CSI Europe: Regulation Conference Summary - Lead Expert

Regulation Seminar 11^th – 12^th June 2013

Seminar Report

We have just finished our two day Regulation seminar in the City of Peace and Justice, The Hague.  The event has been extremely positive and I hope all who attended found it useful in progressing the network’s aims.  From a Lead Expert point of view, it was extremely encouraging to see how the partner cities have all progressed the establishment of their Urbact Local Support Groups and developed their own thoughts in relation to our key themes

Day One – Regulation Conference

The first day of the meeting was a conference held in the Skylounge on the 40^th floor  of The Hague Tower, an impressive building with views over the whole City.  Ton, Bo and colleagues from The Hague were joined by representatives from the new JESSICA funds established by The Hague and Rotterdam and Ruud van Raak from the Rotterdam Managing Authority.  Will Church from CBRE, the fund manager of the Evergreen Fund in the Northwest of England was also able to come.  Having these additional voices at the conference added greatly to the discussion and debate giving the network the additional perspective of practitioners in fund management, State aid and ERDF.

Although most of our partners were able to attend we did miss colleagues from Riga and Lille Metropole.  Hopefully this note will provide them with a quick update of the conference and if they want to discuss further please get in touch.  We will issue the presentations and other documents we discussed with this note.  We look forward to seeing them next time.

The event began with an introduction to the City from Rick Klijberg, The Hague’s Head of Investment Strategy and Research.  Rick provided us with an interesting summary of the Hague’s achievements in delivering Urban Development; some of the challenges faced by partners over the last couple of years (including in relation to the funding of the building in which the event was being held!); and the City’s plans for the future.  Ton Overmeire then impressed the room with his presentation using the new(ish) Prezi software.  This took us on a tour of the City and, with the help of one of Donald Duck’s relatives (Scrooge McDuck?), introduced the network to our guests.

We then had a round-up from our network partners which I think will become a regular feature of our seminars.  Each partner gave feedback on progress within their city with particular reference to the factsheets we circulated that the Commission have produced relating to Integrated Sustainable Urban Development and Financial Instruments.  All partners reported that there has been contact between themselves and their Managing Authorities, which is positive, although there was a range of experiences of the level of engagement between the MA and the cities across the network.

A number of cities have found resistance at MA level to consider ITIs and similar mechanisms which would see a greater degree of decision making at City level.  This is disappointing given that many of our cities are close to the needs of their area and understand how investment would be best deployed.  Whilst we understand that many MAs will not be able to formally devolve development of their programme to partners, we would hope to secure through our ULSGs a level of engagement that will give cities a say in the development of the strategy.  As this is what the Commission seems to be seeking through the Partnership Agreement, we should continue to explore how the network can secure this for partners in the future.

Other issues fed back by partners included the continuing success of the FIs in Portugal to deliver projects and colleagues from Porto will provide us with some information at a future event as to the approach they are taking.  Another issue that was highlighted by some colleagues was the impact of local accounting rules and the need for “off balance sheet” accounting arrangements to ensure the FI does not have an adverse effect on a City’s borrowing limits.  This is a good example of how “local” regulations also impact on FIs which we should consider further within the network.

We finished the round up with The Hague who described the progress they have made towards establishing their fund.  Everything is in place now except for the State aid approval which is a great achievement for Ton and his colleagues in the Netherlands.  When we had our very first meeting in Manchester about twelve months’ ago, Ton reported how he was about to embark on the procurement of a fund manager.  It is very good news that this work has been successful and I look forward to hearing news of the State aid clearance and future investments in the months to come.

It was also interesting to note that the State aid clearance is the last hurdle for the project.  The Hague intentionally based their approach to State aid on the Northwest and Andalucia approvals to avoid delay.  Despite this it is clear that DG Comp still have to give the issues detailed consideration to proposals.  We need to explore through the network how this can be streamlined for the next programme. 

After a break for coffee, which itself generated a huge amount of positive networking, I gave a short introduction to the new regulations that tried to highlight the link between the Europe 2020 objectives, Cohesion Policy, the Common Strategic Framework and its funds and the proposals for Integrated Sustainable Urban Development and Financial Instruments as very clearly described in the factsheets recently issued by the Commission.

