Cash-strapped Liverpool Council is set to fork out an additional £7m on the development of a south Liverpool housing site where costs will balloon to £60m before work on building a single property has even begun.
Remediation work at the contaminated Festival Gardens site in the south of the city is already budgeted to cost a staggering £52 million before a housing developer even moves in to start building homes - but a new report shows costs have spiralled significantly beyond this.
Festival Gardens is a former tip site that was transformed, landscaped and planted up to become the home of the Liverpool International Garden Festival in 1984. The local authority spent £6m buying a section of the site in 2015 from Langtree - insisting at the time that the sale would only go through subject to site surveys and the correct due diligence being done. A year later the authority agreed to fund around £6m of site investigations on the former waste land.
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The overall plan is to create 22-acres of remediated land with access roads and other infrastructure for residential development of up to 1,500 homes, including 20% affordable housing, with an overall completion date of August 2031.
But with costs of cleaning up the site now set to balloon to close to £60m before a housing developer even moves in - one senior city councillor is labelling the situation as "an absolute scandal."
After buying the land for £6m, the council commissioned site investigations to identify potential remediation options for the former tip at a cost of a further £6m. It was established that the most appropriate area to develop was a 22-acre plot at the northern end of the site.
The council commissioned Vinci as its principal remediation contractor to manage the design, delivery and validation of the land's remediation and surface water infrastructure. This work was budgeted at £25.52m and approved via a council report in January 2021. Vinci were later instructed to carry out other work, including preparing an area for a substation.
The council secured £36.8m of grant funding towards site remediation and preparation from Homes England (£9.9m) and Liverpool City Region Combined Authority (£26.9m). With the council spending £6.1m buying the site and £6m investigations - this provided a total budget of £51.4m to fund site acquisition, site investigation, planning permission, site set-up and enabling works, site remediation and strategic infrastructure.
But a new report to the council's audit committer now shows that the council will be forced to fork out a further £7m after further issues were found on site. This includes £5m costs for extra material that needs to be remediated, £1.3m costs in delays to the work and extra fees for consultants, supervisors and inflated fuel prices.
The report states: "These cost increases totalling £6.97M are directly attributable to the terms and conditions, and risk allocation, that the Council accepted under the remediation works contract with Vinci." It adds that the additional costs will require a transfer of funds from other projects in the council's capital programme that are not proceeding.
The eye-watering costs and significant overspend is prompting serious questions and criticisms about how the council acted when it first bought the land back in 2015. Former Mayor Joe Anderson previously said he and the council "knew full well what they were buying" and said the due diligence was done in carrying out the surveys.
But Lib Dem leader Cllr Richard Kemp said two exempt reports submitted to cabinet about these decisions should now be made public. He said: "The Festival Gardens overspend is an absolute scandal that needs to be carefully looked at to ensure that such half-baked projects cannot proceed again.
"Initial costs here were grossly underestimated and eventual land sale costs were grossly over-presented. The result is a huge cost to council taxpayers. I have no doubt that had the council had a half decent estimate of these there would have been no decision to buy this land or if a land purchase had gone ahead, it would be at a nominal price to allow the land to be used for open space purposes.
"The people of the Festival Gardens area have been tormented by heavy traffic for five years, remediation will not complete for another year. Then there will be years of heavy building costs as the site is developed including heavy piling equipment. Two exempt reports were submitted to Cabinet during this debacle, and I want those to be made public so that we can all see who knew what and when they knew it".
In its own report, the council says there are a number of "important lessons to be learnt" from the Festival Gardens project. It states: "If a decision is made to acquire a former domestic landfill with the objective of comprehensive regeneration, it should be acknowledged that this is a high risk commitment with uncertainty around viability and deliverability."
The report adds: "There could be merit in the council obtaining a greater understanding of market forces when assessing contract risk such as increases to taxes and duties, given that fuel duty has doubled over the course of the works contract."
As well as the ballooning costs, the council could also face a legal challenge from developer Ion. The company previously had an exclusivity agreement with the council for building homes on the site and the two parties worked up a draft masterplan, but this was not completed and the deal expired.
In September this year, the council announced it would instead launch a full procurement process to find a development partner for the land at Festival Gardens after a year-long review. The local authority said the move is being made to ensure the project aligns with the council’s recently adopted Local Plan, Council Plan and the Mayoral triple lock policy, which stipulated a new approach to development focusing on sustainability, inclusivity and social value. The new approach will push the project back by a year.
The change of approach did not go down well with Ion who hinted at potential legal action against Liverpool Council.
In September a spokesperson for Ion said: "We are obviously very disappointed by this approach, particularly given that the council has confirmed on numerous occasions that our performance on the project is not in question and the fact that we have worked seamlessly with the council's regeneration team to progress the project since our involvement commenced some four and a half years ago."
They added that they expected to enter formal discussions with the council to "establish how our contribution to date will be recognised and to agree a way that our considerable knowledge can be used to assist with the successful delivery of this important site. Hopefully such an approach will resolve the matter without recourse to litigation."
Explaining the council's decision, Cllr Sarah Doyle, Liverpool City Council’s cabinet member for development and economy, said: "Given its strategic importance to our housing programme, it is only right and proper that a major review of our approach was undertaken to ensure it aligns with all the new policies we’ve adopted since our new mayor was elected."
And speaking about the additional costs, the cabinet member added: “The transformation of this site has been a mammoth undertaking and we have worked very closely with contractors to ensure the surrounding communities have been kept up-to-date every step of the way.
“It’s not a surprise given the sheer scale of the site that the excavation has surpassed what was originally estimated and costed. But whatever the additional costs will be, they will be dwarfed by the long-term economic impact for the city and the millions in revenue that will be generated by the council tax income which we can invest in our front line services.”
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