Mareel deal beggars belief (Michael Mackay)
So the council have just pumped another £1.1 million into Mareel, to save their own investment they say. Who would have guessed?
In my opinion, and I’m sure a lot more people, this has been a project surrounded by disasters from the very beginning with its cost being over double the original price.
When it began the arts trust said it would be a self-sustaining building and they would not need the council to prop them up. But now look what’s happened. The council has had to step in and take control.
What’s worse is the fact that Mareel has also been given charity status so they don’t have to pay VAT So does this now mean that they can ask for money under this new heading and be treated like other true charity organisations.
From the beginning I have always said it was an over-expensive and not-needed building, although it’s here and I’m glad Shetland musicians are getting the use of it. But in a time when the council is closing down places like Viewforth, the pensioners’ club at the Freefield Centre, schools, SYIS and parts of COPE, I think it just beggars belief.
Councillor Gary Robinson says that one lesson learned was that in future the council would ensure that any major capital investments were backed up by a security in the building itself. But I say if he and the council had voted against this size of building (and future projects) in the first place they would not be finding themselves having to throw more millions of our money at it.
When you actually sit back and add up what the council has thrown away money at it’s unbelievable. How many millions on the non-Bressay bridge, the Anderson High School fiasco, the money to LPA for trying to stop the dredging of the north harbour and now Viking Energy? That money alone would have easily have saved the other projects I have mentioned.
I thought this council was actually going to turn things around for Shetland, but now I see they are just a continuation of the last. But then again half of them are from the last council so what could you expect?
Michael Mackay
38 Hoofields,
Lerwick.
Ian McCormack
I canna really disagree with your arguments Michael,
I do love the cinema, but I canna help but feel the millions wasted in the LPA fiasco and the other things you mentioned could have went towards the debt that the sic are fighting to clear. But it’s here now and we should support marreel and see it work for the community.
David Seymour
As Michael says, it is opinion that Mareel has been “surrounded by disasters”. There is no doubt that there have been challenges, but that is not unusual for any multi-million capital build project. As I understand it, it seems that there has been around a 10 to 15% overspend, depending on what stage of planning the initial figure is derived. Again, that is not unusual and probably below average (the Taxpayers Alliance published figures in 2009 (when construction of Mareel started) indicating the average overspend for ‘government’ projects was 38%). However, final figures will not be known until current legal proceedings are settled.
What was/is unusual is the economic climate in which Mareel was built and subsequently opened, and how this adversely affected the construction industry and local authorities. The SIC have been forced to make unpopular but necessary revenue cuts to a range of services which has fueled negativity and questionable comparisons between Mareel’s capital costs and across the board SIC revenue contraction.
In response to some of the specific points Michael raises:
It would appear that Mareel could indeed be “self sustaining” in terms of revenue if known indexes are applied, such as twice the projected cinema attendances. Capital build costs are another matter.
It is not clear what Michael means by “the council has had to step in and take control” – Shetland Arts still own, operate and maintain the building.
It is not a “fact that Mareel has also been given charity status so they don’t have to pay VAT”. Mareel is a building operated by Shetland Arts Development Agency, a “true” charitable organisation registered in 2006 and there is no blanket exemption for charities from VAT.
Michael mentions “Viewforth, the pensioners’ club at the Freefield Centre, schools, SYIS and parts of COPE”. Whilst this may provide some economic and social context, the examples are all of revenue cutbacks, and not all are/were funded by the council. To my knowledge, Mareel receives no revenue funding from the council, or the Charitable Trust for that matter.
My opinion on Mareel is one of broad support and I don’t wish to criticise the sentiment of Michael’s letter, but I do believe it is worth sticking to the facts and providing balance to opinions.
ian tinkler
Shetland Arts still own, operate and maintain the building! God help Mareel, the lunatics are still in charge of the asylum! Just how do Shetland arts remotely qualify to run what in essence is now a commercial undertaking needing to make a profit?
Johan Adamson
I like Mareel, but I am not sure on a couple of points above, as DS says, so we stick to the facts
I dont think given enormous staff costs and the costs of the films that SADA can ever be self-sustaining, or even Mareel. It takes a lot of bums on seats to make up these fixed costs, even with a zero lease, but I look forward to seeing these accounts.
