Does a new rugby stand generate measurable social benefits?

The Policy & Resources Committee were offered the above as being the social benefits for residents which would come from lending £22.9m to Saracens Copthall LLP. You could buy an awful of social benefits directly for that. It is, in Mr Mustard's opinion, a blind, a complete red herring to say that Saracens must have a posh new west stand otherwise those social benefits won't appear.

The below is what the Saracens Sports Foundation, a registered charity, linked but legally separate from commercial ventures with 'Saracens' in the name, have generated as income in the last 8 years.

Cast your minds back to 2013 when Saracens moved to Copthall Stadium and the new, state-of-the-art East Stand was built. Can you show Mr Mustard the surge in charitable activities that occurred at that time? No you can't, because it didn't happen. Why would it happen if a second stand was built? It wouldn't.

The charitable foundation does great works but it doesn't need the new West Stand to do them in, there is already the East Stand after all, and many of the other activities are in the community itself.

The community of Barnet, all 394,400 of us, do not need a new rugby stand. 3053 rugby fans will like it, but it isn't the role of a local authority to fund private rugby clubs backed by multi-millionaires. They funded the East Stand & they aren't broke, worth at least £500m between them. They just need to cash in a few shares or sell a tiny portion of their property portfolios, a 100ft yacht or a private plane.

Yours frugally

Mr Mustard

Saracens - alternatives to the reckless loan

When the proposal to lend £23.9m to Saracens Ltd (later changed to Saracens Copthall LLP) was considered in July 2018 'alternative options' was a section in the committee papers, as it always is.

The meeting was given a shockingly short set of options by the Deputy Chief Executive, Cath Shaw, either yes or no to making the loan. According to Mr Reasonable she is paid £151,433 a year. You would think that someone paid that much would be able to find some other intelligent or creative alternatives. Of course the leader of the council wants this loan to go through, as he cast his deciding vote in favour of the loan when the committee vote was tied 5-5 in October 2018 and so if she wants to progress in her career, maybe to CEO one day, it is best not to rock the boat. Mr Mustard, or you, will have to come up with some alternatives.

1. Let multi-millionaires fund the loan.

The joke is that the two main men behind Saracens are both fabulously wealthy (which is fine by Mr Mustard who is happy with his lot) and could find this sort of money down the back of the sofa in order to fund their sporting plaything if they so chose. A quick trawl of the internet finds these sort of numbers to give you a scale of their wealth which puts them into the Sunday Times top 1000 rich list.




This is how Mr Mustard thinks the stadium should be funded.

2. Lend just a small portion of the money, say £1m

A 100% loan is risky for one lender to provide & so a consortium of lenders should be found. Other parties who will benefit could provide part of the loan. The Saracens Sports Foundation is active across North London (a dozen more local authorities to ask there) in Hertfordshire (approach St Albans City Council, Hertfordshire County Council etc) in Luton (who have a town council). The club itself has at least 10,000 fans as the average attendance is 9,400 and they don't all go to every game. Why aren't they being offered the chance to invest? Mr Mustard knows two keen fans. Both of them could easily stump £2,290 each and get a seat named after them & some other benefits.

Middlesex University could jointly procure the stand and stump up a capital sum which reflects its percentage share of the usage and then pay zero rent.

3. Pay for the social benefits

The following social benefits are what we are going to get from lending to Saracens Copthall LLP to build a new stand apparently.



A new community garden will be lovely but could be built regardless of a new stand.

What is the cost of the educational opportunities which are being sought? as the council could simply pay for them. They should also be putting the requirement out to tender (it seems to be taken for granted that Saracens alone can provide these). Providing these new social offerings doesn't need a new stand, there is a perfectly good East stand there already. There is plenty of green space around for exercise programmes which again the new stand isn't needed for. There are also plenty of other sports grounds within the borough which could be used and the council itself is building two brand new leisure centres. Can you guess where one of them is?
 

yes, it's at Copthall!

