Agenda item

Appendices 1 and 2 of this report are not for publication as they contain exempt information of the description contained in paragraphs 14 and 16 of Part 4 and paragraph 21 of Part 5 of Schedule 12A of the Local Government Act 1972.

RESOLVED: that

1)        the Indoor Arena Funding Strategy as set out within this report and in more detail at Confidential Appendix 2 be approved.

2)        entry into and execution of the Development and Funding Agreement (DFA) previously approved by Cabinet in July 2023, be authorised and in so doing approve any amendments to the legal documentation as may be necessary, for reasons including but not limited to ensuring consistency between them and finalising any outstanding areas of further deeds and documents which are ancillary to the legal documents approved, subject to consultation with S151 Officer and Legal Officers.

3)        It be noted that, subject to entering in to a DFA with the Arena Developer/Operator and approval by Cabinet of the MSCP Business Case at a future meeting, relevant financial implications will be updated in the Medium-Term Financial Plan, Capital, and Treasury Management Strategies to be consistent with this funding strategy, to form a revised affordability envelope.

4)        It be noted that Treasury Management Activities are delegated to the S151 Officer and implementation and review of this funding strategy will be undertaken as part of the annual updates to the strategy and checkpoints in respect to this project specifically as part of post project review.

Appendices 1 and 2 of this report are not for publication as they contain exempt information of the description contained in paragraphs 14 and 16 of Part 4 and paragraph 21 of Part 5 of Schedule 12A of the Local Government Act 1972.

Public and confidential letters from the Economy and Culture Scrutiny Committee were circulated

Cabinet received a report seeking agreement to the funding strategy for the new Indoor Arena project, and seeking authority to enter into and execute the DFA suite of legal agreements previously approved by Cabinet in July 2023.  The economic benefits that the new arena will bring to Cardiff were highlighted.

The report highlights that, due to inflationary pressures, the cost of the new Indoor Arena had increased from £180m to £280m; Live Nation consortium will take full responsibility for these additional costs.  The Live Nation consortium has worked to reduce the level of cost increase through a review of the Arena design and reconsideration of site infrastructure requirements.

It was noted that the design has now been developed to RIBA Stage 3, including cost plans, which indicate that the scheme is now within the Live Nation consortium’s revised affordability envelope, and without any additional financial contributions from the Council.

Appended to the report is a report from the Council’s Treasury Advisors (LINK). The report sets out the economic and interest rate outlook, Authority’s current capital financing requirement, borrowing policy and options available, accounting and statutory issues for consideration and financial modelling scenarios. 

The proposed funding strategy focuses on temporary borrowing arrangements during the three year construction phase of the Arena whilst the Council continues to monitor the interest rate market, with a view to entering into a more long-term borrowing arrangement at a fixed interest rate either a) once the Arena is open and operational, or b) at such a time when the S151 officer, in their professional judgement, and after considering the latest treasury management advice, concludes entering into long-term funding arrangements is most appropriate and affordable for the Council.

It was highlighted that this strategy is different to previous options considered in that it would mean the Council carrying interest rate risk after signing the Arena DFA.  However, a balance is required between certainty of rates and affordability if the Arena Affordability Envelope is to be met.

The key principles of the funding strategy were highlighted to Members with particular attention drawn to the risk mitigation and milestone reviews that will be put into place.

RESOLVED: that

1)        the Indoor Arena Funding Strategy as set out within this report and in more detail at Confidential Appendix 2 be approved.

2)        entry into and execution of the Development and Funding Agreement (DFA) previously approved by Cabinet in July 2023, be authorised and in so doing approve any amendments to the legal documentation as may be necessary, for reasons including but not limited to ensuring consistency between them and finalising any outstanding areas of further deeds and documents which are ancillary to the legal documents approved, subject to consultation with S151 Officer and Legal Officers.

3)        It be noted that, subject to entering into a DFA with the Arena Developer/Operator and approval by Cabinet of the MSCP Business Case at a future meeting, relevant financial implications will be updated in the Medium-Term Financial Plan, Capital, and Treasury Management Strategies to be consistent with this funding strategy, to form a revised affordability envelope.

4)        It be noted that Treasury Management Activities are delegated to the S151 Officer and implementation and review of this funding strategy will be undertaken as part of the annual updates to the strategy and checkpoints in respect to this project specifically as part of post project review.