Tourism Development Fund: Extending terms to enable grants to private sector

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A decision made 20 February 2012:

Decision Reference: MD-E-2012-0008
Decision Summary Title :	Opening the Tourism Development Fund to the private sector		Date of Decision Summary:	10th February 2012
Decision Summary Author:	Performance and Operations manager		Decision Summary: Public or Exempt? (If exempt State clauses from Code of Practice booklet)	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	Opening the Tourism Development Fund to the private sector		Date of Written Report:	10th February 2012
Written Report Author:	Performance and operations manager		Written Report : Public or Exempt? (State clauses from Code of Practice booklet)	Public
Subject: Extending the terms of the Tourism Development Fund (TDF) to enable grants to be awarded to private sector entities.
Decision(s): The Minister decided to lodge the attached report and proposition to extend the Tourism Development Fund terms in order to enable grants to be awarded to private sector entities.
Reason(s) for Decision: The TDF Panel should have the ability to consider awarding grants to private sector organisations if their applications provide the most added value to the Tourism industry in Jersey.
Resource Implications: There are no financial implications. 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.
Action required: The Minister requests that the Greffier lodges the attached report and proposition for debate as soon as possible.
Signature: Senator AJH Maclean		Position: Economic Development Minister
Date Signed:		Date of Decision (If different from Date Signed):

Tourism Development Fund: Extending terms to enable grants to private sector

PROPOSITION

TOURISM DEVELOPMENT FUND – ASSISTANCE TO THE PRIVATE SECTOR

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

to extend the terms of reference 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 ECONOMIC DEVELOPMENT

REPORT

THE STATES agreed to the establishment of the Tourism Development Fund (TDF) in 2001 (P170/2001). Over the last ten 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.

This Proposition 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 six thousand islanders and visitors attended the event which generated significant national and international coverage from the UK 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 the Stabilisation Fund.

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 benefitting from the TDF, we risk stifling entrepreneurism 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 five projects from twenty six 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

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 along side 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 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’ investment. This is the right thing to do to most effectively support the development of tourism in Jersey.

Financial and manpower implications

There are no financial implications. 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.