The United Israel Appeal is warning that the American federation system could lose confidence in the Israeli government if it does not provide more than $1 billion in compensation to UIA and the Jewish Agency for Israel.
At issue is whether the government will provide up to $1.2 billion in compensation to the two organizations for public housing units they own that will be sold off at big discounts under a new law.
Without compensation, said Jeff Kaye, director of the UIA’s Israel office, the organizations could face serious problems because the housing units form part of the collateral for extensive bank loans they have taken out.
A sudden sharp depreciation on their balance sheets could lead the banks to refuse to grant additional credit.
Kaye said this would damage the ability of UIA and the Jewish Agency to “do our job” and would “potentially upset existing confidence” of federations in the Israeli government.
The UIA serves as the funding link between the U.S. federation system and the agency, which provides humanitarian services in Israel, such as immigrant resettlement.
On Monday, the Knesset passed a bill introduced by the opposition to sell as many as 120,000 low-cost public housing units to their tenants at substantial discounts of between 35 percent and 85 percent of market value.
The bill — opposed by the governing coalition — aims to help immigrants and poorer segments of society who have rented low-cost public housing units for more than five years to become homeowners.
UIA and the agency own 11,000 and 8,500 of these housing units, respectively, through an agency-owned company called Amigour.
They bought the housing units during the past 30 years at times when there was a need to provide low-rent housing for new immigrants and the disadvantaged.
Earlier this year, when the opposition began drafting the legislation, UIA and agency officials insisted on compensation that would total the difference between the market value and the discounted sale value of the property.
“We told Knesset members that we have no problem with getting out of public housing if the Knesset decides,” said Kaye.
“But you can’t give away our property without compensating us.”
After the two organizations lobbied for it, the new law includes a clause on compensation, based on an existing law on government compensation for property confiscated for public works projects such as highways.
However, the details and procedures for valuating the property have yet to be set, and UIA and agency officials expect the government to invite them for talks within weeks.
Government officials have said the value of compensation could total 4 billion shekels — roughly $950 million at current exchange rates. That leaves a $250 million gap, based on the $1.2 billion the two organizations are seeking.
The total value of compensation will in part depend on how many tenants decide to buy the homes they now rent.
The government, which is trying to keep spending down, said it will be hard pressed to find the money.
Eli Yosef, a Finance Ministry spokesman, said the ministry has not yet discussed the matter.
“We know that the law is the law,” he added. “But we will have a problem fitting this into the budget.”
The Archive of the Jewish Telegraphic Agency includes articles published from 1923 to 2008. Archive stories reflect the journalistic standards and practices of the time they were published.
