Renegotiated schools contracts save city tens of millions, mayor says

Mayor of Tallinn Mihhail Kõlvart.
Mayor of Tallinn Mihhail Kõlvart. Source: Siim Lõvi /ERR

Two renegotiated deals over the maintenance of 10 Tallinn schools will save the city tens of millions of euros, the capital's mayor says.

Two companies, BCA Center and Vivatex, had tenders for maintaining the schools across the capital in contracts dating back to 2006 but which, the City of Tallinn argued, were no longer appropriate to the situation and were harming the city and its education sector.

The Vivatex contract was renegotiated and signed last year, BCA's just recently.

Mayor of Tallinn Mihhail Kõlvart (Center) put the savings to the city across both companies at €37-38 million and heralded the fact that this had been done without needing to go to court.

Kõlvart said: "After last year's agreement with Vivatex, the city achieved savings of around €2 million per year. An agreement had not at the time been reached with BCA, and it took another year for that to happen under similar conditions. With this agreement in place, the city can save an additional €17-18 million."

Getting rid of contracts which were harming the city had been one of the mayor's stated goals on taking the office in 2019.

"At the moment we can say that a result has been achieved in two major areas. In fact, there is one more major contract which needs resolving in respect of future perspectives. These processes here have not been started yet," he went on.

This final major administrative contract to be concluded concerns social housing, and the city will have contract extension and buy-out options with regard to the agreement.

BCA Center owns and manages the Karjamaa basic school, and four high schools: The Haabersti vene gümnaasium, the Kadriorg saksa gümnaasium (pictured), the Nõmme gümnaasium and the Tallinn ühisgümnaasium.

Kadrioru Saksa gümnaasium (Kadriorg German High School) is one of the BCA-owned and managed schools. Source: Siim Lõvi /ERR

Vivatex manages four high schools: The Pelgulinna gümnaasium, the Tallinn 32nd gümnaasium, the Kristiine gümnaasium, the Laagna gümnaasium and Kalamaja basic school.

It is estimated that Tallinn ahd paid BCA and Vivatex together €110 million in respect of school management, over a period of 15 years.

Tallinn City Secretary Priit Lello told ERR in fall 2021 that the BCA and Vivatex contracts as they were were financially harmful to the city and that the buyout of schools was also being considered . 

Tallinn reached a new agreement with Vivatex last February, which at the time Mayor Kõlvart said would lead to savings of €20 million through to the end of the contract's terms, in 2026.

Businessman Urmas Sõurumaa, owner of Vivatex, claims the city's savings can even reach €30 million. 

According to the new contract, the City of Tallinn is to buy back the five schools for €12 million at the end of the contract term.

As for BCA, an agreement has now been reached "on similar, if not the same, terms".

Had those negotiations failed, the city had also been preparing to unilaterally by out the schools in question, but, following lengthy negotiations, "at some point we reached the stage where the partner (ie. BCA-ed.) agreed to the city's conditions, meaning the need to go to court to complete the buyout procedure was removed," Kõlvart said.

The new contract between the City of Tallinn and BCA will apply retroactively from January 1, 2022.

The old BCA and Vivatex contracts dated back to 2006, signed during Jüri Ratas' time in office as Tallinn Mayor, after being repaired during when his mentor Edgar Savisaar was still mayor.

The contracts with Vivatex Holding, which belongs to Sõõrumaa, who also heads the Estonian Olympic Comittee (EOK), and BCA Center, with majority ownership held by Jaanus Otsa and Olaf Herman, are valid until 2036.

As of 2021, it was estimated that the city had about €140 million left to pay the two companies over the preceding 15 years.

Back in 2006, the deals made sense, however, Kõlvart said, even as such terms would not be accepted today.

"The city was not able to renovate so many schools and ensure maintenance on its own [in 2006]," Kõlvart said.

For similar reasons, in the early 2000s, Tallinn signed a contract with Utilitas' predecessor, Tallinna Kütte. The district heating network was given to the company to manage and repair, and the city undertook to buy it back after 30 years at the investment price.

 In order to get rid of the supposedly financially harmful contract, the city had to hand over two-thirds of Tallinn's district heating network to Utilitas. Kõlvart himself has said that this solution was beneficial for the city.

A small dispute with Vivatex over an extension to the Kalamaja basic school remains in place, however, and negotiations on this aspect are ongoing.

All 10 school buildings were renovated at the beginning of the contract period, then underwent ongoing repairs and were taken care of in order; every eight years the administrator is required to carry out major repairs again.


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Editor: Andrew Whyte

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