Jerusalem fails to attract commuters

Jerusalem Photo: ASAP Creative Shutterstock

Relatively few people come from outside to work in Jerusalem. Can the business center planned for the city's entrance remedy this?

Jerusalem is almost totally dysfunctional as a metropolitan center, according to figures from the annual statistical report published by the Jerusalem Institute for Israel Studies, which is being published today on Jerusalem Day. In 2018, 70 years after Israel became independent, the country's capital is not attracting industry; it is an impoverished city incapable of providing its residents with a fitting level of service.

The independent revenue of local authorities shows their degree of independence. Only 62% of the revenue in the Jerusalem municipality's regular budget is independent, compared with 82% in Tel Aviv. The Jerusalem municipality's total budget superficially appears the same as that of Tel Aviv, but in budget per population receiving services from the municipality, Tel Aviv's budget is double that of Jerusalem (NIS 14,800 per capita compared with NIS 7,200 per capita).

The combination of a large budget with a high degree of independence enables Tel Aviv to diversify it services for its population and the entire metropolitan population (in effect, Israel's entire population receives services from the Tel Aviv municipality directly or indirectly) and to develop and maintain its status as a leading metropolitan center.

The figures speak for themselves. 329,100 men and women are employed in Jerusalem, but 77% of them - 252,000 - are residents of the city. Day commuters, those who travel every day from other places, account for only 23%, 77,100, of Jerusalem's working population. For the sake of comparison, only 39% of those employed in Tel Aviv live in the city; Tel Aviv attracts the remaining 257,000, 61%, from other places.

Jerusalem Institute for Israel Studies researcher Yair Assaf-Shapira explains that revenue from employment is critical for the city's existence: "A city that is a metropolitan center generates revenue from the added value created by employees entering the city every morning. This can be presented simplistically as revenue from high municipal property taxes paid by workplaces in which residents work, plus the municipal property taxes paid by the workplaces providing services to employees and to other workplaces (multiplier effects - restaurants, shops, printing houses, law firms, and so forth). The more a city attracts economic activity, the bigger its municipal property tax base is.

Shapira says that the Jerusalem district and the Judea and Samaria district constitute Jerusalem's metropolitan area. Most of Jerusalem's commuters (52,600) come from this area.

According to Shapira, Jerusalem is not succeeding in becoming a metropolis because it lacks the metropolitan home base that Tel Aviv has - the medium-sized cities surrounding it like a heavy ring. "When you look at metropolitan Jerusalem, you discover that most of the residents are also residents of the city itself," he says.

Paradoxically, the natural outlying areas of Jerusalem, the residents of the communities beyond the separation fence (the cities of Ramallah, Bethlehem, Hebron, and their suburbs) are not part of the metropolitan space.

Looking ahead, it does not appear that the situation is likely to change, because in contrast to Tel Aviv, most of the housing starts in Jerusalem are for residential purposes. "A lot of people talk about how important it is for Jerusalem to attract people - to put it bluntly, Jews. You hear this a lot from decision-makers. My opinion is otherwise. I think that Jerusalem should attract economic activity. I think that the central business district now under construction at the entrance to Jerusalem is excellent. It will create delayed demand. As soon buildings are constructed, companies and employees will come, and there will be a commercial center. If the employees come from out of town, that will be great. That is how a metropolitan city works."

"No reason to go to Jerusalem"

Geocartography Knowledge Group CEO Dr. Rina Degani is not as optimistic as Shapira. "Jerusalem has many competitors. Businesses considering locating themselves in Jerusalem need a good reason to go there. The world revolves around the Tel Aviv center and everyone wants to work here. There are many opportunities to develop business space in the area between Tel Aviv and Jerusalem: Bat Yam, Rishon Lezion, Ness Ziona, Shoham, Modi'in, Beit Shemesh, Neve Ilan, and others. All of these business spaces are developing simultaneously. There is no reason to go to Jerusalem.

