Since the Carmel Tunnels opened to traffic in December 2010, hundreds of millions of shekels have been transferred to the concessionaire to subsidize discounts in tolls granted to vehicles. Yet despite these discounts, tolls have risen by 65%, with many Haifa commuters preferring to forgo the shortcut through the tunnels, in order to save nearly NIS 900 per month.
In 1996 the state published the BOT (build, operate, transfer) tender for the Carmel Tunnels project, which was then one of the biggest and most complicated infrastructure ventures ever built in Israel. The following year the concessionaire was chosen to build, operate and maintain two sets of tunnels on Mount Carmel in Haifa, beneath the ridge, from west to east and east to west.
The tender was based on the public private partnership (PPP) model, in which the state grants a concession to a private company to take responsibility to provide public infrastructures including financing, planning, construction, operation and maintenance, according to pre-defined criteria. Throughout the period of the concession, the concessionaire is entitled to charge users of the infrastructure, as set out in the contract, in order to recoup the cost of construction and maintenance, and generate a profit.
Highways in Israel built in a similar way include Road 6 and the Tel Aviv Fast Lane. Inb the coming years fast lanes will be built in this manner on Roads 2, 20 and 5. But according to the State Comptroller’s report last November, no lessons have been drawn on the subject to understand the strengths and the weaknesses of this method.
A toll road with charges set in the concession contract
During the planning of the project many objections were heard about building the highway, which would provide drivers with a short cut between suburbs to bypass the city center.
In any event, in December 2010, the tunnels opened to traffic, and the Carmelton consortium, which had been awarded the concession to operate the tunnels until 2040, began operations through the Netivei Hacarmel company. The tunnels made journey times for cars significantly shorter and in recent years the advantages of the tunnels have also benefitted bus passengers.
The tunnels operate as a toll road and charges were set out in the concession contract. The State Comptroller’s report published this month includes estimates by the Accountant General that the highway and tunnels cost NIS 1.25 billion to build.
The toll is the same for all vehicles, and is updated once a quarter, linked to the Consumer Price Index (CPI). As part of agreements over the years, tolls have also been hiked several times, and various discounts given. In 2016, a discount was awarded to light trucks up to 12 tons, but according to the report, no one in the government-owned Cross-Israel Highway Company, the road's regulator, or in the Ministry of Transport examined the effects of that discount. In 2018 and continuing until the end of this year, tolls for cars were reduced.
These discounts sound like a positive development for drivers who want to use the tunnels, but it was the state coffers that financed these discounts. Thus, instead of drivers paying the toll if choosing to use the tunnel, all citizens subsidize the journey. The accumulated subsidy since 2018 reached NIS 226 million this year and the discount for light trucks began even earlier.
In August, Haifa Mayor Yona Yahav demanded that government ministries cancel the toll altogether. The Ministry of Transport backed the call, and director general Moshe Ben-Zaken informed the mayor that Minister of Transport Miri Regev also supported canceling tolls, but that this was under the authority of the Ministry of Finance.
But industry sources branded these demands as populism and impractical due the high cost to the state coffers of providing subsidies, which would be paid for by the entire public.
Despite all this the toll has only climbed over the years, despite the subsidies and discounts. Drivers using both sections of the tunnels daily in both directions pay NIS 40.60 per day and NIS 893.2 per month, while capacity utilization even during rush hours does not exceed 77%.
In 2010, when the road opened, the cost of the trip (in 2024 prices) was NIS 6.7, but this year it reached NIS 11.1, an increase of 65%. A similar increase also applies to trucks and public vehicles.
The State Comptroller says that this toll increase is, "Despite the reduction in the toll and the realization of the discount set in the addendum to the concession agreement from December 2017, and which has been financed by the state to the tune of hundreds of millions of shekels.
"This real toll increase stems from the fact that in addition to being linked to the CPI, the toll was updated three times in the first eight years of operation of the tunnels, from a base price of NIS 5 to NIS 8, and together with CPI linkage, the rate of price increase was higher than the rate of toll reduction and realization of the discount."
It was also found that from 2011 to the end of 2020, total revenue from enforcement exceeded enforcement expenses by about NIS 8 million.
The State Comptroller notes that based on the projections, there will be a constant revenue surplus compared with expenditure throughout the entire concession period. Accordingly, the State Comptroller proposes cutting compensation to the concessionaire by 17%.
In the work of a traffic consultant from January 2023 for the Cross-Israel Highway, it is stated that the toll is still a major barrier to increased use of the tunnels, especially during off-peak hours, along with unused capacity on the road. Despite this, there is no differential pricing of the trip, and it is also expensive compared to other toll roads.
A study by a traffic consultant in January 2023 for the Cross-Israel Highways regulator stated that the toll is still a major barrier to increasing use of the tunnels, especially during off-peak hours, when there is major unused capacity through the tunnels. Despite this, there is no differential pricing for journeys, and it is also expensive compared with other toll roads.
At the end of this year, the agreement regarding toll discounts ends, and this will be an opportunity for government ministries to agree another arrangement, under which even if the state chooses to subsidize discounts on the road, it will not be swallowed up in pre-agreed price increases, and if the capacity has not yet been exhausted, this is just another reason to add more public transport services.
No response has been forthcoming from Carmelton and Cross-Israel Highway.
The Ministry of Finance said, "The scale of use of the Carmel Tunnels is high, and the infrastructure is utilized relatively efficiently. Regarding the reduction of compensation rates and reimbursement of expenses for the concessionaire, the process of updating the Carmel Tunnels regulations is in full swing."
The Ministry of Transportation says, "Tunnel capacity utilization is high during peak daily hours, allowing for a good level of service. Its rate is high relative to non-toll roads in the area. The tolls in the Carmel Tunnels in Haifa are determined by law and in accordance with the concession agreement signed by the Accountant General at the Ministry of Finance.
Published by Globes, Israel business news - en.globes.co.il - on November 20, 2024.
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