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1 March 2016
Record No: 1634764
Notice of An Extraordinary Council Meeting – Monday, 7 March 2016
Pursuant to clause 22, schedule 7 of the Local Government Act 2002, an Extraordinary Council Meeting
will be held in the Council Chambers, 15 Seymour Street, Blenheim on Monday, 7 March 2016 to
commence at 9.00 am
B U S I N E S S
As per the Order Paper attached.
MARK WHEELER CHIEF EXECUTIVE
Marlborough District Council
Order Paper for the EXTRAORDINARY COUNCIL MEETING
to be held in the Council Chambers, 15 Seymour Street, Blenheim
on MONDAY, 7 MARCH 2016 commencing at 9.00 am
(Mayor) (Report prepared by M Wheeler)
The ASB Theatre Trust has a cash flow issue, notwithstanding a successful fundraising
campaign, and seeks Council support by way of additional guarantee to enable it to meet its
Council made decisions over the last decade supporting the construction of a new civic theatre.
There have been many challenges including a significant increase in forecast construction
costs following the Christchurch earthquakes and consequent engineering requirements.
In June 2012, Council provided a guarantee of $2.750 million to enable the Theatre
construction to be tendered and a contract awarded. The Marlborough Civic Theatre Trust
(“Trust”) awarded the construction contract to local company Robinson Construction Ltd in late
2012 with construction commencing in February 2013.
The project was to be originally funded by a Council grant of $5 million, property sale of
$6 million, fundraising of $6 million and grant funding from Government of $4 million.
In 2015 the Trust lodged an application to the Significant Projects Fund for $3.1 million. Owing
to the timing of the Lottery Grants Board decisions Council approved an increase of $850,000
to the loan guarantees in April 2015 taking total guarantees to $3.6 million. This increased
guarantee enabled the Trust to continue to meet the contract obligations in relation to the
construction of the Theatre.
The total Council loan guarantee is $3.6 million (ASB $3.1 million and The Canterbury
Community Trust $500,000). The guarantees are contingent liabilities only called upon if the
Theatre Trust cannot repay its loans when they become due.
The ASB guarantees would not have been required in the event that the Trust’s funding
application to the Lotteries Grant Board was successful. Unfortunately the application was
unsuccessful and the Trust did have to borrow the funds from the ASB, relying on Council’s
Guarantee. Council was advised of the Lotteries decision following its announcement last year.
The Trust has been actively fundraising. An additional $1.561 million has been raised since
that guarantee approval through pledges, grants and gifts (including a concert piano worth
$250,000). This is a significant achievement. Unfortunately Government support has still not
been obtained. Further efforts have been made to secure Government support for the project
and it is still possible that support may be forthcoming. It has not been budgeted.
In December 2015 significant construction contract variations were claimed. It had previously
been reported to the Project Control Group that there would not be any significant variations
based on quantity surveyor work and a value management process. Therefore this claim was
an unpleasant shock to the Trust. Variations claimed total $722,000 and are a major
contribution to the cash flow issue the Trust now faces. The engineer to the contract is
establishing the justification for the claimed variations but we expect they will largely be
The additional funds raised are predominantly pledges. These pledges are payable over
several years thus are not all immediately available to meet short term cash flow requirements.
As of 31 January pledges of $1.77 million are still receivable. $1.3 million of the pledges relate
to three entities (including the ASB), mostly payable in instalments over a 3, 5 or 10 year period
Council - 7 March 2016 - Page 1
depending on the size and nature of the pledge. This gives us a high degree of confidence in
the future pledge income.
The Trust had anticipated that the Canterbury Community Trust loan scheme would provide the
loan finance in relation to the pledges but this fund was inundated with requests when it opened
and the Trust, as a past recipient, was declined in October 2015.
The Trust recently requested further funding from the ASB ($1.5 million) to be met by the
pledges as they are received. Unfortunately the ASB, while happy to provide the loan, has
requested that it also be secured by Council guarantee. This advice was received last Friday
19 February and was unexpected given the indications received that the financing
arrangements could be achieved.
