JESSICA Evaluation Study for Silesia · 2017-12-11 · Analysis of strategic documents ... SWOT...

JESSICA Evaluation Study for Silesia

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Developed for the European Investment

Bank

C i t y C o n s u l t i n g I n s t i t u t e

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Disclaimer

This report takes into account the particular instructions and requirements of our client. It is not

intended for and should not be relied upon by any third party and no responsibility is undertaken to

any third party.

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.

City Consulting Institute Sp. z o.o.


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Table of Contents

1. Review of the market for urban regeneration projects in the Silesia region ................................ 14

1.1. Regeneration projects implemented in Silesia ...................................................................... 14

1.1.1. Financing sources of regeneration projects .................................................................. 14

1.1.2. Principles of financing regeneration projects ............................................................... 14

1.1.3. Formal conditions necessary to implement regeneration projects .............................. 16

1.1.4. Availability of resources for regeneration projects ....................................................... 18

1.1.5. Characteristics of the completed projects .................................................................... 19

1.1.6. Conclusions for JESSICA ................................................................................................. 26

1.2. Possibility of financing regeneration projects within ROP SL ................................................ 26

1.2.1. Project eligibility criteria ................................................................................................ 26

1.2.1.1. Formal conditions .................................................................................................. 26

1.2.1.2. Eligibility of costs ................................................................................................... 27

1.2.1.3. Beneficiaries .......................................................................................................... 29

1.2.2. Analysis of the existing lists of project selection criteria and indicators as regards their

relevance for JESSICA .................................................................................................................... 29

1.2.3. List of key potential projects to be implemented in the years 2010-2013 ................... 39

1.2.4. List of key projects financed after a restricted call of proposals ................................... 41


1.3. Analysis of strategic documents ............................................................................................ 45

1.3.1. Local Revitalisation Programmes .................................................................................. 45

1.3.2. Multi-annual Investment Plans ..................................................................................... 50


1.4. Identification and evaluation of specific potential JESSICA projects .................................... 55

1.4.1. Projects reported in a survey research ......................................................................... 55

1.4.2. Other potential projects ................................................................................................ 60


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1.4.3. Assessment of the interest of potential beneficiaries in a revolving financial instrument

60

1.5. SWOT analysis for JESSICA ..................................................................................................... 61

1.6. Conclusions for JESSICA ......................................................................................................... 63

2. Financial and social analysis for JESSICA implementation ........................................................... 64

2.1. Present financial instruments for urban regeneration projects ........................................... 64

2.2. Budgetary implications of JESSICA for the Silesia Managing Authority ................................ 74

2.2.1. Cash flow in case of the traditional donation system - variant 0 .................................. 75

2.2.2. Cash flow in case of JESSICA implementation – V1 – one UDF. .................................... 77

2.2.3. Cash flow in case of JESSICA implementation – V2 – 1 UDF created from the ROP and

investors (JST) funds. ..................................................................................................................... 83

2.2.4. Cash flow in case of JESSICA implementation – Variant 3 – HF, 2 UDFs from the ROP

and shareholders (JST, banks) funds. ............................................................................................ 89

2.2.5. Cash flow in case of JESSICA implementation – Variant 4 – 1 HF/EIB and >2 UDFs

created from the ROP and shareholders’ funds (JST, banks). ....................................................... 96

2.3. Non-budgetary effects of JESSICA implementation ............................................................ 104

2.4. PPP as a method of optimising the JESSICA implementation process. ............................... 105

2.5. Summary. Conclusions for JESSICA implementation. .......................................................... 112

3. Institutional analysis of JESSICA implementation. ...................................................................... 114

3.1. Description of potential market participants in JESSICA. .................................................... 114

3.1.1. Public administration................................................................................................... 114

3.1.2. Public institutions ........................................................................................................ 118

3.1.3. Financial sector institutions ......................................................................................... 122

3.1.4. Private sector ............................................................................................................... 126

3.2. Ability and willingness of the private and public sectors to support urban regeneration in

Silesia through JESSICA .................................................................................................................... 131

3.2.1 Conclusions: willingness to engage in JESSICA projects and institutional structure of the

Programme. ................................................................................................................................. 134

3.3. Analysis of institutional models of JESSICA operation ........................................................ 136


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3.3.1 Potential JESSICA organizational structures ................................................................ 136

3.3.2. Establishment of a Holding Fund ................................................................................. 139

3.3.2.1. Basic tasks of holding funds (HF) ......................................................................... 145

3.3.2.2. Benefits resulting from the HF establishment..................................................... 147

3.3.2.3. Entities that may potentially establish a HF ........................................................ 147

3.3.3. Establishment of Urban Development Funds ............................................................. 152

3.3.3.1. UDF business models ........................................................................................... 156

3.3.3.2. UDF operating as a credit – guarantee institution .............................................. 156

3.3.3.3. UDF operating as a capital investor ..................................................................... 157

3.3.4. HF/UDF model ............................................................................................................. 157

3.3.4.1. Advantages and disadvantages of the full model of JESSICA implementation. .. 158

3.3.5. One UDF model ........................................................................................................... 159

3.3.5.1. Conditions and advantages of the one UDF model ............................................. 159

3.3.5.2 Institutions that may establish one UDF ..................................................................... 160

3.3.6. Institutional model and project financing possibility .................................................. 162

3.3.6.1. One UDF model ................................................................................................... 162

3.3.6.2. HF and 2 UDFs model .......................................................................................... 162

3.3.6.3. HF and a greater number of UDFs ....................................................................... 162

3.3.6.4. EBI involvement and possibility of project financing ......................................... 163

3.3.7. Institutional model and participation ability ............................................................... 163

3.3.7.1. One UDF model ................................................................................................... 163

3.3.7.2. HF and 2 UDFs model .......................................................................................... 163


3.3.7.4. EBI and a possibility of other entities involvement ............................................. 163

3.3.8. Institutional model and PPP ........................................................................................ 164

3.3.8.1. One UDF model ................................................................................................... 164

3.3.8.2. HF and 2 UDFs model .......................................................................................... 164



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3.3.8.4. EBI involvement and PPP ..................................................................................... 164

3.4. Comparison and evaluation of different institutional models of JESSICA implementation 165

3.4.1. Analysis of advantages and disadvantages resulting from entrusting the EIB with the

HF function .................................................................................................................................. 169

3.4.2. Recommendations for the Śląskie Voivodship ............................................................ 170

3.4.2.1. Recommendations concerning the Holding Fund establishment ....................... 170

3.4.1.1. Recommendations concerning the number of UDFs .......................................... 171

3.4.1.2. Recommendation concerning organisational changes in time. .......................... 172

4. JESSICA implementation strategy in Silesia ................................................................................. 174

4.1. Recommendations on how JESSICA should be taken forward in Silesia in short-, medium-

and long-term perspective .............................................................................................................. 174

4.2. JESSICA implementation methodology ............................................................................... 175

4.3. Indicative timeline of the new structure implementation .................................................. 176

4.4. Potential risks for the Managing Authority ......................................................................... 177

4.4.1. Managing Authority’s financial obligations resulting from RPO SL ............................ 177

4.4.2. State aid and project sustainability issues .................................................................. 179

4.5. Recommendations............................................................................................................... 181


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Index of tables

Table: Financing sources of regeneration projects in Silesia until 2008. .............................................. 14

Table: Principles of financing regeneration projects ............................................................................. 14

Table: Formal conditions necessary to implement regeneration projects ........................................... 17

Table: Basic formal limitations influencing the adopted regeneration development directions ......... 18

Table: Availability of resources for regeneration projects .................................................................... 18

Table: Regeneration projects implemented in Silesia ........................................................................... 20

Table: Basic types of projects ................................................................................................................ 28

Table: Product and result indicators ..................................................................................................... 32

Table: Key potential regeneration projects (years 2010 – 2013) .......................................................... 39

Table: List of key projects financed after a restricted call of proposals ................................................ 42

Table: Strategic planning model ............................................................................................................ 47

Table: Budgeting in a self-government entity ....................................................................................... 52

Table: Analysis of selected projects ...................................................................................................... 58

Table: The EIB funds for regional development. ................................................................................... 67

Table: Maximum value of financial support from the Surcharge Fund. ............................................... 69

Table: Summary of the objective, value, crediting period and interest rate of TBS Programme loans.73

Table: Analysis assumptions – V0. ......................................................................................................... 75

Table: Cash flow for subsiding mechanisms of the ROP SL (in million PLN) ......................................... 75

Table: Financial flow for the subsiding mechanism of the ROP SL in PLN (V0). .................................... 76


Table: Advantages and disadvantages of V1. ........................................................................................ 78

Table: Financial flows for variant 1 [million PLN] - V1. .......................................................................... 79

Table: Analysis assumptions– V2 .......................................................................................................... 83


Table: Financial flow for variant 2 [million PLN] – V2. .......................................................................... 85



Table: Financial flow for Variant 3 [million PLN] – V3. .......................................................................... 91



Table: Financial flow for Variant 4 (million PLN) - V4. ........................................................................... 99

Table: PPP objectives. .......................................................................................................................... 106


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Table: Conclusions for PPP implementation ....................................................................................... 109

Table: Critical factors of PPP from the JESSICA perspective. .............................................................. 110

Table: Opportunities for cooperation in PPP with JESSICA support. .................................................. 111

Table: Potential engagement of public administration units in JESSICA. ............................................ 114

Table: Potential engagement of public institutions into JESSICA. ....................................................... 118

Table: Engagement of the financial sector in JESSICA. ........................................................................ 122

Table: Analysis of ability and willingness to implement projects financed within the JESSICA frame.

............................................................................................................................................................. 132

Table: Units’ engagement on project level. ........................................................................................ 133

Table: Interest in engaging in JESSICA projects. .................................................................................. 134

Table: Model: HF (EIB) + UDF .............................................................................................................. 137

Table: Model HF + UDF ........................................................................................................................ 138

Table: Model UDF ................................................................................................................................ 138

Table: Choosing the HF operator in accordance with the Public Procurement Law. ......................... 144

Table: Entrusting HF management to the EIB. .................................................................................... 145

Table: The Upper Silesian Fund – advantages and disadvantages ...................................................... 147

Table: EIB – advantages and disadvantages ........................................................................................ 149

Table: Advantages and disadvantages of the full JESSICA implementation model. ........................... 158

Table: Comparative analysis of chosen organizational models. ......................................................... 165

Table: Comparative analysis of chosen organizational models – financial aspect.............................. 166

Table: Analysis of advantages and disadvantages of chosen organizational models. ........................ 167

Table: Organizational model with the HF involvement. ...................................................................... 172

Table: Recommendations for JESSICA ................................................................................................. 173

Table: Main problems that may be encountered throughout JESSICA implementation .................... 175


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List of Acronyms

BGK Bank Gospodarstwa Krajowego

CEB Council of Europe Development Bank

Consultant City Consulting Institute Sp. z o.o.

EC European Commission

EIB or Bank European Investment Bank

ERDF European Regional Development Fund

GZM Metropolitan Association of Upper Silesia (Górnośląski Związek Metropolitalny)

HF Holding Fund

IA Implementing Authority

IRDOP Integrated Regional Development Operational Programme (Polish: ZPORR)

IUDP Integrated Urban Development Plans / Programmes

JESSICA Joint European Support for Sustainable Investment in City Areas

JST Territorial self-government units

KFM, NHF Krajowy Fundusz Mieszkaniowy (National Housing Fund)

LRP Local Regeneration Plan / Programme

MA Managing Authority for a Regional Operational Programme

MIDF The Municipal Investment Development Fund

MRR Ministry of Regional Development

NBP National Bank of Poland

NFEPWM National Fund for Environmental Protection and Water Management

PPP Public-private partnership

Region Śląskie Voivodship

Report Report prepared according to the consultancy contract with EIB

ROP Regional Operational Programme

ROP SL Śląskie Regional Operational Programme

SDPSV Spatial Development Plan of the Silesian Voivodship

SF Surcharge Fund

TBS Towarzystwa Budownictwa Społecznego (Social Housing Societies)

The Study,

Project

Advisory project named ‘JESSICA Evaluation Study for Silesia.

UDF Urban Development Fund

UMSL Marshal Office of Śląskie Voivodship (regional government of Silesia)


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Introduction

The JESSICA Evaluation Study for Silesia has been contracted by the European Investment Bank and

developed by experts of City Consulting Institute Sp. z o.o.

The Study has been conducted with reference to regional conditions, in cooperation with all Silesian

self-governments.

The analysis has been possible thanks to the commitment of representatives of the Department of

Regional Development of the Marshal Office of the Śląskie Voivodship.

JESSICA is a chance for further dynamic development of the region. The possibility of financing

projects from revolving mechanisms is welcomed by self-government authorities as well as by

entrepreneurs. JESSICA may be also a chance for the development of public – private partnerships

and an initiative promoting interesting projects.

Mateusz Górka

Chairman of City Consulting Institute Sp. z o.o.


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Summary

Chapter Summary

Review of the

market for urban

regeneration

projects in the

Silesia Region

The market of regeneration projects in Silesia has been shaped primarily by

the guidelines of the Integrated Regional Development Operational

Programme. Beneficiaries (mostly communes) willing to apply for a grant,

adapted their projects and Local Revitalization Programmes to the guidelines.

In result, most projects were non-profit, limited to visual and functional

development of city centres, buildings or post-industrial areas.

The most interesting projects have been financed primarily from own

resources of the investors.

The present guidelines on regeneration are more liberal and most projects are

thus eligible. However, it is still obligatory to calculate the funding gap which

may in turn result in financing non-profit projects, similar to those

implemented within IRDOP.

In case of JESSICA, it is not obligatory to calculate the funding gap. Co-financed

projects may be thus much more interesting.

Present ROP SL guidelines concerning revitalization are coherent with JESSICA

regulations. There is thus no need to introduce any changes to eligibility

criteria, types of projects or product and result indicators.

Financial and social

analysis for

JESSICA

implementation

Financial and economic analysis of possible JESSICA implementation options

has been developed on the basis of the following criteria:

data from potential beneficiaries (possible engagement in JESSICA,

institutional analysis and financial conditions of participation in

UDFs);

ratio analysis resulting from a review of documents concerning

JESSICA elaborated so far.

In result of the analysis of possible variants of JESSICA implementation in

Silesia it should be stated that the optimum solution is to implement the

option: HF + >3 UDFs + shareholders (self-government entities, banks). Higher

number of UDFs results in the so called leverage effect, consisting in the ability

of encouraging public (self-government entities) and private (banks) sectors to

contribute shares to UDFs. Higher JESSICA resources will in turn result in the


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possibility of financing a greater number of projects and continuous increase

of the UDF value (e.g. by profit from interest rates).

Institutional

analysis of JESSICA

implementation

Institutional analysis has been elaborated with regard to the binding home

and Community law as well as interministerial arrangements concerning

financial mechanisms similar to JESSICA.

The analysis has taken into account all institutions whose participation in

JESSICA would be possible from the financial or institutional point of view.

The analysis has proven that taking into account the present institutional

conditions as well as the time remaining to the end of the programming

period 2007-2013, the only solution that may have considerable impact on

regional development is the model based on the institutional division of the

HF and the UDF. In order to minimise the risk for the Marshal Office, it is

recommended to base the HF on EIB structures.

After the year 2013, one should consider the purposefulness of further HF

operation or handing over its operation to a local entity.

JESSICA

implementation

strategy in Silesia

Efficient JESSICA implementation necessitates the following actions:

Establishment of a HF within EIB structures (no need to apply the

public procurement procedure, EIB experience, advantageous

financial conditions as well as experience of other countries prove that

this institutional solution is the best possible one).

Initial establishment of two UDFs (financial and investment ones).

Preparing potential beneficiaries in the following areas:

o information (knowledge on JESSICA is still very poor, a number

of trainings and information campaigns should be organised);

o technical (the most considerable problem seems to be the lack

of Integrated Urban Development Plans that are necessary in

order to apply the systemic approach to revitalization and

prove the impact of a particular project on other projects to

be implemented in the area. As JESSICA encourages public –

private partnership, it would seem necessary to implement

PPP Implementation Plans, facilitating the contracting

procedures).

Implementation of a JESSICA application system as well as control and

monitoring procedures.


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Conclusions Revolving financial mechanisms are welcomed by the market. Due to the

character of the EU granting system, most regeneration projects are of social,

non-profit character. There is a need on the market to implement projects

that may become local development factors in the area of revitalization.

Large number of potential JESSICA projects and advanced stages of technical

plans development are considered the major success factors. Problems

include legal issues and know-how of potential beneficiaries.

A cycle of trainings on JESSICA should be organised, Integrated Urban

Development Plans and PPP Implementation Plans should be developed in

order to implement the future JESSICA projects efficiently.


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1. Review of the market for urban regeneration projects in the Silesia

region

1.1. Regeneration projects implemented in Silesia

1.1.1. Financing sources of regeneration projects

The beginning of the regeneration process in Silesia is related with the possibility of applying for

European Union funds within the Integrated Regional Development Operational Programme in the

years 2004 – 2006r.

All previous efforts of local authorities in this respect had been standard investment actions resulting

from current needs or development programmes other than Local Revitalization Programmes.

Table: Financing sources of regeneration projects in Silesia until 2008.

1.1.2. Principles of financing regeneration projects

General principles of financing regeneration projects have been presented in the table below:

Table: Principles of financing regeneration projects

Grants Source General co-financing principles

IRDOP General principles of financing were the following:

75% - ERDF

10% - state budget

15% - own resources (including loans/credits)

EEA FM Two regeneration projects have been financed within the EEA FM in

grants

• IRDOP;

• ROP;

• EEA FM;

• ministry funds;

• voivodship contracts;

loans

• commercial banks;

• EIB;

own resources

• total financing;

• co-financing;


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Silesia:

Revitalization of the Old Castle Complex and the Habsburg

Park in Żywiec

Protection and conservation of written heritage of Cieszyn

General principles of financing were the following:

up to 85% - the Donor Countries


ROP SL General principles of financing are the following:

85% - ERDF


Due to the fact that the call of proposals has been witheld and

projects are selected only within the Subregional Development

Programmes of the ROP 2007 – 2013, their implementation has only

just started.

Other A number of projects have been financed from the resources

granted by regional or national authorities. Thermal efficiency and

water and sewage management projects have been co-financed

from the resources of the National and the Regional Environment

Protection Funds.

A few projects have been also co-financed within INTERREG 3A.

Loans Most projects have been co-financed by loans. This fact resulted from the following:

necessity of providing own resources [in case of refunding, loans ensured financial

liquidity of beneficiaries];

necessity of covering the difference between the sum applied for and the real

project cost [project evaluation periods were relatively long and during that time

exchange rate differences as well as price increase occurred];

Some beneficiaries financed regeneration projects by loans only [this solution was most

frequently applied by municipal companies or entrepreneurs implementing profitable

projects].

Own resources Financing projects partially from own resources took place in case of all projects co-

financed by the European Union. The share of own resources in case of projects co-


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financed by loans was determined by bank contract conditions. Projects implemented

solely from own resources occurred rarely. However, some local authorities decided to

choose this solution.

With regard to the above compilation, it should be stressed that most regeneration projects in Silesia

have been co-financed from the European Union resources [IRDOP]. Limitations resulting from the

IRDOP application guidelines have strongly influenced the character of the projects and defined

regeneration directions to be continued for many years.

1.1.3. Formal conditions necessary to implement regeneration projects

The beginning of the process of implementing regeneration projects in Silesia was undoubtedly

related with the possibility of applying for the resources from the Integrated Regional Development

Operational Programme (Polish acronym: ZPORR). According to the guidelines defined by the

Programme Complement to the Integrated Regional Development Operational Programme for the

years 2004 – 20061 and Revitalization Guidelines2 it was necessary to develop a Local Revitalization

Programme in order to meet the formal conditions of applying for EU resources. The general scope of

a Local Revitalization Programme was defined in an Appendix to IRDOP.

First Local Revitalization Programmes were developed mostly in order to meet the formal criteria.

These were frequently analyses based on minimum eligibility criteria, pointing only the projects to be

potentially co-financed. That in turn caused the present situation in which many representatives of

local governments see a Local Revitalization Programme as a strategic document of poor

functionality and not as an important spatial document determining the development of degraded

areas.

1 Programme Complement to the Integrated Regional Development Operational Programme for the years 2004 – 2006 (appendix to the

resolution of the Minister of Economy and Labour of 25 August 2004 on the adoption of Programme Complement to the Integrated Regional Development Operational Programme, Offical Gazzette No 200, item 2051)

2 Revitalization Guidelines, Principles, Procedures and Methods of Contemporary Revitalization Processes (Polish: Podręcznik Rewitalizacji, Zasady, procedury i metody działania współczesnych procesów rewitalizacji), 2003, GTZ Gesellschaft für Technische Zuzammenarbeit i Urząd Mieszkalnictwa i Rozwoju Miast, Warszawa.


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Table: Formal conditions necessary to implement regeneration projects

The above scheme of regeneration project implementation was characteristic to most Silesian

gminas applying for IRDOP grants.

Perceiving a Local Revitalization Programme as an appendix necessary to meet the formal criteria of

project evaluation processes results in development of Local Revitalization Plans in isolation from

urban development procedures. The document is thus called a development plan but the projects

included in it do not have to be coherent and integrated with each other in any way (apart from

location).

Application Form

Together with a feasibility study and other appendices (including LRP), an application form was the document enabling local government bodies to apply for an IRDOP grant.

Strategic documents

Development of strategic documents was primarily aimed at meeting the formal criteria. In many cases, local government bodies adapted their LRP to the contents of a technical plan and to feasibility

study analyses.

Technical plans, licences, permits

Technical plans and building permits were obligatory in order to apply for IRDOP grants; in result only those projects were financed that had been previously planned and included in the required strategies;


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Table: Basic formal limitations influencing the adopted regeneration development directions

1.1.4. Availability of resources for regeneration projects

Resources for regeneration projects implemented in Silesia have been and still are considerably

limited. It is only possible to implement projects in two basic forms, both having advantages and

disadvantages.

Table: Availability of resources for regeneration projects

•the area on which a particular project is to be implemented should be the property of the beneficiary; ownership

right

•project should by design be non-profitable;

•no possibility of implementing projects within PPP (legislative errors);

project profitability

•projects located only within administrative borders of cities;

•post-industrial areas;

•post-military areas; location

•little resources compared to demands;

•limited scope/value of a project aimed at increasing chances for a grant;

financial limitations

grant

• possibility of financing only 85% ofproject value from external resources;

• complicated procedure of applying,settling and monitoring projects;

• necessity of ensuring projectsustainability;

• necessity of monitoring the assumedindicators;

• necessity of participating in a call ofproposals [the value of applicationsfiled exceeds several times the value ofavailable resources];

own resources / loans

• possibility of financing any project;

• possibility of financing profitableprojects;

• simple system of financial settlement;


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Most projects implemented in Silesia have been co-financed from IRDOP grants. Only a few projects

that had not been selected during a call for proposals procedure were financed from other resources.

This fact proves that there are no efficient mechanisms developed to finance and co-finance

regeneration projects in Silesia.

1.1.5. Characteristics of the completed projects

The character of completed regeneration projects has been defined mostly by the following factors:

IRDOP regulations;

ROP SL regulations;

Information included in guidelines describing the principles of developing regeneration

programmes.

Silesian regeneration projects may be divided into three basic groups3:

3 The division is based on the number of projects implemented.

Innovative, designer projects, resulting from integrated strategies of actions leading to a certain aim

(economic, social, etc.)

Projects developed on the basis of IRDOP, ROP SL guidelines in order to

obtain the best possible essential evaluation results.

Investment projects not related with regeneration areas but coherent

with Local Revitalization Programmes.

Table: Regeneration projects implemented in Silesia

Location Project Beneficiary Financing source

Bielsko Biała

Bielsko-Biala Old Town Bielsko Biała

ERDF, state budget, own resources

Bieruo Repair and redevelopment of social infrastructure in Bierun, 15

Rynek Street.

Bieruo ERDF, state budget, own resources

Bieruo Construction of a footbridge on a fitness trail in Bieruo Bieruo ERDF, state budget, own resources

Bieruosko-Lędzioski poviat Adaptation of a building at 24 Ledzinska Street for Business and

NGO Incubator

Bieruosko-Lędzioski poviat ERDF, state budget, own resources

Bytom Adaptation of a building for the Silesian University of Technology

in Bytom

Bytom ERDF, state budget, own resources

Bytom Revitalization of the main building of the Municipal Library in

Bytom

Bytom ERDF, state budget, own resources

Bytom Revitalization of the Bytom Market Square Bytom Municipal budget including municipal bonds,

Fund for Silesia

Bytom Bytom Industrial Park Partnership agreement signed on 9 July

2004 between the Upper Silesian

Enterprise Transformation Agency Joint

Stock Company in Katowice, Bytom

Municipality, "Orzeł Biały" Joint Stock

Company, PUMECH-Orzeł Sp. z o.o. w

Bytomiu, and Mines Restructuring

Company. Project participants were

also: Partnership for Environment Fund,

and Association of Bytom Employers.

1.3 The Sectoral Operational Programme

"Improvement of the Competitiveness of

Enterprises

Bytom “Dolomity” Sports Valley “Dolomity” Sports Valley Project “Modernization of the company aimed at

improvement of service quality, introduction of

new services and increase of sales” was co-

financed (in 50%) from Phare 2002.


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Project “Orderman – virtual orders” was co-

financed (in 50 %) from The Sectoral

Operational Programme "Improvement of the

Competitiveness of Enterprises”.

Project “Investment planning – swimming pools

in Dolomity Sports Valley” was co-financed (in 50

%) from The Sectoral Operational Programme


Enterprises”.

Project “Development of technical plans of a ski

centre in Sosnowiec” was co-financed (in 50 %)

from The Sectoral Operational Programme


Enterprises”.

Project „High service quality in Dolomity Sports

Valley” was co-financed (in 50%) from Phare

2003.

Bytom Revitalization of Jana III Sobieskiego Square in Bytom Bytom ERDF, state budget, own resources

Bytom Adaptation of a building for the Polish-Japanese Institute of

Information Technology in Bytom

Polish-Japanese Institute of

Information Technology


Bytom Reconstruction of a nursing home in Bytom Nursing home city budget, National Disabled Persons

Rehabilitation Fund, Bytom Fund for


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Environmental Protection and Water

Management

Bytom Development of a Professional Career Centre in Bytom Professional Career Centre City budget, Integrated program of alleviating

the restructuring effects in the mining industry.

Bytom Reconstruction of Świętochłowicka and Łagiewnicka Streets in

Bytom

Bytom City budget

Bytom Ringroad of the Upper Silesia Agglomeration Bytom ERDF, state budget, own resources

Chorzów Revitalization of Amelung industrial reservoirs in Chorzów Chorzów ERDF, state budget, own resources

Cieszyn Revitalization of a post-industrial building on 4 Wałowa Street in

Cieszyn for the purposes of a Social Education Centre

Cieszyn ERDF, state budget, own resources

Czechowice - Dziedzice Development of areas neighbouring with the Północ district in

Czechowice-Dziedzice

Czechowice - Dziedzice City budget, RPO SL

Czeladź Revitalization of the medieval Old Town in Czeladz – stage I

(infrastructure)

Czeladź 69,66% - ERDF, 10% - state budget

Częstochowa, Revitalization of the Jasna Góra Park in Częstochowa Częstochowa, ERDF, state budget, own resources

Częstochowa Reconstruction of Berka Joselewicza Street Częstochowa City budget

Częstochowa Reconstruction and development of a post-industrial building for

the purposes of a Modern Art Gallery

Zachęta Association City budget

Częstochowa Reconstruction and repair of the Exhibition Pavilion B and the

Museum of Mining on 7 Kamienic Street in Częstochowa

Museum of Częstochowa City budget

Częstochowa Repair, reconstruction and modernisation of a monumental

building on 24 Najświętszej Maryi Panny Avenue in Częstochowa

Częstochowa - ZGM TBS Sp. z o.o. City budget

Częstochowa Modernization and adaptation of a former House of Orthodox

Clergy called “Popówka” for the purposes of the Museum of

Pilgrimage

Museum of Częstochowa City budget


Page 23


Gliwice Regeneration of the Castle of the Piasts – establishment of a

Centre of Cultural Information and Regional Education

Gliwice, Museum ERDF, state budget, own resources

Gliwice Regeneration of a post-industrial zone in Nowe Gliwice PHARE 2003, city budget

Gliwice Revitalization of the Radiostation Gliwice City budget

Gliwice Development of the cycle path network in Gliwice Gliwice City budget

Gliwice Thermal efficiency improvement of the Gliwice Music Theatre The Music Theatre City budget and the Regional Fund for


Management

Jastrzębie Zdrój Modernization of buildings in the Zdrojowy Park for the purposes

of the University of Silesia

University of Silesia City budget

Jastrzębie Zdrój Modernization of buildings in the Zdrojowy Park for the purposes

of a library and reconstruction of a fountain in Jastrzębie Zdrój

Jastrzębie Zdrój, University of

Silesia

City budget

Jastrzębie Zdrój Adaptation of a hospital building for the purposes of the District

Court in Jastrzębie Zdrój

District Court in Jastrzębie Zdrój City budget

Jastrzębie Zdrój Modernization of a swimming pool on Witczaka Street in

Jastrzębie Zdrój

Jastrzębie Zdrój City budget

Katowice Adaptation of a post-military building on 17 Koszarowa Street for

the purposes of the Academy of Fine Arts in Katowice

Academy of Fine Arts in Katowice ERDF, state budget, own resources

Katowice International Congress Centre in Katowice Katowice RPO SL and city budget

Katowice New seat of the Museum of Silesia in Katowice Museum of Silesia in Katowice Voivodship government resources

Katowice The heart of Nikiszowiec. Revitalization of the Museum of

Katowice History building in Katowice

Museum of Katowice History ERDF and city budget

Katowice Szyb Wilson Gallery Szyb Wilson Gallery Own resources and grants from the city of

Katowice

Kłobuck Development of the Kłobuck Market Square and its surroundings Kłobuck ROP SL and city budget


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Łaziska Górne Revitalization of the monumental City Hall in Łaziska Górne Łaziska Górne City budget and the Regional Fund for


Management

Łaziska Górne Construction of a sports hall on Ogrodowa Street in Łaziska

Górne

Łaziska Górne Ministry of Sports and Tourism grant within the

Fund for Development of Physical Culture

Łaziska Górne Construction of a sports and recreation centre "Żabka" Łaziska Górne City budget, Integrated program of alleviating

the restructuring effects in the mining industry.

Marklowice, gmina Revitalization of a post-industrial area – Tropical Island – stage I Marklowice ERDF, state budget, own resources

Mierzęcice, gmina Modernization of the transport system and water and sewage

management on post-military areas

Mierzęcice ERDF, state budget, own resources

Mikołów Revitalization of a post-industrial area – construction of a

swimming pool and a communication system in Mikołów.

