Edinburgh councillors have rejected a funding plan that would let the first phase of the troubled tram project extend from the airport right into the heart of the city.
In a vote on Thursday 25 August they refused to borrow the additional £231 million that would be needed, meaning the line will now terminate at Haymarket instead of running to St Andrew Square, close to the main Waverley railway station, as previously agreed.
The earlier decision was made subject to agreement of funding and the approval to borrow to meet the costs. Now Labour and Conservative Councillors have rejected the funding package put together by senior council staff, in a motion saying the St Andrews Square option "has not been sufficiently de-risked". Liberal Democrats and the Green group wanted to go ahead, while the Scottish Nationalists abstained.
The Council Chief Executive is now authorised to negotiate a new settlement agreement with the infrastructure consortium in consultation with political group leaders. Any new agreement would see the first phase of the project delivered from the airport to Haymarket as phase one of a longer-term strategic plan.
Following the meeting, Cllr Jenny Dawe, Leader of the City of Edinburgh Council and a Liberal Democrat, said "It's heartbreaking that the decision to progress to St Andrew Square has fallen threatening this city's future financial vibrancy.
"I am really angry that Labour and Tory Councillors have rejected the professional advice of our Chief Executive and officers and some of the most highly regarded legal, technical, financial and engineering experts in the country.
"This was the option that was supported by the business community within the city and would have seen a profit realised. An initial line to Haymarket makes no financial sense. It will run at a permanent annual £4million loss."
Sue Bruce, chief executive of the City of Edinburgh Council: said: "There has been a significant amount of time and effort committed to the post mediation work. The recommendations reflected the considered professional advice of officers and advisors. The Council has made its decision and every effort will now be made to implement it."
The accepted amendment also noted concern about the impact on local businesses and specific issues of rates relief, general business support and potential compensation for loss of earnings as a result of tram works. Council officials will prepare a separate report to councillors on these issues.