Theatr Clwyd trust idea to save public cash and offer financial freedom
The local authority which runs Theatr Clwyd is set to hand over responsibility to an independent trust.
Flintshire County Council wants to save on the £895,000 it spent this year.
The Mold-based theatre, which is planning a £30m revamp, also receives money from the Arts Council for Wales.
Council chief executive Colin Everett said the authority was "not in any way letting it go" but wanted to give the theatre more financial independence to tap into other funding.
The ruling Labour cabinet backed the move recommended by Theatr Clwyd's board of governors.
"We're looking to transfer to what is the industry model for theatres by 2021," Mr Everett told the Local Democracy Reporting Service.
"I'm pretty sure it's now the only theatre that's also a production company that's in council ownership.
"Us and the Arts Council will continue to subsidise it, but a lot of it is a financial incentive as it will allow it to access grants and VAT exemptions on ticket sales.
"It gives it more financial independence and would to some extent reduce the public subsidy."
The council previously warned in 2015 that its funding for the theatre could be under threat due to wider budget pressures.
Earlier this year, the theatre was made a grade II-listed building by Cadw, the Welsh Government's historic environment service.
Built in 1976, it was recognised for its special architectural interest as an important example of a post-war civic arts and theatre complex.
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At the time, Cadw described the building as "one of the leading examples across the UK".
In April, Theatr Clwyd won a prestigious Olivier Award when Home, I'm Darling was named best new comedy.
A final report on the proposed change of management is expected to be brought back to the cabinet by the end of this year.