Edinburgh trams expected to run at operating loss

image captionTrams are due to return to Edinburgh next year

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.

Financial risk

The council has confirmed it will absorb any losses if the trams do not perform as well as expected.

A spokeswoman for the council said: "The council would carry the financial risk on that."

Lesley Hinds, Edinburgh City Council's transport convener, added: "Although the arrangements are still in draft form, we'll ensure that any dividend drawn from income will go back into Edinburgh's transport system and that there will be no financial impact on the city's bus service.

"We'll ensure that ticketing and timetabling are fully integrated across bus and tram and I'm determined that all modes of transport in Edinburgh are considered as we develop our approach."

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.

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