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ITEM EX12

EXECUTIVE – 7 SEPTEMBER 2004

PEGASUS THEATRE

Report by Director for Learning & Culture

Introduction

  1. Pegasus Theatre provides a performing arts programme with an emphasis on participation in drama and dance by young people – particularly those who may otherwise be excluded from such activity. It has an impressive record of achievement in this field and is recognised as a leading youth arts organisation regionally and nationally. Although it has a particular relationship with the communities of East Oxford, where it is located, its remit is countywide. It is owned and partly run by the County Council. Until April 2004 its principal link with the Council was through the Community Learning Service, and since that date it has come within Cultural Services.

  2. Pegasus Theatre Management Committee (PTMC) was set up by the County Council in 1992 as a decision-making body responsible for the direction of the theatre, with representation from local people, adult and youth users, and the County and City Councils, both of whom revenue fund the programme of activity. The majority of staff are employed by the PTMC rather than the County Council. A separate Pegasus Theatre Trust (PTT) was established in 1995, principally as an external fund raising organisation. Its membership comprises some, but not all, members of the PTMC.

  3. The physical condition of the theatre is very poor. In particular studio, rehearsal and backstage facilities housed in old temporary buildings are primitive and in many respects give concern regarding basic health and safety requirements. Front of house facilities are also basic and unwelcoming. Not only do these limitations impact adversely on staff, performers and customers, they also constrain opportunities to develop the centre of artistic excellence which Pegasus has the potential to become.

  4. A bid submitted by PTT to the last major round of Arts Council capital Lottery funding has resulted in an offer of £2.7 million for a capital and organisational development project with a total cost of £5.7 million. A detailed project proposal, including design development, will have to be submitted to the Arts Council in March 2005 in order to release Lottery funds.

  5. Preparation for submission of the project proposal has raised a number of issues relating to the governance of Pegasus and as a result a formal approach has been made to the County Council by the PTMC and the PTT seeking resolution of these issues (Annex 1) (download as .doc file).

    6. Future Governance of Pegasus Theatre

  6. Arts Council England have made it clear that a condition of Lottery funding is an expectation that Pegasus Theatre become a properly independent organisation. This is consistent with discussions which have been continuing for some time regarding the need to clarify the status of both PTMC and PTT, and has been reinforced by the legal advice obtained by PTMC (see Annex 1) (download as .doc file) to the effect that they are operating in a very unclear and potentially personally risky situation.

  7. Alternatives to moving to an independent Pegasus would be either to continue with the existing unclear compromise, or to bring the operation fully under County Council control. The former is not viable, for the reasons given in the preceding paragraph. The latter cannot be recommended both because the Council lacks the organisational capacity and focus to support a specialist arts facility like Pegasus, and specifically because the opportunity of significant Lottery funding would be lost.

  8. Whilst PTMC is in an equivocal position, advice obtained by PTT is that its existing constitution permits it to take on full responsibility for the Theatre, including the capital development project, on-going operation, possession of its assets and employment of staff.

    9. Protection of County Council Interests

  9. If the operation of Pegasus Theatre is fully transferred to the Trust, the question arises of how the County Council can best continue to ensure that its assets (and any ongoing public subsidy) are used in appropriate ways. Options which have been considered are:

      1. a contract or service level agreement between the Council and PTT;

      2. for the Council to become a member – and possibly for the time being to have full membership control – of the Trust;

      3. for Council representatives to attend PTT meetings in an advisory capacity, participating in discussions but with no voting powers;

      4. for the Council to have the right to nominate one or more Trustees.

  10. In the case of (iv), to avoid PTT becoming an "influenced body" or "controlled body" the number of Council-nominated Trustees should be less than 20% of the total. Given the current size of the PTT Board, this would restrict the Council’s nomination to one. Also, in any case of conflict of interest, a Trustee so nominated would be required by law to place the interests of the Trust ahead of those of the Council.

