The Brighton i360 has been given a million-pound warning as councillors allowed the seafront attraction’s operator more time to pay off its debts.
The i360 owes Brighton and Hove City Council almost £48 million, including interest, and has been told to make payments totalling at least £1 million this year.
The owners were warned that if Labour wins the local elections in May, they could look for a new operator if repayments keep being missed.
But this would almost certainly mean that the council would have to write off much or all of the debt while still owing millions of pounds to the government.
Councillors decided against foreclosing on the debt now because it would risk a closure before the summer season – the best chance of the attraction making enough money to pay down some debt.
So far, the i360 has repaid £5.8 million but, under its original repayment schedule, had been due to stump up almost £18 million by now.
The latest crunch meeting – a special meeting of the council’s Policy and Resources Committee – was called after a missed repayment of £900,000 at the end of December.
And it followed a demand by the council’s external auditors for the risk to be recognised in the annual budget which was set last week.
The council is setting aside £2.2 million a year to cover repayments to the Public Works Loan Board, having brokered a £36 million loan to enable the observation tower to be built.
Councillors met at Hove Town Hall for four and a half hours today (Monday 27 February) and spent more than two hours in closed session discussing the finances in detail.
They considered a report which said: “It is … recommended that the board and management be given time to implement their new strategy for a successful attraction at the i360.
“This will likely be the best option to maximise the council’s return and protect the public purse.”
The strategy includes “walks” on top of the i360 pod and “immersive experiences” that mix theatre with food and drink as well as street food stands and a “games bar”.
The i360’s bosses told councillors that it had been badly affected by the coronavirus pandemic, followed by the “cost of living crisis” and rising inflation, in common with the wider tourist economy.
But councillors said that the i360 had missed payments on its debt before the pandemic.
The Green leader of the council, Phélim Mac Cafferty, asked for “contrition” and said: “Only a few days ago, we had to set the budget. It has been absolutely horrendous.
“What we would also need to hear is some contrition, some reflection that this is adding to the burden on the city.”
Founding director Julia Barfield, who chairs the i360 Ltd board, said that the economic situation was “dire” and she said: “We are very sorry if anyone suffers because of the i360. I’m very sorry.
“We are also contributing to the city to the tune of £30 million a year. It’s a desperate situation but we are doing our best to come out of it with a whole new provision for the future.”
Councillor Mac Cafferty asked why the i360 did not make enough money to service its loan repayment due at the end of December, despite the success of the nearby Shelter Hall.
He said: “You operate on one of the most successful spans of coastline in the entirety of the United Kingdom.
“You are feet away from Shelter Hall where you have to book ahead. I’ve never been able to turn up at Shelter Hall and just get a seat and have some food and drink.
“I’m wondering what has been missing on the board. The rest of us can look up and down the coast and see places like Shelter Hall doing really well. What has been missing from the board that means you haven’t been able to do that?”
Mrs Barfield said that the i360 had helped to regenerate the whole area, pointing out that the Shelter Hall was a building site for the first four years of operation.
Conservative leader Steve Bell asked the i360 board why it had not signed the loan restructure agreement last year.
The revised schedule meant lower interest, lower repayments for several years and regular cash sweeps to service the loan.
Mrs Barfield said that the loan restructure had been agreed in principle and there was no reason why the agreement was not signed.
But the council’s assistant director for city development and regeneration Max Woodford said that there were outstanding issues to resolve.
However, the restructuring did not work once the first payment was missed without an agreement in place.
Councillor Bell said that the i360 company owed it to the city to apologise, adding: “Why is it acceptable that you do no repay the loan – the monies you’ve borrowed from the residents of this city by the council on their behalf? Why is it acceptable that you don’t repay it?”
Mrs Barfield said that she did not think it was acceptable but “just not possible at this time”. She said that the i360 company intended to repay all the money in the long term.
Another director, Eleanor Harris, a visitor attraction consultant and the former i360 chief executive, told councillors that the i360 had “performed well” compared with other indoor attractions nationally since the pandemic.
She said that the £30 million economic benefit to the city had been calculated scientifically, taking into account hotel stays, restaurant bills, taxi fares and other visitor spending.
