This is an HTML version of an attachment to the Official Information request 'ASB Theatre loan draw down'.



 
M A R L B O R O U G H   D I S T R I C T   C O U N C I L   T E L E P H O N E   ( 0 0 6 4 )   3   5 2 0   7 4 0 0  
P O   B O X   4 4 3  
F A C S I M I L E       ( 0 0 6 4 )   3   5 2 0   7 4 9 6  
B L E N H E I M   7 2 4 0  
E M A I L   m d c @ m a r l b o r o u g h . g o v t . n z  
N E W   Z E A L A N D  
W E B   w w w . m a r l b o r o u g h . g o v t . n z  
 
 
1 March 2016 
 
Record No:  1634764 
File Ref: 
D050-001-02 
Ask For: 
Mike Porter 
 
 
 
 
 
 
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 
 
Open Meeting 
1. ASB 
Theatre 
Funding 
Pages  1 



1. ASB 
Theatre 
Funding 
(Mayor)  (Report prepared by M Wheeler) 
C600-005-C01-01 
Purpose 
1. 
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 
contractual obligations. 
Background 
2. 
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. 
3. 
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. 
4. 
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. 
5. 
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. 
6. 
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. 
7. 
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. 
8. 
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. 
9. 
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 
approved. 
10. 
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.  
11. 
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. 
12. 
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. 
13. 
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 
14. 
Appendix One provides the latest project financing information for the construction of the 
Civic Theatre.  It excludes operating requirements. 
15. 
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 
variations. 
16. 
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 
17. 
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. 
18. 
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.   
19. 
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. 
20. 
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. 
21. 
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. 
22. 
The cash flow budget shows that: 
a) 
A cash deficit will be evident by the end of March 2016 and will reach $1.48 million by 
the end of April 2016. 
b) 
The cash deficit peaks in June 2016 at $1.5 million but remains $1.49 million by 
June 2017. 
c) 
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. 
d) 
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. 
e) 
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 
$200,000. 
23. 
Given this budget, a $1.5 million additional borrowing facility is needed and can be obtained 
from the ASB with Council’s guarantee. 
24. 
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. 
25. 
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. 
Summary 
26. 
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 
repayment holiday. 
27. 
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 
$3.6 million. 
Council - 7 March 2016 - Page 3 

28. 
Alternatively if the additional $1.5 million guarantee is provided the Theatre can operate and 
provide the community benefits expected. 
29. 
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). 
30. 
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. 
31. 
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. 
RECOMMENDED 
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
Appendix One 
As at  
31‐Jan‐16
Capital Expenditure 
Budget 
Funding 
Budget 
Received 
Variance 
Construction 
16,831,295
Public 
6,250,312
4,474,105
1,776,207
Fees 
3,756,537
Council 
5,000,000
5,000,000
0
Theatrical Services 
1,500,000
Property Sales 
6,000,000
6,000,000
0
Stage Lift 
250,000
Community Facilities Fund 
833,000
833,000
0
Variations (as advised TMCo report) 
722,020
Significant Activities Fund 
500,000
500,000
0
Total Budget 
23,059,852
Interest 
117,065
117,065
0
CCT Loan 
500,000
500,000
0
Spent To Date 
19,200,377 17,424,170 1,776,207
Construction 
15,046,596
Note  
Fees 
3,840,617
Public funding includes all  new pledges  as at 31/1/16 
Theatrical Services 
977,598
 
Stage Lift 
182,932
20,047,743
Remaining Expenditure 
3,012,109
Funding To be Received 
1,776,207
ASB 
Finance 

Finance Required 
1,235,901
Facility 
3,100,000
Drawn 
2,310,000
Bank Accounts as at 31/1/16 
686,071
Balance 
790,000
Net Current Accounts 
‐174,146
Finance ASB Remaining 
790,000
Total 
1,301,924
Net Funding Position 
66,023
Council - 7 March 2016 - Page 5 

 
 
 
Marlborough Civic Theatre
Appendix Two
Cashflow Forecast through to 30 June 2017
2016
2017
Total 
To Date
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Movement Outstanding Total
Operations
Pledges and Grants from Fund Raising
4,474,105
39,954
238,998
35,131
159,781
29,781
58,031
6,281
15,481
16,231
38,975
36,509
6,859
8,259
24,459
2,509
55,592
4,259
777,088
999,119 6,250,312
Operating Grant MDC
0
0
0
0
0
200,000
0
0
0
0
0
0
0
0
0
0
0
200,000
Operating Income
47,600
197,459
138,446
297,683
123,671
94,760
269,974
160,993
256,293
188,333
143,408
55,303
119,558
180,668
220,703
227,378
194,818
2,917,041
Cost of Sales
20,357
120,150
87,781
154,679
59,128
34,349
136,167
70,505
111,565
86,295
70,805
22,090
66,005
75,485
111,885
121,655
82,055
1,430,956
Operating costs
95,310
99,888
90,256
98,629
87,319
158,387
108,038
94,618
107,379
81,599
101,549
126,842
108,355
91,542
101,342
98,742
102,892
1,752,688
Net Cashflow on Operations
‐28,113
216,419
‐4,461
204,156
7,005
160,055
32,049
11,351
53,579
59,414
7,562
‐86,771
‐46,543
38,099
9,984
62,572
14,129
710,486
Financing
Interest (ASB Loan and CCT)
12,955
12,955
12,955
12,955
12,955
12,955
12,955
12,955
12,955
12,955
12,955
12,955
12,955
12,955
12,955
12,955
12,955
220,235
Principal Repayment CCT
4,175
4,261
4,199
4,244
4,218
4,265
4,240
4,251
4,297
4,273
4,318
4,294
4,305
4,416
4,228
4,371
4,350
72,705
Principal Drawdown ASB
2,310,000 790,000
3,100,000
Net Cashflow from Financing
772,870
‐17,216
‐17,154
‐17,199
‐17,173
‐17,220
‐17,195
‐17,206
‐17,252
‐17,228
‐17,273
‐17,249
‐17,260
‐17,371
‐17,183
‐17,326
‐17,305
497,060
Capital Expenditure
Construction Contract
20,047,743 728,269 1,061,201
922,639
100,000
100,000
0
0
0
0
0
0
0
0
0
0
100,000
0
3,012,109
23,059,852
Net Movement in Cashflows
16,489 ‐861,998
‐944,254
86,957
‐110,168
142,835
14,854
‐5,855
36,327
42,186
‐9,711
‐104,020
‐63,804
20,728
‐7,199
‐54,754
‐3,176
‐1,804,563
Plus Opening Bank Balance (net of current Accounts)
511,925
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
511,925
Less Working Capital Requirement
200,000
200,000
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
‐1,492,639
With New $1.5 million ASB loan guaranteed by Council
Principle draw down
600,000
900,000
1,500,000
Interest (@ 4.5%)
2,250
5,625
5,625
5,625
5,625
5,625
5,625
5,625
5,625
5,625
5,625
5,625
5,625
5,625
5,625
5,625
86,625
4.50%
Opening Bank Balance
328,413
64,165
14,287
95,619
‐20,175
117,035
126,264
114,784
145,486
182,048
166,712
57,066
‐12,362
2,740
‐10,084
‐70,463
Closing Bank Balance
328,413
64,165
14,287
95,619
‐20,175
117,035
126,264
114,784
145,486
182,048
166,712
57,066
‐12,362
2,740
‐10,084
‐70,463
‐79,264
Council - 7 March 2016 - Page 6 


 
Appendix Three 
 
Council - 7 March 2016 - Page 7