City landed with £5m bill to fill gap in TIE pensions

Tram works continue on Princes Street as the city counts the cost of TIE
Tram works continue on Princes Street as the city counts the cost of TIE
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A NEW £5 million bill has emerged from the process of winding up beleaguered tram firm TIE – and it will have to be met directly by the taxpayer.

The city council will have to pay off a massive deficit in the pension scheme of the “arms-length” company it set up to run the tram project.

TIE staff past and present have accrued a bumper pension pot of £12.2 million – but there is only £7.6m left in the fund.

The council will have to pay £4.6m over the next five years to fill the gap in funding because of the decision to formally wind up the company, which will cease to exist next Monday.

The massive bill comes on top of £2.1m of redundancy costs already paid out to TIE staff, as well as the £2.8m-a-year charge of bringing in consultants Turner & Townsend to take over “project management” duties from TIE.

Councillor Lesley Hinds, transport spokeswoman for the Labour group on the council, said: “I am concerned that every day there is a new figure.

“I will be asking what the ongoing revenue cost of TIE will be, because we also have the £700,000-a-quarter impact of Turner & Townsend.

“When I first suggested that we do not have TIE any more because it has lost the confidence of the public, [transport leader] Gordon Mackenzie said it would be far too expensive to do that, then months later it was announced that it would be disbanded. What other costs are there going to be? Is the office where they are based on a long-term lease, for example, and what will that cost? You just wonder where these costs will stop.

“What councillors need to get is a proper indication of what these costs are likely to be in future.”

The cost to the council of plugging the TIE pension deficit will be paid to the Lothian Pension Fund, which administers the TIE scheme, over each of the next five years – meaning a re-occuring cost of nearly £930,000 a year over that period.

The boards of Transport Edinburgh Limited and TIE have already been reduced to “statutory minimum” levels – meaning they will continue to operate but only as largely dormant companies.

A council spokesman said: “The costs associated with winding down TIE, including all costs associated with redundancy payments made to TIE staff and, in a few cases, early access to pension, have been reported in full to councillors.

“The deficit in the pension fund for TIE Ltd is an issue that has existed independently from the costs directly associated with the change from TIE Ltd to the new Project Manager, Turner and Townsend, and is therefore a liability that would have fallen to the council regardless of the decision to close the company down.”

TIE moved into the CityPoint office at Haymarket Terrace in 2006, when it signed a ten-year lease. But it is understood that the company has an agreement in place to break from the lease in the fifth year – with the break clause coming into effect early next year.