A regional committee established by the Ministry of Interior to examine the distribution of income from the YS Gat industrial zone is recommending that all of the tens of millions of shekels in annual revenue from the zone be paid to the Kiryat Gat municipality, instead of 59% at present. Under the current arrangement, the other 41% of the revenue is split among the Yoav Regional Council (18%), the Shafir Regional Council (17%), and the Lakhish Regional Council (6%). The committee recommends that the change be made gradually, so that Kiryat Gat will receive the full amount starting in 2022. YS Gat, whose tenants include the Intel fab, paid NIS 50 million in annual municipal property taxes. Kiryat Gat sources say that this revenue is the town's main source of income. Following Intel's announcement in recent weeks of its plan to invest NIS 40 billion on enlarging its activity in Kiryat Gat, revenue from the industrial zone is slated to increase.
The committee's report, a copy of which was obtained by "Globes," was given to the three other local authorities involved for their comment. The investigative committee notified the parties that they had until mid-March to respond to the report, after which Minister of Interior Aryeh Deri would made a final decision. Nevertheless, in view of the approaching general elections, a final decision in the matter will be taken only after the next government is formed. Sources familiar with the dispute told "Globes" that the committee's recommendations would deter regional councils all over Israel from any attempt at establishing joint industrial zones.
"If the agreement is not changed, Kiryat Gat will suffer economic collapse"
The investigative committee, officially named the Investigative Committee for Consolidating Authorities, was appointed by the Ministry of Interior in order to examine the distribution of revenue from the YS Gat industrial zone among the Kiryat Gat municipality and the Yoav, Lakhish, and Shafir regional councils. The committee worked on its recommendations for two years. The committee has five members, headed by chairperson Ruth Yosef, formerly in charge of the central district at the Ministry of the Interior. In the course of its work, the committee held three public meetings and conducted three tours of the disputed area.
The committee explains the changes that it recommends by citing projected changes in the coming years in Kiryat Gat, "which is becoming an important city in the area between two metropolises," the committee states. The committee further buttresses its recommendation by stating that Kiryat Gat "is assuming responsibility for a significant part of the expansion in the supply of housing units in this area."
The committee notes in this context that Kiryat Gat has two roof agreements for the development of 15,000 housing units, mostly in the northern part of the town. At the same time, government agencies are promoting large-scale housing plans that are projected to add 53,000 new housing units to the town by 2040. The committee adds that the YS Gat industrial zone will continue growing, developing, and absorbing new enterprises. It is currently marketing 600 dunam (150 acres) for industry out of a total of 2,000 dunam (500 acres) available.
The committee report states that if all of these plans for housing and industry are carried out, the per capita industrial area in Kiryat Gat will diminish, while increasing in the regional councils.
Kiryat Gat Mayor Aviram Dahari told "Globes." "Every housing unit costs the city NIS 10,000, in contrast to industrial space, which balances the budget. If the revenue sharing agreement with the regional councils is not canceled, Kiryat Gat will suffer economic collapse."
Although the decision is not final, it appears that the recommendation puts an end to a dispute lasting many years between Kiryat Gat and the regional councils over the division of revenue from the industrial zone. Intel's existing fab pays NIS 50 million of the aggregate NIS 70 million paid by the entire industrial zone. The Kiryat Gat municipality receives 59% of this amount.
The investigative committee recommends giving Kiryat Gat 74% of the revenue in 2019, 90% in 2020, 98% in 2021, and 100% in 2020. The committee said that it wanted to allow the regional councils to adjust to the proposed change.
"The committee has taken note of the fact that the regional councils have several ready plans for developing productive business zones that will maintain their financial soundness and also provide for the absorption of the new population planned in the coming years," the report states.
The investigative committee states, "The area is slated to undergo accelerated development in the coming years, in the course of which many housing units will be added to Kiryat Gat, while new businesses are added to the YS Gat industrial zone and substantial industrial areas are developed in the jurisdictions of the regional councils included in this report."
In its recommendation to deprive the three regional councils of revenue from the industrial zone, the committee took into account the three regional councils' financial soundness. For example, the Lakhish Regional Council, which the committee says is less economically stable than the other two regional councils, will receive revenue from the YS Gat industrial zone until 2021, in contrast to the Yoav Regional Council, which will receive no more revenue from it starting in 2020.
Adv. Joseph Raiten represented the Shafir Regional Council and Adv. Chen Somech and Adv. Ariel Shine from the Barash Somech law firm represented the Yoav Regional Council. Kiryat Gat and the Lakhish Regional Council had no legal representation.
Regional Councils Center chairperson and Merhavim Regional Council head Shay Hajaj said, "I want to refute the ridiculous assertion that the regional councils are economically well off. The regional councils near Kiryat Gat rely on equalization grants from the Ministry of the Interior. This approach of depriving one poor authority in order to give to another is illegitimate and non-objective, and sets the local authorities at odd with each other.
"The Ministry of the Interior gets our quarterly reports, and knows the state of every single local authority.
"We're working now with the Ministry of the Interior to establish an index for the soundness of local authorities. Once this index is available, it will be easier to assess each local authority according to its soundness. If they think we will give in to the geographic committee in this matter, they are mistaken. We're in favor of cooperation, and that's the right way to work - jointly, not with underhanded tricks."
Thanks to Intel
The current dispute originated with Intel's decision in the 1990s to build a large fab in Israel. The Israeli government decided that it would be built in Kiryat Gat, which was a national priority area. Since the city lacked sufficient space to ensure future expansion of the fab, Kiryat Gat signed an agreement in late 1995 with the neighboring regional councils of Lakhish, Yoav, and Shafir, which transferred 4,085 dunam (1,021.25 acres) to Kiryat Gat's jurisdiction for construction of a joint industrial zone and established the division of revenue between the authorities.
The fab was built. Under the agreement, 37.5% of the municipal property tax revenue was paid to Kiryat Gat and 62.5% to the regional councils. The Kiryat Gat municipality began a campaign in 2003 to cancel the revenue sharing agreement on the grounds that new residential neighborhoods were being constructed in the town with no commercial and other business space to balance the town's economic situation.
In 2009, three new residential neighborhoods were built - Habanim, Guggenheim, and Haprachim. The famous first roof agreement was signed with the Kiryat Gat municipality in 2013, based on construction of 7,600 more housing units in the Karmei Gat neighborhood. The roof agreement raised the dispute by another notch, and the distribution of revenue was changed in 2014 with the approval of the boundaries committee, giving Kiryat Gat 59% of the municipal property tax revenue, with the three regional councils getting 40%: Yoav 18%, Shafir 17%, and Lakhish 6%.
Published by Globes, Israel business news - en.globes.co.il - on February 27, 2019
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