A perfect storm sunk the Byre Theatre, Fife councillors were told as they backed moves to resurrect it under a trust.
The St Andrews venue closed its doors last Thursday after succumbing to financial troubles and a liquidator has been appointed.
Executive members of Fife Council were told that three forces combined and a “perfect storm began to emerge”.
The 80-year-old theatre had struggled since its new building opened in 2001 and the Scottish Arts Council now Creative Scotland withdrew funding in 2011.
The council’s executive director for environment, enterprise and communities, Steve Grimmond, said it was finally pushed under by a predicted reduction in income, significant debt from the external operator of the cafe-bar, which closed down, and the depletion of limited budget reserves.
“This resulted in critical, then terminal cashflow problems,” he said.
Despite having a link officer in the council and two councillors on the Byre’s board, Mr Grimmond said it was only in the final hours the local authority learned of the financial black hole.
He said: “We were aware that the financial parameters within which the Byre was operating were difficult but they were able to produce a balanced budget.
“The extent of the problems only became apparent very, very recently.”
Asked whether the theatre’s management had approached the council for assistance on top of its annual grant of £258,000, Mr Grimmond said: “The Byre Theatre appreciated that Fife Council continued to support it despite the complete removal of Creative Scotland funding.
“The board recognised the contribution Fife Council was making and did not see Fife Council as a route for additional support to sustain the model.”
Ahead of a meeting on Friday between MSPs, Creative Scotland and culture minister Fiona Hyslop, the executive committee unanimously backed the development of proposals for the theatre to be operated by Fife Cultural Trust.
The council-funded trust already runs Adam Smith Theatre, Carnegie Hall, Lochgelly Centre and Rothes Halls and the Byre had been due to join it on April 1.
Interest previously expressed by St Andrews University in using the building, which is owned by the council, is also to be explored.
Mr Grimmond said: “We have the basis for a far more efficient model that can operate five theatres across Fife.
“The resources that Fife Council provided for the Byre Theatre could be provided to the trust.
“There’s also an opportunity to diversify the nature of what is delivered at the Brye and engagement with the university could be important in terms of that.”
Fife’s SNP leader, Councillor Peter Grant, said the trust taking control of the theatre was an obvious option, at least in the short-term.
He said: “It can afford to run at a slight deficit for a while. I don’t want to say we can’t afford to do it; I don’t think we can afford not to do it.”
Questioning whether the council could fund five theatres, Liberal Democrat leader Tim Brett asked: “Are we trying to do too much with the resources we have?
“As much as I want to see the Byre reopening, I don’t want to see any of the other theatres close.”
Deputy council leader David Ross, who chaired the committee meeting, said: “There are absolutely no guarantees going forward but there are positive signs.
“People are talking to each other and looking at how we can find the best solution.”