The Local Authorities (Capital Finance) Regulations 1997

Transactions for the replacement or enhancement of a building and provision of heating services

41.—(1) In this regulation, in relation to a private finance transaction to which paragraph (3) applies (a “relevant transaction”)—

• “corresponding purpose”, in relation to any qualifying purpose, means the same qualifying purpose, or a different purpose within the same category as that which includes the same qualifying purpose;

• “old building” means the relevant building in respect of which the authority make a decision such as is mentioned in paragraph (3)(b); and “new building” means the building which, in consequence of such a decision, the authority use for a corresponding purpose;

• “qualifying purpose”, in relation to the use of land, means a purpose specified in any of the categories 1 to 6 and 8 and 9 of Schedule 1 to these Regulations, and “category” means one of those categories; and

• “relevant building” means a building—

  (a)

  which is situated on non-housing land;

  (b)

  which is in use by the authority for a qualifying purpose; and

  (c)

  in which the authority have a freehold interest or a leasehold interest under a lease granted for a term of not less than 99 years.

(2) A credit arrangement which is a relevant transaction shall be excluded from section 49(2), and the initial cost and the cost at any time of the transaction shall be calculated in accordance with paragraphs (4) to (7).

(3) This paragraph applies to a private finance transaction where—

(a)the initial cost of the transaction does not fall to be determined under regulation 40;

(b)at any time during the period of five years ending on the date on which they enter into the transaction, the authority made a single decision either—

(i)to cease to use a relevant building and to use a different building for a corresponding purpose; or

(ii)to carry out works for the enhancement of a relevant building and to continue to use the same building, after the completion of the works, for a corresponding purpose;

(c)the asset provided for the authority’s use under the transaction consists of, or includes, the new building or, as the case may be, the works of enhancement of the relevant building; and

(d)the services provided in relation to the asset consist of, or include, maintaining and repairing the system for heating the new building and providing for the supply of the gas, electricity and fuel required for such heating.

(4) Subject to paragraph (7), the initial cost of a relevant transaction shall be the lesser of—

(a)70 per cent. of the amount which, apart from this regulation, would be the initial cost of the transaction; and

(b)the amount which, apart from this regulation, would be the initial cost of the transaction minus the relevant deduction.

(5) For the purposes of paragraph (4)(b), the relevant deduction is the amount which would be the initial cost of the transaction assuming that—

(a)the initial cost fell to be determined in accordance with section 49(1) and (2);

(b)no consideration was required to be given in the financial year in which the transaction was entered into; and

(c)for each subsequent financial year of the transaction, for the purposes of the formula in section 49(2), “x” was an amount equal to the product of the formula—

(6) Subject to paragraph (7), the cost at any time of a relevant transaction shall be the lesser of—

(a)70 per cent. of the amount which, apart from this regulation, would be the cost of the transaction at that time; and

(b)the amount which, apart from this regulation, would be the cost of the transaction at that time minus an amount equal to the product of the formula—

(7) For the purpose of calculating the initial cost or cost at any time of a relevant transaction, the authority shall disregard any consideration not in money which has been, or falls to be, given by them in respect of the transaction.