Economic Stimulus: Budget allocation to Economic Development for grant to Durrell Wildlife Conservation Trust

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A decision made 1 July 2010 regarding: Economic Stimulus: Budget allocation to Economic Development for grant to Durrell Wildlife Conservation Trust.

Decision Reference: MD-TR-2010-0098
Decision Summary Title:	Discretionary Fiscal Stimulus – Economic Development Department Allocation – grant to Durrell Wildlife Conservation Trust		Date of Decision Summary:	22nd June 2010
Decision Summary Author:	Chief Executive		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Fiscal Stimulus Funding to the Economic Development Department in respect of a grant award to Durrell Wildlife Conservation Trust		Date of Written Report:	22nd June 2010
Written Report Author:	Acting Fiscal Stimulus Programme Manager		Written Report : Public or Exempt?	Public
Subject: Economic Stimulus Plan: budget allocation to the Economic Development Department in relation to grant to Durrell Wildlife Conservation Trust.
Decision(s): The Minister approved the allocation of £1,500,000 to the Economic Development Department, in respect of a grant to be awarded to Durrell Wildlife Conservation Trust on a £1 for £1 matched funding basis, to be transferred to the department’s budget in 2010. The Minister further instructed the Chief Officer of EDD to report on spend of all stimulus monies, and project progress/performance, on a monthly basis in accordance with guidelines set by the Treasury and return any unspent grant monies, or repayments of the grant which may arise in the future if certain events take place, without limit in time.
Reason(s) for Decision: A discretionary fiscal stimulus allocation from the Stabilisation Fund of £44m has already been approved. The approved funding to EDD, totalling £1,500,000, will enable grant payments to be made to Durrell in accordance with the critical path for delivering this stimulus project on a timely basis.
Resource Implications: No financial resource implications other than those explained above and in the accompanying report. No manpower resource implications.
Action required: Treasury to be informed of decision to release necessary funds to the Economic Development Department budget.
Signature:		Position: Senator P F C Ozouf, Minister for Treasury and Resources
Date Signed:		Date of Decision:

Economic Stimulus: Budget allocation to Economic Development for grant to Durrell Wildlife Conservation Trust

Allocation of Discretionary Fiscal Stimulus Funding to the Economic Development Department in respect of a grant award to Durrell Wildlife Conservation Trust

1. Purpose of Report

The report summarises the evaluation process and resulting recommendation of the Fiscal Stimulus Steering Group (the “FSSG”) to the Minister for Treasury and Resources in respect of the allocation of the funding to the Economic Development department (“EDD”) in respect of a grant award to the Durrell Wildlife Conservation Trust (“Durrell”). The grant of £1,500,000 is to be awarded on a £1 for £1 matched funding basis, in respect of the development of a new visitor centre (including new retail and café facilities) and the associated infrastructure requirements. The project will give a significant boost to the construction industry by way of releasing a project which totals £3m and will not, in the absence of matched funding from the fiscal stimulus fund, take place at this time.

2. Background

As recommended by the Corporate Services Scrutiny Panel the total programme of fiscal stimulus projects includes schemes to be undertaken by both States departments and non-States organizations, with the Durrell project representing a public-private partnership which achieves a 100% multiplier on the States of Jersey spend.

A bid from EDD to support a significant redevelopment project by Durrell was included in the provisional programme of fiscal stimulus projects in August 2009, with the bid progressing through the evaluation process until March 2010 at which time the FSSG made a recommendation to the Minister for Treasury and Resources that a funding allocation of £1,500,000 be made to EDD to enable it to advance a grant to Durrell.

The Minister for Treasury and Resources considered the advice of the FSSG and decided to commit to funding the scheme given its merits as a fiscal stimulus project to benefit the construction industry and with a 100% multiplier on the government spend. In addition the regeneration of one of the island’s main tourist attractions should have positive consequences for Jersey’s visitor economy.

Since that time the Chief Officer of EDD has been finalising a Memorandum of Understanding, which is now agreed, between EDD and Durrell governing the arrangement between the parties, including the deliverables from the project and the circumstances under which repayment will be required (the “Memorandum of Understanding”). At the same time the project team at Durrell, together with its advisers, has updated the programme and cost plan to reflect the updated timescales and project (which is limited to certain phases of a larger scheme), and undertaken the remaining pre-contract work in order to be able to publish the tender as soon as possible after the formal approval of the funding.

Durrell is an independent charity which undertakes conservation activities throughout the world in order to help save species from extinction. It also undertakes conservation work from its zoo in Jersey through the protection and breeding of endangered species. It does not receive any regular funding from the States of Jersey, although it has in the past benefited from small grants from the Tourism Development Fund. The organisation celebrated its 50th anniversary last year and provides an important attraction for Islanders and visitors (it is estimated that 30% of staying leisure visitors visit).

