COMMISSION COMMUNICATION TO THE COUNCIL AND PARLIAMENT - Financing new buildings for the European Parliament in Brussels and Strasbourg
Date: 1996-10-29
Institutions: European Commission
Subjects: EU financing, European Parliament, public building, seat of institution

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels,  29.10.1996 
COM(96) 518  final 

COMMISSION  COMMUNICATION 

TO  THE COUNCIL  AND PARLIAMENT 

Financing  new buildings  for the European  Parliament 

in  Brussels  and Strasbourg 

FINANCING  NEW  BUILDINGS  FOR  THE  EUROPEAN  PARLIAMENT  IN 
BRUSSELS  AND  STRASBOURG 

INTRODUCTION 

1. 
The  decision  adopted  by the  governments  of the Member  States  at the  European 
Council  in Edinburgh  on  12 December  1992  requires the European  Parliament  to  carry 
on  its  activities  in  Strasbourg,  Brussels  and  Luxembourg.  Appropriate  buildings  must 
therefore  be  made  available  in  each  of these three  cities. 

For  new  buildings,  Parliament  is  tending  towards  long-term  leasehold  formulas  with 
purchase  options: 

(a)  For  Brussels  and  Strasbourg,  the  aim  is to  establish  a buildings  capacity  compatible 
with  a  Parliament  of  around  700  members,  which  it  currently  considers  its  maximum 
potential  size,  even  in the  case  of  future  enlargement  of  the  European  Union. 

In  Brussels,  the  "Espace  Leopold" programme  consists  of  constructing* three  buildings. 
Buildings  Dl  and  D2  have  been  completed  and  fully  paid  for  from  Parliament's  budget 
(for  a  total  of  ECU  344.35  million,  including  ECU  28.55  million  in  interest).  Building 
D3, the cost of  which  is currently  estimated  at ECU  831  million  including the  land,  will 
be  ready  for  1 April  1997.  Parliament  intends  to  have  vacated  all  other  buildings  apart 
from  the  Espace  Leopold,  Montoyer  and  Eastman  buildings  by  the  end  of  1997,  which 
means  that  shortly  after  this  date  the  Belliard  I  and  II,  Renard,  Remorqueur  and 
Van  Maerlant  buildings  will  be  given up. 

In  Strasbourg,  the  IPE  IV  building,  the  cost  of  which  is  currently  estimated  at 
ECU  460  million  including  land,  should  be  available  to  Parliament  on  1 October  1997. 
At that  point,  Parliament  will  cease  to  occupy  the  Palais  and the  IPE  III  building. 

(b)  For  Luxembourg,  Parliament  does  not  foresee  any  new  building  projects,  but  is 
examining  the  possibilities  for  purchasing  office  buildings  that  it  currently  leases. 

Parliament  recently  drew  up  new  guidelines  for  the  conditions  for  financing  the 
2. 
D3  building  in  Brussels  and  the  IPE  IV  building  in  Strasbourg,  with  the  aim  saving 
money  and  increasing  the  transparency  of the  operations: 

- 

- 

examination  of  the  possibilities  of  replacing  the  current  financing  arrangements, 
which  involve  the  intermediation  of  property  developers  and  the  conclusion  of 
leasehold  contracts with  them, by a direct  financing  allowing  for  the  purchase  of 
the  buildings  as  soon  as they  are  available,  or  shortly  afterwards; 

reduction  of the  period  for  financing  from  the current  20  years  (Bureau  decision 
of  24  January  1996) to  10 years. This  shorter period  was assumed  by  Parliament 
in  the  figures  it  put  forward  for  the  1997 preliminary  draft  budget. 

Parliament  would  also like to introduce a strict alignment,  as far  as possible, between the 
financing  formulas  in  Strasbourg  and  Brussels. 

3. 
The  European  Parliament  asked  the  Commission,  as  the  competent  body  for 
proposing,  regulating  and  managing  the  budget,  to  present  a  communication  to  the 
budgetary  authority  on these  guidelines. 

This communication  is the response to the request.  First of all, it notes the main  features 
of  the  current  financing  system,  on the  basis  of  information  provided  by  Parliament.  It 
then states what,  according to the Commission, would be the legal, accounting,  financial 
and  budgetary  implications  of  the new  guidelines  envisaged  by  Parliament. 

4. 

The  budgetary  authority  is asked  to take  a  position: 

- 

- 

on the principle  of direct  financing  contracted  by the European  Community 
for  these buildings operations, the repayment  of which would  be charged to 
Parliament's  budget; 

on  the  length  of the  financing  period,  either  in the  case  of  direct  financing 
or within  the framework  of the current  financing  system  (without  prejudice 
to  the  improvements  which  could  be  made  to  it,  depending  on  the 
possibilities  of  the  financial  markets). 

