‘Let’s see plan B before you get penny of your £84m docks cash’

City council chiefs have been ordered to prove that an £84 million plan to trigger development work at Leith Docks remains viable before borrowing a penny.

The council had proposed becoming the first Scottish authority to use a “tax increment financing” (TIF) scheme to fund infrastructure work that would encourage developers to invest in the area.

Under the proposals, £84m would be borrowed to take four separate projects forward and then the loan repayments would be funded through an increase in business rates that would come from firms flocking to the area.

However, Forth Ports has announced it plans to focus development on renewable energy rather than housing, offices and retail – and that has led to concerns that the increase in business rates income, which the whole plan is based on, will not be as significant as first expected.

Now officials have been asked to provide details of a fallback plan before pressing ahead with any of the four projects: an access road, an esplanade outside Ocean Terminal, a new finger pier and “lock gates” that would allow more cruise liners to access the port.

Following a debate in the City Chambers on concerns about the business case for the scheme in light of the new Forth Ports plan, city leader Jenny Dawe said: “We will ask for a further report on the issues raised, in particular the impact that the change in direction has on the finances of the TIF and what the return will be. We do need a piece of work that gets more detail on that.”

There are fears that the council could have to fund the borrowing through its revenue budget if the increases in business rates do not happen.

Councillor Tom Buchanan, the city’s economic development leader, said: “I think it would be useful to get information about what mechanism the council will put in place if we don’t get the uplift we expect from business rates. We need to know any assurance that the director can give that there will be a mechanism to cover for that.”

It emerged last week that the council is expected to formally begin the hunt for a contractor for the first part of the TIF project – building a £16m road to link Constitution Street and Seafield Road – early next year, with work expected to get under way in 2013.

The three other projects are on hold until a masterplan is provided by Forth Ports. A new public esplanade for shops and restaurants had been proposed outside Ocean Terminal, while there were also plans to create lock gates that would allow more ferries and cruise liners to dock in Edinburgh, and a new pier for the Royal Yacht Britannia.

Dave Anderson, director of city development at the council, said full details of the impact on business rates income will not be known until Forth Ports brings forward a new masterplan. But he added: “We are already in discussions with two major renewables companies that have indicated that they want to look at Leith as a new major location and five or six are looking at the east of Scotland.

“We will have to remodel non-domestic rate income relative to that so we will have to go back to the drawing board project-by-project to look at risks relating to non-domestic rate income.”