 5 for the outer loop. Between 3 p.m. and 7 p.m., the fee will be NIS 5 in both directions for the inner and central loops, and NIS 2.5 for the outer loop.
In the future, the Ministry of Finance will review the tariffs in light of examining travel speeds, according to a formula, where the Central Bureau of Statistics is responsible for determining speed measurements. The use of the speed standard aims to test the effectiveness of congestion charges in reducing traffic loads.
During discussions of the bill in the Knesset Finance Committee, it was decided to exempt motorcycles from the congestion fee, as well as emergency and rescue vehicles. After a long debate over taxis, it was decided that they would pay 50% of the fee, while truck drivers would pay double that.
Frequencies in New York too
Israel is not the only country that continues to change its policy on congestion charges. New York Governor Kathy Hochul recently announced that Manhattan’s congestion charge, which was set to range from $15 to $24 per day, will be scrapped.
There, too, the cancellation of the reform would have hurt the public transportation budget, as the fees were supposed to raise billions of dollars to improve the subway, New York City’s underground rail system. Hochul had expressed enthusiastic support for the plan, and American media attributed her change of heart to political motives.
According to the Wall Street Journal, imposing a congestion charge in New York would have saved the Metropolitan Transportation Authority about $15 billion to improve the public transportation system. Hundreds of millions of dollars were invested in the project, which was suddenly canceled at the last minute.
Congestion charges are imposed in London and Stockholm and aim to make drivers aware of the negative consequences of using private vehicles: air pollution, lost time, damage to productivity, road accidents, etc. In addition to financing improved public transport provision, these charges reduce demand for private vehicle journeys.
This article was published in Globes, Israeli Business News – en.globes.co.il – on July 3, 2024.
© Copyright Globes Publisher Itonut (1983) Ltd., 2024.
