Agenda item

Octagon Theatre Finance Report

Meeting of District Executive, Thursday 17th February 2022 9.30 am (Item 146.)

Decision:

RESOLVED:	That District Executive recommends that Full Council approves:-
	a.	an increase in the capital budget of £6m, to be funded by prudential borrowing, to bring the total budget for the project to £29.01m;
	b.	an increase in the revenue budget of circa £0.680m per annum for the financing costs (MRP £0.289m, Interest £0.392m) arising from the increased borrowing needs. An initial assessment is that the financing costs may be covered from Year 6 by ticket levies and operating income, however further analysis is needed to be carried out as interest rates are expected to rise at Final Business Case stage;
	c.	the project team to incur expenditure of £1.2m from the capital budget to progress to the next gateway decision stage (the Final Business Case incorporating RIBA stage 3 designs and costings).
Reason:	To provide an overview of the current budget position and the revised costs of delivering the Octagon redevelopment project arising from the recent RIBA stage 2 design and costings and to seek approval for an increase to the current capital budget of £6m to reflect the revised costs of the redevelopment.

Minutes:

The Portfolio Holder for Health and Well-Being introduced the report which advised of the revised costs to deliver the Octagon redevelopment project arising from the recent RIBA stage 2 design and costings project. He said officers had reviewed the project because of increased build costs and now asked for an uplift in finance to meet the expected total project costs. He reminded Members the upgrade was well overdue and there was a need to carry out significant changes at the Octagon Theatre. He noted the £10m Central Government grant and support from the Arts Council which would make it a significant venue in the area and bring income to the local community. He concluded that most of the questions raised by the Scrutiny Committee were answered at the meeting.

The Regeneration Programme Manager said that officers had worked hard with the architects to find efficiencies in the scheme by reducing the circulation space and reconfiguring some of the backstage area to reduce costs whilst still delivering the outcomes required.

During discussion the following points were made:-

· The report should detail at beginning that costs had increased due to COVID and increased construction materials.

· The local MP and Government Minister substantially backed the project and it was important for the town and district.

· Although the cost of the project had increased it still made sense to invest in it.

· There was substantial provision for risk in the project and it was hoped that it would not be required.

· There was an additional risk reserve proposed in the capital programme which was pooled among other projects.

In response to questions from Members, the Director for Place and Recovery advised:-

· A substantial programme was under way to identify how to bring services together under the Unitary Authority and bringing projects forward in the future was in their plan.

· The costs were as reliable as they could be and reflected the current construction costs and allowed for inflationary increases during the life of the project.

· An end stage review had been agreed for projects in the future.

· Reports would continue to be presented to the District Executive and Council at each stage of the project to ensure Members remained committed to moving ahead.

The Chairman of the Scrutiny Committee advised that whilst they raised some issues, there were expressions of support and acknowledgement that it was important to have a cultural asset of this quality as it was some distance to similar sized venues. He said that it had been helpful to have the Portfolio Holder and officer at their meeting to answer their questions. He said their concern was the additional £6m and that due diligence needed to be strong on the project.

At the conclusion of the debate, the Portfolio Holder thanked the team of officers working on the project and he proposed the recommendations be agreed. Members were content to propose the recommendations to Council for confirmation.

RESOLVED:	That District Executive recommends that Full Council approves:-
	a.	an increase in the capital budget of £6m, to be funded by prudential borrowing, to bring the total budget for the project to £29.01m;
	b.	an increase in the revenue budget of circa £0.680m per annum for the financing costs (MRP £0.289m, Interest £0.392m) arising from the increased borrowing needs. An initial assessment is that the financing costs may be covered from Year 6 by ticket levies and operating income, however further analysis is needed to be carried out as interest rates are expected to rise at Final Business Case stage;
	c.	the project team to incur expenditure of £1.2m from the capital budget to progress to the next gateway decision stage (the Final Business Case incorporating RIBA stage 3 designs and costings).
Reason:	To provide an overview of the current budget position and the revised costs of delivering the Octagon redevelopment project arising from the recent RIBA stage 2 design and costings and to seek approval for an increase to the current capital budget of £6m to reflect the revised costs of the redevelopment.

Supporting documents:

Agenda item

Octagon Theatre Finance Report

Council and Democracy