Document of The World Bank Report No: 24941-CO PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN IN THE AMOUNT OF US$100 MILLION TO THE CAPITAL DISTRICT OF BOGOTA WITH THE GUARANTEE OF THE REPUBLIC OF COLOMBIA FOR THE BOGOTA URBAN SERVICES PROJECT February 14, 2003 Finance, Private Sector and Infrastructure, Sector Management Unit Colombia and Mexico Country Management Unit Latin America and Caribbean Region CURRENCY EQUIVALENTS (Exchange Rate Effective February 14, 2003) Currency Unit = Peso Colombiano (Col $) Col $1 = US$0.00034 US$1 = 2959.75 FISCAL YEAR January I - December 31 ABBREVIATIONS AND ACRONYMS CGUH Comite de Gesti6n Urbana y Habitacional (Urban Management and Housing Committee) CVP Caja de Vivienda Popular (Social Housing Entity) DAAC Departamento Administrativo de Acci6n Comunal (BogotA District, Community Action Department) DAPD Departamento Administrativo de Planeaci6n Distrital (Bogota District, Planning Department) DAMA Departamento Tecnico Administrativo del Medio Ambiente (BogotA District, Environmental Department) DISTRICT Local Government of Bogota, Capital District DNP Departarnento Nacional de Planeaci6n (National Planning Department) DPAE Departamento de Prevenci6n y Atenci6n de Emergencias (Department for Disaster Prevention and Emergency Assistance) EAAB Empresa de Acueducto y Alcantarillado de BogotA (Bogota District, Water and Sewerage Company) FONDATT Fondo de Educaci6n y Seguridad Vial de Transito y Transporte (Traffic Safety Fund) GOC Government of Colombia IDU Instituto de Desarrollo Urbano (BogotA Urban Development Institute) PCU Project Coordinating Unit PMIB Programa de Mejoramiento Integral de Barrios (Barrio Improvement Program) POT Plan de Ordenamiento Territorial (Comprehensive Nine-year Land-Use Plan) SHD Secretarfa de Hacienda Distrital (District Finance Secretariat) SOP Secretarfa de Obras Piblicas (District Secretariat for Public Works) STT Secretarfa de Transito y Transporte (District Secretariat for Traffic and Transport) UPZ Unidades de Planeaci6n Zonal (Local Planning Units) Vice President: David de Ferranti Country Manager/Director: Isabel Guerrero Sector Manager/Director: Danny Leipziger Task Team Leader/Task Manager: Thakoor Persaud/Mauricio Cuellar COLOMBIA BOGOTA URBAN SERVICES PROJECT CONTENTS A. Project Development Objective Page 1. Project development objective 3 2. Key performance indicators 4 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 4 2. Main sector issues and Government strategy 5 3. Sector issues to be addressed by the project and strategic choices 9 C. Project Description Summary 1. Project components 10 2. Key policy and institutional reforms supported by the project 12 3. Benefits and target population 12 4. Institutional and implementation arrangements 13 D. Project Rationale 1. Project alternatives considered and reasons for rejection 14 2. Major related projects financed by the Bank and/or other development agencies 15 3. Lessons learned and reflected in the project design 16 4. Indications of borrower commitment and ownership 18 5. Value added of Bank support in this project: 18 E. Summary Project Analysis 1. Economic 18 2. Financial 20 3. Technical 21 4. Institutional 22 5. Environmental 23 6. Social 26 7. Safeguard Policies 27 F. Sustainability and Risks 1. Sustainability 28 2. Critical risks 28 3. Possible controversial aspects 31 G. Main Loan Conditions 1. Effectiveness Condition 31 2. Other 31 H. Readiness for Implementation 32 I. Compliance with Bank Policies 32 Annexes Annex 1: Project Design Summary 33 Annex 2: Detailed Project Description 40 Annex 3: Estimated Project Costs 45 Annex 4: Cost Benefit Analysis Summary 46 Annex 5: Financial Summary 57 Annex 6: (A) Procurement Arrangements 59 (B) Financial Management and Disbursement Arrangements 64 Annex 7: Project Processing Schedule 70 Annex 8: Documents in the Project File 72 Annex 9: Statement of Loans and Credits 73 Annex 10: Country at a Glance 75 Annex 11: Transport Sector 77 Annex 12: TransMilenio Mass Transit System 84 Annex 13: Barrio Improvement Program 86 Annex 14: Social and Resettlement Plans 90 Annex 15: Environmental Analysis 96 Annex 16: BogotA District Finances 101 MAP(S) MAP A. Improved Mobility Component MAP B. Urban Upgrading Component MAP C. Bike Paths Network COLOMBIA Bogota Urban Services Project Project Appraisal Document Latin America and Caribbean Region LCSFU Date: February 14, 2003 Team Leader: Thakoor Persaud Sector Manager/Director: Danny Leipziger Sector(s): General transportation sector (60%), Water Country Manager/Director: Isabel Guerrero supply (16%), Sanitation (14%), Other social services Project ID: P074726 (10%) Lending Instrument: Specific Investment Loan (SIL) Theme(s): Access to urban services for the poor (P), Administrative and civil service reform (P), Civic engagement, participation and conmmunity driven development (P) Project Financing Data- -. +,' -, , - - -,... [X] Loan [ ] Credit [ ] Grant [ ] Guarantee [ Other: For Loans/Credits/Others: Loan Currency: United States Dollar Amount (US$m): $100.0 Borrower Rationale for Choice of Loan Terms Available on File: l Yes Proposed Terms (IBRD): Fixed-Spread Loan (FSL) Grace period (years): 5 Years to maturity: 17 Front end fee (FEF) on Bank loan: 1.00% Payment for FEF: Capitalize from Loan Proceeds Initial choice of Interest-rate basis: Auto. Rate Fixing by period 6 months Type of repayment schedule: [X] Fixed at Commitment, with the following repayment method (choose one): customized [ I Linked to Disbursement Conversion options: [X]Currency [X]Interest Rate [X]Caps/Collars: Financing Plan (US$m). - *Source- ', .,. - .- -:: ,., Local, : - -,Foreign :, ," Total - BORROWER 132.34 40.33 172.67 IBRD 75.88 24.12 100.00 Total: 208.22 64.45 272.67 Borrower: MUNICIPALITY OF BOGOTA Responsible agency: MUNICIPALITY OF BOGOTA Address: Secretaria de Hacienda de Bogota, Carrera 30 #24-90, Of. 601, D.C., Colombia Contact Person: Israel Fainboim Tel: 57-1-338 5003 through 06 Fax: 57-1-3509891 Email: ifainboim@shd.gov.co Estimated Disbursements ( Bank FY/US$m): 20_04 2005 2006 2007 Annual 7.00 27.00 30.00 25.00 11.00 Cumulative 7.00 34.00 64.00 89.00 100.00 Project implementation period: 4.5 years Expected effectiveness date: 04/01/2003 Expected closing date: 10/31/2007 - - A. Project Development Objective 1. Project development objective: (see Annex I) The objective of the proposed project is to assist the Municipality of Bogota to implement a strategic portion of its three-year Development Plan (PD), consistent with the ten-year spatial plan (POT), aimed at improving urban livability by increasing access, coverage, quality, reliability and inter-agency coordination in the provision of transport, water, sanitation and related basic services, particularly for residents in low-income areas. According to the 2001-2004 Development Plan for Bogota, the primary objective is to move away from sectoral to comprehensive policies so as to collectively build an inclusive and equitable city. The basic premise is that the city is the product of social, cultural, economic, physical, and environmental factors, which together determine the quality of life. In line with this perspective, the Municipality has achieved a solid record of innovative policy and project implementation, along with a strong financial management and governance structure for which it has had several awards, the latest being UN recognition of its operation over the past decade. These improvements in municipal operation and adoption of a ten-year planning horizon make Bogota an excellent candidate for an integrated multi-sector operation, which is more complex and more focussed upon a longer-term perspective than past Bank operations in the sector. The project objectives are to be achieved through investments in transport, water and sewerage infrastructure works, environmental improvements and community development activities. These, along with other city-wide transport investments and institutional and policy-reform measures, are aimed at improving operation of the transport, water and some shelter-related entities in about fourteen of the city's poorest Unidades de Planificaci6n Zonal (planning units or UPZs), inhabited by just over 1.2 million residents, who currently account for almost a fifth of the total population of BogotA. The project objectives are consistent with achievements made by BogotA over the past decade to improve living conditions for all residents, especially the poor. Among such achievements are development of a strong financial base with high dependency upon local revenue sources; improved efficiency and services through privatization of various public entities; improved coverage of basic infrastructure, education, health and housing services and institutional and policy reforms discouraging use of private automobiles and encouraging efficient public transport. Bogota's public transport system, the Transmilenio has generated worldwide interest. Although only three of a planned twenty-two line system are currently in operation, Transmilenio is regarded as a very simple, efficient and user-friendly system costing about 10% of the investments needed to move the same number of passengers in conventional underground metro systems. Other innovations of the District include restricted use of 40% of private vehicles during peak hours (Pico y Placa) ; reclamation of public space; disbanding the local transit police and transferring their functions to the national police; promotion of non-motorized transport systems; private concession for several transit functions and private participation in road maintenance contracts. All of these actions have been accompanied by an ongoing institutional reform program which has achieved significant reduction in operational costs and freed more resources for increased coverage in transport and road maintenance investments. A just-completed Bank loan for US$65 million (the Bogota Urban Transportation Project (BUTP), Loan 4021-CO), helped finance an investment program of about US$184 million, primarily in the transport sector. The proposed loan, Bogota Urban Services Project (BUSP) has a much broader focus, including both transport as well as urban upgrading, technical assistance, institutional and environmental components. Both projects share several common features, including the role of participating entities, type of works, and in the institutional, financial and administrative arrangements. -3- 2. Key performance indicators: (see Annex 1) Annex 1 contains greater details on input, output and impact indicators, including baseline figures, for the various project investments. Among the key performance indicators are the following: Low-income neighborhood upgrading: (i) number of neighborhoods legalized; (ii) number of sites (UPZs) upgraded; (iii) number of very poor households (strata 1&2) reached; (iv) improved accessibility and mobility (either via Access or Feeder roads to the Transmilenio line); (v) increased potable water, surface drainage and sewerage connections; (vi) improved tenure security; (vii) improved access to sidewalks, parks, community and recreation facilities (viii) increased number of community development initiatives completed. Transport-related improvements: (i) increased accessibility to 14 UPZs; (ii) increased accessibility of feeder routes to the Transmilenio system by improving the quality of the roads; (iii) increased share of trips made via public transport; (iv) decreased average travel times and vehicle operating cost; (v) reduced accident rate; (vi) increased length and use of bike paths. Technical Assistance indicators in support of the ten-year spatial plan (POT) and the current administration's Development Plan (PD): (i) implementation of recommendations from the different specialized studies done under the previous urban transport project, notably, those on accidents, parking, operation of public transport and traffic management; (ii) upgraded Air Pollution Monitoring Network and DAMA's Air Quality Management Plan reviewed and revised; (iii) agreement on a regional development planning framework; and (iv), strengthening of various sector institutions such as the District's low income housing entity, the Caja de Vivienda Popular (CVP), its traffic and transport entity, the Secretaria de Transito y Transporte (STT), its transport construction and maintenance entity, the Instituto de Desarrollo Urbano (IDU), its finance and tax management entity, the Secretaria de Hacienda Distrital (SHD), and the planning entity, Departamento Administrativo de Planeaci6n Distrital (DAPD). 1B. Straeglc Content 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: R200-0228 [IFC/R2002-0238] Date of latest CAS discussion: January 16, 2003 Country Assistance Strategy (CAS). The proposed project supports the CAS strategy of promoting peace through: (a) fast and sustainable growth; (b) sharing the fruits of growth and (c) building efficient, accountable and transparent governance. In this context, the project supports the Bank's lending program in the following three strategic areas outlined in the CAS to: (i) have the most tangible impact on poverty alleviation and help Colombia meet the MDG targets; (ii) incorporate lessons learned from Bank operations and (iii) pilot innovative interventions with important demonstration effects. Colombia has lived through several decades of a protracted armed conflict. This has intensified significantly over the past two decades, contributing to the displacement of approximately 2.5 million people so far. The recent rupture of the peace dialogue between the previous Colombian Government (GOC) and the Revolutionary Armed Forces of Colombia (FARC) would most likely exacerbate the situation. Over the past year, it is estimated that the rate of displacement increased by about 50%. A significant share of the internally-displaced people (IDP) has moved to Bogota. It is estimated that about 0.5 million have sought refuge in the peripheral low-income neighborhoods of the city, many of these being among the identified project UPZs. For such groups as well as others who live in these low-income areas, several components of the proposed project will address many of the CAS objectives -4 - mentioned above. The physical and social upgrading of these areas will allow displaced persons as well as other poor residents to improve their living conditions and increase intra-community as well as intra-city mobility, thus facilitating greater access to jobs, education and various social and public services and aiding resumption of their livelihood in line with the first CAS goal. Consistent with the CAS goals mentioned above, several District institutions will be streamlined and new policies developed to facilitate significant private sector participation, especially in transport and road-maintenance activities. There will be improved infrastructure services provided under the proposed project. Additionally, the project will also focus on sectors which have important externalities (e.g., water, sanitation, and transport and housing). Millennium Development Goals (MDG). The provision of water, sewerage and access to basic services in some of the poorest zones of Bogota are consistent with the following MDGs: (a) eradication of extreme poverty and hunger; (b) ensuring environmental sustainability; (c) reducing child mortality and (d) promoting gender equality and empowering women. Several of the key performance indicators listed above will show achievements of these goals over time as the project is being implemented. 2. Main sector issues and Government strategy: Colombia is a highly urbanized country with 73% of its estimated 40 million population living in urban areas in 1998. Rural-urban migration continues to be strong, mostly because of social conflicts in the countryside. Colombia's largest urban agglomeration is Bogota, with an estimated population of about 7 million, followed by Cali, Medellin, and Barranquilla, each having close to two million people. Among the main problems facing Bogota and other large cities are: (i) inadequate management of the public transport system; (ii) deficient land-management policies which lead to unregulated urban growth and the appearance of unapproved settlements in ecologically-sensitive areas or those in which it is technically or financially difficult to provide adequate services; (iii) unsatisfied demand for basic urban services; (iv) high unemployment and underemployment levels; and (v) increasing urban crime, violence and insecurity. While the GOC has recently taken steps to focus more on agglomerated zones, it still has not fully developed specific policies with respect to the management of large cities and metropolitan areas. Instead, it has traditionally focused in the past on decentralization, city-planning processes, and on sectoral policies, some of which affect certain cities more than others. Political, fiscal, and administrative sectors. The District is currently divided into 20 localities which together receive 10% of its tax revenue in transfers. The funds are allocated proportional to the level of poor people living in each locality. These localities draw their development plans in a participatory process but except for minor maintenance activities, it is the central city Government which executes the projects. The revenue structure of Bogota is not compatible with the city's growing financial needs. Recent reluctance of the City Council to approve several new tax and cost-cutting initiatives has added to the problem.The decentralization process, which began in Colombia in 1983, provided opportunities for residents to choose local representatives through elections every three years and granted greater independence for municipalities to organize themselves to address the needs of their residents along with full responsibility for financial management. (A new law aimed at extending the term of elected municipal representatives with greater flexibility for seeking reelection is to be implemented in 2004). The Law of Urban Reform (1989) was designed to assist municipalities to improve their operations through such mechanisms as expropriation, designation of priority areas for urban expansion, land banks, land readjustment, land improvement tax, and transfer of construction and development rights. Unfortunately, for both political and technical reasons, many Colombian municipalities never made full use of their ability to improve financial self-sufficiency through their own tax base, cost-recovery - 5 - policies and other initiatives. Instead, they preferred to continue with their high dependency upon mandatory revenue-sharing resources from the GOC, the consequence being a precarious financial future for many of them because of fluctuating transfers and high municipal debts, most of which are guaranteed by future national transfers. Bogota is among the few municipalities which took several tax-reform measures, sought out new revenue sources, reorganized and streamlined several sector institutions and found various ways to improve its operations to the point where it was able to successfully float bonds internationally and locally for some of its funding needs. In spite of the positive actions taken, the financial health of Bogota deteriorated recently as a result of country macroeconomic problems which affected both direct transfers as well as property values and business activity, the latter two being important sources of own-revenue for Bogota. Additionally, the capital investments completed over the past few years will demand increased recurrent expenditures in operation and maintenance costs. Legal and Other Reform Measures. Preparation and implementation of long-term development plans is a legal feature which became mandatory in 2000 for all municipalities. Subsequent laws have been designed to strengthen the planning process at the city and regional levels. These include provisions for municipal preparation of environmental plans, determination of the conditions for creating metropolitan areas, strengthening of citizen participation in the decision-making processes of cities and recognition of recent legislation regarding environmental, metropolitan and territorial issues. Law 388 of 1997 established that all municipalities have to design and implement spatial plans (Plan de Ordenamiento Territorial, POT) which cover a ten-year period and deal with land use, land regulation, development and city expansion. Spatial plans are also intended to provide a long-term vision guiding the preparation of three-year local development plans (PDs), which every municipality must prepare in consultation with the local population. Through a combination of legal and reform measures, the GOC has been moving the urban agenda towards more efficient and integrated urban planning, inter-election continuity, and high levels of citizen participation in the urban decision-making process. Community Participation. During the process of preparing the POT for Bogota almost 900 private and public institutions participated through workshops, teleconferences, seminars and surveys. The final document incorporates the recommendations and observations of a very wide cross section of citizens, community and social organizations. The POT identified planning units or Unidades de Planeamiento Zonal (UPZ) according to various physical and functional characteristics, with identification of their current status and long-term potential, along with the plans, programs and projects needed to achieve the results envisioned. The POT classified 28 UPZs as Type 1, which meant among other things that they were non-consolidated areas with deficiencies in infrastructure, accessibility, public space and services. It also defined a subprogram for neighborhood improvement, the Programa de Mejoramiento Integral de Barrios (PMIB). The PMIB prioritized 14 of these UPZs according to several criteria specified in the POT which are aimed at promoting development of strategies for improving physical as well as social and institutional conditions in the identified UPZs. These provide the framework for the upgrading component of the proposed project, which supports the physical, social and institutional aspects of the PMIB in the selected UPZs, with special efforts being made to promote community participation in the formulation of proposals for neighborhood improvement activities. Urban Upgrading. It is estimated that Bogota has just over 1,400 informal settlements occupying 24% of its area and housing 22% of its population. Although there have been important efforts over the past decade aimed at addressing shelter problems (e.g., land tenure reform, subsidy programs, specialized lending-entities and systems, infrastructure investments), the results have not been very satisfactory as evidenced by the large and growing number of informal settlements in the city. The response of the District to these issues has been: (i) providing support to poor neighborhood upgrading projects with co-financing from multilateral and bilateral institutions; and (ii) the creation of Metrovivienda, a District - 6- agency in charge of acquiring vacant land, contracting out the urbanization work, and selling the urbanized plots to builders who in turn sell the plots with units to families who meet the profile and conditions established by Metrovivienda. In this way, Metrovivienda seeks to reduce some of the obstacles (delays and high transactions cost) facing private developers who attempt to acquire and develop raw land on their own. By targeting large tracts, Metrovivienda is also trying to preempt unapproved and sub-standard development of such land by private developers who do not comply with various minimum urbanization requirements and consequently create settlements which ultimately require costly public investments for in-situ upgrading works. The Caja de Vivienda Popular (CVP), was created in 1942 to promote housing for the working class in the city. Over the years, other entities were created to respond to the growing housing deficit problems. The housing sector is currently structured through the Comite de Gesti6n Urbana y Habitacional (CGUH) in which Metrovivienda, CVP, Urban Renewal, Corporaci6n La Candelaria and the Sub-secretariat of Housing participate as executing entities. Under this scheme, the CVP was assigned the following functions: (i) coordination of the Programa de Mejoramiento Integral de Barrios (PMIB); (ii) housing improvement (physical upgrading and land tenure); and (iii) resettlement of population located in high risk areas and close to bodies of water. The recently-elected national administration has proposed several changes in ministerial and sectoral responsibilities. In line with these proposals, the District Government also has a proposal for institutional and functional changes within several entities. In this context, the plan is to place the CVP and its functions within the administrative structure of the District's Environmental Entity, DAMA. While final approval of this proposal is still pending, a review shows that the proposed changes will not significantly affect implementation of this component primarily because there is already ongoing discussion among the main actors on how to address any transition issues. As part of its efforts to address the needs of residents in marginal areas, over the past four years, the District has carried out the Programa de Desmarginalizaci6n and Programa Mejoremos el Barrio y la Casa, which are aimed to improve living conditions of about 650,000 inhabitants in low-income neighborhoods. The goal of Programa Mejoremos el Barrio y la Casa is to integrate such areas into the District economy by increasing the participation of the residents in various economic and social activities. Reflecting a holistic approach, the program includes the following components: neighborhood legalization of tenure, investment in schools, parks and infrastructure as well as improvement of institutional capacity and community participation. The proposed project is consistent with the goals of this initiative insofar as there are subcomponents geared toward assisting both the District's Planning Department (DAPD) with its housing policy plans as well as the Caja de Vivienda in the formulation and implementation of the PMIB (See Annex 13). Transport Sector. Decentralization of most transport sector functions to local governments in 1987 and 1993 left the Ministry of Transport with the role of regulator and policy-maker for national sector activities. At the Bogota District level, the Traffic and Transport Secretariat (STT), is the regulatory and policy-making entity. STT is also responsible for traffic management, public parking, supervision of public transport, vehicle inspections and the processing of drivers' licenses. There are three other municipal entities which share responsibility for managing the transport sector in Bogota: (i) the Urban Development Institute (IDU), which is in charge of the planning, execution and maintenance of infrastructure projects; (ii) the Public Works Secretariat (SOP), which used to be the main agency responsible for road maintenance; and (iii) Transmilenio S.A., which plans and manages the city's innovative busway system. In 1997, the District Government transferred almost all of the operations of SOP to IDU but the District Council did not approve the elimination of SOP. The current Administration is considering merging the operations of STT and IDU, and liquidating SOP by placing its residual functions within the administrative structure of a new Secretariat. - 7 - In the late 1990s, the District authorities decided to respond to citizen complaints against a chaotic transport system marked by long travel times, high levels of air pollution, an old public-transport fleet which was inefficiently operated, and a poor use of road space. The plan began with formulation of a long-term mobility strategy aimed at changing the transport system in line with the POT objective of improving the quality of life of residents while making the city more efficient and competitive. Among the key elements were priority for public transport, exploring alternative travel modes and creating disincentives aimed at reducing use of private cars. The main actions taken in support of this strategy included: (i) design and implementation of the first phase of a comprehensive and efficient mass transit system, Transmilenio, using segregated busways and involving far-reaching structural reforms of the traditional bus operations; (ii) promotion of the use of non-motorized transport and improvement of public space; and (iii) restriction of private car use in peak hours and introduction of an annual car-free day. The Bank-financed Bogota Urban Transport Project (Ln 4021-CO) had a significant impact in supporting this strategy, both through the provision of financing for the construction of the first busways and in TA to the District. Bogota's new transport policies in general, and Transmilenio in particular, have received wide international recognition and acclaim for their innovativeness, social responsiveness and financial and environmental sustainability. More importantly, the residents of Bogota are proud of their city's achievements, as evidenced by continuing high ratings in opinion surveys carried out by local NGOs. Encouraged by this strong support, the city administration has formulated the following vision statement for the year 2006: a) Increase Transmilenio coverage by building an additional 40 km of busways, and support infrastructure (300 km of additional feeder routes and 80 new stations), maintaining the private participation model for its operation, and involving the public in its planning and control. It is expected that the system will move about 1,800,000 passengers on a typical work day (24% of all public transport trips). b) Increase the use of non-motorized transport, with the widening of sidewalks, bike-paths and malls. It is expected that 19% of total trips taken will be done on foot, and 6% by bicycle. c) Reduce private car use by 10%, applying an array of administrative and economic incentives, disincentives and restrictions. d) Reduce the existing bus fleet by half (from about 21,000 to about 16,500 registered vehicles) through a combination of administrative, economic and financial measures. e) Extend the city mobility strategy to the metropolitan region. For the long-term horizon, the vision for the year 2016 includes a further increase in the coverage of Transmilenio, with the construction of more exclusive busways (388 km) and support infrastructure (1,000 km of additional feeder routes), maintaining the same operational framework. It is expected that by that time, about five million trips would be made on a typical workday on the expanded Transmilenio system. The Bank-financed Bogota Urban Transport Project (Ln 4021-CO), has had a significant impact supporting the District's transport strategy and its operation. By leveraging project funds and TA, the Bank was able to provide assistance in preparation of TORs, legal and related studies and in plans for phasing out the operation of SOP, assisting in the privatization of several functions of STT and for - 8- dismantling the local transit police force. Between 1996 and 1998, the ratio of income to expenses among sector institutions grew from 61% to 74% and the operating costs over the period was reduced from 17% to 10%. Traffic enforcement measures improved substantially and the collection of traffic fines increased fourfold. Vehicle- registration transactions processed by the private sector also increased from 467,000 in 1999 to 607,000 in 2000, in indicator of improved efficiency. The unit cost of road maintenance dropped by about 77%, mainly because of increased competition, and the inventory of network under active maintenance grew by about 660% between 1996 and 1999. The TA program helped to finance several studies and pilot programs for: parking, accident prevention, non-motorized transport, public transport improvement, traffic signal optimization, recycling of used tires and batteries and noise-reduction monitoring and enforcement actions. Water and Sanitation. The agency in charge of providing water and sanitation services in Bogota is the Water and Sewerage Company (EAAB), an autonomous company owned by the District. The overall level of service provided by EAAB is good in terms of water coverage (96%) sewerage coverage (87%) metering (98%), continuity of water supply (24 hr/day) and quality of supplied water which conforms with established standards. At the same time, within several low-income areas, there is inadequate water, sewerage and storm water drainage coverage. Consistent with the POT, the EAAB has already started to provide the trunk and network systems needed to improve coverage and service quality in the identified areas. Over the years, the Bank has provided assistance to the EAAB in various investment and reform measures, the latest being Loan 3952/53-CO, under which the EAAB has undertaken an ambitious modemization program aimed at rehabilitating and maintaining its key assets, reducing the vulnerability of water supply system by securing backup sources and increasing coverage in poor neighborhoods. EAAB is also making preparations to address efficiency and service quality issues through plans for cost reductions and greater private sector participation in its operations. Crime and Violence. Citywide surveys in Bogota invariably show crime and violence high on the list of citizen concerns. The Mayor sees crime and violence as a manifestation of a lack of a sense of community which is very much related to the deprived living conditions and lack of access to employment opportunities in these communities. A key element of the Mayor's development plan is a Citizen's Culture program (Cultura Ciudadana) which, among other things, seeks to use a wide array of messages and actions aimed at reducing conditions which encourage violence. Among some of the actions taken by the city council are restrictions against carrying firearms, limiting the hours of service of entertainment establishments, creating parks and playgrounds, campaigns against drunk driving and strengthening of various enforcement mechanisms. Crime reduction in Bogota has been significant but continued efforts are being made to reach all groups of citizens at various contact points (streets, schools, churches, parks, cultural and social events), to cultivate a spirit of cooperation and community among citizens. 