Mikołów City budget, Integrated program of alleviating

the restructuring effects in the mining industry,

Ministry of Sports and Tourism grant

Mikołów Development of the Environment and Ecology Centre of the

Silesian Botanical Garden in Mikołów

Silesian Botanical Garden ROP SL and city budget

Upper Silesia Museum, Bytom Revitalization of buildings of the Upper Silesia Museum Upper Silesia Museum ERDF, state budget, own resources

Ożarowice Post-military area revitalization in Ożarowice – stage I:

Construction of Transportowa and Nowa Streets and a water

supply system

Ożarowice ERDF, state budget, own resources

Ożarowice Post-military area revitalization in Ożarowice - II stage: internal

roads, utilities, adaptation for business purposes

Ożarowice ERDF, state budget, own resources

Pszczyna Revitalization of the Pszczyna Old Town Pszczyna ERDF, state budget, own resources

Ruda Śląska Development of a trade – exhibition – cultural centre in Ruda

Śląska - Wirek

Ruda Śląska City budget, Integrated program of alleviating

the restructuring effects in the mining industry

Ruda Śląska Council housing in the city Ruda Śląska City budget

Ruda Śląska Adaptation of a building in Ruda Śląska for the purposes of the

Municipal Prevention Centre

Addiction Treatment Centre and

Municipal Prevention Centre


Rybnik Renovation of a monumental tenement house on the Market Rybnik, Public Utilities Department ERDF, state budget, own resources


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Square in Rybnik and its adaptation for business purposes

Rydułtowy Rydułtowy Cultural Centre Rydułtowy ROP SL, own resources

Siemianowice Śląskie Development of the Market Square Siemianowice Śląskie City budget

Siemianowice Śląskie Development of the “Siemion” sports centre Siemianowice Śląskie City budget

Siemianowice Śląskie Modernization of the “Michał” sports centre Siemianowice Śląskie, City Sports

and Leisure Centre

City budget, grant from the Fund for

Development of Physical Culture

Sławków Revitalization of the monumental Sławków city centre Sławków City budget

Sławków Revitalization of the monumental inn in Sławków Sławków Ministry of Culture, voivodship contract for the

year 2004, city budget

Sosnowiec Adaptation of a post-industrial building for the purposes of the

Silesian University of Technology

The Silesian University of

Technology


Tarnogórski poviat Business Incubator – development in advantageous conditions Tarnogórski poviat, Inkubator

Przedsiębiorczości Sp. z o.o.


Ustroo Revitalization of the Market Square in Ustroo Ustroo ERDF, state budget, own resources

Żywiec Renewal of the Żywiec Old Castle elevation Żywiec Marshal Office of Śląskie Voivodship, Ministry of

Culture, own resources

Żywiec Revitalization of the Old Castle Complex and the Habsburg Park

in Żywiec

Żywiec Financial Mechanism of the European Economic

Area Ministry of Culture, own resources

Żywiec Revitalization and development of the Old Castle complex and

the Habsburg Park in Żywiec

Żywiec ERDF, state budget, own resources

Żywiec Preservation of the Żywiec cultural heritage – cooperation

between the Żywiec library and Kysucka Kniznica in Cadcy.

Żywiec INTERREG IIIA Poland-Slovakia, own resources

1.1.6. Conclusions for JESSICA

1.2. Possibility of financing regeneration projects within ROP SL

1.2.1. Project eligibility criteria

1.2.1.1. Formal conditions

If IRDOP formal conditions set regeneration frames not only for Silesia but also for the whole

country, ROP SL guidelines are to a considerable extent based on local conditions.

From the formal point of view, application procedure in case of regeneration projects is similar to

IRDOP.

The key element is obviously the application form with several appendices, one of them being a Local

Revitalization Programme. The scope of LRPs is defined by separate guidelines.

•Due to the necessity of ensuring project eligibility and more importantly, smooth process of formal appraisal, beneficiaries avoided projects that did not directly result from the list of exemplary projects;

•Information on regeneration reached local governments shortly before the deadline for filing application forms. Several local authorities did not manage to prepare good projects on time.

The market of regenation projects that are innovative,

profitable and result from integrated municipal strategies

is very limited and requires considerable support.

•It is the guidelines that create the picture of Silesian regeneration. The basic aim of local government authorities is to win a grant. Only in case of failure, alternative solutions are considered, such as PPP, changes in technical drafts, combining the project with other projects implemented in the direct neighbourhood (also by other institutions).

The problem of regeneration is substantive and results

primarily from the guidelines of IRDOP and ROP. The present state of Silesian regeneration is

the reflection of formal requirements not urban

planning.

•The market expects a mechanism enabling application in long term perspective (revolving mechanism).

•The projects implemented should be profitable and related (logically and economically) with other actions implemented in the region.

The market expects financial mechanisms enabling

implementation of profitable projects.


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According to these guidelines, Local Revitalization Programmes do not introduce the notion of

“integrated municipal plans”. It is thus possible to apply for resources to finance projects that are not

systemically related. The guidelines do not also define detailed procedures of setting revitalization

areas, depending on factors such as:

degradation degree,

poverty,

unemployment,

development perspectives.

This approach means that on the one hand beneficiaries are free to choose regeneration projects

and the choice does not have to be limited by indicators excluding certain locations and on the other

that they can also develop LRP with no detailed analyses.

1.2.1.2. Eligibility of costs

The basic difference between IRDOP and ROP SL results from the eligibility criteria and the types of

projects that may be co-financed.

According to the Complement to ROP SL:

All project costs must be borne in accordance with the public procurement law.

All project costs must be documented by invoices issued by contractors or by other,

equivalent documents.

Only the expenses necessary to implement the project may be considered eligible.

Within measure 6.2, sub-measures 6.2.1. and 6.2.2 only the costs borne in accordance with

the National Eligibility Guidelines for Structural Funds and the Cohesion Fund implemented

in the years 2007 – 2013, defined in the regulation 1083/2006/WE and Eligibility Guidelines

for the ROP SL implemented in the years 2007 – 2013 (Appendix no 2 to the Śląskie Regional

Operational Programme 2007-2013) may be considered eligible.


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Table: Basic types of projects

Measure Types of projects

Measure 6.2. Revitalization of

degraded areas

Submeasure 6.2.1.

Revitalization of large

cities

Submeasure 6.2.2.

Revitalization of small

cities

1. Reconstruction and repair of post-industrial/post-military/post-

state farm environments, including their adaptation for business,

educational, tourism, social or cultural purposes, as well as

development of neighbouring areas, resulting in solving

economic or social problems in the revitalized area (except for

housing estates).

2. Development of municipal areas, including construction,

reconstruction and repair of buildings for business, educational,

tourism, social or cultural purposes, as well as development of

neighbouring areas, resulting in solving economic or social

problems in the revitalized area (except for housing estates).

3. Supplementation and repair of built-up areas, including infill

buildings, repair of occupied and unoccupied buildings and their

adaptation for business, educational, tourism, social or cultural

purposes, as well as development of neighbouring areas,

resulting in solving economic or social problems on the

revitalized area (except for housing estates).

4. Complex development of land for business purposes, except for

infrastructure for inhabitants.

5. Development of monitoring systems aimed at increasing safety

in public spaces.

6. Replacing asbestos elements of multi-family housing

developments with less harmful materials, only with asbestos

utilization4.

4 Housing projects have to be implemented in areas meeting any three criteria defined by indicators published in

the Guidelines of the Minister of Regional Development on housing projects, based on Article 474 of Regulation no

1828/2006


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1.2.1.3. Beneficiaries5

1. Territorial self-government units, their associations, societies.

2. Entities in which the majority of shares is owned by territorial self-government units or their

associations and societies.

3. Entities contracted by territorial self-government units in accordance with the public

procurement law.

4. Schools of higher education.

5. Churches and denominations and legal persons of churches and denominations.

6. Non-government organisations.

7. Public finance sector units with legal personality (not listed above)

8. Housing communities, social housing associations,

9. Partnerships of the entities mentioned in 1-8 represented by a leader.

10. Entities acting in accordance with the Law on public-private partnership.

1.2.2. Analysis of the existing lists of project selection criteria and indicators as

regards their relevance for JESSICA

Project selection criteria have been presented in the compilation below.

Project type 1. Reconstruction and repair of post-industrial/post-military/post-state farm

environments, including their adaptation for business, educational, tourism, social or cultural

purposes, as well as development of neighbouring areas, resulting in solving economic or social

problems in the revitalized area (except for housing estates).

Project type 2. Development of municipal areas, including construction, re construction and repair of

buildings for business, educational, tourism, social or cultural purposes, as well as development of

neighbouring areas, resulting in solving economic or social problems in the revitalized area (except

for housing estates).

Project type 3. Supplementation and repair of built-up areas, including infill buildings, repair of

occupied and unoccupied buildings and their adaptation for business, educational, tourism, social or

5 According to the Complement of the Regional Operational Programme of Śląskie Voivodship 2007-2013


Page 30

cultural purposes, as well as development of neighbouring areas, resulting in solving economic or

social problems on the revitalized area (except for housing estates).

No Criterion Weight

1. Number of project objectives – economic, social, cultural, tourist,

recreational, educational:

2 objectives other than the economic one - 1p.

economic - 2p.

economic and one other objective - 3p.

3 objectives and more – 4p.

4,0

2. Degree of implementation of LRP priorities. 2,0

3. Innovativeness of project solutions. 1,5

4. Project availability to general public. 1,5

5. Adjustment for the needs of the disabled. 1,0

Project type 4. Complex development of land for business purposes, except for infrastructure for

inhabitants.

No Criterion Weight

1. Availability of the investment area. 4,0


3. Project impact on the development of economic infrastructure. 3,0

4. Project location in the light of area investment attractiveness. 1,0

Project type 5. Development of monitoring systems aimed at increasing safety in public spaces.

No Criterion Weight

1. Functionality of the solutions applied. 5,0


3. Common initiatives (of different entities) aimed at complex protection of the

project area.

2,5


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Project type 6. Replacing asbestos elements of multi-family housing developments with less harmful

materials, only with asbestos utilization .

No Criterion Weight

1. Degree of urgency (assessment of the present state and possibility of safe usage

of asbestos elements).

4,5


3. Quantity of asbestos removed. 3,5

Table: Product and result indicators

Measure 6.2. Revitalization of degraded areas

Submeasure 6.2.1 Revitalization – large cities

1. Reconstruction and repair of post-industrial/post-military/post-state farm environments, including their adaptation for business, educational, tourism, social or cultural purposes, as well as development of neighbouring areas, resulting in solving economic or social problems in the revitalized area (except for housing estates).

Product N Number of post-industrial/post-military/post-state farm environments reconstructed for the purpose of at least two of the objectives Psc. Product N Area of post-industrial/post-military/post-state farm environments reconstructed for the purpose of at least two of the objectives m2

Product N Number of post-industrial/post-military/post-state farm environments reconstructed for business activity purposes psc. Product N Area of post-industrial/post-military/post-state farm environments reconstructed for business activity purposes m2

Product N Number of buildings with technical (including municipal) infrastructure reconstructed pcs.

Product N Area of buildings with technical (including municipal) infrastructure reconstructed m2

Product N Length of reconstructed technical (including municipal) infrastructure m

Product N Number of buildings adapted to the needs of the disabled pcs.

Result T Number of events organised with the use of project infrastructure pcs.

Result T Number of people using the buildings covered by the project people Result N Number of the disabled using the buildings covered by the project people Result N Number of buildings protected pcs.

Result N Area of reconstructed and regenerated public infrastructure m2

Result N Number of new service points in the revitalized area pcs.

Result N Usable area m2

Result N Area of developed grounds neighbouring with the buildings covered by the project m2

Result N Area of post-industrial/post-military/post-state farm environments reconstructed for the purpose of at least two of the objectives m2

Result T Number of new enterprises in the area covered by the project pcs.

Result T Regenerated area m2

2. Development of municipal areas, including construction, reconstruction and repair of buildings for business, educational, tourism, social or cultural purposes, as well as development of neighbouring areas, resulting in solving economic or social problems in the revitalized area (except for housing estates).

Product N Number of buildings restored for the purpose of at least 2 of the objectives pcs.

Product N Area of buildings restored for the purpose of at least 2 of the objectives m2

Product N Number of buildings constructed for the purpose of at least 2 of the objectives pcs.

Product N Area of buildings constructed for the purpose of at least 2 of the objectives m2

Product N Number of buildings reconstructed for the purpose of at least 2 of the objectives pcs.

Product N Area of buildings reconstructed for the purpose of at least 2 of the objectives m2

Product N Number of buildings reconstructed for business activity purposes pcs.

Product N Area of buildings reconstructed for business activity purposes m2


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Product N Usable area of the reconstructed buildings m2

Product N Green areas developed around the buildings covered by the project m2

Product N Small architecture area m2

Product N Number of small architecture elements pcs.

Product N Number of parking places pcs.

Product N Parking area m2

Product N Area of reconstructed and regenerated public infrastructure m2

Product N Length of internal roads built in the area covered by the project m

Product N Length of internal roads reconstructed/repaired in the area covered by the project m

Product N Number of road infrastructure elements built pcs.

Product N Number of road infrastructure elements reconstructed / repaired pcs.



Result N Number of buildings protected pcs.




Result N Area of regenerated public spaces that became available for the purpose of at least 2 of the objectives m2

Result N Area of grounds that became available in result of the project m2

Result T Number of people using the buildings covered by the project people Result N Number of the disabled using the buildings covered by the project people Result T Number of new enterprises in the area covered by the project pcs.


3. Supplementation and repair of built-up areas, including infill buildings, repair of occupied and unoccupied buildings and their adaptation for business, educational, tourism, social or cultural purposes, as well as development of neighbouring areas, resulting in solving economic or social problems on the revitalized area (except for housing estates). Product N Number of buildings restored for the purpose of at least 2 of the objectives pcs.




Product N Number of infill buildings developed for the purpose of at least 2 of the objectives pcs.

Product N Area infill buildings developed for the purpose of at least 2 of the objectives m2




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Result N Number of the disabled using the buildings covered by the project people


Result T Number of people using the buildings covered by the project people




Result N Number of people using the developed / regenerated empty public spaces. people



4. Complex development of land for business purposes, except for infrastructure for inhabitants.

Product N Number of buildings constructed pcs.

Product N Area of buildings constructed m2

Product N Usable area in the buildings constructed m2






Product N Length of access roads built in the area covered by the project m

Product N Length of access roads reconstructed/repaired in the area covered by the project m




Result N Number of incubators established in result of the project pcs.

Result N Area of incubators established in result of the project m2






5. Development of monitoring systems aimed at increasing safety in public spaces.

Product N Number of monitoring appliances installed pcs.


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Product N Area covered by the monitoring system m2

Product N Number of districts covered by the monitoring system pcs.

Product N Number of monitoring systems implemented pcs.

Result N Number of crimes in the city pcs.

Result N Number of people covered by the monitoring system people

Result N Crime detection rate %

Result N Number of offences / crimes recorded by the monitoring system pcs.

6. Replacing asbestos elements of multi-family housing developments with less harmful materials, only with asbestos utilization . Product N Number of buildings from which asbestos was removed pcs.

Product N Area of buildings from which asbestos was removed m2

Product N Area from which asbestos was removed m2

Result N Amount of asbestos containing materials removed Mg

Result T Number of people living in the regenerated buildings people

Measure 6.2. Revitalization of degraded areas

Submeasure 6.2.2. Revitalization – small cities

1. Reconstruction and repair of post-industrial/post-military/post-state farm environments, including their adaptation for business, educational, tourism, social or cultural purposes, as well as development of neighbouring areas, resulting in solving economic or social problems in the revitalized area (except for housing estates).

Product N Number of post-industrial/post-military/post-state farm environments reconstructed for the purpose of at least two of the objectives pcs.

Product N Area of post-industrial/post-military/post-state farm environments reconstructed for the purpose of at least two of the objectives m2

Product N Number of post-industrial/post-military/post-state farm environments reconstructed for business purposes pcs.

Product N Area of post-industrial/post-military/post-state farm environments reconstructed for business purposes m2






Result T Number of people using the buildings covered by the project people Result N Number of the disabled using the buildings covered by the project people Result N Number of buildings protected pcs.

Result N Area of reconstructed and regenerated public infrastructure m2



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Result N Area of post-industrial/post-military/post-state farm environments reconstructed for the purpose of at least two of the objectives m2



2. Development of municipal areas, including construction, re construction and repair of buildings for business, educational, tourism, social or cultural purposes, as well as development of neighbouring areas, resulting in solving economic or social problems in the revitalized area (except for housing estates). Product N Number of buildings restored for the purpose of at least 2 of the objectives pcs.


Product N Number of buildings constructed for the purpose of at least 2 of the objectives pcs.

Product N Area of buildings constructed for the purpose of at least 2 of the objectives m2








Product N Usable area of the reconstructed buildings m2

Product N Green areas developed around the buildings covered by the project m2

Product N Small architecture area m2

Product N Number of small architecture elements pcs.

Product N Number of parking places pcs.

Product N Parking area m2

Product N Area of reconstructed and regenerated public infrastructure m2

Product N Length of internal roads built in the area covered by the project m

Product N Length of internal roads reconstructed/repaired in the area covered by the project m










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Result N Area of regenerated empty public spaces that became available for the purpose of at least 2 of the objectives m2


Result T Number of people using the buildings covered by the project people Result N Number of the disabled using the buildings covered by the project people Result T Number of new enterprises in the area covered by the project pcs.


3. Supplementation and repair of built-up areas, including infill buildings, repair of occupied and unoccupied buildings and their adaptation for business, educational, tourism, social or cultural purposes, as well as development of neighbouring areas, resulting in solving economic or social problems on the revitalized area (except for housing estates).

Product N Number of buildings restored for the purpose of at least 2 of the objectives pcs.




Product N Number of infill buildings developed for the purpose of at least 2 of the objectives pcs.

Product N Area infill buildings developed for the purpose of at least 2 of the objectives m2






Product N Number of the disabled using the buildings covered by the project pcs.



Result T Number of people using the buildings covered by the project people Result N Number of the disabled using the buildings covered by the project people Result N Usable area m2 Result N Number of new service points in the revitalized area pcs.


Result N Number of people using the developed / regenerated empty public spaces. people



4. Complex development of land for business purposes, except for infrastructure for inhabitants.

Product N Number of buildings constructed pcs.

Product N Area of buildings constructed m2

Product N Usable area in the buildings constructed m2



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Product N Length of access roads built in the area covered by the project m

Product N Length of access roads reconstructed/repaired in the area covered by the project m




Result N Number of incubators established in result of the project pcs.

Result N Area of incubators established in result of the project m2





Result T Revitalized area m2

5. Development of monitoring systems aimed at increasing safety in public spaces.

Product N Number of monitoring appliances installed pcs.

Product N Area covered by the monitoring system m2

Product N Number of districts covered by the monitoring system pcs.

Product N Number of monitoring systems implemented pcs.

Result N Number of crimes in the city pcs.

Result N Number of people covered by the monitoring system people

Result N Crime detection rate %

Result N Number of offences / crimes recorded by the monitoring system pcs.

6. Replacing asbestos elements of multi-family housing developments with less harmful materials, only with asbestos utilization .

Product N Number of buildings from which asbestos was removed pcs.

Product N Area of buildings from which asbestos was removed m2

Product N Area from which asbestos was removed m2

Result N Amount of asbestos containing materials removed Mg

Result T Number of people living in the regenerated buildings people

Project selection criteria are general and all refer to non-profitable projects. In case of JESSICA, it is

necessary to broaden the criteria by the following aspects:

Profitability / self-financing ability of projects [crucial in the light of the method of financing

projects within JESSICA]

Compatibility with an Integrated Municipal Development Plan [crucial in the light of

necessity to implement a systemic approach to urban regeneration]

The present list of product and result indicators is very complex and enables applicants to

characterise potential JESSICA projects. There is no need to introduce any changes as their

implementation would additionally lengthen the process of JESSICA implementation.

1.2.3. List of key potential projects to be implemented in the years 2010-20136

An analysis has been conducted of potential ROP SL projects. The projects (listed in the compilation

below) correspond to ROP SL guidelines on eligibility.

The general profile of the projects comprises actions in the following spheres:

revitalization of public spaces;

development and modernization of historical buildings and museums;

modernization of transport infrastructure.

The character of these projects is non-commercial. However, some of them, especially concerning

modernization of sports, cultural and post-industrial infrastructure could generate considerable

income.

Table: Key potential regeneration projects (years 2010 – 2013)

No City Project

1. BIELSKO – BIAŁA Revitalization of the Bielsko Old Town – “Visit and rest” – stage II.

2. BIELSKO - BIAŁA Revitalization of the Słowackiego Park in Bielsko-Biała.

3. BIELSKO-BIAŁA Revitalization of the Bielsko Old Town.

4. BIERUO Reconstruction of XVI century dyke on Chemików Street.

5. BIERUO Revitalization of the area of Paciorkowce in Bieruo Nowy for sports and

recreation purposes.

6. BIERUO Construction of an impounding reservoir in Bijasowice.

6 The list was developed on the basis of information supplied by self-government units in response to the request of

the Marshall Office of Śląskie Voivodship.


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7. BIERUO Development of new cycle paths.

8. BIERUO Development of the Łysina reservoir area in Bieruo Stary.

9. BIERUO New city monitoring system.

10. BIERUO Modernization of roads, pavements, power utilities and fibre networks within

the Old Town.

11. BIERUO Reconstruction and repair of a post-industrial building including its adaptation

for business, social and cultural purposes.

12. BIERUO Reconstruction and repair of the Jutrzenka Cinema and Theatre.

13. BIERUO Reconstruction and repair of the Gama Community Centre.

14. BIERUO Gallery and museum of the city of Bieruo.

15. BIERUO Reconstruction and adaptation of a sports hall in the Homer district.

16. BIERUO Revitalization of the area of a former crystal grinding workshop on Borowinowa

Street.

17. CIESZYN Monitoring system in the Cieszyn Down-Town.

18. CIESZYN Regeneration of the building on 7 Limanowskiego Street in Cieszyn –

construction of a public parking.

19. CIESZYN Regeneration of the building of the former border crossing by the Friendship

Bridge.

20. CZĘSTOCHOWA Modernization of the Wieluoski Square and Rocha Street

21. DĄBROWA GÓRNICZA Construction of a school and education centre with a sports centre for disabled

children and youth in Dąbrowa Górnicza: stage I – development of the area and

external utilities.

22. DĄBROWA GÓRNICZA Reconstruction of the monumental Zagłębie Culture Palace in Dąbrowa

Górnicza.

23. DĄBROWA GÓRNICZA Reconstruction of the DAMEL city stadium in Dąbrowa.

24. DĄBROWA GÓRNICZA New parking places and reconstruction of the communication system in the

Morcinek district of Dąbrowa Górnicza.

25. DĄBROWA GÓRNICZA New parking places and reconstruction of the communication system in the

Sikorskiego district in Dąbrowa Górnicza.

26. GLIWICE Development of the areas around the Radiostation.

27. GLIWICE Revitalization of the Radiostation – Gliwice.eu

28. GLIWICE Reconstruction and development of the stadium on Okrzei Street in Gliwice.

29. GLIWICE Reconstruction of the Municipal Theatre ruins.

30. GLIWICE Modernization of the “Forrest” swimming pool.

31. GLIWICE Development of the Rzeźniczy Square in Gliwice.

32. GLIWICE Modernization of the square on Narutowicza Street.


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33. ŁAZISKA GÓRNE Revitalization of fitness trails around the “Żabka” swimming pool in Łaziska

Górne.

34. MYSZKÓW Revitalization of the Myszków Market Square.

35. RUDA ŚLĄSKA Revitalization of the Kozioła Park.

36. RUDA ŚLĄSKA Revitalization of the historical centre of the Wirek district.

37. RUDA ŚLĄSKA Revitalization of the Sobieskiego Park.

38. RUDA ŚLĄSKA Revitalization of recreation grounds – development of the Achtelika Valley.

39. RUDA ŚLĄSKA Hill of New Ideas – revitalization of a park for sports and business purposes –

stage II.

40. RUDA ŚLĄSKA Development of green areas – Planty Kochłowickie.

41. RUDA ŚLĄSKA Renovation of St. Paul Church and a viewing tower in Ruda Śląska.

42. SIEWIERZ Reconstruction of the Market Square in Siewierz.

43. SIEWIERZ Complex conservation of the Siewierz castle – stage II.

44. SIEWIERZ Development of active tourism and recreation infrastructure “Pogoria Summer

and Water Sports Centre”. Cycle path from Kuźnica Warężyoska Reservoir to

Siewierz Castle ruins.

45. SIEWIERZ Development of the Siewierz Castle surroundings for recreation, tourism and

sports purposes.

46. SOSNOWIEC Reconstruction of the “MUZA” building in Sosnowiec as a chance to promote

culture.

47. SOSNOWIEC Adaptation of the Sielecki Castle.

48. SOSNOWIEC Reconstruction of Chemiczna Street.

49. SOSNOWIEC Revitalization of the monumental Schoen Park in Sosnowiec.

50. SOSNOWIEC Revitalization of the Three Caesars’ Triangle and adaptation of the Biała

Przemsza river for tourism and recreation purposes.

51. SOSNOWIEC Revitalization of the Rudna district – stage II.

52. STRUMIEO Revitalization of the monumental Strumieo Old Town.

53. ZAWIERCIE Development of the local cultural infrastructure by building a new seat of the

Zawiercie Municipal Library.

54. ZAWIERCIE Development of the local sports infrastructure by modernizing the Zawiercie

municipal swimming pool.

1.2.4. List of key projects financed after a restricted call of proposals

Table: List of key projects financed after a restricted call of proposals

No Measure/Sub-measure (no and name)

Project title Beneficiary (leader + partners)

Total project cost (PLN) Grant (PLN)

Western Subregion Development Programme 24 Sub-measure 6.2.1.

Revitalization - "large cities" Modernization of a sports and entertainment arena

in Rybnik - Boguszowice Rybnik - Gmina 5 571 478,57 3 999 764,47

25 Sub-measure 6.2.1. Revitalization - "large cities"

Monitoring system in the City of Rybnik - Stage II Rybnik - Gmina 2 190 631,24 1 840 000,00

26 Sub-measure 6.2.2 Revitalization – “small cities”

Establishment of a "Culture and Entertainment Centre" in Rydułtowy

Rydułtowy - Gmina 11 045 000,00 6 160 000,00


Social and cultural centre with exhibition areas Pietrowice Wielkie -Gmina

8 004 664,00 6 800 000,00


Modernization of a sports and entertainment arena for the purpose of a cultural and educational centre

Czerwionka – Leszczyny - Gmina

13 508 816,00 11 480 000,00

29 Sub-measure 6.2.2 Revitalization – “small cities””

Development of public spaces for the purposes of a municipal open – air market in Czerwionka Leszczyny

Czerwionka – Leszczyny - Gmina

3 764 920,00 3 200 000,00

44085509,81

33479764,47

Southern Subregion Development Programme 39 Sub-measure 6.2.2

Revitalization – “small cities” Revitalization of degraded areas and development of technical infrastructure for the purposes of the Water

Sports and Recreation Centre

Bestwina - Gmina 2 600 000,00 2 200 000,00


Time for Business – reconstruction of the railway station in Czechowice-Dziedzice

Czechowice-Dziedzice -Gmina

5 002 000,00 3 900 000,00


Revitalization of degraded areas of the Silesia coal mine

Bielski - Poviat 2 488 556,00 1 900 000,00


Revitalization of buildings of the former cement mill Goleszów - Gmina 1 416 517,60 1 204 000,00


INTEGRATOR – Municipal Centre – repair of the monumental tenement house on 9 Mickiewicza

Street in Skoczów

Skoczów - Gmina 2 924 960,00 2 456 000,00


Revitalization of the monumental Old Town in Strumieo

Strumieo - Gmina 2 967 040,00 2 516 000,00


Revitalization of Great Houses – stage I Ustroo - City 2 230 701,68 1 896 000,00


Development of the area neighbouring with the Północ district in Czechowice - Dziedzice

Czechowice – Dziedzice - Gmina

2 552 946,89 2 141 232,36


Revitalization of areas neighbouring with the Castle Hill in Cieszyn – modernization and development of

Cieszyn - Gmina 1 548 120,00 1 101 600,00


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the public parking 48 Sub-measure 6.2.2

Revitalization – “small cities” Revitalization of the park in Łękawica Łękawica - Gmina 703 031,28 565 940,18


Development of the quarry area in Glinka Ujsoły - Gmina 620 603,33 526 209,56


Revitalization of post-industrial infrastructure for business, recreation and social purposes

Węgierska Górka -Gmina

990 712,71 805 059,89

26045189,49

21212041,99

Northern Subregion Development Programme 37 Measure 6.1 Enhancement of

regional growth centres Sports centre on Żużlowa Street in Częstochowa Częstochowa - City 70 000 000,00 29 520 000,00


Reconstruction and repair of the Youth Community Centre in Częstochowa

Częstochowa - City 4 470 592,00 3 800 000,00


Repair and adaptation of the former astronomical observatory for cultural and educational purposes in

Częstochowa

Częstochowa - City 2 646 153,85 1 720 000,00


Business Activity Zone Poczesna - Gmina (project leader), partner gminas:

Kamienica Polska, Starcza, Konopiska

14 117 647,06 12 000 000,00


Development of the Market Square in Kłobuck Kłobuck - Gmina 6 559 789,54 5 575 821,10


Reconstruction of the Market Square in Krzepice as an element of the town revitalization programme –

stage I

Krzepice - Gmina 2 380 708,00 2 023 601,80


Reconstruction of the Old Town and Jana Pawła II Square in Żarki

Żarki - Gmina 2 761 000,00 2 295 000,00


Revitalization of the Market Square in Koziegłowy Koziegłowy - Gmina 1 936 025,88 1 622 400,00


Myszków Business Initiative Centre in former factory buildings from the beginning of the XXth century;

Myszków, 12 Kościuszki Street

Myszków - Gmina 3 025 352,20 1 193 548,88


Revitalization of areas degraded by excavation of moulding sand in the gmina of Niegowa for tourism

and recreation purposes

Niegowa - Gmina 783 070,92 665 610,28


Revitalization of the Market Square in Myszków - Mrzygłód

Myszków - Gmina 3 285 590,21 651 507,28

41 965 929,66

31 547 489,34


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Central Subregion Development Programme 84 Sub-measure 6.2.1. Revitalization

- "large cities" Adaptation of a building for a Social Initiative

Centre in Chorzów Chorzów – Gmina with

poviat rights 1 729 411,78 1 470 000,00


Adaptation of a building for a Social Initiative Centre in Bytom

Bytom - City 1 935 940,00 1 470 000,00


Adaptation of a building for a Social Initiative Centre in Świętochłowice

Świętochłowice - City 3 526 419,77 1 353 985,95


Adaptation of a building for a Social Initiative Centre in Ruda Śląska

Ruda Śląska - City 1 729 411,78 1 470 000,00


Safe Mysłowice – city monitoring system Mysłowice - Municipality

1 684 490,60 1 200 000,00

Total 10 605 673,93

6 963 985,95

Total resources in all sub-regional programmes 122 702 302,9

93203281,8


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1.3. Analysis of strategic documents

1.3.1. Local Revitalisation Programmes

The objective of Local Revitalization Programmes is to elaborate social, economic and spatial

development directions for degraded urban areas, post-industrial and post-military areas. These documents

are parts of strategic planning actions, that is, actions undertaken by local self-government

authorities to plan for the future, define project stages and provide for financing resources. Effective

strategic planning may be characterised by the following features:

It helps self-government entities define common objectives acceptable by the society and achieve

them,

•Due to the necessity of ensuring project eligibility andmore importantly, smooth process of formal appraisal,beneficiaries avoided projects that did not directlyresult from the list of exemplary projects;

•Information on regeneration reached localgovernments shortly before the deadline for filingapplication forms. Several local authorities did notmanage to prepare good projects on time.

Formal requirements of ROP SL (Priority 6) correspond to

JESSICA implementation conditions

•It is the guidelines that created the picture of Silesianregeneration. The basic aim of local governmentauthorities is to win a grant. Only in case of failure,alternative solutions are considered such as PPP,changes in technical drafts, combining the project withother projects implemented in the directneighbourhood (also by other institutions).

