Better to let the private sector risk money on a new Brisbane theatre

In a November 2015 post New 1,500 seat theatre would likely be a waste of taxpayers’ money, I questioned the desirability of a state government-funded $1.3M business case to investigate a new 1,500 seat theatre for Brisbane. At the time, I was criticised by the Courier-Mail’s Paul Syvret for seeing things through a “coldly commercial prism” (see this post). But based on today’s news, I feel even more strongly that my comments at the time were justified. Following Premier Palaszczuk’s announcement yesterday of a new $150M theatre being tacked on to QPAC, today’s Courier-Mail reports:

A market-led proposal by Sydney-based Foundation Theatres for a $100 million theatre on the old State Library site adjacent to Queen’s Wharf has been with the State Government since last year. Foundation Theatres, which runs the hugely successful Capitol and Sydney Lyric Theatres in Sydney, would have required only $25 million from the Government.

Yesterday the Premier insisted that proposal was “still in play”.

“If they still want to pursue that they can,” she said.

But by announcing the new theatre as an extension of QPAC she has effectively killed off that proposal.

This is another good example of government activity crowding out private sector activity. Government activity is generally only justified where there is market failure or equity concerns (in which case transfer payments are typically more efficient than public provision of a good or service). Given the market-led proposal from Foundation Theatres, where is the market failure in this case?

The private sector appears willing to have met the bulk of the cost of the new theatre. The private sector proponent Foundation Theatres isn’t totally pure, as it was asking for a $25M contribution from the state government, but this would have been a much smaller outlay than the $150M the government will now spend building the theatre itself. Of course, one would need to consider what exactly the state government would have received for its $25M investment in the Foundation Theatres venture. That said, based on the limited information in the public domain, it is difficult to understand the logic behind the Government’s $150M investment in a new theatre at QPAC.

QPAC_Exterior

By Joe Gatling from Ho Chi Minh City, Vietnam – Queensland Performing Arts Complex, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=11983514

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7 Responses to Better to let the private sector risk money on a new Brisbane theatre

  1. Jim says:

    So QPAC’s latest annual report shows that they have just had a stellar year and actually had revenues that covered about 83% of their costs, leaving the need for grants at a measly $8 million. Clearly this is the time to massively increase capacity, crowd out the private sector, and cannibalise your own (already inadequate) revenue streams!

    I suspect that the interest bill, depreciation, and operational losses on the additional capacity will in in excess of $20 million a year (even under a bold assumption that revenue performance will be similar to the exiting operations and there is no crowding out at all).

    I suspect $20 million a year would be more than enough to provide accommodation for the homeless in central Brisbane. Now that would be the art of good Government….

  2. Katrina Drake says:

    Gene, you really should get out more !

    I have no problems with the Queensland Government spending on public facilities for the arts and education.

    QPAC was built in 1985, as part of the art complex including performing arts centre, art gallery, museum and library.

    It was envisage that the Concert Hall would be the home of the Queensland Symphony Orchestra, the Lyric Theatre would be the home of the Queensland Opera, and the Playhouse and Cremorne for the Queensland Ballet and Queensland Theatre.

    Queensland has been in desperate need of more performance space for a some time. In 1985 when QPAC was opened, the Queensland Population was 2.6 Million, it is now 4.6Million.

    Build it and they will come…. I doubt anyone expected the number of international concerts and musicals that would book out our performing arts theatres, and squeeze out our local arts companies.

    I’m hopeful more performance spaces might lead to more competition for the audience ticket.
    $340 for 2 tickets at the Lyric Theatre is outrageous.

    I hope they build both theatres – see you opening night !

    • Gene Tunny says:

      I have no problem with public investments in arts and education so long as they stack up. This doesn’t appear to be the case here as there appears to have been a better value for money option from Foundation Theatres.

  3. cairnseconomy says:

    Who knows. At least in regional centres the size of the theatre as I understand is a bit significant when it is required for public high schools. Who has a clue?
    Cairns has now almost completed a new civic theatre and at the same time ……

    • cairnseconomy says:

      Also. Have no idea why public high schools have a requirement to fit their entire school in a public theatre once a year? Have they surveyed their students on this?

      • Gene Tunny says:

        Haha. The quality of school facilities nowadays is extraordinary. I recall many horrible full school assemblies sitting in the large school quadrangle in the hot Townsville sun.

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