Hotels plan derailed by 'trams tax'

Published on Thursday 1 April 2010 10:18

A PLAN for two hotels on Leith Walk is in doubt amid a row about the amount the developer should pay towards the tram project.

The project would see the former council social work offices, Shrubhill House, demolished and replaced by a three-star hotel, a budget hotel and three shops.

But the council's transport department has requested a 866,278 tram contribution from the developer, and Silver Fern is only willing to pay 350,000.

However, the council has not been willing to reduce the amount. Unless a legal agreement can be reached over the level of contribution, work cannot start.

John Bury, head of planning at the city council, said: "The applicant has advised that the project cannot bear these costs and made an offer to contribute 350,000 and requested the application be approved on this basis. The applicant has provided the financial appraisal for the project in support of their position and this has been inspected by council officers.

"While the council has supported reductions in the levels of contributions as part of the economic resiliency action plan on other applications, in this instance a reduction is not supported as a case has not been made."

Many developers have been allowed to pay less than the council originally demanded because of the economic climate and the value of a new project to the city.

Earlier this year, council chiefs accepted demands by Fraser Hamilton to reduce the tram contribution for its proposed aparthotel by 250,000. And developers behind the 850 million "St James Quarter" plan agreed to pay only a 1.4m "tram tax" – around 6.5m less than expected.

Council chiefs need to raise 25m of their 45m share of the 545m original cost of the trams through contributions linked to developments along the route.

Councillor Ian Murray, Labour finance spokesman, said he did not want the tram contribution to become a reason developers gave to not invest in Edinburgh.

But he added: "The council has set a precedent by giving reduced contributions. Once you do it for one site it is difficult not to provide it at other sites. For traders who have suffered along Leith Walk, it would be a bitter pill to them if new businesses are able to ride off the benefits of the tram but not pay the proper contribution."

The contributions formula considers the type of development, walking distance from the tram route and size of project. Cllr Murray said how the tram contribution is worked out should be reassessed in the current climate.

A spokesman for Silver Fern Group said: "It is not our policy to comment on matters before planning consent has been granted."