Implementation of JESSICA will not necessitate any

changes to the list of product and result indicators

•The market expects a mechanism enabling applicationin long term perspective (revolving mechanism).

•The projects implemented should be profitable andrelated (logically and economically) with other actionsimplemented in the region.

In response to the revitalization market

demand, it is recommended to include rural communes strongly influenced by large cities on the list of potential

JESSICA beneficiaries


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It presents development aims and tasks to do as well as necessary resources and achievement

methods,

It focuses on feasible (not desirable) enterprises by real and true assessment of local resources,

chances and threats.

Effective strategic planning necessitates also financial planning actions such as Multi-annual

Investment Plans. It provides control and realism in the process of defining priorities and their

selection.

Strategic planning combines a large number of small projects (investment tasks) in order to

achieve wider economic objectives. Strategic planning enables authorities e.g. to:

avoid guesswork and accidental decisions,

organise preferences of the local society,

organise local problems and demands in order of precedence.

Analysis of LRPs adopted by particular city councils has proven that these documents are

multi-annual plans of economic, social and spatial actions covering the period of maximum 20 years.

All the activities are planned for the years 2007 – 2013, in correspondence with the ERDF

programming period.


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Table: Strategic planning model

Local Revitalization Programmes assume the necessity of update as new demands appear

and new development directions are defined. These Programmes are coherent with ROP SL or IRDOP

(in case of not updated programmes) guidelines. Revitalization projects concern not only technical

infrastructure but also improvement of local community life quality.

Local Revitalization Programmes enable gminas and their partners to apply for European

Union grants to finance their projects. Possibility of financing investments from external resources

enables gminas and other self-government entities to implement the projects defined by the

Policies, programmes, sectoral plans

Development strategy Spatial Development Plan

Multi-annual Investment Plan

Priorities

Annual budget

Investment expenditure Operating expenditure

ProjectProject Project Project

Local Revitalization Programme


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Programme. The major objective of a LRP is thus provision of coherence between all activities and

tasks concerning a particular revitalization area.

Revitalization projects defined by the LRPs analysed are primarily investments eligible for

financing from the resources of the Śląskie Regional Operational Programme within Priority VI

Sustainable urban development. In order to win a grant, it is necessary for a potential beneficiary to

present a Local Revitalization Programme including the project to be co-financed.

Local Revitalization Programmes include also key projects and investments covered by

Subregion Development Programmes. The key projects are:

1. Podium – a modern sports and entertainment arena in Gliwice.

2. New seat of the Museum of Silesia in Katowice.

3. Enhancement of the role of the Pilgrimage Centre by modernizing Najświętszej Maryi Panny

Avenue in Częstochowa.

4. Academic Information Centre and Library.

5. International Congress Centre in Katowice.

Investments defined by Local Revitalization Programmes are coherent with the types of

projects defined by the Detailed Description of ROP SL Priorities, that is:

Construction (including outward extension, upward extension and reconstruction), conversion

and repair of public buildings shaping the metropolitan image of the region.

Development and transformation of representative public areas characterised by high quality

urban solutions and supraregional importance.


and repair of academic infrastructure.


and repair of cultural, tourism, sport and recreation infrastructure of supraregional importance, in

which international meetings, congresses, fair, exhibitions, sports and entertainment events may be

organised.

Construction (including outward extension, upward extension and reconstruction) and

conversion of strategic public transport infrastructure (excluding means of transportation).

Establishment and development of economic activity zones, especially on post-industrial areas.

Reconstruction and repair of post-industrial/post-military/post-state farm environments,

including their adaptation for business, educational, tourism, social or cultural purposes, as well

as development of neighbouring areas, resulting in solving economic or social problems in the

revitalized area (except for housing estates).


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Development of municipal areas, including construction, reconstruction and repair of buildings

for business, educational, tourism, social or cultural purposes, as well as development of

neighbouring areas, resulting in solving economic or social problems in the revitalized area

(except for housing estates).

Supplementation and repair of built-up areas, including infill buildings, repair of occupied and

unoccupied buildings and their adaptation for business, educational, tourism, social or cultural

purposes, as well as development of neighbouring areas, resulting in solving economic or social

problems on the revitalized area (except for housing estates).

Complex development of land for business purposes, except for infrastructure for inhabitants.

Development of monitoring systems aimed at increasing safety in public spaces.

Replacing asbestos elements of multi-family housing developments with less harmful materials,

only with asbestos utilization.

The Local Revitalization Programmes analysed have to be updated due to the following

reasons:

LRPs have not been updated since the last call for proposals of the EU programming

period 2004 – 2006 or since selected projects have been included in particular

subregional development programmes of Śląskie Voivodship within ROP SL 2007 –

2013,

There has still been no call for proposals announced in the present programming

period as the call has been withheld until further notice.

Introduction of new projects or modification of the already included ones in the

course of the update process before the call for proposals.

LRPs are usually updated after application documents had been prepared or after the planned

deadline of applying within subregional development programmes had been announced.

There is also a necessity to ensure coherence between multi-annual investment plans and local

revitalization programmes of a particular self-government entity. Due to the new request of the ROP

MA, it is obligatory to ensure financial resources for a particular project only when a co-financing

contract is to be signed. There may be thus postponements of multi-annual plan completion dates

(new project titles, costs, financing sources and time-tables).


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1.3.2. Multi-annual Investment Plans

Certain competences of self-government entities to earn profit and bear expenses have

considerable impact on the level, directions and types of investments.

Public investments of self-government entities may be divided according to the following

scheme:

social infrastructure (e.g. schools, community centres, social security centres, hospitals, out-

patient clinics, etc.),

technical infrastructure (e.g. roads, heat, water and waste water systems, sewage treatment

plants, dumps, city transport).

Investments in infrastructure contribute to improvement of life quality and business activity

conditions. They may also have positive impact on the job market. One should also remember that

investments in infrastructure (including revitalization projects) result in greater attractiveness of a

particular area than investments in social infrastructure.

Investment policy of self-government entities implements the objectives of social and

economic policies and influences the investment attractiveness of a particular entity. Investment

policy is a type of expenditure policy and is combined with profit policy by defining possible sources

of financing public investment and debt service. Investment policy of a self-government entity is a

conscious and purposeful choice of:

projects to be implemented in accordance with certain previously defined criteria – new,

continued, modernization, material, financial projects (including the definition of investment

potential of the particular entity);

methods and sources of financing investment (grants, e.g. from the European Union as well as

credits and loans), reflected in the development strategy, revitalization programme and multi-annual

investment plan.

A multi-annual investment plan of a self-government body comprises a compilation of

investment projects to be implemented in the next few years. It is developed in result of strategic

choice of investment directions in a long-term perspective and its aim is social and economic growth.

The bases for multi-annual investment plans are medium-term and long-term budget

projections, taking into account the maximum debt level and the costs of debt service. These

projections are the basic tool, integrating profit with expenditure.


Page 51

According to statutory regulations, the primary objectives of long-term investment policies

are the following:

improvement of road infrastructure, public transport – projects aimed at higher transport

quality,

improvement of living conditions, e.g. by providing connection to the waste water system,

revitalization of historical and monumental buildings,

revitalization and activisation of degraded urban areas, degraded post-industrial, post-

military and post-mining areas,

construction or modernization of buildings aimed at the development of sports, tourism and

recreation,

providing conditions for entrepreneurship development,

providing conditions for housing development,

improvement of technical conditions of public buildings.


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Table: Budgeting in a self-government entity

The key assumptions and directions of investment policies of self-government entities are the

following:

ensuring compatibility with social and economic development conditions of self-government

entities, defined in strategic and urban planning documents,

ensuring continuation of the already began projects and the ones planned for the analysed

period, including key social and economic tasks,

assuming the estimated expenses on the basis of the present and the long-term budget

projections as well as macro-economic indicators,

assuming the expenses planned for the initial years on the basis of tender procedures, signed

contracts or cost estimates,

adaptation of the projects to operational programmes for the years 2007 – 2013, financed by the

EU (chance for a grant),

Budget assumptions

Present financial

situation of the entity

Major tasks

Investment projects

Forecast of macro-

economic indicators

Profit policy

Grants

Main threats

Initial assumption of budget

values


Page 53

introducing projects in case of which the Council of the particular entity has already undertaken

financial obligations,

maintaining indicators of debt and debt service on a reasonable level, not exceeding the statutory

limits (Law on public finance).

Limitations concerning debt levels for self-government entities are the following:

the total sum of instalments to be paid in the particular year as well as potential payoff of sums

resulting from guarantees granted by a self-government entity, together with due interest from

credits and loans, due interest, discount and redemption of securities issued by the entity must not

exceed 15% of the income planned for the particular budget year,

in case the relation of the total sum of the public debt and amounts due from sureties and

guarantees granted by public finance sector entities to the GDP exceeds 55%, the total sum of debt

and debt service increased by potential liabilities resulting from guarantees of a self-government

entity must not exceed 12% of the income planned for the particular budget year, unless these

liabilities had been incurred before the day this relation was published.

There are also certain limitations concerning the debt level of self-government entities:

the total debt of a self-government entity at the end of a budget year must not exceed 60% of

actual revenues of this entity in that particular year.

throughout a budget year, the total debt of a self-government entity at the end of each quarter

must not exceed 60% of planned revenues of this entity in that particular year.


In order to formulate the directions of investment policy, being the basis for a Multi-annual

Investment Plan, self-government entities:

- define project selection criteria, e.g. in accordance with its long-term objectives defined in

strategic documents such as development strategies or revitalization programmes,

- define own business potential and economic situation, as well as financial, economic and

technological feasibility of projects,

- choose the cheapest methods of financing, adequate to the investment type as well as

present and anticipated financial situation,

- formulate and then update a Multi-annual Investment Plan at least once a year, in

accordance with the investment policy,

- adapt multi-annual plans to annual budgets, introducing modifications caused by

demographic, financial or economic factors;

Multi-annual Investment Plans include:


Page 54

- principal assumptions, including those on the document update,

- projection of revenues and expenditures for the period covered by the plan as well as debt

and debt service ratios,

- general characteristics, including the structure of investment expenditures, new and

continued projects,

- material and financial plan, divided into groups, e.g. roads, revitalization, health care,

education, etc. The plan includes each project title, implementation period, total cost in

particular years as well as sources of financing;

Multi-annual Investment Plans include mostly projects aimed at social and economic

development (transport, investment attractiveness, sports, recreation, life quality and public

safety);

as investment is one of the primary public functions of self-governments, influencing the life

quality of inhabitants, resources devoted to investment are higher from year to year;

financial engineering of degraded areas regeneration projects comprises primarily resources

from ROP SL (Priority VI) and own contribution;

most projects included in the investment plans analysed are not coherent with the ones

included in Local Revitalization Programmes; this situation results from the following

reasons:

o LRPs have not been updated since the last call for proposals of the EU programming

period 2004 – 2006 or since selected projects have been included in particular

subregional development programmes of Śląskie Voivodship within ROP SL 2007 –

2013,

o There has still been no call for proposals announced in the present programming

period as the call has been withheld until further notice.

o Introduction of new projects or modification of the already included ones in the

course of the update process before the call for proposals.

Multi-annual Investment Plans and Local Revitalization Programmes have to be updated in

order to introduce potential urban regeneration projects to be co-financed from the

resources of ROP SL. Projects should be verified with regard to their scope, timetable and

cost. Moreover, new projects should be added to strategic documents in response to social

demands and needs.


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1.4. Identification and evaluation of specific potential JESSICA projects

1.4.1. Projects reported in a survey research

The present list of potential JESSICA projects is very comprehensive. The value of the projects may

exceed 150 mln EUR. The list has been developed on the basis of a survey research, conducted by

City Consulting Institute Sp. z o.o. and the Marshal Office in Katowice, as well as on the basis of

personal meetings of the Consultant representatives with members of local governments.

No City Project

1. BIELSKO – BIAŁA

Construction of a City Stadium on Rychlinskiego Street in Bielsko

– Biala.

2. BLACHOWNIA New Blachownia market.

3. BLACHOWNIA Repair of two business premises owned by the gmina of

Blachownia

4. BLACHOWNIA Revitalization of recreation areas around the Blachownia water

reservoir; a harbour and a yacht club.

5. CHORZÓW

Adaptation of a monumental municipal slaughterhouse for the

purpose of a business centre.

6. CHORZÓW Modernisation of a post-industrial shaft on Siemianowicka

Street.

7. CHORZÓW Construction of indoor tennis courts.

8. CHORZÓW Reconstruction of commercial pavilions and a local community

centre.

9. CHORZÓW Modernisation of the building of the Silesian College of

Computer Studies.

10. CHORZÓW Regeneration of a building of The Poznan School of Banking,

Faculty in Chorzow (66 Wandy Street).

11. CHORZÓW Regeneration of a building of The Poznan School of Banking,

Faculty in Chorzow (29 Sportowa Street).

12. CHYBIE

Regeneration of post-industrial areas in Chybie (Kuchenna and

Polna Street).

13. CIESZYN

Regeneration of the municipal market on Katowicka Street.

14. CIESZYN

Regeneration of the Cieszyn Venice area.


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15. CZELADŹ

Reconstruction and development of buildings for commercial

purposes (Rynek 26/28).

16. CZELADŹ Reconstruction and development of a building (Rynek 22) for

the purpose of a business centre.

17. CZELADŹ Reconstruction of a monumental pithead building for the

purpose of a training and cultural centre.

18. CZELADŹ Construction of commercial pavilions within the medieval Old

Town in Czeladz.

19. CZELADŹ Reconstruction of a monumental building of the “Elektrownia”

Modern Art Gallery.

20. CZERNICHÓW

Regeneration of the “Flamingo” Centre in Miedzybrodzie

Zywieckie.

21. CZĘSTOCHOWA Development of a recreation centre in Lisiniec.

22. CZĘSTOCHOWA Reconstruction of a tenement building on 44 Wolności Street.

23. CZĘSTOCHOWA Construction of a building on Śląska and Waszyngtona Streets

for service and hospitality purposes.

24. DĄBROWA GÓRNICZA Regeneration of Dabrowa Gornicza down-town – development

of post-industrial areas of the Defum factory.

25. DĄBROWA GÓRNICZA Regeneration of Dabrowa Gornicza down-town –development

of public space in the neighbourhood of the railway station.

26. DĄBROWA GÓRNICZA Regeneration of post-industrial buildings of the “Paryz” mine in

Dabrowa Gornicza.

27. DĄBROWA GÓRNICZA Regeneration of post-industrial areas of the “Paryz” mine in

Dabrowa Gornicza (Jadwiga heap).

28. GLIWICE

Development of investment grounds – Science and Technology

Park.

29. GORZYCE

Development of a Recreation Centre “Olza “.

30. JAWORZNO Construction of a multi-storey car park with commercial

premises in Jaworzno city centre.

31. KATOWICE Regeneration of Pawla, Wodna and Gornicza Streets in

Katowice.


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32. KATOWICE Regeneration of Mariacka and Dworcowa Streets in Katowice.

33. KŁOBUCK Reconstruction of the municipal open-air market.

34. KŁOBUCK Adaptation of a palace to a conference centre and revitalization

of the palace park in Kłobuck.

35. KŁOBUCK Development of the swimming pool area in the Sports and

Recreation Centre in Kłobuck.

36. LUBLINIEC Construction of a swimming pool in Lubliniec.

37. MIASTECZKO ŚLĄSKIE Adaptation of areas neighbouring the Zinc Mill in Miasteczko

Slaskie for business purposes.

38. OGRODZIENIEC

“Krępa” Recreation Centre in Ogrodzieniec.

39. POWIAT BĘDZIOSKI

Regeneration of Rogoznik and adaptation for the purpose of a

water sports centre.

40. RUDA ŚLĄSKA

Commercial Centre on Janasa Street.

41. SŁAWKÓW

Regeneration of the monumental centre of Slawkow – stage I –

commercial buildings.

42. ZAWIERCIE Cristal Valley – regeneration of post-industrial areas.

43. ZAWIERCIE Development of degraded urban areas surrounding the railway

station in Zawiercie.

The above projects have been analysed by the Consultant with regard to the following issues:

profitability (income generation capacity defined on the basis of a study of the documents

supplied by potential beneficiaries as well as personal meetings);

location (attractive location of the project);

stage of document preparation (technical plans, concepts, drafts, feasibility studies).

On the basis of the analyses conducted it may be stated that all projects are profitable or combine

the open access with commercial development.

Some projects are perfectly located (e.g. Development of a recreation centre in Lisiniec – 200 metres

from the Jasna Gora Sanctuary) that will be directly translated to their attractiveness.

The projects are consistent with urban planning documents, most of them have ready functional –

utility programmes and technical plans.


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On the basis of the above analysis one may state that as far as project maturity and readiness for

implementation are concerned, potential JESSICA beneficiaries are ready for the initiative

implementation.

Table: Analysis of selected projects7

No City Project

1. CZELADŹ Element Description

Project title Construction of commercial pavilions within the medieval Old Town in Czeladz.

Short description

The project concerns developing an area situated in the historical and monumental centre of Czeladź. It consists in building a complex of historically styled commercial pavilions within the medieval Old Town (together with water and sewage systems and transport infrastructure). 39 commercial premises located in a few pavilions with arcades will be constructed. The project location is very advantageous – in direct neighbourhood of the Market Square and the National Road no 94 from Wrocław to Kraków.

Project value Project value: 8.454.759 PLN The resources have been provided in the Multi-annual Investment Plan. Project timetable: 2010-2011.

Compatibility with the LRP

The project is compatible with the LRP and other strategic documents. The Local Revitalization Plan of the City of Czeladź was approved by the resolution LVI / 765 / 2005 of 21 July 2005. The Plan will be updated after the issue of state aid in regeneration projects will will have been regulated by appropriate laws (as it influences the financial engineering of projects) and after the Environmental Impact Assessment procedures will have been completed. The project is complementary with regeneration actions undertaken in the years 2006-2007 in the neighbouring areas: the project consisting in revitalization of the urban area and complete technical infrastructure supply of 10 streets and the Market Square was supported by an IRDOP grant.

PPP The project does not directly necessitate a contribution of a private partner. However, there are private parties interested in it:

7 The above compilation has been developed for all projects mentioned in the present Study. The above examples are to prove

the great diversity of actions to be undertaken and stages of preparation of particular beneficiaries.


Page 59

No City Project

private entities willing to create a commercial network in cities

association of merchants (capital contribution)

ENION S.A. (Turon Group) building its own power supply network will be a project partner. Technical conditions have been already agreed. Another project partners is ZIK Sp.o.o. – a company managing the municipal water and sewage system.

Technical documentation

The project has:

complete technical plans,

all necessary opinions and agreements,

building permission for public purpose investment,

decision on environmental conditions of approval of an undertaking,

building permit,

technical graphs,

cost estimates, bill of quantities, Specification for Work Accomplishment and Acceptance

2. CZĘSTOCHOWA Element Description

Project title Development of a recreation centre in Lisiniec. Short description

Development of an urban area (about 40 ha), situated in the neighbourhood of the city centre and the Jasna Góra Sanctuary. Planned usable area – 11.000m2. Functional programme:

high quality aquapark

wellness & Spa

sport & fitness

entertainment facilities Total water area – 1590 m2

Project value 127.000.000 PLN Compatibility with the LRP

The project has been included in the Municipal Revitalization Programme (updated in 2008).

PPP The project is anticipated to be implemented within PPP.

Technical documentation

Functional – utility programme.

3. JAWORZNO Element Description

Project title Construction of a multi-storey car park with commercial premises in Jaworzno city centre.

Short description

The aim of the project is to: - provide parking places in the city centre (in the neighbourhood of the Old Town Market), - development of one of the key city districts for


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No City Project

the purposes of a pedestrian zone; construction of a fine arts square between the library and the museum; - combination of parking and service functions. The project product will be a four-storey building with 282 parking places (total area of 9 490 m2). The ground floor will be devoted to service points.

Project value Estimated project value: 13 895 000 PLN No resources have been provided for the project in the Multi-annual Investment Plan as the city still searches for additional sources of financing.

Compatibility with the LRP

The project is compatible with the Local Revitalization Programme and is located in a revitalization area. It is also compatible with the objectives of measure 6.2.1 Revitalization of big cities of the ROP SL 2007-2013.

PPP Possibility of establishing PPP. Technical documentation

Spatial conception of a multi-storey car park (developed in 2009).

1.4.2. Other potential projects

The list of potential JESSICA projects will be successively broadened, depending on the following

factors:

information and methods of reaching potential beneficiaries;

implementation of public-private partnerships;

JESSICA operation and opinions on the mechanism;

1.4.3. Assessment of the interest of potential beneficiaries in a revolving financial

instrument

In the course of work leading to the development of the Report, a survey research has been

conducted and several meetings between City Consulting Institute Sp. z o.o. experts with

representatives of local government authorities have been organised.

Interest of potential beneficiaries may be estimated on the basis of the following factors:

list of potential projects;

interest in the financing method (including potential institutional solutions);

information transferred from Municipal Offices to their budget entities.


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1.5. SWOT analysis for JESSICA

The SWOT analysis has been developed on the basis of regional conditions concerning urban

regeneration projects.

Possibility of financing projects

STRENGTHS WEAKNESSES

large number of wide-range projects that are already prepared or implemented,

continuity in financing regeneration projects,

greater scope of project effect achieved thanks to implementation of integrated projects, characterised by wider scope and value, also commercial and generating considerable profit ,

participation of the private sector in project financing,

fast payment schedule and availability of resources as well as possibility of quick use of resources,

wide range of financial products (loans, credits, capital contribution, guarantees),

a revolving mechanism opening a long-term possibility of financing

relatively little resources,

necessity of searching for additional sources of financing the mechanism in order to develop it,

lack of experience with financial mechanisms aimed at urban development,

little knowledge on JESSICA among potential beneficiaries,

lack of Integrated Urban Development Plans; Local Revitalization Programmes comprise projects that are not systemically related,

unpreparedness of local governments to conclude PPP contracts,

List of potential projects

•over 150 projects have been reported, out of which 43 may be directly placed in the JESSICA context;

•preliminary list of projects has been prepared;

Financing method

•local governemtns search for attractive methods of financing their projects, including revolving mechanisms enabling them to obtain resources in the most advantageous moment of a particular project implementation;

•local governements prove considerable interest in participation in UDFs

Information on JESSICA

•information on JESSICA is still very poor;

•main principles of JESSICA operation have been presented during the meetings between the Consultant and local government representatives;

•some local governement entities informed their budget entities and other potential beneficiaries on the chance offered by JESSICA.


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OPPORTUNITIES THREATS

possibility to implement competitive, revolving financial mechanisms,

greater allocation of resources achieved thanks to participation of numerous institutions and partners in JESSICA,

interest rate rebates,

mild monetary policy of the state,

failure to meet the funding gap criteria,

readiness of self-governments and financial institutions to finance regeneration projects,

implementation of PPP projects, financed from private resources,

higher interest rates on credits and loans,

strict monetary policy of the state,

other competitive financial mechanisms,

difficult situation on the credit market and restrictions introduced by banks,

engagement of self-governments in projects that are not related with revitalization,

high debt and debt service ratios of local government entities,

passive attitude of public entities towards projects implemented within PPP,


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1.6. Conclusions for JESSICA

•beneficiaries prepare projects on the basis of guidelines that will enable them to apply for EU grants;

•formal requirements, eligibility criteria and lists of potential beneficiaries correspond to JESSICA regulations;

•there is no need to introduce any key changes to ROP SL in the process of JESSICA implementation;

The market of regeneration projects in Silesia has been

to a considerable extent shaped by the formal

requirements of IRDOP and ROP SL

•Beneficiaries mostly apply for grants, what results in the development of non-profit projects, whose maintenance in long perspective becomes a burden for local governments;

•Revolving mechanisms offer a possibility of better planning and searching for project partners;

There is a necessity to implement revolving financial mechanisms

•as there are no trainings on JESSICA, knowledge of self-government representatives on the initiative is very poor;

There is no system of information and trainings on

JESSICA

•most regeneration projects do not result from systemic solutions;

•LRPs are developed in order to adapt the document to potential projects;

•mechanisms should be introduced in order to necessitate complex urban planning;

Application procedure based on Integrated Urban

Development Plans should be considered

•in case of JESSICA projects it is necessary to evaluate their profitability and possibility of self-financing

Project profitability should be added to the evaluation

criteria


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2. Financial and social analysis for JESSICA implementation 8

2.1. Present financial instruments for urban regeneration projects

Currently there are no funds created from public resources and specialised in financing complex

regeneration projects in Silesia. Most revitalization projects are financed externally, primarily by

bank loans. Nevertheless, bank credits are available only for th entities meeting specific criteria and

requirements. This option is also strongly dependent on the situation on the financial market,

including interest rate strategy of national banks.

The main financial resources for regeneration projects in the Śląskie Voivodship are:

Internal funds of territorial self-government and other public institutions,

European Union funds,

European Investment Bank (EIB) funds,

Commercial banks’ funds,

Private equity (for commercial projects)

Financial resources obtained for renovation projects are often related to operational plans or funds,

e.g. to regional development. Each individual financial instrument used in Silesia is described below.

The Śląskie Regional Operational Programme (ROP SL) for 2007 – 2013

The main European Union financial source for Silesian regeneration projects is the European Regional

Development Fund (ERDF), within the Śląskie Regional Operational Programme for 2007-2013 –

Priority VI. Sustainable urban development.

Priority VI supports projects related to reinforcing regional development centres and regeneration of

degraded areas. This support includes ventures associated with the development of metropolitan

functions (including projects concerning characteristic objects or representative areas) located in big

cities of the Silesian agglomeration. As part of the local development centres’ strengthening plan, 20

million PLN was granted to support projects implemented in city agglomerations defined in the

Spatial Development Plan of the Silesian Voivodship (19 urban districts/cities, combined into 4 city

agglomerations).

8 The level of potential contribution of particular shareholders has been defined on the basis of the development

perspective of the potential JESSICA projects. In the Consultant’s opinion, the engagement of particular shareholders may be even higher than the one adopted foe analysis purposes. Due to the fact that the potential JESSICA projects are well prepared and correspond to regional development strategies, it was assumed the EIB may also be interested in financing them.


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Revitalization of post-state farm environments, post-industrial and post-military degraded areas puts

emphasis on restoring public space order. These projects concern development of urban areas,

infilling the existing buildings, providing investment areas with access to the domestic and

international road network. Apart from the full scope of revitalization activities for degraded areas,

additional housing investments are planned, dedicated to remove asbestos from existing buildings.

All degraded areas regeneration projects have to result from Local Revitalization Programmes.

Projects putting emphasis on economical recovery, development of new forms of economic activity

or creating new jobs, are prioritized.

Regeneration activities have been divided for government units with various population potential.

Maximum grant amounts to 85% of the total eligible cost of investment.

Currently, projects to be financed are chosen in a competition within Subregional Development

Programmes or from the indicative list of key projects. The ERDF’s total financial pool for Priority VI is

312,8 million PLN. The resources devoted to the key projects amount to 153,85 mln PLN. 47,29 mln

PLN was devoted to subregional projects and 111,66 mln PLN to the contest ones.

Actions complementary to regeneration measures distinguished in ROP SL are the following:

Priority I: Technical research and development (R&D), innovation and entrepreneurship,

Measure 1.3. Technology and innovation transfer.

Priority II: Knowledge society, Measure 2.1 Knowledge society infrastructure; Measure 2.2.

Development of public e-services.

Priority III: Tourism, Measure 3.2. Tourism-related infrastructure. 3.3 Tourism information

systems, 3.4. Tourism promotion.

Priority IV: Culture, Measure 4.1. Culture infrastructure, 4.2. Culture information systems,

4.3. Culture promotion.

Priority V: Environment, Measure 5.3. Quality air and renewable energy sources.

Priority VII: Transport, Measure 7.1. Modernization and development of transport system,

7.2. Public transport.

Priority VII: Educational infrastructure, Measure 8.1. Higher education infrastructure.

Priority IX: Health care and recreation, Measure 9.3. Local sport infrastructure.

Operational Programmes for the years 2007 – 2013

Renovation ventures may be also realized together with other operational programmes, e.g.:

Rural Development Programme for 2007 – 2013.

Priority axis III. Quality of life in rural areas and differentiation of rural economy.


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Infrastructure and Environment Operational Programme.

Priority axis XI. Culture and cultural heritage.

Priority axis XIII. Higher education infrastructure.

Priority axis VII. Environment friendly transport.

Human Capital Operational Programme for 2007 - 2013

Priority I. Employment and social integration, Priority VII. Social integration promotion.

Innovative Economy Operational Programme for 2007 - 2013

Priority axis VI. Polish economy on the international market in 2007-2013.

Operational Programme: Trans-border Cooperation – Republic of Poland – Slovak Republic –

2007 – 2013 and Operational Programme: Trans-border cooperation Czech Republic –

Republic of Poland - 2007 – 2013.

A loan from the European Investment Bank for financing regional development – granted with the

BGK support.

The loan for regional development in the BGK can be granted to the following entities:

Territorial self-government units (Polish acronym - JST): municipalities, associations of

municipalities, districts and voivodships,

JST subsidiaries and budget entities,

Other units, if the credited project aims at regional development.

The condition to receive the loan is to dedicate it for:

Co-financing projects supported by structural funds of the EU,

Co-financing projects according to the regional development strategy (without the EU

support),

The loan can embrace various economy sectors. The objectives of the loan may include:

environment protection, infrastructure, knowledge economy development, education and health.


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Table: The EIB funds for regional development.

Sector The bank loan object

Environment

protection

Drinking water supply and distribution

Waste water and sewerage,

Environment protection equipment,

Reduction of noise and vibration,

Collection, transport and recycling of waste,

Renovation of protected monuments and buildings,

Regeneration of urban constructions,

Other activities related to environment protection.

Infrastructure

Transportation (roads, rails, ports and airports),

Telecommunication (e.g. telecommunication network),

Industrial parks and zones,

Tourist infrastructure,

Sport, recreation and cultural objects.

Knowledge

Economy

Development

Human capital and society’s qualification in line with the concept

of lifelong learning, access to high quality information and

communication technology infrastructure,

Education, commercial and administrative processes within the

following areas: higher education, university research, media,

logistic/mail processes, e-business, e-government,

Innovative products and processes/services supporting long-term

competitiveness of the economy.

Education

Educational infrastructure and auxiliary facilities (e.g. student

accommodation, sport facilities),

Education equipment and teaching tools (e.g. textbooks),

Curricula, teacher training programmes etc.,

Vocational training and lifelong learning programmes in education,

Research components in higher education (e.g. science parks),

E-learning and open universities,

Development and knowledge dissemination via the media.

Health

Buildings and equipment at all heath care levels, including primary

health care, clinics, hospitals, hospices, psychiatric care,


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Investment in research and development (education centres,

equipment, hardware and software for staff training, laboratories,

diagnostic centres),

Centres and programmes for public health and preventive care,

Infrastructure and programmes for preventive and social healthcare

including: social support, nursery, care for the disabled etc.

Veterinary projects.

EIB funds can cover up to 50% of total project costs. In case of projects supported by other EU funds

or loans, the total EU support can cover maximum 90% of the total cost.

The minimum and maximum cost of a project in case of this financing method is 40 thousand and 25

million EUR respectively. The total cost of the loan granted cannot exceed 12.5 million EUR.

A bank loan is granted in Polish zlotys for minimum of 4 and maximum of 5 years. The grace period

for repayment is up to 5 years. Interest rate of loans is variable and covers:

Variable basis rate, settled by the EIB every 3 months,

Fixed margin for the BGK.

