WOKING Borough Council is facing a £300million black hole on its flagship Victoria Place development.

According to council figures to be presented today by the ruling Liberal Democrats within the first local budget under the administration, Victoria Square Woking Limited (VSWL), owner of the new Victoria Place shopping centre, residential development and hotel, has associated debts worth nearly twice the current value of its assets.

In the first estimate of the financial shortfall connected with the project that has come to dominate the town centre, assets are valued at up to £445m against associated debts of £745m.

The debt figure owed by VSWL to Woking Borough Council means loans by the council to the arms-length company are not fully backed by financial assets, creating a black hole of at least £300m.

In a complex ownership structure, VSWL is owned 48% by the borough council, giving it only that amount of any positive equity in VSWL.

However, as the effective banker for the company, the council holds 100% of the loan to VSWL on its own balance sheet. In turn, the council owes this money to central government via the Public Works Loan Board – and must pay this back in its entirety.

It is akin to the council taking 48% of the upside as owner and 100% of downside as banker.

Cllr Dale Roberts, portfolio holder for finance and economic development at Woking Borough Council, said:  “Victoria Square suffered from enormous cost overruns, far in excess of its original scope as a regeneration project.

“Many years of gradual mismanagement allowed this debt to balloon, without the value of the underlying projects growing by anything like the same proportion.

“This underlines why we implemented new controls on the business plans of council-owned companies. It also underlines the enormous challenges that we now face ahead of tonight’s local budget meeting. 

“There will not be easy or quick solutions. Responsible decisions to start putting Woking Borough Council on a more sustainable future financial path could take decades, but we are gradually rebuilding a council that puts local residents first again.”