Vehicle leasing considered to plug the £57m hole in development costsBy Steven Vass
EDINBURGH tram fares could end up higher than originally expected with the news that city authorities are considering leasing instead of buying the trams to cover their £57 million shortfall for the first full stage of development.
Executives at tram operator Transport Initiatives Edinburgh (TIE) and the city council are also looking into likely consumer demand to decide whether it is worth pushing ahead with a second line.
The leasing arrangement would be one of a variety of options to allow Line 1B, from Roseburn near Haymarket station to Granton in the north, to be built during the first phase.
Leasing the planned 27 trams would avoid the £54m cost of buying them upfront, but would see the operating costs of the system increased each year. These would almost certainly be passed on to consumers, which may jeopardise TIE's plan to make fares the same on the trams as on the buses. The buses cost a flat £1.10 per journey.
With the cost of Line 1A, which will run from Edinburgh Airport to Newhaven by 2011, having risen from £498m to £512m, the £90m cost of Line 1B is even further beyond the reach of the £545m funding.
TIE needs to commit to Line 1B by next January or pay a £3.2m penalty to the developer, and would also have to foot the cost of a fresh round of public procurement to get the work done.
If it decides to go ahead, leasing trams would sit alongside seeking extra public or private funding as a solution to the problem. With Granton earmarked for substantial housing developments in the coming years, its property developers are seen as one potential source. The council and TIE plan to finish their study and make any necessary proposals to Transport Scotland by November.
Their case will also be helped by a recent council decision to sell off land worth around £10m on the peripheries of Line 1A in areas such as Broomhouse, Ballgreen and Leith's Constitution Street to help it meet its £45m contribution to the overall project.
Transport minister Stewart Stevenson will have raised hopes with recent comments that the government "stands ready to assist" in helping to draw extra funding from the private sector.
Dave Anderson, director of city development at the council, stressed that the council and TIE will only push ahead with Line 1B at the present if the economic case stacks up.
He said: "We would not launch a route into an area that's already served by buses unless we felt it's going to wash its face."
Malcolm Chisholm, the Labour MSP for Edinburgh North and Leith, said he supported Line 1B and believed there was strong demand in the Granton community, but he did not think that leasing the trams was the way forward.
He said: "It would not be acceptable to fund the line in a way that increases fares because we have to support public transport at a price that people can afford. They will have to find another way to fund the line. At the end of the day, it may be necessary to go back to the Scottish government."
A spokesman for the government said: "This government has recommitted to the previous government's commitment to fund £500m and no more. The rest of it is a matter for Edinburgh council.
"There has only ever been definite plans for Line 1A."
A spokesman for TIE said: "TIE is working closely with City of Edinburgh Council and other stakeholders to identify the best option available to fund the shortfall and deliver the full benefits of Line 1B.
"There are a number of options available and we are all committed to finding the best value solution. We believe that Line 1B is of significant economic, social and transport benefit."
TIE outlined plans for Lines 2 and 3. Line 2 would run between Granton and Newhaven, while Line 3 would extend Line 1A to Newbridge beyond Edinburgh airport to Little France in the southeast.
