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Gordon Mackenzie

<em>Picture: Xiengyod</em>

Picture: Xiengyod

By James Browne

It was probably the worst, least decision – so to speak. A few days ago, the City of Edinburgh Council decided to continue building the tram line – but to stop it at Haymarket.

The councillors had three options in front of them: to cancel the project, to take it to Haymarket, or to carry on with the plan to run the trams to St Andrew Square. The result was a political compromise which made no economic sense, at least in terms of running a tram service that would ever break even.

That decision is back in the melting pot after the first minister, Alex Salmond, warned that the Scottish government might withhold around £60 million. That’s what remains of the £500m grant given to the project by Holyrood. Now the floundering project is back before the council after the lord provost confirmed there would be a special meeting convened on Friday morning.

There had already been some speculation about last week’s decision. Work was already scheduled to restart on Princes Street next month, paid for by Bilfinger Berger, the main contractor. There was also the question of what had been agreed during the protracted period of mediation. Would a change to the terms of this – by cutting back on the route – alter the willingness of the consortium to continue with the project?

The economics of the decision, at least in part, also seemed to fly in the face of reason. The city would no longer have to borrow the extra £231m to fund the service into the centre of town, saving something like £15m a year in interest charges. But, instead, it guaranteed the creation of the ultimate white elephant.

Yes, the tram would run from the airport to Haymarket – but how many tourists would want to take a tram part of the way into Edinburgh, only to have to change to a bus or train to complete the last part of their journey? Some projections have suggested that the route could, as a result, lose as much as £4m a year.

Edinburgh Chamber of Commerce has already described the decision as “bonkers”, and there has been outrage among city centre traders who face yet more disruption. Princes Street was closed to traffic for almost a year to allow tram lines to be laid. But if trams now stop at Haymarket, this section won’t be needed and it may well have to close again to allow the lines to be lifted unless a phase two is envisaged at some time in the future.

The company which until now has been in charge of building the tram network, TIE (now effectively being wound up), had gone out of its way to accommodate the objections of businesses along the route. There have been suggestions that this was, in part, one of the reasons why the project has taken so long. However, it has emerged that the £25m which businesses in the city centre would have paid would now be lost were the service to be cut short at Haymarket. Around £5 million has already been received and would have to be repaid, with the remaining £20 million being written off.

If the last tranche of government money is withheld, the economic case for restricting the line will be thrown into turmoil once again. Could it be that the case for continuing to St Andrew Square, via Princes Street, would once again be preferable? Last week’s decision was supposed to be final. It could not be revisited for 12 months unless there was a material change in circumstances. The first minister’s announcement may represent such a change.

Speaking to BBC Scotland, the council transport convenor, Gordon Mackenzie, said that his own party (the Liberal Democrats) clearly thought cutting to route at Haymarket “…was the wrong option last time and with the costs likely to increase and a considerable question mark over the funding, we’re even more convinced that St Andrew Square is the better option.

“The big question is what do other parties think? I think the people of Edinburgh want us to act like grown-ups – to have a serious look at this. Nobody liked the Haymarket option. There was outrage in Edinburgh and elsewhere with it, so, I hope other parties will look at it afresh and come to a different conclusion.”

Friday’s meeting could also discuss the possibility of allowing a new consortium to take over the scheme. There have been reports that the Canadian train manufacturer, Bombardier, and the operator of the Paris Metro, RATP, are “still interested” in taking on the project despite a similar offer having been rejected in July. They believe they could control the spiralling costs of the troubled development.

Unlike the existing consortium, BSC (Bilfinger Berger, Siemens and CAF), which is being paid up-front, the new group has offered to finance the deal itself and only be paid when the trams were running. It also offered to take on the risk should there be any further problems with construction. In addition, any delays in completing the project and then not operating trams according to timetable would lead to a cut in payments.

However attractive that may be, councillors will need to take other factors into account – not least the cost of extricating the city from the existing contract. Friday’s meeting is likely to be fraught. Labour and Conservative members looked rather pleased with themselves last week when they voted through the shortened line. They will feel a lot less comfortable now.

