A council has grossly underestimated the value of one of its prize assets.

Brighton and Hove City Council had valued Shoreham Airport at just over £4 million.

But the district auditor, in a check of the council's accounts, found its real value was more than £21 million.

It means the council undervalued the airport by £17 million and will have to recalculate its end-of-year accounts.

The timing of the independent auditor's wrist slap, which will come before the policy and resources committee next week, is embarrassing for the city council and Worthing Borough Council, which jointly own the airport.

The authorities are due to begin negotiating the terms of the sale of the airport to their preferred contractor, The Erinaceous Group, today.

Erinaceous has announced plans to make it an international hub offering commercial flights to Europe.

It wants to develop a visitor centre, aviation academy, business park, leisure services and mixed commercial activities on the airport's southern perimeter.

The Group hopes to begin operating the airport, recently re-branded Brighton City Airport, from next April on a 150-year lease.

Brighton and Hove finance councillor Simon Burgess said the district auditor's revaluation would not affect negotiations with Erinaceous. It was a technical adjustment which did not reflect the true market value of the airport, he said.

The auditor valued the land and buildings individually while the council's figure was based on the whole airport as a tradeable entity.

Coun Burgess said: "The auditor's rules take no account of services that have to be provided by the owner, such as fire and rescue, air traffic control and the costs of maintaining and running the airport. A proper market valuation would take account of those things. We couldn't sell the airport for £21 million."

A senior council source said the real market value of the airport was less than half the £21 million claimed by the auditor.

Green Party convener Keith Taylor said: "The way that Labour has mismanaged Shoreham Airport reads like a storyline from the Teletubbies. The district auditor's valuation is higher than the council's because the auditor has not been blinkered in considering future uses of the site.

"Just a few weeks ago, Brighton and Hove City Council selected a preferred private partner to develop the airport in return for a mere fraction of the value the district auditor has determined.

"There was an overwhelming public opposition to enlarge the airport. At a local level, people didn't want extra noise and pollution. At a national level, we need to reduce carbon emissions to combat global warming, not increase them by building new runways."

Conservative finance spokes-man Brian Oxley said: "It may well be an accounting technicality and I'm asking for more information to clarify the position."

Nick Cummings, project director of the Erinaceous Group, said: "We remain very enthusiastic to be partners with Brighton and Hove City Council and Worthing Borough Council in regenerating the airport."

Shoreham airport is the oldest commercial airport in the UK, established in 1910. The airport covers about 248 acres between Shoreham and Lancing. There is one hard surface runway of 1km and two grass runways.