Decision Maker: Co-operative Executive
Decision status: Recommendations Approved
Is Key decision?: Yes
The Howden House contract (‘the Contract’) has been set a significant savings target in order to contribute to the Council achieving its challenging budget position in the future.
To carry out a Refinance to replace the current funder with a potential new funder on more favourable terms in order to deliver a financial gain for the Council.
Failure to carry out the Refinance will result in more pressure on achieving the Council’s current and future budget and may result in more drastic cuts to front line services.
11.1 |
The Howden House PFI contract (‘the Contract’) has been set a significant savings target in order to contribute to the Council achieving its challenging budget position and to deliver its workplace strategy.
This report seeks approval to the Council pursuing a contract Refinance to replace the current funder of the Howden House PFI contract with potential new funder, on more favourable terms and the introduction of an energy saving sharing mechanism in order to deliver a saving to the Council and to progress any necessary changes to the contract. |
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11.2 |
RESOLVED: That Co-operative Executive:-
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i. monitor the progress made by Council officers in determining the optimal refinancing option and approve (if appropriate) the recommended option; and ii. review and authorise the submission of a business case to the DLUHC/ HMT; and iii. complete the refinance of the Contract subject to the approval of commercially acceptable terms by the Director of Legal and Governance; and
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11.3 |
Reasons for Decision |
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11.3.1 |
The Howden House contract (‘the Contract’) has been set a significant savings target in order to contribute to the Council achieving its challenging budget position and delivery its workplace strategy. |
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11.3.2 |
The well-established nature of the contract makes it more attractive to the funding market and there are a limited number of competing relatively safe investments for funders in the current economic environment. These combine to give the Council a high chance of success in achieving a Refinance of the contract on the most favourable terms. |
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11.3.3 |
The Do-Nothing option will result in more pressure on achieving the Council’s current and future budget and may result in more drastic cuts to front line services. |
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11.3.4 |
Failure to carry out the Refinance will result in more pressure on achieving the Council’s current and future budget and may result in more drastic cuts to front line services. There is no evidence that deferring the Refinance will result in a more viable outcome in the future. |
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11.4 |
Alternatives Considered and Rejected |
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11.4.1 |
Do Nothing
Under this option no further action would be taken now in relation to a Refinance or other contract changes and all activities would be stopped.
In this scenario the Council would have to bear the abortive transaction costs and would not generate the expected ongoing contract saving.
This would have the advantage of being able to carry out a Refinance in future years should the finance market be deemed to be more competitive.
However, there is no certainty that there would be an improvement on the current market conditions and the benefits of a refinance reduce with time as more of the debt is paid off at the current higher rates. This is particularly the case with a contract that only has 9 years remaining. |
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11.5 |
Any Interest Declared or Dispensation Granted |
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None |
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11.6 |
Reason for Exemption if Public/Press Excluded During Consideration |
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None |
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11.7 |
Respective Director Responsible for Implementation |
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Executive Director, Place |
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11.8 |
Relevant Scrutiny and Policy Development Committee If Decision Called In |
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Overview and Scrutiny Management Committee |
Report author: Jayne Clarke
Publication date: 25/01/2022
Date of decision: 19/01/2022
Decided at meeting: 19/01/2022 - Co-operative Executive
Effective from: 01/02/2022
Accompanying Documents: