Agenda item

7.1

The Committee received a report of the Director of Finance and Commercial Services providing an update on the position of Sheffield City Trust following recent issues of cash flow problems.  The report contained information on the background to the position, the Trust’s current cash flow issues, the work in progress to try and mitigate the problems, a longer-term strategy and next steps.

7.2

In attendance for this item were Eugene Walker (Executive Director of Resources) and Ryan Keyworth (Director of Finance and Commercial Services).

7.3

Ryan Keyworth referred to the report, focusing on the background to the current position. He reported that there had been a long relationship between the Trust and the Council, and the last 10 years of austerity faced by the Council had resulted in significant funding cuts and a consequent increase in the maintenance backlog across its asset base, which included the Council-owned facilities leased to the Trust.  Mr. Keyworth stated that the Council and the Trust had been working to reduce the subsidy paid to support the Trust’s operations, in stages, from over £5m historically, to zero by 2019/20 and, although a proposal had been agreed, it had proved to be unachievable. The precise level of the problems facing the Trust became known to the Council in June, 2019 and, following a request for additional funding, the Council commissioned Grant Thornton to undertake a financial review of the Trust. The review had been completed in October, 2019, but due to its confidential nature, although it had been circulated to Members of the Committee, could not be made publicly available.  Mr. Keyworth added that it had been agreed in principle that a subsidy of £2.8m a year, together with a one-off payment of around £3m for urgent remedial works be made, and that officers would work with relevant Cabinet Members to look at a longer term strategy.

7.4

Members of the Committee raised questions, and the following responses were provided:-

·                 It was accepted that, given the current financial problems,  reaching a zero subsidy during the 2019/20 financial year was not going to be possible.  There had been a cash deficit of around £2.8m over the last few years, which was likely to continue in future years.

·                 The plan for the Council to invest around £3m over the next 18 months to keep the existing facilities open and available to the public would cover only the most essential works, and would hopefully provide the time it needed to develop a longer-term strategy.  This amount, which would be in addition to any revenue support that was required to cover the Trust’s trading deficit, was included in the Council’s 2020/21 budget planning process.

·                 The Council’s existing relationship with the Trust was due to come to an end in 2024, with the end of the Major Sporting Facilities debt.  It was acknowledged, however, that this process would not be simple, with a number of transactions needing to be completed, one such transaction included the Luxemburg Bond, that had been used to part-finance the assets managed by the Trust.

·                 Due to the vast differences in the facilities, mainly regarding their size and age, and, in turn, their running costs, there were separate agreements for each.  It had been acknowledged that it was very difficult in this day and age to operate public amenities without subsidies.

·                 Due to the complicated nature of the lease, the Council was working very closely with the Trust in order to prevent any of the facilities closing.  Whilst it was not expected that the Trust would hand back the management responsibilities of any of the facilities prior to the agreement ending on 2024, there were plans in place in order to mitigate this.

·                 There was no opportunity to alter the terms of the leases between the Authority and the Trust in a way that would improve the financial performance of the Trust.

·                 It was hoped that, by maintaining its strong relationship with the Trust, there would be no need to amend any terms of the lease.  It was hoped that, by continuing this relationship, an appropriate way forward could be agreed on, and a longer-term strategy developed.

·                 Whilst the Authority was aware that there were financial issues, it was only made aware of the full extent of the situation in June, 2019.  Some of the issues go back as far as 1992, when the Trust was set up as an independent charity, of which the Authority had no formal control.  The relatively undeveloped cash flow reporting provided to the Trust Board until recently meant that it was not possible for the Trust to forecast the point at which it would require cash flow support further in advance than it did.

·                 The one-off payment of £3m will be used to enable the day-to-day operation of the facility to continue, in terms of funding urgent remedial works, as well as any works required to meet health and safety standards.  This figure had been arrived at following discussions between Council officers and Sheffield International Venues (SIV) to identify a minimum amount to enable the facilities to continue operating.  There would be a need for further discussion in terms of how this amount was dealt with as part of the Council’s 2020/21 budget planning process.

·                 The Trust had sought advice in terms of managing its cash flow problems and was trying to do everything it could in order to manage its affairs, which included calling on the Council for further cash flow support following its cash flow flexibility from capital and ticket sales having been exhausted.

·                 It had been acknowledged that there was a need for detailed discussions in terms of how the facilities were operated in the future.

·                 The Authority needed to work with the Trust in terms of improvements to its operations management, predominantly regarding maximising the use of the premises in terms of attracting more and bigger events.  As part of its efforts to reduce subsidy levels, the Trust had contracts to operate leisure facilities outside the City.

·                 Whilst there had been issues in terms of management, the Trust had suffered from several years of national austerity, as well as facing stiff competition from venues in surrounding areas.

·                 As part of the development of a longer-term strategy, consideration would be given to the important role that the Trust played in terms of improving the wellbeing of residents of the City.  SIV have worked with a number of community and voluntary organisations in connection with offering special concessions for targeted individuals or groups of people, and residents could purchase the Sheffield Saver Bus Card or SIV Life Card, to obtain discounts when using the facilities.

·                 Officers were currently working with the Trust in connection with the level of remedial works required in order to keep the facilities fit for purpose, following the undertaking of building condition surveys.  Such work would involve looking at prioritising where the funding was most required.  Following the success of Graves Leisure Centre, which was being operated without a subsidy, it had been identified that there was a need to give serious consideration to some of the older facilities.

7.5

RESOLVED: That the public and press be excluded from the meeting before discussion takes place on the confidential paper circulated to Members of the Committee, on the grounds that, if the public and press were present during the transaction of such business, there would be a disclosure to them of exempt information as described in paragraph 3 of Schedule 12A to the Local Government Act 1972, as amended.

7.6

Officers in attendance responded to a number of questions raised by Members of the Committee on the contents of the paper now submitted.

7.7

At this stage in the proceedings, the meeting was re-opened to the public and press.

7.8

RESOLVED: That the Committee:-

(a)      notes the contents of the report now submitted, together with the comments now made and the responses to the questions raised;

(b)      thanks Eugene Walker and Ryan Keyworth for attending the meeting, and responding to the questions raised; and

(c)      requests:-

(i)       the Director of Finance and Commercial Services to:-

(A)      submit a report to a future meeting of the Committee, providing an update on the financial position, following the review due to be completed by the end of October, 2019, and a representative of Sheffield City Trust be invited to attend the meeting; and

(B)      submit a report to a meeting of the Committee, to be held in six months’ time, providing an update on the draft strategy, and a representative of Sheffield City Trust be invited to the meeting; and

(ii)      that if any major deviations to the proposed recovery plan become apparent, this information be reported back to the Committee as a matter of urgency.

The votes on the above resolution were ordered to be recorded, and were as follows:-

For the Resolution (8)

-

Councillors Denise Fox, Dianne Hurst, Abdul Khayum, Bryan Lodge, Ben Miskell, Moya O’Rourke, Chris Rosling-Josephs and Paul Turpin

Against the Resolution (5)

-

Councillors Ian Auckland, Alan Hooper, Mohammed Mahroof, Barbara Masters and Martin Smith.

(NOTE: Prior to the passing of the above resolution, an amended Motion moved by Councillor Martin Smith and seconded by Councillor Ian Auckland, to replace paragraph (c) as follows, was put to the vote and negatived:-

“given the nature of the contents of the confidential paper, requests  that (i) Sheffield City Trust submit a final copy of the report to a meeting of the Committee at the earliest possible opportunity, and give the Trust an opportunity to address the Committee and (ii) no further cash be handed to the Trust beyond any current commitment until the concerns regarding alleged mismanagement have been addressed, and appropriate controls and measures have been put in place.”

The votes on the amended Motion were ordered to be recorded, and were as follows:-

For the Motion (6)

-

Councillors Ian Auckland, Alan Hooper, Mohammed Mahroof, Barbara Masters, Martin Smith and Paul Turpin.

Against the Motion (7)

-

Councillors Denise Fox, Dianne Hurst, Abdul Khayum, Brian Lodge, Ben Miskell, Moya O’Rourke and Chris Rosling-Josephs)