Medium Term Financial Plan 2013 – 2015 (P.69/2012): seventh amendment.

STATES OF JERSEY

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MEDIUM TERM FINANCIAL PLAN 2013 – 2015 (P.69/2012):

SEVENTH AMENDMENT

Lodged au Greffe on 23rd October 2012 by Deputy J.A.N. Le Fondré of St. Lawrence

STATES GREFFE

2012   Price code: A  P.69 Amd.(7)

MEDIUM TERM FINANCIAL PLAN 2013 – 2015 (P.69/2012): SEVENTH AMENDMENT

1  PAGE 2, PARAGRAPH (a) –

After the words "as set out in Summary Table A" insert the words –

"except that the intended total amount of States income shall be increased by  £2,250,000  in  the  year  2014  by  the  payment  of  an  additional distribution  from  the States  of Jersey  Development  Company  Ltd.  in these amounts which the Minister for Treasury and Resources would require from the Company by 30th June 2014."

2  PAGE 2, PARAGRAPH (a) –

After the words "as set out in Summary Table A" insert the words –

"except that the intended total amount of States income shall be increased by  £2,250,000  in  the  year  2015  by  the  payment  of  an  additional distribution  from  the States  of Jersey  Development  Company  Ltd.  in these amounts which the Minister for Treasury and Resources would require from the Company by 30th June 2015".

DEPUTY J.A.N. LE FONDRÉ OF ST. LAWRENCE

REPORT

The States of Jersey Development Company ("SoJDC") has existed in various guises since the 1990s. The published accounts of the company show profits since 2008, and bonuses  have  been  paid  to  key  members  of  staff  in  a  number  of  years  on  a performance basis.

Yet there does not seem to be any mechanism by which the directors are held to account by us as a shareholder in terms of a minimum performance return to the Public.

Members will hopefully have noted that a performance structure was adopted when Jersey Telecoms was incorporated (by way of 9% Preference shares), and indeed (although I have not investigated whether there was a similar motive behind their creation), the States have preference share investments in both the Jersey Electricity Company and Jersey Water.

An  extract  of  the  published  accounts  of  SoJDC  (and  its  predecessor)  shows  the following information –

2008 Balance Sheet  £ Cash at Bank  5,618,192

Profit and Loss Account  £ Turnover  12,160,089 Operating Costs

Salaries  785,100 Premises & establishment  108,314 Estate Management  364,114 Other(1) 3,680,914

4,938,442

Gross profit  7,221,647

Additional movements

Revaluation taken to P&L  18,556 Other net movements(2) (1,676,791)

2009  2010

£ £

6,900,438  7,242,739

£ £

766,505  3,390,497

830,248  775,550 93,979  80,334 328,588  326,341 124,416  164,468 1,377,231  1,346,693

(610,726)  2,043,804

985,233  37,767 155,552  (5,104)

2011  Total

£ £

6,134,209  n/a

£ £

1,965,409  18,282,500

988,756  3,379,654 104,333  386,960 392,401  1,411,444 217,451  4,187,247 1,702,941  9,365,307

262,468  8,917,193

452,059  1,493,615 100,804  (1,425,539)

Retained profit for the year  5,563,412  530,059  2,076,467  815,331  8,985,269

1. – includes cost of land sold; depreciation; audit; legal and professional, etc.
2. – includes costs of developing land; costs of SoJDC; community benefits, finance income/costs, etc.

Page - 3

P.69/2012 Amd.(7)

From 2012 onwards a small return will be made to the States of £759,000 per annum (see page 224 of the MTFP); however, this is basically a refund of car parking receipts in  relation  to  car  park  revenue  arising  on  the  Esplanade  Car  Park  when  the administration of the land was recently passed from TTS to SoJDC.

It should also be noted that this excludes the revenue that arises from the Waterfront Car Park, which although identified for eventual return to direct States ownership, presently remains under the ownership and control of SoJDC.

It is obviously important that SoJDC has sufficient resources to continue to operate; however,  it is  also  important that the company  does  have  financial incentives to deliver actual returns within agreed timescales.

I  therefore  submit  to  members  that  at  a  time  when  the  States  are  searching  for additional  funds,  that  some  of  the  monies  held  within  an  entity  which  is  100% controlled by us, could be applied to better use within the States finances.

Whilst we are informed that SoJDC is performing well, in my view this will sharpen the performance of the management of the company, and should seek to deliver real, tangible performance to us, its shareholders.

This amendment is in 2 parts, and it is my intention to allow separate votes.

It is for members to consider whether they think this is reasonable at all, or in part; i.e. whether, for example, it is reasonable not to receive any significant defined return from this company for a further 3 years, despite it being profitable.

Thus, if members consider that a return should only be forthcoming in 2015, then they should vote for Amendment 2.

If they think a return should only be forthcoming in 2014, then they should vote for Amendment 1.

If they wish to see a return in both periods then they should vote for both parts. Financial and manpower implications

There are no manpower implications arising from this report.

If Amendment 1 is adopted, States income will increase (from non-taxation sources) by £2.25 million.

If Amendment 2 is adopted, States income will increase (from non-taxation sources) by £2.25 million.

If  both  amendments  are  adopted,  States  income  will  increase  (from  non-taxation sources) by £4.5 million.