Jerusalem's Mayor Uri Lupolianski said Wednesday that the long-standing arrangement under which church-owned properties in the capital are exempt from city property taxes (arnona) is costing "hundreds of millions" of shekels and must be ended. Lupolianski was speaking to The Jerusalem Post on the day that Prime Minister Ehud Olmert met at the Vatican with Pope Benedict XVI. The mayor said it was absolutely acceptable that Christian houses of prayer be exempt from the city taxes, but that it was unfair and unacceptable for other church holdings - including hotels, restaurants and bars, he said - to enjoy similar exemptions. "They benefit from city lighting, from garbage collection," he noted. "And I have Jewish hotel managers, for instance, asking me how it can be that their competitors can charge lower prices because they don't pay city taxes." Lupolianski said he understood the sensitivities of Israel's relationship with the Vatican and that he was not insisting that such church-owned properties necessarily be required to pay 100 percent city taxes. "There can be a compromise... say 50%," he said, "but the government must reach an agreement with the Vatican. Jerusalem can't live like this. It's discriminatory. And it's costing us hundreds of millions." Senior Israeli diplomatic officials in Rome said that while Olmert and the pope discussed in general terms the bilateral issues between Jerusalem and the Vatican, they did not get into details about how much city tax the Vatican should pay. However, the official said that issue was not over the Vatican asking for a full exemption, since they have a variety of different properties and institutions in the city and it was clear to both sides that a church, for instance, would not be taxed at the same rate as a guest house. The issue, the official said, was rather over whether an agreement, once reached, would be in force "forever," which the Vatican was demanding, or whether it might be changed some time in the future. According to the official, the Vatican wanted the agreement to be permanent, while Israel - as a democracy in which things change - felt unable to provide that type of commitment. "If we do this for the Vatican, then both the Jews and the Moslems will demand similar treatment," he said. The official said that negotiations on this issue were "moving forward," and that a Vatican team met with Foreign Ministry officials about the issue in Jerusalem on Wednesday, a follow-up to another meeting held between the two sides two weeks ago in the Vatican.