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<em>Picture: Xiengyod</em>

Picture: Xiengyod

By James Browne

It was probably the worst, least decision – so to speak. A few days ago, the City of Edinburgh Council decided to continue building the tram line – but to stop it at Haymarket.

The councillors had three options in front of them: to cancel the project, to take it to Haymarket, or to carry on with the plan to run the trams to St Andrew Square. The result was a political compromise which made no economic sense, at least in terms of running a tram service that would ever break even.

That decision is back in the melting pot after the first minister, Alex Salmond, warned that the Scottish government might withhold around £60 million. That’s what remains of the £500m grant given to the project by Holyrood. Now the floundering project is back before the council after the lord provost confirmed there would be a special meeting convened on Friday morning.

There had already been some speculation about last week’s decision. Work was already scheduled to restart on Princes Street next month, paid for by Bilfinger Berger, the main contractor. There was also the question of what had been agreed during the protracted period of mediation. Would a change to the terms of this – by cutting back on the route – alter the willingness of the consortium to continue with the project?

The economics of the decision, at least in part, also seemed to fly in the face of reason. The city would no longer have to borrow the extra £231m to fund the service into the centre of town, saving something like £15m a year in interest charges. But, instead, it guaranteed the creation of the ultimate white elephant.

Yes, the tram would run from the airport to Haymarket – but how many tourists would want to take a tram part of the way into Edinburgh, only to have to change to a bus or train to complete the last part of their journey? Some projections have suggested that the route could, as a result, lose as much as £4m a year.

Edinburgh Chamber of Commerce has already described the decision as “bonkers”, and there has been outrage among city centre traders who face yet more disruption. Princes Street was closed to traffic for almost a year to allow tram lines to be laid. But if trams now stop at Haymarket, this section won’t be needed and it may well have to close again to allow the lines to be lifted unless a phase two is envisaged at some time in the future.

The company which until now has been in charge of building the tram network, TIE (now effectively being wound up), had gone out of its way to accommodate the objections of businesses along the route. There have been suggestions that this was, in part, one of the reasons why the project has taken so long. However, it has emerged that the £25m which businesses in the city centre would have paid would now be lost were the service to be cut short at Haymarket. Around £5 million has already been received and would have to be repaid, with the remaining £20 million being written off.

If the last tranche of government money is withheld, the economic case for restricting the line will be thrown into turmoil once again. Could it be that the case for continuing to St Andrew Square, via Princes Street, would once again be preferable? Last week’s decision was supposed to be final. It could not be revisited for 12 months unless there was a material change in circumstances. The first minister’s announcement may represent such a change.

Speaking to BBC Scotland, the council transport convenor, Gordon Mackenzie, said that his own party (the Liberal Democrats) clearly thought cutting to route at Haymarket “…was the wrong option last time and with the costs likely to increase and a considerable question mark over the funding, we’re even more convinced that St Andrew Square is the better option.

“The big question is what do other parties think? I think the people of Edinburgh want us to act like grown-ups – to have a serious look at this. Nobody liked the Haymarket option. There was outrage in Edinburgh and elsewhere with it, so, I hope other parties will look at it afresh and come to a different conclusion.”

Friday’s meeting could also discuss the possibility of allowing a new consortium to take over the scheme. There have been reports that the Canadian train manufacturer, Bombardier, and the operator of the Paris Metro, RATP, are “still interested” in taking on the project despite a similar offer having been rejected in July. They believe they could control the spiralling costs of the troubled development.

Unlike the existing consortium, BSC (Bilfinger Berger, Siemens and CAF), which is being paid up-front, the new group has offered to finance the deal itself and only be paid when the trams were running. It also offered to take on the risk should there be any further problems with construction. In addition, any delays in completing the project and then not operating trams according to timetable would lead to a cut in payments.

However attractive that may be, councillors will need to take other factors into account – not least the cost of extricating the city from the existing contract. Friday’s meeting is likely to be fraught. Labour and Conservative members looked rather pleased with themselves last week when they voted through the shortened line. They will feel a lot less comfortable now.

