Overspend Archives - Aberdeen Voice

Ten Reasons To Vote Against The CGP

Aberdeen City, Aberdeenshire, Articles, Community, Environment, Featured, Information, Opinion No Responses »

Feb 242012

Peter Veritas makes the case for voting “Retain”.

1. There is a very real danger that the City Garden Project will bankrupt Aberdeen.

The City Garden Project (CGP) is planned for a greenfield site which would require substantial excavation. It is a five acre, five storey, underground construction that would span both a main road and a railway track

It’s roof would be required to hold approximately ninety thousand tons of topsoil, the same weight as the worlds largest aircraft carrier. It is projected to cost £140M.

Union Square, which is of a similar size, was built on a flat brownfield site with good access. The final cost was £250m.

Marischal College is a much smaller existing building that was recently renovated. No major construction was performed. The final cost came to £65M.

Given that context, how can we be expected the believe the estimate for The City Garden Project is realistic? Should the City Garden Project experience a similar scale of overspend to the Scottish Parliament Building or the Edinburgh trams, then the shortfall could conceivably be of the order of £360M. The city, which is already £560M in debt, would be liable for this overspend.

It could not be rolled up into the existing loan, and would require immediate payment. Failure to cover the overspend would result in us being left with a dirty hole in our city centre. The only options open to the council would be to auction off it’s remaining assets, such as the other parks, to property developers, and to increase council tax massively. Public services which have already suffered severe cuts would be totally decimated.

2. Aberdeen has suffered badly from previous developments.

St Nicholas House, the New Market, The Denburn dual carriageway, the Denburn Health Centre, The St Nicholas Centre, and Virginia Street are all universally acknowledged as failures that now blight our urban landscape. Aberdeen lost many beautiful buildings to clear the way for those developments.

The people who campaigned against those architectural and planning atrocities are also campaigning against The City Garden Project. They’ve been proven right time and time again. Perhaps it’s time we listened to them?

3. We already voted against this Project under a different name.

There is something sinister about the City Garden Project. It was originally conceived as the City Square Project (CSP), and envisioned as a five acre flat concrete piazza. That proposal only emerged after Peacock Visual Arts were given planning permission to embed an unobtrusive arts centre into the hillside of Union Terrace Gardens. Sir Ian Wood pledged £50M to build The City Square, but promised to scrap the Project if the public rejected it.

That was then put out to a flawed public consultation, in which the public voted against by a substantial majority, despite the online survey mysteriously defaulting to a “yes” vote. Sir Ian then reneged on his promise and continued to push the concept, the council ran roughshod over the electorate, and by the casting vote of the Lord Provost, consigned the Peacock plan to the dustbin.

Sir Ian has consistently stated that he will only contribute his £50M to this particular proposal and nothing else, and that if we reject his proposal then he will divert the money to Africa. His behaviour is baffling.

4. There has been an air of deception around The City Garden Project.

The City Square Project was rebranded as The City Garden Project. During the Project’s second coming the public were presented with six designs and invited to vote on them. None Of The Above was not a option.

Aesthetically, the public appeared to favour the Winter Garden design. From a conceptual perspective The Monolith design was arguably the most cohesive.
The appointed panel then refused to release the outcome of this public vote and instead selected The Granite Web, a design for which very few people acknowledge having voted, and which many people considered to have been among the weakest.

CGP propaganda has continually claimed that Union Terrace Gardens are a dangerous place, but Grampian Police crime figures reveal that they are actually among the safest places in the city centre. Neighbouring Belmont Street, which the plans propose to connect to the Granite Web, is statistically the worst area for street crime.

Under the rules of the referendum, registered campaign groups are limited to £8k spending to maintain a level playing field. However a mysterious group of anonymous business people has allegedly ploughed £50K into sending pro-CGP propaganda to every home in Aberdeen City. This is not within the spirit of the referendum and is arguably a breach of the rules.

It has been claimed numerous times that the 250 year old elm trees in Union Terrace Gardens are diseased, but a recent report by a tree surgeon has given them a completely clean bill of heath. These elms are among the last surviving in Europe, and they flourish both due to their isolation from other elms, and because the pollution of the city prevents Dutch Elm disease from spreading to them. These trees are all covered by a preservation order.

