The Treasury guarantees the operation

The Treasury guarantees the operation of a nursing home

Negotiations have been ongoing for the past few months between the City of Hafnarfjörður and the Ministry of Welfare after the municipality requested that the ministry renegotiate a 2010 contract for the construction and operation of a 60-bed care home in Hafnarfjörður pursuant to so-called lease route would be reviewed. An agreement has now been reached on changes to the provisions of the older contract regarding rent, financing, equipment purchases and operations. The Hafnarfjörður Town Council approved the new agreement at its meeting today.

Last year, the Municipality of Hafnarfjörður requested a review of the contract with the Ministry of Welfare from May 2010 regarding the design and construction of a nursing home and its lease to the state treasury. The care home was scheduled to be ready in autumn 2012, but those plans did not materialise, and the operating conditions and influencing factors have changed somewhat since then. In light of this, it was decided to request a review of the provisions in the contract relating to the rent, financing, equipment procurement and operation. Under the previous agreement, the rent to the state treasury was specified as a fixed amount per square metre, which was not to change until the nursing home was fully completed and operational. After that, the rent was to be adjusted proportionally in line with the consumer price index. Some time was spent reaching an agreement on the rent the City of Hafnarfjörður receives for leasing the premises to the state treasury. The outcome was an upward adjustment to the rent of approximately 26.51% from the original agreement.  The increase is due, in part, to rising prices and changes to building regulations which incurred additional costs.

Review of the contract leads to benefits for the municipality.

For years, municipalities have been running nursing homes on behalf of the government, many of them at a considerable loss. In light of this, changes were requested to the terms of the agreement to ensure that the City of Hafnarfjörður would not have to bear any direct costs for the home's operation. The new agreement provides that the national government, and not the city, will be responsible for the operation. The previous agreement also provided for the construction of the care home to be financed by a construction and long-term loan from the Housing Finance Authority. Experience, however, shows that most, if not all, of the municipalities that have built under the so-called lease-to-own model have been able to obtain loans on better terms than those offered by the Housing Finance Authority. The municipalities have taken advantage of this, but this has required separate negotiations. However, provisions in the new agreement allow Hafnarfjörður municipality to finance the construction in another way, and the municipality only needs to demonstrate secured funding for the project. The 2010 agreement also provided for a separate arrangement regarding the purchase of movable equipment for the care home, for which the municipality was to pay 15% of the cost. This cost was an unknown quantity in the previous agreement, but with the amendment, the purchase of equipment is predetermined, thereby fixing the total price, and so it is not anticipated that the purchase of equipment and devices will be negotiated afterwards.

A new care home at Sólvang in Hafnarfjörður is scheduled to be ready in spring 2018 and is currently in the design phase. The council's plan is to connect the new building to Sólvang, thereby continuing to use the older building as a care home and, in part, as a service centre for senior citizens. For this to happen, an agreement must be reached with the national government for an additional 20 nursing home places in Hafnarfjörður. Negotiations regarding the increase in places are still ongoing, but it is clear that there is a great need for more nursing home places in the capital region, and this increase would meet those needs.