The Bank charges also commission for granting a credit.

Examples of regeneration projects co-financed by the EIB in Silesia are the following:

City of Częstochowa: Reconstruction of the areas surrounding Najświętszej Maryi Panny

Avenues, project value: 12.370.000 PLN, EIB resources: 7.865.250 PLN

City of Częstochowa: Development of the amphitheatre by the Niemena Promenade for

recreation purposes, project value: 5.300.000 PLN, EIB resources: 780.000 PLN,

City of Katowice: Reconstruction of the Katowice Down Town, project value: 120.742.701

PLN, EIB resources: 4.512.000 PLN,

City of Katowice: Reconstruction of the communication system around the Jantor ice rink,

project value: 9.633.039 PLN, EIB resources: 1.144.000 PLN,

City of Katowice: Rawa Boulvars, project value: 20.127.272 PLN, EIB resources: 6.787.699

PLN.

Domestic funds

Funds for regeneration projects can also come from the following financial investment instruments:

Social housing support programme from the Surcharge Fund;

The Municipal Investment Development Fund;


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The Thermomodernization Fund;

The TBS Programme (Polish: TBS - Towarzystwo Budownictwa Społecznego - Social Housing

Society)

The National Fund for Environmental Protection and Water Management

The financial instruments mentioned above (except for the NFEPWM) are established, assigned or

transferred on the basis of separate Acts to be realized by the BGK. The Bank plays a special and

important role in the Polish banking system: it finances and supports housing development,

expansion of small and medium sized companies and local government operations. The BGK, as a

state financial institution of high credibility, specializes in serving the public finance sector.

Governmental programme of financial support from the Surcharge Fund devoted to social housing,

sheltered housing, flophouses and lodging houses for the homeless.

The Surcharge Fund supports the following projects:

Construction of a building, including extension of an existing property owned by the investor

or in their perpetual usufruct;

Renovation and rebuilding of a property or its part (owned by the investor and fit for human

habitation);

Change in the way of using a property or its part (owned by the investor and requiring

renovation or rebuilding);

Purchase of a housing property or a building;

Purchase of a housing property or a building and its renovation;

Covering a part of costs of a TBS project – building a housing property by the Social Housing

Society.

Table: Maximum value of financial support from the Surcharge Fund.

Venture Social housing

Sheltered housing

Flophouses and lodging houses for

the homeless

Council housing

Investor Type of investment

Municipality

Munici-pality, county

Municipality, association of

municipalities, public benefit organization

Municipality

Construction work, including extension or superstructure

30% 30% 40% 30%

Renovation and rebuilding of a property or its part

40% 40% 50% 40%

Changing the way of using a property or its part

40% 40% 50% 40%

http://www.nfosigw.gov.pl/site/main_en/dzialalnosc_kontakty.php


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Purchase of a housing property or a building

30% 30% -- 30%

Purchase of a housing property or a building and its renovation

30% 30% -- 30%

Housing property built

by TBS

Construction work, including extension and superstructure

40%2 40% -- 40%

Renovation or rebuilding

50%2 50% -- 50%

Changing the way of using a property

50%2 50% -- 50%

The Municipal Investment Development Fund

The Municipal Investment Development Fund was established by the BGK on 1 January 2004 on the

basis of the Act of 12 December 2003. The MIDF grants preferential loans to municipalities and their

associations for the purpose of preparation of the documents necessary for municipal investment

projects, to be co-financed by EU funds. The loan can be spent on a feasibility study, a cost and

benefit analysis and other project documents, including analyses, expertises or studies necessary for

the venture.

The municipalities applying for a MIDF loan may choose procurement by a single-source procedure

instead of organizing a tender open to other banks.

The loan amount cannot exceed 500 000 PLN per one project and 80% of the net budgeted costs. The

credit can be transferred at once or in instalments. In order to get the money off, 20% of the net cost

of technical plans has to come from own resources.

The crediting period cannot be longer than 36 months. Nevertheless, the BGK can extend it by up to

18 months of grace period. The interest rate for the loan is calculated as 0.5 of bill of exchange

rediscount rate accepted by the National Bank of Poland as a rediscount.

The BGK charges interest - 1% of the loan amount. The credit and interest payback is made on a

monthly or quarterly basis.

The Thermomodernization Fund;

The basic goal of the Thermomodernization Fund is to support investments in thermomodernization,

renovation projects and rebuilding of single-family houses, financed jointly with the loans from

commercial banks. This support is called accordingly: “thermomodernization bonus”, “renovation


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bonus” and “compensation bonus”, and is accounted as a part of repayment of a bank loan taken for

the particular project.

The thermomodernization bonus can be requested by an owner or administrator of:

a residential building,

multi-apartment residential buildings,

public buildings owned by local self-government units and used for public functions,

a local heating network,

local heat emitters.

The bonus cannot be granted to budgetary units or entities.

The thermomodernization bonus can be granted to investments in thermomodernization, if the goal

of the venture is:

Reduction of energy consumption necessary for air and water heating in residential

buildings, multi-apartment residential buildings and buildings owned by territorial self-

government units, used for public functions,

Minimizing costs of acquiring heat, delivered to the above mentioned buildings via

a technical connection to a centralized heat source created as a result of liquidation of local

heat sources,

Decrease of initial energy losses in local heating networks and connected local heat sources,

Partial or total replacement of existing energy sources for renewable energy or application

of high-efficiency cogeneration with obligatory savings in energy consumption, regulated by

an adequate act.

In order for a project to be considered eligible, an internal energy audit has to be presented and

positively verified by the BGK.

From 19 March 2009, the value of the thermomodernization bonus has been equal to 20% of the

granted credit (no more than 16% of the total project cost and double expected annual savings on

energy costs, evaluated on the basis of the energy audit).

BGK investment loans for territorial self-government units.

This loan may be spent on the following tasks:

financing the planned deficit in the JST’s budget,

paying off debt obligations resulting from issued securities as well as incurred loans and

credits,


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re-financing expenses borne in the particular budgetary year, in which the self-government

unit was applying for a BGK loan,

funding other ventures and expenses.

The investment loan can be paid at once or as a non-renewable credit line, paid in tranches.

The bank can finance up to 100% of venture costs. The maximum payback period is 10 years, but the

bank can decide to grant the investment credit for a longer period (if it is in line with the

Specification of Essential Terms of a Contract) or agree on grace period for credit and interest

repayment.

In order to receive an investment loan, a potential borrower has to:

provide legal protection of the loan repayment,

have a sufficient credit rating,

prove his own contribution to the credited project, if applicable.

The interest rate is based on fixed market rates and the bank’s profit margin is set up individually.

The Social Housing Society (TBS) Programme

In accordance with the Act of 2 April 2009, the BGK is obliged to undertake tasks resulting from the

state housing and housing development policy (including rental building).

The main aim of the TBS Programme is to increase the availability of apartments for people whose

income does not enable them to satisfy their housing needs on the market. The main tool to achieve

this objective is a preferential loan for:

Social Housing Societies (TBS) and housing cooperatives for building and adapting

apartments for rent;

Housing cooperatives for building new flats to be inhabited on the basis of cooperative

housing tenancy law;

Municipalities for building technical infrastructure auxillary to housing estates.

TBSs as well as housing cooperatives are non-profit organizations; their statuary goal is to satisfy

housing needs of a society. Apartments financed by loans from the TBS Programme can be rented to

families/individuals, who do not have legal rights to any other living premises and have limited

income per capita. Implementation of the social programme for rental housing is supported by

territorial self-government units.

The programme in its current shape will be relevant for all applications sent before 30 September

2009.


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Table: Summary of the objective, value, crediting period and interest rate of TBS Programme loans.

The National Fund for Environmental Protection and Water Management (NFEPWM)

The National Fund for Environmental Protection and Water Management (NFEPWM) is the biggest

institution implementing the National Environmental Policy. The NFEPWM finances investments in

environment protection and water management in the areas important from the perspective of

accommodating to the European Union regulations and norms. The objective of the NFEPWM is to

financially support ecological investments of nationwide and cross-regional importance as well as

local projects, important from the environment protection perspective.

Distribution of financial resources within the NFRPWM is organized in the following areas:

air protection,

water protection and water management,

protection of the Earth surface,

nature, landscape and forestry preservation,

geology and mining,

ecological education,

the State Environmental Monitoring,

multidisciplinary programmes,

extraordinary environmental threats,

expertises and research.

There are three funding forms available in case of the NFRPWM:

•Building or adapting apartments for rent with low rentals or assuring cooperative housing tenancy rights

Objective of the loan

•Max. 70% of costsValue

•Approx. 35 years, depending on the rediscount rate in the NBP and inflation for construction and assembly production.

Crediting period

•Variable, set as an effective rate - 50% of rediscount rate in NBP, not less than 3.5% (current interest rate for all new loan contracts is 3.5%, same for existing contracts if they were negotiated, 4.5% for all the remaining contracts signed before 6 May 2004.

Interest rate


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loan (granted by the NFRPWM, loans or credit lines granted by other banks but from the

NFRPWM’s resources, project co-financing from both NFRPWM and bank resources),

subsidy (investment and non-investment subsidies, surcharges to bank loans, amortization)

capital financing (taking over company’s stocks or shares in order to reach ecological

effects).

2.2. Budgetary implications of JESSICA for the Silesia Managing

Authority

In order to define the budgetary and financial effects of the JESSICA initiative, a cash flow forecast

was prepared for the following options:

Variant zero – V0 - without implementing the JESSICA initiative, with the subsiding mechanism

of the Śląskie Regional Operational Programme for 2007-2013, as the sole funding source.

Variants including the JESSICA initiative:

V1 – establishment of 1 Urban Development Fund (UDF) from the ROP SL funds,

V2 – establishment of 1 UDF from the ROP SL and shareholders’ funds (e.g. local self-

government units),

V3 – establishment of a Holding Fund (HF) and 2 UDFs from the ROP SL and stakeholders’

funds, e.g. local self-government units and banks,

V4 – establishment of a HF managed by the EIB and >2 UDFs from the ROP SL and

shareholders’ funds (e.g. local self-government units and banks)

For the purpose of this study, the initial value of resources available from the ROP SL for

regeneration projects (within Priority VI) was estimated to be the same in all considered options,

both in case of the granting system and in case of JESSICA. The projected cash flow was prepared in

PLN. A fixed exchange rate 1 EUR = 4 PLN was assumed for the analysis purposes.

The analysis time horizon (years: 2010-2022) has been adopted for the period needed to establish

JESSICA managing structures, develop implementation procedures, select first projects to be

implemented, and the 10 year period of payoff of loans/credits, in order to show the financial

leverage effect and the revolving mechanism.


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2.2.1. Cash flow in case of the traditional donation system - variant 0

Table: Analysis assumptions – V0.

Time horizon Years: 2010-2022

From 2010 – spending the first money from the ROP SL, Priority VI.

2015 – end of the spending period, e.g. according to the n+2 rule (binding

in case of EU funds).

Financial sources European Regional Development Fund – Śląskie Regional Operational

Programme for 2007-2013, Priority VI. Sustainable urban development.

Funding pool – initial

value

40 million EUR = 160 million PLN

Income tax Subsidies are income tax free for legal persons (in accordance with the

binding law).

Table: Cash flow for subsiding mechanisms of the ROP SL (in million PLN)

0,00

20,00

40,00

60,00

80,00

100,00

120,00

140,00

160,00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

End of year balance Inflows Outflows - subsidy use


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Table: Financial flow for the subsiding mechanism of the ROP SL in PLN (V0).

Item Years

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

End of year balance 140,00 95,00 50,00 20,00 5,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

Inflows 160,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

Outflows –subsidy use 20,00 45,00 45,00 30,00 15,00 5,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00


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2.2.2. Cash flow in case of JESSICA implementation – V1 – one UDF.

This variant assumes establishment of 1 UDF, for which the start-up capital would come from the

Śląskie ROP for 2007-2013 funds only.



Signing the contract for establishing and managing the UDF - end of 1st

half of 2010.

Number of UDFs – 1.

2nd half of 2010 – transfer of funds to the UDF, arranging selection

procedures, project preparation.

2011 – implementation of the first projects.

Financial sources ERDF – Śląskie ROP, Priority VI. Sustainable Urban Development


value

40 million EUR = 160 million PLN

Financial income Income from bank deposit interests: 3% per year.

Income from the granted loans: 4% per year.

Operational costs Management cost: maximum 3% per year of the registered capital (ROP SL

resources).

Income tax Taxation of income on interest rate deposits and accounts: 19%

Taxation of income from granted loans 19%

Average payback

period

20 years

Grace period 2 years

Granted loan

commission

None

Investing unused UDF

capital

Fund relocation for new ventures of minimum 30 million PLN.


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Table: Advantages and disadvantages of V1.

Disadvantages Advantages

High organisational costs of the MA related with

setting up organizational structures, guidelines

for JESSICA management (personal costs, external

expertise, equipment etc.).

Low costs of program management during

JESSICA implementation, primarily connected

with simple organizational structure and low

demand for highly qualified human resources.

Impossibility to obtain the financial leverage

effect. Low potential for finding shareholders due

to low impact on the market and competitive

mechanisms of financial and capital markets.

Clear and standardized operation methods.

Insufficient MA experience or its complete lack in

implementation of similar projects (financial

mechanisms). Additional costs for expertise

outsourcing or employing consultants.

Possibility of delay in JESSICA implementation,

and even in the development of procedures.

Few years of standstill on loans, due to allocation

of all available resources, 2 years of grace period

and the loan payoff period.


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Table: Financial flows for variant 1 [million PLN] - V1.

Details Arranging UDF

Use of EU funds Long term operational plans

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Year-end balance of UDF funds

159,54 159,59 160,53 161,90 163,36 164,02 164,86 165,91 168,25 170,02 172,01 175,22 177,97

161,94 4,85 5,74 6,17 6,25 5,46 5,64 5,85 7,14 6,57 6,79 8,01 7,55

In-flow 160,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

Fund transfer from the Managing Authority

1,94 4,85 5,74 6,17 6,25 5,46 5,64 5,85 7,14 6,57 6,79 8,01 7,55

Net financial income from interest on deposits and loans

2,40 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80

2,40 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80

Out-flow 1,94 4,85 5,74 6,17 6,25 5,46 5,64 5,85 7,14 6,57 6,79 8,01 7,55

Management fee 0,00 1,20 3,20 5,20 6,72 6,72 6,72 6,72 8,04 8,04 8,04 9,24 9,24

0,00 0,23 0,61 0,99 1,28 1,28 1,28 1,28 1,53 1,53 1,53 1,76 1,76

Financial income 0,00 0,97 2,59 4,21 5,44 5,44 5,44 5,44 6,51 6,51 6,51 7,48 7,48

2,40 4,79 3,89 2,42 1,00 0,03 0,24 0,51 0,77 0,08 0,34 0,65 0,08

Income from interest on loans (gross)

0,46 0,91 0,74 0,46 0,19 0,00 0,05 0,10 0,15 0,01 0,06 0,12 0,02

Tax for interest related income 1,94 3,88 3,15 1,96 0,81 0,02 0,19 0,41 0,63 0,06 0,27 0,52 0,07

Income from interests on loans (after taxation)

3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00%

Income from interests on bank deposits (gross)

3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00%

Tax for interest related income 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00%

Income from interests on deposits (after taxation)

19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00%

20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00


Page 80

Important values: 0,00 30,00 50,00 50,00 38,00 0,00 0,00 0,00 33,00 0,00 0,00 30,00 0,00

UDF management costs - % 0,00 30,00 80,00 130,00 168,00 168,00 168,00 168,00 201,00 201,00 201,00 231,00 231,00

Deposit interest rate 0,00 0,00 0,00 1,50 4,00 6,43 8,13 7,80 7,40 7,01 8,29 7,94 7,52

Loan interest rate 0,00 30,00 80,00 128,50 162,50 156,08 147,95 140,15 165,75 158,74 150,45 172,52 164,99

Tax on credit and deposit related income

159,54 129,59 80,53 33,40 0,86 7,95 16,91 25,77 2,50 11,28 21,56 2,70 12,97


Page 81

160

0 0 0 0 0 0 0 0 0 0 0 0

160

Authorised share capital 2010-2022 (million PLN)

kapitał przekazany przez IZ (środki RPO)

150,00155,00160,00165,00170,00

175,00

180,00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

UDF funds balance at the end of each year [million PLN]

Capital transfered by the MA (ROP funds)


Page 82

0,00

50,00

100,00

150,00

200,00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Unused capital of UDFat the end of each year [million PLN]

0,00

20,00

40,00

60,00

80,00

100,00

120,00

140,00

160,00

180,00

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

UDF operations

pożyczki udzielone w danym roku spłaty pożyczek saldo udzielonych pożyczekLoans Balance of loans Credit payback


Page 83

2.2.3. Cash flow in case of JESSICA implementation – V2 – 1 UDF created from the ROP

and investors (JST) funds.

This variant assumes that there is 1 UDF established, with the initial capital created from the

Śląskie ROP funds and shareholders’ funds (JST)

Table: Analysis assumptions– V2


Signing the contract for establishing and managing the UDF – end of

1 half of 2010.


2 half of 2010 – ROP funds transfer to the UDF, arranging selection

and realization procedures, project preparation.

2011-2012 – transfer of shareholders’ funds to the UDF.


Financial sources European Regional Development Fund – Śląskie ROP 2007-2013 –


Shareholders commitment – territorial self-government units (JST).

Funding pool – initial value ROP: 40 million EUR = 160 million PLN

JST: 24 million PLN

Financial income Income from bank deposits: 3% per year.

Income from bank loans: 4% per year.

Operational costs Management cost: maximum 3% per year of the registered capital

(ROP SL resources).


Taxation of income from granted loans: 19%

Average payback period 20 years


Granted loan commission None

Investing unused UDF capital Fund relocation for new ventures of 30 million PLN.


Page 84



High organisational costs of the MA connected with setting

up organizational structures, guidelines for JESSICA

management (personal costs, external expertise,

equipment etc.).

Low costs of management, primarily

resulting from simple organizational

structure and low demand for highly

qualified human resources.

Low possibility of obtaining the financial leverage effect.

Few years delay in the process of contributing capital by

potential shareholders, due to lack of strong impact and

competitive mechanisms on capital and investment

markets.

Clear and standardized operation

methods.

Insufficient MA experience or its complete lack in

implementation of similar projects (financial mechanisms).

Additional costs for expertise outsourcing or employing

experts.

Possibility of delay in JESSICA realization, even in the

development of procedures.

As it would be one of many loan funds, potential

shareholders (cities) would prove little interest in it.

Few years of standstill on loans, due to allocation of all

available resources, 2 years of grace period and the loan

payoff period.


Page 85

Table: Financial flow for variant 2 [million PLN] – V2.

Details Arranging UDF Use of EU funds Long term operational plans

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Year-end balance of UDF funds 157,60 153,77 151,89 159,95 160,01 160,30 177,33 178,36 179,86 180,89 182,89 184,90 186,90

160,00 0,97 2,92 12,86 5,18 5,41 22,15 6,79 7,25 6,79 7,76 7,76 7,95

In-flow 160,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00

Capital granted by the MA 8,00 16,00

Capital granted by other shareholders (including cities)

0,00 0,97 2,92 4,86 5,18 5,41 6,15 6,79 7,25 6,79 7,76 7,76 7,95

Net financial income from interest on deposits and loans

2,40 4,80 4,80 4,80 5,12 5,12 5,12 5,76 5,76 5,76 5,76 5,76 5,94

2,40 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80

Out-flow 0,00 0,00 0,00 0,00 0,32 0,32 0,32 0,96 0,96 0,96 0,96 0,96 1,14

Management fee 0,00 0,97 2,92 4,86 5,18 5,41 6,15 6,79 7,25 6,79 7,76 7,76 7,95

Profit commission from loan’s interests – for shareholders

0,00 1,20 3,60 6,00 6,00 6,00 7,20 7,20 7,20 7,20 8,40 8,40 8,40

Financial income 0,00 0,23 0,68 1,14 1,14 1,14 1,37 1,37 1,37 1,37 1,60 1,60 1,60

Income from interest on loans (gross, ROP capital) 0,00 0,97 2,92 4,86 4,86 4,86 5,83 5,83 5,83 5,83 6,80 6,80 6,80


Income from loans (after taxation)

Income from interest on loans (gross, shareholders capital)

0,00 0,00 0,00 0,00 0,00 0,24 0,00 0,00 0,48 0,00 0,00 0,00 0,00

Income from interests on bank deposits (gross) 0,00 0,00 0,00 0,00 0,00 0,01 0,00 0,00 0,02 0,00 0,00 0,00 0,00



Important values: 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00%

UDF management costs - % 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00%

Deposit interest rate 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00%

Loan interest rate (ROP) 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00%


Page 86

Loan interest rate (shareholders) 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00%

Tax on the credit and deposit related income 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00

The payback period (years) 0,00 30,00 60,00 60,00 8,00 0,00 30,00 16,00 0,00 0,00 30,00 0,00 4,56

Loans granted YTD 0,00 30,00 60,00 60,00 30,00 30,00

Loans YTD (ROP capital) 8,00 16,00 4,56

Loans YTD (shareholders capital) 0,00 30,00 90,00 150,00 158,00 158,00 188,00 204,00 204,00 204,00 234,00 234,00 238,56

Loans – total 0,00 30,00 90,00 150,00 150,00 150,00 180,00 180,00 180,00 180,00 210,00 210,00 210,00

Loans total (ROP capital) 0,00 0,00 0,00 0,00 8,00 8,00 8,00 24,00 24,00 24,00 24,00 24,00 28,56

Loans total (shareholders capital) 0,00 0,00 0,00 1,50 4,50 7,43 7,60 7,23 8,35 8,79 8,37 7,93 9,01

Credit payback 0,00 0,00 0,00 1,50 4,50 7,43 7,20 6,83 7,97 7,63 7,23 6,85 7,99

Loans (ROP capital) 0,00 0,00 0,00 0,00 0,00 0,00 0,40 0,40 0,38 1,16 1,14 1,08 1,03

Loans (shareholders capital) 0,00 30,00 90,00 148,50 152,00 144,58 166,98 175,75 167,40 158,61 180,24 172,31 167,86

Granted loans balance 0,00 30,00 90,00 148,50 144,00 136,58 159,38 152,55 144,58 136,95 159,72 152,87 144,89




Page 87

160

0 0 0 0 0 0 0 0 0 0 0 0

160

0 0 08

0 0

16

0 0 0 0 0 0

24

Authorised share capital 2010-2022 [million PLN]

kapitał przekazany przez IZ (środki RPO)

kapitał przekazany przez pozostałych udziałowców (w tym miasta)

0,00

50,00

100,00

150,00

200,00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

UDF funds balance – at the end of each year [million PLN]

Capital transferred by the MA (ROP)

funds)

Capital transferred by other shareholders (including cities)


Page 88

0,00

50,00

100,00

150,00

200,00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Unused capital of UDF – at the end of each year [million PLN]

0,00

20,00

40,00

60,00

80,00

100,00

120,00

140,00

160,00

180,00

200,00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

UDF operations

pożyczki i kredyty udzielone w danym roku spłaty pożyczek i kredytów ogółem

saldo udzielonych pożyczek i kredytów

Loans granted per year

Balance of loans granted

Credit payback - total


Page 89

2.2.4. Cash flow in case of JESSICA implementation – Variant 3 – HF, 2 UDFs from the ROP

and shareholders (JST, banks) funds.

This variant assumes that will be 2 UDFs and 1 HF established, with the initial capital composed of

the Śląskie Regional Operational Programme 2007-2013 funds and shareholders’ (JST and banks)

funds.



Public procurement procedure, signing the contract for establishing and

managing the HF – end of 2009.

1 half of 2010 – transfer of funds to the HF.

Choice of UDFs – end of 1 half of 2010.


2 half of 2010 – transfer of funds to UDFs, arranging selection and

realization procedures, project preparation.


Financial sources European Regional Development Fund – the Śląskie ROP 2007-2013 –


Shareholders commitment – territorial self-government units (JST, banks)


value

ROP: 40 million EUR = 160 million PLN

JST: 24 million PLN

Banks: 48 million PLN

Financial income Income from bank deposits: 3% per year.

Income from loans: 4% per year.

Operational costs Management cost:

HF: maximum 2% of the authorised capital (ROP funds) – per year.

UDF: maximum 3% of the authorised capital (ROP funds) – per year.


Page 90


Taxation of income from granted loans: 19%

Average payback

period

20 years


Granted loan

commission

None


capital

Fund relocation for new ventures of min. 30 million EUR.



Costs connected with HF

operation, comprising a share

of the initial capital (ROP

funds)

Low costs for the MA, resulting from the fact that the MA would

not be responsible for managing the funds from operational

programs and investing them in particular UDFs. The HF would take

over all the responsibilities of a managing authority.

More complex mechanisms in

case of the investment UDF.

Possibility of accommodating financial instruments to a project.

Necessity to individualize

procedures, including finance

and accounting.

Possibility of obtaining the financial leverage effect. From the

public finance sector’s point of view, not only income from the

invested funds is important. Professional management of ROP

funds is considered a key objective of the HF operation.

Necessity to employ highly

qualified stuff, leading to cost

increase.

Possibility of involvement of other financial institutions, including

banks and other shareholders (e.g. cities).

Possibility of relocation of resources for new ventures after paying

off all loans, achieved thanks to the shares of self-government

entities and banks.


Page 91

Table: Financial flow for Variant 3 [million PLN] – V3.

Details Arranging UDF Use of EU funds Long term operational plans

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Year-end balance of HF funds 0,00

160,34

In-flow 160,00

Authorised share capital contribution 0,34

160,34

Operational income 160,34

0,00

Outflows 0,00

Capital transfer to UDF

Other 2,40

Operational loss (negative value) 0,46

1,94

Operating activities 1,60

Income from interest on deposits (gross) 159,89 208,92 227,63 245,46 270,44 279,84 289,15 291,82 293,86 296,25 299,99 303,40 307,91


160,34

Income from bank deposits (after taxation) 8,00 8,00 8,00

Management fee (3%) 16,00 16,00 16,00

48,00

Year-end balance of UDF funds 1,95 5,83 9,43 9,43 9,46 11,08 11,31 12,98 12,37 12,71 14,06 13,73 16,41

2,40 4,80 6,72 7,60 8,48 9,68 10,00 10,32 10,32 10,32 10,32 10,32 11,90

In-flow 2,40 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80

Funds transferred from HF 0,00 0,00 0,00 0,88 1,76 2,64 2,64 2,64 2,64 2,64 2,64 2,64 3,37

Funds transferred by other shareholders (including cities)

0,00 0,00 0,00 0,00 0,00 0,32 0,64 0,96 0,96 0,96 0,96 0,96 1,14


Page 92

Funds transferred by commercial banks 0,00 0,00 1,92 1,92 1,92 1,92 1,92 1,92 1,92 1,92 1,92 1,92 2,59

Funds transferred by EIB 1,95 5,83 9,43 9,43 9,46 11,08 11,31 12,98 12,37 12,71 14,06 13,73 16,41

Operational income net with interests on loans and deposits

0,00 2,40 4,80 6,40 6,40 6,40 6,40 7,68 7,68 7,68 8,88 8,88 9,78

0,00 0,46 0,91 1,22 1,22 1,22 1,22 1,46 1,46 1,46 1,69 1,69 1,86

Out-flow 0,00 1,94 3,89 5,18 5,18 5,18 5,18 6,22 6,22 6,22 7,19 7,19 7,92

Management cost 0,00 0,00 0,00 0,88 1,76 2,64 2,64 2,64 2,64 2,64 2,64 2,64 3,37

Profit payout for moneylender – from interests on bank loans

0,00 0,00 0,00 0,00 0,00 0,32 0,64 0,96 0,96 0,96 0,96 0,96 1,14

Profit payout for shareholders – from income on interests

0,00 0,00 1,92 1,92 1,92 1,92 1,92 1,92 1,92 1,92 1,92 1,92 2,59

Profit payout for EIB – from income on interests 2,41 4,80 4,47 1,79 0,73 1,26 1,15 1,53 0,77 1,19 1,66 1,26 1,72

0,46 0,91 0,85 0,34 0,14 0,24 0,22 0,29 0,15 0,23 0,32 0,24 0,33

Operational income 1,95 3,89 3,62 1,45 0,59 1,02 0,93 1,24 0,63 0,97 1,35 1,02 1,39

Income from interest on loans (gross, ROP capital)

Tax from interest related income 2,00%

Income from bank loans (after taxation) 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00%

Income from interest on loans (gross) 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00%

Income from interest on loans (shareholders capital)

4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00%

Income from interest on loans (EIB capital) 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00%

Income from interests on bank deposits (gross) 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50%


Income from interests on bank deposit (after taxation)

19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00%

20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00

Important values: 0,00 60,00 108,00 56,00 16,00 24,00 8,00 40,00 0,00 0,00 30,00 0,00 56,97

Management cost of the HF 0,00 60,00 60,00 40,00 0,00 0,00 0,00 32,00 0,00 0,00 30,00 0,00 22,38

UDF management costs - % 0,00 0,00 0,00 0,00 0,00 8,00 8,00 8,00 0,00 0,00 0,00 0,00 4,60

Deposit interest rate 0,00 0,00 0,00 16,00 16,00 16,00 0,00 0,00 0,00 0,00 0,00 0,00 13,19

Loan interest rate (ROP) 0,00 0,00 48,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 16,80

Loan interest rate (shareholders) 0,00 60,00 168,00 224,00 240,00 264,00 272,00 312,00 312,00 312,00 342,00 342,00 398,97

Commercial loan interest rate (1,5%+WIBOR) 0,00 60,00 120,00 160,00 160,00 160,00 160,00 192,00 192,00 192,00 222,00 222,00 244,38

EIB loan interest rate 0,00 0,00 0,00 0,00 0,00 8,00 16,00 24,00 24,00 24,00 24,00 24,00 28,60


Page 93

Tax from credits, loans and deposits’ income 0,00 0,00 0,00 16,00 32,00 48,00 48,00 48,00 48,00 48,00 48,00 48,00 61,19

Payback period for loans and credits [years] 0,00 0,00 48,00 48,00 48,00 48,00 48,00 48,00 48,00 48,00 48,00 48,00 64,80

Loans and credits granted YTD 0,00 0,00 0,00 3,00 8,40 11,05 11,43 12,08 11,91 13,30 12,71 12,04 12,91

Loans YTD (ROP capital) 0,00 0,00 0,00 3,00 6,00 7,85 7,55 7,16 6,78 8,02 7,68 7,28 8,40


Loans YTD (commercial banks) 0,00 0,00 0,00 0,00 0,00 0,80 1,60 2,36 2,28 2,16 2,05 1,94 1,84

Loans YTD (EIB capital) 0,00 0,00 0,00 0,00 2,40 2,40 2,28 2,16 2,05 1,94 1,84 1,74 1,65

Loans and credits granted total 0,00 60,00 168,00 221,00 228,60 241,55 238,12 266,04 254,14 240,83 258,13 246,09 290,15



Loans total (commercial banks) 0,00 0,00 0,00 16,00 32,00 47,20 45,60 43,24 40,96 38,80 36,75 34,81 46,16

Loans total (EIB funds) 0,00 0,00 48,00 48,00 45,60 43,20 40,92 38,76 36,71 34,78 32,94 31,20 46,35

Credit payback 159,89 148,92 59,63 24,46 41,84 38,29 51,03 25,77 39,73 55,41 41,86 57,31 17,76


Page 94

160,56

0 0 0 0 0 0 0 0 0 0 0 0

160,56

0 0 0 016 16

320 0 0 0 0 0

64

0 032 32

64

0 0 0 0 0 0 0 0

128160

0 0 0 0 0 0 0 0 0 0 0 0

160

Authorised share capital 2010-2022 [million PLN ]

kapitał przekazany przez HF (środki RPO)

kapitał przekazany przez pozostałych udziałowców (w tym miasta)

0,00

200,00

400,00

600,00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022


Capital transferred by the MA (ROP)

funds)

Capital transferred by other shareholders (including cities)


Page 95

0,00

50,00

100,00

150,00

200,00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022


0,00

100,00

200,00

300,00

400,00

500,00

600,00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

UDF operations

pożyczki i kredyty udzielone w danym roku spłaty pożyczek i kredytów ogółem

saldo udzielonych pożyczek i kredytów

Loans granted per year

Balance of loans granted

Credit payback - total


Page 96

2.2.5. Cash flow in case of JESSICA implementation – Variant 4 – 1 HF/EIB and >2 UDFs

created from the ROP and shareholders’ funds (JST, banks).

