A row has erupted between Melton Borough Council and Leicestershire County Council after the latter refused on legal advice to accept a £15m government grant.
The money from the Housing Infrastructure Fund would have been used towards Melton’s southern relief road.
But Leicestershire said Homes England (HE), which administers the fund, had drawn up a contact that left too much risk with the county council.
A Leicestershire cabinet report said the £15m contribution would leave the county to “forward fund at risk £55m in advance of developer contributions being received”.
It said county council lawyers had been in talks with HE’s external lawyers and officers about a grant determination agreement, which would be a precondition of Leicestershire drawing down the money.
The agreement had though “been drafted to favour heavily the interests of HE”.
Most of the contractual risks would be borne by Leicestershire and attempts to amend this “were met with significant resistance by HE’s external lawyers".
The report gave as an example that although Leicestershire had no statutory function for housing, it would have been required to ensure housing outputs were met.
It said there was “a reasonable chance that the £55m would be fully recoverable from developers…over a period of up to 20 years…however, there are significant risks associated with forward funding infrastructure and recovering costs at a later date as development comes forward”.
These included that decisions on s106 funding would fall to Melton, which might decide to devote this money to other purposes.
Talks with Melton showed it was thinking of a liability cap of £1m, which Leicestershire’s director of corporate resources thought “did not adequately take into account the comfort the county council needed given the risk that s106 funding would not be forthcoming, leaving the county council significantly exposed”.
Leicestershire’s stance has though infuriated Melton, which faces losing the relief road.
The district has taken the unusual step of setting up a website petition calling on the county to accept the money on HE’s terms. Melton’s page on change.org has attracted more than 900 signatures.
Leader Joe Orson said: “As the highways authority [Leicestershire] have a responsibility to deliver the roads that Melton needs.
“When they submitted this funding bid, they raised everyone’s expectations and now, after having secured the money, incredibly, they are choosing to hand it back.”
He said the Leicestershire report was “so disingenuous this must be some kind of joke.
"Are they seriously looking to blame us for something they are responsible for? They have a budget of £500m, ours budget is £5m. They are the highways authority, we are not. How can we have failed to reach an agreement when they’ve not asked us to do anything for over three months?”
County leader Nick Rushton said: “Put simply, there is too great a financial risk to the county council if the £15m HIF grant were to be accepted.
“On top of the £55m, another significant contribution is required for the northern and eastern legs, plus a further £22m for schools. It’s clear that the county council’s budget is becoming increasingly stretched.”
Homes England has been contacted for comment.