Land Agency Faces Cash Crunch as Result of Off-budget Projects

Meirav Arlosoroff
Meirav Arlosoroff
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Camp Ariel Sharon, a complex of military bases under construction in southern Israel.
Camp Ariel Sharon, a complex of military bases under construction in southern Israel. Credit: Kobi Gideon / GPO
Meirav Arlosoroff
Meirav Arlosoroff

The government agency that manages state land faces a huge cash crunch because Finance Minister Moshe Kahlon used it to fund several projects off-budget.

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Even as Israel Land Authority revenue has soared, some officials believe it cannot meet its 35 billion shekel ($9.6 billion) commitment for moving many army operations to the Negev from central Israel.

ILA revenue rose 70% last year, to 16.1 billion shekels, as it implemented Kahlon’s program to rezone more state land for housing in a bid to cut home prices. But the agency’s expenses climbed 58% to 8.7 billion shekels and transfers to the government climbed 85% to 7.4 billion.

The cash crunch may escalate this year as the Housing Ministry uses it to fund programs such as increasing the public housing stock.

The ILA says it’s unconcerned, pointing to its revenue spike in 2017. It also notes the treasury held out a 1.5 billion shekel safety net in the event it can’t meet its obligations to the army this year.

“The ILA will meet its obligations as it has done in the past,” a spokesman for the agency said. The Finance Ministry did not respond.

However, sources point to the massive financial obligations that have been imposed on it since Kahlon took over as finance minister in 2015 and say odds are good that more may be piled on.

The ILA owes the army some 2.5 billion shekels a year for the relocation of bases, a several-year operation designed to free up valuable land in and around Tel Aviv area.

Another 2 billion goes to funding infrastructure projects that the government has undertaken as part of umbrella agreements with local authorities. In exchange for making land available for new residential neighborhoods, the government covers the cost of roads and infrastructure.

The biggest of the ILA commitments comes from Kahlon’s flagship housing undertaken, Mahir Lemishtaken (Buyer’s price), which sells land to contractors at a discount that is then passed on to home buyers. That program cost the ILA 3 billion shekels annually.

The Housing and Construction Ministry is now seeking the ILA’s help to cover the cost of buying 7,000 apartments to add to the stock of public housing — an initiative that will cost 7 billion shekels a year if approved. The ministry also wants smaller sums to subsidize the cost of fortifying buildings in Israel’s earthquake-prone north and for urban renewal schemes.

The ILA may also be tapped for tens of billions of shekels connected with evacuating the Sde Dov Airport in Tel Aviv.

The raid on the ILA has been the subject of controversy since it began three years ago. Then-treasury accountant general Michal Abadi-Boiangiu supported by the Bank of Israel, said it was an accounting trick that endangered Israel’s credit rating.

Since then the treasury has published two budget deficit figures every year — one by the accountant general’s office that includes the ILA contributions and another by the budget division that doesn’t.

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