The details appear in a report to Wednesday's meeting of the cabinet.
The £1 million was borrowed in January 1991 to finance the council's capital programme.
Then as now, the normal route for cash strapped councils was to borrow from the Public Works Loan Board - a department of the UK Debt Management Office, which lends to local authorities and collects the repayments.
In 1991, the Bank Rate, as it was then known, was 14%. The report by the Acting Chief Executive Richard Harbord says that whilst he cannot find the PWLD rate for 60 year loans at the time, the 60 year gilt yield - the income from government bonds was 4.25%. That rate was lower than it is today and broadly comparable with rates charged by the PWLB.
Initially the loan was from Scottish Provident, but they assigned the benefit to a company called State Street Nominees at the end of 1993.
All those years ago local authority treasury matters were delegated to the Section 151 Officer, who is usually the council's treasurer and must be a qualified accountant - ie someone who apparently knows whereof he speaks.
Whilst you might think that taking out a loan as huge as £1 million would involve a long and detailed discussion and decision process, in 1991 most authorities would have reported loans in retrospect to a Committee to note by which time the deal would have been done.
Mr Harbord reports that in July last year legal opinion was sought on the loan.
Tantalisingly, he mentions that the loan receipt is shown in the report and that the counsel's opinion is attached.
But sadly, that information is not to be shared with us, the riff-raff. Nor is the information as to what the loan was for - although it is apparently specified in the receipt.
But then, we're only the ones paying for this mega cock-up.
The legal opinion says "the terms of the loan agreement are harsh, " which whilst true is simply the council's bad luck, as it was accepted. And whilst State Street have no problems meeting the council they believe that the loan is legal and can be defended in court.
Mr Harbord's contacts in the world of public finance reckon the loan could be paid off if £2.23m was offered, which would fully compensate State Street for the remaining 40 years. But Mr Harbord adds: "My contacts who operate at the highest level with Banks tell me an offer of £1.75m may be negotiable, although that could not be guaranteed."
The current 50 year rate at the PWLB is 4.73% and borrowing £2.23m now to clear the debt would cost £195,490 a year, compared with the cost of the current loan costs of £111,250.
But, says the report, it is not even that simple. "The premium over the £1m represents the net present value of interest due over the next 40 years and is a revenue charge. Thus we would need to find between £0.75m and £1.23m from our revenue budget to pay off the loan.
"I have made enquiries to see if Central Government would allow us exceptionally to capitalise this premium and they firmly say they cannot do so. This is as I would expect.
"Based on these figures it is extremely unlikely that the Authority will ever be able to repay the loan, although the cost of doing so will reduce over time and so the loan will need reviewing every 5 years or so. Repayment would bring an immediate revenue saving of £111,125 per annum."
Mr Harbord poses a number of questions - most of which have already occurred to us.
· Given that at the time borrowing seems to have been from the PWLB, why did Boston go for this commercial lender?
· Why did they borrow for 60 years when interest rates were so high?
· Was there no alternative of borrowing short term and seeing what happened to interest rates?
· Why was the rate so high when long term gilt rates were so relatively low?
Mr Harbord recommends that the loan is kept under review in case market conditions become favourable or revenue monies become available.
And in a piece of classic understatement, he concludes: "I can only surmise that there was some crisis which required immediate borrowing but on the face of it perhaps unfairly with the benefit of hindsight it does look like a very major case of very poor judgement. The residents of Boston will have paid over £6m in interest by the time this loan is repaid."
Boston Eye says: We think that calling this a case of poor judgement is putting it too mildly.
And we have some questions of our own that we think need answering as well.
Are there no records or minutes relating to this loan? We understand that a receipt was apparently all that was needed, but there must have been further information published at the time.
Who was the Section 151 officer at the time? It must be possible to find out. Then perhaps it might be possible to discover why these decisions were taken.
Those are just starters for ten. To accept the recommendation of an on-going review merely sweeps the issue under the carpet.
And if you think a million pounds plus five in interest sounds big time ... read tomorrow's blog, when another eight million goes down the drain.
* From the song "Sixteen Tons."
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