Last April, a group of senior managers celebrated the signing of a huge deal at 2C restaurant atop Tel Aviv’s Azrieli Center. The managers arrived at the restaurant from their fancy offices, which take up three whole floors in the Round Tower. These were not senior partners in a successful accounting firm, financiers, or heads of an international investment house of the sort that populates the Azrieli Center, but rather the managers of a dreary government company called NTA Metropolitan Mass Transit System Ltd., charged with building a mass transit system in the Tel Aviv metro area.
The cause for celebration was the signing of a deal between NTA and IBI, a big architectural firm, for planning and oversight of construction of ten underground light-rail stations. The price: NIS 560 million. NTA’s senior executives figured spending such a vast amount of taxpayers’ money was a good reason to party at the expense of the ordinary citizen.
NTA’s story reflects the ills of Israel’s public sector. Over the years, the company responsible for the most important transport project in Israel behaved outrageously. Hedonism, extravagance, cronyism, disorganization, and overall indifference brought NTA to pathetic accomplishments with the NIS 2.5 billion the Ministry of Finance channeled to it over the years. Only in recent months does it seem that new winds are blowing through the company’s halls and the Tel Aviv light rail project is finally getting on track.
In order to advance the mass transit project in Tel Aviv, NTA has already invested double the infrastructure costs of the Jerusalem light rail. In Jerusalem, the train has been running for over two years already, while in Tel Aviv contractors have not even been chosen to build the first line, the Red Line. Even worse, after 15 years of operations, NTA has not succeeded in receiving approval for any one of the other planned light-rail lines, despite endless hours of planning and consultancy. They say, “many people built villas in Kfar Shmaryahu with money they received from NTA.”
I'd bet on after 2023
When NTA was established in the late 1990s, the assumption was that Tel Aviv would build a light rail long before Jerusalem, but Murphy’s Law had its way and anything that could have gone wrong along the way, did, and at the worst possible time. As in Jerusalem, a private franchisee was chosen to build the project, but the global credit crisis torpedoed their attempts to raise bank financing to launch the project. The franchisee was forced to ask the government to be flexible about the terms of the agreement, but the pedantic Treasury officers who managed the Office of the Accountant General at the time refused, and in August 2010, they cancelled the franchise agreement. Six months later, the government made the rash decision to transfer responsibility for the project to NTA, which had up to that point been only a support company.
Since the government decision, two years have gone down the drain. The budget estimate, which at the time of the franchise was NIS 11 billion, is now nearing NIS 17 billion, and the completion date, which was originally 2013, is now estimated between 2020 and 2022. But even these estimates are not final. “Globes” received an email written by a senior manager at NTA (who was responsible for establishing the Red Line, among other things, and left the company voluntarily in 2012) to a personal acquaintance. “I do not agree with a great many of the things that are happening there, in terms of the management plan, contract distribution policies, the organizational structure, and personnel hiring,” he said to his friend, “In terms of timetables, I would bet on 2023 or later, and in terms of budget, the 11 billion shekels will double.”
In its first years, NTA was mostly a great place for the lowest cadre of political appointees, insiders, and “friends of.” NTA transferred most of its professional activity to a private body called Mesilot, which charged exorbitant fees for its work, totaling NIS 300 million. The State Comptroller revealed that NTA’s agreement with Mesilot included full payment of Mesilot salaries and office expenses, and a special “bonus” for each additional employee that Mesilot hired, including secretarial staff. In 2011, NTA’s new chairman Michael Ratzon ended the relationship with Mesilot and the company began reassuming the professional functions that it had lost. The number of positions at NTA jumped from 40 to 160 within two years, and is expected to exceed 200 in the coming year.
But the manpower employed by NTA did not meet the demands of the job. Not one qualified candidate was found to manage building the Red Line, and other key roles also lacked candidates. Only two people at NTA had previous experience with light rails. A senior government official responsible for the project told “Globes,” “NTA’s problem was management and the quality of the workforce. The company was managed haphazardly, it was impossible to get answers for anything, and the entire process that NTA tried to advance got stuck.”
These anecdotes reveal a wasteful and hedonistic managerial culture. The extravagant meal at 2C, which cost taxpayers thousands of shekels, was only one example. A special device for absorbing cigar smoke, which was installed in the chairman’s office, is another. The device was for overriding the building’s smoke detectors, so the chairman would be able to smoke his favorite cigars in peace, without moving from his supple leather couch. But that is just small change. The big-league spending includes the decision to rent the fanciest offices in the Azrieli Towers at an annual cost of NIS 8 million, or NIS 60 million over the course of the 7-year lease. “We could have found offices in Sderot, but we wanted to be close to the heart of our operations,” Ratzon said in a recent television interview.
According to the State Comptroller, to date, NTA has spent NIS 1.25 billion on preliminary evacuation and relocation of infrastructure along the planned route of the Red Line, NIS 151 million on expropriations and evictions, NIS 126 million on various office expenses, and NIS 528 million on early-stage planning.
