Israel's Metro Project Accumulates 2.8 Billion Shekels Amid Tax Shortfalls

Israel's massive Metro project in the Gush Dan region, estimated at 182.5 billion shekels, has accumulated 2.8 billion shekels in its dedicated fund so far, while the newly introduced metro tax has yielded a meager 45 million shekels, Globes has learned. Half of the giant infrastructure project's funding is slated to come from the state budget, with the second half financed through dedicated taxes and municipal contributions.

Revenue Streams and Shortfalls

Significant income is currently registered by the Israel Land Authority (ILA), which by law transfers at least 500 million shekels annually as part of transactions surrounding future stations. However, the ILA does not exceed this statutory minimum. Additional funding comes from local authorities, which are required to pump 4.5 billion shekels into the project based on a formula factoring in economic strength and station count. By the end of last year, 268 million shekels had been transferred from municipalities.

Another projected revenue source is the metro tax, devised under the assumption that the underground network will enhance property rights and real estate values. Property owners benefiting from the project are meant to pay a special tax alongside betterment levies. So far, only 45 million shekels has been collected from this tax. While it is a new levy expected to grow over time, developers have strong incentives to pay standard betterment levies quickly, as they stand at 60% until the end of 2030 before jumping to 72%.

Skepticism and Financing Gaps

Metro tax revenues are expected to yield 25 to 30 billion shekels over the project's lifetime, but analysts and state auditors remain skeptical. In a report on the project, the State Comptroller noted that this projection reflects a downward revision in revenue estimates ranging between 2 and 13 billion shekels.

This assessment reflects a decline in revenue estimates ranging between 2 and 13 billion shekels.

Another intended source is congestion pricing, expected to generate 700 million shekels, though its implementation has been repeatedly postponed and is now pushed to 2027. Government financial reports indicate that ongoing work is underway to validate revenue estimates and formulate a comprehensive funding concept to cover budget shortfalls.

Both the State Comptroller and Bank of Israel officials have warned of acute timing mismatches. According to preliminary estimates, tens of billions of shekels in interim government financing will be required. Potential solutions raised by the government include issuing bonds through budgetary mechanisms or securing institutional financing. Meanwhile, the project moves forward as dozens of groups bid on 65 billion shekels worth of excavation tenders.