I  -  THE  CURRENT  FINANCING  SYSTEM 

1.  The  D3  building  in  the  "Espace  Leopold" complex  in  Brussels 

The  building  work  undertaken  by  Parliament  in  Brussels  will  bring  the  total  area 
used  by  it  to  around  406  000 m2  (above  and  below  ground),  compared  with 
175  000  m2now. 

A leasehold  contract with purchase option was concluded  for the construction  of the 
complex,  for  a period of  27 years from  the delivery date for each building and with 
a repayment  period  of  20 years, signed  on  8 January  1992 between  Parliament  and 
the  SEL  (Société  Espace  Leopold). 

With  regard  to  long-term  financing,  this  contract  allows  Parliament,  in  close 
collaboration  with  the  SEL,  to  modify,  if  it  is  considered  more  beneficial,  the 
financing* terms  stated  at  the  outset. 

The  contract  gives  Parliament  the  possibility  of  making  one  or  several  capital 
payments,  deducted  from  the amount  still  outstanding.  These payments  lead to  the 
reduction  of  either  the  amount  or  the  number,  as  Parliament  decides,  of  future 
instalments. In this way, the investment costs of the Dl  and D2 buildings were  fully 
repaid  on  31  July  1995  and  1 March  1996  respectively.  For  the  D3  building,  the 
financing  conditions currently remain those set out at the beginning: credit  provided 
by  a  bank  consortium,  over  20  years,  in  BFR  (BIBOR+0.15%)  or  in  ecus 
(LIBOR+0.275%). 

Parliament  can,  at any time, buy the buildings for  the sum of the outstanding  capital 
or  for  one ecu if it has been fully  repaid. However, the purchase option  for  the land 
on which  the  D3 building  stands may  only  be exercised  until  31  May  1998, and  in 
this case Parliament  is bound  also to exercise the purchase  option  on the rest  of the 
complex. 

The land on which the D3 building stands is currently leased by the Belgian railways 
(SNCB),  which  owns  it, to the  SEL, under  a 93-year  lease, which  has already  been 
paid  in full.  On the condition that Parliament exercises its option on this land  before 
31  May  1988,  and,  therefore,  on  the  whole  complex,  the  Belgian  government  has 
undertaken 
the  end  of  1995,  at 
BFR  4  138 million,  or  ECU  107  million),  on  the  basis  of  the  terms  of  payment 
currently  being  negotiated  with  Parliament. 

this  purchase 

to  subsidize 

(valued,  at 

Independently of the question of whether the land will be purchased  or not, the terms 
of  the  Belgian  government's  acceptance  of  the  costs  of  development  (BFR  2  600 
million  excluding  VAT)  still  have  to  be  agreed. 

2.  The  IPE  IV  building  in  Strasbourg 

This building will consist of a new assembly chamber seating 750, a press centre and 
1133 offices.  The  building work undertaken  by Parliament  in  Strasbourg  will  bring 
the  total  area  occupied  there  to  around  255  000 m2  (above  and  below  ground), 
compared  with  120 000  m2  now. 

The IPE IV building has been leased for 27 years from the date of delivery  and with 
a  repayment  period  of  20  years.  The  lease  was  signed  on  31  March  1994  by 
Parliament  and  the  SERS  (Société  d'Aménagement  et  d'Equipement  de  la  Région 
loan 
de  Strasbourg).  Construction 
(PIBOR+0.125%)  and  a 
to  FF  2  214  million 
(LIBOR+0.18%). The French government and the various local authorities concerned 
have  underwritten  a  guarantee  of  up  to FF 2  000  million. 

is  being  financed  by  a  FF  340  million 

in  ecus  equivalent 

loan 

As  in  the  case of  the  D3  building  in Brussels, the contract  for  the  IPE  IV  building 
leaves  Parliament  the  possibility: 

- 

- 

- 

of  asking  for  the  initial  financing  conditions to  be  renegotiated; 

of  making  capital  payments  reducing  the  total  of  the  instalments  or  the 
repayment  period, 

of  announcing  its  intention  to  buy  at  any  moment  between  the  lease  taking 
effect  and its expiry. However, the question remains of what,  depending on the 
length  of  time  before  this purchase  option  is exercised,  the  fiscal  treatment  of 
this operation  would be in terms of VAT. An answer to this is awaited from  the 
French  government. 

The  SERS  has  already  paid  half  of  the  contract  price  of  the  land  (contract  price: 
FF  130 million)  to  the  City  of  Strasbourg.  The  balance  of  FF  65  million  must  be 
paid  10 years after  the building  is completed.  However, the  City  of  Strasbourg  will 
forgo  this  second  payment  if  Parliament  has  already  exercised  its  purchase  option. 