3. Sector issues to be addressed by the project and strategic choices: 3.1 Affordable upgrading and improvement of marginal settlements: As indicated above, access to affordable housing, especially for the poor, is a very serious problem facing Bogota and many of the larger cities in Colombia. The large influx of refugees fleeing the violence adds to the problem inasmuch as they arrive with minimal assets and skills and their needs are very urgent. The new housing solutions of Metrovivienda plus additional subsidies, average about US$10,000 per completed unit, a sum which, on both the demand and supply side, is not sustainable nor replicable because is well beyond the affordability level of most of the poor who live in marginal settlements and the Govemment cannot afford to provide similar assistance free of charge to all who qualify. The upgrading and settlement-consolidation works within the proposed project seek to develop a more -9- affordable and sustainable approach for improving about fourteen UPZs. It incorporates the premise that upgrading should be a process designed to effect incremental improvements in these areas over time in line with the resources (monetary and in-kind) of the residents and in their interest in improving their neighborhoods both physically and socially. Another important feature is that such improvements should continue in line with the ability of the residents (direct or indirect) to operate and maintain the assets created. The element of community development is as important as the physical works since it promotes greater self-reliance and community spirit, with the whole process becoming significantly less costly than many of the traditional approaches currently being used. To the degree that there are positive results in the fourteen UPZs, it is expected that the process can be later scaled up by the District in subsequent operations. In parallel to the proposed upgrading works, there will be TA and studies aimed at understanding how such unauthorized settlements are formed and seeking ways of discouraging the formation of such settlements by addressing the underlying causes. 3.2 Implementing t pransport sector reforrm measures initiated under thDe pirevious project: There is need to continue implementation of several of the institutional and policy changes and studies which commenced over the past six years, e.g., in public transport, comprehensive road maintenance system, improved traffic management system, parking, accident prevention, continuation of the bike path network and related activities. The District has commenced implementation of several of these measures; however, analysis and feedback for future modifications and wider coverage is now needed. The proposed project includes assistance for continued expansion of the Transmilenio system, continued improved access to public transport facilities, including non-motorized transport, a strategic plan for road safety and traffic management and accompanying environmental measures. 3.2.L lluter-agency coordination: Historically, coordination among sector entities for service expansion and maintenance activities has had mixed results. On several occasions, for example, in road and water works, there have been cases where one service provider would have just completed its task and another would arrive shortly thereafter to commence its work, damaging the new investment in order to gain access to its own system. The resulting disruptions and costs have been significant. It is expected that under the proposed project, there will be greater coordination among the various entities which provide basic services and there will also be an important complementary feature of full beneficiary participation in key aspects of the decision-making process governing such investments. The CVP will be in charge of the coordination of the different activities (primarily water, sewerage, drainage, local streets, sidewalks, recreational and related social facilities) as part of the upgrading works in the selected UPZs. Such coordination will be very important in reducing costs, avoiding disruptions in services and in assuring efficient operation and maintenance actions. C. Project Description Summary I. lProject components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): A. Improved mobility. (US$Ml80.87) This component, to be executed by IDU,Transmilenio and STT- FONDATT, includes actions for continued expansion of the second phase of the Transmilenio system and continued improved access to public transport. It comprises the following activities: (i) construction of busways in Avenida Suba from Calle 80 to Avenida Ciudad de Cali; (ii) upgrading and rehabilitation - 10 - of feeder routes which connect neighborhoods to the Transmilenio system as part of an integrated system; (iii) construction of bicycle paths and sidewalks as part of non-motorized transport facilities; and (iv) measures for improving public transport, road safety and traffic administration in the city of Bogota. B. Urban upgrading. (US$M76.34) This component is designed to support the activities of the Programa de Mejoramiento Integral de Barrios (PMIB), which is the District's urban upgrading program derived from the POT and PD. CVP is the institution in charge of coordinating the infrastructure works and social activities undertaken by IDU, EAAB, DAAC and DAPD in the selected 14 UPZs. The infrastructure works comprise: (i) planning and legalization of barrios; (ii) construction of storm water drainage systems, water and sewerage systems (iii) upgrading and rehabilitation of access roads; (iv) resettlement of population located in high risk areas, including flood plains; (v) construction and rehabilitation of public space and community services; (vi) improvement of environmental conditions; and (vii) technical assistance for home improvement and land titling activities. The social activities associated with the physical works include: (i) promoting citizen culture; (ii) strengthening social organizations; and (iii) assisting vulnerable population. C. Institutional strengthening. (US$M14.46) This component is aimed at improving the performance of the institutions in delivering urban services through activities that will guarantee the social, environmental and financial sustainability of the works undertaken by the proposed project. The activities include technical assistance for District institutions working in areas ranging from transport, housing and environmental management sectors (IDU, CVP, DAMA), to planning and financing urban development activities (DAPD and SHD). Specifically, this project will support the following actions: (i) equipment and consulting services to develop an information system for road infrastructure administration (IDU); (ii) creation of mechanisms to improve the coordination among District institutions, community organizations, NGOs and the private sector for the implementation of neighborhood improvement programs (CVP); (iii) environmental studies and equipment for improving air quality management and enforcement and recovering of land-degraded UPZs (DAMA); (iv) preparation of mobility, housing and regional policies which would provide input for the development of future policy measures in the city (DAPD); (v) studies and consulting services for strengthening fiscal management and increasing District revenue (SHD); and (vi) consulting services and equipment for the Project Coordinating Unit. - - l~~~~ndlcatWe -ofk Component f. Costs,. ;Bof, i. financing Bank- .__ _ _ _ _ _ _ __ . . (US$M) ~'-Total . (US$M : .tinancing A. Improved Mobility 180.87 66.3 60.40 60.4 B. Urban Upgrading 76.34 28.0 28.00 28.0 C. Institutional strengthening 14.46 5.3 10.60 10.6 Total Project Costs 271.67 99.6 99.00 99.0 Front-end fee 1.00 0.4 1.00 1.0 Total Financing Required 272.67 100.0 100.00 100.0 - 1 1 - 2. Key policy and institufionaD reforms supported by the project: The project will support the following key policy and institutional reforms: (i) assisting the District to find sustainable low-cost alternatives for upgrading low-income settlements; (ii) reorienting interventions in upgrading work to reflect the comprehensive integrated nature of such activities, requiring greater inter-institutional cooperation and coordination; (iii) increasing private-sector participation in maintenance and street-paving works; (iv) strengthening the capacity of IDU to provide improved access of low-income households to public transport facilities and encouraging greater use of public transport and non-motorized transport alternatives over the use of private cars; (v) assisting the District to develop appropriate sector and regional development policies; (vi) strengthening the capacity of DAMA for controlling air pollution, and for integrating the environmental dimension into urban development planning and (vi) strengthening the fiscal management of the city. 3. Benefits and target population: Benefits of the proposed project will accrue to several groups in diverse ways. The upgrading component is expected to provide improved quality of life through increased access to basic services for about 600,000 of the poorest residents in Bogota, which corresponds to about 50% of the inhabitants of Strata I and 2 living in illegal settlements and 36% of the residents living in poverty (SISBEN 1 and 2). Families will have a greater sense of security and well-being through community participation efforts and through improved mobility and access to basic services they will be better able to participate in various home-based and other employment opportunities. To the degree that this component achieves its goals, it will also provide the District with a model for addressing similar needs for most of the estimated 1,500 informal settlements in Bogota. The improved mobility component will provide easier access of all residents to work, education, health, recreation and other such facilities. Additionally, it is expected to help reduce accidents, improve air quality and reduce noise pollution in Bogota. At the District level, improving the efficiency, responsiveness and operation of the various project sector entities will also have an important beneficial impact and could provide the impetus needed for reforms in other entities. The development and implementation of mobility, housing and regional policy will support the planning activities of the District and benefit the competitiveness of the region. - 12- 4. Institutional and implementation arrangements: It is envisioned that the proposed project will overlap with the final year of the three-year election cycle at the District level. The District of Bogota will be the borrower and the GOC will be the guarantor. Bogota will assume the foreign exchange risk associated with the proposed loan. The proceeds of the loan will be passed on as a grant from the District to the various participating District entities under individual subsidiary agreements acceptable to the Bank. The Project Coordinating Unit which was created to assist in the implementing of the previous transport loan to Bogota (Loan 4021-CO), will continue to provide a similar function for the proposed loan. A review of the PCU shows that while it already has capable and efficient staff, it will need an expert in Bank procurement policies to assist the implementing entities in their procurement tasks. There will also be need for project financial management assistance for the staff of the PCU. The PCU is located in the Finance Secretariat (SHD) to which all of the District agencies report. After the first year, the entities would have the primary procurement responsibility and the PCU will provide any needed support. The smaller entities may continue to need more assistance throughout the project and appropriate provisions would be made to facilitate this. While the programmed investments in sewerage and water works in the selected UPZs is counted as part of the project cost, the District has requested that these investments not be considered as project counterpart funds since the District has an ongoing arrangement to ensure that the needed services are provided. Each of the entities already has within its respective jurisdiction, responsibility for the activities which are to be implemented under the proposed project. Furthermore,'the size of the proposed loan proceeds vis-a-vis the budget of these entities is relatively small. While there will be no special units for project-related works within the various implementing entities, each agency will establish and maintain complete records of sources and use of project funds along with the responsibility for periodically submitting all required financial management and other reports to the PCU where a consolidated project account would be maintained. In line with the institutional changes at the national level, the current administration is preparing various institutional reform measures which have already been submitted to the Municipal Council for review and approval. These reforms are aimed at creating a more efficient operational structure which, among things would facilitate greater private sector participation and inter-agency coordination. Appropriate provisions will be made in the legal agreements to ensure that none of these reforms or streamline measures would have an adverse impact upon the proposed project. Under the proposed project, IDU, as the agency in charge of constructing, maintaining and improving the city's road system and open space, will be in charge of the road construction, upgrading and maintenance sub-components, including the relevant policy-reform components. STT- FONDATT, the Transport and Transit Secretariat's Traffic Safety Fund, will be responsible for executing investments directed towards improving transit management and policies to increase public transport usage as well as non-motorized transport options. Some of these policies include: (i) reorganizing the public transit system and improving its efficiency for public transport, improved control of the non-Transmilenio public transit system; (ii) planning a citywide parking policy that will cover both residential and commercial areas; (iii) implementing an educational campaign to promote voluntary observance of traffic laws; and (iv) improvements in the traffic signal network. For the PMlB component, while each sector-entity will do its respective task in the UPZs, it is envisaged that the CVP will be the coordinating entity for these investments. Along with this task, the CVP will also be responsible for: (i) housing improvement (physical upgrading and land tenure); and (ii) resettlement of population located in high risk areas and close to water bodies. DAMA, the City's Environment Department, has an important role in the formulation of the POT and PD. In this capacity, DAMA will provide assistance to the various entities as they work in implementation of - 13- the proposed project. Similarly, there will be inter-agency contact with Transmnilenio, Metrovivienda, DAPD and other entities to the degree that such contact will be needed to facilitate project implementation. Most of Transmilenio's functions are concessioned to the private sector through a small autonomous entity which focuses on planning, administration and compliance issues. Transmilenio will execute all the investments related to expansion and consolidation of the new system. This unit is funded through a percentage of fare revenues collected by private operators and through the sale of advertising space on the Transmilenio facilities. i~~. Project I ~ ~ ~ ~ ~ ~ Secetarate Woritl Sariik ....r.4rje a 'ri il a aclenida 9 Sil L; (Mobliby, iSabiato Uni 1. Project alternatives considered and reasons for rejection: Three alternatives were considered in the process of preparing the proposed project. Since Bogota had just completed its ten-year and three-year plans (POT and PD respectively), the option of a programmatic loan was discussed with District authorities. It was felt that the POT and PD could be used as the basis for such progMmrnatic lending if some adjustments could be made in line with the requirements of a programmatic loan. However, this option was seen as a longer-term one since it was felt that the District was just moving into its new planning system. Furthermore, it appeared that several possible changes in the POT and PD would have been needed for a programmatic loan and these are not expected to be easily accomplished because of the time constraints and the number of legal issues which were not clear. Also, in light of the District's assessment of its needs and its perception of the relative strengths of the lenders, the District was already well-advanced in its discussions with the Andean Fund (CAF), the Inter-American Development Bank (IDB) and other lenders for loans to finance clearly-identified portions of its planned investment program over the next three years. The Bank was being asked to assist in the transport, water and upgrading sectors. Internally, within the Bank, while there was great interest in such a programmatic approach, preliminary discussions identified several legal, financial, procurement - 14- and related issues which indicated that it would have taken some time to resolve. This option was therefore not considered acceptable at this stage. In light of the complementarity of several components, especially the water and sewerage and the transport-related ones in the upgrading works, the option of including the water company EAAB and expanding the reforms to include actions within the EAAB was next considered. There were several issues related to this option. First, because the EAAB is an autonomous entity, it could not share in a single Bank loan to the District and so another loan would have been needed. Additionally, EAAB did not have authorized borrowing permission from either its Board or the Government of Colombia as the Guarantor. A further complication arose when it was determined that the EAAB was already well-advanced in its own privatization initiative and it was apparently not ready to focus upon some of the reforms which the Bank believed were urgently needed in the wastewater subsector. Because of these reasons, this option was not considered further. The third option which was considered and found viable was to combine several elements of the previous two options to the degree possible in order to develop a multi-sector approach. The just-completed Bogota Urban Transport Project had already incorporated several of these elements, e.g., trunk lines, access roads, institutional reforms, environmental studies, non-motorized transport systems, traffic safety and related areas. At the same time, since District officials were also using a multi-sector approach in both their long and short-term development plans, there was a convergence of ideas on the approach to be used in preparing the proposed project. Under this option, an integrated portion of the District's investment program was selected for project financing with counterpart investments identified as: (a) land acquisition for the Av. Suba and the UPZ works and (b) the cost of the Av. Suba trunk line. 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). .~ ecr .j . - Latest Supervision Sector Istue l ' 2 > l 'Project (PSR) Ratings __________________________________ __________________________. (Bank-financed prolects only) Implementafton Development Bank-financed Progress (IP) Oblective (DO) Rationalization of urban transport in Bogota Urban Transport HS HS Bogota Project (closed in 2001) Comprehensive upgrading of low Guatemala Municipal S S income neighborhoods Development Project (closed in 1997) Comprehensive upgrading of low Caracas Slum Upgrading S S income neighborhoods (in implementation) Comprehensive upgrading of low Recife Urban Upgrading income neighborhoods (in preparation) Increase the efficiency, coverage, and Uruguay OSE Modernization S S sustainability of water supply and and System Rehabilitation sanitation services Program (in early implementation) Increase the efficiency, coverage, and Colombia, Santafe I Water and S S - 15 - sustainability of water supply and Sewerage Rehabilitation sanitation services Project (in implementation) Increase the efficiency, coverage, and Colombia, Cartagena Water, S S sustainability of water supply and Sewerage and Environmental sanitation services Management Project (in implementation) Increase the efficiency, coverage, and Colombia, Water Sector S S sustainability of water supply and Reform Assistance Project (in sanitation services in small and implementation) medium sized cities. Other development agencies CAF To support the construction of Education, culture and transport infrastructure ($ 1OOM) 1DB To strengthen the municipality, and Citizen participation ($1 8M) - IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3. Lessons learned and reflected in the project design: Low income neighborhood comDrehensive upvrading. In addressing low-income shelter issues, until recently, most public officials tend to regard the provision of completed new units as the ideal sustainable solution. While it is recognized that unauthorized settlements in inaccessible or hazardous areas are generally costly and difficult to improve, efforts to understand and curb such practices have not had high priority. The option of upgrading works with most residents remaining on-site has not generally been given the attention it deserves and the usual approach has been to do such works after all residents are moved out of the site. Because of such practices, programs providing both new and upgraded units have generally been very costly and unsustainable for all who qualify for such assistance. There is need to seek new approaches involving efforts to prevent such unauthorized settlements in the first instance, and to use in-situ improvements done in stages over time, with affordable appropriate technology and with greater beneficiary participation in both the decision-making process and in all stages of the implementation and follow-up phases. Apart from lower cost, such approaches also tend to promote community ownership, cohesiveness and several other beneficial results. Studies to better understand the process along with community participation, including community contracting of works and in-situ self-help improvements will be features of the upgrading works envisioned under the proposed project. Cost recovery is an essential element in upgrading programs, if not for recovery of capital investments and expansion, at least to the degree needed for continued operation and maintenance of the assets - 16 - created. Bank experience suggests that the financial viability of upgraded works and improved services is enhanced when beneficiaries are allowed to make informed choices arising from a participatory process of analysis of priorities, costs (including capital investment as well as operation and maintenance costs) and available resources. Previous projects show that NGOs and CBOs can be effective vehicles for promoting cost recovery, given their unique relationship with the community. The proposed project will take account of household preferences in the process of selecting upgrading works, and with NGO and CBO assistance, efforts will be made to ensure basic community maintenance of the facilities provided under the project. The Bank's policy paper on housing indicates that the poor suffer most when housing markets fail. The problem is compounded when the authorities seek to place greater emphasis upon the demand-side assistance where income is one of the most important determinant, rather than on the supply side where governments can do a lot more to reduce transactions costs and facilitate and promote the supply of lower-cost solutions through such actions as land-titling reform, more appropriate construction norms and standards, greater inter-agency cooperation and coordination in providing basic services, with clearer and more consistent monitoring and enforcement mechanisms to prevent settlement in hazardous or otherwise unsuitable areas. Actions aimed at reinforcing more supply-side activities in such areas as land titling and inter-agency cooperation have been included in the proposed project. Urban transport Important sector reforms and operational improvements, such as those achieved in the Bogota Urban Transport Project (BUTP), require visionary leadership with a willingness to take risks, long-term comrnitment and continuity. In Bogota, the Bank-City partnership has benefited from these elements over the past six years. The second term of the current mayor adds continuity and stability and provides the opportunity to consolidate and expand upon the achievements of the earlier project. Even though the positive impact of the BUTP has been much more far-reaching than originally envisaged, issues such as staff reductions are very complicated and difficult to resolve. For example, approximately 4,300 influential unionized workers of various sector entities lost their jobs during the past four years and even though the Public Works entity, SOP, has been stripped of its responsibilities after a reorganization, the city council is still not willing to approve the final stage of legally disbanding SOP. The District was able to accomplish such layoffs because it made provisions early in the design phase, assisting ex-employees with separation packages and retraining assistance to enter the job market. Through such actions as the inclusion of incentives for new bus operators to be in partnership with existing ones, the District is taking account of some of the negative employment effects arising from efficiency increases in the transport sector as old buses and taxis are taken out of circulation. Such actions are needed both from the perspective of making the changes more acceptable to those who are affected as well as on equity grounds. For project implementation, instead of creating special units to implement the components, it is better to use the entities which are traditionally involved in such tasks. Having a small strategically-placed and ably-staffed coordinating unit (PCU) to help with inter-agency coordination and other such activities greatly facilitated smooth project implementation for the BUTP. There were several staff changes within the various implementing entities for the BUTP. However, the PCU, with close supervision from the Bank, worked well with the counterpart entities to address technical, contract management, resettlement, financial and other implementation issues. A similar approach is being incorporated in the proposed project. - 17 - 4. Ifndications of borrower commilient and ownership: Since the proposed components form part of the District's POT and PD, it is clearly seen as an integral part of the District's development strategy. As the BUTP project was coming to a close, both the GOC and District authorities requested continued Bank assistance in the District's investment program. After discussing various alternatives, the concept of the proposed loan evolved and the Municipality of BogotA requested and obtained approval from the National Govemment to borrow US$100 million for the proposed Bank loan. It was agreed that the Ministry of Finance and Public Credit will be the Guarantor of the proposed project. The Municipality began preparation works toward the end of 2001 and after a project identification mission in November 2001, each of the proposed implementing entities has had special preparation teams working very closely with consultants and Bank counterpart staff in the preparation of the various components. Additionally, instead of disbanding the PCU of the recently-completed BogotA Urban Transport Project, the Mayor agreed to retain the staff and use the unit to assist in the preparation of the proposed project. 