  11. Of the options outlined in paragraph 9, it is recommended that a combination of (i) and (iv) will best serve the interests of the County Council: that is a contract which sets out the Council’s requirements both from the capital development project and from the future operation of the Theatre, together with a requirement that the Trust amend its constitution to provide the Council with the right to nominate any number of Trustees, provided the total nominations were less than 20% of the total Board membership.

    12. Transfer of Assets to Pegasus Theatre Trust

  12. In order for the PTT to operate as a truly independent body it will be necessary to transfer the County Council’s assets – most notably the site, buildings, equipment and intellectual property – to the Trust.

  13. With regard to the site and buildings, soundings will be taken of the Arts Council as to whether a long-term leasehold, as opposed to transfer of freehold, would meet independence requirements. In either case, the transfer will need to be subject to conditions which ensure that in the event of the Trust being wound up or Pegasus ceasing to operate as a Theatre, possession would revert to the Council.

  14. Some equipment at Pegasus is owned by the County Council and some by PTMC. An inventory exercise is currently being conducted to confirm which is which, with a view to PTMC equipment being transferred to PTT. Eventually there will need to be an agreement of the basis on which any Council-owned equipment is to be used by PTT.

  15. The position with regard to intellectual property, including the name Pegasus Theatre and the copyright on any work originating or commissioned there, requires clarification.

    16. Transfer of Staff

  16. The PTMC has already notified those staff which it employs of its intention to transfer them to the PTT. The County Council has been asked by PTT to consider the transfer of the three County Council employees. Two of those employees are on extended leave of absence between August 2004 and January 2005, and it is intended to begin consultation on this issue on their return.

    17. Capital Funding

  17. The County Council’s approved capital programme includes a sum of £45,000 as a first contribution to the development of Pegasus. Further contributions of £405,000 in 2005/06 and £375,000 in 2006/07 have been previously noted by the Executive as commitments against a predicted surplus in the Learning & Culture capital programme (£31.6 million in 2005/06). Clarification that these sums are included in the capital programme will be required in order to secure the Lottery funding of £2.7 million.

    18. Revenue Funding

  18. If the operation of the Theatre is fully transferred to the PTT then the County Council revenue budgets which support some staffing and operational costs will need to transfer in the form of an annual grant. Currently these amount to approximately £90,000 net per annum. The Pegasus programme of activity also receives an annual grant of £15,000 from the Council’s arts budget.

  19. PTT have pointed out that an enhanced Pegasus Theatre will need to seek additional revenue from its public sector funders, from generated income and by seeking private sponsorship. No formal approach has yet been made to the County Council for an uplift in funding, and it is expected that when one comes it is likely to have to be addressed from within existing Learning & Culture budgets.

    20. RECOMMENDATIONS

  20. The Executive is RECOMMENDED to:

          1. agree that the operation of Pegasus Theatre should be fully externalised to the independent Pegasus Theatre Trust (PTT);

          2. give permission to the Pegasus Theatre Management Committee to wind itself up and transfer all its assets (including those owned by the County Council), liabilities and responsibilities to PTT;

          3. authorise PTT to fully manage and deliver the next phase of the Pegasus development project;

          4. instruct the Head of Cultural Services and the Head of Legal Services to draw up a contract with PTT to ensure that the County Council’s interests and those of the people of Oxfordshire are protected in the capital development and future operation of Pegasus Theatre;

          5. require PTT to appoint any number of County Council nominees as Trustees, provided the total of such appointments is less than 20% of the total Board membership;

          6. instruct the Head of Cultural Services, the Head of Property and the Head of Legal Services to negotiate the basis for the creation of new property rights to be taken by PTT on 1 April 2005, to be recommended for approval to a future Executive meeting;

          7. agree in principle the transfer of existing County Council revenue budget in the form of an annual grant to PTT from 1 April 2005;

          8. confirm that the commitments of £405,000 in 2005/06 and £375,000 in 2006/07 are to be included in the capital programme; and

          9. note that consultation with three County Council staff regarding their possible transfer to PTT will begin in January 2005.

KEITH BARTLEY
Director for Learning & Culture

Background papers: Nil

Contact Officer: Richard Munro (01865 810191)

August 2004

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