Agenda item

Octagon Theatre Finance Report

Meeting of Annual Budget meeting, South Somerset District Council, Monday 28th February 2022 6.30 pm (Item 122.)

Decision:

RESOLVED:	That Full Council agreed to:-
	a.	an increase in the capital budget of £6m, to be funded by prudential borrowing, to bring the total budget for the Octagon redevelopment 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 Council with 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.

(Voting: 34 in favour, 1 against, 5 abstentions)

Minutes:

The Portfolio Holder for Health and Well-Being advised that at the end of design stage 2 it had been identified that the build costs would be significantly more than anticipated and so the design was revisited to keep the design features whilst reducing costs. He invited the Arts and Entertainment Venues Manager to show a short video of how the building would look when completed.

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

· The Council did currently subsidise the Octagon Theatre but with the new business plan it was hoped this would diminish over time when the theatre re-opened.

· A long process of value engineering had been undertaken by the Property and Development Project Manager to contain the construction costs. Inflationary increases had also been anticipated for the life of the project which was a contingency.

· The length of the loan period would be provided to Members.

· The ticket levy for Westlands was separate to the ticket levy for the Octagon theatre. The levy would be £1.50 per ticket for the first five years rising by 50p every five years and would apply to both venues.

· Costs to fit out the kitchens and bars was now included in the costs but the majority of the additional costs were the inflationary increases.

· All funding sources were being explored from trusts, foundations, local fundraising and individual giving. Any successful bids would be reported.

· There was no opportunity to increase the Department for Culture, Media and Sport funding of £10m.

· South Somerset had been designated as a Priority Place for funding by the Arts Council and they had been encouraged to apply for national portfolio funding to support ongoing revenue costs and arts engagement.

During discussion it was suggested that a patronage scheme could be set up to provide additional funding to the project.

At the conclusion of the debate, the Portfolio Holder reminded Council that no renovation works had taken place since the 1980s and the seating capacity needed to be increased to increase income to a position to self-fund itself.

The recommendations were proposed and seconded and were confirmed by 34 in votes favour, 1 against and 5 abstentions.

RESOLVED:	That Full Council agreed to:-
	a.	an increase in the capital budget of £6m, to be funded by prudential borrowing, to bring the total budget for the Octagon redevelopment 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 Council with 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.

(Voting: 34 in favour, 1 against, 5 abstentions)

Supporting documents:

Agenda item

Octagon Theatre Finance Report

Council and Democracy