FAQ - Jessica

What types of projects are appropriate?

Rules on the eligibility of project expenditure, using JESSICA, are the same as those on the use of Structural Funds as a whole, and also need to take account of any specific national constraints.

Apart from specific non-eligible items listed in the Regulations, such as housing in some of the Member States, JESSICA may allow for more flexible management of projects, respecting at the same time eligibility rules, provided always that the projects being supported form part of “integrated and sustainable” urban development plans.

Ineligible expenditure components might, for example, be included as part of a larger, multi-sector urban project, provided sufficient additional funding is attracted from other private or public sources to finance these ineligible components.

JESSICA funds could be targeted specifically at projects such as:

• Urban infrastructure, including transport, water/waste water, energy, etc.
• Heritage or cultural sites, for tourism or other sustainable uses
• Redevelopment of brownfield sites, including site clearance and decontamination.
• Office space for SMEs, IT and/or R&D sectors
• University buildings, including medical, biotech and other specialised facilities
• Energy efficiency improvements.

What is an Urban Development Fund?

An Urban Development Fund (UDF) is a fund investing in public-private partnerships and other projects included in an integrated plan for sustainable urban development. To be eligible for JESSICA funding, the UDF will need to demonstrate, amongst other things:

• sufficient competence and independence of management
• a comprehensive business plan and budgets for undertaking qualifying projects
• sound financial backing.

A UDF can be a separate legal entity, or be established as a “separate block of finance” within an existing financial institution. In such cases, JESSICA funds need to be separately accounted for and clearly segregated from the other assets of that financial institution.

UDFs can be established at either a national, regional or local/city level in response to integrated urban development plans, project pipelines and investor interests.

What is a Holding Fund?

A Holding Fund is a fund set up to invest in more than one UDF. Whilst a Holding Fund is not a requirement for JESSICA implementation, there are several benefits for Member States in having one:

• It allows Managing Authorities to delegate some of the tasks required in implementing JESSICA to appropriate professionals. These tasks include establishing specific criteria for making investments in UDFs, appraising and recommending appropriate UDFs to invest in, negotiating contractual arrangements with as well as monitoring and reporting on the performance of UDFs
• Member States with a less developed urban investment sector can still take advantage of JESSICA funding immediately, whilst UDFs and qualifying urban investment projects are being established and implemented
• Holding Funds allow for JESSICA funds to be combined with other public and/or private sector resources for investment in UDFs.

What is an “integrated plan for sustainable urban development”?

An integrated plan for sustainable urban development comprises a system of interlinked actions which seeks to bring about a lasting improvement in the economic, physical, social and environmental conditions of a city or an area within the city.

The key to the process is “integration”, meaning that all policies, projects and proposals are considered in relation to one another. In this regard, the synergies between the elements of the plan should be such that the plan as a whole adds up to more than would the sum of the individual parts if implemented in isolation.

In many Member States, city-wide and area based development plans that have been prepared and adopted in accordance with existing planning protocols are likely to satisfy such a definition. Non-statutory plans and other policy documents approved following public consultation and appropriate community impact assessment might also provide an adequate basis for integrated urban development.

A case study on the Czech Republic can be found under the section Case Studies.

When does JESSICA come into force?

The EU Structural Funds’ legislative package for the programming period 2007 to 2013 provides the JESSICA operating framework. Operational procedures are being drawn up and will take effect once Operational Programmes have been formally agreed with the European Commission.

To qualify to use JESSICA, Member States must include an urban agenda in their Operational Programmes and, ideally, should also include a statement on the potential use of JESSICA in delivering this agenda. Member States will then need to decide what proportion of their Structural Funds they would like to channel using JESSICA.

JESSICA is not a new source of funding for Member States, but rather a new way of using existing Structural Fund grant allocations to support urban development projects.

What are the benefits of using JESSICA?

The principal benefits are:

• Recycling of funds – as long as JESSICA funds have been invested, by UDFs, in eligible project expenditure before the expiry date of the Structural Fund programming period (n+2, i.e. by the end of 2015) then any returns/receipts generated from that investment can be either retained by the UDFs or returned to Managing Authorities for reinvestment in new urban regeneration projects. For those Member States facing a prospect of reduced EU grant funding in the next programming period, JESSICA offers the opportunity to create a lasting legacy for the current funds.
• Leverage – a significant implied advantage of JESSICA is its potential ability to engage the private sector, thereby leveraging both further investment and, perhaps more critically, competence in project implementation and management. Private sector investment can, in some instances, meet the requirements for the Member State’s match-funding contribution (Regulations require that Member States make a contribution, alongside the Structural Funds, to their Operational Programmes. This percentage of “own funds” can be different in each Member State.). Despite the fact that JESSICA allows grant receipts to be “transformed” into repayable investment, they are not repayable to the European Commission and should therefore not be regarded as public sector debt.
• Flexibility – JESSICA provides a flexible approach, both in terms of broader eligibility of expenditures and in the use of JESSICA funds by way of either equity, debt or guarantee investment.
  
• Expertise and Creativity – Member States, Managing Authorities, cities and towns will benefit from expertise of the banking and private sector. JESSICA could also act as catalyst in urban areas to enhance the investment market and therefore complement other initiatives or sources of funding that may already exist in the Member State. Involvement of the private sector, however, will still need to take account of “State Aid” rules.

What are Operational Programmes?

Operational Programmes are detailed strategies, agreed between the Member States and the European Commission, covering the use of EU Structural Funds and match funding contributions during the 2007-2013 period.