Funds that Managing Authorities (MAs) use for the JESSICA initiative can be certified as interim payments from their Structural Funds allocations, principally those supported by the ERDF but also, where appropriate, ESF, as investments rather than grants.10 This is done by placing funds from the Operational Programme (OP) into either an Urban Development Fund (UDF) directly or through a Holding Fund (HF), which then invests through UDFs. Where an UDF receives support from more than one Operational Programme, keeping separate accounting for contributions from each OP is necessary11. An UDF can then provide non-grant financial instruments such as equity participations, loans, loan guarantees, subordinated loans and other risk-taking mechanism (including through PPP structures, etc.) therefore facilitating urban development investments.
UDFs may have different legal structures (from fully public to fully private, with all intermediary possibilities) and administrative forms. The UDF manager may decide the exact legal structure or administrative form, provided that this is done with the observance of Regulation (EC) No 1828/2006 which stipulates that UDFs shall be set up as "independent legal entities governed by agreement between the co-financing partners or shareholders or as a separate block of finance within a financial institution".
UDFs need not be geographically specific. Spatially-defined UDFs would invest exclusively within an urban area within a specific locality supported by an integrated urban plan, or in any other administrative space allowed by the Managing Authority. UDFs could alternatively cover the whole or part of the Managing Authority area, but specialise in sectors or have well-defined objectives. Sectors could vary from public-service investments (e.g. public transport, cultural and sports venues, etc.) to those targeting private buyers and operators, including housing, offices, commercial areas.
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10 COCOF 08/0002/03-EN.
11 COCOF 08/0002/01-EN.