As a result of this decision the Trust is in a position where it requires bridging finance to meet
the commitments it has entered into, even though it has secured the monies to meet its
contracted obligations through loans and pledges. On Tuesday night 23 February the Trust
met and agreed it had no choice but to request Councils additional guarantee of $1.5 million.
A formal request from the Trust was received on Thursday (attached).
Construction Project Funding
Appendix One provides the latest project financing information for the construction of the
Civic Theatre. It excludes operating requirements.
This shows a small surplus of funds from the construction project of $66,023 once all pledges
are received. It should be highlighted that further fit-out of the Theatre is required over the
coming year to provide for its full functionality, eg kitchen fit-out and studio theatre to meet its
potential to host conventions. We have not budgeted for the capital cost of these facilities nor
any revenue from them. As construction is nearing completion there is now a high level of
confidence in the construction costs to provide an effective functional theatre including
The Theatre will be in operation from March, although some less immediately essential aspects
of the construction will be incomplete. A formal opening is planned for May at which time the
construction project will be complete (albeit without the kitchen or studio theatre). The capital
costs estimate does not include these additional facilities.
Cash Flow Budgets
It is important to note that $20 million has already been spent out of a total construction capital
cost estimate to $23 million. To default on contract payments now could put all that work and
the funding provided at risk with nothing to show except an incomplete Theatre. The Trust’s
pledge income would be applied to interest payments and eventually Council would be required
to honour its guarantees, ie; make loan and interest repayments, without any of the positive
community benefits the Theatre undoubtedly would provide.
Attached (Appendix Two) is a cash flow forecast, through to 30 June 2017, incorporating the
latest information on fundraising, construction costs, operating costs and projected interest
costs on the Trust’s borrowings. Fundraising continues to be a focus of the Trust but only
currently committed pledges are included in the cash flow budget.
Operating revenues and costs have been reviewed based on current bookings only with a small
allowance only for future bookings. In the year July 2016 to June 2017 there are 189 days
currently booked. There is every chance further bookings will be made and accordingly it is
expected that the operating projections are reliable and conservative. A working capital
provision of $200,000 is also budgeted.
For the year to date to 31 January 2016 the Trust has incurred an operating deficit of $250,000
which it has also had to fund. Presently, until the Theatre opens and is fully operational, the
Trust is incurring a deficit of $50,000 per month which is the cost of operation while receiving
Council - 7 March 2016 - Page 2
little revenue from operations or its previous rental income. We have included these deficits in
the cash flow forecast.
Interest cost projections are based on the current ASB borrowing rate applicable to a Council-
guaranteed facility. The facility in place with ASB is interest-only at present and accordingly no
allowance has been made for principal repayment which is likely to be outside the Trust’s
financial capability at present. There remains a possibility that Central Government will assist
the Trust. ASB loan principal is not payable until late 2019 (four years from first draw down).
Provision for Canterbury Community Trust interest and principal repayments has been made.
The cash flow budget shows that:
A cash deficit will be evident by the end of March 2016 and will reach $1.48 million by
the end of April 2016.
The cash deficit peaks in June 2016 at $1.5 million but remains $1.49 million by
As at 31 January 2016 there are committed pledges outstanding of approximately
$1.8 million; as at 30 June 2017 remaining pledges are expected to total $1 million.
The existing ASB and Canterbury Community Trust loan balances at 30 June 2017 will
total $3.53 million. Interest on the new $1.5 million loan (if approved) is shown at the
bottom of the spreadsheet. Assuming an overall interest rate of 4.5% on ongoing
annual interest cost of $220,000 would be incurred.
The operating deficit (operations only, no capital, depreciation nor interest) for year
ended 30 June 2017 is forecast at $158,000 ie; it is less than Council’s ongoing grant of
Given this budget, a $1.5 million additional borrowing facility is needed and can be obtained
from the ASB with Council’s guarantee.
The Trust needs to have funding in place by the end of March to continue to fund both
construction progress payments to completion and the on-going operation of the Theatre.
