Tourism Development Fund: assistance to the private sector (referred to scrutiny on 2nd May 2012).

STATES OF JERSEY

TOURISM DEVELOPMENT FUND: ASSISTANCE TO THE PRIVATE SECTOR

Lodged au Greffe on 13th March 2012 by the Minister for Treasury for Resources

STATES GREFFE

2012   Price code: C  P.26

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to refer to their Act dated 18th December 2001 in which they established the Tourism Development Fund, and –

in accordance with Article 3(3)(b) of the Public Finances (Jersey) Law 2005, to vary the purposes of the Tourism Development Fund to allow the Minister for Economic Development to grant financial assistance to private sector entities to support the development of the tourism sector in Jersey.

MINISTER FOR TREASURY AND RESOURCES

REPORT

The States agreed to the establishment of the Tourism Development Fund (TDF) in 2001 (P.170/2001). Over the last 10 years the TDF has enjoyed considerable success with  a  proven  track  record  of  increasing  visitor  numbers  and  spend,  generating additional investment in tourism, and developing media opportunities to bring the unique  benefits  of  Jersey  to  a  wider  audience.  The  latest  Annual  Report  (2010) detailing a full list of projects awarded funding is appended to this Report.

Article 3(3)(b) of the Public Finances (Jersey) Law 2005 states that on a proposition lodged by the Minister [for Treasury and Resources], the States may vary the purposes of an established fund. This Proposition therefore asks the States to agree to extend the remit of the TDF so that investment can be considered for private sector initiatives alongside the public and voluntary sector initiatives that are currently included within the scheme. This will build on the TDF's achievements so far by encouraging a more diverse  range  of  proposals  at  the  same  time  as  providing  leverage  for additional investment that would not otherwise be available. This will further strengthen Jersey's tourism industry and its ability to compete in a global marketplace.

Success to date

Members will be aware of numerous successful tourism events and infrastructure developments over the past decade. Many of these would either not have happened or not have realised their full potential without the TDF.

For example, financial assistance from the TDF enabled the conversion of a number of Jersey Heritage sites to holiday let accommodation. They provide a new and exciting accommodation  offering  for  visitors  whilst  conserving  and  utilising  some  of  the fantastic  natural  heritage  sites  Jersey  has  to  offer.  At  the  same  time,  they  are generating significant returns: Seymour Tower previously generated just £540 in rent over a year and now generates over £8,000; Barge Aground used to generate under £10,000 a year and now commands an annual income of £30,000.

The TDF has provided funding to support the marketing of the Liberation Music Festival.  Last  year,  over  6,000 Islanders  and  visitors  attended  the  event  which generated  significant  national  and  international  coverage  from  the  U.K.  media, including BBC Radio 3 and the Daily Telegraph, to as far afield as the China Daily and China National Radio.

Providing the funding for a feasibility study allowed Durrell to investigate and refine its plans for the development of their facilities. This ensured that the project design would produce value for money, enabling Durrell to have a strong business case which had a direct impact on their successful bid for £1.5 million from Fiscal Stimulus Funding.

A full list of the grants awarded by the TDF is available for Members to review in the TDF Annual Reports.

Reasons to extend to the private sector

Despite its success so far, it is important not to be complacent and continually seek to improve the return on States' investment. On its establishment, the States took a decision to not adopt an amendment to open the TDF to private sector organisations. It is now appropriate to reconsider this issue.

Whilst it is acknowledged that public or voluntary sector organisations face different financial circumstances to those of the private sector, just because an organisation happens to be private, it does not follow that it has the necessary capital available to invest in new initiatives now to see future returns. This situation has been exacerbated by current economic conditions where gaining credit from traditional sources is harder than ever regardless of the nature of organisation in need.

It should be recognised that in preventing the private sector from benefiting from the TDF, we risk stifling entrepreneurialism in a sector which now more than ever needs to  maintain  a  competitive  advantage  in  a  crowded  market-place.  The  public  and voluntary sectors do not have a monopoly on good ideas which generate profitable returns: the TDF have been approached by a number of organisations in the private sector who have put forward some worthwhile projects that could have produced excellent  results.  Jersey's  tourism  industry  cannot  afford  to  miss  out  on  these opportunities.

This proposal would allow the TDF Panel to consider all bids for grant support and make  their  decisions  based  purely  on  merit:  which  projects  will  bring  the  most visitors; generate the most visitor spend; stimulate investment; and promote Jersey to the widest audience. These are the projects that will benefit Jersey to the greatest extent. The TDF Panel should not be forced to exclude projects which fulfil these criteria  yet  due  to  their  organisational  structure  are  deemed  ineligible  to  receive support.

Furthermore, as a matter of policy, the TDF has sought to ensure that the majority of grants only provide partial funding of an event or project and stimulate contributions and funding by others. For private sector organisations, this will be taken a step further. It will be a condition for every project that as a minimum, the grant is matched pound-for-pound with private sector investment. This policy will leverage further additional investment from sources that would not have otherwise have been utilised to develop the tourism industry.

Safeguards

There are significant safeguards built into the current system. The TDF is founded upon the principles of good governance and the model is designed to assess net economic impact with evidence-based outcomes.

Effective and detailed scrutiny of proposals by the industry experts that sit on the TDF Panel ensures that only high quality initiatives with sound business plans and the potential to add significant value to Jersey are successful in gaining support. The strict application of these criteria can be demonstrated by the fact that only 5 projects from 26 applications  were  granted  financial  assistance  in  the  last  completed  round  of funding applications. This upfront scrutiny is reinforced with involvement from EDD throughout the project. A proportion of the grant awarded is retained until the project

is completed, when a report is required to demonstrate the delivery of the initial aims and objectives of the grant funding. Members can be reassured by this track record that every application, regardless of whether it is submitted by a private, voluntary or public organisation, will meet with the same rigorous examination procedures.

Furthermore, additional safeguards will be put in place ensure that the TDF will only provide funding where there is a proven market failure. A model has been devised that will allow project analysts to identify the economic benefits and costs of projects that apply  for  funding,  and  to  help  judge  whether,  on  balance,  these  projects  offer sufficient economic benefits to both the Jersey tourism sector and the wider economy to  justify  public  funding.  Initially,  applicants  will  be  asked  to  complete  a  short questionnaire asking some simple questions about their proposal. This will enable the most promising projects to be identified and the other projects to be screened out. The promising applicants will then be asked to complete a more detailed questionnaire – the answers forming the basis of the figures put into the model by the project analyst.

Structure of the model

Direct economic benefits and costs

Additional

Overall economic assessment economic Value for money

costs and benefits

Social and

environmental

impact

Financial viability and deliverability of project

Insurance and transitional benefits

Financial costs and benefits

Source: Oxera

The model will provide values for each of the sections above and culminate in an overall economic assessment. This assessment should be considered alongside the economic assessments of other projects seeking funding, and their financial viability and deliverability.

Members should also note that all organisations submitting proposals will continue to receive  the  support  that  they  have  enjoyed  in  previous  years.  As  is  the  current procedure, where necessary, applicants will be provided with advice regarding their business  plans  as  well  as  their  organisational  and  project  development.  This Proposition does not penalise the public and voluntary sectors in favour of the private sector – it merely puts them on an even footing to allow the best return on States investments. This is the right thing to do to most effectively support the development of tourism in Jersey.

Financial and manpower implications

There are no additional financial implications for the States. The application process is being revised to enable a more efficient process which should counter any additional manpower demands that may be generated by any increase in applications due to this measure.

APPENDIX