A 99 year lease is tantamount to selling the building. It is like me putting up a house and then getting the council to pay for my roof and letting me live in it forever. But that’s OK since the SIC was backing this anyway and it is a municipal building which we should all use. It did attract funding from outside Shetland and it is a lovely functioning building (at least inside). I would think the money has come from capital.
SADA is a charity, but given that these are not allowed to trade, they must have set up another company to operate Mareel, of which we have heard nothing. It certainly used to be that shops etc could not get charitable status, therefore charities have trading arms.
SADA receives revenue funding from Shetland Charitable Trust and from any other grants they may apply for for specific projects. I will assume the SCT will ensure that they fulfill all the conditions of their funding like they did with SYIS.
I am disappointed that SADA did not ask for sponsorship for Mareel from private individuals and companies, since I think this would have been forthcoming, instead of financing the capital shortfall 100% from the SIC.
David Seymour
I don’t wish to pick holes in Johan’s comments, but there are a few points worth clarifying. Charities are ‘allowed to trade’ without setting up a ‘trading arm’ if it fits within their primary purpose. Furthermore (as far as I understand the situation) Shetland Arts operate as a Social Enterprise, defined by the Department of Trade and Industry as “….a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners.”
In summary, Shetland Arts can and do trade commercially, and did so for years before Mareel opened through directly comparable activity such as the operation of the Bonhoga cafe, regular music events and festivals, film screenings at the Garrison Theatre etc. Hopefully that may go some way to answering Ian Tinkler’s question of “Just how do Shetland arts remotely qualify to run what in essence is now a commercial undertaking needing to make a profit?” (a polite request to Ian. Please refrain from injecting needless personal attacks into the debate. It adds nothing to the discussion beyond ill feeling and, as is often exemplified, regularly results in exchanges of opinion and information degenerating into childish name calling).
Johan also flags up the inherent ‘fixed costs’ of operating Mareel. It may be an assumption on my part, but given that these are indeed fixed costs it should be straightforward to include them in operational revenue forecasts. The business plan may have been derided by many, but it has been thoroughly scrutinised by several experts (my terminology) over the years and has yet to be proven overambitious. Indeed, if double the forecast cinema attendances are to be factored, this would presumably cover the known ‘fixed costs’.
A quick question for Johan. Does she know that SADA did not seek private sponsorship? I’m not aware of any information on that subject to be in the public domain.
Also, the capital shortfall did not come “100% from the SIC”. Other funders including HIE, Creative Scotland and the ERDF contributed significant sums to the overspend.
Paul Meyer
The council spends OUR taxes willy nilly on projects that seemingly overrun on cost – the Mareel is no exception!
What I really find amazing is, although Shetland has a plethora of swimming pools (many of which are hardly used), at 60 degrees north we don’t have any ICE RINKS!! Just across the North Sea Norway has forty indoor ice rinks and three indoor speed skating rinks. In mainland Scotland there are another nineteen ice rinks!
Instead of spending millions on a building such as the Mareel which is fine if everyone likes cinema and the arts, I propose much of that money would have been better spent on an indoor Ice Rink. Why you may ask? The answer is simple.
Such a facility would offer us Shetlanders a huge opportunity for sports by way of family and children’s participation in open ice skating, the creation of ice hockey teams (playing home and away), broomball, figure skating, speed skating, curling, Christmas & other event ice shows, etc. There is a hue and cry for offering facilities for the young so an Ice Rink would be ideal not only for kids – but for the rest of us.
Another missed opportunity councillors.
Jonathan Wills
It is indeed useful to look at the facts, certainly before making wild allegations about the people and organisations who have worked together to secure the Mareel building in the public interest.
Mareel is not a separate company. It is a building owned by Shetland Arts and leased for 99 years to the council, which has granted a sub-lease to Shetland Arts, a registered charity. Shetland Arts receives no council subsidy for its running costs.
Shetland Charitable Trust funds a three-year programme of artistic and cultural activities organised by Shetland Arts. These events take place in Mareel and in other venues.
As with other trust grants, there is a formal agreement about what is provided in return for the money. If the conditions of the grant are broken, then the grant or a portion of it can be withdrawn. Shetland Arts has delivered the programme agreed with the trust and continues to do so, as far as I am aware.
