Argyll and Bute Council has decided not to part-fund a yacht berthing facility in Oban Bay.

The decision was made following the conclusion of a second report into the proposed facility by AECOM, the independent consultancy appointed to assess the viability of the proposal.

The council will now investigate how the £900,000 allocated to Oban Bay and Harbour development should now be spent.

The proposal was part of Argyll and Bute’s £30million CHORD programme which aims to assist regeneration and economic development in five towns – Campbeltown, Helensburgh, Oban, Rothesay and Dunoon.

The idea of a yacht facility was originally put forward by Oban Bay Marine (OBM), which had requested that CHORD funding be used to provide £900,000 towards the total cost.

Last September the council commissioned AECOM, a consultancy with significant experience of marina development, to assess the viability of such a facility in Oban Bay.

AECOM’s initial report, published in December 2009, recognised that the proposal had merit. However, it also highlighted that the proposal promoted by OBM contained a range of challenges and uncertainties from the technical, operational and financial perspectives.

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OBM asked that it be given the opportunity to revise its proposal in the light of AECOM’s findings, to which the Council agreed. The revised plans were submitted in March, since when they have been being assessed by AECOM.

Whilst the Boards recognised OBM had made progress in terms of operational and technical aspects of the proposal, outstanding concerns over capital and revenue funding are such that grant support for the project cannot be supported.

One of the key areas of concern relates to the project’s capital cost. With the £900,000 of CHORD funding and a loan of £800,000 from the Crown Estate, the Council estimates that a funding gap exists of £898,000. In addition, the AECOM study identified that the income generated by the facility would not allow the venture to break even.

AECOM liaised closely with key stakeholders over the last few months in taking forward this assessment, including OBM. However, the size of the funding gap means that the project is not viable even when tested against a range of financial scenarios.

Council Leader and Chair of the CHORD Programme Management Board, Councillor Dick Walsh, said: “Our appointment of AECOM back in September was based on their expertise and ability to deliver a comprehensive and fully independent assessment of Oban Bay Marine’s plan.

“Their report into the revised proposal makes it clear that, in their professional opinion, the capital funding gap and annual projected revenue losses are such that this project is not financially viable.

“It is our responsibility to ensure that any decision taken regarding allocating public money will not involve any ongoing revenue burdens or expose the authority to future financial risk or uncertainty.

“Our decision has been based on a realistic assessment by AECOM of the commercial and financial aspects of the project both in the short and longer term. In this period of public sector austerity, we must base the decision on sound business principles.

“The Programme Management Board has therefore agreed, regrettably, that we cannot support Oban Bay Marine’s revised proposal.”

Councillor Walsh said that the Programme Board will now ask officers to investigate how the £900,000 previously earmarked for the scheme might be spent in the Oban Bay area.

(GK)