JESSICA JESSICA Initiative for North Rhine-Westphalia EVALUATION
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Nd JESSICA JOINT EUROPEAN SUPPORT FOR SUSTAINABLE INVESTMENT IN CITY AREAS JESSICA Initiative for North Rhine-Westphalia EVALUATION STUDY Contractor: Prof. Dr. Michael Nadler Ziegeleiweg 36; 40591 Düsseldorf Email: [email protected] kindly supported by: May 2010 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. Evaluation Study --- JESSICA iiinitiativeinitiative for North RhineRhine----WestphaliaWestphalia Page 222 This work, including all its parts, is protected under copyright law. Any unauthorised use outside the narrow limits laid down by the Urheberrechtsgesetz (Law on copyright) is unlawful and liable for prosecution. This applies in particular to reproduction, translation, microfilming and storage and processing in electronic systems. Copyright: Prof. Dr. Michael Nadler 12.07.2010 Evaluation Study --- JESSICA iiinitiativeinitiative for North RhineRhine----WestphaliaWestphalia Page 333 Table of contents Page 1 The implementation process for JESSICA in North Rhine-Westphalia ...... 12 1.1 Initial situation in Germany ............................................................12 1.2 The need for structural support in North Rhine-Westphalia ......................13 1.2.1 Market failures, bottlenecks and structural problems ................13 1.2.2 Structural support in the Operational Programme to strengthen regional competitiveness and employment in the period 2007- 2013 ..........................................................................18 1.2.3 Sustainable urban and regional development in the OP (ERDF) for North Rhine-Westphalia ..............................................21 1.2.3.1 Planned measures for the integrated development of problem urban areas (Focus 3.1)23 1.2.3.2 Planned measures to eliminate bottlenecks to development, particularly in heavily industrial regions (Priority 3.2).......................................28 1.2.4 Expected effects of the OPs and opening the OP for the JESSICA initiative .........................................................33 1.3 Implementation of the JESSICA initiative in North Rhine-Westphalia ..........34 1.3.1 Roles and responsibilities of the actors ................................34 1.3.2 Description of phases and procedural steps ..........................35 1.3.3 Timetable (and steps already completed) for achieving the interim results ........................................................................38 2 Identification of sustainable urban development projects ..................... 39 2.1 Definition of selection criteria .........................................................39 2.1.1 Urban development policy requirements for project applications under the North Rhine-Westphalia OP .................................39 2.1.2 Supplementary requirements in the Working Group .................40 2.2 Selection of a project portfolio for the first implementation phase of the urban development fund ...........................................................45 2.2.1 Project proposals for NRW.URBAN ....................................45 Copyright: Prof. Dr. Michael Nadler 12.07.2010 Evaluation Study --- JESSICA iiinitiativeinitiative for North RhineRhine----WestphaliaWestphalia Page 444 2.2.2 Projects selected by the Steering Group ...............................48 2.2.2.1 Project development with property held as an investment: Kultur Ruhr office, Bochum ............48 2.2.2.2 Administration building development, Kiekert, Heiligenhaus ..................................................50 2.2.2.3 Purchase of buildings at compulsory action on Bochumer Straße, Gelsenkirchen ......................53 2.2.2.4 Brownfield site development at Pumpen Müller, Herne............................................................56 2.2.2.5 Klöckner-Humboldt-Deutz (KHD) land development, Cologne.....................................58 2.3 Resulting cash flow structure and risks of the model project portfolio ..........63 2.3.1 Project development of the Kultur Ruhr office, Bochum, with retention as an investment ...............................................63 2.3.2 Administration building development at Kiekert, Heiligenhaus .....64 2.3.3 Purchase of properties by compulsory auction in Bochumer Straße, Gelsenkirchen ....................................................65 2.3.4 Brownfield site development, Pumpen Müller, Herne ................66 2.3.5 Klöckner-Humboldt-Deutz (KHD) land development, Cologne .....67 2.4 Financing and capital-market-neutral returns on investment ....................70 2.4.1 Internal project returns ....................................................70 2.4.1.1 Internal rate of return for project assessment ....70 