The “core” funding for Shetland Arts comes from Creative Scotland, formerly the Scottish Arts Council.
Cinema attendances at Mareel have been higher than its critics (myself included) expected.
ian tinkler
Cinema attendances at Mareel have been higher than its critics (myself included) expected. Well Jonathon that is highly impressive, Worth the £ millions of over spend that critics (yourself included) expected, and happily voted away whilest cutting funding for education and provision for the elderly to the bone.
Johan Adamson
DS – We would surely know if SADA asked for sponsorship of Mareel because it would have been in the public domain. Individuals would have been asked to chip in. I think you should state your credentials DS as you seem to know more than average about the whole situation. I was at one time a Trustee.
I am not really talking about the fact it is a social enterprise, but the fact it is a registered charity, preparing an OSCR return. Just how does it now qualify to be a charity? There is no charitable giving and the running of the Bonhoga cafe etc was a small part of their income before, now they are claiming to be more and more self sufficient so Trading is a not insignificant part of the operation. We hear nothing about Arts Development any more because all we hear about is Mareel and events. I know that there was once a plan to set up a separate trading company, but the advice must have been it was now unnecessary?
And JW, yes I omitted that SADA are also part funded by Creative Scotland.
Johan Adamson
If a cinema could gain advantage by having charitable status, surely all of the countries cinemas would claim to be furthering the arts in Scotland?
stephen shirmer
I see the banter goes on and on about this Mareel , well you have it staring in you view everyday so best to use it, as for who pays who for this project I suppose the banter will continue as usual.
The truth of this successful or not project will become plain to all when they publish the total running costs including wages and there profit for the year-
lets hope it does not make our eyes water because whatever they are someone is going to have to pick up the bill !
ian tinkler
Steven, the true cost will be manicured and coddled out of sight. Freedom of information requests on costs of Mareel’s past wages bill have already been refused by the SIC. We will not see the true cost in cash terms; it will just be measured in cut backs in spending to the education of our children, social care funding and the care of our elderly.
paul barlow
Mareel is not a separate company. It is a building owned by Shetland Arts and leased for 99 years to the council, which has granted a sub-lease to Shetland Arts, a registered charity. Shetland Arts receives no council subsidy for its running costs.
really. so the council are NOT giving them money in rent to rent it back to them. are you having a laugh. you must think we are really stupid. is the rent that shetland islands council are paying in a lump sum or spread over 99 years.
Be honest and stop trying to hide behind dodgy accounting tricks your giving them a large dollop of public money because they will go bust without it.
how many home helps will get the sack because your bailing out failing ego trips.
how many teachers wages did the costs of the Anderson mess up cost.
how many ferry crossing for the Bressay bridge joke.
how many OAP meals clubs did the Norrona cost.
how may skips did the David Clarke affair cost us. oddly we are not allowed to know.
i think its time that OUR council started being truly open and honest. so we had better not look further back at other mess ups.
a little snippet from December
Mr Robinson seconded councillor Jonathan Wills in moving that councillors approve the package. Both were among the project’s
most outspoken detractors four years ago, but each said the move was necessary to protect the council’s £6 million investment in the venue.
Asked if he felt the decision would make justifying school closures and ferry cuts doubly difficult to defend, Mr Robinson replied: “I’ve got that loud and clear, but I would hope that by February we would have resolved this [Mareel] one way or another.
yeah right.
David Seymour
Johan, as an ex-trustee you may have better ‘credentials’ than I, but I do have experience of the construction industry and of volunteering in the third sector. I have followed the progress of Mareel (and many other construction projects) with great interest and take the time to carry out research before posting – and all the information I’ve posted is available online. I don’t claim to “know more than average about the whole situation”, but there’s plenty of information out there if folk care to look.
We do seem to have differing interpretations of legislation regarding charities and social enterprises. I may have misunderstood your point, but there is no legislation to prevent a charity adopting a social enterprise model whilst still retaining charitable status and/or deriving a significant part of it’s income from trading. My understanding is quite the opposite, with government and local authorities encouraging charities to trade commercially in order to mitigate ever decreasing public subsidy.
You ask “Just how does it now qualify to be a charity?”. A quick search of the OSCR website indicates Shetland Arts has been a charity since late 2005. I humbly suggest that if you have specific questions regarding the charitable status of Mareel and/or Shetland Arts that you contact them or OSCR.