3. Fiscal Stimulus Rationale

· Timely – a significant proportion of the stimulus will take effect in 2010, and will begin during the period now predicted to be the most affected by the economic downturn.

The need for projects which target the construction industry at this time is supported in the Jersey Business Tendency Survey (published by the Statistics Unit), which shows that the weighted net balance of respondents in the sector reported that they were working below capacity as at September 2009, with negative business optimism and negative indicators in respect of new business. The latest results, as at March 2010, continue to show many negative indicators, and although expectations for the future picked up slightly it would be premature to see this as the beginning of a trend.

· Targeted – Fiscal Stimulus funding will be matched by Durrell ie a £1.5m investment from the States of Jersey will result in a total of £3m plus of expenditure on the project as a whole in the local construction industry that would not otherwise take place.

The latest unemployment figures show that the construction industry is one of the worst affected sectors and this project will provide certainty of income for the successful contractor/s for around 12 months, thereby contributing to job security throughout the anticipated period of the economic downturn. The project would not go ahead at this time without Fiscal Stimulus Funding but would be deferred until an improvement in the general economic environment facilitates Durrell undertaking a major public fundraising.

· Temporary – there will be no recurring costs for the States of Jersey.

· Value for Money - The original plan comprised a number of phases and has been refined over the last few months to make the visitor centre phase the priority given its commercial potential to help Durrell maximize its revenues, as well as deliver a value for money scheme on a realistic scale. This project is an integral part of Durrell’s strategy going forward, as the organization reported a large deficit in 2009 that well exceeded the budgeted deficit and as a result has undertaken a strategic review that has led to the loss of some jobs. The implementation of these difficult actions is considered by EDD, the sponsoring department, to demonstrate the Durrell Board’s commitment to operating a financially sustainable business in Jersey, which will require a more commercial approach and improvements in revenues from existing visitors as well as developing new income streams. The development of a new visitor centre that will provide enhanced facilities is intended to contribute towards this aim.

The Durrell Board undertook a full option appraisal in relation to the project and determined that it would be more appropriate to reduce the scale of what they were attempting to deliver in 2010 and the early part of 2011.

· Economic impact - The project will utilise a number of local contractors, sub-contractors and supporting trades people and has a relatively low off island spend on materials. This scaled back project delivers an increased proportion of local work which improves the merits of the scheme against the targeted criteria and reduces leakage from Jersey’s economy. In addition, the investment is to be made in an important visitor attraction.

· Achievability – a governance structure is in place at Durrell for delivery of the project and EDD as sponsoring department will participate to ensure appropriate oversight. Specialist input will be sought by EDD, if and when it is considered appropriate, from Jersey Property Holdings to ensure that there is appropriate representation from professionals who are experienced in overseeing and delivering construction projects.

With these considerations in mind, EDD and Durrell worked to satisfy some specific additional conditions attached to the provisional “amber light” prior to proceeding to a “green light” approval. The Fiscal Stimulus Steering Group was informed of developments since the approval of the provisional “amber light” and undertook a detailed review, which included discussion of the project, and Durrell’s difficult financial circumstances with the Chief Officer of EDD, following which it was satisfied that the conditions have been met, allowing it to make the recommendation to the Minister in March 2010. EDD and Durrell have now agreed the Memorandum of Understanding to formalize the terms and conditions of the grant payment and to ensure that EDD achieve compliance with Financial Direction 5.4, “Obtaining Value for Money from Grants”. This agreement will include a commitment by Durrell’s Board of Trustees to repay the States’ investment, on the basis of a sliding scale, in the event of sale or change of use of the Durrell site, amongst various other conditions. Both parties have undertaken to sign the agreement immediately after the funding is allocated by way of this ministerial decision.

4. Recommendation from the Fiscal Stimulus Steering Group

The Fiscal Stimulus Steering Group recommends to the Minister for Treasury and Resources that a sum of £1,500,000 is now allocated, following finalisation of the Memorandum of Understanding, to the Economic Development department’s budget in 2010 to allow it to make grant payments on a matched funding basis to Durrell for the project outlined above. The project will be overseen by EDD which as sponsoring department will have the continuing responsibility for monitoring and oversight to ensure that the conditions of the grant are met and that the Memorandum of Understanding is adhered to.

5. Reason for Decision

A discretionary fiscal stimulus allocation from the Stabilisation Fund of £44m has already been approved. The project meets the key criteria for fiscal stimulus being timely, targeted and temporary and will benefit local business and individuals. The £1,500,000 allocation to EDD will enable grant payments to be made to Durrell in accordance with the critical path for delivering this stimulus project on a timely basis, placing construction and related works of a total estimated value of £3m with local businesses, which would not otherwise take place.

6. Resource Implications

No financial resource implications other than those explained above.

No manpower resource implications.