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Request for Information on Private Equity Contributions in Educational Projects and Value for Money Considerations

Adam Irish made this Official Information request to Erica Stanford

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From: Adam Irish

Dear Erica Stanford,

Under the Official Information Act, I request information on the repayment expectations for private equity contributions in educational projects.

Specifically, I'm interested in understanding how this approach is considered value for money. The Crown can typically borrow at the government bond rate, offering a lower risk return rate of 4.64% for 10-year bonds. In contrast, private equity investment usually requires a return exceeding 8%. This suggests that if the taxpayer funds a return higher than the government borrowing rate, and if the budget isn't balanced, we're essentially borrowing more at 4.64% to pay for the higher returns on the equity investment. Moreover, even if the taxpayer directly funds it, the interest cost for the project would be significantly less than the required return of the private equity investment if just at the government bond rate.

School infrastructure is typically not a user-pays system, and thus, taxpayers fund this directly in one way or another. It seems counterintuitive to promote private investment into schools when the government could initially fund these projects through debt at a cheaper rate, and fully own the asset at the end of the period. The cost of maintaining a fully owned asset is typically much lower than the lease costs that private investors require to generate a return on their capital. Moreover, by leasing, the Crown forfeits any potential capital appreciation, which is then incorporated into the market return that the private equity holder requires. Additionally, as a result, buying them out at a later date would cost significantly more. How does this approach align with the pursuit of value for money?

Could you please provide any briefings and analyses from the Ministry of Education and/or Treasury on this matter?

Kind regards

Adam

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From: Erica Stanford (MIN)
Erica Stanford

Thank you for contacting the Office of Hon Erica Stanford, Minister of
Education, Minister of Immigration, Lead Coordination Minister for the
Government's Response to the Royal Commission's Report into Historical
Abuse in State Care and in the Care of Faith-based Institutions, and
Member of Parliament for East Coast Bays.

 
While the Minister considers all correspondence to be important and all
messages are carefully read and considered, it is not always possible to
provide a personal response to every email received.

* If your message is for Minister Stanford’s advice, expresses a
personal view, or if you have copied your email to another Minister
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you need to seek this from the Associate Minister of Immigration, Hon
Chris Penk. His email is [email address]. Minister Stanford
is unable to comment on individual cases.
* If you are seeking ministerial intervention with an education matter,
this may be transferred to the Ministry of Education, they can be
contacted at [email address]. Minister Stanford
is unable to comment on individual cases.
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care, you will need to seek this from the Survivor Experiences Team,
who can be contacted at [email address].
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staff may contact you for more information. 
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managed in accordance with the provisions of the Official Information
Act 1982, which may include transfer to a more relevant Minister or
agency.
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managed in accordance with the principles of the Privacy Act 2020,
which may include transfer to a more relevant Minister or agency.
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Electorate News please follow: [1]Erica Stanford (national.org.nz)
* To find out more about Minister Stanford read her [2]biography or
recent [3]statements.

Office of Hon Erica Stanford
Reception +64 4 817 6805 | Ministerial Email
[4][Erica Stanford request email] | Web [5]beehive.govt.nz |
Postal Freepost Parliament, Private Bag 18 041, Parliament Buildings,
Wellington 6160, New Zealand

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