Tram PFI too expensive, says county council

Nottinghamshire County Council has pulled out of a partnership for a multimillion-pound tram scheme leaving its neighbouring city council with an estimated £18m in extra costs.

The authority, along with Nottingham City Council, signed a PFI contract in 2000 for the construction and maintenance of a new tram system in the area. The councils have since decided to extend the Nottingham Express Transit (NET) scheme, by terminating the existing contract and re-tendering it with additional works included.

However, when the Conservative Party took over Nottinghamshire Council in June, one of its key pledges was to withdraw from the second phase of the NET project. The council formally announced its decision in a report released last week.

"The proposals for each route have an unacceptably high level of environmental impact on many local residents," it said. "In addition to noise and visual intrusion, there is loss of valuable open space and significant impact on Green Belt land."

Communities in the affected area are already well served by public transport, it says.

The report also argues that the project was too expensive and the possibility of cost increases was a major concern. It predicts that it could save £18.5m by pulling out of the scheme – a cost that will be picked up by the City Council.

Pat Armstrong, director of NET at Nottingham City Council, said the council was "disappointed" by the news, but would continue with its NET phase two plans. "We believe working together in partnership has been very productive and very successful. We would still like the county involved."

The city council will still get its PFI allocation from government (£530m), which means that the added costs will not stop the project going ahead, said Armstrong.

Once the new contract is signed, Nottinghamshire Council will be free of its obligations under NET phase one.

But before this happens, "there are negotiations to have between the two council [and]…legal agreements [to sort out]", said Armstrong. It will take several months to untangle the third party contracts and to fully relieve the council of its commitments, he said.

Meanwhile, an advert for NET phase two was released last week. Bidders will be invited to submit proposals in November, with three consortia invited to progress early December. Existing PFI contractor Arrow Light Rail is expected to bid.