5. Those arguing in favour of the City Garden Project are mostly connected to it in some way.

Scotland’s top public relations firm were engaged to promote the Project, which may be why the majority of stories that have appeared in the local press have been fawningly in favour of the CGP.

Those who have argued the merits of the Project, both in the press and on-line, are interconnected people with an as-yet unknown agenda.

In addition to the numerous PR professionals being paid thousands of pounds each day to present the case, there are several property developers, the owners of assorted the premises on Union Street, and various oil company executives.

No fewer than three city councillors, who backed the Project, recently announced that they intend to stand down, and have also revealed that they are planning to leave the city. Virtually all of those involved are members of Acsef, Scottish Enterprise, the Institute of Directors, and The Chamber of Commerce. The same dozen people feature time and time again in the groups which have come out publicly in favour of the Project. The same people wearing different hats.

6. The economics have no basis in fact.

Tax Incremental Funding (TIF) is intended to fund the redevelopment of brownfield sites. Businesses which later setup in and around those sites pay increased business rates which repay the cost of the development in a similar manner to a mortgage. The business case for this Project bends the rules since the increased rates will not be gathered for the site itself, but from two new industrial estates, located several miles away and for which planning permission has already been granted.

The 6,500 jobs and £122M of projected annual revenue are a product of these new industrial estates working at full capacity. This is almost guaranteed to occur anyway without The Granite Web.

Furthermore, the paid author of the reports is PricewaterhouseCoopers (PWC), which has recently been fined £1.4m for audit failure. PWC rates the TIF case at Risk Level 3, where 4 is the highest risk.

7. To save the architecture of the Denburn Valley

None of the Granite Web mockups, artists impressions, or video, have addressed the issue of the rear elevation of Belmont Street.

This is home to some of Aberdeen’s most spectacular architecture, descending right down to the level of Denburn Road. Architecture which will be obliterated when the CGP connects to it, some five storeys further up.

Most of these buildings are either local businesses or publicly owned concerns, and several of them have picturesque balconies below the finished level of The Granite Web.

8. To retain our sheltered park.

Union Terrace Gardens lie in the Denburn Valley which offers shelter from the wind and urban pollution. Raising the area up to street level would turn it into a wind trap.

The wind would howl round the concrete walkways and other architectural features of the granite web, plants would struggle to survive, and people would avoid the area, preferring instead to travel along the relatively sheltered confines of nearby streets. It’s a fallacy to claim that this development would enhance connectivity.

9. Union Terrace Gardens have been cynically starved of funding – in order to ‘pave the way’ for this redevelopment.

Union Terrace Gardens was the centre piece of Aberdeen’s famous successes in the Britain in Bloom contest. Over the course of the past eight years the council has cut funding, with the result that the Gardens are no longer maintained at previous award-winning levels

The beautiful Grade A listed public toilets were closed, the famous giant draught boards were ripped out, the winter skating rink was no longer installed and concerts and other public events were discontinued

A modest investment would both regenerate the Gardens, and improve access to them. There is no need to risk bankrupting the city for what amounts to no additional benefit

10. The curse of Corbie Haugh.

Back in the seventeenth century, the area where the Gardens now stand was a wood called Corbie Haugh. The ancient Scots word for crow is corbie and the wood was named after the crows which gathered in the grassy valley and within the bank of elm trees. The elm trees in the Gardens date back over 250 years to that eighteenth century wood.

An ancient legend, The Curse of Corbie Haugh, holds that when the crows depart, the city will be ruined. If the elms are chopped down, the crows will indeed depart, and if they city ends up burdened by an additional £360m of debt, then it shall indeed be ruined!

SAVE OUR CITY FROM DISASTER BY VOTING TO RETAIN UNION TERRACE GARDENS.

WhaT IF?

Aberdeen City, Articles, Community, Environment, Information, Opinion No Responses »

Feb 222012

Aberdeen is a city on a downward slide. That makes for uncomfortable reading, doesn’t it? Our gut instinct, being the proud city we are, is to reject this notion out of hand, though deep down we all know it is true, says Graeme Campbell.

The cause of the rot is not easy to identify. Opinions will differ and any debate would most likely be fierce. It is perhaps best to say the gradual slip in the condition of our once grand and glorious city can be pigeon-holed to two vague categories – poor planning and the slow decline of the energy sector.
Or perhaps over-dependence on it? Two and a half pigeon holes then.

