2014-2020 JESSICA Evaluation Study for Nine Polish Regions
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2014-2020 JESSICA Evaluation Study for Nine Polish Regions: Kujawsko-Pomorskie, Łódzkie, Lubelskie, Małopolskie, Mazowieckie, Śląskie, Świętokrzyskie, Wielkopolskie, Zachodniopomorskie Final Report 30 April 2014 DISCLAIMER: This document has been produced with the financial assistance of the European Union. The views expressed herein can in no way be taken to reflect the official opinion of the European Union. Sole responsibility for the views, interpretations or conclusions contained in this document lies with the authors. No representation or warranty express or implied will be made and no liability or responsibility is or will be accepted by the European Investment Bank or the European Commission in relation to the accuracy or completeness of the information contained in this document and any such liability is expressly disclaimed. This document is provided for information only. Neither the European Investment Bank nor the European Commission gives any undertaking to provide any additional information or correct any inaccuracies in it. 1 | P a g e 2014-2020 JESSICA Evaluation Study for Nine Polish Regions 2014-2020 JESSICA Evaluation Study for Nine Polish Regions: Kujawsko-Pomorskie, Lubelskie, Łódzkie, Małopolskie, Mazowieckie, Śląskie, Świętokrzyskie, Wielkopolskie, Zachodniopomorskie Part I Submitted to: European Investment Bank Date: 7 April 2014 Version: Final Report Report completed by: Regional Project Managers: Cezary Gołębiowski, Marta Mackiewicz, Jacek Goliszewski, and Jan Fido Report reviewed by: Agnieszka Gajewska, Project Team Leader and Lily Vyas, JESSICA Programme Manager Report approved by: Bob Green, Partner, Mazars ©Mazars LLP. All rights reserved April 2014. This document is expressly provided by Mazars LLP to and solely for the use of the EIB and must not be quoted from, referred to, used by or distributed to any other party without the prior consent of the EIB. Mazars LLP accepts no liability of whatsoever nature for any use by any other party. 2 | P a g e 2014-2020 JESSICA Evaluation Study for Nine Polish Regions EXECUTIVE SUMMARY This Executive Summary presents key findings of the JESSICA Evaluation Study for Nine Polish Regions: Kujawsko-Pomorskie, Lubelskie, Łódzkie, Małopolskie, Mazowieckie, Śląskie, Świętokrzyskie, Wielkopolskie, Zachodniopomorskie (“Evaluation Study of Nine Polish Regions”, “Study”). The Study has been performed to assist the Regions in incorporating Financial Instruments (“FIs”) into the new Programming Period 2014- 2020 to support urban and territorial development. The objective of this Study was to determine how and to what extent such FIs can facilitate, accelerate or amplify investment in sustainable urban and territorial development in the context of the 2014-2020 Cohesion Policy framework. The Study also seeks to demonstrate why the use of FIs can be, in certain contexts, more suitable to foster urban projects compared to other financial products including grants. The Study also defines the most appropriate FI structures that could be set up by Managing Authorities (“MAs”) to best address their regional objectives in relation to urban and regional development. JESSICA initiative JESSICA - Joint European Support for Sustainable Investment in City Areas - is a technical assistance initiative of the European Commission (“EC”) developed jointly with the European Investment Bank (“EIB”) and in collaboration with the Council of Europe Development Bank (“CEB”) with the aim of supporting sustainable urban development and regeneration through FIs. The objective of JESSICA is to address the challenges and complexity of sub-optimal performance within the urban sector, and to deploy FIs as a strategic tool for cities to promote investment projects as an integrated investment strategy rather than on a stand-alone basis. Under procedures applicable in the 2007-2013 Programming Period, MAs in the Member States (“MS”) are offered the possibility to invest some of their Structural Funds (“SF”) allocations in FIs (revolving funds) supporting urban development and recycle financial resources in order to enhance and accelerate investments in Europe's urban areas. These FIs are Urban Development Funds (“UDFs”) investing in Public- Private Partnerships (“PPPs”) and other projects included in integrated plans for sustainable urban development. One of options available to MAs is to channel funds to UDFs using Holding Funds (“HFs”), which are set up to invest in several UDFs. This may offer the advantage of enabling MAs to delegate some of the tasks required to implement FIs to expert professionals. The main benefits of JESSICA are the following: (i) it makes Structural Fund support more efficient and effective by using “non-grant” FIs, thus creating stronger incentives for successful project implementation, (ii) it mobilises additional financial resources for PPPs and other sustainable urban development projects, and (iii) it uses financial and managerial expertise from international financial institutions such as the EIB. This should allow public and private parties to develop small and large-scale urban development projects in cooperation. Since capital is given out as loans, equity or guarantees, not as grants, in general only projects that generate return flows (i.e. either solely through commercial returns or project revenues generated through payments from the public side, e.g. with availability payment to the project investors or other payments to projects lenders or from other appropriately justified and secured sources) can be financed. Experience in using FIs for urban development and regeneration Based on the findings of the Study, in general, Polish MAs and other market participants (including municipalities and other project developers) have rather limited experience in using FIs. The experience from utilising region specific local FIs providers and intermediaries (including regional guarantee and debt funds as well as local equity providers) is focused on SMEs sector and does not address specific project needs in the urban development space. Relatively weak understanding of FIs and lack of experience in their implementation have also been reflected in the quality of project applications submitted in response to a questionnaire that has been conducted as part of this Study among over 2,500 potential project promoters 3 | P a g e 2014-2020 JESSICA Evaluation Study for Nine Polish Regions (“Questionnaire”). This area needs closer investigation during Ex-Ante Assessments and while designing specific solutions on the level of Regional Operational Programmes (“ROPs”) to address the potential barriers in using FIs. Taking into account limited know-how and experience in designing and implementing FIs, the need for professional support to the potential beneficiaries in project structuring and implementation is very high. It is therefore highly advised that Technical Assistance should also be used to provide a high-quality professional support, in addition to ensuring adequate administrative capacity within the MAs1. The European Commission is currently developing a new Technical Assistance Platform to support the implementation of FIs . The best understanding of FIs has been demonstrated in the Regions that Most of beneficiaries and decided to implement JESSICA and JEREMIE2 initiatives in the 2007-13 MAs who already Programming Period. The implementation of JESSICA is assessed as implemented JESSICA generally positive and shows systematic progress with a steep learning assess it very positive due curve, with several Regions reaching relatively high allocation rate as of to its clear benefits. the end of September 2013 (with the highest allocation rate measured as the amount of loan agreements signed to the funds allocated to the UDFs of over 90% in Wielkopolskie as of the end of September 2013). Current beneficiaries of JESSICA FIs mentioned the value-added of such instruments, in particular: 1) lower interest rates; 2) longer tenors than available in the commercial market and 3) no additional costs and extra fees. Private beneficiaries have indicated additional benefit of JESSICA FIs that allows for financing of significantly larger urban development projects than in the case of grants or financial instruments available for SMEs at the regional level. Implementation challenges with FIs Whilst stakeholders (both on the beneficiary as well as MA level) involved in implementing FIs to date within the Programming Period 2007-2013 were in general positive about the experience, many also noted the challenges involved with FIs. Stakeholders felt that improving and/or further supporting FI implementation would lead to increase in the attractiveness of FIs as well as potentially accelerate investments into suitable projects. In the 2007-2013 Programming Period, the major hurdle experienced by private beneficiaries was, according to the results of the interviews performed, the need to demonstrate an alignment of their projects with respective Local Revitalisation Plans. The general view of private sector beneficiaries is that the process of obtaining the necessary status in the Local Revitalisation Plan is challenging and time- consuming. While this factor should not be attributed to any specific UDFs or MAs, slow progress in this area that cannot be controlled by a private party often discourages potential beneficiaries. This however will not be a requirement for the 2014-2020 Programming Period. In some cases, beneficiaries also referred to time-consuming procedures on the UDFs’ side. Private