And by using local suppliers whenever possible, Ms Harris said that the i360 had added more to the income of the city.
Labour councillor Amanda Evans asked how the i360 could be described as successful when it could not pay its debt.
She said: “I understand some attractions, purely in terms of visitor numbers, perform better than others – and I appreciate people are working hard to make that happen.
“But it is complacent and insulting to describe something as ‘bouncing back successfully’ when it is not paying its debts.”
Another Labour councillor, Clare Moonan, said that Labour had never thought it would make sense to borrow money from the Public Works Loan Board for a visitor attraction.
She said: “We’ve tried to make it work for the last six years – and we will continue to try to make it work because that is in the best interests of the city.
“It’s £151 per person in the city – the repayment of this loan – so we need to make it work in the best interest of residents of the city.
“If it was autumn, I might be recommending we pull the plug and get a new operator. It’s not. We’re in the spring. We’ve got the summer ahead and we’ve got to try to get what we can out of the i360 over the summer.”
After two hours of discussion behind closed doors, councillors agreed to
- Note the new strategy
- Affirm the council’s key focus is to ensure as much of the public money owed by the i360 is paid back quickly
- Reserve the right to step in and enforce its rights under the loan agreement
- Commission restructuring experts to ensure regular and frequent finance updates and cash flow forecasts from the i360
- Receive further details on the short-term plan for the summer 2023 season by the end of May
- Seek significant reassurance of the viability of a new long-term business plan through the i360 member working group
The Tory and Green gift that keeps on taking.
And neither party has taken any responsibility for their decision to vote for the loan.
It doesn’t make a hoot of a difference of who was responsible. What is important is how they now deal with it.
It doesn’t make a hoot of a difference of who was responsible. What is important is how they now deal with it.
A sorry tale indeed. They ought to be able pay something back… Kitcat’s Folly was always going to be a white elephant. Many of us knew that. And the insult of building this new, useless structure directly opposite the rusting hulk of the old West Pier. All that money…we could have had a new West Pier, powered by wind, solar and tide, with a dock at the end for boats to take people out for the day. The old West Pier should have been removed long ago. It’s dangerous and it’s not pretty. It’s a reminder that the city is rotting and needs a good dose of TLC, and people in charge who have common sense instead of daft ideas.
Bizzare that the one in Weymouth at half the height only cost £3.5m this opened in June 2012 and closed in 2019 and subsequently sold, it was owned by Merlin Entertainments (owners of Alton towers, chessington, Thorpe park, Lego land etc)
Odd that the iSore opened in August 2016 at £42.6m and doesn’t work financially, someone somewhere received a big fat cheque .
Misue of public funds verging on maleficence. Warrants a police investigation.
The Loan proposal (agreed in two oarts) was clearly identified as high risk hy officers. Greens & Tories voted for the 2nd decisive top up loan and Labour meteky abstained. Nobody voted against.
Disgraceful.
So many of us saw through this absolute disgrace of a supposed attraction, a vanity project from Jason Kitcat and his cohort’s, burdening the locals with a staggeringly large debt. Certainly should be a criminal investigation for this shambolic farce, Councillors and designers/financial ‘partners’ need to be put before a committee to confess their wrongdoings.
The Green Party; a newer grape, on a withered vine…
A set of stocks should be installed next to the Town Hall. All council officers and councillors complicit in pushing the scheme through, should be made to sit in them . Rotten fruit will be provided.
Except for tomatoes. Even rotten ones are too valuable at present.
Can we get a comment from Jason KitKat – as leader of the Greens’, he was the prime mover in pushing this over the line
“ Councillor Mac Cafferty asked why the i360 did not make enough money to service its loan repayment due at the end of December, despite the success of the nearby Shelter Hall.” That’s hilarious.
Hungry people love an excellent piazza and a beer at a reasonable price with friends and family, sitting down with a sea view. That’s infinitely better than a very expensive sea view, but absolutely nothing else – and having to stand. There is no comparison. Mr Mac Cafferty.
The company directors are fools for pitching this doomed venture. The Green council was idiotic to buy into it.
The original business proposal needed deeper due diligence. It was deeply flawed & in my view the fame of the London Eye architects blinded officer and councillor perspective.about i360 boasting by the developers (Mr & Mrs Marks basically).
