How will Cardiff’s Indoor Arena be financed?
Money to burn? Cardiff Council plan to spend over £200M of your money to help US global entertainment firm Live Nation to build an arena in Butetown
Cardiff Civic Society has been trying to find out how much the new Indoor Arena would cost the city and whether the claimed benefits will be realised.
Most of the information about this is hidden from residents – who will have to pay the bill – in confidential appendices to Cabinet papers. CCS has submitted Freedom of Information requests to get to the truth, but Council is stalling on its obligations.
Some information has nonetheless filtered out. Council has accepted from the time of its choice of Atlantic Wharf as the location for the Arena that, while it should not require an ongoing operational subsidy, arenas are not sufficiently profitable to cover the substantial capital costs required for new-build projects, and that an element of public funding would be required. The question is how much.
Council’s Cardiff Newsroom has quoted £150 million as the cost of building the Arena, but it will clearly be more than that. The Capital Strategy 2022/23 paper, to be presented for approval by Full Council on 3 March, gives some indication of the total cost. Several lines in the Capital Investment Programme 2022/23 - 2026/27 spreadsheet in that paper refer to the Arena:
Row 48: Indoor Arena Contribution to Delivery (Part) = £5 million
Row 84: Indoor Arena - enabling costs = £30.1 million
Row 85: Indoor Arena - contribution to delivery (part) = £14.5 million
Row 86: Indoor Arena - Direct Funding = £138.1 million
Together these total £187.7m, well above the claimed £150m. And this is not the full cost. The description for row 85 states the £14.5m is “part of £24.3m contribution to support construction of the Arena”. Last year’s capital strategy anticipated expenditure during the current year of £12m, some of which was from the contribution. If that has been spent, these figures indicate an expected total cost of around £200m. But projects of this scale rarely complete to budget and construction costs are rising sharply.
The Council papers claim the Arena will be fully funded by annual lease income from the Arena Operator, although Council Leader Huw Thomas has previously accepted that Council will cover around 15% of the cost. The description of row 85 in the spreadsheet implies that lease income will cover only the cost of borrowing for Direct Funding. If so, Council would carry at least 30% of the cost, or upwards of £60m.
Another view of this comes from the Capital Financing Requirement table, which includes an item ‘Arena Affordability Envelope’ which rises to £246m by 2025. After that it falls by £4m a year, suggesting this is what Council expects as revenue from the lease income. A 46-year lease has been proposed, implying a total lease income of £184m, confirming a shortfall of around £60m, even if costs do not rise.
The Capital Strategy also notes that £64m has been spent to secure the site of the Red Dragon Centre as an enabler for a wider masterplan for the Atlantic Wharf Regeneration. But the covering paper for Council acknowledges there are no budget allocations for that wider plan. Pandemic restrictions must have reduced revenues from the Centre. How much will be lost?
Some deductions and guesses made here may be wrong. If so, it is easy for Council to correct them. Put all the facts in the public domain so that citizens can see how their money is spent.