COUNCIL tax payers could end-up footing a £500,000 bill for a legal dispute between Durham County Council and Darlington Borough Council.

The two councils are at logger-heads over assets and liabilities that were reorganised when Darlington split from the county council to become a unitary authority in 1997.

The borough council claims that £2m from a £12m fund belongs to it and that it has not received £10m of shares in Teesside Airport, Newcastle Airport and Premier Waste Management, to which it says it is entitled.

The authorities have been unable to come to an agreement and have had to start a costly arbitration case.

This could cost up to £500,000, for which one or both of the councils will have to pay. The money will have to come from council taxes, as there is no insurance policy to cover such cases.

Darlington Borough Coun-cil's director of corporate services, Paul Wildsmith, said that the £12m fund has come from revenue balances from government and council tax.

However, since the dispute began he says that the fund has not been frozen and the county council has continued to use it.

Council officers have already spent a lot of time trying to sort out the dispute and have had to seek specialist legal advice, but now it has had to go to arbitration the councils will have to present their cases to a leading counsel.

Mr Wildsmith said: "It could cost up to half a million pounds and it is going to be council tax payers footing the bill, in Darlington or Durham or both, depending on the ruling.

A spokesman for Durham County Council said that during the reorganisation in 1997, around one-sixth of its services were transferred to Darlington. This included a range of rights, liabilities and responsibilities, as well as millions of pounds worth of assets.

He added: "Virtually 99 per cent of the transfer went smoothly, or has since been settled through discussion and negotiation. It is not surprising, given the breadth and scale of things, that there should remain some sticking points.

"Durham County Council believes these involve issues which it considers are worth contesting in the long term interests of the people it serves and represents."

The arbitration procedures have started and are expected to be completed in the summer.