It looks to have all the facilities you could desire to help improve people's fitness and wellbeing.

Thus we see that the council plan to lend out £22.9m without the public knowing the value of social benefits they will garner as a result (cue frantic work by some poor employee of Barnet Council who now has to go and try and put a figure to this).

4. Charge a decent interest rate

Mr Mustard thinks that given the risk the loan rate of 6% is too generous. He did the collect out on a finance company in the City of London which made loans to customers who normal banks wouldn't touch. They charged 10% interest. They went bust and it was one of Mr Mustard's toughest ever assignments to get all the money back, which he didn't manage as it wasn't possible.

You may have others alternative ideas which Mr Mustard may not have thought of. Do enter them in the comment box below.

Yours frugally

Mr Mustard 

More questions than answers - Saracens Copthall LLP

Having read the entire committee paper which was introduced by the above recommendations, Mr Mustard had a few questions to ask of the committee. He will now set out the words which caused him to ask questions and the responses, such as they were.

As you see the answer is top secret, so presumed to be inadequate. What Mr Mustard wanted to know was how admission fees & other income paid to Saracens Ltd were going to be ring-fenced so that they weren't used to pay any other costs. A simple statement that the answer is in the exempt report isn't an answer at all.

Mr Mustard wanted to know who was providing a loan guarantee so he could assess if they were good for £22.9m or not. We don't know.

In the absence of an answer there is no public evidence that the loan guarantees are satisfactory.

This answer tells us that the combined rents paid by Saracens Ltd and Middlesex University are sufficient to repay the loan. That of Middlesex University alone is not enough. Should anything happen to the fortunes of Saracens Rugby, such as the premier league collapsing, there will be repayment problems.

Given the scale of the transaction it isn't unreasonable for the public to be told who is guaranteeing 44% of the loan. Who cares about the other 56%? not the council. None of the questions look like they should have exempt answers, having been carefully worded so as not to ask for specific numbers.

It is of no comfort to be told nothing at all.

Without knowing if the estimated (synthetic) credit rating is on, say £1,000 or £1,000,000 it isn't of any value. Assessments were not sought from the three credit rating providers who are specified in the Treasury Management Strategy. Clearly the council have cast about for some crumb of good news they could put in the report.

It concerns Mr Mustard that the shareholders are not legally obliged to make good any losses of Saracens Ltd. This makes the assurances almost worthless and the moving around of debits and credits doesn't really matter as losses will still be incurred. What matters more are the accounts of Saracens Copthall LLP (SCLLP).

Mr Mustard had seen recommendation 3 but the meeting could have amended it. The Audits may get brought forward this year by Saracens.

Of course Saracens have got a costed build plan in place otherwise they wouldn't know the cost of the stadium or the expected completion date. This information should not have been exempt.

It looks to Mr Mustard that instead of matching the borrowing and the loan for the entire 30 year term the council are going to juggle their needs in the hope of saving a few quid. There is the risk that rates will rise, or that public borrowing will become harder to obtain, and then extra costs could be incurred. If they were to nail the PWLB loan in place at the same time as they lend out they would eliminate any timing and capacity risks.

Even the council, before they have lent Saracens a single penny, have doubts about the repayments starting on time. Mr Mustard worries that this loan might be made on an interest only basis.

The July report was wholly inadequate to identify just four risks. The council were not at all forthcoming and Mr Mustard doubts that they have thought this through at all. They aren't however, gambling with their own money but yours and mine, the council tax payer.

If this was a bank doing the due diligence and taking the proposed loan to the credit committee, it would be much more thoroughly researched, every possible negative item would have been documented and stress tested and in all probability the loan would have been refused. Oh wait;

Despite the minimal facts in the answers Mr Mustard will keep on asking the difficult questions because unless he and other members of the public do so even more doubtful ventures will come into being.

Yours frugally

Mr Mustard