Izzy Sheratzky's Thwarted Attempt to Invigorate Kiryat Shmona

If only the state would get out of the way ...

Mid-interview, Izzy Sheratzky stops talking. He gets up and opens a wooden cupboard. "Come here. I want to show you something," he says, bends to the bottom shelf and pulls out a gorgeous album.

It is really a file that contains his dream between its covers: a giant tourism attraction right by Kiryat Shmona, complete with artificial ski slopes, a state-of-the-art space museum and hotels. Israel has nothing like it.

Hapoel Haifa facing off against Ironi Kiryat Shmona  - Nimrod Glickman
Nimrod Glickman

"I spent a million dollars just planning the place," he says, refering to the plan he concocted after the Second Lebanon War. He figured to fund 5% himself and collect the rest from the government and donations. "I met with the prime minister at the time, Ehud Olmert," who, he says, liked the idea.

Donors didn't. They wanted to give to education or welfare, not ersatz Alpine experiences. Sheratzky couldn't do it alone: "I'm not that rich."

Judging by his past, Sheratzky, a self-described "nut" for Kiryat Shmona, would do anything to make his dream come true. The man who bought the car-wreck of a company called Ituran and turned it into a giant trading at a market capitalization of NIS 1.2 billion on Nasdaq and the Tel Aviv Stock Exchange doesn't feel the project is too big for his britches.

His love affair with the northern-border city began in 1999, when he saw it pounded by Katyushas on television, a place with "no jobs there, no economy," he said. "I decided I had to help." He began funding projects in the city: a soup kitchen providing 600 meals a day, a dental clinic, facilities for special-needs children and other welfare and education projects. He won't say how much he's donated so far but when the number "NIS 500 million" was tossed out, he wrinkled his nose. "The money doesn't matter, it's the caring," he says. "I live there and I'm involved."

Kiryat Shmonaites know Sheratzky mostly for buying the local soccer club, Ironi Kiryat Shmona, in 2000. Each year he's invested some NIS 10 million in the team, mainly sponsoring the company through Ituran and his other companies. And he isn't even a soccer fan. But when he was asked to sponsor the team, he saw it as a way to lift morale in the town.

Not in it for the money

He may not have dreamed of soccer, but Sheratzky, who began as a detective and is today one of Israel's bigger businessmen, found his legs in sports. He attends the games and has opinions about the state of soccer in Israel. His team has done excellently, rising to the Premier League, competing in the UEFA Cup and after a slide to the second-tier National League, recouped and is now fourth in the Premier League. Earlier this year Ironi Kiryat Shmona won the Toto Cup, its first major trophy.

The team is a regional attraction. "All week we wait for the game. If not for Sheratzky, we wouldn't even have that," says Rami, a local fan.

But the soccer fever and helping the city's poor have not made Sheratzky a happy man. Au contraire. Twelve years after he began helping Kiryat Shmona, he's bitter. In recent months he's been battling furiously with the Ministry of Industry.

Specifically, he's been battling with the ministry's investments center, hoping they'll relax the rules and give a big grant for Ituran to move its production to the Kiryat Shmona industrial zone. His goal, he states, isn't to make money, but to provide jobs. The battle has made him rethink his entire investment in the town.

"Everything I did in Kiryat Shmona is a mistake. We did amazing things, but I failed. I couldn't make the city what I wanted. My goal was to revolutionize the city, turn it into a Tel Aviv. It didn't happen. The problem in Kiryat Shmona isn't security or education. It's employment."

No money to spend on shopping

Kiryat Shmona sports a mall. Yael Levy ("Not the singer" ) stands by the counter at Cafe Greg, looking worriedly at her territory. She grew up in Kiryat Shmona, moved to a next-door kibbutz 25 years ago but four months ago, when opening the cafe, came back. To little traffic. The mall's corridors are quiet.

"Business is a lot weaker than I'd expected," Levy admits. "We're worried. We have to hold special sales to attract people. It's very hard here."

"It's dead here most of the time," interjects a saleslady from a fashion store, joining the conversation. "Seventy percent of the shoppers are from the adjacent kibbutzim. Nobody in the town has money."

Local librarian Avraham Lev has spent 60 years in Kiryat Shmona. The community center that operates the library is being run itself by a liquidator. The workers there pick their words carefully, not to step on toes. But the truth of their low pay comes out.

"The Israeli governments and political parties send people to the end of the country, to settle there ... but the governments over the years neglected Kiryat Shmona and other development towns," says Lev, who's been in the city from age 6 months. "During the first Lebanon War people still remembered Kiryat Shmona. The moment the war was over and the IDF forces retreated, the leaders forgot the city. It's a failure. There's no work and the jobs there are pay very little. Young people realize it offers them nothing and leave. There's been no long-term strategy."

The city has its own vicious circle: Property is dirt-cheap, attracting poor people who then become a burden on local welfare services, Lev adds.

Lev salutes Sheratzky and his contribution to the town - but he has a problem with him, too. As a sworn communist, Lev supports Hapoel Tel Aviv. When Hapoel Tel Aviv plays Ironi Kiryat Shmona, he has to support both teams. Happily for him, their latest face-off ended 1:1.

Kiryat Shmona mayor Nissim Malka doesn't miss a game either, unless it's on Shabbat. Sheratzky has already won an award from the city: Now it's acting to snare him the prize, Malka's office people say.