3.  Budgetary  effect  of  the  current  financing  system 

The  foreseeable  budgetary  implications  of keeping  the current  financing  conditions 
are  presented  in  Annex  A: 

1  - Financial  and  budgetary  data  on the  D3  building  in  Brussels 

2  - Financial  and  budgetary  data  on the  IPE  IV  building  in  Strasbourg 

3 - Budgetary  costs relating to the other buildings occupied by Parliament  (1997-99) 

II  -  THE  IMPLICATIONS  OF  THE  NEW  GUIDELINES  ADOPTED  BY  THE  EUROPEAN 
PARLIAMENT 

The  question  of  whether  direct  financing  can  and  should  be  used  to  purchase  new 
buildings  for  Parliament  in  Brussels  and  Strasbourg  must  be  considered  mainly  on 
the basis  of  legal  and  accounting  considerations,  as well  as from  the  point  of  view 
of the benefits  which could accrue from  it, in particular financial  benefits.  However, 
the question of shortening the financing period, either within the framework  of direct 
financing  or  within  that  of  the  current  system,  essentially  revolves  around  the 
compatibility  of  the  scheduling  of  the  resulting  annual  charges  with  the  budgetary 
constraint. 

1.  Legal  and  accounting  aspects 

Up to now, borrowing (directly on the capital markets or from  financial  institutions) 
has  been  used  by the  European  Community  as a  means  of  obtaining  the  necessary 
funds to be able to grant loans for policy operations.  The provisions of the Financial 
Regulation  (Article  20(5))  correspond  to  this  borrowing/lending  link. 

(a)  Legal  aspects 

Even  if,  in  the  past,  direct  financing  by  banks  was  never  used  for  purchasing 
buildings, this formula,  in the Commission's  view,  is possible  from  a legal point  of 
view. 

Using  direct  financing  (instead,  for  example,  of  indirect  borrowing  through  a 
developer  with  a  lease-purchase  contract  or  a  long-term  lease)  for  the  purchase  of 
a building  is not  incompatible  with the provisions  of the Treaty.  The  principle  of  a 
balanced  budget  set  out  in Article  199 of the  EC Treaty  and  in the  decision  on  the 
own  resources  system  would  not  be  breached  if  the  Community  borrowed  for  a 
specific  operation  leading  to  the  formation  of  assets  (in  this  case,  real  assets,  as 
opposed  to  a  financial  asset  as  in  lending/borrowing  operations)  justified  by  its 
activities and requiring a considerable lump-sum expenditure. It is own resources that 
will  be  used  to  cover  the  annual  budgetary  expenditure  for  the  repayment  of  the 
loan,  while the capital  operations  (loan and purchase  of the building)  do not  appear 
in the  budget,  but  are  recorded  in the  assets  accounts. 

Incidentally,  this  financing  formula  was  already  proposed  by  the  Commission  in 
1992  for  the  "Maison  d'Europe"  building  project  in  Geneva. 

The  implementation  of  borrowing/lending  operations  within  the  framework  of 
Community operational policies is based on specific legal instruments adopted on the 
basis  of  Article  235  of  the  Treaty. 

In  the  case  of  direct  financing  for  the  acquisition  of  a  building  to  be  used  for 
carrying  on the institutions'  activities, the operation comes under the  administrative 
management  of  these  institutions,  which  make  their  own  autonomous  decisions  in 
this  respect.  The  Commission  therefore  believes  that  a  specific  legal  instrument  is 
not  necessary  and  that  direct  financing  for  the purchase  of buildings  could  be  done 
with  the  backing  of  the  two  arms  of  the  budgetary  authority. 

The  budgetary  authority  would  authorize  the  Commission  to  charge  the  necessary 
financing  to  the  European  Community,  pursuant  to  Article  211  of  the  Treaty, 
according  to  the  methods  and amounts shown. 

The  contracts  relating  to the  purchase  of  buildings  could  be passed  by  Parliament, 
on  a mandate  from  the  Commission,  the  European Community  then becoming  the 
owner  of  these buildings. 

(b)  Accounting  aspects 

As the proceeds  of  the  financing  contracted do not constitute budget revenue,  they 
would be treated as an extra-budgetary operation and would be included in an annex 
to part  B of the Commission budget, in accordance with the arrangements laid down 
in  Article  20(5)  of  the  Financial  Regulation.  The  building  and  the  corresponding 
borrowing  would  be  included  in the balance  sheet accounts  among the  institution's 
assets. 

The  amounts  of  the  repayment  instalments  for  the  finance  contracted  would  be 
entered  each  year  under  expenditure  in  Chapter  20  (investments  in  immovable 
property,  rental  of  buildings  and associated  costs)  of  the Parliament  section  of the 
budget,  with  the  appropriate remarks. 

