Firms face 50% rates hike to fund controversial gardens plan

Business rates near the site of the controversial civic square planned for Aberdeen's Union Terrace Gardens could soar by as much as 50 per cent, opponents claim.

One of the funding models proposed to pay for the 140 million plan to turn the Victorian gardens into a "mini Central Park" in the heart of the city is a tax increment financing (TIF) scheme.

Friends of Union Terrace Gardens, the organisation formed to oppose the development championed by oil tycoon Sir Ian Wood, claim that the proposed finance scheme could lead to 240 firms based near the site facing increases in their business rates of between 20 and 50 per cent, placing some small local companies in financial jeopardy.

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A spokesman for the campaign group said: "The TIF model proposed in a paper by accountants PricewaterhouseCoopers (PWC) would see hundreds of local businesses having their business rates raised to pay for the square.

"The council agreed to investigate this model in principle on 19 May, but at no point have local businesses been consulted on their views on a scheme which could see their rates going up by as much as 50 per cent."

The spokesman said TIF had not yet been tested in the UK and that opinion was divided over the scheme in the United States, where it is more commonly used to develop brownfield sites or for affordable housing.

He said: "According to the PWC report, the council would use the TIF funding formula to partially bridge a 70m gap in the City Square budget which could leave Aberdeen in debt for up to 25 years.

"Aberdeen will have to raise 150m in extra tax to pay off the 70m loan that the square is expected to incur.

"While the highest proposed rate of increase is 50 per cent for companies on Union Terrace, small businesses on Back Wynd, Little Belmont Street and Belmont Street could see increases of 20 per cent, should the scheme be rolled out."

The system was "completely untested" in the UK, he said, and worked on the assumption that surrounding businesses would see huge financial benefits from the project.

Vicky Rider, a member of the campaign group, said: "There is a real concern that if the rates increases did take place, some of the business would not be able to survive. A lot the businesses are small independents and are already struggling."

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Fred Craig, co-owner of independent record shop One Up in Belmont Street, said some businesses would be driven out of the area by the TIF scheme.

"It would probably make us rethink the whole thing and it may put some firms out of business," he said. "When you try to cost out the running of a business in this day and age, things are very tight, profit margins are really tight. A 20 per cent increase on a rates bill is massive."I really don't think a project that size could be funded by such a small group of businesses in the local area."

A spokesman for Aberdeen City Council stressed that no final decision had been taken on the future finding for the project.

He said: "Council leader John Stewart has requested officers to submit a report on TIF to a future finance and resources committee meeting and for further briefings to elected members. Any speculation about the use of TIF at this stage is premature."