Scottish Borders Council borrowed £10 million from the Public Works Loans Board [PWLB] the day after it finalised a £9.6 million property deal to purchase a country estate near Melrose.
Not Just Sheep & Rugby was first to report last month that the poverty stricken local authority which has repeatedly cut front line public services in recent years had assumed ownership of the remaining 109 acres of Lowood after completing negotiations with the previous owners, the Hamilton family.
But details of how the acquisition of the estate with its nine properties including a substantial residence had been financed were not included in a report published by SBC in advance of a full council meeting shortly before Christmas. It confirmed the deal had been concluded on December 6th.
This week the UK Government's Debt Management Office published a list of cash advances made to councils, police authorities and other public bodies during December 2018.
It shows that on December 7th Scottish Borders Council arranged a £10 million loan from the PWLB with the money to be spent "immediately". According to the published data SBC will pay interest of 2.74% on the loan which will be repaid over 30 years.
There has been no indication that this multi-million pound loan was needed to pay for Lowood. And we understand elected councillors are not able or willing to discuss the terms of the purchase which is designed to free up land principally for house building but also for other development purposes.
Last month's council meeting was told in a report: "The Council paid £9.6 million for the estate (lower than the price cap previously agreed by Council) and is now finalising the expenses due on the purchase which will form part of the overall project cost".
There have already been claims the £9.6 million paid for the estate was excessive.
Councillor Stuart Bell, leader of the opposition SNP group at SBC told the December council meeting:"The £9.6 million outlay, plus expenses, plus cost of maintaining the land and assets, plus the cost of borrowing mean we’ll need to sell it all for over £11 million just to break even. Reports we have seen in private say there will also be significant infrastructure costs to develop the site.
"I don’t believe this site is worth £9.6 million, when you go into the detail of the terms and conditions of the sale; and that – as we know – was the opinion of the District Valuer whose assessment with vacant possession (which we will not have) was much lower than 9.6 million. Even when adjusted up for a “special assumption” she valued the land at a price lower than we are paying".
Perhaps the authority's hard-pressed council taxpayers and some councillors will be concerned at the size of the escalating debt mountain on the council's books.
The audited accounts for 2017/18 record total financial liabilities of £252.8 million as of March 2018. That figure had increased by more than £3 million over twelve months (£249.6 million at March 2017).
Latest financial information shows total borrowing - mainly from the PWLB, but also including a series of so-called LOBO loans - stood at £202.7 million, a significant increase from the 2017 figure of £196.5 million. PWLB debt on its own went up from £112.4 million to £119.6 million in the space of a year.
On top of that must be added £47 million of outstanding interest on three secondary schools built using PFI arrangements which will continue to drain money from council coffers for many years to come. SBC expects to pay £10.8 million in 2018/19 to service its overall PFI debt.
The annual charges including interest payable on loans used for capital expenditure totalled £11.68 million in 2017/18. The overall figure to service debts of more than £22 million when PFI is included equates to a sum capable of paying for a range of local government services.
If local taxpayers are expected to foot the bill for the purchase of Lowood over the next three decades then surely they are entitled to see the full details of the deal and the background which persuaded a majority of their elected representatives to spend £9.6 million of other people's hard earned money. For example what price did the District Valuer put on the Lowood land?
Unfortunately it seems every effort will be made to prevent information reaching the public domain.
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