There  would  be  no  need  to make  a guarantee  entry  in the budget,  because  the risk 
of  default  could  only  come  from  the budget  itself. 

2.  Financial  aspects 

In  the  case  of  direct  financing  contracted by the  Community  for the  acquisition  of 
buildings, the best terms and most appropriate techniques will first have to be sought 
In  the  choice  of 
by  asking  for  tenders  from  financial  institutions  interested. 
financing  arrangements,  and  therefore  the  other  parties  to  the  contract,  it  will  be 
necessary  to  take  into  account  not just the comparative cost of the various  formulas 
proposed,  but  also the possibilities of making partial early repayments, should funds 
be available  in the budget,  and the possibilities of limiting the risks of variability in 
the  periodic  payments,  which  might jeopardize  the  orderly  long-term  development 
of  the  administrative  expenditure  of  all  the institutions. 

The amounts of the annual instalments for repayment of financing  of this type, based 
on the cost of the buildings to be acquired and the assumptions corresponding  to the 
current market  conditions, are indicated in Annex B. for various repayment periods. 
This same annex also includes a comparison with the current financial  arrangement. 

This  information  shows  that,  over  the  same  period,  the  annual  budget  expenditure 
which  would  result  from  direct  financing  would  be  only  marginally  less  than  that 
which  can  be  anticipated  under  the  current  system  of  financing.  This  result  is  not 
surprising  in that the savings that can be expected from direct financing  involve only 
a  reduction  in  the  intermediation  margins  and  perhaps  the  possibility  of  obtaining 
slightly  better  terms  from  the  financial  institutions  by  direct  negotiation. 

However,  in view of past commitments, this formula  would facilitate  the exercise of 
purchase  options  on  the  buildings  within  the  time  limits  necessary  to  obtain  the 
benefit  of  free  acquisition  of  the  land: 

-  by  means  of  a  subsidy  corresponding  to  the  price  of  the  land  on  which  the  D3 
building  stands (ECU  107 million), the methods of payment for  which are  currently 
being  negotiated  between  the  Belgian  government  and  Parliament; 

-  by  the  undertaking  given  by  the  French  authorities  concerned  that  under  these 
conditions they  would  forgo  the half payment,  in the  10th year after  delivery  of the 
building,  of  the  land  on which  the  IPE  IV building  stands, by which  time  it  would 
mean  a  saving  of  around  ECU  10 million. 

The  Parliament  sees  the  main  advantage  of  the  use  of  direct  financing  as  being  a 
considerable  simplification  of  the  current  legal  arrangements.  Apart  from  the 
immediate  acquisition  of  ownership  of the buildings, this  rbrmula would  mean  that 
contractual  relations  could  be  limited  to those  established  between  the  Community 
and  the  group of  banks providing  the finance,  so that there would  no  longer  be any 
intermediation  by  property  developers.  This  would  lead  to  greater  transparency  in 
managing  the  operations,  notably  for  the  public. 

3.  The  question  of  the  financing  period:  compatibility  with  the  budget 
constraint 

Parliament's  wish to  shorten  the time period  initially  envisaged  for  the  financing  is 
not  in  fact  connected  to  the  formula  which  would  be  adopted  for  this  financing:  a 
shorter period is possible both in the case of the current arrangements and in the case 
of  direct  financing;  earlier  repayments  than  on  the  normal  schedule  would  also  be 
possible  in  the  two  cases. 

(a)  Financial  considerations 

It is certain that repayment over a shorter period costs less in total, at current prices, 
than repayment over a longer period, the cumulative interest being less, assuming the 
rate  stays  the  same.  However,  two  elements  must  be  taken  into  account  in  the 
financial  calculation: 

Given the strict budgetary constraint, account should be taken of the  alternative 
uses  for  the  additional  resources  which  are  needed  in  the  first  few  years  to 
make a repayment over a shorter period. The shortening of the financing  period 
may  lead  to  other  expenditure  being  supplanted  and  therefore  to  constraints 
which  are difficult  to sustain  in certain  areas of  activity,  or to  less  economical 
choices  for  other  projects  and  other  institutions. 

- 

If  the  comparison  is made  in present  values,  all  other  things  being  equal,  and 
since  the  rate  of  discount  is  equal  to  the  interest  rate1,  the  period  of  the 
financing  has  no  effect  on  its cost. 

(b)  The  budgetary  constraint 

The  ceiling  of  heading  5  of  the  financial  perspective  is  set  up  to  1999,  and  it  is 
difficult  to  envisage  a revision  to  raise this  ceiling  before  then.  It  is  also  not  very 
likely  that  the  allocation  for  the  administrative  expenditure  of  the  institutions  will 
increase  appreciably  in  real  terms  in  the  new  framework  which  will  have  to  be 
defined  in  the  medium-term  period  to  come.  Furthermore,  within  this  allocation, 
expenditure  on pensions  should  increase  considerably. 