Some 150,000 people have abandoned Kiryat Shmona over 35 years because of the security situation, the mayor says, and the state has tried to treat the town's mortal disease with aspirin.

TheMarker: Have you tried to enact a master plan to rehabilitate the city?

"Right after Benjamin Netanyahu was elected prime minister, I sent him a detailed 10-year plan for handling the town at a cost of NIS 240 million," Malka answers. "I got a letter from the director general of the Prime Minister's Office, who sent me to meet with two clerks at his office. I met with them. They mocked me."

Bereft, he left, he says. The Prime Minister's Office did not comment for this article.

The mayor wants a train

Based on statistics, no question that Kiryat Shmona has a problem. Central Bureau of Statistics data from 2008 shows 22,000 residents, of whom 5,400 live on welfare, disability, pensions and a host of other allowances. While the national average wage was NIS 8,000, the average wage in Kiryat Shmona was NIS 5,300 that year. According to the statistics bureau's index, socioeconomically the city ranks 5 on a scale of 10.

"That's wrong," says Malka. "We're lower, but there are a lot of new immigrants who bought a car using tax exemptions, which skewed the figures. Also, 2,000 students from the Tel-Hai Academic College register as living here to get benefits, which impacts the 'education' part of the index. But they don't really live here and leave once they graduate."

All agree that the city's real problem isn't the security situation. It's jobs. "People need economic security too," points out the mayor. Companies talk about moving there but don't, including because of the cost of transporting products to the center. "Kiryat Shmona needs a train more than Carmiel does," he argues.

A year and a half ago, Sheratzky thought he could help the people of Kiryat Shmona by building Ituran's new center in the city. A few months ago he told the Ministry of Industry, Trade and Labor he meant to move up to 300 (75% ) of the company's workers to Kiryat Shmona and that later, he'd move other companies he owns, with 120 more workers. Sheratzky even inquired into the cost of buying a small plane to fly executives to and from the northern city.

Meanwhile, he applied for a ministry grant as an "anchor" - a high-tech company that would provide well-paying jobs. When a company qualifies, the ministry's investments center will pay 35% of the cost of wages to start with. The perk dries up after three years. Also, Ituran would have received a tax break under the Investment Encouragement law, as a plant in the periphery. But to be eligible for discount tax, the company has to pay employees 30% more than the average wage, meaning NIS 12,500 a month. Ituran averages pay of NIS 8,500 a month. That's where the company asked the Investments Center for flexibility: If it had agreed, the company would have been eligible for an NIS 8 million grant in the first year.

"In the past I had tried to move the company's call center to Kiryat Shmona, but ran into bureaucracy," says Sheratzky. He gave up. Now he's giving up on moving the whole company to the town, in order to help the city: "I can't lose money on it. Israeli investors may have an interest in Zionism, but the company is also listed on Nasdaq and I can't explain the move to them."

He doesn't understand the demand that the average wage at the plant be NIS 12,500. He finds it astonishing. "I told them that the average wage in Kiryat Shmona is much lower than the national average. I asked them to give me the grants according to the national average wage, which would greatly lift the average wage in Kiryat Shmona. We reached an agreement at NIS 8,500 and they said it was going well. Then they ignored me for several months. Finally, they said no."

He could have manipulated the figures by putting his wage and his son's into the calculation, Sheratzky points out. But he didn't want to.

The Ministry of Industry, Trade and Labor wasn't happy about the plan to fly the executives.

"Who said that? We never talked about flying. It's a lie," says Sheratzky. "I'm buying a plane using my own money. It's costing me $3 million and more than NIS 100,000 a month. My goal is just not to lose money and if I make something, the whole profit goes to Kiryat Shmona. Anybody who knows me knows that I'm nuts about Kiryat Shmona. I just took the city's theater with debts of more than a million shekels and I'm going to reopen it. I'm going to win. I'm going to move the company."

The Ministry of Industry, Trade and Labor commented that companies have several ways to get benefits for employment in the periphery, one being regular employment, another through high salaries. Ituran asked for benefits on the high-pay track but didn't meet the criteria, the ministry said.

The Finance Ministry rejected the option of lowering the criterion of average wage. "During the last meeting between the company and the Investments Center, Ituran was offered to submit its request for the workers who did qualify. We're waiting for the company's reply. But the Investments Center is willing to meet and hear the company's complaints, to try to find a solution and help the company move its plant to Kiryat Shmona."

Kiryat Shmona and its surroundings have two large industrial zones with about 50 plants. "We want more and more factories," says Shimshon Arbel, manager of the Kiryat Shmona and Upper Galilee industrial zone. "But it's hard for companies here." For instance, water and sewage costs are higher than in the center. They have to transport their raw materials in and their goods out, and the state isn't helping, he claims. "A plant the size of Sheratzky's would be a strategic asset for Kiryat Shmona. The state should relax its terms."

Mayor Malka agrees. "Companies aren't standing in line to move to Kiryat Shmona," he points out. "I would expect the state and the Ministry of Industry, Trade and Labor to help."

A soldier named Oded is standing by the road, hitching a lift. He was born in Kiryat Shmona, he says. Will he stay there after army service? No, he won't. "It hurts, but it's impossible for a person like me to start life here. Maybe one day, after I have kids and they grow up and I retire, I'll move back to this beautiful place."

With reporting by Moshe Harush and Ora Coren.