A Sheffield Council contract to resurface potholed streets, replace trees and upgrade street lights is to be refinanced to save up to £14 million.
A report to the authority’s cabinet meeting on Wednesday seeks approval to progress with the refinance to save between £300,000 and £600,000 a year over the remaining 22 years of the private finance initiative with Amey.
It says that not carrying out the Streets Ahead refinance could result in ‘more drastic cuts to frontline services’ because of council budget cuts and that there will be ‘no loss of service for the people of Sheffield.’
The council says that, if the report is approved, negotiations will begin with banks that currently provide funding for the contract and potential new funders, with the aim of getting more favourable interest rates than those agreed in 2012.
Coun Ben Curran, cabinet member for finance and resources, said: “It is important we take advantage of the fact that interest rates are lower now than in 2012.
“Everyone knows the council is facing huge budget reductions due to government cuts. We do our best to reduce costs on back office spend so that we can direct as much resource as possible to protect front line services that the public rely on.”
Approval is also sought for some ‘minor operational changes’ to the £2 billion contract which will result in savings. Some are described as ‘high value changes’.
The changes are detailed in a report appendix which is restricted because it is ‘relating to the financial or business affairs of any particular person.’
The report also said that the council had previously tried to contribute extra capital funding by way of public sector debt to generate savings but the proposal was later rejected by central government because of accounting problems.
‘Significant costs’ will be incurred by the council to undertake the refinance and make changes to the contract – including the appointment of financial and legal advisors as well as paying Amey’s costs as agreed under the contract.
That is on top of paying half of the £265,000 in abortive costs from when its previous attempt to make savings was rejected.
Any savings made from the refinance would apply from the financial year 2016-17.