The  past  and  future  development  of  the  various  categories  of  administrative 
expenditure  of  the  institutions  covered  by  heading  5  over  the  period  1995-99  is 
presented  in  Annex  C. 

It  emerges  from  this  that,  even  in  the  current  situation  of  financing  the  new 
Parliament  buildings over 20 years, there will be tight constraints between now  and 
1999, and particularly in 1998, on the growth of the other institutions'  administrative 
expenditure.  This  situation  will  make  it  very  difficult  to  implement  recruitment 
programmes  as  planned  after  the  last  enlargement,  and  adapt  building  capacity 
correspondingly.  These  constraints  will  very  probably  continue  beyond  1999. 

Shortening  the  period  of  financing  of  Parliament's  buildings  to  10  years  would 
therefore  severely  handicap  the  running  of  the  other  institutions. 

Still assuming a 10-year financing  of Parliament's buildings and taking as a basis the 
most  recent  scheduling  of  its other  administrative  expenditure,  as established  by  its 
Secretariat,  Parliament's  share of expenditure  in the heading  5 total would rise  from 
19.9%  in  19962  to  21.8%  in  1998  and  to  21.3%  in  1999  (in  relation  to  the 
heading  5 ceiling  excluding  pensions, this  share  would  rise  from  22.0%  in  1996 to 
24.2%  in  1998  and  23.7% in  1999). 

An  entirely  valid  assumption  in  this case. 
Including  the  effect  of  the  supplementary  and  amending  budget  1/1996. 

CONCLUSIONS 

The  Commission  is of  the  opinion: 

(1)  That using a direct financing  formula for Parliament's new buildings, replacing 
the  current  system,  is  legally  possible  and  compatible  with  the  principles  of 
sound  financial  management: 

- 

- 

- 

- 

it  would  result  in  a  significant  simplification  of  the  current  system  and  much 
greater  transparency  in contractual  relations; 

using  this  formula  would  make  it  possible  to  obtain  subsidies  related  to  the 
acquisition  of  land  on which  the  buildings  stand; 

the new financing  arrangement would make it possible to become owner of the 
buildings  as  soon  as,.or  shortly  after,  they  are  delivered: 

savings,  albeit  small,  can  be  expected  from  this  new  financial  package,  if  the 
market  possibilities  are properly  exploited. 

(2)  That  shortening  the  period  of  financing  these  buildings  could  force  the  other 
institutions  into  restrictive  measures  which  would  hamper  their  smooth 
operation. 

Any shortening of the financing  period envisaged by Parliament  should not lead 
to  an  increase  in  its  share  in  the  heading  5 total  beyond  20%,  which  roughly 
corresponds to the current situation. This proportion is what the chairmen of the 
political  groups  in  Parliament  recommended  in November  1988  as  a  financial 
package  for  establishing  ils  future  budgets.  It  would  already  impose  tight 
constraints on the other institutions, if account is taken of the expected  increase 
in expenditure on pensions, which involves an inevitable reduction in resources 
for  the  other  institutions  when  Parliament's  share  in  the  total  of  the  heading 
reaches  a  given  level. 

10 

ANNEX  A:  BUDGETARY  IMPACT  OF  THE  CURRENT  FINANCING  SYSTEM 

1  -  D3  building  in  Brussels 

Anticipated  date  of  availability:  1 April  1997 

Estimated  cost  of  the  building  at  the  date  of  availability:  ECU  831  million 
(BFR  32  070  million) 

Calculation  of  the  annual  lease  payment: 

-  Period:  20  years 

-  Payment:  six-monthly,  the  assumption  here  being  that  there  would  be  no  early 
payments 

-  Basic  interest  rate:  6%  (ECU  LIBOR)  including  margin.  The  assumption  here  is 
that  the  rate  remains  unchanged  over  the  whole  period. 

Exchange  rate  used:  1 ECU  =  BFR  38.6974,  assumed  to  remain  unchanged  over 
the  whole  period 

Anticipated  amount  of  the  annual  payment: 

-  1997:  ECU  53.9  million 

-  subsequent  years  up  to  2017:  ECU  71.9  million  (per  full  year) 

Other  revenue  or  expenditure: 

-  Subsidy  from  the  Belgian  government  for  the purchase  of the  land:  not taken  into 
account  in  this  case  (the  condition  that  the  ground  be  purchased,  with  the  whole 
complex,  before  the  deadline  of  1998 could  not  be  fulfilled) 

-  Possible  subsidy  ot  the  cost  of  developing  the  land:  not  taken  into  account 
(independent  of  the  financing  formula) 

11 

ANNEX  A:  BUDGETARY  IMPACT  OF  THE  CURRENT  FINANCING  SYSTEM 
(CONTD.) 