In another question you ask “If a cinema could gain advantage by having charitable status, surely all of the countries cinemas would claim to be furthering the arts in Scotland?” Interesting, but presumably most cinemas are owned and operated commercially in order to generate profit for shareholders or owners. They can’t just claim to be “furthering the arts” to gain charitable status and still generate profit for said beneficiaries.
I’m not sure I agree that “We would surely know if SADA asked for sponsorship of Mareel because it would have been in the public domain. Individuals would have been asked to chip in.” For example, Shetland Arts website contains links inviting donations for Mareel and I see no reason why sponsorship discussions between Shetland Arts and commercial companies would be in the public domain. Shetland Arts Annual Accounts (available on their website) do indicate sponsorship and donation income, but don’t comprise a particularly significant percentage of their turnover.
David Seymour
Ian, I see no reason why the SIC would be in a position to comply with a FOI request in relation to “Mareel’s past wages bill”. The SIC were paid by Shetland Arts to provide payroll services, they don’t provide revenue funding and Shetland Arts is a charity, and as such not obliged by the Freedom of Information Act.
I also very much doubt that Shetland Arts could “manicure” and “coddle” the “true cost” considering the financial scrutiny they will be under from a range of funders and the charity regulator. Furthermore, Shetland Arts publish their Annual Accounts on their website which includes information on wages – I’ve just had a read through. Perhaps you should too before making unsubstantiated pre-emptive accusations of coddling and manicuring.
You have yet again clouded the waters by directly attributing a selection of emotive revenue cutbacks to a single capital investment – the SIC have had to tighten their belts on revenue across the board (capital investment in Mareel or not) due to a significant and historical annual overspend, and under instruction from Audit Scotland. Audit Scotland’s “Shetland Islands Council Statutory Follow-up Report” provides much of the information required to illustrate this.
The SIC’s ‘Medium Term Financial Plan’ lays out the policy of capital investment, including the annual capital grant “the SIC receive from the Scottish Government each year to spend exclusively on capital” (£4,795,000 for 2012/13).
To compare Mareel to other capital investments could be fair, but to blame Mareel for social care and education revenue cutbacks is erroneous. I assume that these comparisons are the result of a misunderstanding, rather than an attempt to engender resentment.
Johan Adamson
My point is David, that you cannot gain an advantage using tax or charities law over other cinemas, being in a better tax or VAT situation, which was exactly Michael’s point. But this is a very technical point and one SADA must sort out itself with its auditors and OSCR and HMRC. You state “most cinemas are owned and operated commercially in order to generate profit for shareholders or owners. They can’t just claim to be “furthering the arts” to gain charitable status and still generate profit for said beneficiaries”. No they cant, so Mareel cant hide behind a charitable status either.
At one point, Gary Robinson said the cash could not come out of capital for Mareel because the building was not owned by the SIC. It has been stated that this is still true with the 99 year lease, therefore, the money must be revenue, so Ian is right, it coming out of the revenue budgets.
And, if SADA really wanted public sponsorship of Mareel they would take out ads in newspapers, magazines and on local radio and write to companies locally and ask individuals. I, nor my employer nor any company I have dealings with have been asked to sponsor even a light switch in Mareel.
ian tinkler
David, the facts are self-evident and there for all to see. Mareel has cost million and millions of pounds, wasting scarce resources of tax payers and Shetlander’s funds, £15 million to date and rising. At time of severe recession and financial cutbacks I and most intelligent, non-arty type people, would regard this as extreme idiocy. At few extra punters sitting , in the cinema, subsidised at £100s per ticket is hardly a rational use of public funds. Your rather long and digressive letters will never justify the money squandered this costly white elephant. If you feel I am clouding the issue just look to the facts. I will not re-quote them, yet again, they are in the public domain.
stephen shirmer
Mr Tinkler, if what you say is true about the true cost of this on-going saga, more like a tale of woe, and the true cost being hidden from all , then this is a sad day for the people of Shetland who do not deserve to have the wool pulled over their eyes.
John Tulloch
Two questions:
1. SIC is responsible for managing Shetland’s money and no-one else’s so was the £6M that came into Shetland for Mareel from outside sources bad for Shetland?