5. Value added of Bank support in this project: The Bank has extensive global experience in both investment and policy areas of urban upgrading projects, urban transport projects, urban water and sanitation projects and in projects which promote community and social development. Having been involved in the Colombian urban sector for many years with several successful operations and a solid implementation record, the Bank has gained the confidence of both District and GOC authorities. It is currently in a unique position to assist BogotA to consolidate and build upon the achievements of earlier transport, environmental and water projects and to help in transitioning the District to a new phase for possible future programmatic lending. IE. Summnary Projec Analyelz (Detailed assessments are in the project file, see Annex 8) 1. Econonic (see Annex 4): (©) Cost benefit NPV=US$ million; ERR = 19-60 % (see Annex 4) 0 Cost effectiveness 0 Other (specify) Cost benefit analysis for mobility component (67% of project investment costs) ERR 24.7% Cost benefit analysis for upgrading component: ERR ranging from 18.6% to 59.9%. Annex 4 contains details of the complete cost-benefit analyses which were conducted to determine the economic viability of the main project components. The analyses demonstrate the viability of the project and of its individual components. All project components, including the infrastructure works and complementary investments in institutional development, community participation and education were included in the analyses. To determine the net incremental costs and benefits, "with" and "without" project scenarios were constructed. On the basis of these scenarios, the net incremental financial benefits and costs of the proposed investment programs were assessed. These were then adjusted to account for the impact of taxes, subsidies and externalities to arrive at the economic cost and benefit streams. An opportunity cost of capital (OCC) of 12% was used in the NPV analyses. Costs include all capital costs, operation and maintenance costs, rehabilitation, resettlement, environmental mitigation and contingencies. In order to avoid an overestimation problem, the TA and other costs of complementary actions necessary to derive the expected benefits and sustainability levels were also included. Finally, sensitivity analyses were done for the major components in order to assess - 18- the impact of changes in critical assumptions on the economic viability of the project. Benefits from the mobility component include time savings, vehicle operating cost savings, reductions in accidents, and environmental gains due to reduced emissions of gases. The mobility components are expected to increase vehicle operating speed and thus save time to users and reduce operating costs and emissions. The implementation of the second phase of the Transmilenio, including busways and feeder routes, will result in improved access to work, education, health, recreation and other urban facilities for most District residents, directly (for system users) and indirectly to all who will benefit from reduced congestion (time and cost savings and environmental improvements). Benefits from the urban upgrading component are expected to improve the quality of life of about 600,000 of the poorest residents of Bogota living in the 14 UPZs which will be upgraded. Such benefits include: (i) improved access arising from improved street layout and street paving in the 14 UPZs which will be connected to core city centers and facilities; (ii) improved water supply and sanitation services, including a reduction or elimination of supply rationing and intermittent services and ultimately improved health conditions and reduction of morbidity rates; (iii) reduction of risk to lives and property due to the resettlement of people living in risk-prone areas; (iv) a reduction in risks and losses to life and property due to a reduction of flooding resulting from investments in macro and micro drainage works; (v) increased access to recreational activities with the financing of ecological and community parks; (vi) increases in social capital by involving community groups in the planning and execution of the project as well as the financing of community driven activities through the community contracting component; (vii) benefits from formal property ownership; and (viii) improved institutional capacity to address planning and shelter needs in the District's estimated 1,500 informal low-income areas. A hedonic pricing methodology was used to estimate the economic benefits of access to improved urban services. The hedonic price function is derived from housing markets in which similar transactions can be observed. The welfare significance of this system comes from the fact that while it is extremely difficult to estimate the benefits from a package of investments such as those under the project, there are ways to observe how consumers value specific attributes which are not provided separately in the market but are embodied in the housing unit and reflected in housing values (e.g., access to water, sanitation, drainage, community facilities, distance from city-center, etc.). Consultants were hired to conduct surveys and develop a hedonic price function to estimate the marginal value of these non-market attributes provided by the project, allowing for the measurement of welfare effects from changes in non-market attributes. Since the type of project works in each of the fourteen UPZs differ from each other because of physiography and different types and levels of service deficiencies, it was not possible to calculate an overall EERR and NPV for all UPZs as a group. Instead, two representative UPZs were selected and detailed studies were done on these as proxy for the upper and lower range of benefits which can be expected. In these two UPZs, Gran Yomasa and Ismael Perdomo, the Intemal Economic Rate of Retum (IERR) was estimated at about 60% and 19% respectively. Ismael Perdomo is located in an area of very difficult terrain and in general, most of the other twelve UPZs have greater similarities to Gran Yomasa than to Ismael Perdomo. It is thus expected that the IERR of the works in the other UPZs will be above 19%. For the mobility component (comprising about 66% of overall project costs), the IERR was estimated at about 25%, even when no commensurate benefits are taken into account for the STT component (because of difficulty of estimating such benefits). As indicated in Annex 4, a comprehensive sensitivity analysis confirmed the robustness of the results. From a macroeconomic perspective, Bogota and the metro area are expected to derive gains in several forms from the project works. While not all of these are additional to those listed above, they are worth - 19 - mentioning here. The project investments are expected to have significant economic growth linkages mainly through the reduction of congestion and improved citywide integration of the affected marginal settlements. The institutional strengthening and technical assistance components will also have important impact by creating an enabling environment for new local private investments. Finally, although the project was not promoted as an employment-generation program, it is expected to generate a sizeable number of short-term, primarily unskilled, employment since labor accounts for about 40% of total project investments. The direct and indirect social welfare benefits are also an important factor to be considered at this point. By helping marginalized populations to gain improved mobility and access to basic services while at the same time, working with such groups to help them to better able to articulate their concerns, establish priorities and work together to achieve better living conditions, the project makes a very important contribution. Also, from a welfare perspective, since the Government already has a cross-subsidy policy in providing basic services and almost all of the upgrading works benefit the two lowest strata of the population, the project investment in these components is expected to have a significant poverty impact. 2. Financial (see Annex 4 and Annex 5): NPV=US$ million; FRR = % (see Annex 4) BogotA has won recognition from different regional and international entities for several aspects of its operation over the past decade. Three relatively recent awards are the United Nations Development Program award for urban sustainability, which recognizes the efforts of the last four city administrations, the Stockholm Challenge award in 2001 for the District's policies to curb car use, and the Stockholm Partnerships award in 2002 for its Transmnilenio rapid transit bus system. In its finances, as Annex 16 shows, the District has significantly strengthened its fiscal position during the 1990s and was therefore able to undertake important investments aimed at improving the quality of life in Bogota. In 1999 one of the worst recessions hit Colombia and the District suffered severe declines in its revenue base. Tax revenue has recovered slowly but in 2001 it was still below 1999 levels in real terms. The District, nonetheless, was able to undertake its largest-ever infrastructure construction program in 1999 and 2000, thanks to the sale of its power company and transfers from the National Government. While the overall financial shape of the District is not as strong as in 1998, it is still in a solid position. For example, in 2001 BogotA placed US$100 million in bonds in the international market for which there was an oversubscription. Further, for its domestic bonds the District has always received a rating of AA+, which was recently upgraded to AAA by Duff and Phelps de Colombia. As indicated in Annex 16, projection of the Districts finances until 2006 show that the District will be able to provide timely counterpart funding and service its debts while still having a significant share of resources for investment and maintenance. However, it has to continue to carefully manage its recurrent expenditures and to follow its currently sound fiscal policy package aimed at revenue enhancement, improved operational efficiency with increased private sector participation. A sensitivity analysis was done to examine the potential impact of variations in the expected performance of tax revenue and current expenditures. The results indicate that the District's financial position will remain sound even with a 20% decrease in expected tax revenues or a 20% increase in recurrent expenditures. Under these circumstances, however, the District will have to sharply reduce its pace of investment, but it will continue to be able to undertake the current project and manage its overall debts. Fiscal Impact: It is not easy to quantify the net fiscal impact of the project upon the District finances because the project -20- works benefit several different groups of beneficiaries in various ways and they are affected by different cost-recovery policies. At about 67 % of the project, the mobility component comprises the largest share of the investment. In terms of a direct investment-recovery path, while there is no earmarked recovery source, the gasoline tax is expected to offset some of the cost of the project. Additionally, there are indirect sources such as the value-added tax paid by businesses on increased economic activity in the city, those from transport companies and increased property tax values associated with the improved streets and project works. For the upgrading component which is about 28% of the total project cost, in terms of financial outlays and associated financial receipts, it is the policy of the Govemment and the District to subsidize the lowest strata of the population. In some cases, e.g., for water and sanitation services, there is a cross-subsidy structure which is triggered and so there is no additional govemment receipts or outlays. For property tax in the UPZs, since almost all of the upgrading affects the lowest two strata of household income groups and the Government has a policy of subsidizing these groups, the District will not be able to recover much of its investments in the UPZ via direct property tax payments. However, since the main works are through EAAB and it has policies in place to recover the funds needed to maintain the system, this should not be a problem. Several previous attempts by the District to enact strong direct recovery policies for infrastructure works in non-poor areas have met with stiff council and resident opposition. Part of the reason for this is that there are many who support the argument that by making these initial key capital investments, the District will capture a stream of secondary and lower-rung benefits from the incremental economic and finance activities which such District investments will generate. Indications are that the District should try to recover a greater share of its investments directly from the primary beneficiaries, even those in poor areas, and it should apply its subsidy assistance in a more selective way. However, this is a difficult socio-economic issue and while it is expected that part of the TA for SHD will review recurrent-cost financing, given the current country situation, it is not an easy topic to resolve at this point. It is also expected that with the community development activities, there would be greater proclivity among residents to first, use the assets with more care and thus minimize vandalism, and secondly, to help maintain the facilities once they see the benefits of doing so. While the direct recovery of investments is difficult to assess at this time, as seen in Annex 16, the debt-service burden upon the District of the additional project loan is not expected to be onerous, both from the perspective of the total external debt position as well as from a loan repayment perspective. 3. Technical: The works which will be executed by IDU correspond to road improvements, including paving and rehabilitation. These works will permit the access of public transport (Transmilenio feeder routes) to the neighborhoods. The technical specifications of the roads will be designed according to urban standards defined in the POT and engineering standards defined in the District's construction specifications. IDU will also construct the connections of the existing bike-paths which will integrate the system as a network. The bike-path standards are contained in the Master Plan for Bike-paths and the code of Public Space. EAAB project components include the construction of local water supply, sewerage and storm water drainage networks in low income neighborhoods and the secondary networks which are needed so as to make the local networks operable. The norms and standards for these works are governed by both POT and EAAB design and construction norms which are consistent with national requirements. For the community works which will be coordinated by CVP, both POT guidelines and community preferences will govern the way that the public space facilities, sidewalks and other community projects will be constructed. All of these works under the District's Obras con Saldo Pedagogico program are - 21 - reviewed for compliance with the required norms and standards. 4. Institutional: 4.1 Executing agencies: The executing agencies are: (i) for the mobility component: IDU, STT-FONDATT and Transmilenio. (ii) for the low-income neighborhood upgrading component: IDU, CVP and DAMA. (iii) for the institutional development component: IDU, CVP, DAPD, DAMA and SHD. Each agency will have the following functions under which it is expected to manage the execution of its respective component in line with the provisions of the legal agreements. Among the specific responsibilities are: (ii) preparing an Annual Operative Program; (ii) preparing the monitoring and supervision documents regarding physical works, separate project accounting and financial information and sending these to the coordinating unit; (iii) managing payments and preparing disbursement requests; (iv) providing any needed counterpart funds; (v) sending the terms of reference to the Coordinating Unit before the bidding process and carrying out the contracting process according to the appropriate Bank requirements; (vi) facilitating technical visits for supervision of the works, acquisition of goods, installation of systems and consulting services; (vii) being responsible for the operation and maintenance of works and equipment contracted or purchased under the project; (viii) ensuring that all information for Bank supervision and external auditing are readily available. 4.2 Project management: While each entity will be responsible for implementation of its respective component, there will be a Project Coordinating Unit (PCU) in the BogotS District Finance Secretariat (SHD). The PCU will be in charge of the following functions: (i) monitoring and coordinating all project activities and providing timely feedback on project progress, problems and other matters to the District and the Bank; (ii) consolidating the information sent by the other agencies on the Annual Operative Program and sending it to the Bank no later than 60 days after the end date of each fiscal year; (iii) coordinating project counterpart resource requests in the District's annual budget; (iv) ensuring appropriate use of Bank as well as counterpart funds; (v) collecting administrative, financing and accounting information from other executing agencies and preparing a consolidated project financing report to the Bank according to agreed norms and procedures; (vi) monitoring and evaluating project progress each semester and reporting to the institutions the corrective measures indicated by the auditors and evaluators; (vii) ensuring appropriate use and maintenance of works, goods, equipment and materials financed by the project; (viii) reviewing and approving the terms of reference as well as the procedures related to acquisition of goods and contracting consultant services; (ix) guaranteeing that all the activities comply with the Project Operational Manual. The SHD will undertake inter-institutional agreements with the executing agencies. If any of the original executing agencies is to be eliminated because of planned institutional reform measures which the District currently has under consideration, the functions and activities of the affected entity would be automatically reassigned to the entity which assumes the role of the one eliminated or, if this is not possible, to a new entity to guarantee project continuity. 4.3 Procurement issues: The latest Country Procurement Assessment Report was done in 2000. The proposed project implementing entities have experience with Bank-financed projects for which they have used Bank procedures without any substantial problems. - 22 - 4.4 Financial management issues: The SHD through the PCU will be responsible for the financial management arrangements under the project. Given its multi-sectoral focus, with six implementing agencies, the financial management arrangements would entail the consolidation of financial information (accounting, budgeting, internal control, external auditing, financial monitoring reports preparation and disbursement), coming from the respective implementing agencies. The Chart Of Accounts for the project will follow the GOC accounting policies and procedures and the project financial monitoring reports (FMRs) established for all Bank-supported projects starting after January 1, 2003. The FMRs would be consistent with the new Financial Management Guidelines for Financial Management Assessment, Project Implementation and Supervision. During project preparation, the District indicated an interest in adopting the Bank's FMRs system for both project monitoring as well as the basis of withdrawals of the Bank loan proceeds. The SHD is expected to have in place, prior to loan effectiveness, the institutional capacity required for the financial management of the project. It is an effectiveness condition that the District hires a full-time management coordinator, at least one accountant and a procurement specialist. During project preparation, it was agreed that the SHD would prepare a detailed action plan relating to its financial management responsibilities, for review and concurrence by the Bank financial management team as a condition of Loan Effectiveness. The items to be included in the action plan are: (i) financial management arrangements for the consolidation of the financial information to be provided by the executing agencies; (ii) an adequate accounting information system to facilitate the transfer of the financial information from the executing agencies to the SHD for consolidation; (iii) format for the FMRs and accounting system required by the Comptroller General and the Accountant General Office, both of the GOC, for monitoring and evaluation purposes; (iv) the terms of reference for the required external audits; (v) the Operational Manual and the organizational structure required, including a viable internal control system; and (vi) modalities for implementing a report-based disbursement arrangements, for the use of the special account and its links to the individual project accounts as well as the flow of funds, consistent with Bank policies and procedures. The action plan is an integral part of the financial management assessment and is available in the project files. The Flow of Funds call for Bank loan funds to be channeled to the project through a Special Account to be established in a commercial bank. The SHD would pass on the funds as a grant to the project implementing agencies in accordance with their respective subsidiary agreements with the District of Bogota. Bank funds, along with District counterpart funds from the implementing agencies would be used to fund project activities. The SHD will undertake periodic project-wide reconciliation of the balances in the project Special Account, the individual project accounts at the implementing agencies and the overall project expenditures. With respect to risks, the specific financial management risk pertaining to this project concerns the provision of adequate counterpart resources in a timely manner. In addition, the use of FMRs as the basis for disbursements represent a potential financial management risk which would need to be closely monitored during the initial period of project implementation. Regarding the counterpart funding risk, this has not been a problem in the Bogota Transport Project implemented by the District so this risk is not expected to be particularly high. The report-based disbursement risk is expected to be substantially mitigated by the considerable institutional strengthening undertaken by the PCU prior to project implementation. Details of the financial management assessment are contained in Annex 6B. 5. Environmental: Environmental Category: B (Partial Assessment) 5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis. - 23 - Investments under the project include the construction of dedicated lanes for Transmilenio buses and car traffic in the Avenida Suba, feeder routes for the Transmilenio system, as well as urban infrastructure construction and improvement activities in selected UPZs. 1[DU contracted a consortium of consultants to prepare the designs and environmental impact studies of the Suba trunk line. The Task Team reviewed the TORs for the environmental studies to ensure that the Environmental Assessment for the Suba trunk line considered both the indirect and cumulative impacts associated with construction activities, such as rerouting of traffic, induced growth, and land-use changes. An initial screening of the Suba trunk line was carried out during project preparation, where it was determined that the most relevant aspects to be considered in the EA for the trunk line include: (i) the resettlement of 591 households and businesses, (ii) the rerouting of traffic through secondary roads during construction, (iii) an increase in air pollution and noise levels during construction, (iv) the disposal of construction waste, and (v) potential minor effects on ecosystems in the project's area of influence, specifically the C6rdoba wetlands and Suba hills. The Environmental Impact Assessment prepared by the consultants identified these aspects among the probable negative impacts resulting from the construction of the trunk line. With respect to operation, the consultants identified high noise levels as a probable negative impact, and the reduction in sulfur dioxide emissions and mobility improvements in the corridor as positive environmental impacts. Recommendations for measures to control, prevent, and mitigate construction impacts were provided, such as scheduling construction activities only during the day and ensuring construction equipment is well maintained and utilizes the latest technologies, in order to help guarantee that noise levels fall within the daily norm. In addition, areas of high sensitivity and cultural patrimony, such as the C6rdoba wetlands and Josd Marfa military school, will not be encroached upon with any type of intervention during construction (see Annex 15). The consultants also prepared an EMP to address potentially significant negative environmental impacts during construction and operation. The EMP defines the mitigatory and preventative methods to be carried out, institutional responsibilities, and estimated costs for social management, vegetation and landscape management, and environmental management programs, as well as monitoring and follow-up, to be overseen by the contractor during the construction phase. In addition, the EMP includes the environmental technical specifications for contractors to be included in the bidding documents for the construction of the Suba trunk line. Under the upgrading component, project investments will construct/improve basic urban infrastructure in approximately fourteen UPZs and the project will finance the upgrading of access roads, storm water drainage systems, water and sewerage systems, public spaces, and the regularization of titles. Most impacts will be associated with construction nuisances, such as noise, dust, and traffic congestion, in populated areas. IDU has prepared operational manuals with environmental guidelines to ensure that during the construction phase, appropriate steps would be taken to address such problems as dust and noise from construction activities, disposal of construction wastes, safety (workers and the public), and timing of construction works. To ensure compliance with the Bank's environmental safeguard policies, environmental specifications for contractors will be included in the bidding documents and work-specific environmental management plans, subject to IDU's approval before works begin, will be prepared by the contractors. 5.2 What are the main features of the EMP and are they adequate? Building on the project's EA, an EMP was prepared to address potentially significant negative environmental impacts during construction and operation of the Suba trunk line. The EMP is divided into a series of components that aim to control, prevent, mitigate, and/or correct the identified impacts. These components directed toward addressing construction impacts include environmental management, social management, vegetation and landscape management, and monitoring. The EMP thoroughly - 24 - defines the activities and impacts to be managed within each of these components, the methods to apply, those responsible for carrying out the programs, applicable legislation, monitoring indicators, timeline for executing the programs, the required resources and costs, and those responsible for follow-up or ensuring the application of the proposed methods in each program (see Annex 15). In addition, the EMP provides a framework for preventing and mitigating potential negative environmental impacts during operation through the provision of training to bus operators, occupational health programs, conservation of vegetation, management of waste water and solid wastes, fuel management, a fleet maintenance plan, monitoring and follow-up. The EMP also defines for each of these operational programs the methods to apply, location of activity, those responsible for executing the program, the applicable legislation, monitoring indicators, timeline for execution, required resources and costs, as well as those responsible for monitoring and periodic audits. In addition, with respect to the urban upgrading component, the rules for contractors have been detailed in IDU's environmental guidelines, and these specific environmental procedures will be included in the bidding documents. These guidelines require that contractors prepare an environmental management plan, which provides arrangements for mitigating environmental impacts during construction, to be approved by IDU as well as the environmental authority, before initiating works. The guidelines also call for periodic audits to ensure that the plan is carried out. 5.3 For Category A and B projects, timeline and status of EA: Date of receipt of final draft: November 25, 2002 An initial draft of the consultant's EA and EMP was submitted to the Bank on October 25, 2002, and a final draft of these documents was submitted on November 25, 2002. 5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EA report on the environmental impacts and proposed environment management plan? Describe mechanisms of consultation that were used and which groups were consulted? Consultations have been held with the community in the area of influence (located along the Suba corridor) during project selection and design. In carrying out the consultations, the corridor was divided into eight sectors with the community of each sector invited to participate in a separate meeting to review the project's designs. In these meetings, the consulting team that prepared the EA and EMP presented the project's details to the community. In addition, the meetings were attended by representatives of IDU, Transmilenio and the Technical and Environmental Auditor. During the meetings, the attendees had the opportunity to write down their concerns or suggestions and the consultants responded either during the meeting or published their responses in an agreed site. In addition, the consultant's offices were open to the public, where information regarding the project was readily available and the community could also express their concerns or suggestions. 5.5 What mechanisms have been established to monitor and evaluate the impact of the project on the environment? Do the indicators reflect the objectives and results of the EMP? The Environmental Management Plan has defined under each of its detailed programs monitoring requirements that include indicators, the agencies/groups responsible for periodic monitoring during construction and operation, as well as a listing of monitoring activities. The environmental auditor will assume the responsibility of supervising all programs proposed under the EMP, and will prepare periodic reports for the environmental authorities on compliance, problems, and potential solutions. In addition, the bidding documents for the upgrading works will outline monitoring provisions, in which an environmental audit of the contractor's work will be carried out periodically to ensure that it complies with the contractor's respective EMP or ELA. -25 - 6. Social: 6.1 Summarize key social issues relevant to the project objectives, and specify the project's social development outcomes. Several social issues will be addressed in the project, including: (i) development of social capital along with the proposed upgrading component; (ii) TA for developing quality-of-life indicators which go beyond the traditional output/outcome indicator scheme; (iii) programs to inform and educate the users of the Transmilenio system; (iv) unification and improvement of the various resettlement policies of different District entities, to be applied in all cases of public works, environment preservation, hazardous zones and urban renewal. Additionally, Components A and B include Social Management Plans. The objectives of the Social Management Program for Component A- Improved Mobility- are the following: (i) to mitigate the social impacts resulting from physical infrastructure works; (ii) to provide the necessary information to the communities affected by the physical works; (iii) to promote participation of the residents under the influence of the project and respond effectively to their demands. For Component B - Urban Upgrading, the Social Management Plan seeks to strengthen social identity and social cohesiveness and promote sense of responsibility upon collective goods. These objectives will be reached through the following sub-components: promotion of citizen culture, strengthening social organizations and assistance to vulnerable groups. The construction of the Suba busway (Al) and assistance to families in vulnerable areas (B4) may require resettlement of some of the affected population. A Resettlement Plan for Al and a Resettlement Framework for B4 were prepared to address such needs. For the construction of Av. Suba busway, IDU prepared according to Bank Policy 4.12 a Resettlement Plan which was approved by the Bank and adopted by the entity. Under this plan, there is an estimated 591 families and businesses to be resettled. For the resettlement of families living in risk prone areas of the UPZs, CVP prepared a Resettlement Framework. The families located in areas close to water bodies and hazardous zones will be identified and assisted during the implementation of the PMIB (See Annex 14 for more details). The civil works related to installation of water and sewerage pipes (Component B2), improvement and rehabilitation of roads (Component B3), and construction of parks and community facilities (Component B5), will not involve any land acquisition actions or cause loss of shelter, assets, access or loss of income sources. 6.2 Participatory Approach: How are key stakeholders participating in the project? Key stakeholders participate at several levels in the project. In preparing the POT, there were about 900 public and private institutions involved in workshops, dialogs, surveys and other such methods. Additionally, for both the transport and upgrading works, several representatives of the responsible entities held community meetings and sought active feedback from community groups, NGOs and CBOs before they prepared their investment programs. During Project implementation each component entails several activities to facilitate community participation as such: information and consultation sessions with communities; information activities through different communication mediums; workshops to promote the adequate use and control of public space and training to improve the capacity of social organizations. 6.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations? - 26 - The CVP has already been in contact with several NGOs and community-based groups and it is working to pool the resources of social workers and others involved in the sector for greater coordination and community interaction. 6.4 What institutional arrangements have been provided to ensure the project achieves its social development outcomes? IDU will contract a specialized team to implement the Resettlement Plan. The team will be composed by I director, 3 social specialists, 3 lawyers, 1 economist, 1 real state professional, 2 certified public accountants, and 3 assistants. IDU has a Social Management Unit which is responsible for contracting and supervising the implementation of the Plan. From the previous Bogota Urban Transport Project, IDU has strengthened its capacity to design and implement resettlement plans. Additionally, IDU has adopted the resettlement procedures for all the works that cause involuntary displacement. Designation of the CVP as the lead entity with responsibilities for both coordination of infrastructure and social and community development works will help ensure positive outcomes. Additionally, the policy of the District and the CVP to use existing CBOs, NGOs and other such entities, complemented by project TA, will also help ensure the development outcomes envisaged. 