2  - IPE IV  building  in  Strasbourg 

Anticipated  date  of  availability:  1 October  1997 

Estimated  cost  of  the  building  at the  date  of  availability:  ECU  460  million 

(FF  3 000  million) 

Calculation  of  the  annual  lease  payment: 

-  Period:  20  years 

-  Payment:  six-monthly,  at the  end  of the period,  no  early  payments 
-  Basic  interest  rate:  6%  (ECU  LIBOR)  for  ECU  410  million,  ovçr  a period  of  20 
years;  6%  (ECU  LIBOR)  for  ECU  50 million,  over  a period  of  6  years 

The  assumption  here  is that  the  rate  remains  unchanged  over  the  whole  period. 

Exchange  rate  used:  1 ECU  = FF  6.518,  assumed  to  remain  unchanged  over  the 
whole  period 

Anticipated  amount  of  the  annual  payment: 

ECU  (million) 

1997 

up  to  2003 
(per  full  year) 

up  to  2017 
(per  full  year) 

Building 

Fitting  out 

8.8 

2.5 

-

10.068 

35.474 

-

Other  revenue  or  expenditure: 

Half  payment  of  the  ground  in  2007  if  the  building  is not  purchased  before  that 
date:  FF  65  million,  i.e.  ECU  9.9  million.  Effect  on  the  sum  of  annual  payments 
to  be  made  to  the  SERS  from  this date:  ECU  1.3  million 

12 

ANNEX  A:  BUDGETARY  IMPACT  ON  THE  CURRENT  SYSTEM  OF  FINANCING 

3-  Budgetary  charges  relating  to  the  other  buildings  occupied  by  Parliament 
(1997-99)  in  ECU  million 

BAK 
Chamber 
Schuman 
Senningerberg 
Tour 
Total  Luxembourg 

Palais 
IPE 
IPE I 
IPE  II 
IPE  III 
Parking 

Total  Strasbourg 

Belliard  I and  II 
Montoyer 
Renard 

Van  Maerlant 
Eastman 
Remorqueur 
Dl 
D2 

Total  Brussels 

TOTAL 

1997 

10.3 
0.3 
3.8 
0.4 
1.7 
16.5 

0.9 
5.3 
0.5 
2.8 
5.0 
0.04 
14.5 

7.1 
5.2 

1.3 
20 
0.3 
0.3 
0 
0 
16.2 

47.2 

1998 

10.5 
0.3 
3.9 
0.4 
1.8 
16.9 

5.4 
0.5 
2.9 

0.04 
8.8 

5.3 

0.3 

0 
0 
5.6 

31.3 

. 

1999 

10.8 
0.3 
4.0 
0.5 
1.9 
17.5 

5.5 
0.6 
3.0 

0.04 
9.1 

5.4 

0.4 

0 
0 
5.8 

32,4 

13 

ANNEX  B:  PURCHASE  OF  BUILDINGS  BY  DIRECT  FINANCING  CONTRACTED  BY 
THE  EC 

1  -  D3  building  in  Brussels 

Amount  of  financing  to  be  contracted:  ECU  831  million 

Calculation  of  the  constant  repayment  instalments: 

-  Interest  rate:  5.9%,  assumed  to  remain  constant  over  the  repayment  period 

-  Frequency  of  payments:  June  and  December 

-  Payments  made  at the  end  of  the  period 

Amounts  of  constant  repayment  instalments,  in  million  ecus: 

Over  10 years 

Over  15 years 

Over  20  years 

1997 

83^4 

632 

5 Ï5 

Subsequent  years 

111.257 

84.292 

71.360 

Other  revenue  and  expenditure: 

-  Subsidy  from  the  Belgian  government  for  the  land,  if  the  purchase  option  is 
exercised.  The  assumption  used  here  is that the  subsidy  is staggered  over  10 years, 
discounted  at  a rate  of  5.8%,  i.e.  an  annual  payment  of  ECU  13.6  million. 

-  Possible  subsidy  of  the  cost  of  developing  the  land:  not  taken  into  account 
(independent  of  the  financing  formula) 

14 

ANNEX  B:  PURCHASE OF  BUILDINGS  BY  DIRECT FINANCING  CONTRACTED BY 
THE  EC  (CONTD.) 

