Even as work is underway on the Tel Aviv light rail’s Red Line, the Ministry of Transport and the Ministry of Finance are deliberating on the future of the next two routes: the Green Line and the Purple Line.
While the Red Line was nationalized and its construction assigned to the state-owned NTA, the ministries are reconsidering the possibility of privatizing the planning and developing of the two future lines.
The idea was raised again because of the pressure to move up the timetable for the lines and the potential to raise funds for their construction beyond the state budget; estimates place the cost of the projects at NIS 25-30 billion.
The work on the first line for the Dan Metropolitan light rail has continued as planned, but the project has been the target of heavy public criticism over its costs and timetables. Since the MTS permit was rejected, the project end date was delayed to 2021, while the cost which initially stood at NIS 11 billion jumped to more than NIS 16 billion.
Projects like the high-speed train to Jerusalem or the Red Line in Tel Aviv are handled according to the ‘turnkey’ method which opponents claim is doomed to budget overruns and timetable deviations because they are backed by public funds.
A ‘PPP’ model, however, means the funds invested in the project come from a self-funded developer or are funding which is closely monitored by the banks and experience shows these projects do not significantly exceed their budget or timetable.
Opposition abounds
The original plan for the construction of the Red Line called for a public-private partnership under a BOT (build-operate-transfer) tender. In December 2006, MTS owned by Africa Israel, Siemens, Egged, a Chinese company, and a Portuguese company was awarded the Red Line tender. However, the company did not manage to drum up the required funds for the project by 2010, and the project was nationalized and transferred to the state-owned NTA.
In December 2011, the government decided to build a network of light rail lines by 2025, but four years have passed since and not much progress has been made in finding the funding for the ambitious project estimated at NIS 100 billion.
Last August, NTA began working on the first line, which will take at least six years to build. Meanwhile, as “Globes” revealed, there has been progress in advancing the proposals for two additional lines the Green and Purple.
More than two months ago, the central portion of the Green Line was approved by the National Infrastructure Committee (VATAL) and submitted for public comment until next month. The plan for the central portion of the Purple Line has also been submitted for review by the public.
And the objections have been piling on. Two weeks ago, Tel Aviv deputy mayor Meital Lehavi submitted dozens of objections on behalf of the Tel Aviv Municipality. Lehavi claimed properties have been appropriated without proper compensation for residents and preparation for the construction has ruined the city’s public parks.
The Ministries of Finance and Transportation hope to conclude the statutory planning of the lines by the end of the year while finding solutions for the budgetary difficulties for the projects estimated at NIS 30 billion.
The ministries have come to an agreement the BOT tender under which the Red Line for the Jerusalem light rail was built is not relevant and ill-suited for light rails in urban areas due to the immense power given to the award grantee.
In the Jerusalem project, the state was forced to grant the winner significant concessions to agree to changes and improvements in the project, like adding trains to improve service, beyond what was agreed in the original agreement.
Therefore, if the state decides to pursue the inclusion of private partners, it will likely be under a PFI model which will release the project from dependence on the budget while not providing the winner the ability to oppose changes and improvements to the project after its completion.
One example of a PFI tender is Route 431. Under a PFI, the state retains the right to choose an operator for the project. The tender for an operator is published at the end of the commissioning period, leaving the state free to set its own terms.
Along with this option, the ministries are considering alternative methods to fund and promote the project within the budget.
Speaking to “Globes”, Ministry of Finance officials said, “The question of how the next lines will be developed is under preliminary discussion, during which all relevant options will be considered.” The sources added, “There is not preference yet for undertaking the project with budgetary funding or PPP.”
The minister of transportation currently opposes privatizing the project. A ministry source told “Globes” on Tuesday, “The ceaseless changes to the plan are responsible for its delays through now.”
They claim PPP has plenty of shortcomings despite its advantages. “If a private operator does manage the Green and Purple Lines, NTA will run the Red Line while a third party runs the rest it will be a mess. There was a reason the state nationalized the project in its first round.”
The office of the minister of transportation said, “Minister Katz is leading the project with clear directives and will soon hold a hearing on ways to advance and fund the two lines. The minister ordered NTA led by Yair Shamir to ask for offers. At the end of the hearing, a policy will be formulated and directives will be provided.”
NTA asked not to comment on the report.
Published by Globes [online], Israel business news - www.globes-online.com - on February 10, 2016
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