Chris Sayers, chairman of the Alnwick District Playhouse Trust, detailed the difficulties facing the theatre at a meeting of Alnwick Town Council.
He said: “Three years ago the plan was to move into a partnership whereby the county council would purchase the playhouse building and then rent it back to the theatre and that's exactly what happened.
“The refurbishment, as everyone is aware, took a lot longer than we expected but it's a fantastic refurbishment. The council put in £2.4m and we raised independently a further £800,000.
“The other big change is that we now have the library and tourist information centre integrated which is great.
“We were entering a new era where we would have to pay rent. Previously, although the building was in many ways falling down, we didn't have to pay any rent.
“Quite rightly in this new situation we had to pay a proper commercial rate back to the county council and that was calculated at £42,000 per year.
"That provides us with a challenge because the finances of the playhouse didn't deliver a £42,000 bottom line - they delivered zero.
“We currently do about 60% of our productions which make money - the tribute bands, the films and music events. It cross-subsidises our community events, youth theatre and schools stuff.
“We’re here as community arts centre and it’s not just about providing commercial stuff, it’s making sure we get a balance – and it’s tricky.
“We want to keep that 60/40 split but the problem with that is that it doesn’t give us a great deal of flexibility in terms of income generation and suddenly we had to find £42,000.
“We could have switched that 60/40 mix to having more of the commercial stuff and less of the community stuff but we didn’t want to do that.
“So we put together a business plan and told the council we needed some slipstream time, which they were very generous about, in bringing that rent up to the full amount which will happen in two years’ time.
“And we wanted to look at how we could use the facilities in the new playhouse in terms of the studio and restaurant and expanded auditorium to generate the financial headroom without changing the nature of that community/professional work balance.
“That was the plan and then Covid came. The problem for us was that we were only open for three months.
“Everyone was desperate for the playhouse to open and piled in. They were the three busiest and most profitable months in the playhouse’s history.
"It may partly have been down to pent-up demand but it showed us that we had a model that worked but then we got closed pretty much until this summer.
“Financially, at this moment, we are in an okay position and it’s partly because we accessed the furlough payments for Covid support which meant we didn’t lose any staff and we accessed emergency funding from Arts Council England, about £180,000, which was huge. That allows us to cover our losses and get back up to full function without going broke.
“We won’t sadly have £180,000 in the bank. The problem with theatres is that you make money on your last 10 seats. If you see a theatre with 80% of the seats full it’s going out of business. We make our money on the last few seats and we couldn’t run with full auditoriums when we reopened.
“We started with half capacity and we’ve still not got full auditoriums. We’re doing it carefully so there is confidence in the community to come back into the theatre and it’s going to be slow.
“We have this recovery plan but every time we open and it’s not full on our professional stuff that’s what this Arts Council money has allowed us to do.
“We will get there and the future is looking very positive. We’ll get to a point next year when we’re totally up and flying and at full production again.
“The problem is that we’re starting at minus two years on our business plan. We were meant to be two years further ahead on the development of our business and we’ve just been paused. We are not two years paused on our rent so we have to bridge that gap.
“About 85% of our income comes from business that we fund and about 15% comes from public funds. That 15% allows us to protect that 60/40. If we don’t find other ways of doing it then the only answer will be to shift to a 65/35 or 70/30 model.
“I am incredibly positive about the future of the playhouse. We have used the time during Covid to do quite a lot of work to finish off the building, to experiment with some new things we’d like to do and to think about the future.
"Now we really just have to get on with it and weather this transition into our new operating model over the next couple of years.”
Over the coming weeks, audiences are encouraged to wrap up warm as the theatre has its air conditioning system turned up as a Covid precaution.
Mayor Lynda Wearn said: “It’s very good to hear the playhouse is in a good position and hopefully the audiences will be coming back in their droves soon.”