2-  IPE IV Building  in  Strasbourg 

Amount  of  financing  to  be contracted:  ECU 460  million,  including 
ECU  50 million  over 6 years 

Calculation  of  the  constant  repayment  instalments: 

-  Interest  rate: 5.9%, assumed to remain constant over the repayment period 

-  Frequency  of payments: June and December 

-  Payments  made  at the end of the period 

Amounts  of  constant  repayment  instalments,  in  million  ecus: 

Over  10 years 

Over  15 years 

Over  20  years 

1997 

16.2 

12.8 

11.3 

6  first  years 
(full  years) 

Subsequent 
years 

64.8 

51.5 

45.2 

54.8 

41.5 

35.2 

Other  revenue  and  expenditure: 

Non  payment  of  the  second  half  (FF  65 million,  i.e.  ECU  9.9 million)  of  the 
price  of  the  ground,  the  10th year  following  delivery,  as a result  of prior 
acquisition  of  the  building 

15 

ANNEX  B:  PURCHASE  OF  THE  BUILDINGS  BY  DIRECT  FINANCING  CONTRACTED 
BY  THE  EC  (CONTD.) 

3-  Costs  compared  with  use  of  direct  financing  and with  the  current  system 
of  financing 

Cumulative  total  over  a financing period  of  20  years,  in  million  ecus 

Difference:  total 
lease  payments  minus 
total  of  repayment 
instalments 

Subsidy  D3  land 
Subsidy  IPE  IV  land 
Total 

Current  prices 
IPE  IV 

D3 

Total 

Present  values,  1997 (1) 
D3 
IPE  IV 

Total 

10.8 

6.0 

16.8 

6.5 

136.0 

-

146.8 

-

9.9 
15.9 

136.0 
9.9 
162.7 

107.0 

-

113.5 

3.5 

-

5.5 
9.0 

10.0 

107.0 
5.5 
122.5 

(1)  Discounted  at  a rate  of  6%  per  year 

16 

ANNEX  C:  EXPENDITURE  UNDER  HEADING  5  OF  THE  FINANCIAL  PERSPECTIVE, 
1995-99 

Method 

Table  1  below  presents  a  multi-stage  breakdown  of  the  heading  between  the  various 
categories  of  expenditure  to  be  covered  by the  ceiling: 

-  Pensions  (all  institutions) 

- Buildings  (purchases/leases):  Parliament,  Commission  (except the Publications  Office), 
other  institutions 

-  Other  Parliament  expenditure  (members  and  staff,  administration) 

- Administrative  expenditure  related to the occupation  of the buildings  of the  institutions 
other  than  Parliament 

-  The  balance  beneath  the  ceiling  of  the  heading  shows  the  amounts  available  for 
expenditure,  other  than  on  buildings,  for  the  institutions  other  than  Parliament 

Table  2  shows  the  development  of  the  institutions'  share  in  the  tota1  of  the  heading 
(including  or  excluding  pensions).  For  the  years  1997 to  1999, only  Parliament's  share 
is  shown,  according  to  the  forecast  supplied  for  this  institution,  as the  respective  shares 
of  the  other  institutions  will  depend  on  decisions  made  by  the  budgetary  authority  for 
dividing  resources  between  the  needs  shown. 

Data  sources  and  assumptions 

1. Heading  5 ceiling  at  current  prices: current  financial  perspective,  inflation  rate  of 2% 
in  1998  and  1999.  This-last  assumption  is  also  applied  for  estimating  the  foreseeable 
needs  for  the  various  categories  of  expenditure  for  the  last  two  years. 

2.  Expenditure  on  pensions  (all  institutions):  financial  forecast  by  the  Commission, 
updated  for  1997  in  the  light  of  the  last  estimates  made  under  the  current  budgetary 
procedure. 

3.  Parliament  expenditure: 

(a)  Buildings  programmes: 

-  1997:  financing  of  new  buildings  over  10 years:  PDB 

financing  of  new  buildings  over  20 years:  estimates  by  Parliament's  Secretariat 

-  1998-99: estimates  given by Parliament's  Secretariat, based on the assumption of  direct 
financing  of  the  new  buildings,  over  10 or  20 years. 

17 

- The payment, staggered over the first  10 years, of the Belgian government's  subsidy  for 
the purchase  of  the land  on which  the D3 building  stands, is deducted  from  the  total  of 
repayment  instalments. 

(b)  Other  expenditure:  updated  programme  established  by  Parliament's  secretariat 

4.  Buildings  expenditure  (rental/purchases)  of the  institutions  other  than  Parliament 

(a)  1997:  PDB 

(b)  1998-99: forecasts  by the institutions concerned, established for the  1997 PDB. These 
schedules  correspond,  on  the  whole,  with  those  adopted  in  February  1996  by  the 
interinstitutional technical group on "building programmes and financing  terms" (GRIM), 
assuming  that  preference  will  be  given to  lease-purchase  formulas. 

