“Nuevos Instrumentos de Financiación en Zonas Urbanas”

JESSICAJoint European Support for Sustainable

Investment in City Areas(Ayuda Europea Conjunta en Apoyo de

Inversiones Sostenibles en Zonas Urbanas)José Pablo Rodríguez-Marín Sastre

Madrid, 15 noviembre 2007

Catalonian (Spain) Case StudyJESSICA Preliminary Evaluation Study

January 2007

PROJECTS DIRECTORATE

European Investment Bank100, boulevard Konrad AdenaurL-2950 Luxembourg

JESSICA Preliminary Evaluation Study

1.    The national context and pattern of urbanisation

• The real state sector is very important in Spain. Construction represents more than 10% of GDP at national level (in some areas, it goes up to 18.5%). Furthermore, Spain built more dwellings in 2004 and 2005 than France, Germany and the UK combined.

• Municipalities have a lot of pressure for allowing the construction of new residential neighbourhoods in greenfield areas, and there are a lot of construction projects with adverse effects to the environment.

• This situation is unsustainable in the long term and renewal projects will have to take the majority of the investment in the future. Most operations are based on debt and one of the problems is to provide financial guarantees to these projects

368,259463,099

558,260 594,820 561,186 575,545

690,206739,658

786,257

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1997 1998 1999 2000 2001 2002 2003 2004 2005

Number of houses

10.4%9.6%

9.0%8.6%

8.1%7.5%

7.1%6.7%6.5%

Construction % GDPNumber of houses

368,259463,099

558,260 594,820 561,186 575,545

690,206739,658

786,257

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1997 1998 1999 2000 2001 2002 2003 2004 2005

Number of houses

10.4%9.6%

9.0%8.6%

8.1%7.5%

7.1%6.7%6.5%

10.4%9.6%

9.0%8.6%

8.1%7.5%

7.1%6.7%6.5%

Construction % GDPNumber of houses

Source: INE (National Institute of Statistics) Number of houses and construction % GDP

2.    The need for urban intervention and current investment programmes

• Urban Development Funds seem very interesting for Catalonia in order to regenerate areas, towns and regions. In the following examples, JESSICA could be very useful to go ahead in different projects and its revolving character could warranty the sustainability of them.

• Llobregat plan. The plan for the Llobregat area, which includes the development of the port and the airport of Barcelona, new roads and railways and also logistic zones.

• Barcelona city. Over the next few years, the Barcelona area will see the transformation of about 2,470 acres of land, on which the idea is to create 7 million m2 of new commercial, industrial and office premises. Areas which have newly become central, such as Poblenou 22@, the Zona Franca and Gran Via de les Corts.

• Zona Franca Consortium. The central and regional administrations have also created entities, as the Consortium for the Zona Franca, ADIGSA or INCASOL to develop industrial or commercial land. But their resources are limited.

• Barcelona Biomedical Research Park is an innovative and ambitious scientific project with the aim to make Barcelona one of the most important capitals for biomedical research in Europe

• Immigration. The Generalitat Government and local councils are concerned about how to solve housing, employment and integration in the society of immigrants; and they have developed several projects to promote immigrants integration.

• Housing plan. There is a great demand of social measures in housing. The central government, the autonomous government (Generalitat), and local governments have agreed to invest 68 millions of euros for financing of the renewal of houses in Barcelona and its metropolitan area and for the construction of 889 social houses in Terrasa.

3.    The Focus of National Strategic Reference Frameworks and Operational Programmes

• Most urban developments in Spain are usually under the exclusive control of the local authorities, which are also responsible for their implementation. The financial situation of many cities is very poor, because most taxes are collected by the central and regional governments

• As it is shown below, in case of Barcelona grants and local taxes provide the most substantial part of funding. This position is similar to other Spanish cities. Because of that, the demand of financial instruments for urban projects is very high.

Source: OECD Competitive Cities in the Global Economy, 2006Revenue sources of various cities in OECD metropolitan areas

4.    The potential for JESSICA and likely demand

• The use of JESSICA funds could help to develop urban projects that otherwise, they would never have carried out. For example, UDFs could be used - in a context of fiscal austerity - for the financing of large public projects using public-private partnerships (PPPs).