Valerie
There were lots of flaws within the operational programme for a start and question marks on the proposed numbers.
I wrote to the council requesting information on where they got these numbers from.
I further wrote the comment.
I note that flights will be approximately 20 minutes and you will operate three flights an hour.
Would someone please explain how long it will take to unload and reload the pod especially if we are considering the expected numbers per flight that I roughly worked out as an avarage of 250 per flight?
Where are the apologies from Green party and Tory Councillors? They voted for £40.2Million of public money to be spent on this initially, together with the business proposals and the plan. Now, the Council is saddled with the massive cost of repaying that amount in installments every year. There is also the maintenance costs, the staff, the public relations, the Council staff/time and everything else associated with this Company.
They also failed to ensure any Council representation on the Board of Directors for many years and let the i360Ltd get away without paying the installments for many years. Now, there are massive debts that are resulting in Council cuts because the Council are still responsible for paying back the loan every year.
It seems reasonable to take the reports above of what Councillors MacCafferty, Bell, Evans, and Moonan said at face-value, since none of them have yet posted anything here (our Councillors almost never do, why not?).
In that context, and if any of them wish to retain a shred of personal integrity after such a shameful performance, none of them should put themselves forward in the May Council elections to represent our best interests ever again, surely?
Because that’s clearly the greatest failure of Monday’s meeting – everybody trying to blame everyone else, in an overly-subjective and personally emotional meeting, rather than in the rational, objective, and competent way which such a major financial problem requires!
And although all three Parties (+ the Lib Dems, currently without a Councillor) have affirmed, on multiple occasions, that a committee system is the best form of Local Democracy (which it can be, providing we keep on electing Minority Administrations!) Monday’s P&R Cttee was an inexcusable hollowing-out of the purportedly democratic principles inherent in the Constitution of our City Council (for which all Councillors who participated in that meeting should feel deeply ashamed!).
How so? Well, Policy & Resources is a so-called ‘Executive Committee’, and under our Constitution substantive (financial) decisions must be taken 9n the basis of an (adequate) officers report, which has been placed in the public domain early enough for us taxpayers to be able to analyse it, and to make whatever representations to our Councillors we feel are needed.
However, far from us taxpayers being given an equal chance to have our say, the corporate debtor (Google as: beta I-360 Attractions Ltd for Companies House records) appears to have been given two hours in open session, and possibly two more in closed session, in which to plead their case!
However, in our council’s Constitution, the forum for taking evidence is a formal Scrutiny Panel. in principle held in open session, where any of us can also present our views, if need be contradicting those of other witnesses and/or officers and, with the consent of such witnesses, questioning them directly.
That is what true Local Democracy should look like, surely?
But we are where we are, and our muppets of Councillors and Town Hall officers seem to be so intent on trying to absolve themselves of all blame that they appear unwilling to recognise the realities of the dire situation we’re now in!
So, in the hope of assisting them to focus, here are some points to ponder:
1. Around 2012 local media identified the Top o’ Texas Tower, being built at the State Fair Park in Dallas. Apparently costing the Texans some $12m. So a Gyrotower 1300, from Intamin (specialists in such towers since the 1960s), similar in height to the i360, and revolving slowly, as it rises and falls, but (a big “but”) designed to give 1300 rides per hour, compared to the puny maximum of 400ph, from the i360!
Allowing for the heavy civil engineering required, due to the giant sea-front tunnel, such a profitable tower could have been built here back then for around £9m – such a long way way from the £52m capital cost published in the i360 annual accounts!
2. But £52m is a deceptive figure – yes, it probably did cost that much (because of being a bespoke design), but the nett return upon liquidation is likely to only be in the region of £3.5m, after all sale costs etc!
Why so little? Because a gross price of some £4m-£4.5m is all that it’s worth to a short-term investor!
And “short-term”, when it still has some 43 years of its 50-year Design Life to go?
Well, in truth and as a passenger lift, it only can have such a life with regular, and very expensive, inspection and maintenance of the actual tower. Due to the nature of its design (welded flanged tubular sections bolted to each other), and its sea-front location, probably £2m-£3m every so many years, and for several months, depending on weather conditions during the works!
