'Weaknesses' in £9m loan to water park developer

Scarborough Council was owed £7.9m by the developer of Alpamare when the firm went into administration

A council decision to loan £9m to the developer of a new waterpark was made in the interests of residents but had "key weaknesses," according to a report.

Scarborough Borough Council, which was abolished in 2023, agreed the loan to Benchmark Leisure Ltd in 2013 for the construction of the Alpamare waterpark.

The developer went into administration in 2023 while the firm still owed £7.9m of public money to the local authority.

The report, ordered by North Yorkshire Council, found the decision to approve the loan was "undoubtedly risky" and based on incomplete information, including optimistic views of how much income the venue could bring in.

The review of the loan, undertaken by the council's internal auditors Veritau, focussed on the strength of decision-making and tried to establish why the risks were not properly identified or reduced.

According to the report, Scarborough Borough Council had identified the need to provide a "principal visitor attraction" to support the town's tourism economy and, in 2013, agreed to grant the loan to Benchmark Leisure Ltd to build the waterpark.

It said annual rental payments of £440,000 from Benchmark would then service the loan.

'Over ambitious'

The loan was approved by a single vote and the report criticises how information was shared with councillors.

It said there was a "lack of clarity" over whether the agreement was for a commercial loan or an investment.

It also found the commercial viability of the park was not adequately addressed and potential income levels from visitors and residents had proved to be "over ambitious".

It added that officers had "failed to provide a recommendation to full council based on their professional knowledge and assessment of the risks," which was a particular "omission given the complexity" of the agreement.

North Yorkshire Council's leader Carl Les, said the decision to grant the loan was "undoubtedly risky".

"While the report concludes that councillors understood that there were risks with the proposed agreement, it's also clear that these should have been set out more clearly."

He said it was not possible to know if councillors would have reached a different decision if they had been "better informed".

The building included a wave pool and a number of slides, a splash and play area, and outside pools

Due to a number of delays the waterpark opened later than expected, in July 2016.

Benchmark Leisure Ltd arranged for a separate company, Alpamare UK Ltd, to operate the venue.

Financial difficulties saw Alpamare seek an agreement with its creditors in January 2019 and Benchmark Leisure Ltd stopped making payments to the council in April of that year.

Scarborough Borough Council then began legal action to recover the £7.9m of outstanding debts.

Benchmark Leisure Ltd announced the temporary closure of the waterpark on 12 October 2023 and entered administration on 20 October 2023.

The debt was then inherited by North Yorkshire Council in 2023, when eight councils combined under local government restructuring.

Independent North Yorkshire councillor Janet Jefferson, who voted against the loan when she was a member of the now-defunct Scarborough Borough Council, said she said she had wanted more information and had questioned if the council would get the money back.

She said she found the financial problems "very frustrating" because a number of projects in the area could have used those funds.

"As it works out Alpamare is up and running, but you can't get over the loss of those millions of pounds, which was public money, the residents have paid for it."

She said a decision had to be made at the time but with hindsight more thought should have been given.

Les said understanding what went wrong with the decision to grant the loan was important to ensure future regeneration schemes were based on "sound information and expert recommendations".

"It's also important to make the point that the Alpamare Water Park is today very much part of Scarborough's visitor offer as well as being enjoyed by very many local residents," he added.

Flamingo Land - which took on the running of Alpamare in 2024 - has no links to the borough council's decisions.

Listen to highlights from North Yorkshire on BBC Sounds, catch up with the latest episode of Look North.