• JESSICA could provide the necessary financial and/or technical supports for the analysis and development of PPPs creating enabling environments for the private partners’ finance. In the following table it is shown the different alternatives of UDFs that could be developed in Catalonia

SPATIAL FOCUS Single public institution

Mixed public institution

Public company PPP Non-profit Co-

operatives Private

National/regional ICF Plan Vivienda

Metropolitan ATM

Municipal Promusa Glorias/ Diagonal

Specific URD area Procivesa Con.Costa Brava Port 2000 Cilsa

SECTOR FOCUS

Public services Incasol Consorci Drassanes Clabsa Trambaix

Private oriented CZF WTCB

Social housing Adigsa Aede Saving Banks

SPV La Sagrera Tavasa ALP 2500 Port Aventura

Potential Urban Development Funds to be developed in Catalonia

5.    The Port Vell Detailed Case Study

• One interesting example of the combination between public and private investments in Catalonia is the Port Vell project, which has had a big impact in the life, renewal, employment, urban uses and many other aspects of the Barcelona attraction for residents and tourists:

Companies working in the area: more than two hundred new small and medium size enterprises with an average revenue of 1.5 MM€

Impact in the residential area: a lot of buildings were renewal and new buildings were constructed. Attraction which has been generated in Catalonia: more than eighteen million of visitors.Employment creation: about five thousand new employments, with a considerable percentage of direct

employment in the area.

• Originally, it was the Port Authority of Barcelona (APB) through a public company called Port 2000 who was the developer of the project. But, the lack of financial resources made that the development of the project was slowly than desired, with a delay of several years.

• The use of JESSICA funds could have allowed to bring forward the development of the Port Vell, and to allow that the Port Authority could have invested and developed several years before the development of the Port facilities with a high impact on the overall economy (for example, container terminals).

Infrastructure Amount% Private

Investment% Public

Investment

Marina Port Vell 10.8 MM € 85% 15%

Aquarium 27.0 MM € 80% 20%

Maremagnum 36.1 MM € 62% 38%

World Trade Center 168.3 MM € 49% 51%

Source: Port Vell Economic Impact Study Port Vell Investment

6.    Key issues that need to be addressed to take the initiative forward

• The first stage to effectively implement JESSICA initiative is to promote the creation of UDFs. The HF Manager - in close cooperation with national and regional authorities - may play a key role carrying out a previous work of identifying urban projects that are eligible to be supported by an UDF.

• Once selected the urban projects, the HF Manager should carry out a technical, economical and financial evaluation of the urban projects, in order to evaluate if it is feasible to establish a UDF or how the Holding Funds could participate in the HDFs.

• To carry out these tasks, it is proposed to establish a Holding Fund Manager through an agreement with EIB. This Holding Fund Manager will carry out the necessary activities for the establishment of UDFs in Catalonia and Spain.

Identification of eligible urban

projects

A.1 A.2 A.3 A.4

Tasks to be developed by the “HF Manager” for the creation of UDFs

Agreement and definition of the

terms of investment of

HF

B.1 B.2 B.3 A.4

Tasks to be developed by the “HF Manager” for the investment in UDFs

Monitoring and accounting of

the UDFs

C.1 C.2 C.3 C.4

Reporting on UDFs

performance to EIB

Tasks to develop by the “HF Manager” for the follow-up of the investments in the UDFs

Representation of the interests of

the HFin the Board of Directors of the

UDF

Asses amounts, expected returns, timing, and other relevant variables

Procedures (accounting,

monitoring …) to comply by

the UDF

Technical assistance

for the successful set up of the UDF

Information on payments of the UDFs to EIB and

searching of new projects

Projects evaluation and

define the structure of

the investment

Promotion of Urban

Development Funds

Collaboration with

national/regional authorities for

projects selection

9

Spain Case StudyProjects selection for JESSICA implementation

April 2007

PROJECTS DIRECTORATE

European Investment Bank100, boulevard Konrad AdenaurL-2950 Luxembourg

JESSICA Preliminary Evaluation Study

10

1.    Projects have been selected within five main areas

• Social housing

• Urban renewal

• Infrastructures & urban transport

• Sustainable development

• Immigration and social policies

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2.    These areas are a priority for central, autonomous and local governments

• Social Housing. There is a great demand of social measures in housing. The goal of the new housing policy of the Spanish government is to establish a permanent park of “public houses for rent” and to incentive owners to rent “empty houses”. There is also a plan to build 10,000 houses for rent aimed to university students.

• Urban renewal. The local governments have launched initiatives for the renewal of city centres. In case of Madrid and Barcelona, there are well defined plans for urban renewal of several urban districts. For example, the Barcelona area will see the transformation of about 2,470 acres of land,, such as Poblenou, 22@, the Zona Franca and Gran Via de les Corts.

