Israeli Water Company Mekorot Files Supreme Court Petition to Cap Property Taxes on Water Facilities

Mekorot, Israel's government-owned water company, has petitioned the Supreme Court against the Finance and Interior Ministries, demanding limits on property tax (arnona) imposed on its water facilities. The legal action follows a dramatic 16-fold increase in property tax levied by the Hof Ashkelon Regional Council on one of Mekorot's facilities, raising the rate from 0.28 to 5 shekels per square meter starting in 2029. Mekorot warns this precedent could trigger a nationwide surge in property tax payments, while the compensation it receives through water tariffs remains fixed as a percentage of asset value and unrelated to actual arnona payments.

The Hof Ashkelon Council's decision, approved by the Interior Ministry in 2025, is expected to boost the council's revenues by approximately 19.5 million shekels annually at Mekorot's expense. Mekorot emphasizes that the affected facility treats groundwater and requires no special municipal services, describing the tax hike as an unfair "topographical windfall" benefiting the local authority without corresponding costs. The company argues this creates an unjust cost distribution where local authorities profit while consumers ultimately bear the financial burden through water tariffs.

Mekorot is calling on the government to establish a uniform, symbolic arnona rate for all water facilities nationwide, removing local authorities' discretion. The Water Authority, which regulates Mekorot and often disputes with it, supports this position, stating that a standardized minimal property tax rate should apply especially to large-area water and sewage facilities that do not consume municipal services. The authority warns the current situation leads to sharply rising property taxes on water infrastructure, increasing financial strain on Israel's water sector.

The petition notes that although the government decided in 2023 to set classification and minimum-maximum arnona rates for national infrastructures including water systems, these regulations have yet to be implemented. The Supreme Court is expected to request responses from the relevant ministries, which will decide whether to comply with Mekorot's demands or engage in a full legal battle.

Summary: Mekorot has filed a Supreme Court petition against Israeli government ministries to cap sharply increased property taxes on its water facilities, citing unfair cost burdens and calling for a uniform national arnona rate. The case arises from a 16-fold tax hike by the Hof Ashkelon Regional Council and could impact water infrastructure taxation nationwide.