COUNCIL chiefs are facing a £1 million bill to buy out land under the Festival Theatre – despite having paid up to £45,000 annual rent on it for the past 20 years.
Officials have recommended purchasing the plot from the land owners, having paid rent since 1992.
Two retail stores had to be demolished to make way for the venue – built on to the old Empire Theatre site on Nicholson Street in 1994 – but the owners were not willing to sell.
Instead, at the time, council chiefs struck a little-known deal to sign 25-year leases on the demolished premises and then purchase the site in 2017.
Officials have urged councillors on the finance committee to approve the purchase of the land from the owners, listed as Iftakhar Ali and Mumtaz Ali in council papers, at a cost of £650,000 plus legal expenses.
The move will involve taking out a bank loan which with interest will cost nearly £1.07m.The council faces a similar bill when the owners of the demolished Mackenzie’s Sports, which has also been given an annual payment, decide to sell their plot of land.
Critics have rounded on the administration over the decision to borrow more cash.
Councillor Joanna Mowat, the Conservative finance spokeswoman, said the recent £22m awarded by the Scottish Government or £6m found in reserves – which have both been allocated to new projects – should have been utilised to avoid more bank loans.
She said: “It seems ludicrous that despite the amount of extra cash that was swilling around, the administration are having to borrow to meet this cost.
“We should have stuck it in reserves to meet the costs of the statutory notice and tram scandals or go and sort out these bad historical deals. This was a mess from 20 years ago but to make it worse [council leader] Jenny Dawe had to do an Evita and throw all the money off the back of a train.”
Ricky Henderson, Labour finance spokesman, added: “It is a concern that this is another chunk added to the council’s £1.5 billion debt.”
Insiders involved with the deal at the time said the then-district council and city council were under pressure to finalise the deal with Mecca Bingo, which owned the former Empire Theatre and suggested it was rushed. There is no suggestion that Iftakhar Ali and Mumtaz Ali, who had to move their business when the premises were demolished, are in any way at fault.
Deputy council leader Steve Cardownie, who has been a councillor since 1988, said the authority got a good deal at the time, with the Empire Theatre a far cheaper option than building a new opera house.
He added: “It is unfortunate that we have a bill for £650,000 but if I remember correctly there was a very narrow window of opportunity to buy the Empire Theatre and that it was the best option.”
Councillor Phil Wheeler, finance convener, said money would be saved in the long run.
He added: “The council will realise approximately £3600 in savings per annum until the end of the lease.”