Legislative Assembly for the ACT: 2003 Week 13 Hansard (27 November) . . Page.. 4923 ..
Answers to questions
Capital funding of private projects
(Question No 1021)
Mr Cornwell asked the Minister for Economic Development, Business and Tourism, upon notice, on 21 October 2003:
In relation of capital funding of private projects in the ACT:
(1) Has the government given consideration to loans rather than grants;
(2) If the answer to (1) above is affirmative, how many such projects have also been so funded in (a) 2001-02 and (b) 2002-03;
(3) If the answer to (1) above is negative, why not;
(4) If the answer to (1) above is negative, how does the ACT obtain a tangible financial return upon its investment.
Mr Quinlan: The answer to the member's question is as follows:
(1) No. The Government has not given consideration to using loans over grant-based forms of Government assistance for capital funding of private projects in the ACT.
(2) Not applicable.
(3) Grant-based funding represents the preferred model for delivering assistance for economic and industry development. In particular, grant-based programs:
can be framed around competitive entry guidelines which means the best projects - i.e. those that can demonstrate the best net return of public funds - are prioritised for support
allow the Government to cap annual program expenditure thereby providing a high level of budgetary control and certainty
are constructed around agreements between the Government and recipients, and performance milestones are almost always linked to progress payments. That is, failure to meet performance requirements gives the Government discretion to withhold future payments and/or terminate agreements. Nearly all grant programs managed through BusinessACT also require applicants to contribute their own funds on a 1:1 ratio with Government funds. This means applicants must be strongly committed to projects before they apply or receive funding, thereby reducing overall risk considerably.
In contrast, loan-type assistance arrangements generally suggest a complete return of the initial investment plus a lending margin. In this circumstance, the Government effectively becomes an equity partner in projects. This carries significant additional risk for the Government. Loan-type assistance is also potentially complex and administratively cumbersome. In general, the Government considers that private lending or venture capital institutions can adequately handle projects that can demonstrate a reasonable rate of return on investment.