Councillors have been told the organisation behind Perth Concert Hall and Perth Theatre will struggle to survive financially in 2022.
The venues urgently require a £2-3 million investment in upgrading “fairly elderly” equipment and infrastructure.
While keeping both venues well ventilated has been described as “prohibitively expensive.”
Perth and Kinross Council’s scrutiny committee was given an update on the council’s arms-length external organisation at a virtual meeting.
Spiraling costs
Energy costs are said to have increased by 29 per cent.
Horsecross Arts estimates it will cost them an additional £72,000 to ventilate buildings in 2022/23.
It’s chairman, Colin Hood, told councillors: “The price of that energy – because we buy off of the council scheme – is set and I don’t think it’s subject to rising which is good.
“It’s the actual consumption that’s the issue for us – just keeping these buildings as well ventilated as we can and it’s been prohibitively expensive.”
Head of finance and administration, Willie Anderson, told the committee: “Energy costs are soaring because of the need to ventilate our venues to an appropriate standard because of Covid.”
He also added that there had been “severe cost control” on staffing and programming which “just counteracts the large increase in energy costs.”
Covid impact
Mr Anderson said Horsecross was currently in a “stable financial position” but that it was “very much down to external funding from various agencies over the past year.”
“Horsecross had not any history of setting aside funds – probably because there wasn’t the funds to set aside – for investment in its own internal equipment and infrastructure.
“Our current estimate is that we probably have outstanding requirements which could be as much as £2-3 million.”
He estimated Horsecross required to set aside £200-£300,000 each year into their revenue budget to make up that deficit.
While the buildings are owned by PKC, Horsecross has to finance upgrading infrastructure and equipment.
A lot of those items are said to be in a worse condition due to a long period of inactivity.
Urgent investment
However, a £100,000 investment in urgent IT upgrades in the new year had been agreed councillors were informed.
“Literally nothing has been touched since the Concert Hall was opened,” added Mr Anderson.
Perth Concert Hall opened in 2005.
Dr Hood said the required IT largely related to light and sound controls, to replace “fairly elderly” existing equipment.
The Horsecross chairman added: “The last thing we want – in the middle of a performance – is for that equipment to fail.”
Looking ahead to the 2022/23 budget a number of number of financial challenges were highlighted.
Financial challenges ahead
The head of finance and administration said: “We’ve got a big wage inflation challenge because of the large rise in national living wage.
“Rightly or wrongly a number of our staff are at or about that value so that has a very real impact upon us.
“We also have a wide staff body who have not had any meaningful change in salary in three years and will be subject to the 1.25 per cent increase in national insurance as will everyone else.
“That all tots up to in excess of £150,000.
“Our energy consumption – assuming the need continues – will be £72,000 above pre-Covid days.”
He added that while Horsecross had benefited from two years of no business rates these are expected to come back.
Covid costs were estimated to be “around £1000 a week” for Horsecross for cleaning, and audience management.
Covid impact
Dr Hood added that they were “trying times” and they were focussing very much on community activities.
“However we do have some very severe budgetary issues.
“Our main issue next year will be financial survival because of the upward pressures on costs. These are very very substantial.”
Similarly, budgetary challenges for 2022/23 “have potential to hinder delivery,” councillors were told.
Dr Hood added: “It’s not easy but – to use a theatrical term – we’ll make sure the show goes on.”