6.5 How will the project monitor performance in terms of social development outcomes? In addition to regular Bank and counterpart assessments, provisions have been made to use a well-respected monitoring and evaluation entity, the Fundacion Corona, to conduct periodic qualitative and quantitative assessments of project achievements and to provide feedback on various impacts of the project works. 7. Safeguard Policies: 7.1 Are any of the following safeguard policies triggered by the pr ect? - Policy Triggered . Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) * Yes () No Natural Habitats (OP 4.04, BP 4.04, GP 4.04) (9 Yes * No Forestry (OP 4.36, GP 4.36) () Yes * No Pest Management (OP 4.09) ( Yes * No Cultural Property (OPN 11.03) ( Yes * No Indigenous Peoples (OD 4.20) ( Yes * No Involuntary Resettlement (OP/BP 4.12) * Yes ( No Safety of Dams (OP 437, BP 4.37) U Yes S No Projects in International Waters (OP 7.50, BP 7.50, GP 7.50) (9 Yes * No Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)* C) Yes * No 7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies. Environment. All of the District entities which are involved with the proposed project already have Environmental Management Manuals which apply to the proposed works. Additionally, environmental specifications for contractors are included in the bidding documents and work-specific environmental management plans for the construction of the Suba trunk line and the upgrading works to ensure compliance with the Bank's environmental safeguard policies. Resettlement. Both the CVP and IDU have acquired ample experience in preparing and implementing -27 - resettlement plans under ongoing Bank-financed projects in water and transport respectively. For the Bogota Transport Project, the District decided to adopt the Bank's guideline for right-of-way acquisitions, even for investments financed from its own resources. Additionally, for the proposed project, the District will prepare a Policy Plan for resettlement for those families who have to be displaced because of the proposed project works. Initial indications are that there would be few families who have to be relocated and among these, the majority would be moved because they are in hazardous areas. Under the institutional strengthening component, assistance will be provided to the District to develop a unified integrated resettlement policy plan for all of its planned activities (public works, hazardous zones, environmental preservation, urban renewal), thus eliminating confusion. This initiative is included in the POT and it is expected to assist both affected residents as well as the District in resolving a very controversial and difficult problem. F. SustalnabUiiy and Risks I. Sustainability: The prospects for project sustainability are excellent, given that: (i) the project fits perfectly into the three-year District's development plan (PD) and is consistent with the ten-year spatial plan (POT); and (ii) there have been three strong administrations, which, with Bank assistance, have established several important long-term institutional, policy and related reform measures which cannot be easily reversed. Also, under the current national constitutional framework, the POT and PD cannot be arbitrarily modified and the District is increasingly focusing its attention upon operation and maintenance aspects for its assets. 2. Critical lRisks (reflecting the failure of critical assumptions found in the fourth column of Annex 1): From Outputs to Objective - The second phase of Transmilenio is M The District has already received initial not completed in the next 3-year period. funding from the GOC and has commenced some of the preparatory works. - Residents do not use the public M Public use of the existing Transmilenio and transport and non-motorized facilities as other facilities has been great and this is anticipated. expected to continue. The District has had several programs aimed at helping the public to use the system safely and many of these activities will be assisted by the project. -Safety framework for bicycle use is not M Plans are already being finalized and established and in operation. implementation will commence shortly - Communities do not participate actively M All of the entities have already been working in the project. with the various communities and they have plans to pool their resources and coordinate their efforts more in the future. - Violence in isolated poor M CVP and other staff have developed a good neighborhoods is an obstacle to Project working relationship with community leaders - 28- operations. and provisions are being made to continue and expand upon such contacts. - Morphological recovery plans are not M The POT and ongoing District initiatives, adopted by the authorities and helped by a strong consultation process, communities. provide a solid reference point for the authorities and communities to accept the recovery plans. - IDU and CVP studies are not completed N These studies and TA are being prepared in or the results and recommendations are consultation with the key stakeholders and this not accepted by the authorities. should assure their acceptability. - The DAMA monitoring and technical M This is part of DAMA's ongoing operations support system is not operational. and many aspects are already underway. - The District Council does not approve H It is widely recognized that even though the and support initiatives proposed by SHD. District is efficiently run, its financial situation will suffer without additional funding. This, along with ongoing discussions with the Mayor's office, will help to ensure Council approval. From Components to Outputs - Private-sector contractors do not obtain H There has been positive private sector response financing for constructing the busway. to IDU's publicity of its planned works. Bogota has a AAA credit rating. GOC/ District funding from future transfers and high liquidity in the banking sector have helped. - The Government do not honor its M This risk is mitigated by the legal commitments guarantee to fund 70% of the made by the Government and the negative construction cost of the busway through results which could arise if the Government future transfers. reneges. - Transmilenio trunk system is not in M Both IDU and Transmilenio are well advanced operation. in their preparatory work for this phase of the system. - There is not adequate management and M Non-motorized transport has been an important promotion of non-motorized transport. element of the District's mobility plan and the existing bicycle paths and other activities have shown the commitment of the District to this objective. - STT do not have the capacity to M STT has shown improvements in several key implement the programs and guarantee areas over the past year and it has hired capable stability and staff continuity. consultants to assist it in preparing and designing the project components. -29 - - EAAB water and sewerage investments N The FMRs will contain progress made by do not occur on time. EAAB and IDU. In addition, an agreement between EAAB, CVP, and SHD is being prepared to report the information on water and sewerage investments in the selected UPZs. - IDU investments do not occur on time. M IDU's budget and its investment plans have already been approved and it has made progress in many of the key project tasks. - CVP is unable to effectively coordinate M The schedule of works of EAAB and IDU, two the work of other entities. of the main entities in the UPZs, have already been finalized and CVP has had regular coordinating meetings with them and the affected communities. - There are land acquisition delays. M The experience of the previous Bank project has provided a very helpful tool to address land acquisition under the project. Updated land acquisition plans were reviewed and approved by the Bank. - There are legal constraints to improve M The CVP has been working in this activity for land acquisition procedures. several years and it has experience in the task. Additionally, it has established modest initial goals. - CVP has problems in integrating with M CVP's main functions will pass to DAMA in DAMA's operation. case the reform to liquidate the entity is not approved by the City Council. Both CVP and DAMA staff have made the needed preparations for such change. - There is not adequate enforcement of M The Government is actively seeking to improve air-quality and related controls. air quality standards and it has already commenced with several new enforcement initiatives; additional actions will therefore be in line with such initiatives. - The affected entities do not agree with M The terms of reference of the studies will be the proposals arising from studies done reviewed by the Coordinating Unit and key by DAPD. municipal staff to guarantee that the studies are consistent with the affected entities. - There is political interference as SHD M Both existing macro-economic conditions as attempts to implement revenue- well as the District budget needs will help to enhancement recommendations. minimize such attempts. Overall Risk Rating M Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk) -30- 3. Possible Controversial Aspects: G. Main Loan Conditions 1. Effectiveness Condition The PCU should: (i) have a Financial Management System in place, (ii) appoint a Financial Officer and a Procurement Specialist acceptable to the Bank; (iii) prepare and submit to the Bank a satisfactory Project Operations Manual which includes, among other things, acceptable standard bidding documents and evaluation criteria for National Competitive Bidding, Shopping and Selection of Consultants and (iv), appoint an external auditing firm, based on terms of reference acceptable to the Bank. 2. Other [classify according to covenant types used in the Legal Agreements.] The District should agree to the use of Cost and Quality Based Selection method for the selection of consultants for works costing more than US$100,000, including the consultants for the supervision of works which will be financed by the District. General condition. IDU will award the contract for the construction of the Troncal Suba during the first semester of 2003. External auditors will be hired and they will carry out an annual financial audit of the project as required by Bank Policies. The auditors would audit the Financial Statements on an annual basis. The auditors would also conduct interim audits throughout each year of project implementation. In addition, internal auditing procedures would be performed following SHD internal control procedures. The internal control and auditing system contribute to assure an adequate follow up of the use of funds. H. Readiness for Implementation 3 1. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation. D 1. b) Not applicable. Z 2. The procurement documents for the first year's activities are complete and ready for the start of project implementation. 3 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. D 4. The following items are lacking and are discussed under loan conditions (Section G): - 31 - 1. Compliance with Bank Policies X 1. This project complies with all applicable Bank policies. O 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies. Thakoor Persaud Danny Leipzi - -G iro Team Leader Sector Man r rector Country Manager/Director - 32 - Annex 1: Project Design Summary COLOMBIA: Bogota Urban Services Project *, R . ' ;Key Performance I bta Collection Strategy . ; . ; Hierarchy ~ ~ ~ ~ ~ ~ ~ ~ C ofCritical__ _ _ _ __ _ __ _ __ _ _ Assu mr tions Hierarchy of Objectives Indicators . - _._-_-___4*_____''- Critical umi Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission) 1. Promoting peace and Number of displaced persons Supervision missions. Violence in the project area development. benefiting from the project. does not increase. CVP coordination program Increase in community operational. participation in project areas 2. Achieving fast and Improved service quality in Supervision missions, Institutional reform measures sustainable growth. project area. third-party surveys and focus are.approved by city council groups. and unions. 3. Sharing the fruits of growth. Number of new and renovated Supervision missions. Current and anticipated budget connections made in project funding is available. area. 4. Building efficient, accountable and transparent Operation and Maintenance Supervision, mid-term and All agencies participating in governance. arrangements and budget. ICR missions. the project have medium-term strategies to sustain and expand achievements made through the project Project Development Outcome / Impact Project reports: (trom Objective to Goal) Objective: Indicators: 1. Improve urban livability -improved quality of life Mission reports -Inter-institutional by increasing access, indicators. coordination will continue coverage, quality, reliability, - improved inter-agency Posting of indicators in the throughout the project and inter-agency coordination coordination in city. project's web site. in the provision of water, - decreased average in travel - The timing of investments sanitation, transport and time and costs. and reforms is carefully related basic services, planned and executed. particularly for residents in low-income areas. 2.1mprove system -improved administrative, Mission reports -regional planning framework sustainability by strengthening operational, and planning developed and functioning. the institutional and capabilities of the participating Posting of indicators in the administrative framework for institutions. project's web site. efficient delivery of transport - improved ability to manage services throughout the city. supply and demand in sector. - 33 - I ' . v --Key Perhomiance |Data Collection Strategy 'ierrtrchy of Objectiv J Jndicats ~ J _-_ _ Critical Assumptlons Output from each Output Indicators: Project reports: (from Outputs to Objective) Component: 1. Improved mobility: physical 4 of connectivity solutions Supervision missions, periodic Second phase of Transmilenio works and support to policy constructed. reports, user surveys, is completed in the next 3-year reforms aimed at increasing - increased # of km. covered Transmilenio, IDU and STT period. the use of public transport and by the transport system. field surveys, ICR. non-motorized transport - # of trunk stations built. Residents use the public modes. - # of km of interconnected Posting of indicators in the transport and non-motorized bike paths in operation. project's web site. facilities as anticipated. - # of intersections controlled in unified network system. Safety framework for bicycle - # of articulated and feeder use is established and in buses in service. operation. - # of Passengers transported in a working day. -# of new users in the transport system. - decreased # of traffic-related accidents, injuries and deaths. - increased use of bike paths. - increased service quality. 4 of road-safety programs presented. - reduction of the oversupply in public transport capacity. 2. Urban upgrading: physical 4 of new water-supply Supervision missions, periodic Communities participate and social upgrading of 14 connections. reports, user surveys, CVP actively in the project. UPZs and their connection to - # of new sewerage surveys, ICR. the city. connections. Violence in isolated poor - # of barrios legalized. Posting of indicators in the neighborhoods can be curbed - # of titling processes project's web site. and is not a project obstacle. initiated. 4 of properties titled. Morphological recovery plans 4 of environmental plans adopted by the authorities and prepared. communities. - # of mitigation works executed. - # of families resettled. - # of families trained in improvement works. 4 of works constructed by the community - # of reinforced community facilities done. 3.TA and studies: IDU: Supervision missions, periodic Studies are completed and the implementation of the -An administrative system reports, user surveys, IDU results and recommendations recommendations of the developed and under operation surveys, ICR. are accepted by the authorities. various studies and TA - # of staff using the - 34- contracted. administrative system. Posting of indicators in the project's web site. CVP: Supervision missions, periodic Studies are completed and the - # of projects in the UPZs reports, user surveys, CVP results and recommendations implemented through the new surveys, ICR. are accepted by the authorities. coordination system. - # of community nodes Posting of indicators in the established in the UPZs project's web site. DAMA: - # of new programs and Supervision missions, periodic Monitoring system designed measures implemented reports, user surveys, DAMA and operational. - % of air pollution reduction surveys, ICR. in the District Technical support system - % of vehicles which comply Posting of indicators in the established and operational. with emission standards. project's web site. - % of the population covered by media institutional programs DAPD - # of strategies prepared and Supervision missions, periodic adopted to improve areas reports, user surveys, DAPD under the influence of the surveys, ICR. transport system . - resettlement policy adopted. Posting of indicators in the - # of intervention plans project's web site. prepared and implemented in the UPZs. - # of tools developed for planning and strengthening community participation. SHD - improved vehicle, land, Supervision missions, periodic District Council approves and property, industry and reports, user surveys, SHD supports initiatives proposed commercial tax collection surveys, ICR. by SHD. resulting from studies and TA. - # of new revenue Posting of indicators in the enhancement initiatives and project's web site. strategies prepared and implemented. - FMR system prepared and operational. - 35 - risrreiray ofl Objectrtes ii ~Zetti2r$ { _ ? $ m Project Components / Inputs: (budget for each Project reports: (from Components to Sub-components: component) Outputs) A. Improved mobility US$ 180.86 M A-i Construction of busways US $ 109.90 M Supervision missions, periodic Private-sector contractors will reports, mid-term review, user obtain financing for surveys, Transmilenio data, constructing the busway. ICR. The Government and District have in place legal commitment to fund (66% GOC - 34% District) construction cost of the busway through future transfers. A-2 Upgrading of feeder routes US $ 44.45 M Supervision missions, periodic Transmilenio trunk system is reports, mid-term review, user in operation. surveys, Transmilenio data, ICR. A-3 Non-motorized transport US $ 15.44 M Supervision missions, periodic There will be adequate reports, mid-term review, user management and promotion of surveys, IDU data, ICR. non motorized transport. A-4 Transit and transport US $ 11.06 M Supervision missions, periodic STT will have the capacity to reports, mid-term review, user implement the programs. surveys, STr data, ICR. Stability and staff continuity in STT. B. Urban upgrading US $ 76.34 M B-1 Planning and legalization US $ 0.57 M Supervision missions, periodic Water and sewerage B-2 Water and sewerage US $ 33.37 M reports, mid-term review, user investments occur on time. B-3 Accessibility US $ 29.03 M surveys, CVP data, ICR. B-4 Resettlement US $ 9.97 M IDU investments occur on B-5 Public space US $ 1.84 M time. B-6 Environment US $ 1.19 M B-7 Housing improvement US $ 0.38M CVP effectively coordinates the work of other entities. No land titling delays occur. C. Institutional strengthening US $ 14.46 M C-I Technical Assistance to US $ 2.05 M Supervision missions, periodic No legal constraints to reduce IDU reports, mid-term review, land acquisition procedures. IDU data, ICR. C-2 Technical Assistance to US $ 1.77 M Supervision missions, periodic CVP integrated without CVP reports, mid-term review, problems in DAMA. - 36 - CVP data, ICR. C-3 Technical Assistance to US $ 1.41 M Supervision missions, periodic That there will be adequate DAMA reports, mid-term review, enforcement of air quality and DAMA data, ICR. related controls. C-4 Technical Assistance to US $ 3.75 M Supervision missions, periodic The affected entities agree DAPD reports, mid-term review, with the proposals arising DAPD data, ICR. from studies done by DAPD. C-5 Technical assistance to US $ 5.47 M Supervision missions, periodic No political interference as SHD reports, mid-term review, SHD attempts to implement SHD data, ICR. revenue-enhancement recommendations. Summary of Performance Indicators And Milestones COLOMBIA: Bogota Urban Services Project Overall Project Baseline 2003 2004 2005 2006 2007 End of - INDICATORS (measured with annual targets) Proj. Start - Expected Increases Project Component A - Improved Mobility No of Traffic intersections controlled by Unified Network 875 10 20 20 15 5 945 Component B - Urban Upgrading No. of Barios Legalized 66 19 4 - - - 89 No. of New Water Connections 0 4,950 4,460 3,520 2,740 - 15,670 No. of New Sewerage Connections 0 8,220 17,520 31,860 25,620 - 83,220 No. of km/lane improved and rehabilitated in access roads 0 25 38 38 19 - 120 No. of Community Facilities (parks and public space) 0 16 16 18 5 - 55 No. of Mitigabon Works in hazardous areas 0 3 4 3 5 - 15 No. of Households Reached for Home Improvement TA 0 775 291 - - - 1,066 No. of Land Titles finalized 0 236 200 - - - 436 Component C - Institutional Development No of Staff trained in Strategic Planning in IDU 6 6 12 12 10 4 50 No of Projects Imp. Thru New Coordination System in CVP 0 4 5 5 - 14 Ii - MILESTONES (measured at the end of the project) Baseline End of Component A - Improved Mobility Proj. Start Project No.of Passengers Transported by Transmilenio System 750,000 1,660,000 Increased No. of Daily Passengers on new Feeder Roads 0 340,000 Km operated In Bike Path Network 264.5 300 Increase in Use of Bike Paths (Daily Trips) 3% 5% Oversupply of Legal Public Transport Vehicles 8,500 4,500 Component C - Institutional Development Improved Vehicle, Land, Property Industry and Com Tax Coll. NA NA Prep of New Revenue Enhancement Initiatives and Strategy NA NA - 37- Performance Indicators And Milootones COLOMBIA: Bogota Urben Services Project Component A: Improved Mobility Baselino 2003 2004 2005 2006 2007 End of I - INDICATORS (measured with annual targets) Prol. Start E2pected Increases Project -4 Transit and Transport % Population reached by Traffic Safety Programs 16 10 10 12 12 7 67 No of Traffic Intersections controlled by Unified Network 875 10 20 20 15 5 945 B&ealine End of I - MILESTONES (measured at the and of the project) Proj. Start Project A-1 Construction of Busways No.of Passengers Transported 750,000 1,660,000 No. of Articulated Buses in System 0 254 A-2 Construction of Feeder Roads No. of new Daily Passengers Users of Feeder Roads 0 340,000 Km of Feeder Roads Constructed under Project 0 338 No of New feeder routes 0 39 No. of Buses on Feeder Roads 0 241 A-3 Non-Motonzed Transport # New Connecting links constructed 0 36 Km operated in Unified Network 264.5 300 % total tnps taken by bicycles 3% 5% A-4 Transit and Transport Oversupply of Legal Public Transport Vehicles 8,500 4,500 Performance Indicators And Milestonca COLOMSBIA: Bogota Urban Services Projoct Component B: Urban Upgradinng Baselina 2003 2004 2005 2006 2007 ind ol - INDICATORS (measured with annual targets) Proj. Start -------- -------------. Epected Incroases -------------------- Project B-1 Planning and Legalization of Barlos No of Barlos Legalized 66 19 4 - - 89 No of updated urban design tramework 26 7 5 2 - . 40 -2 Water and Sewerage Improvement No of New Water Connections 0 4.950 4,460 3,520 2.740 - 15.670 No of New Sewerage Connections 0 8,220 17.520 31,860 25,620 - 83.220 Meters of Trunk Main Constructed 5.170 10,960 3,200 2.520 1,040 - 22.890 -3 Access roads No of km/lane bujit in access roads 0 20 30 30 15 - 95 No of km/rehabilitated in access roads 0 5 8 8 4 - 25 B-5 Parks and Public Space No of Community Facilities constructed 0 16 18 18 5 - 55 No of schools reinforced 0 1 1 2 - - 4 B-6 Environmental Restoration No. o Mltigation Works 0 3 4 3 5 is No of Restoration Plans Prepared 0 1 1 - - - 2 B-7 Housing Improvement No ol Households Reached for Home Improvement TA 0 775 291 - - 1.066 No of Land Titles Finalized 0 60 120 120 100 40 440 Boselilno End of I- MILESTONES (measured at the end of the project) Prol. Start Project -3 Accessibility Reduction in Travel Times 0 20% - 38- Performance Indicators And Milestones COLOMBIA: Bogota Urban Services Project Component C: Institutional Development Baseline 2003 2004 2005 2006 2007 End of I - INDICATORS (measured with annual targets) Proi. Start -------------- Expected Increases -------------------- Project C-1 Technical Assistance to IDU No of Staff trainned in strategic planning in IDU 6 6 12 12 10 4 50 C-2 Technical Assistance to CVP No of Projects Imp. Through New Coordination System 0 4 5 5 - - 14 11 - MILESTONES (measured at the end of the project) IMPLEMENTATION DATE C-1 Technical Assistance to [DU Start End Implementation of an Administrative System April, 2003 August, 2007 C-2 Technical Assistance to CVP Implementation of New Coordination System April, 2003 August, 2007 C-3 Technical Assistance to DAMA Air Quality Management Plan revised April, 2003 September, 2004 Plans for environmental restoration in selected UPZ April, 2003 September, 2003 Air Quality Monitoring Network upgraded April, 2003 June, 2004 Enhanced enforcement capacity for controling mobile source emisions April, 2003 December, 2003 Habitat Observatory Results April, 2003 March, 2004 C-4 Technical Assistance to DAPD Preparation of a mobility policy according to the Transmilenio system August, 2003 September, 2005 Resettlement Policies Prepared and Adopted April, 2003 December, 2003 Preparation and implementation of housing policies June,2003 March, 2006 Preparation and implementation of employment generation policy March, 2004 February, 2005 C-5 Technical Assistance to SHD Improved Vehicle. Land, Property Industry and Com Tax Coll. April, 2003 August, 2007 Prep of New Revenue Enhancement Initiatives and Strategy April, 2003 August, 2007 -39 - Annex 2: Ozteiled Project Oescr6ption COLOMbMA: 13ogota Urban Services Project By Component: Project Component 1 - US$180.87 million A. Improved mobiRity. This component, to be executed by IDU, Transmilenio and STr-FONDATT, comprises expansion of the second phase of the Transmilenio system and improved access to public transport. It comprises the following sub-components: A-I Construction of Busways. (US$ 109.90 millions). Construction of dedicated lanes for Transmilenio buses and car traffic in Av. Suba, from Calle 80 to Avenida Ciudad de Cali, a distance of about 11 km. This component includes consultant services (design and supervision), works and land acquisition. This busway will be financed with resources from Transmilenio S.A. and IDU, which will count as counterpart funds. It will be executed by IDU. A-2 Upgrading of Feeder routes. (US$ 44.46 millions) This sub-component, to be executed by IDU, includes consultant services (design and supervision), improving, upgrading and rehabilitation of about 265 km of roads for general circulation as well as feeder routes to the Transmilenio system, most of these being in low-income settlements. By connecting the neighborhoods to the Transmilenio System, these feeder routes constitute an essential part of the District's integrated transport system, affecting about 50% of the users of Transmilenio system. A-3 Non- motorized transport. (US$ 15.44 millions) This sub-component, to be executed by IDU, includes the following activities: (i) construction and maintenance of bicycle paths and sidewalks; (ii) parallel sidewalk improvement (on the other side of the bicycle paths); (iii) improvement and maintenance of the existing bicycle paths; (iv) consulting services to upgrade the Master Plan; and (v) a plan for promoting the use of bicycle paths. A-4 Transit and Transport. (US$ 11.06 millions) This component to be executed by STT-FONDATT will include: A-4.1 Public Transport Studies. This sub-component includes activities to support the development of an adequate transport system. It comprises technical consulting services aimed at improving efficiency and sustainability in the city's transport system through such activities as: (ii) actions aimed at improving the operation of the overall transport system ; (iii) reorganizing public transport management systems to improve service quality in accordance to the Transmilenio system; (iv) decreasing the over supply of public transpoirt vehicles; (v) reducing pollution levels; and (vi) decreasing the transport-related accidents. A-4.2 Road safety: This sub-component seeks incorporation of a road safety policy by the District and includes the following aspects: (i) development of an integrated system of information on road safety and traffic accidents; (ii) establishment of safety standards in road design; (iii) improvement of risky intersections throughout the city; (iv) road safety education; (v) establishment of safety standards for vehicles; (vi) control measures for road safety; (vii) assistance to the people involved in accidents; (viii) training and driver testing; and (ix) development of a system of communication to prevent accidents. - 40- A-4.3 Traffic Administration. This sub-component supports actions to develop a more efficient traffic administration system in the city, including the improvement of traffic signal systems. It also comprises the following aspects: (i) integration of motorized and non-motorized transport; (ii) development of actions to discourage the use of private cars; (iii) implementation of a parking policy; (vi) installation of traffic signal devices; and (vii) analysis of congestion points in traffic circulation. Project Component 2 - US$76.34 million B. Urban upgrading. This component is designed to support the activities of the Programa de Mejoramiento Integral de Barrios (PMIB), which is the District's urban upgrading program adopted from the POT and PD. It is to be coordinated by CVP and will include physical and social aspects: Physical aspects.The physical aspects of the urban upgrading component comprises the following sub-components: (i) planning and legalization of barrios; (ii) construction of storm water drainage systems, water and sewerage systems; (iii) improving or upgrading of access roads; (iv) resettlement of population located in risk prone areas and water bodies; (v) construction of parks, public space and community facilities; (vii) environmental recuperation of degraded areas and mitigation activities; and (vi) technical assistance for housing improvement and land titling. B-l Planning and Legalization of barrios (responsible entities: DAPD). US$ 568,000. This sub-component includes: (i) design and implementation of an urban framework, taking account of construction norms, standards and changing land use patterns; (ii) legalization of 23 barrios; and (iii) design of plans for morphological recuperation. The project will finance "fichas normativas" which is a regulatory instrument established in the POT for the legalization of the UPZs. This regulatory framework comprises the description of land uses, topographic conditions, building codes and level of consolidation of the UPZ. DAPD is in charge of this process. The community plays an important role in the legalization of neighborhoods since they have to submit the topographic plans and obtain the approval for the connection to services from different entities before they initiate the legalization process. Once the documentation is elaborated, it is approved by decree by the Mayor. From the 14 prioritized UPZs, two will receive approval of their urban design structure by the end of 2002 and it is expected that seven more will be completed by the end of 2003, with the rest completed by 2004. This process is needed as a precondition for the legalization stage and requires detailed planning and extensive community participation before it is approved by decree. There are 58 neighborhoods in the 14 UPZs that are not legalized; from these, 23 will be legalized under the project. The municipality is planning to legalize the rest of the neighborhoods by the year 2010. B-2 Water, sewerage and storm water drainage systems (responsible entity: the District). US$ 33,367,000. The PMIB prioritizes the construction of systems which have designs ready. There are 13,969 lots with water system design, 41,520 lots with sewerage system design and 67,058 with storm water system design in the selected UPZs. The District is planning to install about 26.32 km of water pipes, 67.04 km of local sewerage pipes and 225.81 km of main sewerage pipes. Due to current geological movements in Ismael Perdomo, the District does not yet have a diagnosis of the deficit and therefore the construction of new pipes is not included in the period 2003-2004. In San Isidro Patios the District cannot intervene since the neighborhoods have not been legalized and technically the company cannot provide the service because they are located above the established pressure line of service. Additionally some neighborhoods are located in areas of environmental preservation and no action can be taken until the national and regional environmental entities define the procedure to relocate such individuals. - 41 - B-3 Access roads (responsible entity: ]JDU). US$ 29,029,000. This sub-component includes consultant services (design and supervision), improvement and upgrading of complementary routes to the integrated transport system, pavement of local roads that are part of local mobility corridors and improvement of sidewalks. Improving mobility is considered among the most important factor for social inclusion in the Program. Several institutions such as Transmilenio, STT, DAPD, EAAB, CVP and IDU participated in workshops and field visits to define the methodology for laying out the local mobility corridors. The following aspects were considered: (i) circulation of legal transport routes and feeder routes; (ii) technical viability for defining road sections and turning radius; (iii) technical viability facilitating construction of water and sewage lines; and (iv) road-use pattems. The Bank will finance such rehabilitation and improvement works in 13 UPZs. From 2003 to 2006 the goal is to upgrade 95 km/lane and rehabilitate 25 km/lane of access roads. B-4 Resettalement (responsible entity: CVP). US$ 9,971,000. The resettlement of families in the selected UPZs is a responsibility of CVP. The District's Institute for Disaster Prevention and Emergency Assistance (DPAE) DPAE and the EAAB identify vulnerable areas which are at risk of land slides and floods. If the risk can not be mitigated by physical works, families living in those areas need to be resettled. The CVP is responsible for providing technical assistance and carrying out the resettlement process consistent with the requirements of the Bank's Policy 4.12 governing such resettlement activities. More details about the resettlement framework are explained in Annex 14. B-5 Parks, public space and community facilities (responsible entity: CVP). US$ 1,839,000. For the construction of parks and community facilities the District will use an ongoing District program, Projects with Pedagogical Purposes, to increase the coverage and quality of public space and to promote community participation. Through these demand-driven works, the communities that are organized in Juntas de Accion Comunal propose projects within the category of parks, public space or community facilities. DAAC grants the resources for priority projects which comply with the established criteria of the institution. Projects with Pedagogical Purposes have been in operation since 1996 and they are part of the Plan de Desarrollo 2001-2004 "Bogotd para vivir todos del mismo lado. "The goal is to complete 55 of these projects by the year 2006. As part of this component, the Secretary of Education will undertake reinforcement of four school facilities, reflecting both community priorities as well as diagnostic studies which were previously done to determine the seismic vulnerability of school facilities in the city of Bogota. 