The Trust has been working extremely hard to secure funding and financing arrangements to
complete the Theatre without resorting to further Council support. Unfortunately all alternative
avenues have not yielded a satisfactory outcome for the Trust. The extent of community
support evident from the fundraising commitments has been exceptional and indicates the
community is excited about the new Theatre. However, to enable the community to enjoy the
new facility, its completion and opening does require further Council support.
Although the Trust continues to work hard to attract more funds there is no short term
alternative which will ensure the Theatre is completed and opened, other than Council
supporting the Trust with its cash flow problem, by providing an additional loan guarantee of
$1.5 million. The terms of the current $3.1 million facility provide a four year principal
If Council does not approve this further guarantee the Trust will be unable to make payments to
its contractors (and in turn subcontractors) at the end of March. Work will stop, the Theatre will
remain unfinished and probably not operational. $20 million out of a total project capital cost of
$23 million will have been wasted. Significant grants and pledges already made will have been
ineffectual and there will be demands for their repayment. Council’s guarantees to the
ASB Bank and Canterbury Community Trust will ultimately be called on to repay loans totalling
Council - 7 March 2016 - Page 3
Alternatively if the additional $1.5 million guarantee is provided the Theatre can operate and
provide the community benefits expected.
Operating revenue and Council’s operating grant are estimated to cover operating costs and
most of the Canterbury Community Trust principal repayment ($50,000 per annum).
Ongoing interest payments of an estimated $220,000 (assuming no principal repayment and
current interest rates of 4.5%) will still require funding from 1 July 2017 and ASB Loan principal
($4.6 million) will require repayment or refinancing late 2019. By that time Theatre Fundraising
will have continued and its operating position will be much clearer.
Major projects of this kind usually challenge the communities in which they are undertaken.
This project is no exception. The pressures that Council now need to deal with have come from
causes such as the additional engineering demands brought about by the Christchurch
earthquakes and also, the absence so far of significant Government assistance. The Theatre is
a very significant addition to the cultural and wider economic welfare of this region. Council
needs to take long-term views.
That Council guarantee an additional $1.5 million ASB loan facility on terms and conditions
equivalent to the current $3.1 million guarantee.
Council - 7 March 2016 - Page 4
Civic Theatre Financial Report
Community Facilities Fund
Variations (as advised TMCo report)
Significant Activities Fund
Spent To Date
19,200,377 17,424,170 1,776,207
Public funding includes all new pledges as at 31/1/16
Funding To be Received
Bank Accounts as at 31/1/16
Net Current Accounts
Finance ASB Remaining
Net Funding Position
Council - 7 March 2016 - Page 5
Marlborough Civic Theatre
Cashflow Forecast through to 30 June 2017
Movement Outstanding Total
Pledges and Grants from Fund Raising
Operating Grant MDC
Cost of Sales
Net Cashflow on Operations
Interest (ASB Loan and CCT)
Principal Repayment CCT
Principal Drawdown ASB
Net Cashflow from Financing
20,047,743 728,269 1,061,201
Net Movement in Cashflows
Plus Opening Bank Balance (net of current Accounts)
‐533,585 ‐1,477,838 ‐1,390,881 ‐1,501,050 ‐1,358,215 ‐1,343,361 ‐1,349,216 ‐1,312,889 ‐1,270,702 ‐1,280,413 ‐1,384,434 ‐1,448,237 ‐1,427,510 ‐1,434,709 ‐1,489,463
Less Working Capital Requirement
Closing Bank Balance
328,413 ‐533,585 ‐1,477,838 ‐1,390,881 ‐1,501,050 ‐1,358,215 ‐1,343,361 ‐1,349,216 ‐1,312,889 ‐1,270,702 ‐1,280,413 ‐1,384,434 ‐1,448,237 ‐1,427,510 ‐1,434,709 ‐1,489,463 ‐1,492,639
With New $1.5 million ASB loan guaranteed by Council
Principle draw down
Interest (@ 4.5%)
Opening Bank Balance
Closing Bank Balance
Council - 7 March 2016 - Page 6
Council - 7 March 2016 - Page 7