SHETLAND Islands Council has pledged to learn lessons after councillors conceded that several mistakes were made in the way its £7 million investment in cinema and music venue Mareel was handled.
The local authority provided a £6 million grant to Shetland Arts to help pay for the building just over five years ago, but initially failed to take out any form of security or collateral to protect its investment.
When a succession of delays and hitches left the project in jeopardy in 2012, the council stood to lose the £6 million – whereas another funder, Creative Scotland, had taken out security over the building as part of its grant condition.
Last February councillors reluctantly agreed to provide a further £1.2 million to help secure the arts venue’s future. As a result it now has the option of purchasing Mareel for a pound once Creative Scotland’s 25-year security over the building expires.
Members of the SIC’s executive committee met in private on Monday to discuss the findings of a report into the local authority’s involvement in the project.
They heard that regular updates to a “Mareel sounding board” had ceased in summer 2012 as the building neared completion, a year and a half behind schedule.
But there were “outstanding issues with the project at that time which members did not have the opportunity to debate”.
It was only in November 2012, three months after the venue belatedly opened its doors, that Shetland Arts formally approached the local authority seeking more money.
A £600,000 package of “bridging finance” was temporarily agreed while the council carried out a review and due diligence.
Up until last year the SIC provided payroll services to Shetland Arts, and when the arts agency fell into financial difficulty it found itself unable to reimburse the council for a considerable amount of staff wages. That money was subsequently repaid in full.
After the review was completed, councillors agreed to provide £1.2 million “thereby securing the future of Mareel and safeguarding the considerable investment of public funds” in the £14 million project.
Council leader Gary Robinson, who was strongly opposed to the original investment back in 2008, felt that the council was left with no option but to step in and ensure Mareel did not have to shut.
“It wasn’t just about the money,” he said. “It was that, having had the building built and standing here in Lerwick… that wasn’t going to be any good to anybody.”
Robinson said the close involvement of some councillors and officials in the project “gave an impression of a level of authority and responsibility for the project on behalf of the council which was not accurate”.
There was “very little dialogue” between the SIC and other funders, who along with Creative Scotland included HIE and the European Regional Development Fund.
This “disjointed” approach meant funders were “not in a positive to act collectively to address issues in a timely manner”.
The council noted that since June 2013 a “more collaborative” approach between the funders had prevailed as efforts were made to resolve an acrimonious dispute between Shetland Arts and main building contractor DITT.
Robinson said he did not feel any individuals should be held responsible for the council’s failings as it was “symptomatic” of well-documented problems within the organisation up to 2010.
After the Accounts Commission’s hearing into the crisis-hit local authority that summer, changes were brought in which give him “confidence in saying that a similar project would not be handled in the way this was”.
Robinson agreed that the Mareel project had been a victim of circumstance – seeking public money when a double whammy of the global financial crisis and the full extent of the SIC’s financial plight were becoming apparent.
“Before the last council that question [of whether to fund such a project] would never have arisen,” he said, adding that lots of other projects have subsequently been put on the backburner while the local authority “grapples with a massive structural deficit”.
Earlier this month Shetland Arts director Gwilym Gibbons announced that he is to leave the organisation in October after eight years at the helm.
Following all the difficulties surrounding its construction, since opening 18 months ago Mareel has proved hugely popular with demand for the cinema vastly outstripping expectation.
Gibbons said the venue had helped transform Shetland’s cultural landscape and “we are only just beginning to realise the benefits of all the educational activity and everything that Mareel can do”.