So, avoiding any unhelpful debate surrounding the way we arrived at this point, we must as a city look forward to the best possible route to a future of prosperity. We must look for a plan to return grandeur and pride to the Granite City.

Our carefully-selected councillors, together with possibly our most successful loon, Sir Ian Wood and the private partnership Aberdeen City and Shire Economic Futures (ACSEF) think the solution to the gradual slip is a new garden. Not exclusively a garden you understand, but a garden with conferencing facilities and a café. To give all credit due, the plans certainly are impressive and whilst perhaps not so impressive in keeping with the architectural fabric of the city, we are, of course, a city not afraid of change.

In the most recent release posted through all city letterboxes, Aberdonians are directed by a host of interested parties to the key point, “You deserve it!” Well yes, most likely. But oddly, relegated to fifth, is what will be the key point for most Aberdonians. Once again we don’t want to admit this but we’re all thinking it, “We can afford it”.

Will Aberdeen City be pushed to the very brink of bankruptcy by this plan, as happened when the city took the bold decision, so long ago, to construct our now famous Union Street granite mile? Probably not. Of course, Sir Ian’s mammoth oil wealth will go some way to meeting the cost of development on the site – and only on this site, he has been quite clear on that point – the further estimated £100m will come from business rates, council tax – of course – and the heinously-complex Scottish Governmental TIF funding mechanism.

Now nobody wishes to be bored to tears by the inane workings of a TIF, so let’s not worry about that. Instead, let’s find out what other places are using TIF to create.

North Lanarkshire plans to spend £73m to transform the former Ravenscraig steel site, an area of quite unrivalled deprivation, to the benefit of the many people who live in the area.
Argyll and Bute is to extend the North Pier at Oban for £20m, further securing the town’s position as Gateway to the Islands, a major boon to the tourist industry no doubt.
Falkirk plans to use its TIF in a far less grand manner, by bringing about strategic road developments and improving the flood defences. Clearly a sound decision.

But the plans which should be of most interest to any outward-looking Aberdonian comfortably seated in Europe’s oil capital, come from Fife. The council there is to spend its modest £17m TIF improving vehicle and marine access to the already-thriving Energy Park Fife, where renewables are already being constructed. I know, that’s not oil, but it is very real, so let’s not sneer. Not content with this, Fife has also begun construction of the Levenmouth Low Carbon Investment Park which is set to become ‘Scotland’s foremost energy park’.

Whilst in Aberdeen we plan to spend £150m on a garden and café.

Is anyone else embarrassed? Our great city, the economic powerhouse of Scotland, is being distracted by plants and trees whilst other towns are going green in a wholly more financially-sound way. This city has the engineering and science skills, brought by the oil industry and our two modern and diverse universities, to become a world leader in the renewables field.

You don’t need to do the math to know a research and development centre, alongside a manufacturing park would be of significantly greater financial gain to the city than the redevelopment of a garden.

This brings us to the question – has the Council considered this? Understandably, Sir Ian may not be keen, but this is about so much more than the oil empires held by the few; this is about the continuing prosperity of the many.

So, as the ballot papers find their way to you, look around the city. Look for the signs of the rot brought about by poor management by those who, for too long, have only looked inwards – decision makers enjoying the security of the formerly-booming local oil industry.

Consider what the world, given the current environmental and economic climate, would look to Aberdeen for. Horticultural tips? A show in our new 5000-seat outdoor amphitheatre? Or will they look to Europe’s ENERGY Capital to lead the way to a bright new future of renewable energy? And then, as our city leads the world in technological advancement in the renewables field we will look forward to investment, to jobs and to success.

When the ballot paper lands on your doormat, consider what Aberdonians truly deserve and ensure your vote lets our council know just what you want for your future.

TIF – A Message From America

Aberdeen City, Articles, Information, News, Opinion No Responses »

Feb 192012

TIF – doesn’t this American innovation in borrowing just sound fantastic? You get to ‘unlock’ money, re-develop an area, and money comes flooding in. What could be wrong with that? Karin Flavill looks across the pond to the home of the junk bond and bad mortgages, and doesn’t like what she sees.

While arguments rage over the future of Union Terrace Gardens, there’s consensus about one thing. Tax Increment Funding is a somewhat difficult concept to get to grips with. Not because the basic definition is complex.