This variant assumes the establishment of 1 HF managed by the EIB and >2 UDFs, whose initial

capital would be composed of the Śląskie ROP 2007-2013 and shareholders’ funds (JST, banks).



Signing the contract for establishing and managing the HF – end of 1

half of 2010.

1 half of 2010 – fund transfer to the HF managed by the EIB.

Choice of UDFs– by the end of 1 half of 2010.

Number of UDFs – >2.

2 half of 2010 – ROP funds transfer to each UDF, arranging selection

and realization procedures, project preparation.

2011 – implementation of first projects

First UDFs would be established from the resources of the ROP SL. In

a later perspective, the new UDFs would be financed from the

shareholders’ resources (e.g. JST).

Financial sources European Regional Development Fund – the Śląskie ROP 2007-2013

– Priority VI. Sustainable urban development.

Shareholders commitment – territorial self-government units and

banks.

Funding pool – initial value ROP: 40 million EUR = 160 million PLN

JST: 64 million PLN

EIB: 160 million PLN

Commercial banks: 128 million PLN


Page 97

Financial income Income from deposits in the EIB: 2,7% per year.

Income from bank deposits: 3% per year.

Income from loans given: 4% per year.

Operational costs Management fee:

HF: maximum 2% from the authorized capital (ROP funds) – per year

UDF: maximum 3% from the authorized capital (ROP funds) – per

year.

Income tax Taxation of income on interest rate - deposits and accounts: 19%

Taxation of income from granted loans: 19%.

On an EIB account – 0%

Average payback period 20 years


Granted loan commission None


capital

Fund relocation for new ventures of minimum 30 million EUR.



Costs connected with HF

operation, comprising a

share of the initial capital

(ROP SL funds).

Low costs for the MA, resulting from the fact that the MA would not

be responsible for managing the funds from operational programs

and investing them in particular UDFs. The HF would take over all the

responsibilities of a managing authority.

There is also an option to pass management costs to territorial self-

government entities of lower level.

Risk of too high institutional

fragmentation.

Possibility of fitting financial instruments to the project and local

requirements. High knowledge transfer between the HF managed by

the EIB and the UDFs.


Page 98

Necessity to individualize

procedures, including

finance and accounting.

Possibility of obtaining the financial leverage effect. From the public

finance sector’s point of view, not only income from the invested

funds is important. Professional management of the ROP funds is

considered a key objective of the HF operation. The EIB prestige as a

HF adds to the great experience in JESSICA implementation.

Necessary individualization

of procedures.

In accordance with the Roman Treaty, there will be no need to

perform a public procurement procedure for the HF, if the EIB

decides to take over this function.

Necessity to employ highly

qualified stuff, which leads

to increase of costs.

The EIB acting as a HF has the highest possible credit rating (AAA) on

the financial market. Thanks to this fact, the EIB may gather high

capital on favourable conditions. As the EIB is a non-profit oriented

bank, conditions for loan granting are also favourable.

Ability to create good practice database and transfer of experience to

self-government units.

High potential of finding new partners and financing sources.

Possibility to win over other financial institutions, including the EIB,

commercial banks, other shareholders (e.g. cities).

The highest flexibility of this financial model.

Potential diversification of projects.

Due to a great variety of available tools, it would be possible to

achieve the highest value added effect in realizing Integrated

Programs.

Possibility of frequent relocation of financial resources to other

projects (after paying back the previously granted loans), achieved

thanks to the contribution of JST, commercial banks and the EIB.

Implementation of PPP projects.


Page 99

Table: Financial flow for Variant 4 (million PLN) - V4.

Details Arranging HF and UDF

Use of EU funds Long term operational plans

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Year-end balance of HF funds 0,00 160,56

In-flow 160,00

Authorised share capital contribution 0,56

Operational income 160,56

Out-flow 160,56

Capital transfer to UDF 0,00

Other 0,00

Operational loss (negative value)

Operating activities 2,16

Income from interests on deposits (gross) 0,00

Tax for interest related income 2,16

1,60

Income from bank deposits (after taxation)

Management fee (3%) 322,05 327,02 363,14 398,52 480,18 499,34 534,48 537,75 540,84 544,93 548,84 553,42 559,96

324,45 12,17 45,72 48,34 96,38 38,04 54,66 24,07 25,15 26,15 25,97 26,65 32,05

Year-end balance of UDF funds 160,56

16,00 16,00 32,00

In-flow 32,00 32,00 64,00

Funds transferred from HF to UDF 160,00

Funds transferred by other shareholders 3,89 12,17 13,72 16,34 16,38 22,04 22,66 24,07 25,15 26,15 25,97 26,65 32,05

Funds transferred by commercial banks 2,40 7,20 9,60 12,96 14,72 18,88 19,52 20,80 22,06 22,06 22,06 22,06 25,52

Funds transferred by the EIB 2,40 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80 4,80

Operational income net from interests on loans and deposits

0,00 0,00 0,00 1,76 3,52 7,04 7,04 7,04 7,04 7,04 7,04 7,04 8,90


Page 100

0,00 0,00 0,00 0,00 0,00 0,64 1,28 2,56 2,56 2,56 2,56 2,56 3,02

Out-flow 0,00 2,40 4,80 6,40 6,40 6,40 6,40 6,40 7,66 7,66 7,66 7,66 8,79

Management cost 3,89 12,17 13,72 16,34 16,38 22,04 22,66 24,07 25,15 26,15 25,97 26,65 32,05

Profit payout for moneylender –interests on loans

0,00 2,40 4,80 6,40 6,40 6,40 7,68 7,68 7,68 9,08 9,08 9,08 10,62

Profit payout for shareholders –from income on interests

0,00 0,46 0,91 1,22 1,22 1,22 1,46 1,46 1,46 1,73 1,73 1,73 2,02

Profit payout for the EIB –from income on interests

0,00 1,94 3,89 5,18 5,18 5,18 6,22 6,22 6,22 7,35 7,35 7,35 8,60

0,00 0,00 0,00 1,76 3,52 7,04 7,04 7,04 7,04 7,04 7,04 7,04 8,90

Operational income 0,00 0,00 0,00 0,00 0,00 0,64 1,28 2,56 2,56 2,56 2,56 2,56 3,02

Income from interest on loans (gross, ROP capital)

0,00 2,40 4,80 6,40 6,40 6,40 6,40 6,40 7,66 7,66 7,66 7,66 8,79


Income from bank loans (after taxation) 0,91 1,84 1,18 0,70 0,30 0,65 0,40 0,43 0,39 0,36 0,32 0,48 0,64

Income from interest on loans (gross) 3,89 7,83 5,03 2,99 1,28 2,77 1,72 1,85 1,67 1,54 1,36 2,03 2,74

Income from interest on loans (shareholders capital)

Income from interest on loans (EIB capital) 2,00%

Income from interests on bank deposits (gross) 2,70%



3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00% 3,00%

4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00%

Important values: 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00%

HF management costs - % 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50%

Deposit interest rate in HF 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00%

UDF management costs - % 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00% 19,00%

Deposit interest rate in UDF 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00 20,00

Loan interest rate (ROP) 0,00 120,00 120,00 112,00 32,00 80,00 48,00 32,00 31,56 35,00 0,00 0,00 112,05

Loan interest rate (shareholders) 0,00 60,00 60,00 40,00 0,00 0,00 32,00 0,00 0,00 35,00 0,00 0,00 38,38

Commercial loan interest rate (1,5%+WIBOR) 0,00 0,00 0,00 0,00 0,00 16,00 16,00 32,00 0,00 0,00 0,00 0,00 11,56

EIB loan interest rate 0,00 0,00 0,00 32,00 32,00 64,00 0,00 0,00 0,00 0,00 0,00 0,00 33,90

Tax from credits, loans and deposits’ income 0,00 60,00 60,00 40,00 0,00 0,00 0,00 0,00 31,56 0,00 0,00 0,00 28,20


Page 101

Payback period for loans and credits [years] 0,00 120,00 240,00 352,00 384,00 464,00 512,00 544,00 575,56 610,56 610,56 610,56 722,61

Loans and credits granted YTD 0,00 60,00 120,00 160,00 160,00 160,00 192,00 192,00 192,00 227,00 227,00 227,00 265,38

Loans YTD (ROP capital) 0,00 0,00 0,00 0,00 0,00 16,00 32,00 64,00 64,00 64,00 64,00 64,00 75,56


Loans YTD (commercial banks) 0,00 60,00 120,00 160,00 160,00 160,00 160,00 160,00 191,56 191,56 191,56 191,56 219,76

Loans YTD (EIB) 0,00 0,00 0,00 6,00 12,00 17,30 18,30 21,44 22,92 23,45 23,88 24,46 23,26

Loans and credit granted total 0,00 0,00 0,00 3,00 6,00 7,85 7,55 7,16 8,38 8,02 7,60 8,95 8,57



Loans total (commercial banks) 0,00 0,00 0,00 3,00 6,00 7,85 7,55 7,16 6,78 6,42 7,66 7,34 6,96

Loans total (EIB) 0,00 120,00 240,00 346,00 366,00 428,70 458,40 468,97 477,60 489,15 465,27 440,82 529,60

Credit payback 0,00 60,00 120,00 157,00 151,00 143,15 167,60 160,44 152,06 179,04 171,44 162,49 192,29



Loans (commercial banks) 0,00 60,00 120,00 157,00 151,00 143,15 135,60 128,44 153,22 146,80 139,14 131,80 153,04

Loans (EIB) 322,05 207,02 123,14 52,52 114,18 70,64 76,08 68,78 63,24 55,77 83,56 112,61 30,36


Page 102

160,56

0 0 0 0 0 0 0 0 0 0 0 0

160,56

0 0 0 0

16 16

32

0 0 0 0 0 0

64

0 0

32 32

64

0 0 0 0 0 0 0 0

128

160

0 0 0 0 0 0 0 0 0 0 0 0

160

Authorized share capital 2010-2022 [million PLN]

capital transferred by the HF (ROP resources)

capital transferred by other shareholders (including cities)capital transferred by commercial banks

capital transferred by the EIB

0,00

100,00

200,00

300,00

400,00

500,00

600,00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022



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0,00

100,00

200,00

300,00

400,00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022


0,00

100,00

200,00

300,00

400,00

500,00

600,00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

UDF operation

loans granted per year credit payback - total balance of loans granted


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2.3. Non-budgetary effects of JESSICA implementation

The main effects of JESSCA implementation include:

Fund management effectiveness. In the JESSICA mechanism, management functions are

outsourced to an external institution, which is responsible for the development of

guidelines, document templates, potential projects evaluation and selection, funding

ventures, etc.

Optimization of selection processes and mechanisms, as well as project implementation by

applying objective and independent selection criteria, HF/UDF establishment, organizational

structure, standardized application documentation, substance and financial services for

projects.

High quality of projects – achieved in result of engagement of renewable resources, complex

preparatory analyses, role of crediting institutions in financing ventures, involvement of

private partners within PPP frames.

Increase of allocation achieved thanks to the engagement of a greater number of

institutions and other partners in projects financed within JESSICA.

Greater project impact achieved thanks to the implementation of integrated projects of

greater scope and value, as well as commercial and profitable ones. In the traditional

granting system, the grant rate depended on the net income generated by a particular

project, calculated as the so called “funding gap”.

Opportunity to re-invest the income generated by the financial instruments operating within

JESSICA in new regeneration projects. Funds transferred to UDFs for investment are

revolving and can be re-invested in several ventures. As the allocation of EU funds is limited,

only JESSICA may enable potential beneficiaries to prolong the period in which ROP funds

have to be consumed and at the same time to maintain continuity of regeneration projects

financing.

Positive non-budgetary effects argue for JESSICA implementation in Silesia. The mechanism

implementation will lead to: increase of quality and effectiveness of project preparation and

realization processes as well as their positive influence on socio-economic and spatial development

of the region.


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2.4. PPP as a method of optimising the JESSICA implementation

process.

Public-Private Partnership is a form of long-term cooperation of private and public sectors in projects

aiming at implementing public tasks. The objective of this cooperation is to achieve reciprocal

benefits, including both social and commercial advantages. In case of profit-oriented ventures, which

are implemented with the support of a revolving financial instrument, such a partnership of public

and private entities offers a high development potential.

Wide application of PPP can contribute to significant savings, as costs of investment and public utility

service may be reduced. In Great Britain, where PPP projects account for approx. 11% of all public

sector’s investments, the benefits of PPP implementation are evaluated between 10-20%.

The principles of public and private cooperation have been defined in the Private-Public Partnership

Law, which was enacted by the Sejm of the Republic of Poland (Lower Chamber of the Polish

Parliament) on 21 November 2008. Currently, the bill is in the Senate.

According to this Law, the subject of PPP is common undertaking of an activity, based on task and

risk division between private and public partners.

Public Partner

•According to the PPP Law, a publicpartner is any entity operating in thepublic finance sector (according to theLaw on public finances) or any legalperson established by these entities inorder to satisfy common needs anddemands.

Private Partner

•Accoding to the Law, a private partner isany “enterpreneur or foreignentrepreneur “.


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Table: PPP objectives.

Objectives of projects

Construction or renovation of a building.

Services.

Performing a work, including installation of devices which increase the value or utility of a building.

Other services related to maintenance or management of assets, used to implement a PPP

investment or related to it.

The legislator purposefully did not restrict the list of activities, which can be the subject of a PPP

venture. It allows flexibility in choosing projects for realization and precise description of the

investment in a PPP contract. Nevertheless, apart from the Law mentioned above, the civil law

provisions apply.

Once the partnership contract period ends, the subject of partnership (e.g. road, building, hospital,

installations etc.) is transferred to the public partner. The PPP Law obligates also both parties to

transfer the ownership of any other assets to the public partner (e.g. land which was used for the

venture). Nevertheless, parties can agree otherwise in the partnership contract. In the contract,

parties can for example agree to hand over the assets different to the subject of the venture to a self-

government legal person or company, which is established for this purpose by the public partner. The

private partner has a pre-emption right to buy the subject of partnership in the project duration

period or after the end of the investment, if it was assumed to be transferable. This regulation

assures project continuity, also after its completion.

An average PPP project may be divided into 4 stages:

Table: PPP project stages

Stage I

Before a PPP investment is prepared, it should be preceded by a preparation stage, when it is:

identified, analyzed in terms of feasibility and organizational structure. During this stage, the

originator should collect as much information about the project as possible. At this stage, detailed

definition of the parties to be involved in the project should be developed, as well as a list of other

project recognition

evaluation and preparation

tender realization


Page 107

entities engaged in this investment. Further on, socio-economic impact of a project has to be

identified, together with its costs and benefits. The next step is to evaluate the real ability to finance

the project by a public unit and its financial influence on other public entities. In the end, all potential

sources of funding the project should be compared.

Stage II

During this stage, it has to be examined whether the project fits into the definition of PPP projects

and may be contracted as a partnership. It should be primarily evaluated if adapting the PPP

approach will be more beneficial, than any other financial option available for public projects.

Besides, it should be appraised, whether it can be attractive for the private sector. The rate of return

for all financial flows of this project should be calculated. Shall the analysis reveal that the PPP

method can be applied for the particular venture, advantages and disadvantages of various PPP

models have to be considered, in order to choose the optimum one. In this stage, it is advised to

analyze the experience of entities that have already implemented PPP projects within the same

functional area.

Stage III

The tender stage is very detailed, concentrated on creating the partnership structure and choosing

the best private partner. The result of this stage is a complex network of potential solutions, which is

later on structured into a PPP contract. This contract includes all technical, legal and financial

regulations. It should be stressed that active and well structured partnership cooperation together

with a clear hierarchy of own objectives, clear risk division and structure of obligations lead to best

effects of a PPP venture.

Stage IV

Realization consists in implementation of the PPP according to all the assumptions and schedules

specified in the previous stages. Project success strongly depends on PPP contract provisions. The key

principle of successful realization is the win-win rule, which assumes that successful partnership is a

partnership in which risks and tasks are divided optimally and every party is responsible for the

activities they are expert in. Therefore, both parties can benefit from realizing the venture objectives.

Realization of investments in the PPP model brings benefits and profits to all parties. Moreover,

benefit in this case is not only material but also mediagenic.


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Benefits for the public party

The private partner engagement into the project enables the public party to reduce the

costs and helps balance the entity’s budget.

The private capital significantly reduces the risk of stopping construction work due to

shortage of financial resources and increases the probability of infrastructure’s quality

improvement.

Involvement of a private entity means the application of newer technologies and know how.

More efficient management of the investment and human resources shortens the

implementation time and therefore reduces costs.

The role of political impact exerted on the investment and other economic decisions may be

reduced by engaging private companies.

Benefits for the private party

Possibility to invest in a project with an attractive rate of return.

Access to projects which could be previously implemented only by the public sector.

Cooperation with a public sector entity, ensuring new experience, knowledge and skills that

may be further used in other ventures (learning curve).

On the top of the above benefits, involvement in a public project of media’s interest may be

a strong PR element and good promotion for a company.


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Table: Conclusions for PPP implementation

Stream of capital, which can be used for investment in the public sector, achieved thanks to the involvement ofthe private sector. The PPP system faciliates implementation of projects with limited access to public funds as itoffers a possibility to obtain capital from the private sector for public investments. This is very important, as itencourages public entities to apply for structural EU funds.

Spreading knowledge and experience of the private sector and increasing the effectiveness and quality of publicworks.

Sharing the risk related to the venture – in PPP the greatest risk is carried by the party with the biggest potential tosuccessfully manage it with available resources. The goal is to share the risk in the optimum manner to maximisethe added value (not to minimize it for partners).

Higher effectiveness in consuming available resources and higher service level – as previous experience shows,most activities related to a project can be performed more efficiently within PPP, because of managementdiscipline and the private sector experience. Moreover, the service level within PPP is often much higher than incase of traditional investments. This is related to better organization, supervision, implementation of innovativesolutions and motivation to reduce costs. It is also important that this motivation results from both private sectorinterest (concentrated on profits) and public supervision (concentrated on PPP contract provisions related to:breaching the contract by the private partner by not following the agreed standards and quality of servicesprovided).

Ability to generate additional profit for third parties, which also reduces the demand for public funds for otherinvestments.

Ensuring the optimum project management, with limited total cost – transferring part of project risk to a privatepartner encourages him to search for the optimum management method and therefore optimizes the process ofspending the available financial resources. At the same time, the total project cost may be reduced. However,decrease of the total cost cannot result in lower quality of services or other standards provided for in the PPPcontract, as the revenue of the private partner depends on the fulfilment of contract conditions.

Greater supervisory role of the public sector – As responsibility for the project is transferred to the privatepartner, the public party can concentrate on its regulatory functions, planning and monitoring of theimplementation process (although the responsibility to provide public services stays with the public entity).Besides, public services become more competitive and market oriented, which helps maximise the return oninvestment.

Keeping the right proportions while agreeing on a hierarchy of objectives for both public and private partners aswell as the scope of responsibilities. This should result from a clearly defined share of risk and obligations and leadto maximization of benefits and effectiveness of the project.


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In case of the JESSICA initiative, Public-Private Partnership is a necessary element, unavoidable and

beneficial, although there are some critical points, which should be considered in the initial phase of

application verification.

Table: Critical factors of PPP from the JESSICA perspective.

•The PPP Law was initially introduced in 2005, butdue to a large number of errors and lack ofrelevant decrees, it was defective. Applying thisLaw without reference to other acts could be (andoften was) considered a crime.

•Due to numerous problems with PPP, self-government entities are afraid to establish such apartnership. Therefore PPP contracts are oftenvery unfavourable to private partners.

Legal problems with PPP implementation

•The PPP Law in its correct form has been bindingsince 2009. Therefore, there are no practicalexamples of partnership projects implementation.

•There are only few experts in developing contractsand implementing PPP to optimize investmentresults.

Lack of knowledge and experts

•PPP implementation in self-government unitsshould be preceded by a detailed analysis ofbudgetary needs and opportunities.

•Local governments should introduce clearschemes of PPP implementation consisting in thedevelopment of PPP Implementation Plans, whichwould describe the key investment areas, contractparticipation opportunities and PPP models forindividual ventures.

Lack of conditions for PPP implementation strategy in

self-government units

•There is a need to adopt a standardized analyticalmodel to enable unambiguous evaluation ofprofitability of each investment within a PPPmodel, which can be implemented within theJESSICA initiative.

Lack of conditions for evaluation of PPP economic

perspectives.


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The analysis of opportunities connected with JESSICA and PPP gives optimistic results. It should be

stressed, that PPP is a new solution. Due to the fact that long time has been spent on preparing legal

acts and faulty Law was adopted in the end, the new Law has a low acceptance level among most

self-government entities.

On the other hand, local authorities expect the possibility to implement projects within PPP, as it is

the only way to cure the current investment policy and implement profitable projects.

JESSICA has a chance to become a natural incentive for public entities and private investors to

establish partnerships and jointly implement interesting and profitable investments.

In result of JESSICA implementation, Silesia may take the chance of developing advantageous

conditions for investments, from legal, economic as well as financial perspectives (implementation of

a new, revolving mechanism to support investment).

Table: Opportunities for cooperation in PPP with JESSICA support.

JESSICA + PPP

business units

self-government

units


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2.5. Summary. Conclusions for JESSICA implementation.

A comparative analysis was performed for Variant 0 (representing the traditional granting

mechanism of ROP SL funds) and Variants 1-4 (related to JESSICA implementation). The general

conclusions have been summarized below.

Funds granted to JESSICA projects are returnable, contrary to those coming from the subsiding

mechanism of the ROP SL. This fact enables the development of a long-term financial mechanism for


One of the main short-term financial benefits of JESSICA is the option to withdraw the full ROP

subsidy at once. Unused funds (e.g. not yet transferred or left after loan payback) may stay as a bank

deposit and generate additional income from interest. This income should cover at least part of the

management fees.

In comparison to the traditional system, JESSICA’s effects are the following:

The financial capital is revolving, therefore the total funds are not decreasing.

The value of funds transferred for project implementation will be relatively increasing, in

comparison to the traditional mechanism. This will result from re-investment of available

funds coming back to the UDFs as a loan payback. The financial assets will be increased by

interests from loans granted for projects and from bank deposits.

The analysis of 4 variants of JESSICA implementation in Silesia revealed that Variant 4 (HF + >2

UDFs + other shareholders – JSTs, banks) is the optimum one. Establishment of a higher number of

UDFs will result in the leverage effect, which means that the solution will offer a higher potential

for public (JST) and private (banks) sector units to engage their funds in UDFs. Increase of financial

resources within JESSICA means in turn that more projects will be implemented and the UDF value

will increase (e.g. financial income on interests).

Thanks to the implementation of the above variant, an expert institution implementing the JESSICA

initiative will be established. This will result in the following advantages:

• Low costs for the MA, resulting from the fact that the MA would not be responsible for

managing the funds from operational programs and investing them in particular UDFs. The

HF would take over all the responsibilities of a managing authority.

• In accordance with the Roman Treaty, there will be no need to perform a public

procurement procedure for the HF, if the EIB decides to take over this function.


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• Possibility of fitting financial instruments to the project and local requirements. High

knowledge transfer between the HF managed by the EIB and the UDFs.

• Possibility of obtaining the financial leverage effect.

• Ability to create good practice database and support transfer of experience to self-

government units.

• High potential of finding new partners and financial sources.

• Possibility to win over other financial institutions, including the EIB, commercial banks,

other shareholders (e.g. cities).

• Potential diversification of projects.

• Due to a great variety of available tools, it would be possible to achieve the highest value

added effect in realizing Integrated Programs.

• Possibility of frequent relocation of financial resources to other projects (after paying back

the previously granted loans), achieved thanks to the contribution of JST, commercial banks

and the EIB.

• Implementation of PPP projects.

Possibility of obtaining the financial leverage effect.

From the public finance sector’s point of view, not only income from the invested funds is important.

Professional management of the ROP funds is considered a key objective of the HF operation. The EIB

prestige as a HF adds to the great experience in JESSICA implementation.

The EIB acting as a HF has the highest possible credit rating (AAA) on the financial market.

Thanks to this fact, the EIB may gather high capital on favourable conditions. As the EIB is a non-

profit oriented bank, conditions for loan granting are also favourable.


Page 114

3. Institutional analysis of JESSICA implementation.

3.1. Description of potential market participants in JESSICA.

3.1.1. Public administration.

The parties that may potentially be interested in the JESSICA initiative include: central government

administration, voivodeship (region), poviat (county) and gmina (commune) self-government entities

as well as the Metropolitan Association of Upper Silesia.

Areas where JESSICA implementation is possible and desirable have been summarized in the table

below.

Table: Potential engagement of public administration units in JESSICA.

Unit Potential involvement in JESSICA

Central

government

units: regional

offices of central

institutions,

Voivodeship

Office

Central administration is the owner of companies and properties which need

transformation and regeneration. It is interested in contributing a part of its

assets for the purpose of their revitalization.

The State Treasury owns post-industrial and degraded areas (waste dumps,

post- exploitation areas, contaminated land) and post-industrial objects of high

historical value. The State Treasury is also the owner of companies currently

undergoing restructuring processes, being in possession of non-productive

property situated in revitalization areas.

Self- government

voivodeship

entities

Voivodeship self-government plays the role of the ROP Managing Authority and

is the entity responsible for taking decisions on strategy, development

directions and effectiveness of the JESSICA mechanism. JESSICA is an efficient

tool that may be applied in the process of implementing Priority 6 of the ROP

SL. Moreover, voivodeship self-government owns properties situated in urban

areas and other entities that may participate in PPP processes. JESSICA funds

may be applied in the planned PPP investments in the Voivodship Park of

Culture and Recreation or in health care transformation (additional analyses

would be required).


Page 115

Poviat self-

government

entities

Poviat self-government entities are interested in two aspects of the initiative.

Firstly, poviat authorities in country districts would like to support smaller cities

in creating effective financial mechanisms that would enable them to

implement large investments in poviats. Secondly, self-government entities of

both country and township districts may benefit from the initiative

implementation in the areas of healthcare, upper-secondary education and

road infrastructure. PPP initiatives in the sphere of development or renovation

of hospitals and their auxilliary buildings, schools and health care restructuring

processes are particularly interesting. These processes are still in initial phases,

therefore JESSICA could be crucial for their success.

Gmina self-

government

entities

Gmina self-government entities prove considerable interest in JESSICA

implementation. These entities implement urban regeneration projects and

initiate investment processes as well as engage in partnerships aimed at

revitalization of degraded or urban areas. Most self-government entities have

and implement Local Revitalization Programmes. Nevertheless, there is no legal

solution offering support as far as project financing is concerned. The only

financial source is own budget and subsidies from the IRDOP or the ROP SL.

There are also other funds available, but their impact is rather minor: EEA

financial mechanism or funds related to environment protection and domestic

loans. Most of these programmes / funds support non-profit projects.

Therefore, there are no funds able to generate income or added value.

Moreover, the market is lacking resources and legal regulations concerning PPP.

All these factors result in weak financial leverage effects in the sphere of


Most revitalization projects are financed from communal budgets. In the light of

the present crisis and decrease of income, even high potential projects may not

be started.

Seeing the possibility of financing the JESSICA projects outside own budget and

engaging private partners in the process, gminas have proven considerable

interest in the mechanism.

Some gminas have even declared their ability to contribute own resources in

order to reinforce the capital of local UDFs. Gmina self-governments own

properties situated in urban areas and other entities that may participate in PPP

processes. This approach guarantees the establishment of strong regional


Page 116

financial institutions.

Metropolitan

Association of

Upper Silesia -

GZM

The special character of the most urbanized region in Poland was the reason to

establish the Metropolitan Association of Upper Silesia (Polish acronym: GZM).

The main objective of GZM is to create a dynamically developing metropolitan

center, which will be able to effectively compete with other metropolitan

centers in Poland and in Europe.

Other GZM’s objectives are:

- Harmonized development of the whole metropolis, achieved through

the best allocation of member cities’ potential with respect to their

autonomy and individual character.

- Arising pride of being parts of a great city mechanism in the metropolis

inhabitants and assuring that the metropolis potential is available for all

of them.

- Encouraging inhabitants and visitors to discover the metropolis, to

settle and work there.

- Building and popularizing a belief in comprehensive opportunities to

choose a career, life style, encouraging young, well-educated people to

move to and work in the metropolis.

- Promoting, in and outside the country, all advantages of the metropolis:

economical, cultural, touristic and environmental.

Members of GZM:

Bytom Chorzów Gliwice Dąbrowa Górnicza Jaworzno Katowice Mysłowice Piekary Śląskie Ruda Śląska Siemianowice Śląskie Sosnowiec Świętochłowice Tychy Zabrze According to the Associations’ status, it is a municipal association realizing the

following tasks:

- Defining the common development strategy for member cities,

according to the Law on planning and spatial development. The strategy

http://www.gzm.org.pl/eng/index.php?option=com_content&task=view&id=13&Itemid=89



http://www.um.bytom.pl/

http://www.chorzow.um.gov.pl/

http://www.um.gliwice.pl/

http://www.dabrowa-gornicza.pl/

http://www.jaworzno.pl/

http://www.um.katowice.pl/

http://www.myslowice.pl/

http://www.um.piekary.pl/

http://www.rudaslaska.pl/

http://www.um.siemianowice.pl/

http://www.um.sosnowiec.pl/

http://www.swietochlowice.pl/

http://www.umtychy.pl/

http://www.um.zabrze.pl/


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should be taken into account in studies of land use conditions and

directions of particular cities.

- Realization of the tasks included in the common development strategy,

transferred by member cities to the Association on the basis of relevant

agreements.

- Acquisition of financial resources from domestic and international

funds.

- Managing roads handed over to the Association by member

communities on the basis of relevant agreements.

- Development of applications for public funds from the EU budget to co-

finance statutory tasks.

- Labour market activation in member cities, achieved through gathering

and managing financial resources as well as through supporting projects

innovative to economy, increasing competitiveness between member

cities. The scope of these activities is based on relevant agreements.

- Development of analyses and reports on current scarce professions,

assessing the labour market and supporting public education, especially

targeted at educating students in scarce professions. The scope of

these activities is based on relevant agreements.

- Issuing opinions on legislation and decision making processes (national

and regional) in the areas of the Association interest.

- Cooperation with territorial self-government units, including local and

regional communities of other countries and government

administration bodies.

Currently, the Association is responsible for preparation and implementation of

a programme of waste development through thermal processing.

Many urban regeneration tasks of the Upper Silesia Metropolis have to be

implemented by two or more neighbouring cities due to their geographical

location. Therefore, the Association may be a natural partner in the process of

implementing integrated urban projects on this territory.


