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Thursday, July 04, 2013

Edinburgh Trams - Not Quite As Popular And Financially Viable As Promised

    We were once told that once all the money was poured into the Edinburgh trams and they were up and running they would be successful. Who would have guessed that promise was false too:

Edinburgh's trams will run at an operating loss over the next 15 years, according to the council's first full financial projections for the scheme.

The £776m project is due to begin running in July next year.

A report to councillors said the trams would need an initial start-up loan of up to £3m.

The council expects to receive £51m in payments and dividends over 15 years. However, it will pay out £85m in maintenance and refurbishment costs.

Lothian Buses is expected to generate a £33m dividend for the council over the same period.

However, when the costs of the tram scheme are included, the profit drops to £5m......

Professor Richard Kerley, Queen Margaret University's local government finance expert, said: "I am slightly surprised that the projected figures for cash transfers and dividends are so firm when you don't have tram lines up and running yet."

It was originally intended that the trams would run from Edinburgh Airport to Newhaven in the north, at a cost of £545m.

They will now terminate in York Place in the city centre, with the project costing £776m.

   Note sleight of hand comparing £51m takings with £85m "maintenance and refurbishment" but that ignores the actual cost of day to day running, ticket collection etc. Also the "initial start up loan of £3 million" - what do you call a loan that nobody expects will ever be repaid?

  Officially the building cost has not been upped for the last couple of years and is still £776 million but that excludes interest payments which are agreed to bring it over the billion.

   And of course, as Professor Kerley points out this figure is subject to "unforeseen" extra expenses when the system is actually up. With the building cost well over £1bn for half the original track (originally promised at £300 million it is clear that we are still a long way from knowing where the bottom of this money hole lies.

    And Edinburgh city centre is still gridlocked because major roads are endlessly closed to put in/take out/move/repair rails.

    And Edinburgh has gone from being the second favourite tourist city in Britain to not being in the top ten.

   If you can't quit when you are ahead quitting when you are merely £1 billion behind still makes sense. All Holyrood parties (admittedly the SNP less than the others) share the blame. In the spirit of learning from ones mistakes so that one can repeat them perfectly, all of the old parties are in favour of spending £34 billion now £45 billion on HS2 though UKIP are opposed to that one too.

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