Tram chiefs admit they need extra £55 million

Published on Friday 18 June 2010 10:10

THE future of Edinburgh's troubled tram line has been plunged further into uncertainty after bosses admitted they needed an extra £55 million and that parts of the line may never be built.

A report on the project published today said the council would plan for a 10 per cent contingency for the 545m project.

After months of rumours, the city's transport convener, Councillor Gordon Mackenzie, said he was now exploring an "incremental" opening of the route, potentially consigning key sections of the line to the dustbin.

However, bosses said the line could still be up and running by 2012 and sources close to the project hinted at signs of a breakthrough with contractor Bilfinger Berger.

The council said it was now "examining its funding strategy" after expected contributions from property developers failed to materialise.

The plans include borrowing against future profits of Transport Edinburgh Limited (TEL) until 2031 and utilising an allowance under the council's long-term financial plan of 2m per year to cover infrastructure development costs – a move that would raise 24m.

Delivering the 11-mile route on a "phased" basis would leave a number of options, including stopping the line at four different points – Haymarket, York Place, the foot of Leith Walk and Ocean Terminal – as well as the planned end-point at Newhaven.

However, opening the line in its entirety still remains an option, according to tram chiefs, and an increase in the budget was not currently being sought.

They also appeared to distance themselves from an earlier ultimatum that gave Bilfinger Berger just three weeks to shape up or ship out.

Critics of the project said it was now time for a referendum to let the public decide whether to call a halt to the scheme.

Deputy council leader Steve Cardownie said: "This 55m is money that could be spent on new schools or school refurbishment.

"It's time the citizens of this city were given their say on whether this project has a future. How can we have any confidence that this will be the last tranche of money needed?"

SNP Lothians MSP Shirley-Anne Somerville said: "The council leader, Jenny Dawe, should apologise for the folly of going ahead with a project which the SNP always knew would not be delivered on time or budget.

"Phased implementation is just another way of saying you have run out of money."

She added: "This is now damaging to Edinburgh and it's time the people had their say."

Last week the Evening News revealed that tram bosses had spent two-thirds of the budget – 350m – but had carried out just 18 per cent of the construction work.

Today tram firm TIE admitted that progress was behind schedule, but said off-street work at Haymarket, the Gogar depot, and at bridges as Edinburgh Park and Carrick Knowe was "progressing."

The new report revealed the cost of utility diversion work so far had been 62m, compared with the original forecast of 48m. Completing work on Princes Street in time for Christmas cost the council 8m, compared with the original prediction of 2m, and the figure could yet rise to 11m.

Other "additional costs" include external advice from independent consultants, who have told TIE that the tram line could still be opened by late 2012 with the help of a "properly performing contractor".

But John Carson, a former head of maintenance at Network Rail, said TIE was "in denial" if it thought the tram line could be delivered by 2012 for just an extra 55m.

He said: "What will an extra 55m buy? It's just a shot in the dark – even to get the line to Haymarket I would suggest that's not a reasonable figure.

"The best hope for the project now is some sort of resolution with Bilfinger Berger. If it goes to court the whole project will just die."

It also emerged today that of the nine issues which have been settled by an independent adjudicator, the construction consortium received an extra 7.6m, compared with the original 18.2m requested.

Cllr Mackenzie said: "This report brings much greater clarity to the people of Edinburgh regarding all aspects of the tram project. It also dispels some of the myths that others have used politically regarding potential levels of overspend.

"As a public body, the council must prudently manage any risk and the directors' suggestion of adding a 10 per cent contingency figure is reasonable to work with as we look at our various options.

"Of course, if we were not in dispute with the contractor there would be no need to do this. While signs of progress at the west of the city, tram vehicle production and the finalisation of utility works are welcome, we are by no means in the position we would like to be."

Despite Cllr Mackenzie previously saying he was ready to "call time" on the contract with Bilfinger Berger, sources close the project today said there had been some "encouraging movements" in the negotiations, with signs that there could yet be a "positive outcome."

