No one doubts that the war declared by Jerusalem Mayor Nir Barkat against the Ministry of Finance and its minister is aimed at promoting Barkat's personal ambitions in national politics. Barkat is campaigning as Jerusalem's defender, because that is what he has to offer Likud voters. His especially bad relations with Minister of Finance Moshe Kahlon are certainly not deterring Barkat from breaking the rules and disrupting the municipality's activity and services for residents.
It is said that the bad blood between the two men goes back to the Knesset election campaign, when Barkat refused to support Kahlon, at a time when Koby Kahlon, Moshe Kahlon's brother, was still Jerusalem deputy mayor. Koby Kahlon later left his job on bad terms. The Jerusalem municipal budget battle has since become a regular annual ceremony that is getting worse every year. Barkat is taking advantage of the fact that the Ministry of Finance's offices are in Jerusalem to put garbage under the noses of the ministerial workers and block their access to parking. Kahlon, who took pride in reaching an arrangement with the Ministry of Defense, is refusing to be generous in the case of Jerusalem. He objects in principle to increasing the grant for the capital by NIS 300 million, as the mayor is demanding.
Jerusalem has bigger problems than Kahlon and Barkat's egos. Jerusalem is a wonderful place to come from, but it is much less agreeable to live and work there. Take Ministry of Finance budget director Amir Levy, for example, who misses no chance to reminisce about his Jerusalem roots and declare his Jerusalem identity, but who has chosen to raise his children far from the city.
Difficult basic problems
The basic problems of Jerusalem are its excessively large population (900,000 people, of whom at least 37.5% are Palestinians) and inadequate sources of income. The municipality's expenses are growing 4.5-5% annually - from NIS 5.1 billion in 2016 to NIS 5.4 billion in 2017. The money provided by the Ministry of Education falls short of the city's real needs by the cost of about 100 classrooms a year. A cumulative shortfall of 3,800 classrooms has been created, 3,500 of which are in the haredi and Arab sectors. In order to find room for its students, the municipality has had to rent improvised buildings at an annual cost of NIS 100 million. It is true that Bnei Brak has managed to achieve economic independence, despite its rapidly growing poor population, but Bnei Brak's superior location in the heart of the greater Tel Aviv area has enabled it to develop its own office district. Jerusalem has an ambitious plan for its own office district, but it is unclear who want will want to put their offices in the towers being planned there.
Israel's capital has only one real captive customer: the government ministries, whose presence provides it with NIS 1.2 billion in direct municipal property tax revenue. Yesterday, in a press conference summarizing the term in office she is now finishing, Ministry of Finance Accountant General Michal Abadi-Boiangiu admitted that the efforts to increase the governmental presence in Jerusalem had been unsuccessful. She attributed the failure to the difficult in finding available office space and the lack of desire among civil servants to move to the city.
The Jerusalem municipality's revenues are growing at an annual pace of less than 1%. Its main source of revenue is municipal property taxes amounting to NIS 2 billion annually. The huge discounts and exemptions cost the municipal treasury NIS 700 million a year. The haredi MKs apply themselves to continually extending the exemptions. In addition to synagogues and yeshivas (Jewish religious schools), kollels (Jewish religious schools for adults) will soon be exempt from municipal property tax, because they pray there, too.
Ministry of Finance develops a distaste
Despite its unfavorable fundamentals, the Jerusalem municipality has managed to maintain a negligible budget deficit continuously since 2004. In recent years, this achievement is attributable mainly to the capital grant - a special grant for Jerusalem that has amounted to NIS 200-250 million a year for the past decade. In 2016, Barkat managed to increase the grant to NIS 500 million by leaving garbage trucks parked at the Ministry of Finance entrance. This aggressive attitude destroyed the delicate fabric of relations with the Ministry of Finance professional echelon, which has developed a deep distaste for Barkat and his associates. The Jerusalem municipality, however, is now convinced that only force gets results. Where Barkat's personal agenda is concerned, the risk-reward ratio is even more attractive: it is no concern of his if his advancement in national politics leaves scorched earth behind him to his successor as mayor.
Barkat has therefore set an ambitious goal for this year - increasing the Jerusalem grant to NIS 800 million. His argument is that natural increase in Jerusalem's population and its welfare, educational, and sanitation needs require a NIS 185 million annual increase in the Jerusalem grant. That, however, is not enough for Barkat. His goal is to make per-resident spending in Jerusalem equal to the average per-resident spending in the forum of the 15 largest cities. Why should the state finance such a standard of living for Jerusalem residents? Only Barkat knows the answer.
Who is right here? Kahlon is right that there is no economic logic behind Barkat's demand to increase the Jerusalem grant from NIS 500 million to NIS 800 million. The Ministry of Finance's proposal to increase the grant by 5%, in other words to NIS 525 million, looks reasonable. Barkat is right when he argues that the Ministry of Finance is not taking the problem of Jerusalem seriously, and prefers kicking the capital can a few meters forward on the downslope to deciding on a multi-year solution for Israel's capital.
Published by Globes [online], Israel Business News - www.globes-online.com - on January 31, 2017
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