1B-6 Environmental recuperation of degraded areas and mitigation activities (responsible entity: DAMA) US$ 1,193,000. This sub-component entails the implementation of (i) environmental recuperation of degraded areas that are part of the main ecological structure in the UPZ Jerusalen and limiting urban encroachment of rural areas; and (ii) risk-mitigation activities in Ismael Perdomo, Tesoro and San Blas. The environmental improvement actions comprise activities such as land stabilization, refurbishment and landscaping. The design of plans for morphological recuperation comprises actions to protect the environment and recover urbanized areas where previous activities such as mining and housing construction have adversely affected the environmental condition of the UPZs. It will also help ensure the safety of the community by preventing urban development in these risky areas degraded by mining. There are 8 areas which have been identified for such protection. The first plans, which will be carried out with community participation, will be undertaken in Ismael Perdomo, where there is a population at risk due to geological movements, and in Gran Yomasa where there is a need to protect the environmental characteristics of the Entre Nubes Park. - 42 - B-7 Housing Improvement (responsible entity: CVP) US$ 375,000. This component consists of (i) technical assistance for physical upgrading and (ii) tenure regularization. Physical upgrading tasks include technical assistance for reinforcement of the housing structure and complementary measures aimed at improved housing livability. The CVP is planning to assist about 1,066 families by the year 2004. The process of tenure regularization is undertaken through three mechanisms: (i) direct negotiation with the owner (when the owner is identified); (ii) process of "pertenencia" or acquisitive prescription, where social housing has existed for more than five years; and (iii) free transfer when land belonging to the District or the Nation has been occupied before 1988. CVP estimates that there are about 70,281 lots with illegal titles in the selected UPZs; from these, about 19 percent would require direct negotiation, about 72 percent belongs to private owners and about 10 percent belongs to the District and the Nation. The goal of the CVP is to deliver about 436 land titles in the first two years of the project. Even though the PMBI does not include other public services such as electricity, gas or solid-waste disposal, it is expected that the companies which provide these services would participate to coordinate their respective activities in the selected UPZs. Social Aspects. The social aspects of the upgrading component are actions associated with the physical works which contribute to community development and to the generation of social capital. They include: (i) promoting citizen culture; (ii) strengthening social organizations and (iii) assisting vulnerable population groups. The cost of the social aspects of the PMIB is US$ 3.96 millions. While the CVP is responsible for general coordination, other institutions such as IDU, DAAC, DAMA and DAPD are in charge of delivering specific activities (see Annex 14 for more details). Project Component 3 - US$ 14.46 million C. Institutional Development. C-1 Technical Assistance to IDU. (US$ 2.05 million) This sub-component includes the following: (i) equipment and consulting services to support a road infrastructure adrministration system; (ii) development of an information system for IDU's activities; (iii) staff training in strategic issues affecting the entity; and (iv) the implementation of a pilot project to use used tires as a road-surfacing agent. C-2 Technical Assistance to CVP. (US$ 1.77 million). This sub-component includes the creation of mechanisms to improve the coordination among District institutions, community organizations, NGOs and the private sector as well as changes in the operational structure for implementation of neighborhood improvement programs. The activities comprise: (i) strengthening operational capacity through development of actions and strategies; (ii) upgrading technical equipment; and (iii) design and implementation of a system of information, evaluation and monitoring of the PMIB. C-3 Technical Assistance to DAMA. (US$ 1.41 million). This sub-component includes: (i) the acquisition of equipment to improve and modemize the air quality network, such as PM I0, ozone, and Nox analyzers as well as meteorological equipment; (ii) studies and technical assistance aimed at evaluating District projects and programs to control and diminish air pollution and identifying complementary programs to more effectively prevent pollution; (iii) studies to evaluate the effectiveness of current emissions control programs and determine required improvements, including the purchase of equipment for existing mobile units and development of an information system to monitor emissions diagnostic centers; (iv) an economnic analysis of the impacts of air pollution, including health impacts; (v) education and awareness programs on air pollution prevention; and (vi) institutional strengthening to help develop and establish local environmental guidelines for such problems as noise pollution and tire, battery and oil waste disposal. - 43 - C-4 Technical Assistance to DAPD. (US$ 3.74 million). Preparation of mobility, housing and regional policies which would provide input for the development of future policy measures in the city and facilitate future public investment and settlement plans. This component includes the following: (i) assessing the impact of the Transmilenio system on urbanization and land-use patterns and using these result to help in developing more appropriate land use policies; (ii) development of a housing policy including a unified resettlement policy for the District, land management and greater private sector participation; (iii) formulation of regional development strategies taking into account existing socio-economic integration between Bogota and other municipalities in Cundinamarca. C-5 Technical Assistance to SHD. (US$ 5.47 million). This sub-component includes: (i) studies and consulting services aimed at strengthening fiscal management and increasing the District revenue base (i.e cadastre property tax, automotive taxation); and (ii) Consulting services and equipment to support the coordinating unit of the proposed project. - 44 - Annex 3: Estimated Project Costs COLOMBIA: Bogota Urban Services Project -~~~~~ r -~~~~~6 r {FrIgi $mTlon . ~~~~~~~~~~- - ; -4 -t > r ; -{jt.-.< ':m1' A Improved mobblty 118 91 34 65 153 56 B Urban;up adin' 50.13 14,36 64:49 C. nstitubonalstren"'teig 9.63 3.52 13 15 TotaI. Bas§elie 'Cost' 178.67 52.53 231 20 Plhysica Con,tihencies 1 1'.'32 '4.45 15.77 Price Contingencies 19 00 5.70 24 70 Total PNojectCosts 208.99 62.68 271 67 Froit-'end fee O1.00 1 00 Total Financing Required 208.99 63 68 272.67 -45 - Annex 4: Cost Benefit Analysis Summary COLOMBIA: Bogota Urban Services Project 1. Introduction A complete cost-benefit analysis was conducted to determine the economic viability of the project. The analysis shows that the individual components as well as the overall project is economically viable. As shown in the cost and benefit streams, individual components as presented in the project description were grouped differently to facilitate quantification of the benefits associated with the proposed investment costs. The following components were analyzed: (a) Improved Mobility, with four subcomponents as follows: (i) construction of the Av. Suba bus rapid transit line, which is part of Transmilenio's second stage, which, once built, will be connected and integrated to the Transmilenio operating network, (ii) upgrading of roads which will be used by Transmilenio feeder routes, such feeder routes being an integral part of the Transmilenio system, (iii) construction of bike-paths and sidewalks to improve the connectivity of the existing bike-path network, including a plan to promote the use of the network, and (iv) support for planning studies to improve public transport, traffic safety, and traffic management; and (b) Urban Upgrading in 14 of the poorest planning units (UPZs) in the city with integrated investments in: water, sewerage, storm drainage, paving, environmental protection and mitigation interventions and all associated complementary urbanization actions, including: neighborhood legalization and land-tenure regularization and titling, resettlement, community organization, sanitation and environmental education, and institutional strengthening, based on the detailed costs and benefits of interventions in two pilot areas (Gran Yomasa and Ismael Perdomo). The objective of these analyses was to test the viability of the specific sub-components and, based on these results, the benefits and costs of the entire project, to assess its overall feasibility. 2. Methodology Detailed economic and financial assessments were undertaken for the specific components of the Project. All project components were included in these analyses, including the infrastructure works, operation and maintenance and complementary activities. Returns to the investment in institutional development, community participation and education, are included in the analyses as they are considered the basis for service sustainability and are ultimately seen in improved access to urban services in the 14 UPZs and the whole of Bogota. To determine the net incremental costs and benefits, "with" and "without" project scenarios were constructed. On the basis of these scenarios, the net incremental financial benefits and costs of the proposed investment programs were assessed; these were then adjusted for the impact of taxes, subsidies, and externalities to arrive at the economic cost and benefit streams. The cash flows were discounted using a discount rate of 12%, the estimated opportunity cost of capital in Colombia. Costs include capital costs, operation and maintenance costs, rehabilitation, resettlement, environmental mitigation and contingencies. For all the different components, costs of complementary actions necessary to achieve the expected benefits and sustainability levels targeted, were considered. Finally, sensitivity analysis, testing a number of scenarios, was conducted to assess the impact of changes in critical assumptions on the economic viability of the project. Summary of Benefits and Costs: - 46 - 3. Economic benefits Benefits from the mobility component include time savings, vehicle operating-cost savings, reductions in accidents and environmental gains due to reduced gas emissions. Implementation of the second phase of the Transmilenio system, including main and feeder routes will result in improved access to work, education, health, recreation and other urban facilities for most District residents, directly (for system users) and indirectly to all who will benefit from reduced congestion (time and cost savings and environmental improvements). Benefits from the urban upgrading component are expected to improve the quality of life to about 600,000 of the poorest residents of Bogota (living in 14 UPZs that will be upgraded) in the following ways: (i) improved access by the rationalization of street layout and street paving, to the 14 UPZs which will be connected to other developed city areas; (ii) improved water supply and sanitation services, including a reduction or elimination of supply rationing and intermittent services and ultimately improved heath conditions and reduction of morbidity rates; (iii) reduction of risk to lives and property due to the resettlement of people living in risk-prone areas; (iv) reduction in risks and loss of life and property due to a reduction of flooding resulting from investments in macro and micro drainage; (v) increased access to recreational activities with the financing of ecological and community parks, bringing social benefits; (vi) increases in social capital by involving community groups in the planning and execution of the project as well as the financing of community driven activities through the community contracting component; (vii) easier access to public services and other benefits arising from property ownership and registration; and (viii) improved institutional capacity in Bogota to address planning and shelter needs in the estimated 1,500 low-income areas throughout the District. From a macroeconomic perspective, considering the District of Bogota as a whole, the project is expected to have a positive impact linked to: (i) Economic Growth: the project investments, from both major components are expected to be linked to economic growth mainly through the reduction of congestion and the increased connectivity that will integrate large marginal informal settlements to the formal city, and from the institutional strengthening and technical assistance component by creating an enabling environment for new local private investments resulting from the provision of improved and more reliable services; and (ii) Employment Generation: although it was not conceived as an employment-generation program, the project would generate a considerable amount of short-term employment since labor (mainly unskilled labor) accounts for about 40% of total project investments, (this effect is quantified as part of the economic analysis where a shadow price for unskilled labor was used). The main impacts, however, are expected at the community level, where, because of pro-poor project design, the direct benefits are expected to accrue almost entirely to the poorest two household strata in Bogota. The net social welfare impact was estimated in the cost-benefit analysis and as reported below. The Development Plan of Bogota incorporates a strategic choice in favor of access to services by subsidizing investment costs for a large segment of the poor. Most of the beneficiaries will also receive some form of subsidized recurrent costs (O&M) because they are among the two lowest income strata which are exempted from paying property tax. For water and sewerage services, there is a tariff structure under which the relatively wealthier strata of the city will cross subsidize the cost of the poorest groups. 3.1 Estimation of benefitsfrom improved mobility component. The benefits of each subcomponent of the mobility component accrue in the form of: time savings, vehicle operating cost savings, reductions in accidents, and environmental gains due to reduced gas emissions. Accident reductions are expected because the components separate traffic flows by user type (buses in busways, bicycles in bike-paths, pedestrians on sidewalks). To estimate the benefits of the -47 - busway and bike-path components, two different models were constructed. 3.1.1 Av. Suba Busway The busway in Av. Suba is part of Transmilenio's second stage which includes two other busways, Av. Americas, currently under construction, and Av. Norte Quito Sur, where construction will start in 2003. The second stage has 40 km in total and Av. Suba is 10.26 km long. Av. Suba is an extension of the network towards the northwest of the city into a densely populated area, with over 650,000 inhabitants. This area has households falling in both upper and low-income categories, the former living in the area closest to the city center. The Av. Suba busway will have a network of exclusive lanes for high-capacity articulated buses with general traffic using segregated lanes located closest to the sidewalks. Segregated traffic flows help to reduce delays and accidents and vehicles can operate at higher speeds. Buses in the existing network of Transmilenio operate at just over 26 kilometers per hour (KPH) while mixed-traffic buses operate citywide at average speeds of 12 KPH or less. These with-without speed assumptions were used in the analysis. The Av. Suba busway, the Calle 80 busway and the Av. Norte Quito Sur busway will all become an integrated system serving destinations in the city center and the southwest zone of the city. It is assumed that the average trip length will be same as the average trip in Bogota, 8.5 kilometers. Passenger demand in Av. Suba was estimated using data from Transmilenio and Steer Davies Gleave (SDG). The three busways in the second stage are expected to transport about 661,500 passengers per weekday. The original demand study for Transmilenio forecasted that demand in the heaviest link for Av. Suba would be 23,229 passengers per hour in both directions. Transmilenio assumes that this figure represents 10.5% of total daily demand and therefore demand on Av. Suba will be 221,230 passengers/day. For the second stage, a total of 335 buses will be needed, and for Av. Suba 126 buses will be needed, making the projected demand on this corridor approximately 248,802 passengers/day, with the Av. Suba estimated to transport about 235,000 passengers on a weekday. Historic Transmilenio data indicate that weekend demand is about 66% of weekday demand and so the demand estimate for weekend days is about 154,000 passengers. Assuming 238 work days and 122 weekend and holiday days in a year, demand for the first year of operations is estimated at 74,718,000 passengers. Demand estimates for Transmilenio, such as the one done by SDG, are on the conservative side. For example, in the first stage, SDG estimated demand to be 672,000 passengers per day. Actual demand reached the 770,000 passengers per day mark within two years of commencement of operations. Based on Transmilenio data, demand is assumed to grow at just over 2% per year until year 2012 and after that at about 1.65%. For users of Av. Suba, estimated time savings have been adjusted by the increased passenger waiting time for Transmilenio buses which do not depart as frequently as other buses. While it is expected that general traffic will also experience increased speeds as a result of construction of the segregated busways, these benefits were not counted in the analysis. Instead, it was assumed that the negative externalities generated during the construction of the trunk lines (e.g., detours, traffic interruptions and temporary increased congestion), would be about the same as post-works gains and neither of these was taken into account. A similar assumption was made in previous consultant analyses of other trunk lines. Critical to the economic analysis is the monetary value assigned to time saved by the different categories of users. In the initial SDG planning and engineering studies a value of US$0.20 was used. Two other consultant studies, one by Hidalgo and Illera, and the other by Duarte-Guterman, used figures of US$1.20, and US$0.75 respectively. The latter evaluation was part of the ex-post evaluation of the Bogota Urban Transport Project (IBRD 4021-CO). Its assumption of US$0.75 per hour was adopted for - 48 - the evaluation of the project. This value of time assumes that public transport users have a monthly wage of US$212, and car users a wage of US$788 (the current minimum wage is approximately US$125). It is assumed that 30% of Transmilenio's users have an income equal to car users. This assumption is based upon surveys which show that currently, about 70% of Transmilenio passengers come from low-income households while the remaining 30% are upper income ones. Finally, it was assumed that the value of time for journeys to work and all other journeys is the same. This assumption is relaxed in the sensitivity analysis where various values were used. Under Transmilenio, infrastructure investment for the busways, overpasses, accesses and stations is financed by the city government either entirely from its own resources or with Central Government assistance. The GOC has had an agreement with the city to invest US$1,295.6 million between 2000 and 2016 in Transmilenio, this is equivalent to an estimated 65.7% of the total investment in system infrastructure. Investment in trunk and feeder buses, on the other hand, is financed entirely by private entrepreneurs who are also in charge of operating and maintaining their vehicles. Another private entity has responsibility for fare collection of the fares (900 pesos or US$0.35 per ride). The cost of the trunk and feeder buses was estimated at US$166,000 per trunk bus, and US$60,000 per feeder bus. The Av. Suba busway will required 126 trunk buses and 72 feeder buses. These costs, plus operating and maintenance costs, are included in the cost-benefit analysis. To reduce the oversupply of buses and congestion and help reduce pollution caused by old buses, Transmilenio requires its operators to scrap six old buses for every new trunk bus and two buses for every new feeder bus. Based upon sales record and interviews with owners, it is estimated that the cost of the scrapped buses is about 18 million pesos (US$6,920) in Bogota. Vehicle operating cost data used in the analysis were based on the ex post evaluations of Transmilenio, because they have actual data on the operating costs of old and new buses in Bogota as a function of speed. Operating cost data is per kilometer was multiplied by the average distance logged by bus per year. No costs savings for vehicles using the new less-clogged parallel lanes are considered, and this tends to underestimate the profitability indicators of the project. Based upon their surveys of the average cost of accidents and with accident statistics provided by District authorities, Duarte-Guterman estimated the benefits due to accident reduction for stage I of Transmilenio (41 km) at US$1,994,187 in 2001. The injury rate per 100,000 passengers was reduced by 83% in the busways in the first stage of Transmilenio and it is assumed that similar ratios will hold for the Suba busway. While the project is expected to have a positive impact on the environment because of the higher operating speeds and the use of cleaner diesel buses (instead of the fifteen-year average age of existing buses), quantifying the value of this benefit is not an easy task. One approach which was used by consultants in initial planning studies was to assume that these benefits were about 25% of the operating cost of the fleet. A more conservative figure of 2.5% of estimated operating cost was used in this analysis; however, because of the relatively small sum arising from this methodology, the impact upon the overall analysis is not significant. 3.1.2 Feeder routes Transmilenio origin-destination statistics show that over 40% of the passengers of the Stage I line take feeder-route buses. The evaluation for the Av. Suba busway includes estimates of the costs and benefits of the feeder routes; however, the upgrading costs and benefits of other local routes in the UPZs are not included in the evaluation of the Suba trunk line because these are captured by the hedonic price methodology used to evaluate the urban upgrading component of the project. While care was taken to -49 - avoid a double counting problem between the trunk line and the upgrading works in the UPZs, the trunk line analysis could still be overestimated to the degree that only the cost of the main feeder routes is included in the analysis. However, as the sensitivity analysis below shows, even if construction costs increase by 50% the project is still economically viable. 3.1.3 Bike-path component Currently, BogotA has one of the longest bike-path network in the region; however, is not interconnected in several key areas of the city and this dissuades many potential users. Those who do use the system are forced to share the streets with mixed traffic when the paths end, increasing the potential for accidents. This project subcomponent seeks to interconnect the existing network and increase the number of users by making the system less dangerous. The evaluation analyses the marginal impact of the investments on bike use throughout the entire network of bike-paths in Bogota. There are no authoritative demand estimates for the bike-path network in BogotA. While some surveys indicate that about 4% of trips are made by bicycle, in this analysis, a more conservative figure of 2.5% was used. This translates to about 360,000 trips being taken by bicycles in the entire city. Of these trips, it is assumed that there are about 150,000 users of the bike-path network for at least some part of the trip and such users increase at a rate of 2.5% per year, an assumption based on the Duarte-Guterman study. It is expected that there will be a significant number of cyclists who will opt for using the bike-path network, once there is system continuity after the project investments. Duarte-Guterman assumes that 25% of such new users will be former car users and about 75%, bus riders. The move from buses and cars to bicycle represents a savings of operational costs. At the same time, the integrated network will remove cyclists from congested roads which will have a positive impact on traffic flows and accidents. These are two types of benefits which arise from the investments in this component. According to data estimated by Duarte-Guterman, bicycle path investments will have the following benefits: o For current users, savings from reduced accidents is estimated at US$0.018/km. Assuming an average cycle trip of 5 km, the savings would be US$0.09 per user. Adjusting for the fact that the project investments are primarily connecting several formerly closed sections, it is assumed that 10% of this benefit can be attributed to the project works. o Based upon a National University study, it is estimated that overall savings associated with diverted traffic during peak and off-peak hours are US$0.921/km and US$0.398 respectively. For the analysis, it is assumed that 40% of users would come from riders traveling during the two peak periods in both directions. o Based upon past trends in Bogota, Duarte-Guterman assumes an average growth rate of 32% for the diverted traffic; for this analysis, a more conservative rate of 20% is assumed. 3.1.4 Traffic management The benefits of the planning studies and other programs to be done by STT-FONDATT in this component are assumed to be positive. For example, a road-safety program can continue to reduce accident rates as similar programs have shown in the past. Also, plans to synchronize traffic signals and traffic management measures will have important economic benefits. However, since the detailed plans for these components are now under preparation, this component has not been analyzed. 3.2 Estimation of benefitsfrom improved urban services To estimate the economic benefits of access to improved urban services a Hedonic Pricing Methodology -50 - was used. The hedonic price function is based on the housing market in which transactions can be observed. The welfare significance of the Hedonic Price Function comes from the fact that people are revealing the marginal value of particular attributes (such as access to services, distance to center, etc.) that are not sold separately in the market, but are embodied in the unit and are reflected in its price. A hedonic price function was developed to estimate the marginal value of these non-market attributes provided by the project. It permits measurement of the welfare effects arising from changes in a non-market attribute, which is the goal of the economic analysis. Economic benefits using this methodology are generally conservative and tend to underestimate the true benefits since many of the interventions, such as those related to environmental mitigation, cannot be easily quantified while the full costs are included in the analysis. For the estimation of economic benefits of this component, consultants were hired to conduct a survey of a statistically representative sample of households comprising 294 owned properties, 129 leased properties and 40 commercial properties. After outliers were identified and eliminated, the model was used in two of the fourteen selected UPZs (Ismael Perdomo in Usme and Gran Yomasa in Ciudad Bolivar). Different forms were tested for the dependent variable before deciding upon the natural logarithm of value of the house per square meter of lot as the dependent variable. Among the different functional forms analyzed, the most consistent results were obtained with a log-log function, as shown in' equation (1) below. To estimate the function, explanatory variables were selected after each was analyzed independently to find those statistically significant and to avoid the presence of collinearity and correlations that could distort the results. The best models obtained were: For residential property: (1) Ln Value M2 = 14,634 + 0.251 Pavement + 0.178 Legalized rtle. + 0.717 Ln( Baths /M2) - 0.177 Soft slope 0.331 Heavy Slope + 0.328 Telephone + 0.204 Water connection + 0.263 Sewerage connection + 0.868 Ln (Constructed area / Plot area) Table 1. Regression results - Residential property Unstandardized Standardized Coefficients Coefficients B Std. Error Beta t Sig. Constante 14.634 .323 45.376 .000 Via Asfalto .251 .116 .091 2.157 .032 Escritura Registrada .178 .090 .086 1.981 .049 (Bairos por Metro Cuadrado 717 .074 .447 9.707 .000 Pendiente Suave -.177 .093 -.087 -1.893 .060 Pendiente Fuerte o Escarpada -.331 .101 -.163 -3.297 .001 Tel6fono .328 .109 .134 3.005 .003 Alcantarilado .204 .141 .086 1.445 .150 Acueducto .263 .139 .113 1.892 .060 Area Construida / Area Lote .868 .074 .569 11.666 .000 Commercial property: (2) Ln Lease = 10.208 + 0.271 Ln Area + 0.463 Water connection + 0.492 Sidewalk + 0.526 Road material different from earth - 0.381 Corner plot + 0.219 Telephone - 51 - Table 2. Regression results - Commercial Property Standardiz Unstandardized ed Coefficients Coefficients | B Std Error Beta t Constante 10.208 .292 34.920 .000 Ln Area .271 .055 .510 4.944 .000 Acueducto .463 .215 .211 2.157 .039 Tenencia de Anden .492 .201 .255 2.455 .020 Via Material Diferente Tierra .526 .129 .392 4.061 .000 Predio Esquinero -.381 .120 -.324 -3.179 .003 Telefono .219 .127 .180 1.724 .094 Given that the objective is to determine the impact of the non-market attributes on the property value, the elasticity concept is important as it reflects the sensitivity of one variable related to changes in another, specifically, the sensitivity of property value to changes in the characteristics of the property or its non-market attributes. Given the selected functional form the coefficients should be interpreted considering the type of variable. For an equation of the type: LnY=LnBo+LnBIXI +...