As I have previously blogged, the costs of setting up this scheme are huge, involving a Special Purpose Vehicle, seemingly required for no reason other than to keep the lawyers in Ferraris.
The SPV is a limited company wholly owned by the Comhairle, which will take over the schools that are to be refurbished, and then negotiate with the developers to fund and deliver the scheme. The rebuilt schools will be owned by the developers, who will deliver a contractual service to the Comhairle on the basis of the contract negotiated by the SPV. Remember, of course, that those people who are directors of the SPV must negotiate in the best interests of the SPV, and not the best interests of the Comahirle (although they may be the same.)
Clear about all that?
If the Comhairle were to borrow the money and deliver the new buildings, they would use the Public Works Loan Board, which is currently offering a 30-year fixed loan at 5.25%. As a public body the Comhairle can borrow at very, very, very good rates. The developer will have to pay a commercial premium, and charge a further premium, and add a risk premium, probably pushing the cost up to 7%. We, the taxpayers, pay the difference.
When HHP took over the Council stock, the solicitors acting for HHP required the Comhairle to deliver title deeds for every property. Then have a contaminated land survey on every property and then get an indemnity from the Comhairle about the results. Six to nine months of lawyers sweating hard to stretch their fees and find 'issues' that no-one knew existed or were of any concern to either of the parties.
Hopefully, when John Swinney is here next week he will be able to announce that the Comhairle can arrange the rebuild of the schools directly, and in a sensible order of delivery, rather than adhere to the discredited PPP scheme of his predecessors.
Oh yes, and find the extra £5m required to replace the schools.