TIF funds development by borrowing against future business tax gains arising as a consequence of that development. New developments mean new business rates. The local authority keeps a portion of those business rates (from businesses that wouldn’t have moved into the area but for the development) to repay the loan.

The complexity arises in assessing how this mechanism can be applied in a manner that avoids various potential pitfalls. TIF is still very much in the experimental stages in the UK, so we lack a domestic reference point to understand how well the process is likely to work from start to finish.

When business is attracted from one area to another by a TIF funded development, it may be at the expense of another area. This is known as “displacement”. The area benefiting from TIF is pleased to lure business away with its spanking new TIF-funded development. The region losing out wants some protection against financial detriment.

The TIF scheme provides that tax increment coming at the expense of another region can’t be retained by the local authority to make TIF repayments. Like other NDRs, those increments must be sent to Central Government who will pool them with other funds then redistribute the funds equitably among regions.

Rather than being a tool to give cities a competitive edge and win City of Culture status for celebrated developments (the vision currently being promoted in CGP supporters’ referendum campaigns), TIF was first developed in the US as a means of helping regions to improve their most blighted areas. Gradual shifts away from this philosophy, and increasingly creative ways of arguing blight, have led to many states in the US tightening up legislation to prevent TIF from being awarded except where genuine blight is demonstrated.

Chicago is often cited as example of the TIF scheme being misused to benefit the areas that least need it. In August last year, a report was released outlining areas for improvement in the operation of TIF in that city. The report highlighted problems regarding the monitoring of TIF expenditure.

Taxpayers had not been afforded easy access to information that would help them understand the TIF process or to evaluate the performance of the investment. This reduced transparency of the process.

although the initial cost proposed was $224.3 million, ultimately the park cost $482.4 million

The harder it is for the ordinary citizen to understand the TIF process and to evaluate the success of the development it funds, the greater the potential for corruption and abuse of the process by those who do understand it, and who can make it work to their own advantage.

That some will seek and gain an advantage through cronyism is an unfortunate element of life from which no city is immune.

In the 1990s, Chicago Mayor Daley (no relation to Arthur) developed a strong attachment to a project that would come to be known as Millennium Park. A 16-acre landscape situated over an underground parking structure, it was built on top of Railroad tracks in an existing park called Grant Park. The architect involved was Frank Gehry who had won international acclaim for the Guggenheim Museum in Bilbao. The Chicago Tribune enthused that:

“The most celebrated architect in the world may soon have a chance to bring Chicago into the 21st Century”.

The park has certainly won many admirers worldwide and is, in many ways, an excellent model for what the City Garden supporters are hoping that project will become. Properties in the immediate surrounds have become very fashionable and have increased significantly in value.

For others there has been a hefty price tag. For example, although the initial cost proposed was $224.3 million, ultimately the park cost $482.4 million. The park has come at a very high price to Chicago residents in terms of cuts to funding of public services and job cuts that were necessitated by the cost of the park. Salt is rubbed into the wound, on occasion, when the park is closed to the public so that corporate functions may be held there.

During and after the building of the park, Mayor Daley was frequently criticised for alleged cronyism in the awarding of contracts. Other areas of the city continued to deteriorate, while their inhabitants observed the increasing wealth and prosperity of those parts of the city that benefited from TIF funded schemes.
Areas that never suffered from true blight in the first place, but which were a focus of interest for developers, politicians, owners of business premises and others who could make the TIF scheme work for them.

In some ways it’s puzzling that we, supposedly a far more socialist nation than the US, are applying a model of TIF so similar to that model which states in the US have been increasingly trying to move away from by drafting legislation that aims to help TIF function in accordance with its original aims.

There has always been a tendency for conservatives to condemn the poor for their reliance on state sponsored welfare, but in recent years have people started questioning more vigorously the exploitation of taxpayer financed schemes by the some of the biggest players in business (players who have traditionally, but not always accurately, been lauded for their self-sufficiency).

TIF deserves close attention for its potential to increase this problem. Failure to know, or care about, the original philosophy of TIF leaves us less alert to its potential for misuse that could worsen existing inequalities in our society.

The UK version of TIF springs from recommendations in a 2008 report by PWC and Core Group Cities for an alternative method of funding developments in core group cities (the 8 largest regional cities in England). The report is here.

