The three-year project is already well underway - but the pandemic, Brexit and rising energy costs have sent the final bill soaring to £7.35m.
And it took a decision by the council’s policy and co-ordination committee to inject the extra cash to avoid the project being scaled back – and keep it on track for re-opening in Spring 2023.
It will from money set aside to deal with Covid pressures.
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Councillor David Ross, co-leader of the local authority, said: “We need to bite the bullet. The work has started and needs to be finished.
"We need a facility that is fit for purpose and will enhance things going forward. It is essential we approve this.”
But he shared the disappointment of other councillors at the rising costs and the length of time the project was taking – the theatre will have been closed for three years before the public gets inside to see the changes.
He added: “I understand additional problems have bene found and we have been hit by pandemic.
That said, this is an important project for Kirkcaldy. The theatre plays a key role and the cultural hub was key in enhancing the wider town centre initiatives in Kirkcaldy.
He was supported by his co-leader, Councillor David Alexander who said: “We will have a fantastic facility at the end of this. It will be something special for Kirkcaldy.”
The theatre is scheduled to re-open in March 2023 to host the 300th anniversary of the birth of Adam Smith - and a major festival is already being planned to cash in on the landmark anniversary.
Phase one saw the auditorium given a complete overhaul, and workers have now moved on to start work on the foyer, changing almost everything about its lay out to incorporate a new performing arts space, moving the cafe, and bringing the box office front and centre of the space.
The Beveridge Suite is also scheduled to be upgraded.
Behind the scenes, the closure has also allowed electrics to be upgraded, rot tackled, stonework replaced and insulation upgraded to cap energy bills.
The additional funding was welcomed by the trust which runs the region’s theatres, museums, libraries and art galleries – who said the work at the Adam Smith was “a golden opportunity” to transform a long-established venue.
Heather Stuart, chief executive, OnFife, said: “We welcome the additional funding that has been allocated to complete this exciting project, which will bring new life to this cultural asset and benefit both Kirkcaldy and the wider Fife area.
“The refurbishment of the building presented a golden opportunity to make more of this much-loved building by creating a vibrant creative hub in the heart of the town centre, revitalising the popular Beveridge Suite and improving the lower function suite.
!It has also been possible to bring forward scheduled works on sound and lighting that will greatly enhance performances for audiences.”She added: “We’re now looking very much to the future and a grand reopening next year when we can welcome audiences back and help celebrate the 300th anniversary of Adam Smith himself.”