A £15 million loan for a Hilton hotel at the new Fletton Quays development site is vital to safeguard the city’s finances, it was claimed.
During a heated debate between city councillors, the ruling Conservative administration said profit from the loan will help protect services in the face of stringent cuts to its budget from the Government.
However, the Tories were accused of having the wrong priorities and were urged to instead spend the money on building homes.
Opening up the debate during Wednesday’s Full Council meeting, cabinet member for resources Cllr David Seaton said the authority would make a “significant return from the loan” which would “support the council’s budget and protect services.”
He added: “There are risks yes, but we are mitigating these. I would emphasise Hilton Hotels introduced this developer to us.
“These people are seriously property developers. Any failure would be as bad for their reputation as ours.”
The two-year loan will fund the hotel’s construction on the South Bank.
The council has said it will borrow the money at a “very competitive rate” before then lending it to Norlin Hotels Holdings Limited which would pay a higher rate of interest to the council at the end of the two-year period.
The loan will be secured against the land and the building and the amount loaned would never exceed the value of the site.
But Cllr Matthew Mahabadi, Labour and Co-operative member, said: “There’s a degree of obfuscation of risk.”
He questioned where the potential impact of Brexit - such as the cost of labour or cost of materials rising - had been factored in.
He added: “There’s a degree of overconfidence in the administration - I find it quite embarrassing. You find money for projects such as this to play Monopoly on Fletton Quays.
“I think this calls into question the priorities of this council. We should be looking at making vulnerable people’s lives better.
“I think this is a bad investment. I’m not against private investment, but finding £15 million for this sort of thing is questionable to say the least.”
Labour group leader Cllr Ed Murphy said the deal was too good to be true and would put the council’s finances in jeopardy.
He added: “We should be investing in homes. We have 300 homeless families.”
Cllr Angus Ellis, who is also a Labour member, said: “Why can’t this hotel chain pay for itself if it’s so good? Let’s not be a lending company, let’s borrow money for what the people of Peterborough want.”
But there was an equally passionate response from the Conservatives.
Former council leader Cllr Marco Cereste, alluding to the budget deficit the authority faces from April 2018, said: “I’m so confused about what I’m hearing from the opposition. We are looking at a deficit of around £20 million next year.
“I do not think we’ve heard of Santa Claus waiting in the wings to bring us £20-25 million to look after our citizens.
“Unless all of us get our fingers out we are going to have to start making cuts which nobody in this room will tolerate.
“When will you all grow up? We will make half a million pound profit.
“We are going to have to become a commercial business and do business with private companies otherwise we will not survive as a city we recognise.”
Current council leader Cllr John Holdich said: “This hotel is a high quality hotel and will make jobs. I would not put this forward to you if I thought it was a big risk.
“We employ top lawyers to look at the due diligence of it. It’s as safe as we can get.”
Cllr Julia Davidson, a Liberal Democrat member, said: “Why not invest in the services the people of Peterborough want? We need to address the real issues in Peterborough.”
But Cllr John Whitby of UKIP said: “There are differences between doing investment to spend and borrowing money to bring in money to enable us to spend. I’ve been saying we need to become more like a business.”