Overspending concerns raised over ‘indoor arena’s’ £130 million price tag

IT has ambition in spades, eye-catching design and a price tag to match and phase one of the Swansea Central scheme is no longer on the drawing board as work on the indoor arena – the key elements of the city centre project – continues in the rain by the LC.

The affordability of the council-led scheme, which was estimated at £129.7 million this time last year, edged its way into discussions about overspending this week.

Present at the council committee meeting in question was a Wales Audit Office (WAO) employee, who said: “For an organisation like yourselves, to be considering significant additional capital schemes is certainly a concern for us.”

No councillor fainted at these words and birds didn’t drop out of the sky – and, for the record, the WAO has expressed this view before.

But with another year of departmental overspending forecast, although this may change in the coming months, the business case for Swansea Central phase one will be closely scrutinised when it is published.

That’s because the council is borrowing to fund the majority of the new-build and then paying back much of the borrowing costs out of its revenue budget, which funds schools and refuse collection and the like.

An important footnote is that a pot of money has been set aside, said council leader Rob Stewart, to cover some of these repayment costs.

Swansea Central phase one comprises the 3,500-capacity arena and a new digital square and park alongside. These will sit on top of a new car park.

The development will be linked by a new pedestrian bridge across Oystermouth Road to a new commercial and residential building, and a multi-storey car park.

Council chiefs envisage new income streams from phase one – rent from commercial premises, car park revenue, sales of the 36 housing association flats, a share of arena profits, and a business rate rebate among them.

And £22million of Government funding via the Swansea Bay City Region city deal is expected to land at some point.

Years ago, or if this was Bristol or Manchester now, you might reasonably expect the private sector to drive forward an indoor arena project like this, but South West Wales post-financial crash is a different ball game.

Equally, it is not unusual for councils to fund big capital projects.

In a statement, the council said: “What is being created in Swansea via the city deal will provide income to the authority long term and will help to offset the costs of borrowing.

“In addition, the council has the option to divest from such investments at a later date and repay the borrowing if it wishes, and is economical to do so.”

An updated report about Swansea Central phase one will go before cabinet in the coming weeks – and the business case, when published, will be publicly available although commercially-sensitive information will be restricted.

As things currently stand, opposition group leader Chris Holley has reservations about the project.

“At the moment I can’t see that we can afford to borrow the money and not have an enormous effect on services within the council unless they (Labour) find savings of tens of millions over the next couple of years,” said Cllr Holley.

“We are not going to have the (financial) headroom to pay back the interest on the borrowing.”

The Lib-Dem leader took a swipe at the tough financial settlements given to councils from the UK Government and Welsh Government in recent years and said Swansea Central phase one seemed a more robust project two or three years ago than now.

“At the beginning, you think it’s going to get more people in the city – now I can’t see it’s going to be the saviour of the city centre,” he said.

“Some of that concentration of money should have gone on the indoor market, which is the jewel in the crown.”

Cllr Holley also wondered if the new 15,000-capacity indoor arena planned in Cardiff Bay would negatively affect the smaller Swansea arena’s fortunes.

But Cllr Stewart said the Labour administration had created the financial headroom to avoid the impact of new borrowing costs on council services.

He said the level of overall borrowing had also come down under Swansea Labour compared to the previous Liberal Democrat-led administration, and that money had been spent on the indoor market – with new toilets to be installed and further interior work to come.

Cllr Stewart also reiterated that Swansea Central phase one aimed to attract investor interest in phase two of the city centre project.

Phase two covers an area roughly from St Mary’s Church to St David’s multi-storey car park and proposes developments that could include a cinema, restaurants, shops, more than 100 apartments and a large public sector office hub. Some existing buildings would be retained.

“This is about a strategic redevelopment of the city centre,” said Cllr Stewart.

“The delivery of the car parks, new homes, shops, and offices are contingent on the arena being delivered.

“If we don’t deliver that we don’t get the rest.”

Asked if the borrowing costs of Swansea Central phase one could exceed the income generated, he said: “Not for the first five years.”

In a dig at the Lib-Dem leader, Cllr Stewart added: “It’s disappointing but not surprising that Cllr Holley’s Lib-Dems do not want to see major investment in Swansea.

“They presided over a disastrous period of decline where they wasted millions on a bendy bus and other schemes that damaged the city and put many people out of business. We are having to put The Kingsway right because of their mistakes.”

More numbers will emerge in the coming months, just as the arena will start to rise out of the ground.

The cabinet report on Swansea Central phase one last November said the magnitude of the decision to fund the project was “very substantial”.

It added: “The proposed level of local public subsidy is very substantial but less than the envisaged economic benefits set out in the report and on that basis it can be considered justified.

“The financial cost to the council of supporting this scheme’s financing costs over other revenue spending is a matter of policy decision by cabinet today and council in future budget decisions.”

Cllr Stewart and his cabinet colleagues have repeatedly stressed that Swansea’s economic fortunes will continue to wither as people choose to visit out-of-town shopping centres or Cardiff unless action is taken.

Last year’s cabinet report said: “Due to the financial viability the private sector will not invest in major regeneration projects in Swansea, therefore public sector intervention is critical if this project is to be delivered.

“Councils in similar cities around the country are investing or planning to invest in their cities to secure their future and stop the decline.”

There is a huge amount at stake.