Liverpool Council has written off £1.5m on a loss making pop museum and faces a £3m bill if the current tenant leaves.
The British Music Experience tells the story of British pop and rock. The Cunard Building attraction includes memorabilia from stars such as David Bowie and Cilla Black.
The original operator, Music Experience Britain (MEB), collapsed into liquidation in 2017. If the current tenants do not renew the lease in 2024 the council will be faced with paying out around £3m to refurbish the space.
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The council has agreed to write off £1.2m owed to it by MEB and written off another £300.000 owed in rent and rates by the charity that took over the venture. A cabinet report has revealed that MEB made an unsuccessful request for the council to invest a further £2m in the attraction.
The company entered voluntary liquidation just two months later in December 2017, 'leaving staff and six months’ worth of supplier invoices unpaid, including sums due to the council.'
After MEB collapse charity British Music Experience (BME), took over the running of the pop museum. BME is an independent museum and a registered not-for-profit charity. The council entered into a seven-year lease with BME in March 2017, which capped the council service charges at £65k per year.
The cabinet document reveals that the council originally invested £2.6m in BME to help bring the pop themed museum to Liverpool.
However, the lease did not make BME responsible for reinstating and refurbishing the space if the charity decided to leave at the end of the lease. The council will face a £3m bill when this happens.
The report states the museum's performance under BME was 'not being as expected' and the charity owed £1.6m to the council in relation to rent and service charges.
BME struggled to attract sufficient visitor numbers and were then unable to pay rates and rent to the council.
The council was unable to recover this money, the report states. The cabinet report proposed writing off around £1.2m owed by MEB and £300,000 owed by BME. BME has now agreed pledged to pay £65,000 per year to the local authority up to March 2024.
The council will be faced with paying out around £3m to refurbish the space if BME does not renew the lease in 2024
The report states: "These works are expected to take six to twelve months to procure and complete, during which time void costs will have to be paid for by LCC and re-letting costs (agents’ fees, legal costs, etc.). It is strongly recommended that all future leases should include provisions for the tenant to reinstate the space at the end of the lease which aligns with custom and practice."
Officers have now started a 'lessons learned exercise' to inform future lease agreements.
Richard Kemp, leader of the city's Liberal Democrats, said: "This is yet another example of Liverpool City Council being unable to manage its own affairs. Including the original input into the project in 2017 this programme has costs us at least £4 million in write offs.
"However, the cost is greater than that because we are not taking any rental income from what should be the best commercial property at the Pier Head and could end up having to pay £3 million to put the property into a condition that it can be re-let to another organisation.
"So this project may have cost at least £350,000 per short term job created and a minimum of £200,000 per job created.
"We have called this item in for a full review so that the long suffering taxpayers of Liverpool can find out who took these decisions and ensure that they will not be repeated.
"We will also use this call in to ask for full information about what the rent and service charge income is for the Cunard Building as we believe that this income has continually been overstated".
Director of the British Music Experience, Liz Koravos, said: “Unfortunately, the outstanding debt was the result of a failed third party commercial operator who was to pay both BME and Liverpool City Council fixed sums.
“After a challenging start in Liverpool, we are pleased to have continued here and are excited by the significant growth we have experienced since stepping in and taking over operations.
“The Museum receives consistent rave reviews from visitors from all over the world, and was recently awarded Experience of the Year 2022 and Visit England's Award for Excellence 2022 - the top accolade in English tourism.
“We are pleased there is a resolution and also to have formalised the BME's relationship with the city council. BME remains an important, international asset to the city, continually reinvesting in immersive content, jobs, education programmes and a world-class collection of stage outfits, instruments and artwork which charts the history of popular music in the UK.”
Assistant Mayor and Cabinet Member for Culture and Visitor Economy, councillor Harry Doyle, said: “This has been a complex process due to historical debt issues mainly accrued by the attraction’s former operator, which went into administration and was dissolved as a company in 2021.
“It is now run by new and separate entity, the British Music Experience (BME) charity which we have been working closely with to find a resolution. Following meetings with Mayor Joanne and the team here, we are pleased to have reached an understanding which will allow BME to pay an agreed service charge to the council and continue to build on the success it is currently experiencing.
“As a result, 20 local jobs have been secured and now that this valued and award-winning attraction has been supported through the difficult first years, we now hope to see it grow and thrive.”
The report recommended that future council policy would be for tenants to be responsible for reinstatement costs. Last week's cabinet meeting resolved to approve the recommendations contained in the report.
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