Cash-strapped Moray Council faces the “embarrassment” of having to hand back £168,000 to a property firm after they were too slow to use it.
The authority was given the money by Springfield Properties 15 years ago under the condition that it was used for transport improvements.
However, now the money could be returned, with added interest fees, after council management admitted there was no prospect of it being spent before the looming August deadline.
Last night, the debacle was described as “embarrassing” for the region amid gloomy predictions that the council could run out of cash next year while transport officials stress the work it was intended for is still “necessary”.
Elgin City South councillor John Divers said: “The blame for this lies with the decision to cancel the Western Link Road.
“It was all allocated as part of that and then the transport team has been left with little time to come up with an alternative. It’s pretty embarrassing.
“The public will have a hard time believing we’re in the situation where we have to hand money to Springfield while facing budget cuts ourselves.”
Springfield paid the money to the council in 2003 as part of the conditions for the Glassgreen development in the south of the town.
The money was initially intended to be used for the aborted Western Link Road project – which was cancelled despite millions already being spent drawing up the plans.
The scheme was scrapped in 2016 to save more than £8million from spending plans after budgets proved unsustainable.
After that decision was taken, the money was reallocated to convert Moss Street into a one-way system in an attempt to ease congestion at the Laichmoray roundabout.
However, complications drawing up final designs for the £500,000 project have resulted in timescales proving too short for the cash to be used with the project now facing the possibility of going on an indefinite hold.
Councillors are due to meet today to agree that the money should be returned to Springfield.
In a report, transportation manager Nicola Moss described improvements to Moss Street as “still a valuable part” of the strategies to ease congestion in Elgin.
She said: “Returning a developer obligation has reputational risks as the obligations should be sought for necessary works.
“In this case works are still necessary. However, there are no works that can be delivered within the parameters of the legal agreement.”
Other money reallocated from the Western Link Road project is currently being used to convert the junction at South Street and Hay Street from a roundabout into a crossroads.
Springfield declined to comment.