• Infrastructures & urban transport. The autonomous government and local governments have establish agreements for financing of the construction of new transportation infrastructures. Several metro lines are planned to be built In the metropolitan areas of Madrid and Barcelona.

• Sustainable development. Spanish cities are very concerned about pollution reduction and climate change. There are numerous action plans established within the framework of several initiatives such as “Spanish Network of Cities for Climate” (promoted by the Spanish Federation of Municipalities and Provinces, FEMP) or “Agenda 21” debeloped by Ayuntamiento de Madrid.

• Immigration and social policies. The Spanish Government has launched a very ambitious plan to promote housing, employment and integration in the society of immigrants. Furthermore, the State will invest 10,000 millions of euros in the “Dependants action plan” for economic and social aids aimed to these people.

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3.    Ten potential “Urban projects” within these areas have been selected

AREAS PROJECTS INSTITUTIONS INVOLVED

Social Housing State Housing Plan 2005-2008 (“Plan Vivienda 2005-2008”)

Ministerio de Vivienda / Generalitat de Catalunya (ADIGSA) / Comunidad de Madrid (IVIMA)

Social Housing University Rent Housing (“Viviendas Universitarias en Alquiler”)

Ministerio de Vivienda / Generalitat de Catalunya (ADIGSA) / Comunidad de Madrid (IVIMA)

Urban Renewal Urban renewal of the city center (“Rehabilitación del Centro Urbano”)

Ayuntamiento de Madrid

Urban Renewal Urban renewal of Eixample & Poblenou Ayuntamiento de Barcelona (Institut Municipal d'Urbanisme de Barcelona)

Infrastructures & Urban Transport

Improvement of Madrid's metro lines & other urban transportation projects (“Plan de ampliación y mejora del transporte ferroviario y otros proyectos de transporte urbano”)

Comunidad de Madrid (MINTRA)

Infrastructures & Urban Transport

Tramway Salt- Gerona & Fast-line of public transport between Figueres and Roses

Generalitat de Catalunya (GISA)

Sustainable development

Spanish Network of Cities for Climate (“Red Española de Ciudades por el Clima”)

FEMP / Ministerio de Medio Ambiente

Sustainable development

Agenda 21 Ayuntamiento de Madrid

Immigration & social policies

Strategic Plan Citizenship and Integration 2007-2010 (“Plan Estratégico de Ciudadanía e Integración 2007-2010”)

Ministerio de Trabajo y Asuntos Sociales

Immigration & social policies

Dependants Action Plan(“Plan de Dependencia”)

Ministerio de Trabajo y Asuntos Sociales

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4. Examples of current initiatives that could be included in the framework of these projects are the following ones

1. Tramway Salt- GeronaIt will connect the town of Salt and the city of Gerona. Salt is a residential town and Gerona is a main city, equipped with university, services, health care system, commerce and so on. Both local authorities are interested in the project and also private companies are. Some feasibility studies have been started up, taking into account the demand, the investment, and the traffic efficiency. As main characteristics, one total length of 5 km and one investment of about 50 million euros have to be considered. 2. Remodelling of Figueres Castle as leisure centreFigueres Castle is an old fortress, one of the biggest in Europe. It’s almost abandoned and its location is close to Dali Museum, one of the most frequented in Spain and near to Costa Brava beaches.

3. Fast-line of public transport between Figueres and RosesFast connection between Figueres, tourist centre in the area of Empordà (Dalí Museum) and Rosas (core of Costa Brava). It will avoid the traffic collapse in the zone. The length of the layout is about 23 km. The development of the residential quarters would be granted by this fast link.

4. Social housing in Sant CugatSant Cugat is one of the most important towns near Barcelona. Its population is about 73.774 people. There are 2.098 social houses in project actually. PROMUSA, a public company owned by the city hall, is building most part of these houses. The objective is that 8,5% of the total population of Sant Cugat will live in this kind of houses. The authorities want also to increase the percentage of renting in the town.

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5.    The need for urban intervention and potential for JESSICA

• Urban Development Funds seem very interesting for financing of these projects. In the previous examples, JESSICA could be very useful to go ahead in different projects and its revolving character could warranty the sustainability of them.

• Most urban developments in Spain are usually under the exclusive control of the local authorities, which are also responsible for their implementation. The financial situation of many cities is very poor, because most taxes are collected by the central and regional governments

• The use of JESSICA funds could help to develop urban projects that otherwise, they would never have carried out. For example, UDFs could be used - in a context of fiscal austerity - for the financing of large public projects using public-private partnerships (PPPs).

