Council ridiculed for £16.9m buyout deal

Published date: 03 December 2015 |
Published by: Shane Brennan
Read more articles by Shane Brennan


 

DENBIGHSHIRE County Council has paid £16.9 million to buy itself out of a contract for the running of its head office in Ruthin as well as other buildings in the town.

The council used the scheme in agreement with Neptune Developments who had built the council's Ruthin headquarters.

The original deal was financed through the Private Finance Initiative (PFI).

Under the PFI scheme the council paid an annual charge totalling £2.6 million a year to cover maintenance, utilities and other financial costs.

But the council has opted to pay £16.9 million to buy itself out of the last 15 years of the contract.

And now the council is set to do another deal with Neptune Developments for redevelopments in Rhyl. 

But the council has been ridiculed for entering into the contract in the first place and was featured in the latest edition of satirical magazine Private Eye.

The council has hit back against the magazine, a spokesman for Denbighshire County Council said: “The information in the Private Eye article is incorrect.

“The unitary charge the council was paying under the PFI agreement covered much more than the cost of the construction and development of the buildings, so to equate the termination cost and the savings made to the perceived cost of construction is wrong as this was only one element of the total annual unitary charge.

“The rest was made up of charges that covered the complete running costs of the buildings (including cleaning, caretaking, utilities and insurance) as well as their on-going internal and external maintenance.

“The council was contractually committed to paying the unitary charge for another 15 years and covering all of these elements, plus inflation, would have resulted in payments of approximately another £41m.

“The council has paid a compensation sum to exit the agreement but the cost of this, taken with the savings the council will make running the buildings itself, means that it will save at least £12m over what would have been the remaining period of the PFI agreement.

“Some of that £12m is money the council would have had to find in future but some of it translates to an annual budget saving of £575k per year which will help to reduce the pressure on the budgets the council has for important services next year. As the council’s funding is reducing, this amount makes a significant contribution to the savings required to balance the budget without any impact on services or jobs.”

Glenn Swingler, of anti-cuts campaign group Denbighshire Voice, said: “I only have questions. Where has the £16.9 million come from? Was it from reserves? If it's a loan, where from and what are the repayments and over what period? Was there a penalty charge for pulling out of the deal? If so, what are those penalty charges? Who was the company Neptune sold the PFI to? Can we see the details of the scheme to check the figures?”

For more news from across the region visit newsnorthwales.co.uk

You must be a registered user to leave a comment. Register or login here.

Featured Businesses

View all adverts