"There are five million square meters of business space in the Jerusalem area. There are 2.7 million square meters of business space in Jerusalem itself, including 1.7 million square meters of office space. Several more centers are being developed simultaneously: Jerusalem Gateway, Givat Shaul, Atarot, Har Hahotzvim, Sha'ar Binyamin, and Ora Junction. Progress in business space will be very slow. It will not happen in the coming years. It is all right for the Jerusalem municipality to plan 30 years ahead, but it will not be easy."

"Jerusalem is the only example of a metropolis in Israel"

Economist Avner Saadon, who formerly worked in the economic department in the Prime Minister's Office, and currently heads the policy planning department in the Jerusalem municipality, does not accept what the Jerusalem Institute for Israel Studies says about Jerusalem's weakness; he says that Jerusalem is the only metropolis in Israel and that this is the source of its power. "There are 900,000 people in Jerusalem and 400,000 in Tel Aviv. Every neighborhood in Jerusalem is like a small city compared with Tel Aviv. Azor, Givatayim, and Ramat Gan are like a Jerusalem neighborhood. The municipal boundary means nothing. It is an old and irrelevant regulatory distortion.

"Metropolitan Jerusalem is mainly the city of Jerusalem. We are approximately 70% of the population of metropolitan Jerusalem. Tel Aviv is 11% of metropolitan Tel Aviv, which starts in Hadera and ends near Ashkelon. Tel Aviv imports employees who go home to sleep at night in other places. People consume services in Rosh HaAyin and work in Tel Aviv. Tel Aviv may have more business space than Jerusalem, but this comes at the expense of other local authorities. Jerusalem does not steal businesses or municipal property taxes from Maalei Adumim or Pisgat Zeev. You can see that 85% of Jerusalem residents work in Jerusalem.

"The mayor is going to tell the Knesset next week that paradigmatic changes have to be made in Israel. We need seven or eight metropolises. When we make a bus route, we can bring people in a single route from Neve Yaakov through the center of town to Gilo. In metropolitan Tel Aviv, that means passing through eight different local authorities, and that means an argument with each local authority. The only way to develop the country, and that is the advantage of Jerusalem, is to have a single authority. Look how much time they wasted with the Red Line in Tel Aviv. Jerusalem is the only metropolis."

"Globes": What does that mean about businesses in the city?

Saadon: "Business develops at important junctions. That is how it was with the Azrieli Center, the Ayalon route, Highway 5, Ra'anana, Kfar Saba, and maybe the Elef site in Rishon Lezion."

Why should someone want to establish a business in Jerusalem when there are competing sites closer to the central region that offer better conditions?

"Because of transportation. Someone traveling to Shoham will get stuck in a huge traffic jam. Employees want an urban experience and don't want to wait around in traffic jams. In Modi'in, you get off the train and have to take a taxi or shuttle and spend an hour in a traffic jam. In Jerusalem, people can get off the light rail and be in a business center 28 minutes later.

"In my opinion, anyone who wanted to leave Jerusalem has already done so. The railway will attract people living in more distant outlying areas to Jerusalem.

"What is right for the country is to discard the concept of municipal boundaries. Once we start talking about a metropolitan authority, the wealth will be shared among the authorities. It is not right for every suburb like Beit Shemesh or Modi'in to develop a small industrial zone."

Jerusalem Mayor Nir Barkat says that he sees great importance in Jerusalem's economic development and strengthening business there. "Over the past decade, we have developed and led several revolutionary plans for economic development, including physical development of the city, development of the business environment in the city, and development of growth engines and business. The revolution in culture and tourism in the city led to a surge in the number of visitors from Israel and abroad, opening of hotels and new businesses, and the creation of a high-tech community generating thousands of new top-quality jobs. These plans and regular activity have caused economic prosperity in the city and have significantly strengthened business there. In addition, a number of new areas are now being developed at the entrance to the city, which will be located on the country's most advanced transportation hub and will create 60,000 new jobs. That is how we are strengthening Jerusalem."

Published by Globes [online], Israel business news - - on May 13, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Jerusalem Photo: ASAP Creative Shutterstock
Jerusalem Photo: ASAP Creative Shutterstock
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018