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3.1.2. Public institutions

Among the entities interested in JESSICA, there are also public institutions like: Local Development

Agencies, The Regional Fund for Environmental Protection, The Capital Group of the Upper Silesia

Fund (The Upper Silesian Fund, The Center of Regional Projects, The Upper Silesian Regional

Development Agency), The Upper Silesian Business Transformation Agency, TF Silesia and

universities.

Summary of potential engagement areas has been presented in the table below.

Table: Potential engagement of public institutions into JESSICA.

Unit Potential engagement in JESSICA

Local

Development

Agencies

Agencies operating in the region have a broad knowledge on the local economy

and its potential. They operate in the area where business and self-government

meet, what gives them a possibility to participate or to counsel in PPP

processes. Agencies show interest in advising, consulting and training in JESSICA

projects development. Agencies can be also used as local consultation points for

this mechanism.

Regional Fund

for

Environmental

Protection

RFfEP has at its disposal funds dedicated to regeneration of degraded and post-

industrial areas. It supports communes in this respect. The Fund can co-finance

Integrated Programmes of Urban Development as it may grant loans for those

elements of programmes that do not generate income, but reinforce the overall

project effect.

In case of regeneration of degraded post-industrial areas, the RFfEP may be the

key to effective financial engineering of projects.

Capital Group of

the Upper

Silesian Fund

(The Upper

Silesian Fund,

The Center of

Regional

Projects, The

Upper Silesian

Regional

The Upper Silesian Fund is an entity owned in 100% by territorial self-

government units of Śląskie Voivodeship. The company was established in 1995

on the basis of the so called regional contract. Its scope of activity includes:

- Purchase of property and movable assets in order to use them for

business purposes or dispose,

- Attracting external capital to invest on the Śląskie Voivodeship territory,

- Cooperation with domestic, foreign and international institutions aimed

at implementation of the Company’s objectives,


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Development

Agency)

- Administration and management of funds for regeneration and

development projects.

The entity has considerable experience in implementing projects that may be

co-financed within the JESSICA frame. This experience has been gained thanks

to the Department of Communal Investment Development. The Department

aims at:

1. Organizing issuance and sales of securities issued by gminas, gmina

associations and other communal entities on the market.

2. Investing the Fund’s resources in communal entities.

3. Capitalization of the Fund’s property, e.g. through shares in developer

companies.

4. Provision of consulting services in the following areas:

- Financing communal investments with the use of not-budgetary

commercial financial sources;

- Impact of the commune’s budget deficit on its financial credibility in 10

year periods;

- Assessing the effectiveness of communal investment projects;

- Planning and acquisition of financial resources for the purpose of

covering current communal demands (use of different financial

instruments).

5. Implementing financial instruments in gminas.

6. Organizing training sessions with territorial self-government units,

primarily on public finance management.

There is also an Aid Programme Department within the structure of the Upper

Silesian Fund, crediting projects from public funds (including funds from the

European Union). The capital group comprises:

- Silesia Regional Guarantee Fund Ltd. (Polish: Śląski Regionalny Fundusz

Poręczeniowy Sp. z o.o.) – providing guarantees thanks to e.g. the EU

funds,

- Upper Silesian Investment Funds, joint-stock company (Polish:


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Górnośląskie Towarzystwo Funduszy Inwestycyjnych S.A.),

- Upper Silesian Restructuring Fund, joint-stock company (Currently: the

Silesia Capital Fund SA).

Yet another Fund is currently being established. It will be co-financed from

European Union funds in partnership with a subsidiary company of Bank

Gospodarstwa Krajowego and private capital.

In the Upper Silesian Fund group, there is also a company established in order

to cooperate with local authorities in the sphere of construction and spatial

development (CPR Investor) and a company advising small and medium sized

companies, which was in the past a Regional Financing Institution (GARR).

Thanks to their experience, these companies may (in cooperation with the

Fund) establish new subsidiary companies to play the functions of UDFs.

CPR Investor SA staff is highly qualified in urban regeneration and PPP projects.

The company owns the Social Housing Association that may be a very active

player on the regeneration market. The comapny manages post-industrial areas

owned by the Upper Silesian Fund (Fundusz Górnośląski S.A.) and develops their

revitalization strategies. CPR can act as an operator of the Real Estate

Development Fund, regenerating post-industrial areas. On the basis of the

above information, it should be stressed that the Upper Silesian Fund (Fundusz

Górnośląski S.A.) is a unique institution in Upper Silesia, with no equivalent in

terms of experience (best practices), human resources, relevant tools and know-

how. The added value is the experience in cooperation with self-government

entities (being its shareholders at the same time) and private capital (in public-

private partnership).

The Upper Silesian Fund has established a Regional Loan Fund for small and

medium-sized enterprises, assisting entrepreneurs in the process of applying for

EU grants. Support is also granted to people starting up their own business

acitivity, graduates and the unemployed.

Moreover, the Upper Silesian Fund has also created a regional venture capital

fund aiming at innovative project and environment protection ventures. Its

subsidiary – CPR Inwestor S.A. ,together with the local self-governement entity

have established a regional Social Housing Association (TBS) to implement


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The Upper Silesian Fund is interested in creating two UDFs: loan and guarantee

fund and investment fund for regeneration projects. Basing on its experience,

the Fund has expressed the opinion that combining both functions within one

UDF would not be effective. All banks differentiate these two types of activities,

creating separate loan, mortgage or investment banks within one banking

group. Due to the fact, the Upper Silesian Fund declares the establishment of

two separate UDFs within its structures.

The Upper

Silesian Business

Transformation

Agency (Polish:

GAPP S.A.)

GAPP S.A. is a State Treasury Company. The goal of this firm is to break or

mitigate barriers in structural and ownership transformation processes in

companies, leading to development and growth of the region. One of the

company’s priorities is to support competitiveness and growth of small and

medium-sized companies. The company is also engaged in transformation and

management of degraded and post-industrial areas. It declares the will to create

a platform for transformation processes in degraded areas. It would like to

implement regeneration projects and play the role of an advisor in developing

post-industrial areas.

TF Silesia This institution was established to support transformation of companies in the

region. Due to the fact that most of them are located in attractive areas but

posess de-capitalized assets, TF Silesia may be interested in using JESSICA to

bring in assets to urban projects.

Universities Local universities have a great potential and knowledge on the conditions of

post-industrial heritage. Due to the fact, they are interested in supporting

intellectually the initative through research, own regeneration projects,

knowledge sharing and qualification improvement.


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3.1.3. Financial sector institutions

There are financial institutions interested in engaging in the JESSICA initiative. These are commercial

banks, BGK, CEB, EBRD and EIF.

Table: Engagement of the financial sector in JESSICA.


Commercial

banks

Despite of a large number of banks operating on the Polish market, only

communal investment and mortgage banks have shown interest in the

initiative. Due to limited confidence of banks in developer investment

(information valid for August 2009), a majority of them declare their will to

participate, without providing the scope of cooperation they would be

interested in. In general, commercial banks are interested in financing particular

projects that self-government units are involved in. Banks do not have any

experience in managing UDFs and HFs and due to specific requirements of

banking legislation, they are not interested in it.

PKO BP –interested in financing regeneration investments up to 10 million PLN.

It could potentially support bigger investments, after individual negotiations.

The bank prefers financing investments of self-government units.

DEPFA BANK –oriented on cooperation with the public sector, regeneration and

restructuring ventures, PPP. Its experience and cooperation with the EIB in

Silesia opens the possibility of cooperation in implementing the JESSICA

mechanism and PPP. The Bank would involve in investments over 5 million PLN.

ING Bank Śląski – interested in financing projects of self-government entities,

mostly by issuing bonds. Due to its special connection with region, the bank is

interested mostly in Silesian regeneration projects.

Dexia Kommunalkredit Bank – specialized in supporting public and communal

sectors. The Bank is also keen on financing long term public projects, realized as

PPP (long crediting period, up to 20 years). The bank offers also negotiations on

the grace period and pay-back structures fitting the character of the

investment. Funds in various currencies. Issue of bonds. Involvement in

restructuring processes.

DnB NORD – the Banks’ offer includes full service for territorial self-government


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units. The bank finances even the most complicated investment projects,

implemented directly by self-government units or in cooperation with private

partners. It has a great experience in financing housing regeneration,

restructuring of health care institutions and construction of technology parks. It

offers European loans for financing ineligible costs of projects and bridge loans.

Commercial banks are not interested in managing the HF and UDFs or financing

specific projects. Nevertheless, their experience and openness for PPP projects

and public sector restructuring are very important.

BGK BGK, as a state-owned financial institution of high credibility, specializes in

serving the public finance sector. It provides economically and operationally

effective support for socio-economic state programmes and self-government

programmes for regional development. It ensures modern and high quality

offers and good relationship with customers by flexible approach towards their

needs. The mission of BGK is to provide high performance and cost-effective

realization of activities contracted by the state, supplemented by development

of an attractive offer of self-operation for chosen segments of the market,

where the bank can use its natural advantages. The bank’s offer includes:

Long-term loans

- Investment loans;

- Loans for financing EU projects;

- Loans granted by the EIB;

- Loans granted by the EIB with the European Commission grants.

Securities and guarantees

Bonds

- Issue of bonds;

- Consulting services for self-government bodies.

State programmes

- Pre-financing;

- Social housing support programme from the Surcharge Fund;

- Energy Effectiveness Programme – Global Environment Facility.

Special Purpose Funds

Thermomodernization Fund

Communal Investment Development Fund


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Credit Guarantee Fund

European Union Package

CEB CEB was established in 1955. It is the Europe’s oldest financial institution and

Poland is one of its shareholders. The bank is a financial institution of the

Council of Europe, which provides loans for the member states. CEB offers

credits for 50% of the total net cost of an investment or a project.

CEB can finance self-government investment for very long crediting periods and

on very convenient conditions. The bank is also experienced in projects run

jointly with the EIB.

The bank can also co-finance regeneration projects in the sphere of social

housing, health care, education and environment protection. The possibility to

finance construction and modernization of hospitals and educational buildings

seems particularly interesting in revitalization projects. Besides, in case of

integrated renovation projects, the bank can finance some non-profit

components without interest and with minimum bank’s margin.

The bank is not a contractor in terms of the public procurement Law. The

European legislation and the Polish Public Procurement Law (Art. 4 point 1a) of

29 January 2004 as amended, refer to financing with the support from

international organizations, to which the public procurement Law does not

apply. Moreover, in case of the CEB, each application for funding is formally

presented to the Administrative Board of the Bank after it had been agreed with

the Ministry of Finance. Credits offered by the CEB are more favourable than

the ones offered by commercial domestic banks. The bank can cover up to 50%

of the total investment costs, regardless of other funding sources. This

favourable offer includes: low cost of money (no interest), long crediting and

payback period, freedom of choosing the investment type, flexible structure

(option to use various currencies, formulas for interest rates calculation and

characteristics of payback) together with the ability to apply special procedures

for international organizations (in relation to granted credits, according to the

public procurement Law).

The bank is not interested in taking over the functions of the HF and UDFs.

European Bank The EBRD bank has strongly supported the Polish transformation in 1990s.


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for

Reconstruction

and

Development

(EBRD)

Currently, the bank considers its strategy for Poland in 3 areas of potential

engagement:

private sector;

financial sector;

infrastructure and environment.

It is particularly interested in the possibility of engaging in the private sector

transformation, private equity funds and venture capital. The bank will use its

experience in financing projects within the public-private partnership, especially

in the communal and transport sector.

Cooperation with the EBRD can lead to active cooperation on a project, as well

as on a UDF level, where the UDF invests capital in restructuring and

regeneration of urban areas. The bank shows no interest in direct management

of the HF and UDFs.

EIF - European

Investment Fund

The European Investment Fund was created in 1994 to support small and

medium sized companies. Its main shareholder is the European Investment

Bank. Together with the EIF, the bank forms the EIB Group. The EIF provides

high risk capital for small and medium sized companies, especially for the young

and technology oriented. It provides guarantees for loans granted by the EIB.

The EIF does not provide direct loans or subsidies, neither invests directly

in companies. It acts through its middlemen: banks and other financial

institutions. It uses its own funds or resources provided by the EIB or the EU.

The EIF is an institution responsible for implementation of the JEREMIE initiative

in Poland. The JEREMIE initiative aims at supporting companies. There are

potential benefits for JESSICA deriving from cooperation with the EIF, especially

if one of the elements of a PPP regeneration project is reinforcing

competitiveness of companies.


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3.1.4. Private sector

Among private institutions interested in JESSICA implementation, there are mainly municipal

companies, State Treasury companies, restructuring companies, medical centres, developers,

institutions supporting regeneration processes and other investors.

Table: Potential engagement of the private sector institutions in JESSICA.


Municipal

enterprises and

the State

Treasury

companies

Municipal enterprises may play a key role in the process of implementing

projects within JESSICA.

The existing companies concentrate on municipal services, housing and

environment protection. They posses or manage huge assets, located mostly in

regeneration areas. The scope of their interest may include regeneration of

particular areas, objects in PPP or restructuring of whole segments of their

activity in revitalized areas. The main types of companies are:

Water supply companies;

Housing companies;

Heat power companies.

Municipal enterprises have significant experience in the sphere of regeneration,

e.g. heating infrastructure programmes for regenerated districts (realized with

the Heat Power Company support), infrastructural programs within PPP (water

supply and sewage management).

Other units engaged in JESSICA may be municipal special purpose companies,

established in order to implement particular regeneration projects within

JESSICA or PPP. Setting up such a company is the most clear and transparent

form of running a regeneration investment, and at the same time the most

understandable by the commercial finance sector.

Municipal special purpose companies will be therefore interested in managing

projects, applying for financial resources but also in coordinating integrated

programs comprising a few projects. Municipal special purpose companies may

be established by an association of municipalities interested in the

establishment of local UDFs.


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Currently, municipalities of the northern sub-region are interested in

establishing their own UDF as a partnership or investment fund.

State Treasury Companies - most of these companies are currently undergoing

restructuring processes leading to privatization or reorganization of their

operation. They possess huge non-productive assets. Most of them are located

in areas under regeneration (or potential regeneration zones) and they are

often the most interesting architectural objects in the centres of Silesian cities.

These are also potentially interesting investment areas, unfortunately

demanding great outlays for revitalization.

Examples may include Kompania Węglowa S.A. (coal mining company) –

managing mining industry assets or the already presented TF Silesia.

These companies might be interested in running regeneration processes and

contributing land for regeneration ventures together with municipalities.

Decisions on these contributions would be made on a ministerial level. In order

to receive positive results, it would be necessary to prepare a common project

(e.g. Real Estate Development Fund) together with the Ministry of Economy and

the Ministry of Treasury.

Restructuring

companies

Restructuring companies are very specific enterprises, created for the purpose

of managing non-productive post-industrial assets. These are mainly properties,

which in spite of their location require so significant investment in regeneration

that no one wanted to buy them on the commercial market. These properties

might be contributed to regeneration projects.

Spółka Restrukturyzacji Kopalo S. A. (Mines Restructuring Company) may be an

example here as it owns properties in the following cities: Katowice, Bytom,

Sosnowiec, Jaworzno and Zabrze.

Decisions on these contributions would be made on a ministerial level. In order

to receive positive results, it would be necessary to prepare a common project

(e.g. Real Estate Development Fund) together with the Ministry of Economy and

the Ministry of Treasury.

Medical entities The JESSICA initiative does not concentrate on restructuring the public health

care. Most buildings requiring resources for regeneration and restructuring are

located in city centers. Major private companies as well as public health care


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sector employees are interested in restructuring these institutions.

Restructuring in this case means economically justified expenditure on tangible

and intangible assets. Poviats have shown considerable interest in these

projects as they own most hospitals. It is also possible to combine private and

institutional financing (e.g. by the CEB, the EIB or the JESSCA initiative). The role

of JESSICA is to support PPP ventures implemented by self-government units in

order to show profits.

Developers The main problem that developers face is the lack of well located investment

areas. Therefore, they are natural partners for regeneration projects bringing

back to life degraded and post-industrial areas. Another area of their interest is

adaptation of post-industrial and de-capitalized objects, located in city centers,

for the purpose of new functions oriented on development of the center.

Developers could participate in the process of JESSICA implementation in the

following ways:

participation in property development companies or directly in UDFs.

They could support financially ventures connected with property

development. They could also manage the process of restructuring

objects and land as well as engage their own funds.

extensive cooperation - a developer becomes the owner of the land,

initially prepared for regeneration projects. Cooperation between

developers and self-government units starts already in the planning

phase. The effect of this cooperation is market oriented management of

the regeneration process, which guarantees success.

If more than one investor or developer is to be involved in PPP, it is crucial for

local authorities to recognize what are the actual needs of investors already in

the preparatory phase. Good examples may be German companies, like LEG

(Landesentwicklungsgesellschaft). It is also crucial to use proper tools (e.g.

Charrette workshops) in the process of developing complex investment

projects. These objective tools should be preferred by implementing complex

PPP projects based on the JESSICA mechanism.

Investors The main groups of investors indentified in this report are:

International holdings interested in cooperation in the communal

services sector, and therefore also in regeneration of infrastructure in


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degraded city centers (e.g. Veolia, Suez, RWE, Remondis, etc.). These

companies have considerable budgets and have initially declared their

potential engagement in JESSICA projects.

International and domestic companies offering complex regeneration

of cities and other areas (e.g. BIG-STÄDTEBAU GRUPPE) are willing to

engage in integrated, complex regeneration processes and urban

development of cities. These companies may also be shareholders of

various projects and develop financial engineering models for entire

processes. They are interested in operating a capital UDF, but not in

running the HF. They also emphasize that they would like to cooperate

with the EIB or other European institutions during the process (e.g. in

the HF). In their opinion, this solution would assure greater flexibility of

financial engineering models in case of complex regeneration projects

financed from other EU resources.

Domestic and international companies interested in restructuring

particular properties or companies that own properties situated in

regeneration areas (e.g. TUP SA, Szpitale Polskie SA). These companies

are experienced in regeneration processes, e.g. TUP SA has

implemented regeneration projects in Poznan and is currently

progressing with similar projects in Silesia. These companies are not

interested in managing the HF or a UDF but would like to act as project

operators, supporting local authorities. They have their own capital and

may be active players in PPP processes.

Supporting

institutions

Regeneration Forum Association

The Regeneration Forum is the most active unit in Poland and Silesia in terms of

regeneration knowledge. The association is represented in Silesia by a few

experts, experienced in developing regeneration programs as well as

implementation and management of regeneration projects.

The Regeneration Forum cooperates on a daily basis with the Ministry of

Infrastructure and the Ministry of Regional Development as well as the BGK.

The Forum advises self-government units and has published numerous papers

on regeneration. Forum experts have for several years cooperated with

European institutions: the EIB and the EBRD. Several Forum experts have been

http://www.big-bau.de/bigbau/big-staedtebau-gruppe.html


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European experts in countries from outside the Union (e.g. Georgia or the

Balkans). The Forum cooperates closely with regions such as: North Westphalia,

Nord-Pas-de-Calais, Burgundy, Mecklenburg-Vorpommern, Brandenburg.

The Forum declares its support for self-government units, UDFs and assistance

in developing Integrated Development Plans for cities as well as assistance in

project implementation processes.

This institution has created a regeneration best practice database and possesses

the know how in regeneration management.

The Forum is not interested in institutional participation in the HF and UDFs but

may provide experts to support the above institutions with their knowledge.

Silesian Association of Municipalities and Poviats

The Association mission is to serve the local society and self-government units

of Śląskie Voivodeship. The SAMP has 114 member municipalities (including 19

cities with poviat rights) and 11 poviats. The spatial scope of its operation

covers the area inhabited by over 4 million people. All activities and initiatives

undertaken by the association aim at integration of the region and popularizing

the best practices in terms of local development. The idea of the Silesian

Association of Municipalities and Poviats is based on cooperation with other

organizations, both national and international, which can jointly realize

ventures leading to stimulation of regional development.

The main areas of SAMP interests are:

- shaping the common policy of local self-government units;

- representing local authorities;

- informing and training municipalities and poviats in European Union

procedures and programmes;

- urban policies;

- initiatives for economic development of municipalities, poviats and

their promotion;

- implementation of the “Rural Area Development Programme in

Municipalities and Poviats of Śląskie Voivodeship”;


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- informational and educational actions aimed at municipalities and

poviats.

The SAMP is also engaging in regeneration actions, supporting its members in

these processes. The Association may play an advisory role in JESSICA projects.

3.2. Ability and willingness of the private and public sectors to support

urban regeneration in Silesia through JESSICA

The interest of the public and private sectors as well as their ability to engage in projects

implemented within the JESSICA initiative have been analyzed and summarized below. The

comparison has been performed according to the particular unit’s interest in financial and strategic

management of regeneration projects, consultant role, capital or material commitment. Moreover,

the table below summarizes the interest of various institutions in managing projects or independent

project implementation, financing, capital or material commitment, partnership commitment based

on PPP. The table defines also the beneficiaries of credit-guarantee support. Preferred solutions are

marked as “++”.


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Table: Analysis of ability and willingness to implement projects financed within the JESSICA frame.

-- Impossible or unit not interested, - Difficult or not beneficial, +/- Possible, few benefits, + Unit interested, possible solution, ++ Unit very interested, prefered solution.

Unit Financial

management

Strategic

Management

Consulting

and control

Financing Capital

Commitment

Material

Commitment

Central administration -- -- + + - ++

Voivodeship administration - ++ ++ + ++ +

Poviats -- -- +/- -- -- +

Municipalities -- ++ ++ + + ++

Development agencies +/- ++ ++ - - +/-

Special purpose funds (environment, restructuring) - - + + + ++

The Upper Silesian Fund +/- ++ ++ + ++ ++

Commercial banks + - +/- ++ + --

International financial institutions ++ + +/- ++ + -

EIB ++ ++ ++ ++ ++ --

TFI + +/- +/- - + -

BGK + - +/- ++ + --

Polish and international public utility companies (i.e. municipal companies,

health care)

- - - - - +/-

Developers, other institutions investing in real estates (FIN) -- - - - - -

Polish and foreign entities managing regeneration processes + ++ ++ - - -

Institutions supporting regeneration and development of cities. -- +/- + - - -


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Table: Units’ engagement on project level.

Unit Project

management

Independent

project

realization

Financing

projects

Capital or

material

commitment

Capital

partnership

(PPP)

commitment

Assignee of

credit or

guarantee

support

Central administration - - - + - --

Voivodeship administration + + ++ + + +/-

Poviats + + ++ + + +/-

Municipalities + + ++ + + +/-

Development agencies + + - +/- +/- +/-

Special purpose funds (environment, restructuring) - - ++ +/- +/- -

The Upper Silesian Fund ++ ++ ++ ++ ++ -

Commercial banks - - ++ + - -

International financial institutions - - ++ + + -

EIB - +/- + ++ + -

TFI - - ++ + - --

BGK + ++ - + + +

Polish and international public utility companies (i.e. municipal companies,

health care)

+ + + + ++ +

Developers, other institutions investing in real estates (FIN) ++ + - - ++ +

Polish and foreign entities managing regeneration processes + +/- - - - +

-- Impossible or unit not interested, - Difficult or not beneficial, +/- Possible, few benefits, + Unit interested, possible solution, ++ Unit very interested, prefered solution.


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3.2.1 Conclusions: willingness to engage in JESSICA projects and institutional structure of

the Programme.

Table: Interest in engaging in JESSICA projects.

Interest identified Experience of the entity

Institutions

interested in the

establishment of

a HF

Except for the EIB, none of the

units interested in the JESSICA

initiative has shown willingness

to establish a HF. None of the

European institutions, which

could establish a HF without the

time consuming public

procumrement procedure, has

shown interest in it.

The EIB is the only European entity

experienced in creating and managing a HF

within the JESSICA initiative. The EIB is ready

to take over the HF creator role for indefinite

time or for the initial period only (e.g. until

2013). After this time, this function may be

taken over by e.g. The Upper Silesian Fund or

by another institution which will in the

meantime gain necessary experience with the

EIB support.

It is also possible to liquidate the HF after this

time.

Institutions

interested in

formation or co-

formation of

UDFs.

The Upper Silesian Fund

together with the companies

from its capital group is

interested in creating two UDFs

as separate financial

mechanisms. The Fund can also

manage a UDF established by

other units.

Gminas of the northern

subregion have shown interest

in forming a UDF and

contributing their own funds in

order to create an important

institution financing

regeneration of this subregion.

Experience of the Upper Silesian Fund covers

all aspects related with UDF management in

the JESSICA initiative. The Fund has broad

experience in self-government financing,

financial engineering, as well as

transformation of degraded areas. It is a

unique institution in the entire country, which

can solely perform activities related to finance

and regeneration processes management.

Experience of northern subregion gminas is

mainly based on long-term cooperation of the

city of Czestochowa with the EIB and common

regeneration projects. The city employs

a group of experienced experts, who run

financial accounting of EU and EIB funds. The

experts manage complex investment projects


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and have considerable knowledge on

integrated regeneration processes.

Institutions

interested in

content-related

support on

a programme,

fund or project

level

Regeneration Forum,

GAPP

The RF and GAPP experience has been

described in the previous chapter. These

institutions have a broad knowledge on

regeneration and transformation. They have

cooperated with Śląskie Voivodeship for

years. Therefore it is recommended to involve

them as experts in the content-related work.

Institutions

interested in

capital

commitment to

UDFs

Gminas.

Banks declare that in the future

they may financially support

UDFs, but currently the banking

law does not allow them to

participate in such projects.

Financial commitment from gminas may at

the beginning be the main source of financial

leverage in JESSICA. The binding law allows

them to establish companies dedicated to

urban development.

Besides, engagement of gminas gives the

possibility to create solid regional financial

institutions aimed at urban development.

Institutions

interested in

managing

complex

sustainable

projects for

urban

development

Subjects managing regeneration

processes – e.g. BIG STADTBAU.

They are mainly interested in

complex urban projects.

Experience gained in various European


Institutions

interested in

capital

commitment.

Gminas;

Private investors;

International companies;

Interest and experience of these companies is

very important and may lead to the second

step of the JESSICA financial leverage.

Institutions

interested in

managing

Gminas;

International companies;

Public utility companies;

Engagement of these institutions will result

from the Law on public procurement,

concessions and on PPP.


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projects Private companies;

Developers.

Institutions

interested in

financing

projects or

managing UDF

funds.

Investment funds;

BGK;

Commercial banks;

International financial

institutions;

TFI experience in closed investment funds

may be very helpful in the process of creating

an investment UDF. Moreover, formation of

such a fund by gminas can reduce operational

costs of the UDF and help in finding additional

financial resources on the market.

The BGK should also be an important partner,

involved in the JESSICA implementation

process from the beginning.

International financial institutions’ experience

will be useful in planning big, integrated

urban projects, after forming the UDFs.

3.3. Analysis of institutional models of JESSICA operation

3.3.1 Potential JESSICA organizational structures

Full organizational structure of the JESSICA initiative comprises the establishment of one Holding

Fund (HF) and Urban Development Funds (UDFs). The HF is not an obligatory element, but an

authority of the regions, giving various possibilities for more effective management of the

mechanism and receiving higher level of financial leverage. The JESSICA initiative is flexible and

basing on local conditions and European experience it can be easily adapted to the needs of Śląskie

Voivodeship.


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Table: Model: HF (EIB) + UDF

According to the above model, the HF will be established within the EIB structure. From the

Managing Authority perspective, this solution offers real financial benefits, resulting from the

reduction of technical support costs. The costs of establishing the HF within the EIB structures are

lower than the interest rate on the sum contributed to the HF.

Within this structure, it is possible to create more UDFs, according to real needs of the region.

The above model applies to most cases and is the only one guaranteeing quick and smooth

disbursement of financial resources for investment projects.

Managing Authority

Holding Fund [HF]

Created by EIB, technical support of EIB

Urban Development Fund

[UDF]


[UDF]


[UDF]

formal procedure of choosing entities managing the UDFs


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Table: Model HF + UDF

The above structure is similar to the first one, but the HF role is given to an external institution, in

accordance with the public procurement law.

Implementation of this structure offers the possibility of creating more UDFs, but may be time

consuming due the lack of knowledge and experience of the entity establishing the HF. Insufficient

experience in managing revolving instruments may be a critical factor here.

Table: Model UDF

Managing Authority

Holding Fund [HF]

Procedures of choosing the entity managing the HF


[UDF]


[UDF]


[UDF]

Formal procedure of choosing the entities managing UDFs

EIB technical support (optional)

Managing Authority

Urban Development

Fund [UDF]

Urban Development

Fund [UDF]

Formal procedure of choosing the entities managing the UDFs

EIB technical support (optional)


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The above model is seems to be the simplest one. Nevertheless, due to the need of adapting UDFs to

the character of projects and disbursement procedures, developing contracts and contacting EU

institutions, it is highly probable that the UDF (or UDFs) will have to build complicated internal

structures. As the Managing Authority is obliged to perform independent internal controls, it will

have to copy the UDF structure and take over many of the Fund’s responsibilities.

In practice, this model has been adopted only in few German lands, but administrative problems

formally connected to its functionality did not allow spending any financial resources so far. In these

lands, UDF management is performed by regional banks. This solution results in the focus on financial

engineering, instead of the key objectives of JESSICA. In result, these institutions still do not fully

understand the needs and conditions of JESSICA. Basing on the German example it should be stated

that this model is difficult to implement and may paralyze regional development.

3.3.2. Establishment of a Holding Fund

The Council Regulation (EC) no 1083/2006 lays down general provisions on the European Regional

Development Fund, the European Social Fund and the Cohesion Fund. These funds aim primarily at

sustainable development of urban areas. Implementation details have been defined in the

Commission Regulation (EC) no 1828/2006. The Regulation sets out in detail the conditions which

financial engineering instruments should fulfil to be funded under an operational programme.

According to the preamble to the Commission (EC) Regulation 1828/2006:

„contributions to financial engineering instruments from the operational programme and other public

sources, as well as the investments made by financial engineering instruments in individual

enterprises, are subject to the rules on State aid including the Community Guidelines on State aid to

promote risk capital investments in small and mediumsized enterprises”.

The main tool to support sustainable development of urban areas is the EU support (including

financial aid). Joint European Support for Sustainable Investment in City Areas Programme (JESSICA)

is an innovative and very effective financial instrument aimed at regeneration, renovation and

development of urban areas. It enables its beneficiaries to combine funds from various sources into

one financial stream and use them to finance projects supporting regeneration and further

development of city areas. The sources may include e.g. capital contributions, loans, guarantees,

private-public partnership and other financial tools.


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The key role in JESSICA is played by the Holding Fund (HF) and the Urban Development Fund(-s)

(UDF).

According to the European Union assumptions, the start up capital for these Funds will come from EU

structural funds, distributed within Regional Operational Programmes. Therefore, the initial capital

will be contributed from public funds, which according to Article 78, paragraph 6 of the Council

Regulation (EC) no 1083/2006 are considered eligible costs.

Implementation of the JESSCIA initiative and establishment of HFs and UDFs in particular EU member

countries, requires investigation of country specific legislation. It applies also to the following issues:

- legal form of the HF and the UDF, acceptable by country specific legislation;

- procedures of choosing the HF operator and establishing the UDF;

- participation principles for self-government entities and private companies;

- legal conditions resulting from the regional development policy;

- possibility to include PPP in sustainable development of urban areas.

