Richard Garvie, Community Organiser for the Newbury Labour Party recently submitted a Freedom of Information request to West Berkshire Council, regarding the subsidy for the Newbury cinema.
Richard requested information as follows:
"In the council budget for the past two years, it is suggested that £100,000 is paid in subsidy to the cinema. Can the council inform me as to how much money is actually paid in subsidy, what payment method is used, the frequency of payments and to whom the money is actually paid."
Richard received the following reply from David Lowe, Scrutiny and Partnerships Manager at West Berkshire Council:
"In response I can advise that in 2002, West Berkshire Council sought expressions of interest from individuals and organisations interested in developing a cinema to serve the people of Newbury and surrounding area. Although a number of responses were received, planning constraints, land availability, and financial viability, suggested that a scheme at the junction of Cheap Street and Market Street provided the only realistic prospect of developing a new cinema in the Town Centre.
At that time, the owners of the Kennet Centre entered into discussions with a number of cinema exhibitors to try and attract them to the town. Each exhibitor approached demonstrated the marginal nature of film exhibition. They required a "turn key" building to rent (i.e already fitted out to their specification) and a maximum rental figure that they could pay from the anticipated seat sales. In turn, the owners of the Kennet Centre demonstrated that a deal that satisfied the cinema exhibitors would result in a financial loss to them in developing the project
At a meeting of the Council's Executive on 23rd October 2003 a report was considered on "The findings and recommendations of the sub-group established to consider the request for financial support of the project to develop a new cinema for Newbury". It stated that "market forces alone is unlikely to bring forward a development that includes cinema". The meeting resolved to :- 1. Accept the need for a subsidy for a town centre cinema in Newbury and 2. Ensure that the main terms of the agreement are reported to a future meeting of the Executive for consideration. That further report was considered by the Executive on 10th February, 2004.
In the time between starting the search for a cinema developer and a cinema exhibitor and 2007, the Kennet Centre changed ownership. Following the determination of planning applications further discussions were concluded in 2007 and a Funding Agreement was signed between West Berkshire Council and Newbury Trustee No 1 Limited and Newbury Trustee No 2 Limited as Trustees of the Newbury Unit Trust, the current owners of the Kennet Centre.
There have been no payments made to date. However, the Council has set aside reserves in readiness for the requirement to make payments. The Schedule to the Agreement between the Council and Newbury Unit Trust was made prior to construction of the cinema. The Council have agreed to provide funding not exceeding £100k per annum for 5 years from the date of opening. The payment is only triggered if an actual loss is projected for the new development. (The development includes the ground floor units as well as the cinema itself).
In the last two months, Newbury Unit Trust have provided the accounts for the first full year of operation 1st January 2010 to 31st December 2010. The Council has asked for further information about some expenditure lines in the accounts and clarification about the process for future claims. Provided that satisfactory answers are received it is expected that the first payment will be made in the near future.
Officers have identified two major opportunities for providing the means to make the financial payment;
(1) The cinema will be constructed on the Mall Car Park. The Council’s lease of this car park comes to an end in March 2005. It will then return to the landowner (William Ewart) and become a private car park. The Council will lose the car park income. In constructing the cinema the car parking will be displaced. It has been assumed that 80% will be displaced into the surrounding public car parks. The Mall Car Park currently generates £100,000 of income (gross) per annum. It has therefore been assumed that the Council will accrue an additional £80,000 of car park income annually through the construction of the cinema and the subsequent loss of the private car park. This additional income would not be available to the Council if the cinema was not being built. There is sufficient capacity within the Town Centre car parks to accommodate the displaced vehicles.
(2) By introducing a flat charge for evening parking in the Kennet Centre Car Park it is estimated that a further £30,000 of income will be generated. This is modelled on a car parking fee of £1 per evening although it should be pointed out that the Environment and Public Protection Select Committee will be undertaking a car parking review during 2005 and will consider the issue of charges at that time. This will ultimately be reported to the Executive. That said the Management Agreement with the cinema owner is likely to include a cap on the car park fee of £1 per evening with an annual increase linked to the RPI.
