Croydon Council has had to launch a second financial bailout of its £450 million joint venture in the building of Town Hall offices and other possible speculative developments around Croydon.
At the end of 2009 when the credit crunch struck and City money ran away as fast as it could from private equity deals, Laing, the developers building the office block that is supposed to replace Taberner House, persuaded their friends on Croydon Council to take out a £145 million overdraft to fund the scheme.
This week, the councillors in charge of Croydon were forced to recognise the financial disaster facing them following that speculation in the private development market that has put millions of pounds of Croydon council-taxpayers’ money at risk.
Although the housing market was already struggling in 2007 and 2008, this week an official council report “notes a decline in residential markets during 2010, stabilising in 2011 and prediction of future growth between 2013 and 2015″.
Talking about the council’s Hub and other related CCURV schemes – regarded by many outside the Town Hall as nothing more than a Vanity Project – the report says that they now expect “a delay in the delivery of schemes until 2013 onwards, when markets are expected to improve”. That is not a view shared by many finance commentators in The City.
So the speculation in the property market has not worked and now Croydon Council is to permit Laing, their development partner, to stop paying some of the interest on the money lent to them. The interest being charged is already a heavily subsidised rate, costing hard-pressed Croydon council-taxpayers hundreds of thousands of pounds a year.
With the economic crisis deepening, another bailout of its scheme will need to be sanctioned at the Council’s cabinet meeting next Monday.
Most of the papers relating to a decision likely to cost Croydon millions of pounds are being kept strictly private. On past form, they are likely to be denied to all Croydon’s elected councillors, with the exception of a handful among the ruling Conservative group’s cabinet – the very people that created this multi-million pound mess in the first place.
The lack of transparency on the deal can only further worry taxpayers that they are being roundly ripped-off.
To further bail out the scheme, the Council is having to put more publicly owned properties into the commercial joint venture.
Rees House, Morland Lodge, Brigstock Manor, the derelict Cheriton House, Coleby Court and Stroud Green Lodge are all to be thrown into the joint venture in a desperate attempt to keep the project going.
The Council has also announced in the paper that it will demolish Taberner House.
Tony Newman, leader of the opposition Labour group on the council, said, “We have always warned against playing high-stakes roulette with the council tax-payers’ money.
“The lack of transparency and hidden cash flows makes it hard to comment in any great detail. But the scheme seems too much like the type of so-called ‘financial wizardry’ that led to the fall of Lehman Brothers. It’s too risky a business for the council to be involved in.”
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