+LnBn Xn The elasticity is determined as follows, given the type of variable: If Xi is Dummy Elasticity =eBi If Xj is Continuous Elasticity = Bj The equation thus explains which of the investments have a higher impact in the overall property value, and thus will have a greater perceived value upon the residents of the UPZs. As can be seen in Table 3 below, the services that have the greatest impact in property prices are telephone (39%), water (30%) and sewerage (22%). Paving roads also has a major positive impact, increasing property values in about 30%, while land tenure regularization shows a figure of about 20%. It is important to note that property values are affected synergistically by the different non-market attributes. For example, access to only water will increase property values by about 30%, and only to sewerage by about 22%; however, together they increase values by about 66% versus 52% if the impact was the sum of their individual contribution. This clearly demonstrates the benefit of an integrated intervention package in urban upgrading as proposed under the project. Table 3. Elasticities - Residential Properties Variable Eblasicity Paved Road 1.28 Registered property title 1.19 Bathrooms per M2 0.71 Soft slope 0.83 Heavy slope 0.71 Telephone 1.38 Water connection 1.22 Sewerage connection 1.30 Construction area / plot area 0.86 - 52 - For commercial property Table 4 shows the results of the elasticities of the main attributes on preferences. In this equation all explanatory variables have the correct signs; however, contrary to expectations, it was found that commercial corner properties had less value than those in the middle of the street. The most important non-market attribute is the quality of the road (pavement increases rental values by 69%) and sidewalks (64%). Access to water service increases prices by about 59% and having a telephone line, by 24%. Table 4. Elasticities - Commercial Property -Variable - , Elasticity Area 0.27 Water Connection 1.58 Sidewalk 1.63 Road condition (not earth) 1.69 Corner location 0.68 Telephone 1.24 4. Estimation of economic costs Costs include investment costs, operation and maintenance costs, rehabilitation, resettlement, and costs associated with complementary actions. Construction costs considered include: designing, planning and engineering costs, construction costs, which usually span more than one year, and routine and periodic maintenance costs, throughout the useful life of the project, assumed to be 10 years. Since no residual value was estimated, this tends to underestimate the benefits. There is also a provision for physical contingencies during the construction stage equal to 15% of the estimated construction cost. Estimates for the costs of construction where supplied by Transmilenio and IDU based on very complete designs of the facilities to be built, for the mobility component and from Caja de Vivienda Popular for the Urban Upgrading component. For the estimation of economic costs, specific adjustments were made to deduct implicit taxes in material and labor costs and from investment and operation and maintenance costs. Shadow prices were calculated by Econometrfa in the study "Evaluacion Econ6mica del Programa de Mejoramiento Integral de Barrios de Bogota," a study done for the economic analysis of the urban upgrading component of this project. The main conversion factors estimated were: Skilled labor: 0.68, Unskilled labor 0.61, national inputs: 0.87 and standard conversion factor of 0.84. These were used to estimate the economic costs of the urban upgrading component. Once all financial costs were converted into economic costs, incremental costs were calculated based in the comparison of the "with" and "without" project scenarios. The following table shows the conversion factors used in the evaluation of the mobility component. Using those estimates by Econometria, it was possible to calculate aggregated conversion factors from market to economic costs. For activities intensive in qualified labor such as planning and engineering, following Econometrfa's estimates, the conversion factor is that of qualified labor. It was assumed that the buses required for the project will be made in Colombia. As a result of Stage I investments, there are now two factories which make articulated and feeder buses, one in Bogota and the other one in Pereira, a city to the west of Bogota. Due to the high cost of transporting an assembled bus from countries such as Brazil, it is highly probable that the local manufacturers will compete for making the buses for the operators. The shadow price for buses is 0.95. The stations are made in metal and the local industry is - 53- able to manufacture them as it did for the first stage of the project. The conversion factor is 0.95. Table S. Conveirsion Factors - Mobfifity component Conversion factor Iltem to sbadow price Engineering designs 0.6800 Construction of bus-ways 0.8395 Stations 0.9500 Construction of yards and transfer stations 0.8395 Construction of Pedestrian Bridges 0.8395 Maintenance 0.8395 Land acquisitions 1.000 TransMilenio S.A. (qualified labor) 0.6800 Buses 0.9500 O&M buses 0.8062 Old buses 1.0000 Ticketing system 1.0000 O&M ticketing (qualified labor) 0.6800 Main Assumptions: A discount rate of 12% was adopted to reflect Colombia's current economic and political conditions. The exchange rate assumed in the analysis is one dollar is equal to 2,600 pesos of 2002. The base year is 2002 and all amounts used in the models are in pesos of 2002. The period of analysis is 10 years after each component becomes operational. Current and projected population in the project area is based on the population census and GOC populations projections. The number of households per connection is assumed to be one. Benefits were estimated using the coverage target goals as reported by Caja de Vivienda Popular for each component and sub-component. (See Annex I of this document). A detailed explanation of assumptions made for the estimation of economic benefits and costs for each component and subcomponent is presented in sections 3 and 4 of this annex. 6. Results of the cost benefit analysis Given the fact that the interventions in all 14 UPZs will differ considerably, as the access to services and physical characteristics are not homogenous, an overall ERR and NPV were not calculated, based on the 2 UPZs analyzed. However, the program overall is expected to be clearly economically viable, as the analyses of the major components have very positive results. The mobility component (accounting for 66% of overall Project costs) has an individual ERR of about 25%, and the analysis of the 2 UPZ, used as a representative sample, had an ERR of about 60% in Gran Yomasa, and about 19% in Ismael Perdomo. Considering that Ismael Perdomo has such a positive ERR even though it is located in one of the most risky areas of BogotA (because of geological problems), and the other 12 UPZs have much more - 54- favorable characteristics, their ERR are most likely to be comparable to that in Gran Yomasa than to Ismael Perdomo. The results of the economic cost-benefit analysis for the four major components and the overall project are presented in the following table. Table 6. Summary of benefits and costs NPV of flows (US$ 000) Component Total costs Total Benefits Net Benefits EIRR (investments O&M) (NPV) (%) Mobility 332,700 455,000 122,300 24.7 UPZ: 1. Perdomo 24,733 26,189 1,456 18.6 UPZ: G. Yomasa 24,730 38,355 13,624 59.9 Sensitivity analysis / Switching values of critical items: The sensitivity analysis shows that the results of the economic analysis are robust for the cases analyzed. The variables identified as conveying major risk to the subcomponents are: changes in demand projections and time savings for the mobility component and a lower impact in property values for the urban upgrading component, as well as cost overruns for the urban upgrading component. The impacts of these variables were analyzed in the sensitivity analysis. The sensitivity analysis calculates the impact of single-variable changes in a static setting. The variables identified were switched until the component analyzed presented no positive impact. In most cases, the exclusion of benefits from resource savings will not be sufficient for the components to yield a NPV = 0. The large percentage of operating cost overruns required for a negative result, show that the miscalculation of that variable alone will not be sufficient to make the sub-components fail. In view of the relatively high switch values for the different variables, the results turn out to be robust for all cases. Detailed results are presented below. In the sensitivity analysis the impact of a number of variables has been tested. These comprise cost overruns, project delays, vehicle operating cost savings and value of time. The sensitivity analysis was done for the Av. Suba project because clearly it is the main component of the mobility part of the project. The following table shows the results of the sensitivity analysis. As seen below, this component is highly robust and in all scenarios explored it has a positive net present value and a high rate of return. - 55 - Table 7. Sensitivity analysis of Av. Suba busway Switching Value N Net Present Value | Enternal rate of return Base case scenario 141.4 28.54% Value of time 10% higher 152.2 29.64% 20% lower 119.9 26.30% 50% lower 87.6 22.80% Vehicle operating cost saving 10% higher 162.5 30.75% 20% lower 98.' 23.94% 50% lower | 34.2 16.44% Investment cost 15% higher 127.9 25.93% 30% higher 114.31 23.68% 50% higher 96.2 21.09%? In addition, simulations were done to find out the minimum number of users needed for both the Av. Suba busway and the bike-path component. For Av. Suba even with no users using the busway, the operational cost savings are large enough to justify the project. In these circumstances the NPV is US$24.8 million, which means that the IERR is above 12%, the rate of discount. Results for the bike-path component indicate that with 10,000 riders diverted from cars and buses the project will be profitable (economic IRR=12%). It is safe to assume that initially 15,000 riders will be diverted since this is only 10% of the existing number or bike riders. With a growth rate of 20% for users diverted, the IERR is 35.68% at market prices and 44.45% at shadow prices. - 56 - Annex 5: Financial Summary COLOMBIA: Bogota Urban Services Project Years Ending IMPLEMENTATION PERIOD I Year1 I Year 2 Year 3 I Year 4 I Year5 I Year 6 I Year 7 Total Financing Required Project Costs Investment Costs 37.2 74.2 74.0 61.7 24.7 0.0 0.0 Recurrent Costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Costs 37.2 74.2 74.0 61.7 24.7 0.0 0.0 Front-end fee 1.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Financing 38.2 74.2 74.0 61.7 24.7 0.0 0.0 Financing IBRD/IDA 9.0 25.0 30.0 25.0 10.0 0.0 0.0 Government 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Central 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Provincial 28.2 49.2 44.0 36.7 14.7 0.0 0.0 Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 User Fees/Beneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Front- end fee 1.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Financing 10.0 25.0 30.0 25.0 10.0 0.0 0.0 | ,*~* . - - B:. ¢ .) P!EATIONAL PERIOD. . | Year 1| Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 Total Financing Required Project Costs Investment Costs 37.2 74.2 74.0 61.7 24.7 0.0 0.0 Recurrent Costs 0.0 0.7 6.9 7.5 8.2 10.0 9.6 Total Project Costs 37.2 74.9 80.9 69.2 32.9 10.0 9.6 Front-end fee 1.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Financing 38.2 74.9 80.9 69.2 32.9 10.0 9.6 Financing IBRDADA 9.0 25.0 30.0 25.0 10.0 0.0 0.0 Government 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Central 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Provincial 28.2 49.2 47.9 41.3 20.5 7.8 7.4 Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 User Fees/Beneficiaries 0.0 0.2 1.5 1.8 2.0 2.2 2.2 Front- end fee 1.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Financing 10.0 25.2 31.5 26.8 12.0 2.2 2.2 Main assumptions: The main assumption is that the District will finance all recurrent costs not covered by user fees and -57 - therefore there will be no deficit. The analysis of the finances of the District suggest this assumption is reasonable. Recurrent costs were obtained from adding the recurrent costs generated by each component of the project. Some components can charge users. Assumptions for each component are shown below. Av. Subs Busway project Recurrent costs: (Assumptions are same as used for economic evaluation). Routine maintenance costs of civil works are equivalent to 1.5% of investment costs, and periodic maintenance costs are equivalent to 15% of investment cost. Construction takes I year and operations begin the year after. Operating costs of Transmilenio S.A. are prorated from total operating costs to obtain estimate for Av. Suba. Operation and maintenance costs of buses are not included because investment in buses and their operation is paid for by the private sector. Periodic maintenance figures for year 9 are not shown in the table; however they represent an increase in recurrent expenditure with respect to other years. The useful life of the project is 10 years after operations begin. Financing: Four percent of the fares paid by Transmilenio users on Av. Suba busway will go to cover Transmilenio S.A. operational costs. Deficit will be covered by Transmilenio from operational transfers from the District. Bike paths Recurrent costs: (Assumptions are same as used for economic evaluation). Routine maintenance costs of civil works are equivalent to 1.5% of investment costs, and periodic maintenance costs are equivalent to 15% of investment cost. Construction takes four years and operations begin the year after construction of each segment is finalized. Financing: the District will finance all operation and maintenance costs. Users do not pay directly for using bike paths. Urban Upgrading Recurrent costs: Operations and maintenance costs are 5% of investment costs. Construction takes 5 years and operations begin the year after construction of each segment in finalized. Financing: 30% of O&M costs will be recovered from water and sewerage charges by the water company. The District will finance the remaining costs for street maintenance and other recurrent costs. -58- Annex 6(A): Procurement Arrangements COLOMBIA: Bogota Urban Services Project Procurement Procurement for the proposed project would be carried out in accordance with World Bank "Guidelines: Procurement Under IBRD Loans and IDA Credits", published in January 1995 (revised January/August 1996, September 1997 and January 1999); and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" published in May 2002 (revised in September 1999 and January 1999), and the provisions stipulated in the Loan Agreement. Procurement methods (Table A) The method to be used for the procurement described below, and the estimated amounts for each method, are summarized in Table A. The threshold contract values for the use of each method are fixed in Table B. Procurement of Works Works procured under this project would include construction and maintenance of busways, feeder routes, bicycle paths and sidewalks; construction of storm water drainage systems, water and sewerage systems; and improving, upgrading and rehabilitation of access roads, totaling US$193.49 million equivalent, of which contracts for a total cost of US$83.59 million equivalent would be partially financed by the loan, and the remaining contracts for US$109.9 million equivalent would be financed by others. Works to be partially financed by the Bank with an estimated to cost more than US$5,000,000 will be procured following International Competitive Bidding (ICB) procedures, using Bank-issued Standard Bidding Documents. Contracts estimated with an estimated value below this threshold would be procured using National Competitive Bidding (NCB) procedures, using standard bidding documents agreed in advance with the Bank. Works estimated to cost less than US$350,000 may be procured following Three Quotations procedures using model request for quotations satisfactory to the Bank. Works not financed by the loan would be procured following the local law procedures. Procurement of Goods Goods procured under this project would include: communication and monitoring systems to improve the transit operations within the city, air quality control equipment, office supplies and equipment totaling US$11.30 million equivalent, of which, goods with an estimated cost of US$2.52 million equivalent would be partially financed by the loan, while the remaining goods with an estimated cost of US$8.3 million equivalent would be financed by the Bogota District. To the extent possible, contracts for the goods to be financed by the loan will be grouped into bidding packages of more than $250,000 equivalent and procured following International Competitive Bidding (ICB) procedures, using Bank-issued Standard Bidding Documents (SBDs). Contracts with an estimated value below this threshold per contract may be procured using National Competitive Bidding (NCB) procedures and standard bidding documents agreed with the Bank. Contracts for goods which cannot be grouped into larger bidding packages and estimated to cost less than US$50,000 per contract, may be procured using national shopping procedures based on a model request for quotations satisfactory to the Bank. Goods not financed by the loan would be procured following the local law procedures. - 59 - Selection of Consultants Consultant services are estimated to cost US$30.02 million equivalent of which, services for an amount of US$28.12 million would be partially financed by the loan and the remaining services would be financed by the Municipality of Bogota. The consultant services would be procured using Bank Standard Request for Proposals. They will include consultant services for the supervision of construction contracts, and technical assistance on: urban transport and planning, housing financial programs, methodologies for the establishment of a regional framework, development of marginal communities, promoting road safety, use of cycle routes, organization of massive transport, implementation of communication systems, environmental monitoring and management, preparation of norms for communities improvements, technical and financial management for communities. Firms Contracts for firms estimated to cost more than US$100,000 will be procured using Quality and Cost-Based Selection (QCBS) method. Contracts for firms estimated to cost less than US$100,000 may be procured using Selection based on Fixed Budget (SFB). Individuals Specialized advisory services would be provided by individual consultants selected by comparison of qualifications of three candidates and hired in accordance with the provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines. Conmunitv Participation: There are several small works within the communities (e.g., construction of footpaths, replanting of protected areas, minor repair and maintenance works), which residents will be hired to do. Such activities are estimated to amount to about US$1.3 million equivalent. These activities will be procured following procedures for local procurement for small works. Assessment of the agency's capacity to impRement procurement The Project Coordination Unit (PCU) within the Bogota District Finance Secretariat "Secretaria de Hacienda Distrital (SHD)" that was created to assist in the implementing of the previous transport loan to Bogota (Loan 4021-CO), will continue to coordinate, assist and oversee the procurement activities carried out by the six project implementing entities. Procurement of works, goods and services for the Project will be carried out by six different District entities and by Communities under agreement with the Caja de Vivienda Popular (CVP). The entities will be assisted and supervised by the PCU on procurement matters. The six implementing entities are: (i) the Bogota Urban Development Institute (Instituto de Desarrollo Urbano, IDU), (ii) the Bogota District Finance Secretariat (Secretaria de Hacienda de Bogota, SHD); (iii) the Transit and Transport Secretariat (Secretarfa de Transito y Transporte, STT); (iv) the Bogota District, Environmental Department (Departamento Administrativo de Medio Ambiente (DAMA), (v) the Bogota District, Planning Department (Departamento Administrativo de Planeacion Distrital, DAPD) and (vi) the Social Housing Entity (Caja de Vivienda Popular, CVP). An assessment of the capacity of the PCU to implement procurement actions for the project has been carried out and its report is dated November 30, 2002. The proposed organization, the staffing of the PCU and the project implementation arrangements are satisfactory. A Project Operations Manual will include procurement procedures, standard bidding documents to be used for each procurement method, and model contracts for works and goods procured on the basis of three quotations or shopping. The main risks identified the 2002 Country Procurement Assessment Review (CPAR) included some discrepancies between local law and Bank's Guidelines. Identified project procurement risks are (i) - 60 - insufficient PCU staff and (ii) lack of procurement staff familiarity with Bank procurement guidelines and procedures. The local Procurement Law stipulates that for international financing, the procurement law of international agencies will prevail over local laws. In addition to stipulation of the applicability of Bank Procurement Guidelines for all project-financed activities, as was done for the Bogota Urban Transport Project, Annex 4 of the Loan Agreement would also include special provisions governing procurement through NCB and Shopping, along with the Selection of Consultants. Additionally, by Effectiveness Date, Standard Bidding Documents and evaluation criteria for NCB, Shopping and Selection of Consultants will be defined in the Project Operation Manual. The following plan to address these risks is included in the PCA report and was agreed by the Borrower: a) Annex 4 to the Loan Agreement would include sections containing special provisions to rule: (i) Procurement following National Competitive Bidding, (ii) Procurement under Shopping method, and (iii) Selection of Consultants. b) By negotiations, the Borrower to agree in the use of Cost and Quality Based Selection method for the selection of consultants for the supervision or inspection of work contracts partially financed by the Bank and costing more than US$100,000; c) By effectiveness, to submit a satisfactory Project Operations Manual that include standards bidding documents and evaluation criteria for National Competitive Bidding, Shopping and Selection of Consultants; d) By effectiveness, the PCU to appoint a Financial Officer and a Procurement Specialist; e) During the first year of project implementation, the Bank to provide training on Bank procurement procedures and best practices to the PCU staff. The Procurement officer within the PCU to coach procurement staff of the different entities participating in the project. Table A: Project Costs by Procurement Arrangements (US$ million equivalent) 'Procurement Method Expenditure Category ICB NCB -d - Other N.B.F. Total Cost 1. Works 0.00 79.65 1.30 109.90 190.85 (0.00) (70.88) (1.15) (0.00) (72.03) 2. Goods 1.11 0.49 0.00 0.00 1.60 (0.95) (0.41) (0.00) (0.00) (1.36) 3. Services 0.00 0.00 34.58 10.85 45.43 Details provided in Table A-1 (0.00) (0.00) (25.24) (0.00) (25.24) 4. Training 0.00 0.00 0.51 0.00 0.51 (0.00) (0.00) (0.37) (0.00) (0.37) 5. Front-end fee 0.00 0.00 1.00 0.00 1.00 (0.00) (0.00) (1.00) (0.00) (1.00) 6. Land acquisition 0.00 0.00 0.00 33.30 33.30 .______ _ (0.00) (0.00) (0.00) (0.00) (0.00) Total 1.11 80.14 37.39 154.05 272.69 (0.95) (71.29) (27.76) (0.00) (100.00) "Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies. 2' Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services and Front end fee. - 61 - Table Al: Consultant Selection Arrangernen1s (optional) (US$ million equivalent) A. Firms 17.30 0.00 9.71 0.00 0.00 0.00 8.96 35.97 (12.63) (0.00) (7.08) (0.00) (0.00) (0.00) (0.00) (19.71) B. Individuals 0.00 0.00 0.00 0.00 0.00 8.07 1.88 9.95 (0.00) (0.00) (0.00) (0.00) (0.00) (5.90) (0.00) (5.90) Total 17.30 0.00 9.71 0.00 0.00 8.07 10.84 45.92 ___________________ (12.63) (0.00) (7.08) (0.00) (0.00) (5.90) (0.00) (25.61) Including contingencies Note: QCBS = Quality- and Cost-Based Selection QBS Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Selection of individual consultants (per Sectfon V of Consultants Guidelines), Commercial Practices, etc. N.B.F. = Not Bank-financed Figures in parenthesis are the amounts to be financed by the Bank Loan. -62 - Prior review thresholds (Table B) The proposed thresholds for prior review are based on the procurement capacity assessment of the Project Coordinating Unit (PCU) within the Secretary of Finance of the Bogota District (SHD) and are summarized in Table B. In addition to this prior review of individual procurement actions, the procurement plan will be reviewed and approved by the Bank annually. The overall project risk for procurement is AVERAGE. The project is ELIGIBLE for FMR-based disbursements on procurement reporting grounds. Table B: Thresholds for Procurement Methods and Prior Review' . ContrandtifVue ; - Contracts Subject to- Thresol ; rocureent Prior Review Expenditure Category (US$'thousands) Method (US$ 'millions) 1. Works > 5,000 ICB All: None <5,000 NCB First contract each year each entity: 6.0 <350 3 Quotations First two contracts: 0.4 2. Goods >250 ICB All: 0.6 <250 NCB First contract each year each entity: 0.6 <50 IS,NS First two contracts: 0.1 3. Services Firms >100 QCBS All: 18.7 <100 SFB, LCS TORs only Individuals >50 Comparison of 3 CVs All (TOR, contract, CV) <50 Comparison of 3 CVs TORs only Total value of contracts subject to prior review: 26.4 Overall Procurement Risk Assessment: Average Frequency of procurement supervision missions proposed: One every 6 months during first year and after that one every 12 months (includes special procurement supervision for post-review/audits) Thresholds generally differ by country and project. Consult "Assessment of Agency's Capacity to Implement Procurement" and contact the Regional Procurement Adviser for guidance. - 63 - Annen 6(13) FinancWal nagement and Disbursement Arrangemants COLOMBIA: Bogota Urban Servicez Project Financial Management X. Sunmary of the Financial Management Assessment The Bogota Urban Services Project is expected to cost about US$ 273 million, of which the Bank loan of US$100 million would finance about 37% of total project cost, with the remainder financed by the District of Bogot5. The project financing ratio is consistent with the Bank policies which limit Bank project exposure to 50%. Taxes are estimated at about 16% of total project cost and will be paid by the District. The project will have 6 (six) executing agencies, under the leadership of Bogota District Finance Secretary, "Secretarfa de Hacienda Distrital (SHD)". Within the SHD, the project would be under the direct management of the Project Coordinating Unit (PCU); this is the unit which coordinated the execution of the just completed BogotA Urban Transport Project. The implementing agencies are: the Urban Development Institute "Instituto de Desarrollo Urbano (IDU)", the Secretary of Transit and Transportation, "la Secretarfa de Transito (STT)" , the Social Housing Entity "Caja de Vivienda Popular (CVP)", the District Administrative Department of Planning, "Departamento Administrativo de Planeaci6n Distrital (DAPD)", the Administrative Department of Environment, "Departamento Administrativo del Medio Ambiente (DAMA)". SHD, through the PCU, will be responsible for the project financial management arrangements including the flow of funds management for the entire project. Given the multi-sectoral focus, with six implementing agencies, the financial management arrangements would entail the consolidation of financial information (accounting, budgeting, internal control, external auditing, financial monitoring, reports preparation and disbursement), coming from the respective implementing agencies. Each implementing agency would have the necessary arrangements in place in order to assure access in line to the financial information system, under development for this purpose, and the financial staff who would be responsible for preparing the information to be sent to the SHD/PCU for the preparation of the project FMRs. The SHD prepared a detailed action plan relating to its financial management responsibilities, which has been reviewed and agreed to by the Bank Financial Management team. The items included in the action plan are: (i) financial management arrangements for the consolidation of the financial information to be provided by the executing agencies; (ii) an accounting information system to facilitate the transfer of the financial information from the executing agencies to the PCU for consolidation; (iii) format for the FMRs and accounting system required by the Comptroller General and the Accountant General Office both of the GOC, for monitoring and evaluation purposes; (iv) the terms of reference for the required external audits; (v) the Operational Manual and the organizational structure required, including a viable internal control system; and (vi) modalities for implementing a report-based disbursement arrangements, for the use of the special account and its links to the individual project accounts as well as the flow of funds, consistent with Bank policies and procedures. The action plan, which is expected to be updated periodically in light of implementation experience, is an integral part of the financial management assessment and is available in the project files. Under the Bogota Urban Transport Project (Loan 4021-CO) the SHD maintained a consolidated project Special Account while each of the various implementing entities maintained its respective accounts. The external auditors reviewed all of these accounts as well as physical progress and other loan obligations and they presented their report on these and the consolidated project finances. This system worked well and there were no problems in the financial management of the project. The financial management arrangements being proposed under this project are generally similar to those under the BogotA Urban - 64 - Transport project with a Special Account established in a commercial bank. Staffing The SHD/PCU is expected to have in place, prior to loan effectiveness, the institutional capacity required to carry out and manage the financial management requirements, in an orderly and well-established manner. It would provide support, as needed, to the project executing agencies in the procurement, legal and financial management areas which would facilitate Project execution. The SHD/PCU has hired a team which includes a financial management coordinator, an accountant and a procurement specialist. The project related services to be provided through the project financial management unit will be provided by PCU staff assigned full time to the project. These arrangements will obviate the need to create parallel units within each executing agency, in addition to their existing structures. The arrangement would also create a permanent knowledge environment and assure the ownership of the project at the executing agencies, thereby facilitating the institutional capacity building on project and financial management. Flow of Funds - Payments and Operation of Bank Accounts The main issues addressed in the flow of