Councillor Phil Davies introduced a report by the Assistant Director – Community Services that informed that the Council provided extensive leisure, recreation, cultural, open space and library services. The cost to the Council of delivering these services was £17 million, when income from external funding was taken into account. The Council faced significant budget savings due to the removal of the revenue support grant and needed to review how services could be delivered effectively whilst reducing costs, especially for discretionary services.

The Cabinet noted that over the past year the Council had undertaken a detailed review of Leisure and Cultural Services to try and find ways of transforming these services to make them more sustainable, flexible and appropriate. The Council did not wish to be in a situation where it needed to consider closing or reducing services in order to balance its budget. The Council’s preference was for a model which allowed for discretionary services to generate their own funds so they could grow. There was no legal requirement for the Council to provide a theatre service either directly or indirectly.

It was reported that the Floral Pavilion currently cost the Council £899,300 per year to keep open. As a mid-scale (800 seat) receiving theatre, the Floral Pavilion was limited as to the performances it may attract, the percentage of ticket sales it may retain and the income it may generate. Whilst the Council could and would continue to develop new commercial opportunities within the facility – extended bar opening and maximising secondary spend, reviewing programming, developing marketing campaigns to attract new conference and wedding business among others; it was not thought that the Council could get the subsidy to ‘£0’ within the medium term using the current business model. Cuts to the subsidy, without change, could result in the partial closure of facilities.

The current service model for this service was, therefore, financially unsustainable. This issue required a solution which would:

·  Reduce the level of financial support required by the Floral Pavilion from the Council.

·  Ensure that the Floral Pavilion continued to operate and deliver cultural, social and economic outcomes for the people of Wirral.

Members noted that the option of no change had been considered for the future delivery of the Theatre and Conference Centre, where the theatre would continue to operate as part of the Council.  Over the past two years every area of secondary spend had been examined to maximise income including reviewing systems to ensure they were aligned to operational effectiveness, pricing structures, staff structures, marketing and market development. Examples of the approach were taking a more assertive commercial stance over specific one off events or in terms of running the base operation such as the bar.  Members noted that this had paid dividends, but the size of the theatre and Council’s structures had limited this approach. The ability to make decisions quickly to benefit from opportunities as they arose was required in order to develop significant income.

The theatre’s management had projected that the requirement for a subsidy through these measures would fall from £961,500 in 2017/18 to £771,506 by 2020/21, from a mixture of improvement strategies for earned income and cost reductions.  It was not thought that a ‘£0’ subsidy would be achieved within the medium term.

The recommended option was to transfer the operation of the Floral Pavilion Theatre and Conference Centre, as a going concern on a long lease, to a suitable alternative provider, but importantly retaining the freehold. This proposal, if pursued, would see the Council retain ownership of the Floral Pavilion, but see its operations run by an expert organisation. This represented the greatest opportunity for long term savings whilst keeping the theatre open as an attraction in New Brighton and serving residents and visitors to the Wirral.

The Cabinet noted that the long lease of the Floral Pavilion as a going concern would create revenue savings, as the Council would no longer be responsible for the running of the theatre and a ‘one off’ receipt arising from the long lease being paid up front.  It would also avoid any capital costs arising from the refurbishment of the theatre as it approached its 10^th year of operation.

The savings from the transfer of the Floral Pavilion was expected to be annual revenue saving of £550,000 (current net expenditure less fixed support costs and capital charges). In addition, following a valuation undertaken by Lambert Smith Hampton, there was the expectation that a one off receipt would also be achieved.

Councillor Phil Davies informed that the report and the next one on the agenda regarding Golf Courses set out how the Council could sustain the important services it provided for Wirral into the future.  The Council’s leisure services element was under pressure due to its funding situation, notably with social care.  Consequently, it needed innovative ways to continue to fund services going forward. This transfer to a leasing arrangement proposal for the Floral Pavilion Theatre and Conference Centre offered the best chance to sustain it financially.  The transfer would achieve economies of scale and provide the expertise required to attract big shows to Wirral.

Councillor Phil Davies was keen to emphasise that the approach being recommended was not a sell-out, as the Council would retain the freehold of the building.  It was a transfer of the Floral Pavilion on a long lease that would sustain it into the future.  Discussions would continue with the Trade Unions regarding staff and a TUPE transfer etc. The future of the Floral Pavilion would be part of the forthcoming consultation on the Council’s budget options.

RESOLVED:

That the Corporate Director for Delivery Services (Assistant Chief Executive) be authorised to transfer the Floral Pavilion Theatre and Conference Centre at best consideration as a going concern on a long lease.