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The Ashdod municipality has not been informed that it did anything wrong in partially funding the city's first luxury hotel, which is scheduled to open this summer, the head of the Ashdod Municipal Development Corporation said on Monday.

A report by a State Comptroller's Office employee sharply criticized the city, but the office has been sitting on the report since 2007.

Officials from the comptroller's office visited the southern coastal city in 2007 and requested details about the contract with a private developer, but they never mentioned any problems, said Yehuda Avidan, the director general of the Ashdod Municipal Development Corporation.

"Everything's okay," he said. "They came, reviewed all the agreements, contracts, legal opinions and planning documents. Everything came out 100 percent. Apparently, the answers we provided were sufficient and proved that everything was done legally."

The municipal development company invested NIS 50 million in the 196-room beachfront hotel, about half its total cost. The other half was put up by Zvi Sarfati & Sons Investments and Constructions, a private Israel-based company.

A report by comptroller's office employee Michal Dachoach Halevi states that the city should not have taken part in the venture, which raises concerns of preferential treatment.

The report says Ashdod did not give sufficient weight to alternatives to Sarfati and cites a legal opinion by the municipality's legal adviser, who said the city should not get involved in the project.

Apart from the impact the report could have on the Ashdod municipality if it were released to the public, the findings also have far-reaching ramifications for many local authorities planning to follow in Ashdod's footsteps, Dachoach Halevi told State Prosecutor Moshe Lador this week.