It begins with commentary on the economic successes of the core group cities, and highlights continuing problems relating to unemployment and deprivation in some neighbourhoods. It states an aim to “rejuvenate communities, provide new employment opportunities and stimulate further economic growth.”

Promoters of the CGP dismiss the possibility of serious overspending as scaremongering

The report then discusses the increasing political emphasis on a devolved approach to economic development . A defining aspect of TIF is that it permits local authorities greater autonomy in the matter of funding developments once they have been granted the TIF loan.

For this to happen, they must submit a detailed business plan to the SFT who make recommendations to central government regarding feasibility.

PWC, having been involved in the UK version of TIF from its conception, is ideally positioned to assist local authorities with the preparation and submission of their business plans. Finance and Resources Committee meeting minutes from September 2010 discuss PWC’s remit in preparing a TIF business plan for approval by the SFT. The minutes refer to several important city projects the Council would wish to progress, whether or not the City Garden project went ahead.
See: https://docs.google.com …committees.aberdeencity …pwc+tif+business+plan

“The terms of PWC’s assignment make it clear that they are required to produce a business case that ensures zero financial risk for the Council.”

The Council states that it will make no financial contribution to the City Garden Project. The development must be funded wholly by private contributions and by the TIF loan and completed within the budget.

Promoters of the CGP dismiss the possibility of serious overspending as scaremongering. Chicago’s Millennium Park experience demonstrates, however, how this can and does happen. As a response to such concerns, Sir Ian Wood has pledged an extra £35 million. It’s not clear what will happen if the cost exceeds this.

Despite ACC’s insistence that PWC present a business case involving zero risk to the Council, the draft business case completed in January of this year contains no such promise. It focuses on minimising risk and balancing the risks involved in carrying out the project against the risks involved in doing nothing.

Outlining the need to attract investment and talented professionals to Aberdeen to assure future prosperity, the plan refers particularly to the energy industry. Due to the oil and gas industry being regarded as the primary targets for investment in Aberdeen, and Aberdeen’s existing status as the main centre in Scotland for this industry, PWC anticipate displacement being low (10%). A low anticipated displacement figure is essential for arguing the likely success of a business plan.

PWC appears to anticipate investment by that industry increasing in Aberdeen, alongside the increasing depletion of oil and gas reserves

Work is expected to be completed over a 5 year period beginning this year, with TIF borrowing being carried out in stages (the first draw down taking place in 2014). The proposed development is expected to create approximately 2 million square feet of commercial space and to speed up the development of a further 1.4 million square feet of commercial space.

The CCRS (City Centre Regeneration Scheme) predicts 6,500 new jobs resulting from the development. It should be noted, though, that that figure is a “by 2039” prediction.

The business plan states:

“Oil and gas reserves will run out over time, perhaps 30 years, and Aberdeen is looking ahead. It knows it needs to adapt its industrial base and re-examine how it creates wealth and prosperity. Aberdeen is confident it can do so.”

This project is to be completed in 2017, and its success relies significantly on a very low displacement figure of 10%. In presenting this figure PWC relies on the oil and gas industry, already present in Aberdeen (and therefore not being taken from other areas) being the main sources of increased investment in Aberdeen. Confusingly, PWC appears to anticipate investment by that industry increasing in Aberdeen, alongside the increasing depletion of oil and gas reserves in the North Sea.

Perhaps in anticipation of confusion about this assertion, much is made of the possibilities relating to renewable energy – an industry Aberdeen must embrace and develop expertise in, regardless of Donald Trump’s views. The question is whether developments in other areas area will not only compensate for the steadily diminishing presence of the oil industry, but expand to the point where the business plan can work as anticipated.

Regarding the City Garden proposed as a replacement for UTG, the report comments…

“While there is no direct benefit the fact that the City Gardens Project becomes a reality and underpins the CCRS will benefit Aberdeen’s wider population and business community.”

During a recent BBC Scotland debate, campaigner Mike Shepherd (a geologist with years of experience in, and expert knowledge of, the energy sector) was shouted down and jeered at by pro CGP hecklers. The latter have tended to define opponents of the City Garden Project as tree-huggers and luddites who will be crushed by the wheels of change. UTG has also been described, throughout the debate, as a dangerous area…despite police reports indicating far lower crime levels in UTG than in surrounding street level areas.