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<em>Picture: Calum McRoberts</em>

Picture: Calum McRoberts

A report into the funding options available for completing the Edinburgh Tram Project from the airport to St Andrew Square was published today. Based on financial assessments produced by senior officers at Edinburgh City Council (ECC), it would see funds being raised by prudent borrowing against revenue streams contained within the ECC’s Long Term Financial Plan. This would cost the council just over £15 million, or 1 per cent of its gross expenditure.

The report adds that, if the project were cancelled, there would be a one year revenue impact of over £180m to cover associated costs. This decision would also cause significant reputational damage to the city and potential future investment. Discussions are continuing with the Scottish government on other future options which would reduce the requirement for further council borrowing.

According to the ECC’s transport convener, Cllr Gordon Mackenzie, “It is important that we get a clear decision from Council to provide certainty for residents, businesses and to fulfil our contractual obligations. Despite the extra cost, the current Council have a strong record of balancing the budget while improving services and I am confident that will continue.

“The significance of the tram to the city’s future economy is often overlooked because of the problems we have experienced but Edinburgh needs the Council to make decisions that look to the long term, not just the next election, and that means going to St Andrew Square in the first phase.”

Dave Anderson, ECC director of city development, said that “the work undertaken over the summer has enabled key project risks to be mitigated and will give the Council a solid platform from which to make the important decisions on funding and the commercial settlement that will enable a tram link to be completed into our city centre.”

The report also gives the independent verification of the funding options and risk allowance, along with a breakdown of the revenue streams from which repayment can be drawn. It explains the phasing of the funding requirements and shows alternative borrowing options now and future funding options for the future. Finally, it provides further detail on the work being undertaken to sort out the project management of the enterprise going forward.

In June, ECC updated its “Open for Business” scheme to provide support for businesses across the on-street section of the route. This will now include a focused marketing campaign, logistics support as well as funding towards the work being carried out by existing Town Centre Coordinators with an aim to encouraging footfall into the city centre and promoting Edinburgh as a vibrant destination for shopping, business and leisure.

The report will be considered at a full ECC meeting next week. Approval of the funding options would allow the involved parties to finalise a settlement agreement and work to restart throughout the route.

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Despite the current problems over building Edinburgh’s first tram line, a report prepared for The City of Edinburgh Council insists that “integrated working will be key to success of [the] project.” It looked again at the business case and concluded that “the option to deliver tram line 1A in incremental phases is viable and enables Transport Edinburgh Ltd to be profitable from day one.”

It based this on revised figures modelling the number of people likely to use the tram, taking the economic downturn into account. It doesn’t expect the economic impact to last beyond 2015. It also forecasts that the city’s population will have grown to 514,000 by the end of the decade and that 80% of the projected residential development in North Edinburgh will have been built.

Officials believe this confirms that the tram remains important to the development of North Edinburgh and other parts of the city. However, that only works if trams and buses work closely together so it sets out the next steps towards the creation of a publicly-owned integrated transport system. The objective is to integrate Lothian Buses and Edinburgh Trams into a single company.

The city’s transport convener, Gordon Mackenzie, said that the “contractual situation we are currently facing is hugely frustrating and I, along with everyone else, would like to see a resolution as quickly as possible. The challenge we face has implications beyond how we manage public transport, as an efficient and effective infrastructure is vital to our economic prosperity. However we must ensure that whatever the outcome is, it represents the best value we can achieve.”

As a result of the contractual difficulties, the council had previously heard that the tram line might need to be implemented in phases with the most likely first phase running from the Airport to St Andrew Square. Even allowing for this, the new business case concludes that TEL as a whole would be profitable from day one. However, it warns that it might take 3 or 4 years before enough people were using the trams to make their operations profitable.

In the view of the council leader, Jenny Dawe, “this is not just about the tram project – this is about recognising how transport will underpin economic growth in the city over coming years. It is vital that that we make provision for a future which is more sustainable, environmentally and economically. In the difficult circumstances we face, this report’s positive message about the refreshed business case is welcome news.”

The update will be presented to councillors at the full meeting of the City of Edinburgh Council on Thursday next week.