In EU legislation, the problem of the Fund’s legal form is considered in article 43 paragraph 3 of the

Commission Regulation (EC) no 1828/2006, which says that:

„Financial engineering instruments, including holding funds, shall be set up as independent

legal entities governed by agreements between the co-financing partners or shareholders or

as a separate block of finance within a financial institution.

Where the financial engineering instrument is established within a financial institution, it

shall be set up as a separate block of finance, subject to specific implementation rules within

the financial institution, stipulating, in particular, that separate accounts are kept which

distinguish the new resources invested in the financial engineering instrument, including

those contributed by the operational programme, from those initially available in the

institution.”

Therefore, the Commission does not choose only one, specific legal form of the HF and the UDF. It

says unambiguously that it should be an independent legal person or a financial entity allocated

within a financial institution. It means that according to the Polish law, the HF and the UDF may take

one of the following forms:

- company (joint stock or limited liability company, including private-public partnership

participation);


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- investment fund managed by an entity selected for this purpose, e.g. Investment Fund

Associations (TFI) or the European Investment Bank (EIB).

Each of these legal entities assures that theHF and UDFs have the legal capacity to:

- sign contracts;

- contribute to capital;

- grant loans and guarantees.

Establishment of the HF is optional. According to the Council Regulation (EC) No 1083.2006 Art. 44, in

order to implement an operational programme, each EU member state may use financial engineering

instruments, including Urban Development Funds and/or optionally – a Holding Fund.

Nevertheless, taking into account that Poland does not have any experience in implementing JESSICA

and all procedures have to be created from scratch, there is strong rationale behind creating the HF.

The potential benefits of this solution result mainly from the fact that the HF takes over a significant

part of the administration from the Managing Authority (in this case a regional self-government

entity). One should consider both the overall HF management and development (according to Article

43 of the EC Regulation No 1828/2006) of the Operational Plan of actions covering also financial

engineering instruments. The Operational Plan should include a number of key elements mentioned

in the Regulation and consider the methods, criteria, rules and conditions for financing city projects.

The Holding Fund takes over also the responsibility to choose the UDF operator(-s) by means of a

competition.

According to Article 44 of the Council Regulation (EC) no 1083/2006, as part of an operational

programme, the structural funds may finance expenditure in respect of an operation comprising

contributions to support financial engineering instruments for enterprises, primarily small and

medium-sized ones, such as venture capital funds, guarantee funds and loan funds, urban

development funds, that is funds investing in public-private partnerships and other projects included

in an integrated plan for sustainable urban development.

When such operations are organised through holding funds, that is funds set up to invest in several

venture capital funds, guarantee funds, loan funds and urban development funds, the Member State

or the managing authority shall implement them through one or more of the following forms:

(a) the award of a public contract in accordance with applicable public procurement

law;


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(b) in other cases, where the agreement is not a public service contract within the

meaning of public procurement law, the award of a grant, defined for this purpose as

a direct financial contribution by way of a donation:

o to the EIB or to the EIF; or

o to a financial institution without a call for proposal, if this is pursuant

to a national law compatible with the Treaty.

It has to be stressed, that Council Regulation (EC) No 1083/2006 states, that structural funds within

an operational programme may be spent to support financial engineering instruments. At the same

time, the regulation emphasizes that in case this operation is organized through holding funds, a

member country or a managing authority disburses these resources by applying public procurement

procedures.

This regulation allows skipping the procedure in case the contract for services is realized through a

subsidy granted in the form of a direct contribution or donation. The legislator stresses that

disregarding the public procurement procedure is only possible if a financial instrument (assignee)

receives a grant within an operational programme. This form is acceptable for the EIB, the EIF and

financial institutions.

In the Polish legislation, the problem of awarding public contracts from public funds (e.g. structural

funds) is regulated by the Law of 29 January 2004 –Public Procurement Law. The Law does not apply

only in cases described in Article 4. Point 7 of this Article states that this regulation does not apply to

subsidies from public funds awarded on the basis of laws and acts.

There is no unambiguous, direct regulation, excluding the necessity of applying the public

procurement procedure in the process of distributing resources from operational programmes to

holding funds. As far as the EU legislation is concerned, Article 44 of Council Regulation No

1083/2006 regulates this issue unequivocally, as cited above.

Polish legal regulations defining the mechanism of supporting beneficiaries with public funds to

implement projects co-financed from structural funds have been included in the Act of 30 June 2005

on public finances and the Act of 6 December 2006 on the principles of development policy.

Unfortunately, it is impossible to find in these Acts as unequivocal regulations as in case of Article 44

of the Council Regulation (EC) 1083/2006.


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Taking into account the significant interest in financial engineering instruments in Poland, the

Chairman of Public Procurement Office in his letter of 2 February 2009 No OZP/DP/0/2151/1305/09

presented the interpretation of the current legislation in this subject. He affirmed among others that:

according to the provisions of Art.106, paragraph 2, point 3a of the Act of 30 June 2005 on public

finances, there are development subsidies granted for programs, projects and financial assignments

supported by structural funds and the Cohesion Fund (Art. 5, paragraph 3, point 2). Therefore,

according to Art. 4, point 7 of the Public Procurement Law, while granting development subsidies

based on the Act of 30 June 2005 on public finances, provisions of the Public Procurement Law do

not apply. In this respect it should be assumed that financial resources awarded to beneficiaries

within operational programmes as development subsidies (as in Act of 6 December 2006 on the

development policy) are excluded from the obligation to follow the procedures of public

procurement (Art. 4, Point 7 of the Public Procurement Law)

The cited act states also, that according to the Paying Authority Department in the Ministry of

Finance (letter of 13 January 2009, No OP 3/063/22/LRE/09/09/14381) funds granted on the basis of

Art. 44 of the Council Regulation (EC) No 1083/2006 are in line with the definition of a development

subsidy defined in Art. 106, paragraph 2, point 3 of the Act of 30 June 2005 on public finances. The

content of this article argues for this, as it states that grants are state budget expenses, which may be

supported by the article stating that subsidies are state budget expenses dedicated for programmes,

projects and financial assignments supported from structural funds. Transferring financial resources

within a holding fund may be therefore performed according to the Act of 30 June 2005 on public

finances.

According to Art. 27, paragraph 1, point 3 of the Act on development policy, projects may be

financed within an operational programme after a competition organised in accordance with the

criteria defined by the Monitoring Committee. Therefore, in accordance with Art 29-31 of the Act on

development policy, the procedure leading to the selection of the beneficiary (in this case a holding

fund) is open and transparent.

At the same time, according to the opinion of the Paying Authority Department in the Ministry of

Finance, funds granted on the basis on Art. 44 of the Council Regulation (EC) No 1083/2006 are in

line with the definition of a development subsidy defined in Art 4, point 7 of the Public Procurement

Law. It should be thus assumed that transferring financial sources to a holding fund within an

operational programme can be arranged on the basis of Art. 28, paragraph 1, point 3 of the Act on

development policy and Art. 106, paragraph 2, point 3a of the Act of 30 June 2005 on public finances.


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In this case – according the to the quoted interpretation of the Chairman of the Public

Procurement Office – the Act “Public Procurement Law” by exclusion (Art. 4, point 7) will not be

applicable for the procedure of choosing the holding fund, mentioned in Art. 44 of Council

Regulation (EC) No 1083/2006.

However, the consultant would like to emphasize that according to the common law doctrine,

interpretation of current legal norms does not constitute the binding law.

The decision on the discussed issue has to be made by the Managing Authority (in this case the

Voivodeship Management Board) on its own responsibility. Special attention should be given to

maintaining full transparency while choosing the mechanism of granting the right to run the Holding

Fund.

In the consultant’s opinion, only entrusting the EIB with the task of establishing and managing the HF

or alternatively following the full procedure described in the Act on public procurement (as well as

Art. 44 of the Council Regulation) would assure full transparency and chance to work out significant

added value, e.g. additional income from deposits in commercial banks. According to the analyses

conducted, it would be only possible, if the EIB was appointed as the holding fund operator. In the

consultant’s opinion, in case the Voivodeship Board of Management prefers applying the

competition procedure leading to the appointment of a holding fund operator, it has to be absolutely

sure that:

it will be able to run the competition, keeping open and transparent procedures;

the Holding Fund operator will be the best one in all aspects – content-related, social, and

financial.

Table: Choosing the HF operator in accordance with the Public Procurement Law.


Time consuming tender procedures (risk of high number of offers, cancellations, protests);

Shortage of institutions experienced in managing HFs in Poland;

High risk of offering HF management to an entity, which will need content-related support from the Managing Authority (via EIB);

Need to follow the provisions of the Public Procurement Law in the process of signing financing contracts with UDFs;

Significant delay in the UDF establishment process.

Additional mechanism mobilizing entities operating on the Polish fund management market to better understand and implement the financial instruments within JESSICA.


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Table: Entrusting HF management to the EIB.


None Significant acceleration of procedures leading to signing the contract for Holding

Fund management, and thereby acceleration of the UDF creation process;

Great substantive knowledge of the EIB on the implementation process of the

JESSICA initiative, enriched by the experience in implementing similar projects in

other member countries;

Guarantee that the EIB will prepare professional documentation, concerning

especially the Operational Plan and the contest for the best UDF offer;

Signing financing contracts with UDFs on the basis of transparent selection

procedures resulting from internal EIB regulations (no public procurement

procedures).

3.3.2.1. Basic tasks of holding funds (HF)

The main tasks of holding funds include:

taking over the majority of administrative work related with UDF establishment and

project monitoring from the Managing Authority;

consultancy on choosing the best UDFs;

implementation of the Investment and Planning Strategy;

implementation of all actions, including identification and consultancy by the process

of selecting the UDFs that may receive funds from the JESSICA Holding Fund;

evaluation of business plans presented by UDFs (in line with the Investment and

Planning Strategy) and advising the Investment Council on potential options;

negotiating Operational Contracts with UDFs and signing Operational Contracts for

the JESSICA Holding Fund, when the key Operational Contracts are accepted by the

Investment Council.

monitoring and control of operations, according to the conditions of particular

Operational Agreements and the Contract;


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presenting to the Investment Council a report on every operation progress; the

reports shall include information on financial inputs from UDFs to city projects as

well as information on irregularities reported by UDFs;

collecting and handing over to the Managing Authority all information received from

UDFs concerning UDF investments in city projects, so that the MA would be able to

follow all the binding home and EU regulations on state aid, considering that the MA

will be the only party responsible for monitoring the compliance with EU regulations

on state aid and informing the Commission or other relevant domestic institutions

responsible for state aid;

undertaking (to a sensible extent) informational and promotional actions on the

JESSICA initiative and related operations, organizing and/or participating in

conferences and seminars;

managing JESSICA finances, according to the Financial Guidelines;

under the Investment Council consent, the HF will also extemporaneously implement

additional tasks leading to more efficient and effective implementation of JESSICA

activities, like:

o providing (to a sensible extent) help in preparing documentation necessary

for the MA to follow the EU regulations on state aid and/or information on

big projects, their notification, with the reservation that the Managing

Authority is the only party responsible for notifying all operations to the

Commission, if the EU legislation requires such a notification;

o providing (to a sensible extent) support in interpretation of EU regulations

concerning financial engineering and in particular the eligibility of costs;

o providing (to a sensible extent) help in choosing and/or putting the finishing

touches on the integrated plans for permanent and sustainable development

of urban areas and city projects;

o ensuring training for middlemen and other key partners, in order to support

further development of the JESSICA initiative and the public-private

partnership in the urban sector.


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3.3.2.2. Benefits resulting from the HF establishment

Benefits resulting from the HF establishment include:

Significant acceleration of absorption of structural funds (due to the fact that on the

basis of the Council Regulation (EC) No 1083/2006 Art. 78, paragraph 6, contribution to a

HF is considered eligible cost);

Possibility to gain higher income from investing the Fund’s resources;

Simplification and acceleration of procedures in case the HF was established within the

EIB structures (the solution does not necessitate competition procedures);

Possibility of implementing a greater number of financial tools through the

establishment of separate credit-guarantee and capital UDFs;

Possibility of engaging self-government units and the banking sector, which should result

in better financial leverage effect achieved thanks to creating smaller UDFs for sub-

regions and contributing self-government capital for this purpose.

3.3.2.3. Entities that may potentially establish a HF

Table: The Upper Silesian Fund – advantages and disadvantages

Important to function Disadvantages Advantages

Speed of implementation Selection by means of a

competition.

Selection possibility Necessity to organize a

competition.

Experience in implementing

JESSICA

None.

Experience in managing EU

funds

Great experience in managing

loan instruments.

Experience in managing

financial engineering

instruments

Great experience. Various

financial tools.

Ability to assess feasibility Great experience.


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studies, business plans,

investment strategies.

Experience in regeneration

processes

Little experience -

transformation processes only.

Experience in developing

Integrated Urban Development

Programmes

None.


regeneration processes

Through its subsidiary – CPR

Investor

Experience in negotiations with

European institutions

Little.

Experience in PPP None.

Knowledge on the needs of

local self-government entities

Extensive.

Experience in leading complex

investment projects.

Little experience in

infrastructural and real estate

investments.

Experience in capital

investments.

Knowledge of local companies’

needs.

Extensive.

Ability to negotiate

interpretations of regulations

related to JESSICA directly with

the European Commission.

None.

Possibility of finding additional

partners to finance projects.


Average.



Banks and Polish institutions

Great knowledge on the

financial market.

Impact of the regional self-

government on the

institution’s operation.

Capital impact - as a

shareholders meeting.

Via the Programme Council,

capital impact - as the

shareholders meeting,

supervision as the MA.


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Table: EIB – advantages and disadvantages


Speed of implementation Almost immediate

implementation and

disbursement. The mechanism

has been tested in other

regions.

Selection possibility No necessity to organise a

competition.

Experience in implementing

JESSICA

Institution responsible for the

initiative implementation in the

EU.

Experience in managing EU

funds

Multifaceted experience in

managing funds.


financial engineering

instruments

Great experience. Various

financial tools.

Ability to asses feasibility

studies, business plans,

investment strategies.

Great experience.

Experience in regeneration

processes

Experience in the

implementation of

regeneration strategies in EU

member states. Possibility of

implementing the experience of

other countries.

Experience in developing

Integrated Urban Development

Programmes

Consulting the processes of

developing IUDPs in other

European countries.


regeneration processes

Little experience in direct

project management.

Experience in financing big

regeneration projects in Europe

Experience in negotiations with


Great experience.


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Experience in PPP Considerable experience in

developing projects and

financial engineering with EU

funds.

Very important in the initial

phase – the EIB as the high

credibility institution for PPP.

Knowledge on the needs of

local self-government entities

Little knowledge on the needs

of small cities.

Considerable experience in

cooperation with bigger cities

of the region.

Experience in leading complex

investment projects.

The main objective of the bank

is to involve in big investment

projects.

Knowledge of local companies’

needs.

Little knowledge on the market.

Ability to negotiate

interpretations of regulations

related to JESSICA directly with

the European Commission.

Considerable experience,

enabling receiving

interpretations in short time.

Very important element in the

initial phase of the mechanism

implementation.




Cooperation with other EU

institutions in many projects.



Banks and Polish institutions

Extensive knowledge of the

domestic and international

financial markets. High

credibility of the EIB.

Impact of the regional self-

government on the

institution’s operation.

Via the Programme Council.

Supervision as the MA.


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Due to the fact that the only institution interested in establishing the HF is the EIB, other options

engaging other financial institutions have not been analyzed. Basing on previous analyses, the Upper

Silesian Fund can be also considered as a potential HF.

The following conclusions may be drawn on the basis of the above considerations:

In the first stage of the mechanism operation, the HF establishment should be entrusted to the

EIB (if the MA decides to establish a HF). The solution guarantees the application of well known

legal mechanisms and quick absorption of EU funds;

Initially (in period 2010-2013), the best practices database of JESSICA will be created and in this

period cooperation with the EIB is the most important and beneficial. The few months period for

interpretation of the Polish law may be significantly shortened. Basing on the experience

resulting from the implementation of Cohesion Fund projects, it may be stated that participation

of a European bank in an investment may accelerate the decision making process by up to 1 year.

Due to the fact that the investment cycle for regeneration projects lasts approximately for 5

years (profit-oriented investments eligible for JESSICA have not been prepared by self-

governments in detail), a possibility to shorten the procedure is one of the key issues.

PPP – implementation of PPP in Poland has for years faced many problems. Introduction of new

legislation in this area at the beginning of this year has slightly improved the situation. Still, the

ventures undertaken as partnership are saddled with high political risk. Involvement of an

institution like the EIB will be a strong argument for PPP implementation;

Term in office. In case of rigorous time frame for JESSICA implementation, in the initial phase the

risk connected with different people coming to power after the end of each term in office should

be eliminated. The possibility of supervision over the Upper Silesian Fund acting as the HF is both

an advantage and a disadvantage. As a result of election, the authorities of subsidiaries change.

Unfortunately, the change very often leads to interruptions in regular work and reluctance to

make decisions in the period few months before and after the election. Despite of the best

intentions of authorities of all levels to reduce this phenomenon, it is common all over the world.

In this case, it is another prerequisite for appointing the EIB as the HF in the initial phase;

Another positive effect of choosing the EIB is knowledge transfer to the institutions managing the

UDFs. In result, in further phase of JESSICA operation, the HF function can be taken over by

another organization (e.g. the Upper Silesian Fund);


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After 3-4 years, if the number of UDFs is small and self-government entities (associations of

cities) take over all HF activities, the HF might be liquidated. It may lead to a certain increase of

MA administration, but this model may be effective from the economic perspective;

3.3.3. Establishment of Urban Development Funds

The key role of UDFs in JESSICA results from the principal aims of these funds. These are: strong and

effective stimulation of regeneration and further development of urban areas in particular EU

member countries. They should considerably contribute to:

improvement of competitiveness and attractiveness of cities for their citizens, students,

scientists and investors;

optimization in absorption of the capital devoted to urban development, including in

particular post-industrial and post-military areas;

creation of stimuli for efficient management of financial resources available for various

entities, including private units and spending them for the purpose of project

implementation within regeneration processes.

Implementation of the above objectives will be executed by innovative UDF products, like:

granting loans;

acquiring shares in companies providing public services;

granting guarantees for subjects financing projects, including private entities.

According to Art. 43. of the Commission Regulation (EC) No 1828/2006, the decision to establish

Urban Development Funds, their number, objectives and methods of operation belongs to the

Managing Authority. The MA should also decide on the legal form of UDFs. The cited provisions of

the Commission Regulation indicate the key MA role, in particular through the obligation to prepare

the Operational Plan and Financing Contracts.

The decision of the MA concerning the number of UDFs should be preceded by an analysis revealing

the number of potential projects eligible for this type of financing in each city and also the interest in

JESSICA declared by cities of the region. Due to the fact, that in the initial phase UDFs will have

limited financial funds granted from Regional Operational Programmes, it seems reasonable to

reduce the number of UDFs to the essential minimum resulting from the direct initiative of particular

cities.

It is possible to create one big UDF for the entire region. The main advantage of this solution is the

possibility to create one central project database, which will diversify the risk related to the selection


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process of projects in terms of their socio-economic importance and profitability. Another advantage

of this solution is the reduction of costs related with effective management of the Fund. However,

the main disadvantage of this solution is the impossibility to define the Fund’s specialization and to

target its geographical range to a specific region and its needs.

Another solution is to create 3-4 UDFs in the Region. Nevertheless, the initiative in this respect

should come from particular self-government entities. Considering the great engagement of Silesia in

the process of creating advantageous conditions for effective absorption of EU funds and great

regeneration needs in both big and smaller cities, it should be stressed that this solution will have a

positive impact on the interest of local self-government authorities and other entities being potential

shareholders of the Fund aiming at financing ventures that are important from their point of view.

The only shortcoming of this solution in the initial phase of the UDF existence would be dispersal of

funds granted from the ROP and dedicated to the UDFs. Nevertheless, the main strength is the ease

of accumulating experiences in the initial phase of JESSCIA implementation as well as lower risk of

directing significant resources for a project which will not result in any added value.

As it was shown in point 3.3.1., the problem of the legal form of UDFs in the EU legislation has been

regulated in Art. 43, paragraph 4 of the Commission Regulation (EC) No 1828/2006, which does not

restrict or recommend one specific legal solution. It states unambiguously that it should be “an

independent legal person” or “a financial entity allocated within a financial institution”. It means

that in Polish legal conditions, UDFs may take two forms:

company (joint stock or limited liability company, including private-public partnership

participation);

investment fund managed by an entity selected for this purpose, e.g. Investment Fund

Associations (TFI) or the European Investment Bank (EIB).

Each of these legal entities assures that the HF and UDFs have the legal capacity to:

sign contracts;

contribute to capital;

grant loans and guarantees.

It has to be emphasized that in each of these legal forms, partners of different legal status may be

engaged:


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Self-government units and legal persons established by self-government entities to

implement public tasks;

Banks;

Agencies;

Private units (on the basis of the Public-Private Partnership Law)

Other financial institutions.

It means that there is a number of possibilities to establish an UDF operating as “as independent

legal entities governed by agreements between the co-financing partners or shareholders” (Art.43,

paragraph 3 of the Commission Regulation (EC) No 1828/2006).

These may include the following:

Limited company created by one self-government entity (as a subsidiary with 100% of

shares owned by the self-government) or by several self-government entities with equal

amount of shares and votes;

Limited company, whose shareholders may include: self-government entities, banks,

agencies, already existing nationwide or regional Funds or private partners;

Limited company created on the basis of the Public-Private Partnership Act. The new PPP

Act does not obligate the public partner to choose a particular cooperation mode. Self-

government entities may choose from among various options resulting from the Act,

including setting-up a subsidiary or applying the concession model for construction works or

services;

UDF created in cooperation with an already existing Regional Fund (e.g. the Upper Silesian

Fund established by Silesian self-government entities).

Participation in funds means in this case also profit sharing.

Territorial self-government units can establish and join companies without any restrictions.

Nevertheless, the Report cannot omit certain restrictions resulting from the legal status of poviats

and voivodeships. . These restrictions result from the currently binding Municipal Services Law (Art.

10), the Act on poviat self-government (Art. 6) and the Act on voivodeship self-government (Art. 13).

These Acts narrow the scope of activities of the companies established with poviat’s involvement to

public tasks, and in case of voivodeship self-government – to public tasks and promotional actions,

education and editorial activities leading to regional development. On the other hand, UDFs (in

accordance with the Commission Regulation (EC) No 1828/2006) may grant loans, guarantees, as

well as invest in projects, whose scope may exceed the scope of public tasks of territorial self-


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government. It means that only gminas would be able to independently establish UDFs, whereas

other local self-government units could participate in the UDFs being joint stock or limited liability

companies, established in cooperation with other units.

There are similar conditions and restrictions regarding territorial self-government engagement in

investment funds in the Polish legislation.

It should be emphasized that thanks to current actions undertaken by the Polish central government,

whose aim is to provide favourable conditions for the development of small and medium sized

companies, the restrictions described above will soon disappear.

On 24 August 2009, the Polish government approved a draft of an Act introducing changes to the

Acts on municipal services, poviat and voivodeship self-government. The draft changes radically

the content of the above cited articles, by widening the list of territorial self-governments which can

act outside the public services sector (poviats and voivodeships are to be added to the list). A draft of

these changes was directed to the Sejm already in September 2009.

The impulse for the Ministry of Economy to work on an amendment of these Acts was the document

entitled “Directions for Development of Credit and Guarantee Funds for Small and Medium Sized

Companies in the Years 2009-2013” that had been previously accepted by the Council of Ministers.

According to this document, self-governments of voivodeship and poviats will play the key role in the

process of shaping conditions for the development of small and medium sized companies in the

years 2009-2013. In the Council’s opinion, this objective will be reached by allowing self-

governments to create or participate in limited companies whose operation concentrates on granting

credits, guarantees or securities in order to support the entrepreneurship.

It has to be underlined, that on the basis of the above cited EU legislation, holding funds and UDFs

could theoretically take the form of state and self-government special purpose funds. However,

according to the Polish legislation this solution would necessitate the Sejm to pass a law on the

establishment of these Funds first.

To summarize, in the current legal situation, there are no obstacles to establish UDFs. It seems thus

most reasonable to create UDFs in the form of limited companies or within public-private

partnership.


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3.3.3.1. UDF business models

An analysis of EC guidelines on the initiative implementation proves that UDFs are not institutions

managing investment projects but institutions financing such projects. Taking into account economic

effectiveness and the objective to create a long term financial tool to support regeneration

processes, one may distinguish two separate business models:

loan model (money lender);

capital model (capital investor).

Each model requires specific approach and set of tools. On the example of banking institutions it can

be assumed that crediting and investment banking should be separated.

The loan approach is the easier one, related with lower risks, based on the passive UDF approach

towards projects. However, this model gives significantly lower return rates and results in a burden

of securing projects. In case of projects implemented by self-governments (self-government

subsidiaries), the necessity to issue guarantees may result in a negative decision on project

implementation.

The investment approach requires much deeper analysis of business risks. This model requires also

much broader knowledge on regeneration mechanisms from UDFs. On the other hand, it gives much

higher return rates on capital and results in a possibility to develop the UDF. From the perspective of

PPP projects, the investment model increases the projects’ credibility in the eyes of a society.

In case of gminas’ capital contribution to UDFs and in case of PPP projects, none of the above models

can function as a financial pool within an existing financial institution.

3.3.3.2. UDF operating as a credit – guarantee institution

Required skills:

the ability to judge an organization with regard to income generation ability and ability to

discharge liabilities;

the ability to judge the level of securities;

the ability to evaluate an investment project with regard to market risk and ability to


the ability to evaluate the project impact on the integrated effect of urban development,

including the value of land.


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3.3.3.3. UDF operating as a capital investor

Required skills:

the ability to judge organisations being shareholders with regard to their abilities,

experience and business credibility;

the ability to evaluate the market and credibility of business plan provisions. Expertise in

judging market research and analyses;

the ability to evaluate an investment project with regard to market risk and ability to


the ability to evaluate the project impact on the integrated effect of urban development,

including the value of land.

3.3.4. HF/UDF model

Full model of JESSICA operation.

The above model is the optimum one in terms of functionality and technical aspects. An important

issue influencing the financial leverage level in this model will be separation of the loan and

investment UDFs as well as the UDF established by cities (one or few).

Marshal Office of ŚląskieVoivodeship

HF

UDF - loans

UDF - capital

UDF - cities (optional)


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3.3.4.1. Advantages and disadvantages of the full model of JESSICA

implementation.

Śląskie Voivodeship is the biggest urbanized region in Poland. The result is the greatest diversity and

amount of regeneration projects and programmes. In order to manage them effectively, it is

necessary to involve in the process a regional institution that could provide administrative, financial

and content-related support. This institution should be responsible for supervision, training, advising

and control.

In Śląskie Voivodeship there are 4 strong sub-regions;

As the result of the mechanism implementation in the Wielkopolska region, an initiative to

create own UDFs has appeared in some cities;

Operational costs of a HF are not higher than 2%, so if the initiative budget is assumed for

approx. € 40 M, it would be around € 800 000 per year. The costs of establishing an entity

that would serve one UDF and a few big projects may be significantly lower. The costs of

establishing an entity that would serve two or more UDFs granting greater amounts of loans

may exceed the 2% value;

In order to choose an institution that would establish the HF (other than the EIB), it is

necessary to organize a competition procedure which may be time consuming;

In case a greater number of UDFs is established, the control over them without the HF

support will be very difficult and could lead to the increase of the MA costs;

Creation of more than one UDF will result in a strong financial leverage effect, through

financial contribution of gminas and other organizations. It is thus a chance to create an

important financial institution to manage regeneration processes.

Table: Advantages and disadvantages of the full JESSICA implementation model.

Advantages Disadvantages

No need to extend the administration within the

MA.

Higher direct costs.

Possibility to obtain higher profits from investing

the Fund’s resources.

Small possibility of financial leverage on the HF

level.

Possibility to establish UDFs specializing in loans,

capital investments and particular cities. Greater

If the HF establishment is not entrusted to the

EIB, it will be necessary to prolong the process


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effectiveness and flexibility of operation. by organizing competitions leading to the choice

of HF and UDF operators.

A strong financial leverage effect will appear

with higher number of UDFs.

In the long-term perspective, after gaining some

experience and independence by UDFs and after

clear interpretation of legislation is available, the

HF should be liquidated.

High interest of gminas in creating UDFs, if

content-related support from the HF is available.

An entity that may undertake integrated actions

towards law interpretation. Especially

advantageous, if the HF is operated by the EIB.

3.3.5. One UDF model

3.3.5.1. Conditions and advantages of the one UDF model

This model is economically justified in case of a region implementing only few homogeneous projects

in terms of business-economical models of the venture. The basic advantage of this model is the lack

of HF management costs. However, only some HF responsibilities can be taken over by the UDF,

whereas the rest will stay with the MA, which will also generate some additional costs and increase

the MA responsibility.

In case of choosing the operational model based on one UDF, the choice of institution managing

UDFs should be conducted by means of a competition. However, on the MA level, it would be

necessary to create a separate department to analyze all the procedures from the banking,

economical and ROP requirements perspective. Due to the fact that UDFs are to be profit oriented,

the MA will have to judge the economic effectiveness of each project and credit worthiness of the

beneficiaries (not gminas!).

It would be problematic to conduct the UDF activities in both crediting and investment areas. All

market institutions separate these two types of operations. Therefore, in case of choosing the model

based on one UDF, the MA should reduce the JESSICA character to only one operational form.

The choice of the model based on one UDF is reasonable in case of smaller entities and in case of

implementing only few projects, e.g. crediting.


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In case of one complex UDF, costs of its operation may even exceed the total costs of HF creation, as

it would be necessary to build control and decision making structures within the MA. The experience

of existing regional credit funds concentrating on small loans for many assignees reveals that they

are also generating high operational costs, exceeding the level acceptable for UDFs - 3%.

In addition, due to the lower interest of self-government entities to contribute capital to a central

institution, the financial leverage in this model would be reduced to a minimum.

3.3.5.2 Institutions that may establish one UDF

Institution Conditions

Local financial

institution, e.g. the

Upper Silesian Fund,

local Investment

Fund

No experience in JESSICA procedures;

Experience in finance and credit funds management;

Little experience in managing investment processes;

Extensive knowledge on local market conditions;

Possibility to receive little self-government support.

Due to the little experience in the mechanism operation, the Upper Silesian

Fund is interested in the creation of a second level UDF (with a separate HF

institution).

Local institution

dealing with

regeneration,

restructuring, etc.

E.g. GAPP,

Regeneration

Forum,

Development

Agencies.


Experience in finance and credit funds management;

Little experience in managing investment processes;

Extensive knowledge on local market conditions;

Possibility to receive little self-government support.

Due to the little experience in the mechanism operation and the obligation

to build financial engineering tools from scratch, these institutions are not

ready to implement JESSICA in the region. They may take part in a second

level UDF, with the HF support in terms of procedures as well as finance and

risk management.

Banking institutions

- national or

international


Some German regional banks have little experience in the initiative

implementation in Germany. However, an analysis of the German

case proves that bank concentration on financial engineering is

disadvantageous to the initiative and results in the impossibility to


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start the mechanism and spend resources for the projects. Presently,

there is a discussion in those lands organized on the possibility to

withdraw from this model and to shift to the HF/UDF model, applied

in other EU countries.

Experience in managing finances and credits;

Great experience in risk management;

Little experience in direct management of investment processes;

Lack of knowledge on local conditions;

No experience in regeneration processes;

Impossibility to get any self-government support.

Banks have very little experience in creating JESSICA mechanisms and

managing regeneration processes. Entrusting the role of one UDF to banks

carries the great risk of wasting the chance that JESSICA offers in

regeneration processes and local self-government activation.

