By Lucy Phillips
4 February 2011
The chief executive of Newham council has defended its plans to borrow up to £40m to finance the legacy of the Olympics stadium as ‘very low-risk’.
The London borough would use the money to move local football club West Ham into the stadium and prepare the complex for other sports, including athletics, cricket and rugby, as well as for concerts and a university study centre.
But in backing West Ham, the council is going head to head with another Premier League football team bidding to take over the site after the Olympics in 2012. Tottenham Hotspur’s offer, financially underpinned by its billionaire owner, is expected to give the Treasury better returns. But its plans to replace the £500m stadium with one dedicated solely to football run contrary to the Olympic legacy bid and have attracted much public criticism.
The Olympic Park Legacy Company is expected to make a decision imminently.
Doubts have also been cast on the arrangements of the Newham loan. A special purpose vehicle would be set up to run the stadium but it is still unclear if the council would become liable for West Ham’s debt if the club, which has built up millions of pounds worth of losses over recent years, defaulted.
Newham says the details of the loan are ‘commercially confidential’ and will remain so until a decision is made. But chief executive Kim Bromley-Derry told Public Finance that the loan was based on a ‘very robust business case’, which would ensure the stadium would be used all year in a way that was not dependent on football. He expected this to ‘generate significant revenue’.
Bromley-Derry added: ‘It absolutely doesn’t go through our revenue budget and will not impact on the level of service we provide or on council tax or any other tax-raising we undertake. It’s purely a financial arrangement and every penny of the loan will be repaid. That includes capital and interest.’
He was ‘optimistic’ that Newham’s bid would be accepted because it met the Olympic legacy pledge made in 2005 – it would generate ‘several hundred’ local jobs as well as boost sports participation of residents. ‘It makes good financial and commercial sense,’ Bromley-Derry added.