2.4.1.2 Project development with property held as an investment: Kultur Ruhr office, Bochum ............71 2.4.1.3 Administration building development, Kiekert, Heiligenhaus ..................................................72 2.4.1.4 Purchase of properties by compulsory auction, Bochumer Straße, Gelsenkirchen ......................72 2.4.1.5 Brownfield site development, Pumpen Müller, Herne............................................................73 2.4.1.6 Klöckner-Humboldt-Deutz (KHD) land development, Cologne.....................................74 2.4.2 Internal rate of return for the portfolio of five test projects ...........75 2.4.3 Interim conclusion on the project types included in the NRW urban development fund ..................................................76 Copyright: Prof. Dr. Michael Nadler 12.07.2010 Evaluation Study --- JESSICA iiinitiativeinitiative for North RhineRhine----WestphaliaWestphalia Page 555 3 Derivation of a financial model for the NRW urban development fund ...... 78 3.1 Capital requirement analysis at fund level ..........................................78 3.2 Permissible project financing under European law in the JESSICA initiative .79 3.3 Working Group proposals for project financing ....................................81 3.3.1 Structural engineering work (project type 1) ...........................81 3.3.2 Impetus-providing individual measure (project type 2) ...............82 3.3.3 Interim building acquisition (project type 3) ............................83 3.3.4 Interim land acquisition (project type 4) ................................83 3.3.5 Land development (project type 5) ......................................84 3.3.6 Summary assessment ....................................................84 3.4 Permissible refinancing solutions under European law in the JESSICA initiative ...............................................................................84 3.5 Usable volumes from Structural Fund resources ..................................87 3.5.1 NRW ERDF Operational Programme ..................................87 3.5.2 European Agricultural Fund for Rural Development (EAFRD) and European Social Fund (ESF) ............................................90 3.5.3 Summary assessment and consequences of the organisational structure of the NRW urban development fund .......................91 3.6 Conflation of funding instruments and refinancing for a cash flow-based business plan for the NRW urban development fund .........................93 3.6.1 Fund accounting assumptions ...........................................94 3.6.2 Evaluation of fund financing at project level ...........................98 3.6.3 Evaluation of business activity at fund level .........................102 3.6.4 Optimisation of business activity by the future fund management 105 4 Summary report on the fund proposal in the light of the legal framework 114 4.1 Planned fund organisation and process structure for the business activity of the urban development fund ....................................................114 4.2 Legal examination of chosen fund structure for the NRW urban development fund ..................................................................................117 4.3 Analysis of added value of the NRW urban development fund compared with traditional grant funding ....................................................122 4.3.1 Economic added value in terms of a SWOT analysis ..............123 4.3.1.1 Potential strengths and opportunities ..............123 Copyright: Prof. Dr. Michael Nadler 12.07.2010 Evaluation Study --- JESSICA iiinitiativeinitiative for North RhineRhine----WestphaliaWestphalia Page 666 4.3.1.2 Potential weaknesses and threats ...................124 4.3.2 Additional added value from the activity of the fund purely stemming from the ERDF ..............................................126 4.4 Future action steps and potential for the urban development fund in North Rhine-Westphalia .................................................................127 4.5 Summary and outlook ................................................................130 Bibliography: ................................................................................ 132 Copyright: Prof. Dr. Michael Nadler 12.07.2010 Evaluation Study --- JESSICA iiinitiativeinitiative for North RhineRhine----WestphaliaWestphalia Page 777 List of tables Page Table 1: NRW.URBAN project proposals for the NRW urban development fund ..........................................................................46 Table 2: Income forecast for Kiekert, Heiligenhaus .............................65 Table 3: Income forecast for Pumpen Müller, Herne ...........................67 Table 4: Expenditure plan for Klöckner-Humboldt-Deutz,