Jerusalem municipality freezes millions from UN, churches’ bank accounts

Jerusalem municipality freezes millions from UN, churches’ bank accounts

Mayor appears to drag international organizations into budget dispute with Finance Ministry, announcing city will collect NIS 650 million in property tax

The Dormition church on Mount Zion in Jerusalem. (photo credit: Anna Kaplan/Flash90)
The Dormition church on Mount Zion in Jerusalem. (photo credit: Anna Kaplan/Flash90)

The Jerusalem municipality has handed out fines totaling millions of dollars to properties owned by the United Nations and by churches, citing a new legal opinion that says the properties are not legally defined as places of worship and therefore aren’t entitled to exemptions from property tax.

The step appeared to be an escalation of a dispute between the municipality and the Finance Ministry over funds. Mayor Nir Barkat has been conducting a high-profile campaign against Finance Minister Moshe Kahlon that included instructing workers to dump trash at the entrance to the ministry offices in Jerusalem and threatening to lay off more than 2,000 city employees.

The municipal authority said Sunday in a statement that it has started collecting over NIS 650 million ($188 million) from some 887 properties in Jerusalem belonging to various churches and UN agencies, after notifying the Prime Minister’s Office as well as the finance, interior and foreign ministries of the plan about two weeks ago.

Over the last week, the municipality has fined the Catholic Church almost NIS 12 million, the Anglican Church more than NIS 7 million, the Armenian Church NIS 2 million, and the Greek Orthodox Church about NIS 500,000. It took the sums by placing a lien on the churches’ bank accounts, and said that was only the first stage, with more to come.

Jerusalem Mayor Nir Barkat holds a press conference at the Jerusalem Municipality regarding his dispute with the Finance Ministry over the city’s budget, on January 1, 2018. (Flash90)

The state has for years prevented the municipality from collecting property tax from the assets, following an agreement with the churches that exempted them from taxes. However, a legal opinion by Gabriel Hallevy, whom the municipality described as an international law expert, concluded that the agreement isn’t valid when it comes to property tax and that the municipality is obligated to collect it.

“We will no longer agree to have residents of Jerusalem fund these enormous sums,” said Barkat. “The state needs to face the consequences of its decisions. Either the state will compensate us and return the money that is meant to develop the city, or we will collect it as required by law. We intend to conduct administrative and legal enforcement, and if need be, we won’t hesitate to take the matter to the High Court of Justice.”

Municipality employees began an open-ended strike last month to protest the firing of some 2,150 workers amid the budget dispute with the Finance Ministry. On January 7 the municipality agreed to a 45-day grace period during which a team made up of municipality, Finance Ministry and Interior Ministry officials will hammer out an agreed-upon financial framework for making up the city’s budget shortfalls.

Barkat had ordered the layoffs due to the budget showdown with the ministry, which he said was withholding hundreds of millions of shekels from Israel’s poorest city.

Jerusalem enjoys an annual “capital grant” from the ministry that helps it offset low tax revenue due to large populations with relatively high percentages that are not part of the taxpaying workforce, including roughly a third of the city’s population that is made up of ultra-Orthodox Jews and another third of Palestinian Arabs.

A pile of garbage left by Jerusalem city workers in front of the Finance Ministry as part of the municipality’s dispute with the ministry over funding, on December 31, 2017. (Hadas Parush/Flash90)

In 2016, the grant came to some NIS 500 million, and in 2017 to NIS 700 million. Barkat has argued that the city’s unique challenges — such as its ethnic divide and the large percentage of its land area taken up by government institutions — merit a larger grant from the national government.

As part of the campaign for such a grant, he announced last month that the city would have to scale back key municipal services and fire thousands of workers. He also launched a billboard campaign funded by the city to pressure Kahlon to agree to up the capital grant, and paid with his own money for weekend newspaper ads against Kahlon.

With Sunday’s announcement, Barkat seemed to be putting pressure on the state to fund city hall or face a crisis with the United Nations and church bodies.

“The state played a game at the expense of the residents of Jerusalem and illegally exempted the churches and the UN from paying property taxes in parts that are not places of worship without legal basis,” said the Jerusalem municipality on Sunday. “The financial damage caused over the years to Jerusalem due to the state’s stance is almost NIS 1 billion.

“It is absurd for Jerusalem residents to fund municipal services for the churches and the UN on their own, and for the municipality to be prevented from collecting enormous sums that could significantly improving the city’s development and services,” it added.

“If the state wishes the current situation to continue, we demand that it fully compensate us for those sums.”

Times of Israel staff contributed to this report.

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