QUESTIONS have been raised over the funding of the Edinburgh tram extension that could cost up to £145 million.

Edinburgh City Council called on a costing report which found taking the tram to the latest planned terminus at Newhaven would cost £145m. It would cost £127m for the line to continue to Ocean Terminal and £80m to the foot of Leith Walk.

An option to stop at MacDonald Road, costing £47m, is the only one said to be unviable.

The council has asked officers to hold a consultation with potential funders including the Scottish Government and European Union and report back in the autumn when the options will be scrutinised.

The original Granton Spur, which would have completed a loop, was shelved around the time of the economic downturn but has still not been ruled out.

Edinburgh Tory group leader Cameron Rose said there was concern over how the extension would be funded.

He said: "I accept that at some stage the tram needs to be extended but I think funding it remains a big issue bearing in mind the extent of council debt which is beyond where it should be."

Transport convener Lesley Hinds said: "We don't want to make any rash decisions about the future of the project and that's why further due diligence is required to ensure a robust financial case that can be used for a basis for an informed judgement."

The trams began operating at the end of May last year after six years of disruption and a long-running dispute between Edinburgh City Council and contractors.

The project cost £776m, more than the original £545m, and arrived three years late.

It is now the subject of a public inquiry by Lord Hardie.

Ms Hinds said: "I am extremely pleased with the progress of the business case, which already shows the clear economic impact the extension of the tram line could have on the city.

"In the tram's first year of operation we have seen passenger numbers increase, demonstrating a growing demand for public transport in Edinburgh and making the case for extending the tram to benefit people elsewhere in the city.

"It is essential that we learn from our past mistakes and I am confident that this process will deliver thoroughly researched, strategic options for a tram extension."

An economic appraisal shows that an extension would deliver a positive economic impact with significant increases in tram patronage forecast for the Newhaven, Ocean Terminal and the foot of Leith Walk options.

The report also outlines a delivery plan, which builds on lessons learned from the original tram and details the integration of works with both the St James development and the Leith Programme.

Even so around 44 per cent of 1,200 utility works have already been identified as needing potential work carried out in the Leith area.

A formal market consultation is now proposed ahead of the final plan later this year to test the market appetite and to "provide assurance that the scheme can be delivered within the cost and time parameters established".

Officers will also carry out further, detailed analysis of the financial model, which will be independently checked and audited prior to finalising the business case, as well as investigating a series of innovative options under consideration.