Waterfront to set sail as city harbours £50m loan scheme

The scheme would see the council borrow the money against a projected increase in business rates paid by firms lured to the Waterfront.

Officials estimate around 459m of infrastructure work – including the shelved Granton to Roseburn tram line, new roads and sewerage – is needed to bring the Waterfront up to scratch.

Among the initial projects planned for the 50m injection are:

A new Easter Harbour Road to connect from the bottom of Constitution Street to Seafield Road.

A new pier for the Royal Yacht Britannia and visiting cruise ships.

New lock gates on Leith Docks to accommodate cross-Forth passenger ferries.

A new esplanade along Leith Docks to complement a new marina development.

Land values around the Waterfront have fallen by around 60 per cent over the last two years with many housebuilding and office projects shelved.

But a study commissioned by the council estimates that the "tax increment financing" scheme, popular in the United States but untested in the UK, could bank 311m in new business rates over the next 25 years.

Council chiefs need UK Government backing for the scheme, not least to help cover the financial risks of no firms actually moving to the Waterfront, but it is hoped the 50m project will be put out to tender next year with work getting under way in 2011.

City leaders today described the plans as "prudent and workable" and said putting the Waterfront's infrastructure in first will stimulate investment in the area.

Opposition politicians gave it a cautious welcome, but raised concerns about the levels of debt the council could be saddled with.

Dave Anderson, the council's director of city development, unveiled details of the borrowing plan while giving evidence to the House of Commons all-party committee on urban development.

He said: "The fundamental strengths of Edinburgh's economy remain in place despite the impact of the recession and the challenges facing the city's financial services sector

"By seeking to raise only 50m from potential incremental tax flows of 311m, we believe this approach is prudent and workable."

The council plan would also involve creating a temporary 'business rates-free zone' in the Waterfront to encourage firms to initially move there, with officials insisting restrictions would be put in place to stop firms moving to the new zones just to avoid rates.

Edinburgh is competing with a number of English cities to become a Government-backed "accelerated development zone" which would have the tax increment financing powers.

Councillor Cameron Rose, the city's Tory finance spokesman, said: "We are certainly in favour of exploring this idea, getting more detail on how it would work and if there is much market interest.

"But no matter which way you dress it up, it is still debt and there has to be concerns about how exposed the council would be under these arrangements."