And why so costly? The tubular sections (aka ‘Cans’),are rolled from steel plate around 75mm (or more?) in thickness. It’s extremely difficult to produce quality fusion welds in steel so thick! Because the really massive heat input required can result in the outer layer of the steel liquifying and running away before the deeper layers have become sufficiently fluid to fuse together!
Due to the thickness of the steel it’s likely that all seams needed to be welded on both sides. It’s also almost certain that ‘minor weld defects’ were seen on X-ray films, and accepted.
However there is no guarantee that what was a ‘minor defect’ in the factory in 2015 will have remained so after some 12-15 years of constant thermal and wind stress in a maritime environment?
Self-evidently conducting an in-situ X-ray re-examination of up to 1600m of welding (and repairing defects found) is a major technical project, and thus one which will, in another 5-7 years, probably cause the tower to be condemned as being ‘Beyond Economic Repair’.
And adding to that misery is the issue of the special flange bolts, which probably cost several hundred pounds apiece! Like in modern engines these were ‘pre-stretched’ to a specific tension. Thus sample bolts will need to be pulled from each flange, to establish the degree of tension they’re still exerting. And as, like similar engine bolts, the metal no longer possesses sufficient elasticity to permit safe re-use new bolts will have to be installed to replace the pulled ones (and possibly more, if lab tests indicate probable weaknesses in other bolts). Again an essential, but expensive, task if the tower is to be considered safe to use!
Thus, and given that there is not the slightest chance of I-360 Attractions Ltd ever paying our City more than the merest fraction of what we’re owed, what to do?
Seize the project without further delay, before HMRC does for unpaid taxes etc, and/or before Julia Barfield (who appears to be the ultimate controlling owner) puts her companies into administration?
Then BHCC can capitalise the unpaid loan in its books over the next 10 years or so. With an annual Capital Budget of around £200m per annum there seems to be space both for that, and to budget for about £3m in demolition costs (there’ll be little or no scrap value, due to the high cost of cutting-up such thick steel into the small sizes needed for the recycling market).
And operation for the remaining few years? Logic suggests by the Royal Pavilion and Museums Trust who, in an earlier incarnation, have operated the Royal Pavilion (a true international attraction!) for many decades, surely?
Indeed, all through this pathetic (corrupt?) saga, every Councillor, as well as the rest of us taxpayers, has been able to observe that Pavilion visitor numbers had plateaued at around 300,000 per annum, and that’s with decades of sustained professional tourism marketing!
Which seems to leave the largest question of all: just who can and will be prosecuted (and/or sued) for defrauding us City taxpayers of more than £45m, and for wantonly having done so in defiance of the many accurately-reasoned objections made in advance of the fatal decisions to lend public money to a LIMITED LIABILITY company, without requiring the advance deposit of assets professionally valued at 120% or more of the amount of public money to be lent, as security against the risk of default?
Easy response: professional (theme park) investors saw the i360 project was financially unviable, as did dozens of City taxpayers. Ergo BHCC should also have walked away, so why didn’t that happen, before we landed in this predictable, and predicted, financial disaster?
So let’s all try to elect some decent and competent Independent Councillors on May 5th, to hold a common-sense Balance-of-Power over the mainstream Parties who’ve been betraying our trust for far too many years?
Will never make money as the whole complex is in darkness come 6pm. The buildings around the i360 should be used around the clock with bars and perhaps a nightclub. The pod could be a cocktail bar at night doing hourly flights. It only needs a portable loo fitted. The bar is already there.
BUT IT HAS ZERO CHANCE TO GET THE LICENCE AS THE COUNCIL AND THE POLICE WOULD OBJECT.
The council gave millions of our money to the venture we locals said would not attract the number then goes and build a wheel in direct competition at christmas.
How about making the whole complex into a STAR WARS ATTRACTION.
When the complex is not allowed to work around the clock it will never make money. The buildings around the tower close when the pod closes.
This is shameful. There has to be a Public Enquiry, as to how this was allowed to happen.
I have lived in this seaside town for over 60 years’ – all they had to do was come and ask me, and I would have told them they they have more chance of flying to Mars than this so-called attraction making any money, let alone paying-back the loan.
Scandalous.