The debate has often been an acrimonious one, featuring conflicts of various kinds. Already the TIF pilot scheme in the UK form originally advocated by PWC has brought deep divisions to Aberdeen. It seems set to be promoting a cheerfully unapologetic attitude, amongst some in our community, with regard to social exclusion.

A popularly cited reason for getting rid of UTG is that this will also rid the city centre of people with drug and alcohol related problems. Presumably, relegating them to more blighted areas that would, were TIF being applied in a manner consistent with its original aims, be the areas actually benefiting from this scheme.

Think Of A Number

Aberdeen City, Aberdeenshire, Articles, Featured, Information, News, Opinion No Responses »

Jan 272012

The business case for TIF and the City Garden Project by Mike Shepherd

The Technical Feasibility Study for the City Square Project was published in 2009. A key problem area was identified early on:

“The difficulty in quantifying the economic gain is considerable. To describe the benefits in cultural and civic terms and to focus on the future raison d’être of the City of Aberdeen will become the means of explaining the benefits. However it is very difficult to make these benefits seem tangible. Yet this is precisely what will have to be done for a proposal to succeed.”

Three years later, and with the scheme rebranded as the City Garden Project, they are still struggling to give any clear explanation for the economic benefit.

The business case for Tax Incremental Financing (TIF) was presented to Council on Wednesday. TIF is a mechanism whereby a local authority borrows money from central government funds to finance a development project. Any new business rates created by the project are used to pay off the loan and interest. It is intended to act as a self-financing mechanism.

The City Garden Project has a nominal cost of £140m, of which the promised private sector contribution is £70m. Aberdeen City Council is being asked to underwrite a £70m loan through a TIF scheme. This is part of a larger plan to redevelop the city centre which includes knocking down St Nicholas House, the Denburn car park and health centre area.

The TIF business case presented to councillors is, however, seriously flawed.

http://committees.aberdeencity.gov.uk/mgConvert2PDF.aspx?ID=18350

An Attractive Aberdeen

The main justification for the City Garden Project is that it would apparently create a high quality city centre to make Aberdeen more attractive. This is supposed to act to retain and draw in energy and other professionals, together with an increased number of visitors.

“Research shows that talented people choose place rather than job when making location decisions. As an Energy City, Aberdeen competes for skilled people with….areas like Abu Dhabi, Kuala Lumpur, Houston and Perth (Australia).”

Yet, a survey published two months ago makes this claim somewhat questionable.

“ABERDEEN has been rated one of the world’s top cities to live in for the second year in a row, a survey published today reveals. Quality of life in the Granite City is ranked above that of Hong Kong, Los Angeles, Houston and Dubai in the study, which is used by governments and multinational firms to help decide where to send staff.”

http://www.pressandjournal.co.uk/Article.aspx/2536835

Jobs Creation

Most controversial is the claim that regeneration of the city centre could create 6,500 jobs.

The report sets out how his figure was derived. A questionnaire was sent out by the Council to companies and a small number of interested parties in Aberdeen with the intention of assessing the economic impact of the city centre redevelopment. One of the target groups comprised key developers, land owners and agents. Of the 35 parties in this group, only one replied to the questionnaire. They then contacted all remaining 34 developers by phone. Even then, when directly approached, only six of the 34 were prepared to speak to them.

Unfortunately this question did not garner any responses

The developers were asked ‘to identify the extent to which the delivery of each of the five development schemes would result in uplift in development potential for housing, retail outlets, office space, business units, hotels, tourism and leisure in the City Centre’.

However:

“No respondents identified the project as having any impacts on the development potential for business/industrial units in the City Centre”.

Then:

“The next question in the survey requested developers to provide an indication (in quantifiable terms such as the number of units, square footage etc) of the extent to which the identified benefits would impact upon their organisation’s investment plans and/or objectives. Unfortunately this question did not garner any responses as consultees felt it was too soon and/or complex to attribute impacts in these terms.”

That questionnaire wasn’t that much help then.

“Additionally it was apparent that individual developers and other respondents identified potential uplifts in activity and recognised that the timing of investments would be brought forward as a result of TIF. However, many of these developers still had expectations that, irrespective of future economic conditions or City Centre Regeneration Scheme (CCRS) , their specific sites will be taken forward. It was apparent that individual developers and other respondents identified potential uplifts in activity and recognised that the timing of investments would be brought forward as a result of TIF. However, many of these developers still had expectations that, irrespective of future economic conditions or CCRS, their specific sites will be taken forward.” (HA!)

