By Jonathan Morris
BBC News South West
Dartington College of Arts in Devon needs to secure crucial EU funding if its planned merger with University College Falmouth is to go ahead.
Dartington's student accommodation needs updating
Dartington (DCA), which was created in 1961 by the Dartington Hall Trust, does not own its premises and has always relied heavily on its landlord, the trust, for capital spending.
The trust (DHT) has said it cannot afford the £20m needed to modernise the college facilities.
That has led to the college seeking to merge with University College Falmouth (UCF) and create a new specialist University of the Arts in Cornwall.
But the lack of money to fund the move and the call for EU Convergence funds which are only available in Cornwall has made it controversial.
A report by JM Consulting for the DHT this year said: "Dartington is in the unique position of needing to relocate but having no ability to make a significant financial contribution to the capital costs of this relocation."
It said the financing of this option would potentially be supported through EU Convergence Funds, which would have to be matched by other sources.
Replaces Objective One
For regions under 75% of EU average GDP
£440m, from European Regional Development Fund, match funded by public sector and £130m from European Social Fund
Runs from 2007 to 2013
Covers Cornwall and Isles of Scilly
Administrators: South West Regional Development Agency
The consultants proposed a financing package made from Higher Education Funding Council for England (HEFCE) capital grants, convergence funding which is distributed by the South West Regional Development Agency (RDA), contributions from UCF and DCA, as well as borrowing, efficiency savings, fundraising and sponsorship.
But they warned: "There is an element of uncertainty associated with the EU funding."
Professor Alan Livingston, principal of UCF, said he was confident HEFCE, which funds about 70% of Dartington's running costs, and the RDA, would help fund the merger.
"A merged institution will be a major contributor to the economic and cultural future of Cornwall," he said.
"The RDA, I know, is really aware of the potential impact that will have on the regeneration of Cornwall."
Falmouth specialises in art, design and media, while Dartington would bring dance, drama and music.
He said: "I think the logic is overwhelming.
"We have the chance to make something of truly international significance."
Jill Sheen, higher education development manager at the RDA, said Dartington and Falmouth would have to "fight their corner".
She said: "You cannot use public money to move it from one place to another.
"We have to consider the downside too, what is going to happen to south Devon.
"The net impact could be zero in which case we would not do it."
She said the EU was expecting tangible results from convergence funding after six years of Objective One funding ended last year.
"We have to take a fairly hard-nosed view of it.
"The EU is looking for something transformational.
"This is the last chance Cornwall will have for funding on this sort of scale. It has to work."
A report for the RDA and HEFCE by consultants Burns Owens in March said moving to Falmouth was a better option than Plymouth and Torbay, which were also considered.
Dartington Hall Trust has plans to make up the estimated £4.7m loss to the south Devon economy from the loss of the college of arts.
Ideas include an Arts Park to "incubate and support creative enterprises" and the doubling in size of the Schumacher College, an environmental studies college at Dartington.
Both institutions are hoping for a legal agreement on the move to Falmouth by late summer, agreement on funding by the autumn, and if there are no hitches, Dartington could open in Falmouth in September 2010.
Mark Taylor, vice principal of DCA said: "We would need the majority of money from convergence funding.
"We have been speaking to the RDA and HEFCE.
"They understand the issues."
He said it was correct that European funds should be used to help fund the move.
"Convergence money is not available in Devon because that is the way European funding works," he said.
"It can only be spent in Cornwall.
"It cannot be spent on relocation per se, but it can fund economic activity and if we have an internationally successful arts institution in Cornwall with all that Dartington can bring, it would have an economic benefit to the area."
He said if the college did not move, it faced closure.
"The Trust is a small organisation.
"It would have had to invest millions and it does not have that kind of money."