The minimum amount the i360 is due to pay back the council each month is set to be slashed – but it will have to hand over nearly all its profits on top of that.
More than five years after it first opened, the amount the seafront attraction owes Brighton and Hove City Council has increased from £36.2 million to £42.871 million after years of missed payments.
Low visitor numbers were initially blamed on unreliable train services and poor weather, and covid has hit takings even harder.
The council borrowed the money from the government’s Public Works Loan Board (PWLB), at an interest rate of 2.78 per cent.
When the loan was agreed, the i360 agreed to repay the money to the council at a rate of 6.53 per cent, allowing the council to invest about £1 million a year in regenerating the seafront.
But only a handful of repayments at this rate were made before the i360 started to default on the loan in June 2018.
The council is now being asked to agree a restructured loan repayment, slashing the interest rate to 3 per cent.
A minimum repayment schedule has been drawn up over 25 years, with the first six-monthly payment set at £900,000 in December, and £600,000 in June next year.
However, every six months the council will be able to take all the spare money from the i360’s bank account in a “cash sweep”, leaving only enough funds to cover cash flow.
When it first opened, it was paying the council about £1.47 million every six months.
The proposed restructure is detailed in a report due to go before Thursday’s policy and resources committee, which was published this morning.
The report says: “(Councillors have) expressed a clear desire that first and foremost the city council protects the public purse and gets back the money it has borrowed from the PWLB, plus the interest payable by the council on that loan, and that it does this as quickly as possible.
“Doing this quickly minimises exposure to risk, and so the desire to recover the council’s position as quickly as possible is prioritised over and above the city council receiving the ‘margin’ it was expecting to receive on the loan.”
It adds that the “cash sweep” would continue for five years, but if the i360 was doing well after that, it would be able to keep more of its profits, providing an incentive for it to boost performance.
Another £4 million loan made to the i360 by the Coast to Capital LEP, which has now been transferred to the council at no cost, will be repaid once the PWLB debt has been cleared. No interest will be charged on this.
A note at the top of the report says it was published late – less than five working days before the meeting – because discussions with the i360 had continued yesterday.
Within minutes of it being put online, the council issued a press release saying the restructure would “balance the books and secure a sustainable future”.
It quoted an anonymous council spokesperson saying: “The i360 has proved to be a popular visitor attraction and contributes to the city’s year-round visitor economy.
“It has brought with it a number of benefits to what is now a vastly improved and regenerated part of the city’s central seafront.
“The loan restructure is designed to improve the stability of the i360 so it may succeed into the future, as an employer and an important part of the city’s tourism offer.”