2. If Mareel was closed down and bulldozed flat and someone came along in 12 months time and said “Yes, that was far too expensive, I’ll build you another, identical, one for £1.1M, if you like?” What would we say?
David Seymour
I have no time for insults, unsubstantiated accusations and factual inaccuracies, but thank you all for an interesting debate. I’ve presented the facts as I see them and I will leave you to your opinions.
Johan Adamson
On reflection, presumably the reason for the 99 year lease is so that the money could be spent by the SIC from capital, and not revenue. Then the 99 year lease back ensures that SADA still owns the building. And I noticed that the SIC legal dept have issued a statement saying that the lease was not free. But even so, what a jolly wheeze. We should use it to fund the local public halls too.
Johan Adamson
DS you could just let me know where the raft of legislation is that now encourages charities, the voluntary sector and social enterprise to trade to make up for deficiencies in funding?
John N Hunter
As an independent examiner and trustee of several charities I have always considered that trading was the way ahead for them, not relying on the public purse. Social enterprise is by definition trading in any case. According to the NCVO earned income now accounts for 55% of the total income of general charities in the UK.
David Seymour
Johan, here are links to some relevant information as requested (please note that “raft of legislation” were your words, not mine)
The Charity Finance Group published a report (March 2013) “Managing in the new normal – adapting to uncertainty” which provides a good overview of the current UK charity funding climate – http://bit.ly/10ZKPXy (pdf) – 93% of charities report that fundraising had got tougher, 55% have increased trade or social enterprise activity since the start of the downturn and 39% plan to increase trading.
The Social Investment Consultancy published a report (April 2013) “Charities Unlocked” which “explores the commercial enterprise opportunities available to charitable organisations.” – http://bit.ly/11RvjdM (pdf). This article provides an overview – http://bit.ly/17FTTog
Here are a couple of examples of relevant Scottish initiatives:
Just Enterprise programme – “By investing in the third sector now and enhancing self sufficiency we can look forward to a future where these organisations play a full role in public sector reform.” http://www.scotland.gov.uk/News/Releases/2011/07/18120453
Enterprise Growth Fund – “to strengthen the third sector in Scotland – making it more sustainable, capable and enterprising” http://www.justenterprise.org/growth.php?current=six – “An extra £2 million is being invested in Scotland’s third sector to support social enterprises” http://www.scotland.gov.uk/News/Releases/2011/12/15154105 – a great way to help these organisations become sustainable and reach their full potential in the current economic climate.” http://www.scotland.gov.uk/News/Releases/2012/02/Enterprise01022012
The Scottish Government also fund support services for Social Enterprise such as http://www.socialenterprisescotland.org.uk , http://www.socialfirms.org.uk and http://www.senscot.net
David Seymour
Ian, I apologise if you find my contributions “rather long and digressive”. I don’t believe I am being digressive as I don’t believe the situation is as straightforward as you claim it to be. There is much more to it than your assertions of Mareel capital investment being singlehandedly and directly responsible for your selected examples of revenue cuts.
For the sake of clarity, do you really believe that Mareel is indeed responsible for the SIC revenue cuts you regularly mention? If so, I’m happy to engage you in discussion on the point. If not, why do you continue to assert the point?
I also want to make absolutely clear that I am in no way trying to “justify” anything. I am merely interested in the evidence, and thank you for the reminder to “just look at the facts”. Whilst we’re on the subject, you state “…in the cinema, subsidised at £100s per ticket is hardly a rational use of public funds.” Which facts did you use to arrive at that figure?
As you mention, it is indeed a time of “recession and financial cutbacks” but the original capital expenditure, locally and externally, was committed long before the current economic climate took hold.
I like to consider myself as reasonably “intelligent, non-arty” (although I don’t think most people who enjoy cinema and music, or education for that matter, to be particularly “arty” either) but I don’t consider investment in Mareel to be “extreme lunacy”. Personally, I think it is quite remarkable that £6 million of investment into the local economy came from outside sources.
Johan Adamson
I am not being clear. If you run a club, e.g. a golf club, which is charitable and then run a bar, that is Ok for tax, as it is a subsidiary activity. Bonhoga is OK as it is principally a gallery. Mareel is OK if it is principally furthering the arts. But as 50% is principally a cinema, this is not OK for tax or VAT. But as I said, that is for them to argue.