funds assessment were: Special Account requirements, reconciliation of the bank account with the IBRD disbursement information; accounting policies and procedures; and FMR preparation and monitoring. As under Loan 4021-CO, the SHD will establish and maintain a project Special Account (SA); however, under the proposed project the special account will be opened at a commercial Bank. The World Bank funds would be deposited in the SA based on the forecasted project needs as justified by the 6 month FMR projections, which in turn would be the annual investment plans of the project executing agencies, and in accordance with a sound financial program. Funds from the SA would be used exclusively to cover the Bank's share of eligible expenses in both local and foreign currencies. Bank and counterpart funds will be used to meet the financing needs of project activities. The amount of Bank loan funds to be made available to the project executing agencies would be governed by subsidiary agreements to be signed by each executing agency and District of Bogota. The PCU will periodically perform a global reconciliation of the funds in the Special Account, the individual project accounts of the project executing agencies and the project expenditures. The reconciliation process would also include the funds in the executing agencies' bank accounts and any resources received from external sources. The PCU will use the information obtained from the reconciliation for each project component in order to verify sources and uses of funds and other financial statements under the project. Project Financial Monitoring Reports, FMRs The general format for the FMRs would follow those agreed with the Government of Colombia. The specific content and format of the financial monitoring reports (FMRs) were determined during the November 2002 mission and confirmed during negotiations. Each project implementing entity would be responsible for preparing its own project financial information following the agreed format, which would be forwarded to the PCU for consolidation into the project-wide FMRs. The PCU would be responsible for the project financial information to be presented to the Bank. In accordance with Bank Guidelines, the FMRs will provide information for monitoring the financial, implementation, and procurement progress of the project. The financial reports would indicate inflows of financial resources by sources and outflows by expenditure categories, both by reporting period and cumulatively. They would also include supporting schedules comparing planned versus actual expenditures. The financial reports, which would be prepared from accounts that are consistent with the GOC chart of accounts, - 65 - would also provide the basis for the preparation of the project audit reports. Reports to assist the monitoring of physical progress of the project would include project performance indicators that would link the financial information and the progress in project implementation. Reports for monitoring progress in the acquisition of project facilities would include reports on the procurement of goods, works, and services. The procurement progress reports would address issues relating to the compliance with Bank procurement guidelines, highlight key procurement issues and provide information on complaints, inadequate performance, if any, and major disputes. Risk analysis The specific financial management risk to be considered during the implementation of this project is the provision of adequate amount of counterpart resources in a timely manner. The extent of this risk would appear manageable since the shortage of counterpart funding was not an implementation problem under the BogotA Urban Transport Project (Loan 4021-CO), also implemented by the SHD through the PCU. A second financial management risk relates to the fact that the proposed project will be the first pilot project in Colombia utilizing Report Based Disbursement using FMRs. Nevertheless the institutional strengthening that the SHD would undergo prior to loan effectiveness and the significant amount of technical assistance included in the project would substantially mitigate this risk. Some concerns have been raised in relation with the Bank account reconciliation process for individual components managed by the other executing agencies. This risk is not expected to be high; in any case, the reconciliation process will be closely monitored during project implementation. In order to mitigate the previously-described risks, SHD plans to carefully manage its own resources and to provide adequate counterpart funding to the proposed project in a timely manner. In addition SHD has confirmed its intention to utilize the FMRs to monitor the flow of funds and expenditures pertaining to the project. The utilization of FMRs would greatly facilitate the general reconciliation process among the Special Account and the various project accounts. All project funds provided by the Bank would be clearly identified and would not be mixed with other SHD resources. Furthermore, the fact that the other executing agencies participating in the project do not have the same level of financial management capabilities might constitute a risk factor. The executing agencies would then: (i) be assisted by the PCU in preparing the requisite financial information; and (ii) be expected to invest human and financial resources in order to strengthen their institutional financial capabilities to participate efficiently and effectively in the project management. Specific ratings of the project financial management aspects are as follows: - 66 - Risk Risk Rating Risk Mitigation Measures Inherent Risk Country specific Medium to High The country economic, social and political situation may affect the project performance. Entity/project specific Medium The centralized management of the project in SHB will allow an harmonization of FM performance. Each Executing Agency in particular has to assure the adequate flow of funds. There must be an agreement also on the implementation of SHB procedures in order to minimize the unnecessary risks on possible lack of financial management information and weaknesses on financial management performance. Control Risk Implementing Entity Low Institutional experience managing different projects, with good knowledge of general procedures. Fund Flow: Counterpart funds Medium to High Availability of counterpart budget implementation plans, GOC lack of timely counterpart funds Treasury allocation problems with flow of funds and pari-pasu requirements in relation with cash basis plans approval may be a major problem in the near future. Staffing Medium SHB has experienced FM personnel but they do not have experience with the new WB Financial management system. Special Purpose/Intemal Audit Low Quarterly internal audits Extemal Audit Low Quarterly extemal audit and control review, including counterparts participants review will make the project be considered under a lower risk Reporting and Monitoring Low FMRs based on the GOC arrangements accepted by the WB will be implemented Strengths and Weaknesses The SHD and PCU have a sound financial management system. The staff is willing to support the efforts to implement new accounting and reporting information system. The District of Bogota will make an important contribution to the project through focusing on the provision of timely and adequate information for monitoring and reporting, in order to be able to use the planned report based disbursement system to meet the Bank financial management requirements. The management of the flow of funds were confirmed during negotiations and adjusted appropriately to facilitate the consolidation of data emanating from each component. - 67 - Conditions of Effectiveness The following are the Conditions of Effectiveness specifically relating to financial management of the project: (i) the implementation of the Financial Management System; (ii) the establishment of the Organizational Structure and finalization of the Operational Manual for the project; and (iii) the appointment of an external auditing firm on the basis of terms of reference acceptable to the Bank. Financial Management Action Plan The Action Plan that has been prepared by SHD includes the person responsible for implementing the action plan activities, the product or result expected and a satisfactory timetable for the performance indicators to measure the attainment of project results.Those actions to be taken after Loan effectiveness would be monitored during project supervision. 2. Audit Arrangements External auditors will be hired and they will carry out an annual financial audit of the project as required by Bank policies. The auditors would audit the financial statements on an annual basis. The auditors would also conduct interim audits throughout each year of project implementation. In addition, internal auditing procedures would be performed following SHD internal control procedures. The internal control and auditing system to be set up under the project would help to assure an adequate monitoring of the use of project funds. The financial statements of all the executing agencies would also be audited annually by the external auditors under their own separate arrangements and submitted to the Bank. 3. Disbursement Arrangements Disbursements will be both on the basis of Report Based Disbursements (FMRs) and Direct Withdrawal Applications (DWAs), if applicable. In the case of the latter, disbursements will be made on the basis of full documentation, provided in advance, for all eligible expenditures made under contracts with original or amended values above the prior review threshold. For all other eligible expenditures, goods costing less than $250,000, for contracts for consulting firms costing less than $100,000 and for contracts for individual consultants costing less than $50,000 disbursement would be made on the basis of Report Based Disbursements. Retroactive financing not exceeding US$ 5.0 million would be provided for eligible expenditures, civil works, engineering and consultant services incurred between November 4, 2002 and signing of the loan agreement. All consolidated accounts will be maintained by the PCU for post-review during supervision missions and for audit purposes for up to one year after the final withdrawal from the loan. To facilitate project implementation, the SHD would establish a Special Account in US Dollars in a commercial bank. The authorized allocation for the Special Account would be US$8 million which reflects the average 6 month Bank disbursement expected. Replenishment: Monthly replenishment of funds will be made on evidence of satisfactory utilization of the previous disbursements as evidenced by the documentation submitted in support of withdrawal applications. Replenishments, up to the Authorized Allocation(s) will be made initially on the basis of Applications for Withdrawals (Form 1903) accompanied with the supporting and other documentation specified in the Disbursement Handbook. -68- Standard disbursement profiles for the transport and urban sectors for Bank projects show disbursement schedules of 7.5 years for Latin America Region, and 7 years in the case of Colombia. The disbursement schedule of the proposed Bank loan has been set at 4.5 years. This shorter period is being used in light of the record of the District in implementing the previous loan before the original closing date. It also reflects the relatively small size of the investment components in the proposed project compared with the annual investment program of the implementing institutions and the state readiness of the implementing agencies to carry out the proposed activities. The project completion date will be April 30, 2007, with a loan closing date, October 31, 2007. Loan proceeds would be disbursed against the following percentages of eligible expenditures: (a) 89% for works; (b) 84% for goods; (c) 73% for services; and (d) 73% for training. Allocation of loan proceeds (Table C) Table C: Allocation of Loan Proceeds Expenditure Category :. - Amount in US$million . Financing Percentage Goods 1.35 84 Works 72.04 89 Services 25.24 73 Training 0.37 73 Total Project Costs 99.00 Front-end fee 1.00 Total 100.00 - 69 - Annex 7: Project Processing Schedule COLOMBIA: Bogota Urban Services Project ProjectSchdiuleW f- I> anned Actual Time taken to prepare the project (months) 8 15 First Bank mission (identification) 09/23/2001 09/23/2001 Appraisal mission departure 04/08/2002 11/04/2002 Negotiations 06/10/2002 01/16/2003 Planned Date of Effectiveness 08/01/2002 04/01/2003 Prepared by: Thakoor Persaud, LCSFU Diana Ortiz, LCSFU Preparation assistance: Ofelia Haase, LCSFU Bank staff who worked on the project included: - NaIm e I , - SpeclaIib-: Thakoor Persaud Task Team Leader Mauricio Cuellar Transport Specialist/Co-Task Team Leader Diana Ortiz Urban Consultant Elena Correa Social Specialist Angela Armstrong Operations Analyst Juan Lopez-Silva Environmental Specialist Luis Schwarz Financial Specialist Emmanuel Njomo Projects Officer Otto Bolafios Financial Specialist Maria Angelica Sotomayor Infrastructure Economist Marcelo Osorio Procurement Specialist Gerhard Menckhoff Transport Specialist Arturo Ardila Transport Consultant Eduardo Bay6n Consultant Eduardo Brito Lawyer Joseph Formoso Disbursement Specialist Jairo Arboleda Social Development and Civil Society Specialist Alexandra Ortiz Urban Economist Kenneth Gwilliam Peer Reviewer Alan Coulthart Peer Reviewer -70- Bogota District's staff who participated in the preparation of the project: NAME ENTfl POSMON Antanas Mockus Scivikas Alcaldfa Mayor de Bogota Alcalde Mayor ljliana Caballero Duran Alcaidla Mayor de Bogota Secretaria General de la Alcaldfa Mayor Carrenza Saldias Barreneche Aicaldia Mayor de Bogota Conseyera para la Regi6n y Corpetitividad Aiejandro Fiorian Alcaldla Mayor de Bogota Asesor Alcaldia para Vivienda Martha Nieto Lemus Caja de Vivienda Popular - CVP Gerente Luz Steiia Moreno Ca ade Vivienda Popular - CVP Asesora Gerencia Ricardo amfrez Caja de Vivienda Popular - CVP Subgerente VIS Juan Carios il6rez Concejal Concejal Caroiina Barco Departarnento Adnministrativo de Planeac;6n Distitai - DAPD Directora Ignacio Gallo Departanmento Admninistrativo de Planeaci6n Distrital - DAPD Unidad Coordinadora de Politica Habitaconal Josd Salazar Departamento Admtnistrativo de Pilaneaci6n Distrital - DAPD Director POT Julia Mtranda Departarnento Adrmnistrativo del Medho Ambiente-DAMA Directora Gerrnan Camargo Ponce de Le6n Departarnento Adrinistrativo del Medlo Arnbiente - DAMA Subdirector Planeaci6n y Desarrollo Carios Mano Taayo Departamento Administratlvo dei Medio Arnbiente - DAMA Subdirector Ambiental Sector jesus Miguei Sepilveda Departamento Adiniistrativo del Medio Ambiente - DAMA Subdirector Ambiental Sectonal Fiugo Rangel Departarento Nacionai de Planeaci6n Subdirector de Creditos Externos e Internos Diana Rodrfigez Departanento Nacional de Planeact6n Profesional DNP SC Fxernos e Internos Henry Moreno Departanento Nacional de Planeaci6n Subdirector DNP SASB Astnd Alvarez Ernpresa de Acueducto y Alcantarillado Gerente General EAAB Claudia Medina Empresa de Acueducto y Alcantanrlado Gerencia Financiera EAAB Francisco Castiibianco Erpresa de Acueducto y Aicantarilado EAAB Riardo Montezurna Fundam6n Anugos de la Bicicleta Amigos de la Bicicleta Margareth Florez Fundaci6n Corona Jefe Area de Gestion Local Marla Isabel PatiiSo Instituto de DesarroDo Urbano - IDU Durectora General IDU Alejandro Atuesta Instituto de DesarroDo Urbano - IDU Subdirector General Coorporativo Josd Antonio Jaime instituto de Desarrollo Urbano - IDU Director Tecnico de Planeaci6n Dora Lucia Solano Ministerio de Hacienda - Credito Publhco Financiamiento Externo D'reccx6n General CP MarlaFernandaSgnchez Prograna Bogot Como Vamos Coordinadora del Progarna Israel Fainboin Yaker Secretarla de Hacienda de Bogota - SHB Secretario de Hacmenda Gustavo Garia Bate Secretarla de Hacienda de Bogtad - SHiB Subsecretario de Hacienda Maria Luisa Fiernndez Secretarfa de Hacienda de Bogot§ - SHB Directora Distrital de Cr6dito Pulbhco (E) Hector Zamnbrano Secretarla de Hacienda de Bogot§ - SHB Director de Presupuesto Marna Camula Un be Secretarfa de Hacienda de Bogota SHB Directora Distntal de Inpuestos Ricardo Moncada Secretarla de iHacienda de BogotA - SHB Director Unidad Coordinadora PTUB Claud&a Vasquez Merchan Secretar(a de Transito y Transporte - STT Secretaria Carmen Ceciia Trujllio Secretarfa de Transito y Transporte - STT Subsecretana de Planeaci6n Ernesto Mc Cormnick Secretarla de Transito y Transporte - STT Asesor Ricardo Saiamanca Secretaria de Transito y Transporte -STT Subsecretano Tecnico Edgar Enrique Sandovai Transuilenio SA Gerente Dario Hidalgo Transmilenio SA Subgerente Anglica Castro Transmilenio SA Directora de Planeaci6n - 71 - Annex 8: Documents in the Project FRe' COLOMBIOIA: Bogota Urban Services Project A. Project Implementation Plan Project Operational Manual Financial Management Action Plan B. Bank Staff Assessments o Aide- Memoire for Pre-Appraisal Mission, February 4-15, 2002 o Staff Appraisal Report, Colombia, Bogota Urban Transport Project, April 26,1996 o Implementation Completion Report, Bogotd Urban Transport Report, August 8, 2002 o Belii, Pedro. Et al. Handbook on economic analysis of investment operations. 1998 o FPSI Management Unit. Local Govemment access to credit markets in developing economies. C. Other o Alcaldia de Bogota, Plan de Ordenamiento Territorial, Diciembre 1999. o IDU's Environmental Assessment for the construction and operation of busways in Avenida Suba (11-02), o EDU's Environmental Management Plan for construction and operation (11-02), o IDU's environmental guidelines, o EAAB's environmental guidelines. o JP Morgan, Offering Memorandum, BogotA Distrito Capital. Dec 2001. O Estatuto Organico de Bogota, decreto 1421 de 1993. O Rodriguez, Jorge. Finanzas publicas de Bogota, 1980-2001: fines, tendencias e implicaciones de poiftica. o Rodriguez, Jorge y Roberto Steiner. BogotA y la tributaci6n local: evaluaci6n y opciones de reforma. Misi6n para la reforma institucional de Bogota, 2000. O Carrasquilla Alberto and Juan Contreras. Sostenibilidad de las finanzas del Distrito. Misi6n para la reforma instituci6n de Bogota, 2000. O SHB. Politica tributaria del Distrito Capital. Power point presentation. August 2002. O SHB. No tittle. Power point presentation. August 2002. Contains population, social, economic and fiscal data, statistics and information. o Small, Kenneth. 1999. "Project Evaluation." in Gomez-ibanez, W. Tye, and C. Winston (Eds.) Essays in Transportation Economics and Policy. Brookings Institution Press. o Steer Davies Gleave. Proyecto de transporte urbano para Santafe de BogotA. Contrato BIRF 4021-CO-FONDATT-10. Nov. 1999. o Transmilenio S.A. "Transmilenio: el sistema de transporte masivo de BogotA." Nov. 2002. O Duarte Guterman & Cia Ltda. "Evaluaci6n expost del proyecto de transporte urbano de BogotA. Prestamo BIRF 4021 A-CO. Informe final." July 2002. O Universidad Nacional de Colombia. "Diagn6stico y evaluaci6n de la operaci6n de ciclorrutas: caso de Bogota DC."Octubre 2002. o Hidalgo Ivan and Juan Illera. "Evaluaci6n socioecon6mica de la primera fase del sistema Transmilenio". Universidad de Los Andes, 2001. *Including electronic files - 72 - Annex 9: Statement of Loans and Credits COLOMBIA: Bogota Urban Services Project 05-Sep-2002 Dlfference between expected and actual Onginal Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA GEF Cancel Undisb Ong Frm Rev d P069861 2003 CO-SoclalSectorAdpsiment 150.0o 000 000 000 15500 000 000 P057369 2002 CO Judicial Resolufion Inprovement Prj 5 00 0 00 0 00 000 4 80 1 20 0 00 P057692 2002 2nd Magdaiena Madlo Projet (LIL) 5 00 0 00 0 00 00 3 52 0 36 0 00 P065937 2002 CO WATER SECTOR REF ASSISTANCE PROJEC 4000 0 00 0 00 0 00 40 00 6 83 0 00 P041642 2002 CO PRODUCTIVE PARTNERSHIPS 32 00 0 00 0 00 000 29 69 -2 31 0 00 P073572 2002 CO Structural Fiscal Adjusiment Loan 40000 000 000 000 24000 18000 000 P063317 2001 GEF CO-HIGH ANDES 0 00 0 0o 15 00 0 00 14 50 3 23 0 00 P040109 2001 COPUBUCFINANC MANAGEMENTPROJECT 3547 000 000 000 3374 -173 000 P069964 2001 CO- Human Capital Prot - Cash Translera 1so00 000 000 000 12754 -2246 000 P044140 2000 CARTAGENA WATER SUPPLY & SEWERAGE ENV 85 00 0 00 0.00 0 00 68 75 44 17 0 00 P068762 2000 CO- COMMUNITY WORKS (MANOS A LA OBRA 100 00 0 00 0 00 0 00 62 40 45 40 0 00 P050578 2000 CO RURAL EDUCATION 20 o0 0 00 0 00 0 00 18 05 919 0 0o P057326 2000 SIERRA NEVADA SUSTAINABLE OEVELOPMEN 5 00 0 00 0 00 0 00 369 -1 31 0 00 P050576 1939 CO- YOUTH DEVELOPMENT 500 0 00 0 00 000 217 217 0 00 P006861 1998 CO URBAN INFRASTRUCTURE 7500 000 000 000 47.43 3ri27 000 P053243 1998 PEASANTENTERPRISEZONES(LIL) W00 000 000 000 217 217 000 P046112 1998 COPASTOEDUCATION 720 000 000 000 293 293 104 PO06891 1998 CO ANTIOCUIA EDUCATION 40 00 0 00 000 000 1626 14 08 4 02 P006884 1997 FINANCIAL MARKETS DEVELOPMENT 1500 000 000 550 242 792 219 P040102 1997 REG REF TA 1250 0 00 0 o 0 00 3 60 3 60 0 00 P039291 1996 URBAN ENVIRONMENTTA(TAL) 2000 000 000 000 134 134 134 P006694 1996 SANTAFE I (WatertSupply) 145 000 00 0 0 00 34 96 34 96 0 00 P006880 1995 AGRICULTURETECHNOLO 3800 000 000 000 791 791 -719 Total. 138817 000 1500 550 94291 37594 141 - 73 - COLOMBIA STATEMENT OF EFC's Held and Disbursed Portfolio Jun 30 - 2002 In Millions US Dollars Committed Disbursed 1 FC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 2002 BCSC 0.00 7.00 0.00 0.00 0.00 0.00 0.00 0.00 2002 Bavaria 70.00 0.00 30.00 0.00 0.00 0.00 0.00 0.00 1969/85/88/93/95 CF del Valle 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2001 CHMC 0.00 10 63 0.00 0.00 0.00 4.02 0.00 0.00 1974/01 Cementos Caribe 4.05 10.00 0.00 12.95 4.05 10.00 0.00 12.95 1963/90 Coltejer 6.02 0.00 0.00 0.00 6.02 0.00 0.00 0.00 1995/99 Corfinsura 25.00 1.49 23.51 0.00 0.00 1.49 23.51 0.00 2002 Inversura 0.00 15.00 0.00 0.00 0.00 0.00 0.00 0.00 1987 PRODESAL 0.00 0.59 0.00 0.00 0.00 0.59 0.00 0.00 1977/89/92/94/96 Promigas 5.00 0.00 0.00 8.33 5.00 0.00 0.00 8.33 0/94/95 Promusan 0.00 0.20 0.00 0.00 0.00 0.20 0.00 0.00 2002 Proteccion 0.00 10.00 0.00 0.00 0.00 0.00 0.00 0.00 1996 Proyectos 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00 2002 SIG 75.00 0 00 0.00 0.00 0.00 0.00 0.00 0.00 1999 Surenting 0.00 5.10 0.00 0.00 0.00 2.50 0.00 0.00 2001 Tolcemento 3.33 0.00 0.00 10.67 0.00 0.00 0.00 0.00 Total Portfolio: 188.40 65.01 53.51 31.95 15.07 23.80 23.51 21.28 Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic 2001 CCGF 0.00 0.00 19.00 0.00 2002 Bavaria 0.00 0.00 0.00 200.00 2002 Ofumex Oil 30.00 5.00 0.00 0.00 2001 CHMC 0.00 10.00 19.38 0.00 Total Pending Commitment: 30.00 15.00 38.38 200.00 - 74 - Annex 10: Country at a Glance COLOMBIA: Bogota Urban Services Project Latin Lower- POVERTY and SOCIAL America middle- Colombia I Carlb. income Development diamond' 2001 Populafton, mid-year (millions) 43 0 524 2,164 Life expectancy GNI per capita (Atlas method, USS) 1,890 3,580 1.240 GNI (Attas method, US$ billions) 81.5 1,862 2,677 Average annual growth, 1995-01 Populabon (I%) 18 1 5 10 GNI Labor force (#) 2.7 2.2 1 2 per Gross per primary Most recent estimate (latest year avatlable, 1995-01) capita enrollment Poverty (% of population below national poverty line) Urban populaton (% of total population) 75 76 46 Lite expectancy at birth (years) 72 70 69 Infant mortality (per 1,000 live births) 20 29 33 Child malnutntion (% of children under 5) 7 9 11 Access to Improved water source Access to an improved water source (% ofpopulation) 91 85 80 Illiteracy (% of population aqe 15+) 8 11 15 Gross primary enroltment (1 ofschool-age population) 112 130 107 Colmbls Male 112 131 107 Lower-middle-Income group Female 112 128 107 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1981 1991 2000 2001 Economic ratios' GDP (USS billions) 36.4 41 5 83.2 82 4 Gross domesffc Investment/GDP 20.6 15 9 13 4 14.9 Trade Exports of goods and services/GDP 11 9 21 3 19 .9 19.4 Gross domestic savings/GDP 17.0 234 13.7 153 Gross nabonal savings/GDP 16 5 23 1 12.3 14.3 Current account balance/GDP -4 7 5.7 0 4 -2.2 Domestic Investment Intereat paymnents/GOP 1 3 3 4 2 5 2.5 savings Total debVGDP 240 41 5 41 0 451 Total debt service/exports 20 7 36 3 29 9 Present value of debVGDP 40 2 Present value of debtVexports 193 7 ,, tIndebtedness 1981-91 1991-01 2000 2001 2001-05 (average annual growth) GDP 3 8 2 5 2 6 14 2.3 - Colombia GDP per capita 1 7 0 8 0 7 -0.3 0 6 - Lower-middle-income group Exports of goods and services 9 4 4.8 3 3 4 1 2 5 STRUCTURE of the ECONOMY 1981 1991 2000 2001 Growth of Investment and GODP () (% of GDP) 20 Agriculture 19 8 17 4 13 4 1 30 Industry 315 371 301 299 Manufacturing 21 9 209 159 16.3 2097 0 o Services 487 45 4 56 5 571 o40 Private consumption 72.5 67 4 84 6 63 6 .6s General govemment consumption 104 92 218 21.1 GDI e GDP Imports of goods and services 15.4 13 9 19.6 19 0 - 1981-91 1991-01 2000 2001 Growth of exports and Imports (%) (average annual growth) Agnculture 3 3 -18 4 7 01 Industry 5 2 12 4 4 -01 ~ Manufacturing 3 9 -21 10 5 -08 a 9 0 Services 3 2 3 8 12 21 Private consumption 2 8 19 2 6 19 General govemment consumpbon 4 4 9 6 -2 1 0 3 -30 Gross domestc Investment 0 6 -0.3 12 3 9 6 - Exports :Imports imports of goods and services 08 6 3 4 4 11 2 Note 2001 data are preliminary estimates - The diamonds show tour key indicators in the country (In bold) compared with its income-group average If data are missing, the diamond will be incomplete - 75 - Colombia PRICES and GOVERNMENT FINANCE 1981 1991 2000 2001 Inflation Dot7esffc prkes nltn(% Consumer pries 27.3 26.8 8.7 6 5 2D Implicit GDP deflator 22.8 26.0 13.6 76 Is. 10. Government finance s (% of GOP, includes current grants) 0 Current revenue 14.1 11.8 13 3 es 57 s8 99 00 01 Current budget balance .. 4.8 -52 -5.0 GDP deflator #C PI Overall surplus/deflcft .. 26 -6.0 -6.1 - . TRADE 1981 1991 2000 2001 Export and Impont ltvels (USS mill.) (UIS$ mWillions) Total exports (fob) 3,195 7,653 13,115 12,309 a Coffee 1,423 1,336 1,069 764 Petroleum 36 1,460 4.569 3,083 15,0C0 Manufactures 928 2,400 5,190 5,606 Total imports (clf) 5,199 4,963 11,538 12,834 10.010 Food 319 280 1,428 1,578 so ** Fuel and energy 726 284 234 189 Capital goods 1,859 1,565 3,414 4,468 0-__ _ Export pnrce index (1995=100) 8 59 247 243 9s es 97 Oa 99 00 01 Import price index (1995-100) 7 63 193 209 oExports alrmports Termsof trade (1995-100) 118 94 128 116 BALANCE of PAYMENTS (US$ milions) 1981 1991 2000 2001 Current account balance to GOP (%) Exports of goods and services 4,678 9.115 15.624 14,932 2 Imports of goods and services 6,215 6,633 14,400 15,840 Resource balance -1,537 2,482 1,224 -908 o Net income -427 -1.832 -2,530 -2,975 Net current transfers 243 1,697 1,662 2094 2 Current account balance -1,721 2,347 356 -1,789 4 Financing items (net) 1,284 -298 513 2,955 Changes In net reserves 437 -2,049 -869 -1,166 .6 Memo: Reserves Including gold (US$ milions) .. 9,006 10,245 Conversion rate (DEC, local3US$) 54.5 629 3 2,087.6 2.299 8 EXTERNAL DEBT and RESOURCE FLOWS 1981 1991 2000 2001 (US$ millions) Composttion of 2001 dabt (USS mill.) Total debt outstanding and disbursed 8,716 17,201 34,081 37,129 IBRD 1,164 3,728 1,920 2,006 A.2,008 IDA 21 14 7 7 0:3,795 8:7 Totaldebtservice 1,120 3,755 5,171 . IBRD 161 798 368 365 - IDA 1 1 1 1 Composition of net resource floks F 10,453 Offical grants 7 68 79 ..+ Official creditors 277 -150 102 203 \ u Private creditors 1,127 -270 728 D 20.868 Foreign direct Investment 265 457 2,376 2,328 Portfolio eguity 0 0 26 3,380 World Bank program CommItments 0 60 350 635 A - IBRD E - Bilateral Disbursements 251 301 266 368 B - IDA D - Ofter nultilateral F- Pnvate Pnncipal repayments 77 492 243 233 C - IMF G- Short-tern Net flows 174 -191 24 135 Interest payments 85 307 127 133 Net transfers 89 -498 -103 3 Development Economics 9/14/02 -76- Additional Annex 11: Transport Sector COLOMBIA: Bogota Urban Services Project 1. Background Bogota has an estimated population of about seven million living in an area of about 1,732 sq km. The city is an agglomeration of 20 jurisdictions. There are about 28 other smaller suburban municipalities which have a high economic dependency upon Bogotd. In terms of vehicle stock, Bogota has about 27,000 buses, 60,000 taxis, 400,000 private cars and about 200,000 in other vehicles which traverse about 6,379 kms. of its total road network system. About 71% of motorized trips is taken on the public transit system and ownership ratio is about eight residents per car in the city, an average which is below that of comparable cities. Several factors can be cited as possible explanations for the current transport problems in Bogota. The institutions responsible for the sector apparently lack the capacity to adequately plan, manage, operate, monitor and enforce the rules and regulations governing the city's transportation system. For example, there is little traffic-engineering work done by the sector entities and the traffic signal system, rather than facilitating traffic flows, is considered one of the main causes of congestion, due to timning and sequencing problems. Also, a weak institutional and administrative system has resulted in an oversupply of buses in the more popular routes and this has been a main cause of congestion, pollution and accidents. Lax traffic enforcement rules have also contributed to the problem, insofar as parking and transit regulations are not consistently or uniformly enforced. There has also been a historically low level of infrastructure investment, especially in maintenance of the road network and in traffic management systems, the result of this being the poor state of the network (see Table 11.1 below). Table 11.1 Condition of the road network in Bogt Condition Main Intermediate Local Total % of Total Arteries Streets Streets Km-Lane Km-Lane Km-Lane Km-Lane Good 1,114.34 2,159.90 1,842.90 5,116.82 36.6% Fair 441.37 690.49 3,179.61 4,311.47 30.9% Poor 428.87 2,477.44 1,629.72 4,536,03 32,5% Total 1,984.57 5.327,83 6,651.90 13,694.32 100.0% % of Total 14.2% 38.2% 47.6% 100.0% Source: IDU. 2. Recent Developments. Over the past five years, Bogota introduced several innovative policies aimed at addressing many of the main transport sector problems which it faced. One of the primary focus of these policies was emphasis on reducing the use of the private car while making public transportation more attractive. This new initiative covered five main areas: (i) institutional strengthening; (ii) measures aimed at discouraging private car use and incentives to non-motorized transport; (iii) improvements in the public transport system (iv) street maintenance; and (v) traffic management. -77 - Institutional Strengthenin: Until recently, the transport sector in Bogota was managed by three agencies at the city level: the Urban Development Institute (IDU) which was in charge of planning, financing and executing transport works; the Traffic and Transport Secretariat (STT) which had responsibility for handling traffic management, public parking, supervision of public transport, vehicle inspection, and processing of drivers' licenses; and the Public Works Secretariat (SOP) which was responsible for road maintenance. Even though STT is the highest transport authority in the city, it has been severely weakened by staffing problems and in the past, there have been frequent charges of corruption and inefficiency among all of these entities. For STT in particular, its apparent inability to address growing dissatisfaction in the areas it managed created widespread dissatisfaction. In an effort to streamline the system and improve efficiency and accountability, the administration proposed the elimination of SOP, with its functions redistributed to the remaining two sector entities after they themselves were also strengthened and they could privatize some of their operations. Even though the City Council did not approve the proposed package of integrated institutional reforms, the mayor was able to effect most of the changes he sought by reassigning responsibilities among the sector entities, a step which did not require council approval. Almost all of SOP's functions have now been transferred to IDU and STT and its staff fell from a peak of 2,300 to 150 over the past two years. Several functions of the S1T (e.g., license plate issuance), and IDU (e.g., street maintenance) were also farmed out to the private sector. Both IDU and STT now have new organizational structures with fewer but better-qualified and better-paid staff. As a result, there have been significant improvements in transparency, efficiency and effectiveness of their operations. Disincentives to private car use and incentives for non-motorized transport: Among the main tools used to discourage the use of private vehicles are the Pico y Placa