Tallinn schools' adminstrative contracts to change

Kristiine High School in Tallinn.
Kristiine High School in Tallinn. Source: Siim Lõvi/ERR

Tallinn is at the finish line in its complicated negotiations with the capital's schools' administrative contracts partners, and is aimed at concluding or recalculating unreasonably expensive long-term agreements. If agreement isn't reached to lower the fees with these partners, the city can implement its right to buy out the schools before the deadline.

The administrative contracts signed with two companies which were prepared in 2006 during the term of the then Mayor Edgar Savisaar (Center) to repair and maintain 10 schools have already cost the city €110 million, of which half is profit for the companies.

The contracts with entrepreneurs Urmas Sõõrumaa, owner of Vivatex Holdings, and Jaanus Ots and Olaf Herman, majority owners of BCA Center, are valid until 2036.

An estimated €140 million is still left to pay through these 15 years - which depends on the inflation, which naturally can fluctuate during the intervening years. This would make up around €250 million in a 30 year-long contract period. For this purpose, the city has received schoolhouses, which were renovated and are continued to be maintained. An overhaul needs to be organized after every eight years.

Despite the fact that the city and schools are satisfied with the service, it's too much to pay for 10 schools, the city says.

"The city is not satisfied with the balance of contractual obligations," the city secretary representing the city at the negotiations, Priit Lello, said, adding that the city won't sign any contracts on such terms.

However, Lello is refusing to call the contracts harmful for Tallinn. On the contrary, he considers the contracts beneficial.

"The decision-makers didn't make harmful decisions at the time but based their decisions on their best knowledge. These are good contracts. If they didn't have a buy-out clause, we wouldn't be able to negotiate at all," Lello said." The need to repair schools is reviewed every year. The question is whether these payments should be so high."

He says that the situation has changed significantly since 2006, when the contracts were signed. However, today's city leaders have not had such a suspicion that no one of the city leaders at that time reaped the benefits of the contracts, Lello said. Therefore, the city has not asked the judicial authorities to evaluate the agreements concluded at that time.

"The contract partners were selected through public procurement. There is no doubt that the terms of the contracts are fair," Lello said.

Now the city is able to renovate and maintain its own school buildings, without having to hand over the buildings to private companies with expensive contracts.

Although negotiations with management companies were due to end at the end of November, no agreement has yet been reached with either company. Negotiations are held separately with each company, and Lello does not rule out the possibility that they may have a different outcome. However, he confirms that the negotiations are on schedule.

"Negotiations have been difficult. Changing the contracts requires precise targeting, these are not the cosmetic changes we are making. But we do not want the negotiations to drag on forever, they will end in one way or another," Lello said.

One option would be to change the terms of the contract so that the city would have to pay the administrator less for the maintenance and repair of the schools each year in the future. However, it already depends on the goodwill of the contractor and the conditions under which they are prepared to meet. If no agreement is reached, the city will use the right to repurchase the school buildings from the companies earlier. This would terminate the contract.

"The negotiations are passionate but calm," he described the work process. This means that people stay true to their positions, but the tone of the negotiations is still civilized and polite."

If the earlier right to buy out the schools applies, the city has the necessary money on the account, although at the current financial level it would be possible to take a loan.

It is estimated that the repurchase of ten school buildings could cost between €30 and €40 million, depending on the success of the negotiations. The agreements provide for the right to repurchase school buildings earlier but do not describe at what price or how to reach a fair price.

One option would be that the parties will each propose their own price, based on the assessments of the experts involved. Alternatively, the parties may appoint experts to represent them and determine a fair price.

Jaanus Ots, one of the owners of BCA Center, has previously told ERR that their preference is rather that Tallinn pays the final residual cost and the superficies right contract is terminated by agreement of the parties.

"However, this presupposes that the cost has been determined objectively, by experts, and the parties reach an agreement on this," he noted.

Under administrative agreements entered into in 2006, Pelgulinn High School, 32nd High School, Kalamaja Basic School, Kristiine High School and Laagna High School were transferred to Vivatex Holding, and Nõmme High School, Sikupilli High School and Karma High School (now in the balance sheet of Kadriorg German High School) were transferred to BCA Center.


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Editor: Roberta Vaino

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