Strike ends, but municipalities vow legal action on plan to redistribute local taxes

Local leaders say they are preparing to challenge program in court once it passes into law while ‘transferring the fight so it focuses on government, not harming residents’

View of a pile of garbage in Tel Aviv on May 16, 2023 amid a municipal strike (Avshalom Sassoni/Flash90)
View of a pile of garbage in Tel Aviv on May 16, 2023 amid a municipal strike (Avshalom Sassoni/Flash90)

Municipal leaders announced Thursday that they would go to court to fight the government’s controversial plan to redistribute local property taxes from well-to-do areas to poorer municipalities.

At a meeting of the Federation of Local Authorities in Israel as a three-day municipal strike came to an end, mayors decided to “transfer the fight so that it focuses on the government, not harming the residents.”

A statement issued by the group said that preparations were underway for a court petition against the legislation once it comes into law, and that unnamed bureaucratic measures would also be considered.

“[The plan] does not achieve the goals it is claimed to seek to address (the housing crisis), and it is clear that it was promoted for other considerations,” the statement charged.

“We demand the state present a real plan to solve the housing crisis and bring down housing prices, with a realistic incentive to expand the construction of housing, and that it bring real action to strengthen [disadvantaged] municipalities,” the statement read.

Under the contentious so-called Arnona Fund plan, the government will take a percentage of property taxes collected by municipal authorities from local businesses, to be put into a fund that will go to aid municipalities that have more modest commercial activity.

Critics accuse the coalition of planning to use the funds to pay for sectoral demands made by coalition partners, like subsidies to the Haredi community.

They also note that settlements in the West Bank are exempt from contributing to the fund, while they can still benefit from it, and that it is structured in a way that makes Arab municipalities less likely to receive disbursements.

The mayor of the central city of Ramat Hasharon said the strike should not have ended.

“We set out to fight for the future of local government, but unfortunately most of the mayors were not able to look ahead,” Avi Gruber said.

Ramat Hasharon Mayor Avi Gruber, November 20, 2019 (Miriam Alster/FLASH90)

“Instead of folding, we should have continued with a full strike until the Arnona Fund was removed from the agenda… But fear of the public tipped the scales,” Gruber said.

Amid the plans for court action, Finance Minister Bezalel Smotrich wrote a letter to Attorney General Gali Baharav-Miara demanding permission to choose his own representation in the upcoming legal battle, which would normally be covered by the attorney general.

Smotrich assailed Baharav-Miara for not issuing a legal position against the strike in response to a High Court petition on the matter.

“It would have been expected that as the one entrusted with representing the interests of the state and its citizens, many of whom are harmed by the strike, you would not sit on the fence with some weak, irresolute and meandering response, but would stand firm against the strike and demand its immediate end,” Smotrich wrote.

The attorney general’s response “did not represent my position or the position of the government,” he added.

On Monday, dozens of municipalities closed educational institutions and suspended garbage collection and all municipal services, including welfare, to protest the Arnona Fund. Schools and kindergartens reopened the next day.

The mayors of two central cities, Givatayim and Ramat Hasharon, warned Tuesday that they would not comply with the government’s potential demand to transfer the money.

On Monday, Labor MK Gilad Kariv threatened to petition the High Court of Justice against the plan, saying it was engineered to send the majority of the funds to ultra-Orthodox communities and not to Arab towns, which also suffer from financial hardships.


View of an empty classroom at a school in Tel Aviv, during a general strike of some municipalities and local authorities, on May 15, 2023. (Flash90)

Backers of the plan say it will help less wealthy municipalities incentivize residential real estate instead of business and have put an emphasis on the fund helping to build communities far from Israel’s center.

However, detractors say that in addition to the discrimination between municipalities, it punishes communities that have already invested in attracting employers, and takes money that would otherwise be directed toward improving services, such as education and culture.

As it currently stands, the law will disproportionately affect cities with thriving business areas or industrial parks.

The Arnona Fund is part of the Arrangements Bill accompanying the 2023-2024 state budget, which is expected to be finalized within the next two weeks.

It was approved Monday in a vote of the Knesset Finance Committee after a stormy session that saw lawmakers scuffle, with a number of them forcibly removed from the meeting.

The plan will now advance alongside the budget to the Knesset floor.t.

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