Carmel Tunnels May Not Make Money, but Has Buyer

Never mind that the Haifa tunnel system hasn't taken off, if only because of the high toll.

Avi Bar-Eli
Avi Bar-Eli
Send in e-mailSend in e-mail
Send in e-mailSend in e-mail
Avi Bar-Eli
Avi Bar-Eli

Even though Haifa's Carmel Tunnels have underperformed expectations, the private company Allied Holdings is seeking the state’s approval to buy out the share of the Ashtrom Group, bringing its holding to 50%. The other half is held by Shikun & Binui.

Allied Holdings is controlled by Yitzhak Swary, who is better known in Israeli business circles for being a much sought-after assessor.

He needs the state's blessing to buy a controlling interest in the tunnels because the project was a national one, hence ownership may be transferred only with the approval of the state.

Over the past two years, Allied Holdings, which is owned by Professor Yitzhak Swary, has gradually built up a 41.7% stake in Carmelton, buying the shares from Ashtrom. Now Allied wants to buy another 8.3%.

Allied Holdings also owns car importer Champion Motors and Newpan, which imports electronic appliances.

The Carmel Tunnels project was launched in December 2010. Three years and NIS 1.25 billion later, it became the second toll road to be created in Israel. But unlike the first one, Route 6, and in contrast to fond expectations that drivers would hare for the hole in the mountain in order to avoid coastal congestion - it hasn't done as well as hoped.

Would you pay to drive under the mountain?

The tunnels enable drivers to cross Haifa from the coastal highway to the Check Post interchange by driving beneath the mountain instead of traveling over or around it.

About five kilometers of the six-kilometer "shortcut" go through tunnels dug through the mountain's base.

Unlike Highway 6, drivers must pay in advance to travel through the tunnels at tollbooths located at the entrance to the route, or by subscription. Here lies at least one issue: the bottleneck at the entrance.

Another is the cost. Since its establishment, the project has drawn fire for its fairly high toll fees, which were jacked up several times and are to be raised again in June by about 15%. Even those involved in the project admit to being uncomfortable over the relatively high pricing.

About a year and a half ago, to boost the flagging tunnel's status, the state agreed to an increase in the toll – but lowered the cost for trucks taking the tunnels.

In recent months, the state and the franchisee have been discussing alternatives to the additional price increase expected in June, but have not yet reached accord.

Two and a half years since its inauguration, the volume of traffic in the tunnels is only about 66% of the predicted volume on which the project’s financial model was based. Because of that, the state has had to deploy a safety net and compensate the franchisee by around NIS 30 million to make up for the shortfall.

Some suspect the tunnels' problem is protracted adjustment to the existence of a new toll road. Others note that sustaining infrastructure is still incomplete (one example of the latter is the delayed opening of the Krayot Bypass road).

But some claim that the Carmel Tunnels lost some relevance when Highway 6 was lengthened northward. Also, people complain that it just costs too much to take.

The tunnels were built according to the BOT (build–operate–transfer) method. The franchisee, Carmelton, a subsidiary of Ashtrom and Shikun & Binui, built the tunnels and their accompanying bridges. Carmelton will be running the project for about 30 years in exchange for collecting the full amount of the toll for passage through the tunnels and royalties of NIS 220 million, which will be paid to the state over 11 years.

Entering the Carmel tunnel from the sea side.Credit: Yaron Kaminsky
Tunneling under the Carmel.Credit: Gini