Shopping centre's £84m debt hung over council, says leader
An £84m debt to fund a shopping centre in Newport had hung over the local authority, preventing it from moving on, the council's leader has said.
Debbie Wilcox was speaking after Friars Walk was sold to a Canadian investment firm last month, wiping out the debt.
But under the deal the council will pay a £500,000 annual subsidy for up to 15 years if rental incomes do not rise.
Ms Wilcox said front-line services would not be affected as funds have been set aside to cover any costs.
She admitted there had been many sleepless nights because councils should not be about running shopping centres.
Friars Walk was completed in 2015 by the developers Queensberry Real Estate.
The firm had failed to raise enough private sector funding but went ahead with construction after the council agreed to provide them with a loan which at the time it described as "unprecedented".
The sale of Friars Walk to Talisker Corporation wiped out £84m worth of borrowing and interest charges on Newport council's books.
The local authority is in line to receive extra funds, depending on future revenues, but it also liable to pay the 15-year £500,000 annual subsidy if extra revenue fails to materialise.
The council believes the subsidy will only last a few years.
Ms Wilcox said: "I cannot deny that we had many sleepless nights over it because it is not the normal every day thing that we do.
"It did actually determine a lot of the other business because until that was settled, we could not move on untrammelled.
"It did not dominate business in so far as we have our public services to run but nevertheless it took an increasing amount of officers' time."
At the time the original loan was agreed in 2013, when the former council leader Bob Bright was in post, the authority said it was the first in the UK to borrow money on that scale in order to fund a development project.
The council insisted the loan was needed to prevent the scheme from failing and to continue with the regeneration of the city centre.
Ms Wilcox said that if the deal had collapsed then the council would have been forced to take on the ownership of Friars Walk.
She said: "We would look to have sold it at a later date but councils are not about running shopping centres, they are about providing education and running social services.
"When we are left in a situation where have to be a massive regenerative partner, councils have the responsibility to kick-start projects wherever they can.
"In these austerity times we do things in partnership. We had to move forward, we had to make that bold decision. We changed the face of Newport."
Chris Sutton, a property consultant and vice-chair of the business organisation the CBI, said the council loan was justified because, unlike Cardiff, Newport had struggled to attract private investment.
"If you look at the intervention by the public sector, there will always be an element of risk but if the people of Newport are not prepared to invest in their city centre, then who is?" he said.
However Stan Edwards, a Newport-based property expert who used to work for the Land Authority for Wales, described Friars Walk as a "vanity project", and raised concerns about the continuing financial liability facing the council.
"Newport has to find half a million pounds into the foreseeable future which could be spent on other services, I really cannot see this as being helpful to us," he said.