The Jerusalem municipality has issued fines of millions of dollars to properties owned by the various churches and the United Nations, amid a political dispute with the finance ministry of Israel.

The city's municipality cited a new legal opinion which states that the properties are not legally defined as places of worship and therefore are not entitled to exemptions from property tax.

The municipal authority said in a statement on Sunday 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 around two weeks ago, the Times of Israel reported.

Over the past week, the municipality has fined the Catholic Church almost NIS [Israeli shekels] 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.

According to the Times of Israel, the move reflects political wranglings between the municipality and the finance ministry over funds. For years, the state has prevented the municipality from collecting property tax from the assets, following an agreement with the churches that exempted them from taxes. But a new legal opinion by Gabriel Hallevy, described as an international law expert by the municipality, said that the agreement is not valid when it comes to property tax and that the municipality is obligated to collect it.

Jerusalem's mayor, Nir Barkat, has reportedly been conducting a high-profile campaign against the finance minister Moshe Kahlon that included instructing workers to dump rubbish at the entrance of the ministry offices in Jerusalem and threatening to sack more than 2,000 city employees.

'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.'

In January, municipality employees began an open-ended strike to protest the firing of some 2,150 workers.

Jerusalem enjoys an annual 'capital grant' from the finance 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 ultra-Orthodox Jews who make up around a third of the population and another third of Palestinian Arabs.

The Times of Israel reported that with Sunday's announcement, Barkat appeared to be putting pressure on the state to fund city hall or face a crisis with the UN 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. If the state wishes the current situation to continue, we demand that it fully compensate us for those sums.'