5.  Other  expenditure  related  to  buildings  (other  than  that  of  Parliament) 

This refers to expenditure on maintenance, security guards, insurance, network and utility 
connections,  etc.  Forecasts  by the  institutions  concerned. 

6. Other  expenditure not already mentioned  (staff  expenditure and routine  administrative 
costs,  except  property,  of the  institutions  other  than  Parliament) 

This  is  determined  as the  balance  in relation  to  the  heading  5 ceiling. 

18 

ANNEX  C 

Table  1 :  EXPENDITURE  UNDER  HEADING  5,  MILLION  ECUS,  CURRENT  PRICES 

1. Heading  ceiling 

%  p.a. 

2.  Pensions 

1995 

1996 

1997 

1998 

4022 

4191 

4352 

4504 

1999 

4663 

4.2% 

3.8% 

3.5% 

3.5% 

349.8 

396.5 

421.3 

450.2 

475.5 

3.  (1-2)  Ceiling  minus  pensions 

3672.2 

3794.5 

3930.7 

4053.8 

4187.5 

%  p.a. 

3.3% 

3.6% 

3.1% 

3.3% 

4.  Expenditure  on  buildings 

Parliament 

184.9 

99.7 

(a)  over  10 years 

(b)  over  20  years 

137.0 

•  193.8 

194.9 

98.8 

134.3 

135.4 

Commission 

181.8 

183.3 

207.1 

248.7 

263.7 

Other  institutions 

37.9 

82.5 

33.5 

37.3 

38.8 

Total 

(a) 

(b) 

404.6 

365.5 

5.  Parliament:  expenditure  other 
than rental/purchase of buildings 

658.4 

733.9 

377.6 

479.8 

497.4 

339.4 
750.2 

420.3 
788.0 

437.9 
799.1 

%  p.a. 

11.5% 

2.2% 

5.0% 

1.4% 

6.  Parliament:  total  expenditure 

843.3 

833.6 

(a)  Over  10 years 

(b)  Over  20  years 

887.2 

981.8 

994.0 

849.0 

922.3 

934.5 

19 

Table  1 (contd.):  EXPENDITURE  UNDER  HEADING 5 

ANNEX  C 

1995 

1996 

1997 

1998 

1999 

7.  (3-4-5)  Other 
institutions: 
margin available  for  expenditure 
other  than  buildings 

2609.2 

2695.1 

(a) 

(b) 

%  p.a 

%  p.a 

%  p.a. 

8.  Other 
expenditure 
buildings 

institutions: 

routine 
connected  with 

(7-8)  Other 

9. 
institutions: 
margin  available  for  staff  costs 
and 
except 
property 

running 

costs 

%  p.a. 

%  p.a. 

(a) 

(b) 

%  p.a. 

3.3% 

2802.9 

2786.0 

2891.0 

4.0% 

-0.6% 

3.8% 

2841.1 

2845.5 

2950.5 

5.4% 

0:2% 

3.7% 

105.4 

109.9 

118.2 

126.6 

130.3 

2503.8 

2585.2 

3.3% 

2684.7 

2659.4 

2760.71 

3.8% 

-0.9% 

3.8% 

2722.9 

2718.9 

2820.22 

5.3% 

-0.1% 

3.7% 

i.e.  an  average  annual  growth  rate in  real terms of 0.2%  from  1996 to  1999 
i.e.  an  average  annual  growth  raie  in real  terms  of  0.9%  from  1996 to  1999 

20 

ANNEX  C 

Table  2:  STRUCTURE  OF  EXPENDITURE  BY  INSTITUTION  UNDER  HEADING  5,  IN  % 

1.  Shares  in  the  total  ceiling  of 
heading  5 

Pensions 

Parliament 

(a) 

(b) 

1995 

1996 

1997 

1998 

1999 

8.7% 

9.5% 

9.7% 

10.0% 

10.2% 

21.0% 

19.9% 

20.4% 

21.8% 

21.3% 

19.5% 

20.5% 

20.0% 

Commission 

54.3% 

53.6% 

Other  institutions 
2.  Shares 
in 
ceiling,  excluding  pensions 

the  heading  5 

15.5% 

16.3% 

Parliament 

23.0% 

22.0% 

(a) 

(b) 

22.6% 

24.2% 

23.7% 

21.6% 

22.8% 

22.3% 

Commission 

59.4% 

59.2% 

Other  institutions 

17.0% 

18.0% 

21 

ISSN 0254-1475 

COM(96) 518  final 

DOCUMENTS 

EN 

01 

Catalogue  number  :  CB-CO-96-525-EN-C 

ISBN  92-78-10389-6 

Office  for Official  Publications of  the European  Communities 

L-2985  Luxembourg 

M