Brighton’s i360: no justification for public funding

The Brighton Argus reports that plans to build the i360 tourist attraction in Brighton are set to be revived, with Brighton and Hove City Council  providing a loan of £36m towards the cost of the project.  The rationale behind this is that it will bring substantial regeneration benefits to the city.

The history, of course, is one of a consistent charge being put on the public sector to support a piece of private sector speculation.  The developers obtained planning permission in 2006 and in 2012 the Council struck a deal whereby £17m of the funding would come from a Council loan.  Now, in the early days of 2014, it’s reported that the Council will be prepared to back the project to the tune of £36m.

It’s frustrating that so little of the supporting documentation appears to be in the public domain.  But on the evidence of the papers presented to the Council’s Policy and Resources committee in 2012 in support of the smaller loan figure, there is not the slightest shred of evidence supporting the case for substantial regeneration benefits.

The paper argues that the i360 will bring up to 160 FTE jobs to the city – with a further 444 jobs arising from the additional spending in the area. But this number is entirely unsupported and there appears to be no real evidence to suggest that this will do anything to change the City’s culture of endemic low pay and insecurity in hospitatlity-related industries.  It also argues that there will be regeneration of the nearby Preston Street area – and, ominously, increased takings at the Regency Square car park (a suggestion that smacks a little of desperation, to be honest).  There’s no quantification of the benefits, no working or justification.  The working needs to be placed in the public domain.

Moreover, the paper’s approach to costs looks to me to be wildly optimistic and appallingly poorly argued, to the extent that I wonder whether Council officers presented any real challenge at all.  The paper claims that the i360 will attract 800,000 visitors (of which  160,000 will be new visitors to the city), which will drive the forecast revenue.  The detail is set out at paragraph 4.5 in the report, which suggests an operating profit of £6.7m in the first year.  The cost of servicing the debt to the Council of £17.8m will be £2.5m per year, and a table of sensitivities (which isn’t actually a proper sensitivity analysis, because it doesn’t show how changes in assumptions will affect revenues) suggests will be comfortably achieved even if the attendance is as low as 480,000 and the revenue is 40% per visitor less than predicted.

But there is no calculation of optimism bias – a standard multiplier which is added to publicly-funded projects when calculating their value, to allow for the risks of rising costs and overruns.  For a project of this sort the Treasury requires a range of up to 51%, with any reductions in that figure being rigorously justified by explicit risk reduction measures – and remember, these are public funds that are being discussed here and so that level of risk management seems entirely appropriate. The officers’ paper suggests a contingency of  5% (Appendix 1, paragraph 3.9).  It’s obvious that this falls significantly short of best practice – and when we’re talking about the risks falling on Brighton and Hove’s Council Tax payers at a time of unprecedented austerity that’s not good enough.

Moreover, with the private sector having decided the project isn’t worthwhile, the Council is now carrying all the risk on a loan more than twice the size of that previously envisaged.  That suggests that the attendance levels at which the project will be able to make debt repayments will be substantially higher, and moreover the economic situation has continued to deteriorate further since then – especially in terms of the disposable income available to households.  And on top of that, the papers simply assume that the effect other local businesses will be positive, and most of all says nothing about the traffic impacts; it estimates that up to 40% of arrivals will be via local car parks, and there appears to be no estimate at all of the effects on a city which, at the height of the summer, is often paralysed by traffic with tailbacks beyond Patcham on to the A23 at weekends.

And all of this for what is basically a private sector visitor attraction whose benefits simply are not set out in full.  This looks increasingly like a huge effective subsidy for a vanity project from which the private sector has walked away.  It’s hugely risky – and the Council appears to be prepared to expose itself to far greater levels of risk than were deemed as acceptable in 2012.

At the moment, the hottest topic in Brighton politics is the Green administration’s proposed referendum on a Council Tax increase of 4.75%, to fund what would still be a cuts budget.  I know that i360 funding comes from a loan rather than from expenditure financed by the Council Tax, but at a time of unparalleled austerity it seems wholly arrogant and out of touch for the administration seriously to suggest that it should effectively bail out a hugely risky vanity project for the sake of wholly uncertain regeneration gains – and one which is likely to undercut local businesses rather than support them.  I have no difficulty with the Council borrowing to fund regeneration projects that provide jobs and sustainable economic benefits that stay in the city – in my view that’s exactly what it should be doing.  But i360 is looking increasingly like Brighton’s HS2 – a grand projet, far more about vanity and prestige than the much less glamorous but vastly more rewarding type of project that will stimulate the small and medium businesses on which the economic future of the city depends.

It seems to me that the Council simply has not made the case that justifies this level of risk. To commit to this vanity project on the basis of such weak appraisal at a time of austerity would be wholly wrong.

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2 thoughts on “Brighton’s i360: no justification for public funding

  1. Been retrieving historic emails from the aborted Brighton O days and rereading them I feel like the legal judgment to say that they were preparing pilings on the sea floor at the moment when planning consent was expiring was a key blunder on the part of BHCC. This was said to have been the case and to constitute having begun development.

    Three of us worked to prevent the Brighton O going in the gap between the West Pier and Brighton Sailing Club and probed the i360 situation in connection with it.

    Former BHCC West Area Planning Mgr, Ian Coomber, was the agent for the proposed bespoke wheel. A careless contract raised by BHCC let him choose any bit of beach he fancied to use for the planning app . Knowing the i360 consent was due to expire he had the chutzpah to play this poker move with no expectation of development commencing. It was a wild move as it turned out.

    The sea got stirred up, The west Pier Trust got up on its hind legs to defend i360 and saveHOVE with sailing supporters worked ourselves stupid to protect the sailing club.

    The Brighton O was seen off. But the i360 was deemed to have commenced development and Marks Barfield from that moment has enjoyed leverage. I doubt very much that there is any kind of get out clause in place and so planning blight is what we have and Marks Barfield have no intention of taking a hit for all the stuff already manufactured or expenses otherwise already incurred . That is how I see it. There were other questions one of our number pursued but I’ll end the comment here.

    Suffice to say neither BHCC nor The West Pier Trust have anything to be proud of for their abject failure to tie Marks Barfield to a set of dates that allows them to wave this nonsense good-bye. BHCC have used officer resources on this for a good 7-8 yrs now! Time to pull the plug.

    What are Marks Barfield going to do? Sue? Is that the hidden back story? Some kind of consequential problem exists the details of which we are not privy to at this time…..surely.

  2. Pingback: i360: a final appeal to the City Council | Notes from a Broken Society

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