Real Cost of Tel Aviv Light Rail Might Result in Buyer’s Remorse for Government

Real Cost of Tel Aviv Light Rail Might Result in Buyer’s Remorse for Government

A report was published by the State Comptroller about the Red Line project, which is currently under construction in Tel Aviv.

The report is extremely critical regarding the funding associated with the light rail project, as it appears to be burning through funds unlike any other infrastructure project in Israel.

The budget

A budget of about NIS 10.7 billion had been granted to the government when the project had first been promoted, but the opening of the Red Line has been delayed by five times up till now.

In addition, its cost has continued to climb during this time and has now reached NIS 18.6 billion. The Red Line had been scheduled to open commercially on November 30th, but there has been another delay.

The new start date will be in March 2023 and this latest delay is expected to push up the cost of the project by another NIS 100 billion.

The government company that has been granted the responsibility of construction of the light rail project is the NTA.

The state comptroller’s review discovered that the company has been trying to conceal budget overruns by diverting funds from one section to the other.

The problems

This prevents the budget framework of the Red Line from increasing, thereby creating the illusion of no overruns.

According to the report, the project was authorized on the basis of a low estimate, but extensive resources have already been invested.

It said that the government’s ability of cancelling, or even substantially changing the project is reduced, even if the cost of the projects turns out to be tens of percent higher because of the costs that have already been incurred.

The oversight company of the project had recommended a budget addition two years ago because it had predicted that it would not be able to open by the scheduled date.

However, the Transportation Ministry, the Treasury and the NTA had opted to not increase the budget of the project, which means it has remained the same.

Postponement

The prediction has come true in recent weeks because the Red Line project will not open as per schedule.

According to NTA officials, due to the postponement of the project, they had not asked the Finance or Transportation Ministry to increase its budget.

Instead, an investigation showed that it has done the same thing that it has done previously in order to put off asking for a budget increase.

It asked the Transportation Ministry to divert funds from unanticipated expenses for maintenance purposes, which means it does not add to the budget.

It should be noted that it is not the first time that the NTA has made such a request. The State Comptroller discovered that it has used the unanticipated expenses section for boosting other areas of the budget.

The NTA is required to keep 15% of the budget aside for dealing with unanticipated expenses, but it has diverted these funds.

The State Comptroller advised it to not use the same tactic for the other two lines that it is working on in Tel Aviv.

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