Insiders said both sides were keen to avoid a lengthy and costly court battle, although TIE said cancelling the contract with the firm remained an option.

Worryingly for the council, however, the report suggests that raising extra cash may not be without its difficulties due to potential restrictions placed on prudential borrowing as a result of the state of the overall UK economy.

David Mackay, chairman of TEL, said: "I am satisfied that we have exhausted all avenues to bring this dispute to a satisfactory conclusion and offered the contractor a range of options to do so.

"My team have stood firm in the negotiations, with the protection of the public purse uppermost in their minds, but this has been a difficult process with one unwilling contractor.

"I welcome the council's support of our position and I hope to be able to announce significant progress in the coming weeks."

Your Say: Should we pay more money if that's the only way to finish the trams, or just scrap the project?

Kenneth Wright, 53, engineer, Drumbrae Drive: "I think it's too late to pull out of it now. There's that much work and angst gone into it already. I've always supported the trams and thought it was going to be good when it was done and I don't know a city that's not had problems putting them in. I think it would be folly not to continue with it now."

Margaret Macdonald, 79, retired finance assistant, Baberton Mains Place: "No, we shouldn't pay more money – the tram company haven't lived up to the contract, they're years late, as a rate-payer I don't understand why the council isn't taking them to court."

Stephen Valentine, 71, retired civil servant, Giles Street: "If it was an agreed, contracted amount of money, then that's what should be paid."

Jim Taylor, 57, taxi driver, The Murrays Brae: "The way to complete this project is for the council to sell Lothian Buses into the private sector and use the money from that to pay for the rest of the tram project."

Gill Williamson, 41, marketing manager, West Savile Road: "My personal opinion is that we should stop it now. I don't believe we will get trams at the end of this."

Alex Paterson, 63, joiner, Lochend Road: "They've already spent a hell of a lot of money but to stop it would cost a hell of a lot more. On a financial basis they must go ahead and finish the project, although it's going to cost everyone a fortune."

Chance to have your say on where axe should fall

EDINBURGH residents are to be asked where they think the council should make budget cuts via roadshows, questionnaires and even social networking sites.

The city council will launch the nine-month exercise as it prepares to tackle a huge financial black hole.

They are to use online feedback and business and neighbourhood roadshows to gather opinions.

Councillors say they want the public to tell them which services should be priorities.

A council report on the consultation says the exercise will help "management of public and staff expectation of the scale of the challenge".

It also says the survey should result in no "significant expenditure", as it will be carried out using existing resources.

City leader Jenny Dawe said: "The council is facing some of the most difficult financial challenges experienced in living memory as we start to look at the budget for 2011/12. Hard choices will have to be made to ensure that we continue to protect front line services and support the city's most vulnerable citizens.

"The council will be in constant dialogue with stakeholders and members of the public to make sure we take the whole city with us and make the right choices that will affect us for many years to come.

"Every possible way to save money and improve efficiency, including sharing services with other councils and looking at other ways of delivering services, is being explored."

DELAYS AND RISING COSTS ALL ALONG LINE

March 2003: Details of a tram scheme announced, complete with a 2008 finish date and a cost of 375 million.

January 2006: One of the proposed lines is scrapped due to funding crisis. Only line from Leith to airport deemed affordable in a "first phase".

September 2006: Completion date: 2010; cost: 512m.

July 2007: Preparatory work begins. Completion date: 2011; cost: 512m.

December 2008: David Mackay appointed new chair of TIE after the departure of Willie Gallagher.

February 2009: Tram work grinds to halt on Princes Street as Bilfinger Berger demands more money to finish.

May 2009: Completion date: 2012; cost: 545m.

March 2010: Bilfinger Berger proposes delaying completion until 2014, as fears rise that the route may be scaled back.

June 7 2010: Evening News reveals that the project is heading for court and huge delays after council begins moves to kick Bilfinger Berger off the job.

June 9 2010: It emerges that just 18 per cent of construction work has so far been completed, when the figure should be 86 per cent by this stage of the project.

June 18 2010: Report admits project faces 10 percent cost increase and delays