The Buchanan Quarter project, which includes upgrades to the city's Royal Concert Hall as well as an expansion of the existing Buchanan Galleries shopping centre and a link to Queen Street station, involves £80 million of public funding through a tax incremental financing (TIF) scheme. Glasgow City Council said that the scheme would unlock a potential £310m in private investment and create almost 1,500 jobs.
Cabinet Secretary Alex Neil said that the development would "breathe new life" into the city centre. US retailer Forever 21 plans to open its first Scottish store in the new space, with stationery company Paperchase and the clothing chain Gap also announced as tenants.
"Against a backdrop of limited public finances to assist regeneration, we want to encourage innovative funding models, such as TIF, to help lever in additional private sector investment," Neil said. "Across Scotland, it is estimated the pilot phase of TIF could lever in an additional £2.5 billion of private sector investment."
TIF allows local authorities to fund regeneration projects by borrowing money against the predicted increase in locally-collected business taxes from the new development.
Barry White, chief executive of the Scottish Futures Trust (SFT), said that for every £1 of public sector money spent under TIF a further £5 could potentially be invested by the private sector. "Scotland continues to lead the way in the use of TIF," he said. The SFT is an independent company which was set up by the Scottish Government to deliver value for money from public sector infrastructure investment projects.
Following further work with the SFT, a final agreement letter will be issued by the Scottish Government once Glasgow City Council accepts various conditions. The council must "put in place an action plan to maximise benefits for other areas in the city not directly included" in the project, the Scottish Government said.
Falkirk Council, Fife Council and Argyll and Bute received provisional approval for schemes funded through TIF arrangements in November, and the Scottish Government has also approved schemes at Leith Waterfront, Edinburgh and the Ravenscraig phase two scheme in North Lanarkshire.
Similar schemes have been proposed in England and Wales. The Local Government Finance Bill, which is currently before Parliament, sets out a framework which will enable local authorities to introduce TIF, as well as retain a proportion of locally-earned business rates to fund local projects. The changes are due to be implemented from April 2013.