Money’s Too Tight To Mention
Mike Shepherd examines the potential for cost over-run on the City Garden Project and asks …
Money’s Too Tight To Mention is the title of a 1980’s Valentine Brothers pop song covered by Simply Red.
It is also thematic of the City Garden Project (CGP), the controversial proposal to develop Union Terrace Gardens.
The nominal costs for the project are £140m, of which it has been proposed that the private sector provides £70m and Aberdeen City Council borrows £70m through a tax scheme to fund the rest.
A commonly-asked question over the last three years has been, “Who pays for any cost over-run if the project runs out of money?” It is a question that has never been properly addressed and it now looks as if the answer is: “there is no obvious source of money should the costs exceed £140m”.
At a public meeting at Cults Academy in May 2010, it was stated that the Council would pay any excess costs. A month later, Sue Bruce, the then chief executive, decreed at a council meeting that the Council would most certainly not pay for any cost over-run and put the responsibility on to the private sector. This has been the understanding ever since.
At this stage, there are no identified funds should costs ramp up.
However, the private sector has managed to raise no more than £55m of promised funding for the CGP to date. Assurances have been made to the Council that £70m will be on the table and this sum’s availability is one of the conditions for the CGP progressing to the planning stage.
At last week’s council meeting, the question of potential cost over-run was put to Colin Crosbie of the Aberdeen City Garden Trust, the organisation created to take the CGP through to the construction phase. Colin mentioned that the project costs will be less than the nominal £145m and that this gives a built-in margin. The intention is also to put rigorous project and cost management in place.
There could be a problem in finding funds above the projected £70m private sector input. It appears that local businesses are concerned about public goodwill should they be seen to contribute money for the controversial project.
At this stage, there are no identified funds should costs ramp up. One obvious solution is that Sir Ian Wood could make a guarantee to handle this, but there is no sign of this happening as yet.
Could costs over-run on the City Garden Project?
One group of professionals have expressed severe misgivings about the potential for cost over-run on the City Garden Project. Architects.
Scottish architects met at a convention in 2010, and in a straw poll, almost unanimously rejecting the Aberdeen proposal, stated that:
“The costing is absurdly light, making this proposal both technically extremely difficult and financially potentially draining.”
– See: http://www.urbanrealm.co.uk …_delegates_unanimously_reject City_Square_plans
Neil Baxter, secretary of the RIAS, the professional body for Scottish architects, has also said:
“A further significant concern is the much-publicised budget for this proposal. You will be well aware that the highest profile architectural competition in Scotland in recent years was that for the Scottish Parliament and the lengthy and difficult process which ensued from the risible budget initially set for that endeavour. Considering that, in recent years, buildings of comparable scale in Aberdeen and elsewhere in Scotland on straightforward urban sites have cost easily twice the quoted budget figure for this particularly problematic and challenging site we would be very concerned about launching a competition based upon such a questionable budget.”
– See: http://fraserdenholm.blogspot.com/2010_05_01_archive.html
I talked to one architect who had concerns about the allocated budget for the scheme. He told me that the project has “cost over-run written all over it”. There are two tricky areas:
- The project involves a large amount of rock and soil extraction from the site, whilst shoring up both Union Terrace and Rosemount Viaduct.
- It is not easy to build over an existing railway line.
The latter concern possibly derives from a previous situation in the south of England, where a tunnel built to support a new Tesco store above a railway line collapsed. This caused a five-year delay to the original project.
– See: http://en.wikipedia.org/wiki/Gerrards_Cross_Tunnel
What would happen if costs massively over-run?
As mentioned, there are no obvious sources of funds identified to handle any cost over-run above £140m. Aberdeen City Council certainly can’t afford it and the private sector is cash-limited at present. Should it occur, the most likely situation is, to save costs, not everything would be built. Failing that, the project would come to a halt if there is no money left to proceed.
In this instance, there could be a half-built steel and concrete shell where Union Terrace Gardens used to be, clearly the worst case scenario. This would also have the unfortunate effect of causing the tax scheme, underpinning the council’s borrowing, to collapse. This is based on the CGP creating new businesses in the city to provide rates to pay off the £70m loan.
Without a completed project, the Council will be left to service a massive loan. This would be a disaster on a horrendous scale.
The ever-present potential for massive cost over-run on the CGP is a major concern and without a clear plan and identified funds to handle excessive costs, the project is far too risky to consider.
Aberdeen City Council could be sleep-walking to disaster if the scheme gets approved.