Under the Freedom of Information Law, “Globes” requested that NTA provide an itemized list of the company’s payments over the years. After a lengthy negotiation process, which included threats of legal action, NTA agreed to provide “Globes” with a very partial list of its expenses between 2009 and 2012. The list, reported here for the first time, provides additional details. On the list are management companies and construction contractors such as Ram Engineering (NIS 83.75 million), Israel Electric Corporation (IEC) (TASE: ELEC.B22) (NIS 41.5 million), Ayalon Highways (NIS 32.2 million), and earthworks contractor Zalman Barashi (NIS 9.71 million).
A category no less interesting is the local authorities. Tel Aviv Municipality, for instance, received NIS 2.6 million from NTA, and the Petah Tikva Development Company received NIS 11.5 million. The big winner among local authorities was the Bat Yam Coast Company, which received a total of no less than NIS 20 million between 2009 and 2012. These payments reinforce rumors that NTA funneled hundreds of millions of shekels to municipalities and local authorities during the years in which it operated for projects entirely unrelated to the Red Line. A similar phenomenon was revealed in the recently publicized State Comptroller report on the Metronit project in Haifa. It seems that also in this case a thorough examination is in order.
Another interesting expense is to the planning company DHV, which received NIS 25.4 million from NTA in 2011 and 2012. “All the traffic planners in the country, without exception, are working for NTA,” a well-known traffic planner who worked at NTA in the past told “Globes,” “They hire everyone, and they pay very well.”
NTA’s results to date have been wretched by any measure. When Ratzon assumed his post he presented a timetable in which all the main tenders would be held in 2012. Two years have passed, and no tender has been held yet, other than the train car acquisition tender, which has already been postponed four times. Even more upsetting is the fact that, to date, not one of the four additional planned light rail lines (the Green Line, Yellow Line, Purple Line, and Brown Line) has been approved.
“The Red Line is not very significant on its own,” a senior planning official told “Globes,” “Only a network of light rails and BRT lines will bring about a significant change in the travel habits of Tel Aviv metro area residents.” In 2009, five years late, NTA concluded preparation of a new master plan for the light rail lines. This plan rendered all previous planning work obsolete. The problem is that even the new plan is no longer up-to-date, because it does not take into account the vacating of the large IDF bases Tzrifin and Sirkin, each covering 400,000 square meters. Large residential neighborhoods are to be built, but the planned light rail lines do not go anywhere near them. Even the undisputed lines are stuck, such as the Green Line, which is no less important than the Red Line, and which is planned to carry 65 million travelers annually - 50% more than all the travelers on all the current Israel Rail train lines combined. But the plans for the Green Line are still sitting in the planning committees, and their final approval is expected only in 2016, in the best-case scenario.
NTA: “Determined to meet the challenge”
In the past few months, however, it seems that something is changing at the failing company. In September, Alex Viznitzer stepped in as chairman. In recent weeks, NTA has held a bidder’s conference for depot contractors and for the train systems. NTA employees have described new work protocols, and even enforcement of employee dress codes. At the chairman's instruction, NTA is exploring the possibility of leaving Azrieli Center for more modest and affordable offices, and the option of ending the extremely costly agreement with IBI was examined as well. Over the past year, NTA operated for a protracted period without a CEO, CFO, and other senior positions that remained open. The appointment of Yehuda Bar-On as CEO, formerly Ayalon Highways CEO and National Roads Company of Israel Deputy CEO, was recently approved, and the Red Line project is now spearheaded by one of the most prominent professionals in the field: Anthony Burchell, who has 40 years of experience establishing metropolitan light rail systems in Singapore, New Delhi, Hong Kong, and Dubai.
Viznitzer, who started a revolution as National Roads Company of Israel CEO, is currently enjoying wall-to-wall government backing. The Ministry of Finance has said that he brings a different approach to the job that could bring a breakthrough where his predecessors failed. A Ministry of Finance source said: “In the first round, he was a franchisee who failed. In the second round, he was a chairman who thought NTA employees could do everything alone, even if they have no idea how to write a tender for train cars. Viznitzer’s attitude says that we don’t know everything and we need to let international companies and foreign managers take responsibility for the professional part.”
NTA said in response, “What happened is history, and we are doing everything to make amends. NTA is currently reorganizing, and is setting out to meet the mission it has been given through understanding the importance and complexity of the task.
“The company is determined to meet the challenge facing it. Minister of Transport Yisrael Katz's directive on the subject is perfectly clear, and is why he also supported the appointment of Alex Viznitzer as company chairman. NTA and its leaders’ job now is to implement this directive in the best way possible. This must be done in order to rise to the national project facing it, namely building a light rail and BRT network in the Tel Aviv metro area.”
Published by Globes [online], Israel business news - www.globes-online.com - on February 25, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014