• JESSICA could provide the necessary financial and/or technical supports for the analysis and development of PPPs creating enabling environments for the private partners’ finance. In the following table it is shown the different alternatives of UDFs that could be developed in Catalonia

15

6.    Key issues that need to be addressed to take the initiative forward

• The first stage to effectively implement JESSICA initiative is to promote the development of urban projects and UDFs. The HF Manager – in collaboration with the Local Manager - may play a key role aiming to develop and select projects that are eligible to be supported by an UDF.

• The next step –with the support of the Local Manager - is to carry out a technical, economical and financial evaluation of the urban projects, in order to evaluate if it is feasible to establish a UDF.

• To carry out these tasks, it is proposed to establish an agreement with a Local Manager, that will carry out the necessary activities for the establishment of UDFs in Catalonia and Spain.

Identification of eligible urban

projects

A.1 A.2 A.3 A.4

Tasks to be developed for the selection of Urban Projects

Agreement and definition of the

terms of investment of

HF

B.1 B.2 B.3 A.4

Tasks to be developed for the promotion of UDFs

Monitoring and accounting of

the UDFs

C.1 C.2 C.3 C.4

Reporting on UDFs

performance to EIB

Tasks to develop for the follow-up of the investments in the UDFs

Representation of the interests of

the HFin the Board of Directors of the

UDF

Asses amounts, expected returns, timing, and other relevant variables

Procedures (accounting,

monitoring …) to comply by

the UDF

Technical assistance

for the successful set up of the UDF

Information on payments of the UDFs to EIB and

searching of new projects

Projects evaluation and

define the structure of

the investment

Promotion of Urban

Development Funds

Collaboration with

national/regional authorities for

projects selection

16

• The EIB as Holding Fund Manager (HFM) can contract with the Local Manager (LM) the following tasks, among others:

– Selection of projects– Presentation for approval of the European Commission– Survey and management of funds after approval– Management control until the return of the funds

• With two offices located the two main cities in Spain, the LM might perform the pervious tasks. Barcelona office could be the siege of the northern activity and Madrid could be for the rest (central and southern).

• It’s also possible that the main part of the projects will be initially proposed since these two cities. The reason is not only their size and importance. The stage of planning and logistical development in both cities is further more advanced than in the rest of the country.

7.    Operational scheme

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8.    Budget in the first two years

Component cost 1st Year expense

Explanations

Managemet Team 275.100 Three key experts. It includes taxes

Other Staff (administ. & technicians)

94.900 Two employees. It includes taxes

Rental of office 21.120 A monthly rate of 1,600 €/month + 10% commission

Travels & 24.000 A monthly expense of 2,000 €/month

Information systems

7.200 Five computers, one printer, one fax machine, phones, & other

Furniture 2.700 Five job positions (300 € per unit) & other furniture

Comunications (internet, phone,..)

7.080 Phone (90 €/month per employee) + Internet (140 €/month)

Material office & other supplies

6.240 Material office (80 €/month per employee) + other material (120 €/month)

External services 4.200 A fixed rate of 350 €/month

Other overhead costs

7.254 10% of total expenses except salaries

Total 449.794

Component cost2nd Year expense

Explanations

Managemet Team 275.100 Three key experts. It includes taxes

Other Staff (administ. & technicians)

142.350 Three employees. It includes taxes

Rental of office 35.520It includes a second office with monthly rate of 1,200 €/month + 10% commission

Travels & 36.000 A monthly expense of 3,000 €/month

Information systems

3.360Two computers, one printer, one fax machine, phones, & other

Furniture 1.800Two job positions (300 € per unit) & other furniture

Comunications (internet, phone,..)

8.160Phone (90 €/month per employee) + Internet (140 €/month)

Material office & other supplies

7.200Material office (80 €/month per employee) + other material (120 €/month)

External services 6.000 A fixed rate of 500 €/month

Other overhead costs

9.804 10% of total expenses except salaries

Total 525.294

1st Year: One office 2nd Year: Two offices

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9.    Budget in the following years

Budget 3rd Year and onwards

Euros

JESSICA Funds available for new projects 32.000.000

Management Fee 2,00%

Revenues of the Local Manager 640.000

Operating yearly expenses with two offices (third year of operations -600.000

Margin 40.000

• In the third and following years, the Local Manager will be able to fund himself with a management fee of JESSICA funds applied to new projects.

• For example in the case that the management fee was 2%, the Local Manager would be able to bear with their annual costs raising each year €32 M of new funds.