The Council will lose the car park income. In constructing the cinema the car parking will be displaced. It has been assumed that 80% will be displaced into the surrounding public car parks. The Mall Car Park currently generates £100,000 of income (gross) per annum. It has therefore been assumed that the Council will accrue an additional £80,000 of car park income annually through the construction of the cinema and the subsequent loss of the private car park. This additional income would not be available to the Council if the cinema was not being built. There is sufficient capacity within the Town Centre car parks to accommodate the displaced vehicles.
Can't follow the logic on this I'm afraid.
However there is now a blanket £1 evening charge on every town centre car park. This must generate more than enough revenue to cover the cinema subsidy.
However there is now a blanket £1 evening charge on every town centre car park. This must generate more than enough revenue to cover the cinema subsidy.
If the cinema had not been built the Mall Car Park would have remained generating £100k for its private owners.
Building the cinema revoved this car park displacing 80% of those that did park there to other council run car parks in close proximity. Thus generating £80k for the council.
If the cinema had not been built the Mall Car Park would have remained generating £100k for its private owners.
Building the cinema revoved this car park displacing 80% of those that did park there to other council run car parks in close proximity. Thus generating £80k for the council.
Seems like a confused logic here. The council loses the lease on a car park. This reduces the income by £100k. The car park is closed so anticipated income from cars that go to other council car parks is £80k. In addition anticipated income from evening parking is anticipated at £30k. So this means that the council expect to £10k more in parking revenue. The council then gives up to 100k a year if the cinema makes a loss. So the council are in reality (provided the expected income figures are correct) spending up to 90k a year in subsidies to the cinema which is what I thought from the start!
Does anyone have any idea of the real increase in income for these car parks now that the old cinema car park is closed?
No. Cinema is making a profit. The subsidy relates to the units, as detailed in the FOI response. So effectively the empty units below the cinema are costing the council the subsidy. That's my point, this is not a subsidy for the cinema, it's a subsidy for the developer. Vue get nothing from the council.
On the 11th August 2005, the leader of the council said this in relation to a subsidy of the cinema:
"In short, the deal signed for the funding for the cinema is a subsidy that will fall upon Council Tax- payers. Unlike the previous administration, we see no point in trying to hide this fact. We may not have agreed with how the subsidy was arrived at, but as we have said before, we will honour the contract that was signed. An appropriate amount will be budgeted for in the Council’s revenue programme, just as happens for subsidies to other organisations such as the Corn Exchange.”
Only that isn't the case, is it? No wonder everyone is confused, the council said it would pay the cinema a subsidy yet it is actually paying the developer. We have a perfectly profitable cinema, yet we still have to pay £100k a year because of the complex agreement between the council and the developer. Why couldn't the council just say "we will pay the developer £500k as a sweetner" instead of pretending that they were subsidising the cinema?
The deal was that in order for Newbury to get a cinema, it needed to be subsidised. That is what is happening. The use of the word 'cinema' does not exclusively have to mean the company actually showing the films.
If a chain restaurant took on one of the empty units below the cinema - would you expect them to be paid a subsidy by the council?
If a chain restaurant took on one of the empty units below the cinema - would you expect them to be paid a subsidy by the council?
Isn't it more that by subsidising the developer any units that are not taken are being paid by the tax payer? I assume that any units taken would reduce the deficit and the subsidy.
Isn't it more that by subsidising the developer any units that are not taken are being paid by the tax payer? I assume that any units taken would reduce the deficit and the subsidy.
Yep - that was the general idea. No-one wanted to bring a cinema to Newbury. So the council subsidised it.
As half of the development is still empty, I'd say both parties were right.
Unless of course you think Newbury should not have a cinema if it needs a subsidy to exist.
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