Banks have a great role to play as:

institutions co-financing projects;

institutions managing the finance – related tasks of UDFs established

by gminas (If gminas decide to create their own UDFs, with banks’

support only content-related issues will have to be controlled by

them);

CONCLUSIONS:

Currently, there is no institution which could create the JESSICA model based on one central UDF.

The choice of such a model will necessitate a great amount of preparatory work on the regional

administration side. Further control of project implementation and financial policies will also be

the responsibility of the Marshal Office.

The one UDF model requires the founding entity to be a financial institution, able to manage

regeneration processes on the local scale.

The choice of any of the above mentioned entities will be related to risk - higher than potential

benefits.


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This choice is also related with the risk of not spending the resources available until 2015, due to

the necessity of working out all the procedures, preparing projects and implementing them, with

limited experience of the people engaged in the process.

Another risk of this model is the fact that in order to simplify all the operations, the institution

responsible for UDF establishment will decide on the crediting character of the mechanism. In

result, interest in the application of the mechanism in regeneration processes will be considerably

smaller and the impact of JESSICA on PPP will be marginal.

Currently, the Consultant suggests choosing the HF model and creating two or more UDFs. After

the implementation period, liquidation of the HF and direct supervision of UDFs by the Marshal

Office may be considered. After the implementation period, the HF interest may be reduced, to be

fully covered from the UDF profits.

3.3.6. Institutional model and project financing possibility

3.3.6.1. One UDF model

In case of choosing this model, the UDF should be created as a crediting and guarantee institution.

The value of projects should exceed 2 000 000 €. In case of crediting smaller projects, UDF costs

(application evaluation, consulting point’s maintenance, training, financial services, administration)

may exceed the 3% limit. In most projects, it has to be assumed that projects with high level of

security will be preferred (e.g. with gmina guarantees).

3.3.6.2. HF and 2 UDFs model

This model gives the possibility to create two financial institutions, specialized in different tools of

financial engineering. The establishment of the investment UDF gives the possibility to manage more

complicated investment processes and receive securities in a form other than liabilities of self-

government budgets. The business models of the finaced projects should be rather simple. Projects

whose profitability will depend on special local conditions, difficult to be measured and evaluated by

a central UDF will encounter difficulties in receiving the financing decision.

3.3.6.3. HF and a greater number of UDFs

This model offers the greatest flexibility in financing projects. Apart from the advantages mentioned

above, within this solution it is easier to finance projects of sub-regional character. This model

requires close cooperation with the HF, which can play the role of a supplier of financial evaluation

tools for smaller UDFs. Without this support, running small UDFs may be too expensive.


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It seems reasonable to establish one bigger loan UDF and some more investment UDFs. In case of

small UDFs, the investment form will bring better return on capital and will help increase their

potency.

3.3.6.4. EBI involvement and possibility of project financing

The EIB involvement as the HF is crucial for project financing as the Bank has ready business tools

that may be offered to UDFs. In addition, many projects will necessitate financial engineering, based

on additional financing sources. Here the possibility to obtain some funds from other EU institutions

is invaluable. The EIB declares at the same time that it can provide additional support from own

funds, which should considerably increase the financial leverage.

3.3.7. Institutional model and participation ability


No institution has shown any interest in participation in this central institution. Both gminas and

banks do not declare interest in the support on one UDF level. Participation is only possible on a

project level.


External entities show interest in participation within this model. Initially, this interest in related to

the possibility of engaging in an investment UDF, operating as a venture capital fund. Greater

involvement is possible on a project level.


As in case of the above model, also here some initial interest in the investment UDF fund may be

noticed. In addition, there is a clear declaration of gminas to contribute capital to smaller sub-

regional UDFs. Self-government units and companies declare contribution in-kind (in form of real

estates) to UDFs. Also institutions engaged in regeneration of post-industrial areas (GAPP, CPR) are

interested in this operational form.

3.3.7.4. EBI and a possibility of other entities involvement

The EIB involvement improves the credibility of all actions, especially in the sphere of PPP. It may be

thus a strong argument for other entities to participate in the project.


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3.3.8. Institutional model and PPP


In the one UDF model, the role of this institution will consist mostly in financial support of a private

partner, in case the difference between commercial and preferential financing offered by the UDF

decides on project profitability. In practice, financing PPP in this model is improbable.


PPP is highly possible within this model. UDFs may contribute capital to ventures; they may be

originators of spatial development projects. In this model, the investment UDF can play the role of a

real estate development company.


This model offers the possibility to separate a fund, which will be directed at real estate development

in particular gmina associations. This model increases the probability of engagement of gminas into

PPP and managing projects with great UDF support. The existence of a HF may reduce the costs of

project management thanks to common, transparent procedures for all UDFs.

3.3.8.4. EBI involvement and PPP

In recent years, despite of the new legal solutions, PPP has encountered several implementation

problems in Poland. It is large cities that are most interested in this form of cooperation. However,

these projects wait for years to be implemented and are often used in the political game.

Unfortunately, PPP is still the word synonymous to unclean business.

The main PPP failure reasons are:

Inability to understand partner’s needs (both private and public);

Inability to create proper business models;

Problems with finding a partner interested in the investment;

Wrong project assumptions, not reflected in the market needs.

Lack of single interpretation of laws jeopardizing the institution implementing PPP for legal

risks.

The PPP contracts are signed for long periods of time and sole project preparation and

implementation last for 5 and more years.


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Self-government entities intentionally avoid this risk, despite of obvious advantages resulting from

PPP or even impossibility to realize some ventures in a different formula.

The EIB role can be crucial in this case. It is the key issue not only for projects, but also for PPP

implementation throughout the whole region, also outside the JESSICA initiative.

EIB, which has already worked out some legal and business procedures is able to

implement projects in much shorter time;

by shortening the time necessary to receive some binding interpretation of EU

legislation, the EIB can accelerate project implementation even by 2 years (for two years

it was impossible to receive an opinion concerning PPP assets produced with the

Cohesion Fund support, whereas a similar interpretation was issued by the European

Commission in 14 days on request of a European institution);

EIB provides political security of self-government authorities. Engagement of a European

institution as the coordinator of a PPP project reinforces the credibility of the process.

Being experienced in financing PPP projects, the EIB may also facilitate the process of

finding private partners from EU countries.

3.4. Comparison and evaluation of different institutional models of

JESSICA implementation

The most probable organizational models have been chosen for the analysis: one UDF model, HF with

two UDFs (credit-guarantee and capital) and HF and more UDFs - opening the possibility to create

UDFs to gminas and their associations.

Table: Comparative analysis of chosen organizational models.

UDF HF + 2 UDF HF + >2 UDF

Time for absorption of funds +/- ++ (EBI)

+/-

++ (EBI)

+/-

Time for project implementation +/- + (EBI)

-

+ (EBI)

-

Flexibility and change opportunities -- + ++

Fitting financial tools to particular needs - + ++

Management costs + - -


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-- very unfavourable, - unfavourable, +/- neutral, + favourable, ++ very beneficial

Table: Comparative analysis of chosen organizational models – financial aspect.

Values UDF HF + 2 UDF HF + >2UDF

Capital transferred to UDF – total (mln PLN) 184,00 280,34 512,56

ROP SL 160,00 160,34 160,56

Shareholders – cities (in mln PLN) 24,00 24,00 64,00

Commercial banks 0 48,00 128,00

EIB 0 48,00 160,00

Capital transferred to UDF as % of ROP

contribution

13,04% 42,80% 68,67%

Shareholders – cities in % 13,04% 8,56% 12,49%

Commercial banks 0,00% 17,12% 24,97%

EIB 0,00% 17,12% 31,22%

Balance of UDF(-s) funds at the end of 2022

(last year)

186,90 307,91 559,96

Value of granted loans and credits in PLN 238,56 398,97 722,61

Direct costs of the MA - + +

Financial leverage -- +/- ++

Knowledge potential - ++ (EBI)

+/-

++ (EBI)

+/-

Investment diversification - + ++

Financial risk minimization - +/- +

Project impact on regeneration effectiveness +/- +/- +

Possibility to implement big integrated projects + ++ +/-

Possibility to implement PPP projects +/- + +

Possibility to implement low-budget elements

of integrated projects

+/- +/- ++


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Table: Analysis of advantages and disadvantages of chosen organizational models.

Model Description

UDF Disadvantages Advantages

High organizational costs for the MA Initially, lower costs of program

operation, assuming that there is no

technical support necessary (the UDF is

created by an entity having knowledge

on revolving instruments).

Little institutional flexibility Simple business and organizational

structure.

Small possibility of obtaining the

financial leverage effect (limited

interest of gminas and commercial

banks)

Clear and recurrent schemes of

operation.

One of many credit funds Allocating all resources to the loan fund

will result in the establishment of a

financial instrument that is well known

to self-government authorities.

Low educational value Little demand for highly educated staff.

HF + 2 UDF Disadvantages Advantages

Costs resulting from the HF operation (if

established by an institution other than

the EIB).

Low operational costs for the MA. No

necessity to employ competent staff

resulting from the HF managed by

another institution (e.g. EIB).

Difficult mechanisms in the investment

UDF.

Possibility to adapt financial tools to

projects.

Necessity of greater individualization of

procedures.

Possibility to obtain the financial

leverage effect.

Possibility to support gminas in terms of

content-related issues.

Possibility to find additional financial

institutions.

Low HF operational costs (only if the HF


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is established by the EIB, the operational

costs will be compensated by income

from interest on invested capital and

value of technical support).

HF + >2

UDFs


Costs resulting from the HF operation (if

established by an institution other than

the EIB).

Low operational costs for the MA,

possible takeover of some costs by self-

government entities of lower level.

Possibility of strong institutional

fragmentation

Possibility to adapt financial tools to

projects and local conditions.

Considerable knowledge transfer.

Difficult mechanisms in the investment

UDFs

High possibility to obtain the financial

leverage effect.

Necessity of greater individualization of

procedures

Possibility to create a best practices

database and content-related support of

self-government entities.

High possibility to find additional

partners and financial sources.

The greatest flexibility of the model.

Possibility of great diversification of the

model.

Thanks to the variety of tools, it will be

possible to obtain the added value effect

in implementing Integrated Programmes

Low HF operational costs (only if the HF

is established by the EIB, the operational

costs will be compensated by income

from interest on invested capital and

value of technical support).


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3.4.1. Analysis of advantages and disadvantages resulting from entrusting the EIB

with the HF function

Entrusting the HF management to the European Investment Bank having the biggest

knowledge on the JESSICA mechanism would be the fastest possible option, as no

competition procedure would have to be organized. In this case, all funds could be

transferred directly after completing negotiations of the management contract between

the Marshal Office and the EIB.

EIB offers professional support for newly opened institutions and the MA. The value and

quality of technical support is in this case an added value that is not offered by other

entities (the cost of the EIB technical support is estimated as € 200 000 / quarter)9.

The solution enables faster disbursement of ROP SL funds.

As an EU institution, the EIB is able to obtain direct legal interpretations and explanations

from the European Commission, which can be crucial for new projects. The EIB may act

as a middleman between the Marshal Office, central administration and the European

Commission.

Educational actions of the EIB aimed at UDFs and other entities implementing projects

are based on unique experience.

EIB involvement in PPP ventures increases their credibility and assures positive social

perception. At the same time, it offers a possibility of significant economic

development of the region.

The solution introduces a strong partner in the area of finance management to the

region.

The solution facilitates JESSICA implementation, thanks to the possibility of using

procedures developed by the EIB and tested for many years of the bank’s operation.

It provides direct contact with the European Commission and other institutions

responsible for developing and interpreting law for the JESSICA initiative.

9 Assessed on the basis of average prices of consulting services provided by experts, in the scope

necessary for HF operation (legal and economical services, translations, negotiations, development of contracts).


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3.4.2. Recommendations for the Śląskie Voivodship

3.4.2.1. Recommendations concerning the Holding Fund establishment

In the light of the above analyses, the Consultant recommends the establishment of a HF for the

period 2009-2013 and offering HF tasks to the EIB.

The analysis reveals, that the choice of the simplified model (one UDF), in case of a region with

such complex urban functions, consisting of four not fully integrated regions, will not guarantee

reaching all the assumed effects. With the planned amount of money to spend (of approx. 40 € M),

with no financial leverage effect, operation based on one UDF only will not have a considerable

impact on the regeneration process and integrated development of urban areas. In practice, a Fund

with no leverage will be disfunctional and expensive, as it will require building competent structures

within the UDF and the MA. In case of delays of disbursement procedures (delays will occur due to

the necessity of the UDF to acquire the knowledge required to launch the financial mechanism),

the region may lose the chance for dynamic development of PPP, connected to new financial

possibilities.

Entrusting HF tasks to the EIB will enable specification of all legal interpretations concerning UDF

operation and benefiting from the bank’s know-how at the same time.

In case of choosing an institution other than the EIB, the Consultant recommends the establishment

of only one UDF in the initial phase, due to the significant acceleration of disimbursement of funds.

However, this choice will cause significant constrains for the JESSICA mechanism implementation.

CONCLUSIONS – separation of tasks between two different entities is the most effective solution

for regional development.

The Holding Fund will be responsible for:

implementation of the initiative;

preparation of self-government entities;

training sessions;

supervision of financial engineering;

development of procedures;

database of best practices.

The UDF should be responsible for:

choice of projects exerting the greatest impact on regional development and regeneration;

analysis of local needs;


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provision of support for the beneficiaries.

The UDF should be also responsible for the choice of projects to be implemented. The HF would

only choose projects with regard to their profitability.

As the German example shows, combining these two functions (as in case of the one UDF model)

results in concentration on financial instruments only. The influence of project implementation on

regional sustainable development is neglected. This model will result also in the lack of self-

government interest in this initiative and treating it only as yet another place to receive a loan.

Adopting this business model will affect implementation of small, not necessarily effective projects

and stop PPP.

In the Consultant’s opinion, despite of the revolving character of the instrument, the one UDF model

will not be more effective on this stage of experience than the current subsiding model. Moreover, it

will increase the number of risks connected to disbursement of funds. Therefore, the model of one

UDF managed by a financial institution should be dismissed on the basis of past experience and the

Consultant’s opinion.

Considering the current stage of institutional preparation and little time left to the end of the

2007-2013 perspective, in the Consultant’s opinion the only solution that may significantly

influence regional development is the model based on responsibility split between HD and UDF

institutions. In order to significantly reduce potential risks for the Marshal Office, the Consultant

recommends basing the HF on the EIB structure.

After 2013, further existence of the HF as well as potential takeover of HF functions by some local

entity should be reconsidered.

3.4.1.1. Recommendations concerning the number of UDFs

Taking into account the fact that Silesia is the most urbanized region in the country, and that it

already has institutions like the Upper Silesian Fund (experienced in managing crediting-guarantee

and investment activities for self-governments), the Consultant recommends the choice of the full

JESSICA model.

Initially, two UDFs should be created in accordance with the current EIB procedures, based on the

Upper Silesian Fund that is institutionally ready for this solution. Each fund should concentrate on

different financial engineering tools.


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In the initial phase, the actual interest of cities (or their associations) in the engagement of capital in

own UDFs has to be unambiguously identified. In case such an option is confirmed, one should

consider establishing additional UDFs. Due to the threat of organizational fragmentation, it would be

reasonable to reduce the number of city UDFs to 2-5. Investment UDFs should be preferred as they

may work out better capital payoff by concentrating on the implementation of Integrated

Programmes.

3.4.1.2. Recommendation concerning organisational changes in time.

After 2013 (or earlier, in case of any prerequisites for change), the following elements should be

analysed:

rationale of further HF operation;

possibility of transferring the HF role to a local institution;

possibility of particular UDFs operation, potential changes in their operation, including

mergers, ownership structural changes, privatization etc.

Full analysis should be obligatorily prepared after using all the resources provided for project support

in the programme. After this period, the following elements defined by the Marshal Office may

change: guidelines on priorities and eligibility of costs.

Table: Organizational model with the HF involvement.

MA

Śląskie Voivodeship

HF (EIB)

UDF

crediting

project

project

UDF

capital

project

project

UDF

crediting

project

project

UDF

capital

project

project


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Table: Recommendations for JESSICA

•Regional institutions are unpreparedfor independent implementation offinancial revolving instruments - thereis a need of both technical andcontent-related support.

•Takeover of HF funtions by a regionalinstituion will be possible not earlierthan in the third year of themechanism operation.

•The time neccessary for themechanism implementation and thespeed of disbursement of funds willbe crucial in terms of regionaldevelopment.

•A chance resulting from the effectivemechanism implementation is thedevelopment of PPP in the ŚląskieVoivodeship, which will lead tonumerous interesting investmentprojects.

Entrusting the HF establishment to

the EIB is the best solution,

considering the speed and

effectiveness of the mechanism implementation

as well as the best stimulus of

regional development.

•The greater number of UDFs will enablebetter response to local needs. Accordingto the assumptions from the initial stageof this JESSICA implementation study, theself-government involvement in UDFs willdepend on the number of Funds.

•There is a need to create crediting and investment UDFs resulting from the analysis of potential JESSICA projects. This solution will have the greatest impact on regional development.

•The number of UDFs will directly translate to the financial leverage effect. On the basis of the initial analysis it can be stated that the difference in the leverage between the 1 UDF and the HF + >2 UDFs options will be at least 484 million PLN. Having this in mind, there is no rational justification for the 1 UDF model.

Greater number of UDFs and their

differentation will lead to an

increase of financial

engagement of gminas and other

entities (including

commercial banks)


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4. JESSICA implementation strategy in Silesia

4.1. Recommendations on how JESSICA should be taken forward in Silesia

in short-, medium- and long-term perspective

•Appointing the EIB as the institution within which theHolding Fund will be established [thanks to this solution itwill be possible to transfer the resources fast, avoidlenghty public procurement procedures and assurecorrect JESSICA implementation].

•Start of promotional actions, aimed at disseminatingknowledge on the mechanism as well as on PPP.

•Arising interest of regional institutions and self-governemnt entities in participation in UDFs (with capitalor substance).

short-term perspective

•Analysis of the system operation, adopting proceduresaiming at optimization of the number of UDFs andhanding the HF to a regional institution.

•Assessment of the engagement of potential beneficiariesin JESSICA.

mid-term perspective

•Actions aimed at increasing the financial leverage within particular UDFs.

•Increasing the number of UDFs with regard to geographical and sectoral division.

long-term perspective


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4.2. JESSICA implementation methodology

The mechanism implementation methodology comprises actions whose timetable has been

presented in chapter 4.3.

Actions concerning decision making processes in the Managing Authority, the HF and UDFs will be

crucial for the mechanism implementation.

Table: Main problems that may be encountered throughout JESSICA implementation

Problem area Scope of remedial actions

Substantive knowledge of the

institutions that may be

responsible for the

mechanism implementation

Presently, there is no regional financial institution that

would have substantial knowledge and experience in

management and implementation of revolving

mechanisms; due to the fact, cooperation with the EIB

seems the best solution as far as establishment of the

HF and UDFs is concerned.

There is a need to obtain technical support offered by

the EIB in order to optimise the mechanism

implementation and speed up the disimbursement

procedures.

Promotion and dissemination

of knowledge on JESSICA

The mechanism is very little known and requires

promotion. Information and promotional campaigns

should be organised as soon as possible.

Information and promotional actions should be aimed

both at potential beneficiaries and at potential UDF

participants. The JESSICA added value is the possibility

of a very high level of financial leverage.

Technical and factual

knowledge of potential

beneficiaries

Potential beneficiaries are very well prepared as far as

technical plans are concerned. This means that in case

of fast mechanism implementation, it will be possible

to spend the resources fast and achieve first results

and effects.

Beneficiaries are unprepared as far as the

conceptual/substantive sphere is concerned. There are

no Integrated Urban Development Plans, there is little


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knowledge on PPP as there are no PPP Implementation

Plans that would enable fair evaluation of transparency

and complexity of the procedures applied. A system of

trainings should be organised in order to disseminate

knowledge on the JESSICA initiative as well as on PPP,

IUDP, etc.

4.3. Indicative timeline of the new structure implementation

The scheme below presents an indicative timetable of the mechanism implementation.

IV quarter of 2009 - contract with the EIB to establish and manage a HF

I quarter of 2010 - transfer of resources to the HF /EIB

II quarter of 2010 - selection of UDF

III quarter of 2010 - transfer of resources to UDFs, development of project selection and implementation procedures

IV quarter of 2010 - development of projects

I - II quarter of 2011 - selection of projects to be supported

JESSICA implementation


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4.4. Potential risks for the Managing Authority

4.4.1. Managing Authority’s financial obligations resulting from RPO SL

Risk Probability Recommendations

Failure to meet eligibility

criteria defined by the

ROP SL

Little Instructions on project implementation and

disimbursement procedures should be developed

on the basis of the presently binding eligibility

criteria.

Cost eligibility criteria have been defined in the

Council Regulation (EC) No 1083/2006 of 11 July

2006 laying down general provisions on the

European Regional Development Fund, the

European Social Fund and the Cohesion Fund and

repealing Regulation (EC) No 1260/1999,

Regulation (EC) No 1080/2006 of the European

Parliament and of the Council of 5 July 2006 on the

European Regional Development Fund and

repealing Regulation (EC) No 1783/1999,

Commission Regulation (EC) No 1828/2006 of 8

December 2006 setting out rules for the

implementation of Council Regulation (EC) No

1083/2006 laying down general provisions on the

European Regional Development Fund, the

European Social Fund and the Cohesion Fund as

well as Regulation (EC) No 1080/2006 of the

European Parliament and of the Council on the

European Regional Development Fund, national

eligibility quidelines for structural funds and the

Cohesion Fund in the programming period 2007-

2013 issued by the Minister of Regional

Developement on 30 July 2007.

The scope of eligible expenses has been defined in

detail by the MA of ROP SL in the Eligibility


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Guidelines within the Śląskie Regional Operational

Programme for the years 2007 – 2013.

Lack of control systems Medium Development of guidelines and exemplary

contracts with UDFs concerning disbursement of

ROP resources, including guidelines on settlement

and monitoring procedures.

Introduction of a control system of the MA over

the UDFs.

Maintenance of the n+2

rule

Medium Development of guidelines obliging beneficiaries to

implement projects in accordance with the n+2

principle.

Irregularities in the use of

resources

Little Development of guidelines based on the presently

binding Guidelines on the procedures applied in

case of irregularities in the use of resources

granted from the structural funds or the Cohesion

Fund in the programming period 2007-2013.

Failure to apply the public

procurement law

Little Introduction of declarations binding the

beneficiaries to apply the public procurement law.

A beneficiary pledges to apply the law of 29

January 2004 Public Procurement Law (Official

Gazzette 2007 No 223, item 1655 as amended). In

case of beneficiaries operating out of the public

finance sector that are not bound to apply the

Public Procurement Law, a declaration is required

to apply the Guidelines of the Managing Authority

of the ROP SL on awarding contracts in case of

projects co-financed from ROP SL resources.

No disbursement of

resources until 2015 (in

case of the option with 1

UDF or the HF established

by an entity other than

the EIB)

Very high The risk of delays resulting from the lack of

administrative procedures and competence of both

the institutions that might possibly establish the HF

and UDFs and the beneficiaries. Due to the fact

that the time needed to implement regeneration

projects is very long, there is a great risk that they

will not be completed before the year 2015. The


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risk is especially high in case of establishing only

one UDF, not based on the EIB structures. Basing

on the German experience one may state, that

although our neighbours had begun their actions

earlier, they did not manage to spend their

resources, as they based their structures on

completely unprepared financial institutions.

Delays will result from the necessity of developing

structures ready to implement the initiative. The

German experience proves that choosing the

option of 1 UDF paralyses disbursement

procedures within JESSICA.

Basing on British, Lithuanian as well as Polish

experience one may state that initially (in 3 – 5

years perspective) it is absolutely necessary to

engage the EIB in the process of establishing the

HF and applying for technical assistance in efficient

JESSICA implementation. Additional advantage of

this solution is minimised responsibility of the

regional self-government for timely disbursement

of all the resources.

4.4.2. State aid and project sustainability issues

Risk area Risk description

State aid The opinion on state aid issues has been issued by the Ministry of Regional

Development10

Referring to present legal conditions one should state that the notion of state aid

has not been defined in detail in European Union documents. However, on the

basis of Article 87 paragraph 1 of the Treaty establishing the European Community

one may conclude that state aid is the support granted to a company in case the

following conditions are fulfilled at the same time:

the aid is granted by the state and comes from public resources,

10http://www.mrr.gov.pl/fundusze/pomoc_publiczna/czym_jest_pomoc_publiczna/strony/pomocpubliczna.aspx


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the aid is granted on more favourable conditions than the market ones,

the character of the aid is selective (it gives preference to a particular

company or companies or production of certain goods),

it may restrict or restricts competition and has impact on trade exchange

between EU Member States.

In order for support not to be considered state aid, the above conditions have to

appear simultaneously. In case any of the above conditions does not appear, the

support cannot be considered state aid.

The body responsible for issuing opinions on aid projects, notifying them to the

European Commission, respresenting the Polish government in disputes with the

Commission or European courts as well as monitoring state aid granted to Polish

institutions is The President of the Office of Competition and Consumer Protection

(OCCP). It is also the President’s competence to answer questions concerning

interpretation of the state aid law asked by entities granting the aid and potential

beneficiaries.

As JESSICA will function within structural funds (public resources), the issue of state

aid should be considered. The key question in this respect is whether on particular

stages of JESSICA implementation and operation certain entities will be preferred

over the others. Such preference would have impact on EU trade and result in

competition restrictions. The issue will primarily concern the relations between the

Managing Authority and the HF or UDF(-s) as well as between the HF and the UDF(-

s), setting the HF and UDF remuneration, UDF support granted to particular

projects or public entities investing in the UDF or the HF, managing private

resources. In case the support granted within JESSICA was considered state aid, its

beneficiary would be obliged to return it. It should be stressed that not all support

granted within JESSICA will be automatically considered state aid. If all the

entities engaged operate in accordance with market principles and if JESSICA

resources are also transferred according to market principles, there will be no

risk of prohibited state aid.

Project

sustainability

One of the main areas of regeneration activities in Silesia is development of post-

industrial and degraded areas and revival of their economic functions. In spite of

great effectiveness of these actions, their implementation in Silesia may be


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threatened by the fact that interpretation of project sustainability in such cases

remains unclear. These areas should be purchased by entrepreneurs willing to

start-up their business. However, due to sustainability issues, they may only be

leased. This fact has adverse impact on the interest of potential investors.

Minimising this risk is only possible in two cases:

positive opinion of the European Commission on the possibility of selling

the grounds. The key role may be played by the EIB, which may request the

European Commission to present a clear interpretation of this legal

problem in case of the JESSICA initiative.

change of law by the governement, introduction of urban development law

and procurement of the agreement of the European Commission to treat

this instrument on a par with lease.

4.5. Recommendations

In order to plan disimbursement of JESSICA resources properly and use them effectively, it should be

necessary for potential Beneficiaries to prepare the following documents:

Document Scope

Simple

application

form

Simplified application form should be a document whose aim is to present

general, concise information on a particular project. The application form should

include results of detailed analyses conducted and presented in the project

feasibility study, profitability analysis, etc.

Feasibility study

Project feasibility study is a document whose main aim is to prove the rationale of

a particular project and to state whether it is technically, strategically, financially

and economically feasible. A feasibility study should among others include the

following analyses: social and economic analysis, spatial analysys, project

background, economic, social, legal and environmental aspects of the project

implementation, intervention logic (aims, products, results), technical analysis,

environmental analysis, financial, economic, sensitivity and risk analyses. Product

effectiveness is primarily measured by indicators such as rate of return,

profitability ratios, PI, NPV, IRR, DGC.

Integrated

Urban

Integrated Urban Development Plan is developed, adopted and coordinated by a


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Development

Plan

local government as a long-term programme of actions in the sphere of public

space, utilities, society and economy. The aim of the document should be

sustainable development of a particular area or managing it out of crisis and

creating conditions for future development.

The plan should comprise: spatial, social and economic analyses of a city/town,

identification of problems and barriers of development, assumptions, objectives

and timetable of the plan, definition of projects to be undertaken, expected

indicators, implementation and monitoring system, environment impact analysis.

The plan should also include an analysis of planned spatial, social and economic

effects of each project.

Local

Revitalization

Programme

Projects included in the integrated plan have to result from the Local

Revitalization Programme – a planning document adopted by a

City/Town/Commune Council and defining degraded areas to be regenerated.

Multi-annual

Financial Plan

It is recommended for potential JESSICA projects to result directly also from Multi-

annual Financial Plans, developed by particular self-government entities.

A Multi-annual Financial Plan is a tool of rational management of public resources,

taking into account the following: macroeconomic ratios (GDP, average annual

inflation), forecast of interest rates (WIBOR 1M, WIBOR 3M, interest rate s of

commercial credits), forecast of income and expenditure, debt level and

anticipated income and expenditure in the following years.

A Multi-annual Financial Plan defines in detail:

level of possible budget income,

rational level of current expenditures ensuring implementation of all

statutory tasks,

gross available funds (operating surplus) to finance debt service and

planned investment,

net available funds that is the so called financial potential of a self-

government entity (resources to finance investment projects),

setting the maximum debt level of a self-government entity without

losing financial liquidity,

possibility of receiving an EU grant (provision of own contribution),

A Multi-annual Financial Plan facilitates rational implementation of projects

included in strategic documents of a particular self-government entity, defining


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the sources of their financing in subsequent years at the same time providing

resources to finance the statutory tasks of a beneficiary. A Multi-annual Financial

Plan defines the level of resources that may be spent on investment and non-

ivestment projects (what distinguishes it from the Multi-annual Investment Plan)

without affecting the financial safety of the investor (debt and debt service ratios).

In case of projects implemented within PPP, the following additional documents will be required:

Project

profitability

analysis

The aim of a project profitability analysis is to prove whether a particular project

implemented within PPP is effective. The analysis takes into account all expenses

that have to be borne and all income that may be drawn in result of a project,

taking into account alternative investment variants. This information is very

important for potential investors or institutions interested in co-financing the

project.

Project profitability analysis should comprise the following: project description,

forecast of investment outlays, concise social, economic and spatial analyses of

the project background, macroeconomic analysis (economic trends, law,

concessions, interest rates, exchange rates), financial analysis, including forecast

of potential income, structure of costs, cost volatility, decision making accounting

of costs and results, sunk, alternative and calculating costs as well as their impact

on project profitability, forecast of working capital, analysis of financial reports,

analysis of alternative project variants and potential financing sources, economic

analysis- cost benefit analysis, sensitivity analysis, including variance to budget,

risk analysis.

Product effectiveness is primarily measured by indicators such as rate of return,

profitability ratios, PI, NPV, IRR, DGC. These ratios are verified with regard to

requirements of different entities and institutions potentially interested in co-

financing a particular project.

Analysis of

investment

variants

Analysis of investment variants is directly connected with project profitability

analysis. The aim of the analysis is to choose the optimum solution from among

several possible options. In order to conduct the analysis, a number of financial

and economic ratios are examined.

PPP

Implementation

In case of self-government entities, one of the key documents, offering the

possibility of analysing the perspectives of PPP development (cooperation


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Plan conditions, areas, participation possibilities) is a PPP Implementation Plan.

Development of such a document may be beneficial both for potential investors

and for project success.

Principles defined in the PPP Implementation Plan will considerably shorten the

time needed to prepare PPP agreements what will in turn accelerate the process

of investment implementation.

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