New Haifa Bus System Runs Half a Billion Shekels Over Budget

The brand-new Metronit Bus Rapid Transit system in Haifa has yet to transport a single passenger, but it's already so badly over budget that the whole project could be significantly delayed. The Metronit, a pilot for BRT systems in Israel, has exceeded its budget by roughly half a billion shekels so far.

Since the government had budgeted NIS 1.06 billion for the project, the overspending - in terms of both money actually spent and financial commitments (money that hasn't been spent yet) - is a huge 45% of allocated resources.

The company carrying out the project, Yafe Nof, was not supposed to undertake financial commitments that it did not have the means to pay.

Yafe Nof is owned by the Haifa municipality. When the Finance Ministry learned about the spending problem, it immediately cut off all funding for all Yafe Nof's projects.

The treasury and the Transportation Ministry are investigating just how the Metronit could have gone so badly over budget in the first place. Depending on the nature of their findings, the matter could wind up with the state comptroller or even the attorney general.

Project operator blew whistle on itself

How could a pilot project of national importance have careened out of control like that? One problem may be changes to the plan made over the years, say industry insiders. Another is that Yafe Nof may have made commitments - subcontracted out work to other companies - without having money to cover the jobs.

While Yafe Nof has not actually spent NIS 450 million to NIS 500 million more than budgeted, it has commitments to that extent. Its overspending is therefore on paper alone at this stage, and the half-billion includes options to expand the BRT project that have not yet been exercised.

The whistleblower on Yafe Nof's budget breach was the company itself. It had only now realized the problem, the company explained, an explanation greeted in Jerusalem with some skepticism and a great deal of anger. Government sources said it was just two months ago that a three-way agreement was signed between the city of Haifa, the treasury and the Transportation Ministry, arranging each party's responsibilities in the Metronit project - and who would pay for what.

The government sources say they have difficulty believing that Haifa and Yafe Nof had no idea about the budget breach when the agreement was signed. In other words, they knew, but preferred to wait with their bombshell until the contract was signed, thereby committing the state to budget the project.

Three months ago, the CEO of Yafe Nof, Doron Magid, suddenly resigned. He was only recently replaced by the company's VP-infrastructures, Eran Leviteh.

Nor can the ministries evade blame. Yafe Nof has been supervised by a British company called Norcroft, hired by the Finance Ministry. Its supervision touches on project management, commitments to subcontractors and monetary allocation. (Norcroft is also supervising the National Roads Company. ) The investigation must therefore also reach Norcroft itself, to see how hundreds of millions worth of spending and commitments had escaped its notice.

Six years of work

Yafe Nof has spent six years working on the Metronit project, starting with infrastructure works throughout the rapid transit bus line's 40-kilometer route. The jobs started with underground works, then involved rebuilding roads for the extra-long buses, including raising lanes, marking roads and building designated bus stops.

The government budgeted all of that. These works had nothing to do with the Dan bus cooperative, which won the tender to operate the Metronit project.

A year and a half ago, Dan won the tender to build the project and operate it for 12 years, requiring it to make a total investment of NIS 1.3 billion.

Four months ago the Noy investment fund bought 20% of the Special Purpose Company - not the Metronit operating company itself - from Dan for NIS 22.5 million. Two months later the French industrial giant SNCF also bought a 20% interest in the SPC. Dan remains the sole shareholder of the Metronit operating company.

The Finance Ministry has frozen money transfers for the project, but that could wind up causing delays as Yafe Nof finds itself unable to proceed. The Metronit was supposed to start transporting people in mid-November, a date that already seems unlikely.

Once the buses do start operating, Haifa will be the first city in Israel to have elongated, 18.5-meter double-articulated buses, traveling in designated lanes. It is the Haifa metropolis' first mass-transit project. Dan is supposed to be running 90 of these buses, which were developed by Man.