The morning session was brought to a close by presentations from Will Church from the Evergreen Fund and CBRE and Ruud van Raak from the Rotterdam Managing Authority.  They each described their experiences of establishing funds and some of the challenges they have overcome.  It was particularly interesting to hear Will’s account of how CBRE have had to work very hard to try to understand the risks associated with managing a EU regulated FI due to the Commission’s regulatory requirements that do not exist for private sector funds.  He highlighted the challenge to pass on the final recipients clawback obligations that do not relate to their own project but are based on wider risks a programme level.  Clearly this is incompatible with a loan arrangement where it is not reasonable for the final recipient to take such risks where they are paying for the loan through interest and arrangement fees.

Ruud spoke about the devolved arrangements for managing the OP in the Netherlands, which the remainder of the partners can all aspire to, and how it has helped the development of their JESSICA fund that has just been established.

Lunch was followed by a very interesting session led by William van den Bungelaar on behalf of The Hague who presented the outcome of the questionnaire that had been completed by the network partners.  The key messages included the need for close cooperation between MAs and cities which closely reflected some of the discussions we had in the morning sessions.  The need to clarify the eligibility of housing interventions was a second theme and above all, it seems, we share the desire to ensure the new regulations deliver us clarity as well as flexibility.  Willem and Bo are preparing a full report on the outcome of this work, and the wider discussions at the conference and this will form a key part of our final Thematic Policy Paper.

The final session was spent discussing some of the emerging proposals for implementing legislation led by Frank Lee of the EIB.  We are lucky to have the EIB’s support for our network and Frank provided us with an insight into the proposals for ex-ante assessments and the “off the shelf” models. This raised significant debate about issues including the cost of the assessments and whether the ex-ante would be acceptable to DG Comp as well as the MA to demonstrate market failure and demand to avoid having to undertake the work twice.  The timescales for the work were also highlighted as a concern, as the satisfactory completion of the assessment needs to be followed by a procurement of a fund manager. This process can take up to twelve months and the ex-ante process should reflect this by allowing enough time and flexibility to conclude a procurement process without having to seek further approvals.

Overall, both the ex-ante assessment and “off the shelf” models have the potential to add value for cities seeking to establish FIs although there remains a risk that they will develop into unduly restrictive frameworks that will inhibit rather than stimulate innovation in the development of FIs in the future.  If this imports further risks, it will act as a barrier to private sector entrants to the market and therefore, I believe we should seek to bring the concerns expressed by the network partners to the attention of the Commission.

Day Two – Network Session

The beginning of the second day was spent reflecting on the issues that had been identified at the conference the previous day.  As the Commission are holding two events next week for Managing Authorities and Stakeholders respectively we agreed to write to Virgilio Martins and colleagues at the Commission setting out some of the key issues identified within the network.  A copy of the letter will be sent with this note.

In the longer term, we will seek to develop the Theme Policy Paper and Case Study following the event.  We also discussed developing a further summary document that might be used in future discussions with the Commission, MAs and other stakeholders.

Emily Smith from the EIB who was able to attend this session informed the network that the EIB had offered to host a conference aimed at both partners and their Managing Authorities.  This would be held in Luxembourg in the week commencing 14^th October (16/17^th October seemed to be best for most partners).  This would provide us with an opportunity to present the TPP and a summary of our findings to our MAs, and EIB would also be able to provide useful updates in relation to the development of the implementing regulations.  This will potentially be a very useful event, bringing a number of MAs together to work with each other and the network cities to consider current issues in relation to the development of FIs and I very much hope we can all attend with senior reps from our MAs.

Afterwards, we broke into our thematic partnerships to discuss the development of our theme activities.  Leipzig and Ancona then provided us with an outline of how they will approach the TA theme Seminar which will be held at the beginning of December.  They have some good ideas about stakeholder engagement and I look forward to seeing this work develop over the summer.  The other themes are also making good progress.  In the State aid group we talked about basing the Case Study on an analysis of the State aid approaches using a Northwest JESSICA style notification, GBER and the deminimis approach used in the emerging “off the shelf” housing model.

We ended the second day discussing our ULSGs and sharing experiences at recent training many of us have attended.  It sounds like many of us have had some really positive experiences at the national sessions and we discussed the guidance we have received about ensuring the ULSG’s work is embedded in the mainstream work of the City.  Most of us have now got our ULSGs functioning which is good news as we will all need to have draft Local Action Plans ready for the mid-term review in April 2014.

And with that we brought the seminar to a close with lunch. Many thanks to Ton and his team for the work you have put in to arrange the event which was extremely well done.  You have set the standard very high for the rest of the network for future events!

All the best

Des