Surplus schools could be sold to finance budget gap

The sale of surplus schools for their development into commercial or residential property could be the only way to finance an ambitious €60 million programme for the construction of new schools, this newspaper has been told.

Schools built by the Foundation for Tomorrow's Schools (FTS) - the entity responsible for the construction of new schools and their development - were being financed by a €73 million bank loan during the previous administration.

But the loan interest payable now risks gobbling up capital spending earmarked for future schools by the previous government.

The pride of former prime minister Lawrence Gonzi, who boasted of having delivered one new school during every year of his administration, the HSBC Malta loan for the construction of new schools was not made public in the House of Representatives.

At an interest rate of 2.9% per annum, the €73 million loan must be repaid by January 2014.

Former Prime Minister Lawrence Gonzi boasted of having delivered one new school in every year of his administration, yet the HSBC Malta loan for the future construction of new schools was not made public in the House of Representatives.

At an interest rate of 2.9% per annum, the €73 million loan must be repaid by January 2014.

MaltaToday's inquiry into claims by Education Minister Evarist Bartolo that FTS had run out of funds to build new schools has revealed that, according to a preliminary evaluation, FTA had no long-term financing plan for the school construction.

Plans for new secondary schools and the refurbishment of others, as well as the construction of the new campus for the Malta College for Arts, Science and Technology were made "without a structured finance plan or strategy," the evaluation of the FTS's programme of works reveals.

Instead the former government borrowed €73 million from HSBC Malta to finance the construction of new schools. Now it risks having to use a substantial part of the €6.6 million earmarked for capital expenditure in 2013 for new schools to pay back the loan interest.

Evarist Bartolo has confirmed to MaltaToday that the 2014-2020 programme for €60 million in school projects did not have a proper financing plan.

"The Labour government reassures the public it is fully committed to continuing the process of school development and the maintenance of school infrastructure across the country, and that it will also ensure that this will be done through sustainable medium- and long-term financing," Bartolo said when questioned on the assessment of the FTS.

"The financing strategy for the future must be designed from scratch, as in my opinion there is none," the minister said.

The PN pledged a new school every year during the 2013 electoral campaign, tagged at an annual cost of €6 million.

The FTS has already spent €59 million of the HSBC loan, which is secured by a government guarantee. The remaining portion will be spent before the year is out.

FTS's second phase of school construction is now tagged at some €60 million. But with plans by Bartolo to "redesign" the financing plan, questions have been raised as to how FTS will finance the construction.

While Bartolo yesterday announced plans to start co-educational classes in state schools in a bid to stream boys and girls at once into underpopulated secondary schools (see page 3), the FTS is mulling over the option that surplus schools be sold for property development to generate the necessary finances.

On its website, the FTS says that its "ambitious capital investment" requires financing mechanisms that include "sanctioned facilities from local commercial banks at favourable interest rates, to accelerate the capital programme at hand."