Santa Cruz de Tenerife to Revamp Municipal Crane Service Tender

The City Council of Santa Cruz de Tenerife is in the process of preparing a new tender for its municipal crane service, which handles the removal, immobilization, transport, and storage of vehicles throughout the city.

The existing contract, which has been in place since 2014 with Grúas Cuchi, is set to be replaced. This transition necessitates a revision of the council’s economic framework, as the original terms established in 2012 no longer align with updated European public procurement regulations.

Revised Economic Structure

In accordance with Law 9/2017 on Public Sector Contracts, which incorporates European directives into Spanish law, the operational risk associated with the service must be assumed by the awarded company, rather than the council. This stipulation ensures that the concessionaire is responsible for any discrepancies between projected and actual demand or revenue.

To facilitate this change, the council has conducted an economic-financial viability study that assesses the true costs of the service and forecasts its performance over the next ten years. This study introduces a significant shift in the financial model, moving from a percentage-based fee to a fixed annual payment, which will ultimately reduce the expected municipal income.

Specifically, the council anticipates forfeiting approximately €711,457, as calculated by Atlántico Hoy, based on the economic assumptions outlined in the viability study for the duration of the ten-year contract. This amount will be allocated to the contractor, contingent upon meeting the economic projections.

Implications for Revenue Generation

It is crucial to note that the revenue forecasts in the viability study are based on projections from the Santa Cruz City Council, which indicate that anticipated income for 2024 will be significantly lower than previous estimates. The council expects that once the updated Mobility Ordinance is implemented, crane-related income could potentially quadruple.

In April 2024, it was reported that the council’s annual revenue from the crane service concessionaire was about €300,000 less than expected, with actual collections around €100,000 annually. Mobility Councillor Purificación Dávila attributed this shortfall to delays in the implementation of the Mobility and Road Safety Ordinance, which is designed to broaden the criteria for vehicle immobilization and removal.

The revenue forecast included in the viability study for the new tender does not indicate a significant increase in vehicle removals, suggesting that the council’s projected €711,457 waiver is based on maintaining the current rate of removals experienced in recent years.

Transition to a Fixed Fee Model

The existing contract established a variable fee structure, requiring Santa Cruz to retain 13.45% of the gross revenue generated by the crane service, with the remainder going to Grúas Cuchi. This model will be replaced under the new concession.

The viability study outlines that the successful bidder will be required to pay a fixed annual fee of €50,000, totaling €500,000 over the ten-year period, regardless of the actual revenue generated. This fee is intended to cover the use of municipal public domain and any applicable municipal heritage assets.

This transition signifies a move away from a variable percentage model to a more straightforward fixed fee, although it is anticipated that this amount will be lower than previous earnings.

Land Valuation and Future Considerations

The viability study also assesses the theoretical value of the land where the municipal depot is situated, estimating its annual utility at €27,625. The Heritage Service is exploring the possibility of relocating the depot to a site near the Pancho Camurria Pavilion. This land valuation serves as an accounting estimate to reflect the economic value of public domain, and does not imply that rent will be charged, as the €50,000 fee is designed to compensate for this utilization.

Projected revenues for the first year of the new concession are estimated at €824,324, with an expected annual growth rate of 2%. These calculations have been replicated by Atlántico Hoy to evaluate the financial implications of the new contract.

Key points

• The Santa Cruz de Tenerife City Council is preparing a new tender for its municipal crane service.
• The current contract with Grúas Cuchi, in place since 2014, is being replaced.
• The council will forfeit approximately €711,457 in anticipated revenue under the new fixed fee model.
• The new contract will require a fixed annual fee of €50,000 from the awarded company.
• The viability study indicates that the council’s revenue projections for 2024 are significantly lower than expected.
• Projected revenues for the first year of the new concession are estimated at €824,324.