The council’s annual accounts since 2015 have been held up as the authority is locked in a legal battle with a group of residents over how it classifies income and expenditure from four of Whitby’s harbour car parks.
On Friday next week, Scarborough Council will hold an Extraordinary Council Meeting where councillors will be asked to direct the authority to take legal proceedings to define what would be classed as harbour land and the income derived from it.
A report prepared for councillors ahead of the meetings warns that the potential outcome could see up to £4.36 million have to be directed back into the harbour.
The move follows a ruling from the authority’s auditors Mazars, which after five years has concluded that only a court can make a final determination on the issue.
The challenge has come from the Fight4Whitby pressure group which launched legal action in 2016 citing the 1905 Whitby Urban District Council Act, which stated that income from Whitby harbour must be ring-fenced for use within the harbour.
The group maintains that more income has been taken out of the harbour by the council than has been spent on it and hopes that the courts could direct the authority to reallocate funds exclusively for use in the area.
A report prepared for councillors ahead of the meeting warns that the outcome of the legal process could be uncertain.
It states that the land in dispute relates to the Endeavour Wharf, Marina Front, Marina Back and Marina Reserve car parks and whether the income from the land would be classed as being from “harbour undertakings”. The council claims it should not be classed this way, the objector disagrees.
The report adds: “It is possible that the court may determine that some of the revenues derived from car parking facilities relate to and/or are connected with property which is held by the council in its capacity as statutory harbour undertaker.”
The net income for the car parks over the period in dispute, the council claims, is £2.9 million.
The report adds: “Clearly this is one of many possible outcomes and the council will robustly defend its treatment of the income that has been received in line with its legal advice.
“Members should note however that the position is uncertain and the court’s decision could be very unfavourable to the council.
“Conversely the court may determine that the council has acted reasonably and determine that the current treatment is lawful and appropriate. Over the illustrative six year period, the maximum income that the court could determine has not been allocated correctly would be £4.36 million with the minimum being nil.”
However, the report goes on to say that if the courts decide to go back further than the six years in dispute the risk to the council could be “significantly higher”. Money could have to be diverted from other projects to make-up any shortfall.
The way the accounts were compiled did not change in 2015 but it was the first year the objection was received which is why, so far, only the period since then is in dispute.
The objectors believe that the potential figure could be upwards of £7 million that the council would have to ring-fence for the harbour.
John Freeman, from the Fight4Whitby group, said: “After five long years the public can at last be told about the outcome of our campaign to secure all the funds that we believe should have been ring-fenced for the repair and improvement of Whitby Harbour - over at least the last decade if not longer.”
Mr Freeman, who said the group had raised £35,000 to fund the legal fight, wanted to see any money deemed by the courts as harbour income put aside and a harbour board set up to oversee the facility and to spend the money.
On Friday next week, the council will be asked to approve the authority going to court to resolve the matter.
Council leader Coun Steve Siddons said that a decision needed to be made.
He said: “It is a long-standing issue that goes back many, many years and I think it needs to be resolved once and for all and if the courts are the best route for it then so be it.”
The initial cost of the legal action for the council is estimated at between £50,000 and £100,000.