Issue - meetings

The Chair of Scrutiny Board stated that he had requested the item considered by Cabinet on 16 October 2019 in relation to the future operating model for the Civic Halls be called-in. This was an important decision for the Council and the City and he considered it important that Scrutiny Board scrutinise the proposed solution and the market intelligence used to inform the decision.

The Board received a presentation from the Director of Finance which provided the background to the decision. The presentation had been prepared by the Council’s advisors, IPW, who were unable to attend the meeting due to previous commitments.

IPW had been appointed to advise on the different management options and to carry out market testing with prospective operators. IPW were leading industry advisors and had undertaken similar work for cities across the country (including 70% of UK arenas). IPW had also taken the lead on the development and operation of mid-scale venues in Hull, Swansea and Bradford.

IPW fed back that the Civic Halls was in a strong location with a strong catchment and a higher capacity than its competitors. The Hall was also known to have a good reputation amongst artists and promoters. The Board agreed that maximising income was critical and that it was vital to get what happened in the building right. Income generation would need to consider areas such as promoter relationships and secondary spends whilst also taking into consideration social value. 

Four primary operating models had been considered:

1.     Self-operation: In house through the Visitor Economy Team

2.     Self-operation: Trust

3.     External operation: Lease arrangement

4.     External operation: Management agreement

Each of the above options had different features in terms of control over the day to day operation, the level of financial exposure, the certainty of financial income (risk), the level of building risk retained by the Council and the level of annual financial return to the Council to contribute to the capital investment.

It was stated that an external operator would normally be expected to generate higher revenue surplus due to expertise, promoter networks and commerciality. Any external operator would also have programming freedom. The Board considered the different operating models and the associated levels of control, risk transfer and cost certainty. It was confirmed that the Council would be able to specify certain contractual requirements such as payment of the living wage.

Market testing had been carried out and discussions held with ten industry operators, with significant interest being shown from eight (very high). Feedback had been positive with operators considering that the venue would generate a profit, that they would be interested in a lease agreement and that there would be a strong guaranteed annual payment to the Council to support repaying the borrowing. Competition, catchment and product were key. It was confirmed that in any scenario, the Council would retain ownership of the building. 

The preferred option (option 3), was to have a lease arrangement with a private sector operator, paying annual rent to the Council. This  ...  view the full minutes text for item 5