To consider expenditure on essential work to the boilers and the electrical installations with the resultant building regulation works at the Hazlitt Arts Centre (HAC).

1.  That the boilers and associated pipework and controls, electrical switchgear and mains distribution panels are replaced and enabling health and safety works are carried out, all as identified in the report by Mervyn Hayes Consultants set out in Appendix A to the joint report of the Assistant Director of Regeneration and Cultural Services and the Theatre and Events Manager and at the approximate costs set out in that Appendix, plus a contingency of 10%. 

2.  That the necessary urgent works to the HAC are funded from balances, and the monies recouped through either reduced subsidy and/or increased income.

The boilers, associated pipework, controls, air handling systems and electrical installations at the Hazlitt Arts Centre are known to be coming towards the end of their useful life and one boiler has already failed.  Maintenance costs and the risk of failure are also increasing.  Consultants were appointed to advise on the most efficient way of ensuring the business of the Hazlitt Arts Centre continues and to examine ways of improving energy efficiency and comfort levels.

In the course of the investigation into the operating systems at the HAC the contractor identified potential failure and capacity issues with the main electrical intake board which could necessitate shutting the building down for electrical work to take place which could affect business continuity.  There are health and safety concerns about the risk to contractors instructed to work on this equipment.  It is therefore thought appropriate  that the main board is replaced as part of this work.

The consultant’s report confirmed that after over fifteen years of service, in addition to the boiler that has already failed, the remaining three are also at risk of failing and that there is a strong possibility that one or more could fail during the winter of 2011/12.  The existing boilers are no longer in production and, as a result, it has not been possible to find any replacement parts for the boiler that has failed.  Therefore, an efficient heating solution needs to be in place before the heating is turned on for the busy winter season, which includes the pantomime.

The consultant also identified potential problems with the existing pipework and radiators which are over thirty years old.  The system was flushed out in the summer of 2010 in the hope of improving heating efficiency, however, this has resulted in exposing weaknesses in the pipework causing leaking in some areas.  It is therefore considered expedient to replace the elderly pipework and radiators at the same time as the boiler plant to ensure maximum efficiency of the new system.  Additionally modern boilers are recognised to be extremely sensitive and debris from the old pipework could seriously compromise the new equipment.

The programme of work detailed in the joint report of the Assistant Director of Regeneration and Cultural Services and the Theatre and Events Manager will necessitate some essential building works to be undertaken to ensure the health and safety of the contractors and those carrying out any further works or maintenance.  The schedule of work that is necessary is attached at Appendix ‘A’ to the joint report of the Assistant Director of Regeneration and Cultural Services and the Theatre and Events Manager.

Potential Options

The Hazlitt Art Centre houses the only purpose built performance spaces in the Borough and it contributes significantly to the economic (over £2m) and social life of the Town and as such it contributes to the Council’s key objectives of boosting the local economy and making the Town an attractive place for residents and visitors.

In recognition of the value that the HAC provides to the Town, but also the cost of running it, the Council is in the process of looking at alternative ways of operating it but at a reduced cost.  That work is in its early stages and no conclusions on future governance models can be drawn from it.  The question of the repairs is also delaying that work, because of the need for detailed advice on future governance.

The cost of the urgent works is set out in the report and is significant and unbudgeted.  The options that face the Council are:

i.  Not to carry out the works; this risks failure of the heating system and the threats to safety that will rise from not carrying out the works.  The failure of the heating system, particularly in winter, is likely to lead to the closure of the Theatre.

ii.  To close the Theatre – this approach would lose the facility to the Borough and undermine the Council’s strategic objectives.  It would also result in the loss of staff at the HAC and elsewhere in the Council at a maximum redundancy cost of £195,000, and a recurring minimum residual cost of £206,350 per annum.

iii.  Delay the repairs until the governance model is resolved.  The need to repair the HAC heating and power systems and the consequential cost is unlikely to make the HAC an attractive proposition to any future operator as clearly there is a need to reduce the cost of the operation.  Any potential operator would have to achieve a significant income to cover the cost of the repairs either directly or through a loan.  However, an operator other than the Council might be able to obtain some grant funding towards the repair.  The risk of system failure would also remain.

iv.  Fund the works from revenue balances.  The approved capital programme agreed by Council in March 2011 does not allocate resources to the theatre.  The provisional revenue outturn reported elsewhere on this agenda shows a significant favourable variance that will be added to balances for 2011/12.  The Medium Term Financial Strategy already predicts revenue balances in excess of the minimum working balance of £2.3m.  With the addition of the revenue underspend from 2010/11 to balances the predicted unallocated resources will be in excess of £1.3m and Cabinet could provide funding from balances to carry out this urgent work.

Options (i) and (iii) outlined above risk the failure of the systems and risks to safety and potential closure of the Theatre whilst urgent repairs are carried out which at peak times will create considerable disruption to audiences and loss of income and could cause damage to the Council’s reputation.

Options (ii) – the closure of the Theatre – will have financial consequences immediately and into the future, and also erode the Town’s economic and social base.

Option (iv) of funding the repairs from balances enables:-

·  The HAC to be retained for the future to the benefit of the Borough;

·  For the work to be undertaken during the summer of 2011, causing the least disruption to audiences;

·  For any impediment because of the cost of repairs to future governance to be removed.

In relation to recouping the costs of these repairs this should be explored as part of the arrangements for the future governance of the HAC and could take the form of a reduced subsidy and/or a share in the profit over a period o0f time to be agreed.

It is therefore recommended that Option (iv) is pursued and the repairs set out in Appendix ‘A’ of the joint report of the Assistant Director of Regeneration and the Cultural Services and the Theatre and Events Manager are carried out, over the summer of 2011, and those repairs are funded from balances.

The potential options have been set out above and the effects examined.  The reasons for not opting for options (i) to (iii) have been outlined, and it is considered that they are unsuitable alternative courses of action.

It may be possible to shut down the Exchange Studio for the duration of the winter of 2011/12 and just heat the Hazlitt Theatre with the remaining three boilers.  However, the consultant and the property services section consider that that there is a high risk of these boilers failing resulting in a total shut down of the business.