SO WHAT DID THEY DO NEXT ?

“In balancing these different responses (i.e. CCRS will act as a stimulus to market uplift in general versus developers views that each individual site is likely to be taken forward anyway) the Council, ACGT Enterprises and their advisors have initially assumed a profile of development under the no CCRS scenario whereby:

“None of the cultural, leisure or retail elements of the CCRS projects will be taken forward;

“At least one major site totalling 0.720 million square feet will be taken forward in the anticipated timescales projected by developers regardless of CCRS; and,

“On the remaining sites identified, 1.369 million square feet will go forward without TIF over the 25 year period considered, but such developments will lag, on average, three years behind the profile assumed with CCRS.

“On the remaining sites identified, 2,029 million square feet of development (out of total development potential of 3.468 million square feet) will not go forward without the CCRS, over the proposed 25 year TIF period.”

THIS IS THE KEY BIT

“the Council, ACGT Enterprises and their advisors have initially assumed a profile of development “

AND THEN …

Took the 2,029 million square feet figure, multiplied it by ‘standard job density ratios,’ and came up with 6,500 jobs.

Assumptions?

So what happened next?

“In balancing these different responses (ie CCRS will act as a stimulus to market uplift in general versus developers views that each individual site is likely to be taken forward anyway) the Council, Aberdeen City Garden Trust Enterprises and their advisors have initially assumed a profile of development under the no CCRS scenario whereby:

…. 2,029 million square feet of development (out of total development potential of 3.468 million square feet) will not go forward without the CCRS, over the proposed 25 year TIF period.”

The footage was multiplied by standard figures which relate development area to the number of jobs likely to be created, hence 6,500 jobs.

The key word here is ‘assumed’. An exercise in speculation somehow translated into a press statement that the City Garden Project will create 6,500 jobs. This wild claim led to much scepticism. It was pointed out that the London Olympics are only predicted to create 3,000 new jobs.

The Risks

The discussion on project risks is somewhat lightweight. One concern is the possibility of massive cost over-run on the project. The report even tacitly recognises the possibility:

“It has demonstrated with the redevelopment of Marischal College that it can have a major project delivered on time and under budget. This is a rare accomplishment in such large projects.”

In June 2010, I gave a deputation to a Council meeting where I asked who would pay for any cost over-run on the City Garden Project. The then Chief Executive, Sue Bruce, decreed that the private sector would pay, not the Council. Since that meeting, there has clearly been little progress on the matter. The report mentions that:

“Before entering into any TIF arrangement, ACC will endeavour to structure an arrangement with its private sector contributors that minimises ACC’s risk exposure.”

The Council should walk away from the project unless it gets a legally-binding commitment from the private sector to cover all costs of any project over-run. The major financial problems caused in Edinburgh Council as a result of the projected £200m-plus overspend on the trams project should be foremost in councillors’ minds, one would hope.

TIF can be a risky way to borrow money. The risks are understood by the Council:

“For most TIF projects the most significant risk would be in relation to the business rates identified not materialising or being delayed. This would result in ACC having insufficient revenues available through the TIF mechanism to service and repay their borrowings.”

There is another risk. The loan will be in place for a period of 25 years, gradually being paid off, it is hoped, by new business rates. Like a mortgage, interest will accrue on the unpaid part of the loan. The business case assumes an interest rate of 5.2% over the 25 year period. Should interest rates rise by only 1%, then there will be a predicted shortfall of £20.7m left to pay after 25 years.

Careful reading of the TIF business case for the City Garden Project shows that it is based on unexplained assumptions, optimistic extrapolations and will involve financial risk for the Council. Yet the public are being told otherwise.

Tuesday’s ‘Press & Journal’ quoted a City Garden Trust director, who mentioned they had polled 50 people in Aberdeen. Those against the City Garden Project had said the city could not afford the project.

“When the funding was explained and the economic benefits outlined, ten of these people changed their minds. “

This is what I would have told them instead.

“Your house needs doing up, you are heavily in debt, you can barely find the cash for the essentials in life. Should you take out an enormous mortgage for a new patio and garden? No!”