KIRKLEES Council has warned that the company which owns the John Smith’s Stadium is likely to go bust unless a new ownership model can be agreed.
Kirklees Stadium Development Ltd (KSDL) has seen its income hit by the Covid-19 pandemic.
Its annual turnover has reached as high as £4 million in recent years but it has loans to the bank and Kirklees Council totalling £6 million.
The council says the 25-year-old stadium has a backlog of repairs and maintenance which will cost £9 million over the next 10 years. Much of that work must be carried out within five years, and there is little prospect the company could secure new commercial loans.
The threat to KSDL is revealed in a report to Kirklees Council’s ruling Cabinet, which meets on Tuesday.
The report says: “Whilst annual turnover of KSDL has been up to £4m in recent years, the cost base upon which the stadium operation is modelled has come under increasing strain.
“Covid has further impacted significantly on current KSDL stadium operations and on the financial landscape within which the two professional sports clubs operate.
“KSDL management has undertaken several pro-active measures to keep the stadium operational within its current and forecast financial means over the period.
“This includes short-term cashflow management measures, eg deferring loan re-payments, but this is not sustainable beyond the short-term.
“Even excluding the Covid impact, there is an underlying structural financial deficit between KSDL income projections and expenditure on operating cost requirements and outstanding loan repayments. This is before consideration of future stadium operational investment requirements.”
The report says that the HD One leisure and entertainment scheme would have rescued KSDL’s medium to long-term future but that development had “stalled in the current economic climate.”
KSDL is owned by the council (40%), Huddersfield Town (40%) and Huddersfield Giants (20%) and the report explores other possible ownership options.
The council is said to want to retain the stadium as a community asset and wouldn’t want the stadium to be caught up in any administration involving either sports club.
The report clearly states, however, that not changing the ownership structure would likely end in disaster. If the company crashed and the bank loan couldn’t be repaid the council would be left to repay the debt under its guarantee. Outstanding council loans – taxpayers’ money – would also have to be written off.
The report says: “A do nothing approach would lead to an administration/insolvency situation. In this scenario there would be a high probability that the outstanding bank loan would default impacting on the council guarantee and leaving the council with a liability.
“The council’s historic debts in KSDL would have to be formally written off.”
An administration may also impact on Kirklees Active Leisure, which runs the stadium pool and gym facilities, the report warns.
The council is proposing the creation of a Community Trust, which would take on the ownership, protecting the stadium in case of any administration involving Town or the Giants in the future.
The council says such a move would ensure the stadium remains available for community use and, as a new commercial entity, the council would be prepared to loan the Trust the £13 million it estimates it needs going forward.
On top of that the council is eyeing a piece of prime employment land bought by KSDL for the HD One scheme.
The land off Gasworks Street and bordered by the Huddersfield Broad Canal and St Andrews Road could be developed by the council as part of its town centre regeneration plans. The report says the council is prepared to pay an agreed valuation for the land.
On Tuesday, the Cabinet will be asked to agree to support the setting up of a Community Trust “if this proves achievable”; lend the Community Trust £13 million; and buy the Gasworks Street site if an agreed valuation can be reached.
Even if councillors agree there is still a long way to go.