restrictions on circulation (based on license plate numbers), relaxation of price control on fuel, a fuel surtax (partly earmarked for public transport finance) and designation of one day per year as a car-free day. In parallel, the district authorities created incentives for non-motorized transport by constructing bikeways, parks and sidewalks and by encouraging greater use of open space in transport plans. Under the Pico y Placa system, about forty percent of the car and truck fleet is not allowed to circulate during the morning and evening peak periods, based upon the number on the license plates of these vehicles. When this system came into operation in 1998, it applied only to private cars; however, after its successful implementation, in the second semester of 2001, it also included public transport vehicles, with significant positive results. For example, even though about twenty percent of taxis and regular buses cannot circulate during one full work day each week, surveys indicate that all operators end up with as much earning as they received before the system began, primarily because of the decreased competition they face as a result of the restrictions. During the hours of the restriction, average car speed has increased, leading to important timesaving for both private car and public transportation users. Bus average speed, for example, increased 25% from 20 to 25 km/h, and the number of passengers per bus increased by 19 percent. The city administration held its first Car Free day (CFD) on February 24, 2000, a normal work day. One of the goals was to "invite the 14% of the citizens that typically travel by car to travel for one day in the same way as the remaining 86%." It was also aimed at generating a consciousness among the population about how they want the city to develop and to draw attention to traffic problems and the other modes of transportation which existed. Based on the positive results of the first CFD, the city administration included a question on a referendum in November 2002, asking whether people wanted a car free day to be held the first Thursday of February of every year. The proposal was approved and the CFD is now an -78 - annual event in Bogota. Regarding non-motorized transport, the main feature is the construction of a 350-km bicycle-way network that covers a substantial part of the city. Among the goals of the open space-policy are: 500 kilometers of sidewalk free of parked cars; construction and maintenance of about 932,000 m2 of new pedestrian public space, maintenance of about 195,000 m2 of existing pedestrian public space and rehabilitation of about 648 parks. Overall, the public space policy has shifted focus from catering to owners of private cars. At the same time, it has also generated a significant increase in the number of private parking lots and parking buildings available in the city. In this regard, the administration utilized the previous World Bank loan to design a parking policy. The studies helped to identify ways of concessioning 16 parking districts in the city which are expected to provide about US$ 7.5 million per year for 13,800 parking spaces along 2,600 km of streets with charges ranging from one dollar per hour in commercial areas to 5 to 15 dollars per month in residential areas. Priority to Public Transport: In 1999, a new autonomous company, Transmilenio S.A. was created to provide and own the fixed infrastructure needed to organize and administer, with private sector financing, a new bus rapid transit system. This system became a widely-acclaimed success, winning many awards and generating worldwide interest and visits to Bogota. It is described in greater detail in Additional Annex 12 of this document. Traffic management: Acknowledging the limitations of using only fines and other enforcement mechanisms, STT has launched an educational campaign aimed at promoting greater voluntary observance of traffic laws. This program is now in operation and every week, hundreds of drivers are sent to take a two-hour improvement course in lieu of paying a fine. Additionally, for many infractions, the city is using warning and awareness citations instead of fines. In addition to poor road-use habits, several studies show that the lack of appropriate traffic light programming is another main cause of congestion. In the past, the entire system was owned by the municipal telephone company and its operation was let under a single contract to a private firm. However, the ownership was transferred to STT. STT has separated out the operation and maintenance function from the other activities and it has packaged and concessioned these through three contracts. It is estimated that for the first year this approach will save the city almost 3 billion pesos ($1.5 million), and these savings could increase if this new arrangement continues to be successful. STT is planning a traffic control center (Centro de Control de Trafico) which will use high-tech equipment such as TV cameras throughout the city, Global Positioning System (GPS) units on each bus in the city, and supercomputers to monitor and improve traffic flow. The center is expected to cost approximately US$ 30 million, mostly in imported equipment. Street Maintenance: Due to the poor condition of the road network and its cost to users and the District, rehabilitation and maintenance became a high priority over the past seven years. Acknowledging the shortcoming of past force-account practices, the city initiated an innovative project under which road maintenance was contracted to a private firm which was to be paid on the basis of clearly-defined output. Although that contract had to be terminated prematurely because of disputes arising from work quality and payment arrangements, about 3,700 km, equivalent to about 30 percent of the entire road network, were rehabilitated and maintained. In addition, the previous World Bank loan included a component to rehabilitate five main corridors on a pilot basis, for a total of 400 lane-km. These latter contracts were - 79 - executed on time, at low prices and without significant cost overruns. From the overall experience, the District is now able to better prepare its maintenance contract and it has also benefitted from significant price reductions which have arisen as a result of greater competition for such works. 3. Perforrmance of Sector Agencies Traffic and Transport Secretariat (STT). Between 1998 and 2000, the STT has had six different heads and many staff changes, making it very difficult to plan and implement any significant medium or long-term initiatives for the sector, the only exception being the Pico Y Placa program discussed earlier. Many analysts argue that the high staff turnover and the lack of a clear mandate have, to a large extent been responsible for the current chaotic traffic conditions in Bogota. Over the past few years, the agency has shown improvement after being restructured. Its role has been defined more clearly; however, it still needs to sharpen its focus and prioritize its functions and there is also need for more direct TA to help it in its new role. Since early 2001, there have been greater staff continuity in STT and this has allowed it to take several useful institutional strengthening measures aimed at making STT more flexible, with the ability to respond quicker and more appropriately to emerging challenges. Apart from the traffic light management changes which are discussed earlier, STT is also trying to reassert its role as the administrator of the transit system, ensuring an orderly system of route allocation, compliance with its regulations and ultimately, the elimination of excess capacity in the system. It also has a unit which has shown great promise in addressing traffic safety issues. It has made use of recognized external experts in all of its recent initiatives and indications are that with stability and some more TA, it may be able to fulfill its assigned role. Instituto de Desarrollo Urbano, IDU. Between 1998 and 2000, the District made use of both its general income as well as the income received from asset privatization to embark upon an ambitious public works construction program, particularly those related to transportation and public space. It spent about US$ 1.8 billion over a three-year period with the majority of these investments administered by IDU through private-sector contracts. To ensure that IDU was capable of handling its responsibilities, the administration undertook a thorough reform of IDU, utilizing teams of highly qualified outside consultants, including Transparency International. It began with a new organizational structure with fewer but more competent and better-paid staff and with more-clearly defined roles and responsibilities. Processes and procedures where also streamlined and special procedures were developed to deal with problems or issues which could cause delays. Finally, personnel management was of very high quality and this helped in improving staff morale. As a result of these efforts, II)U was well-equipped to handle the surge in its investment program in an efficient and effective manner. For example, it was able to reduce the cost of street maintenance and the maintenance of medians and green space, by 88% in real terms, when compared to what SOP used to pay for the same work. Furthermore, even though it was a new activity and there were several design changes as the project advanced, IDU managed the civil works of the first phase of the Transmilenio project in an expedient manner and without incurring in significant cost overruns. Transmilenio S.A. Transmilenio S.A was created by the City Council at the request of the Mayor early in 1999 as an autonomous city-owned entity. Because of its structure, it does not face the same constraints which government entities face in terms of salaries, budgetary flexibility and continuity. Transmilenio S.A. owns the infrastructure, plans future expansions of the network, monitors the daily service schedule, and has overall management responsibility for the system. Additionally, it is responsible for providing security, maintenance, customer relations and fare collection services, all of which it does through outsourcing. The buses for the system are provided by private companies who win - 80- clear formula-based bids and agree to provide and operate the buses according to Transmilenio's specifications and requirements in return for a fee per km driven. Transmilenio S.A. is funded by transfers from the city government (earmarked for system expansion) and by a three percent commission on the farebox receipts of its system (for administration costs). Because only a limited number of busways is currently in operation, Transmilenio S.A.'s share of the farebox receipts has not been enough to cover its recurrent costs and the city has had to provide the additional resources. For the next stages of system, the commission will be raised above the current three percent level so as to eliminate city subsidy of Transmilenio's administrative costs. The City Plannin,e Department (DAPD). DAPD was responsible for preparing the Master Land Use Plan (Plan de Ordenamiento Territorial, POT) for Bogota which was prepared after intensive civic society consultations. In its urban policy aspects, the POT calls for increased densification of the current Central Business District along with a several intermediate and small business clusters interspersed throughout the city in residential areas, with adequate provisions being made for adequate basic infrastructure services including water, sewerage, motorized (primarily, Transmilenio and other public-transport systems), and non-motorized (bikepaths, sidewalks) traffic and open spaces. The DAPD has done a satisfactory job in managing the preparation of the POT. However, its staffing and focus have been rather weak in the past and it is now trying to improve its interaction and coordination role with other District entities. It is planning to undertake studies aimed at better understanding the impact of the Transmilenio system on land use, land values and several issues which relate to the competitiveness of Bogota and the regional economy. It also plans to study housing and settlement issues. All of these studies, if properly designed and conducted, could provide valuable information for the District to better manage its development. 4. Finance of the Transport sector in Bogot( Bogota has several sources of revenue for financing its transport sector. First, there is a 20% surtax on gasoline which can be used exclusively by municipalities for urban transport purposes such as road maintenance and mass-transit projects. BogotA assigns 50% of its gasoline surtax revenue to finance the construction of the Transmilenio system and the remaining 50% is used for road maintenance works. Other resources which are used to finance transport sector investments in Bogota include the motor vehicle tax and general District budget transfers which can cover both recurrent and investment costs. There is also a betterment tax through which investments can recovered from properties benefitting from such works. The revenue raised from this tax is to be used specifically to cover the cost of construction of the projects which generated the increased property values. National Government transfers for specific projects constitute another revenue source for Bogota. Currently, the National Government has a long term agreement to finance 70% of the financing cost of the Transmilenio project. Fines have also been a financing source for the District; STT covers approximately 70% of its operating costs from various fines levied for violation of traffic regulations. Even with all of these different sources of funding, the District's financing needs for the transport sector are several times greater than available budget. For example, almost two thirds of the road network in BogotA is in poor or fair condition while only one third is in good condition. IDU estimates that to bring the entire network to a good condition and maintaining it at that level, the city would have to spend over three trillion pesos in the period 2001-2004 period (Table 11.2). Assuming that 50 percent of the gasoline surcharge goes to road maintenance, the city would have around 80 billion pesos and it will take 40 years to merely achieve current road rehabilitation and maintenance objectives. For new roads, IDU estimates that another 1.69 trillion pesos are needed, with another 266 billion for building bridges and interchanges. The expansion of Transmilenio requires an additional 1.63 trillion pesos, and the - 81 - expansion of the bike path network, 439 billion. Finally, for public space investments, the funding needs are about 1.3 billion (Table 11.2). The overall total cost of these identified works is 8.8 trillion pesos, while the city expects to invest only 2.7 trillion or about 33% of this amount. Table 11L2 Transport Sector IRequirenments, expected investment and deficits Millions of pesos (2XC02 price). Expenditure ltems Cost 20on-20D4 IRoad Maintenasnce 3,435,625 Routine maintenance 715,052 Periodic maintenance 240,279 Rehabilitation 734,370 Re-construction 1,745,924 Road Construction __ _____396 New Roads and Avenues 1,691,976 Bridges and Interchanges 266,420 ass Tiransit and NMT 2,l9,1273 Transmilenio Busways 1,629,441 Bike Path Network 439,732 Public Space 2,310,40D otal $,773,594 Estimated Available resourcez 2,71O369 Deficit 6,463,225 Source: IDU. The gasoline surcharge and the other taxes mentioned above are yielding a significant share of the District's sector needs for capital, operation and maintenance funding. The potential for increasing resource from these existing sources is not very promising especially since, as in the case of the gasoline surcharge, the District has a successful campaign aimed at curbing increased private auto use and cutting back on the oversupply of buses. One new area which studies indicate is worth exploring further is the non Transmilenio system where, if the District can achieve some basic reforms, it can share in some of the benefits which are expected to accrue under a more-efficient system, as illustrated in Table 11.3 below. -82- Table 113 Characteristics of Current and New Public Transport System Current system New efficient system Quantity of bus 580 urban+33 suburban 180 urban+33 suburban routes Total Length of Routes 29,675 Km 10,062 Km Buses 26,619 12,546 Maximum Load per 75% 100% Bus _ _ _ _ _ _ _ Average Load per Bus 30% 42% Passenger per Bus per 312.0 713.9 day__ _ _ _ _ _ _ _ _ _ _ _ Average trip time 39.3 min 31.1 min Source: STT. Part of the plan of STT to reform the existing system is already being designed and the mechanisms and other details regarding how to capture some of the benefits for improving the system further have yet to be worked out. - 83 - Additional Annex 12: Transmilanio Mass Transit System COLOMBIA: Bogota Urban Services Project Transmilenio is a bus-based mass transit system. It is part of the strategy implemented by Bogota to improve traffic congestion and improve efficiency in the city by reducing dependence on private cars and consists of the following main components: (i) infrastructure which includes segregated busways, stations and terminals, access ways for pedestrians, bicycles and feeder routes, bus parking areas and maintenance shops, all owned by an autonomous public entity and (ii) an innovative public-private partnership arrangement under which buses, fare collection system (equipment, card based and fiduciary management), operation and control systems are all owned and operated by the private sector according to specific performance criteria. The autonomous entity, Transniilenio, has overall responsibility for overall administration of the system. Some of the main features of the system are: (i) people are transported in articulated buses with a 160 passenger capacity; (ii) in addition to the busways, there are physically segregated stations every 500 m on average, and transfer terminals in intermediate locations and at the end of each busway; (iii) passengers pay their fares before entering the stations, using turnstiles and electronic cards; (iv) the terminals and intermediate multi-line stations, are served by special feeder buses (40-80 passenger capacity) which provide intermodal connections without requiring the payment of an extra fare; (v) busways designed for both express service (which stop only at selected stations) and local service (stopping at all stations), thereby facilitating high average service speed and capacity, (vi) each articulated bus has a GPS (global positioning system) connected to a control center, where the frequency, position and speed are controlled; and (vii) the concessionaires for the operation include operators already providing bus services, and domestic and intemational investors, while the feeder bus service is contracted out to existing transport companies. Transmilenio has substantially changed the transport sector of the city; o It has catalyzed the modernization of the public transport industry in Bogota. The creation of financially sound bus operating companies has made it possible to offer efficient and high quality services, applying modern business principles. o It has created a new model to replace the "Guerra del centavo" ("war for a penny") that came about as a result of the traditional payment system to drivers based on the number of passengers moved per day by each bus. o The concession contracts have made it mandatory to retire and destroy 2.7 old buses at the first stage and 6 or more buses for the second stage, for each articulated bus purchased. New buses for feeder routes are also required to be linked to replacement of old bus on a one to one basis for the first stage. In its nearly two years of operations, Transmilenio system shows the following achievements which many neighboring and other cities in Asia and Africa are now aiming to replicate: o High bus utilization: On the busways, buses carry an average of 1,638 passengers per day, compared to 312 passengers per day under the traditional system. o High system usage: As of late 2002, Transmilenio ridership exceeds 770,000 passengers on a typical weekday. According to detailed passengers surveys, 19% of Transmilenio users have access to private cars. o Commercial success: It is expected that the bus companies will have amortized within -84 - approximately four years, their fleets of articulated buses which they had acquired new at a cost of about $200,000 per bus. ( Private operators are estimated to have a return on investments in excess of 14%). * No public subsidies: Except for the initial fixed-infrastructure investment and routine maintenance, all costs are financed from the bus fares which is equivalent to about US$ 0.40 per trip and was the same as fares on non-Transmilenio lines. * Passenger benefits: Compared with the bus services provided in the respective corridors before Transmilenio opened, the average travel time reduction has been 38% per trip. * Much improved traffic safety: In the busway corridors, all of which also carry significant general traffic volumes (in parallel lanes), the weekly number of traffic accidents declined from 26.5 in 2000 to 4.9 in 2001, injuries from 18 to 4.5, and fatalities from 1.3 to 0.1. * Excellent public image: In a survey which was carried out in September 2001 among residents (irrespective of their travel behavior), 88% of those interviewed rated Transmilenio as either "good" or "very good". Residents of all walks in life show pride in the new system; even with increased passengers in the Transmilenio corridors, street crime dropped from an average 5.3 assaults per week in 2000 to 2.8 in the first nine months of 2001. Two main lines of the first stage of the system were inaugurated in December 2000 and the third line was completed in March 2002. The three trunk lines have a combined length of 41 km, with about 305 km of integrated feeder routes. The construction of the second stage started in April 2002, and it is expected to be finished by the end of 2004. It consists of another three lines with a length of 40 km. The main figures of these stages are presented in Table 12.1. When the whole system network of 16 lines is completed by 2016 as currently planned, it is expected to provide a comprehensive transport network in the city and outlying areas. Table 12.1 Transmilenio Figures First Stage Second Stage Total Number of lines 3 3 6 Length (km) 41 40 81 Number of articulated buses 470 335 805 Number of feeder buses 241 258 499 Number of feeder routes 41 20 61 Number of passengers per day 770,000 661,500 1,431,500 Number of passengers in peak hour 70,000 63,000 133,000 Total cost of the infrastructure US$M 203,846 US$M 511,538 US$M 715,384 Total cost of articulated buses US$ 39,770 US$ 28,340 US$ 68,350 Total cost of feeder buses US$ 5,560 US$ 5,950 US$ 11,510 % of total public service trips 16.4% 14% 30.4% % of reduction of average travel time 38% 38% 38% % of reduction of traffic accidents in 89% 89% 89% the bus corridors % of reduction of injured people per 83% 83% 83% 100,000 passengers % of reduction of S02 43% 43% 43% N02 18% 18% 18% MN-10 12% 12% 12% Number of old buses destroyed 1,304 2,010 3,314 - 85 - Additional Annex 13: Barrio Improovement Program (PMIBI) COLOMBIA: Bogota Urban Services Project 1. Background In 1997, the Colombian Congress called for every municipality in Colombia, in very close collaboration with the local population, to prepare and implement a ten-year comprehensive land-use plan known as the Plan de Ordenamiento Territorial (POT), with the purpose of providing a long-term vision guiding the preparation of three-year local development plans (PDs). The preparation of the POT for Bogota was undertaken in three phases. The first phase took place in October of 1998 and included a survey of a representative population sample, as well as seven workshops with 38 focus groups, 15 meetings with economic groups and a seminar with the participation of 500 leaders from all political, economic, social and cultural sectors. The second phase was undertaken between October, 1988 and February, 1999 when a draft of the proposed POT, incorporating the feedback of those consulted, was presented to various leadership groups for review and comments. The final phase, from February, 1999 to March 2000, included the presentation of the plan to all citizens through conferences, exhibitions, seminaries, public hearings and workshops in each locality, with the participation of Local Planning Boards (JALs). The POT identified planning units or Unidades de Planeamiento Zonal (UPZ), corresponding to neighborhoods with similar morphological and functional characteristics, and defined the mechanisms to implement plans, programs and projects in these areas. The POT classified 28 UPZs as Type 1 non-consolidated areas with deficiencies in infrastructure, accessibility, public space and services, and adopted the Barrio Improvement Program or Programa de Mejoramiento Integral de Barrios (PMIB) as a long-term strategy for improving the conditions of these 28 UPZs. With the formulation of the POT for Bogota, there has been a series of upgrading programs taking place. These include the Dismarginalization Program (1998-2001), the Program for Community and Institutional Development in Ciudad Bolivar (1998-2001), the local roads program (2001-2002) and the Southern Bogota Project for Neighborhood Upgrading (1998-2003). The Caja de Vivienda Popular (CVP) was appointed to coordinate the PMIB which includes upgrading works, land titling, resettlement actions, neighborhood and housing improvement. The urban upgrading component of the proposed project is consistent with the goals of the POT and PD. It is designed to support the activities of the PMIB with a holistic approach, taking into consideration physical, social and institutional aspects. It also provides technical assistance for the development of coordinated actions that will help generate broad-based support as well as the sustainability of the program. 2. Selection of the Project UPZs. The PMIB uses the twenty eight UPZs identified in the POT as the starting point. It ranks these UPZs by applying the criteria below and the fourteen which have the most serious physical, social and economic deficiencies comprise its area of intervention. * Relation with the POT: UPZs have to be identified in the POT. - 86 - * Concentration of vulnerable population. Two aspects were considered: income and age. For income vulnerability, the UPZs with the greatest number of population in SISBEN I and 2 were prioritized. The SISBEN is a composite indicator used for the implementation of social policies. It includes such variables as: the housing quality, infrastructure, access to services, demographic aspects, income and occupation, human capital and social security. This system allows ranking households in an ascending order from level 1 to level 5, with the population in extreme poverty being in level I and the population in poverty being in level 2 . Regarding age vulnerability, two groups were considered: young population under 20 years old and elderly people older than 55 years. * Impact. In order to guarantee that the needs of the greatest possible number of people in illegal settlements are addressed, the UPZs with the greatest concentration of population in relation to the total population of the 28 UPZs were prioritized. * Coverage. This indicator refers to the number of lots and hectares illegally developed, giving priority to the UPZs where this number is higher. Two criteria were used: (i) number of illegal lots in UPZ as a share of total number of illegal lots; (ii) hectares illegally developed as a share of total hectares of the UPZ. * Continuity with governmental programs. Areas with previous intervention of governmental action, specifically areas selected by the Dismarginalization Program, were given priority in order to promote program continuity. * Level of integration with other projects. The PMIB seeks to integrate its activities with efforts to improve security of tenure as well as water, sanitary and storm water drainage systems. It prioritized areas with previous land-titling actions and existing water, sanitary systems and those with drainage system designs already prepared. * Accessibility. According to the policy of the POT, UPZs with the greatest accessibility problems should be connected to other UPZs and localities through local mobility corridors and access roads. * Risk. High-risk locales such as environmentally-protected areas and areas with seismic vulnerability, are considered a hazard to the population. The PMIB prioritized UPZs with population located in high risk areas for relocation. Table 13.1 shows the scores of the UPZs which were selected, based upon the above criteria. Table 13.1 UPZs selected for the PMIB project UPZ Name UPZ Number Locality Total Score Ranking Lucero 67 Ciudad Bolivar 79 1 Ismael Perdomo 69 Ciudad Bolivar 72 2 Gran Yomasa 57 Usme 69 3 La Flora 52 Usme 68 4 Patio Bonito 82 Kennedy 64 5 Tibabuyes 71 Suba 63 6 San Isidro-Patios 89 Chapinero 63 7 El Tesoro 68 Ciudad Bolivar 60 8 Lourdes 96 Santa Fe 60 9 Bosa Occidental 84 Bosa 59 10 Verbenal 9 Usaquen 58 11 San Bias 32 San Crist6bal 57 12 Diana Turbay 55 Rafael Unbe Uribe 57 13 Jerusailn 70 Ciudad Bolivar 57 14 Source: Unidad de Poltfca Habitacional - 87 - 3. Diagnosis of SeRected UIPZs In 2000, the estimated population in the 14 UPZs was 1.22 million persons, one sixth of the total population of Bogota. Almost half of this population lives in illegal settlements occupying an area of about 3,000 hectares, about 10% of the total urbanized area in the city. The average density of about 234 inhabitants per hectare in the 14 UPZs is about 33% greater than the overall figure for BogotA (210 inhabitants per hectare). The proliferation of illegal settlements shows two different patterns. Measuring on the basis of area occupied by illegal units, Diana Turbay, Patio Bonito and Bosa Occidental rank among the highest communities; however, on the basis of number of people in illegal units, the highest areas are Jerusalen, Tibabuyes, Diana Turbay and Ismael Perdomo (See Table 13.2). In terms of the UPZs with relatively fewer illegal settlements, e.g., La Flora, Tibabuyes and Grand Yomasa, possible explanations for this could be: (i) higher levels of community organization which in many cases play an important role in the regularization of land and services; and (ii) efforts of past administrations to regularize previous illegal areas. Still, this does not imply that these areas are consolidated or that they comply with existing construction norms and standards. 11T'able 13.2 Tota Area and Populaion in llRegal Settlements in selected UIIZs oTtal Area Total | Occupation rate of Occupatiao rate of He Population iMlegal settlements population living in UPZ by IHectare (%) illegal settlements (%) Lucero 581.61 228,212 61.15 36.12 Ismael Perdomo 554.89 90,084 52.56 58.99 Gran Yomasa 530.24 118,444 37.23 33.78 La Flora 206.88 16,523 24.55 29.32 Patio Bonito 314.21 102,709 85.36 58.27 Tibabuyes 745.78 95,108 25.70 64.44 San Isidro Patios 113.02 8,311 118.16 El Tesoro 223.1 54,503 57.99 50.51 Lourdes 231.63 59,166 77.08 44.30 Bosa Occidental 496.6 166,262 78.64 47.93 Verbenal 344.94 51,148 46.74 42.37 San Blas 352.19 95,685 61.64 22.81 Diana Turbay 182.12 70,228 96.59 61.01 Jerusalen 350.08 64,994 75.63 69.18 Tota UPZs 1 5227.291 1,22¶,377 I 57.51 4637 Source: Departamento Administrativo de Planeaci6n Distrital-DAPD. Informaci6n para el Plan Local 2001. Informaci6n Social Basica de Bogota. In the selected UPZs, the population distribution by age groups appear to be skewed slightly toward younger residents when compared to Bogota as a whole. For example, those under four years constitute about 12-14% in the UPZs versus a figure of about 10% in the city and for the 5-19 year segment, there are about 32-39% in the UPZ versus about 30% in BogotA as a whole. The two most-populated UPZs (Lucero and Bosa Occidental) with about 19% and 14% of the total population of the fourteen UPZs, have the greatest concentration of vulnerable population; 19% and 15% are under 4 years old - 88- respectively; and 18% and 13% are older than 55 years. At 18% and 13% respectively, they also have a significant share of the population in the working-age group (20-54 years). Overall, in the fourteen UPZs, almost half of the total population is between 20 and 54 years. With their generally low education and skill level and the country's current socio-economic conditions, this is an important factor in assessing unemployment and underemployment impacts. According to the SISBEN indicator, it is estimated that there are just over 50,000 persons living in extreme poverty (SISBEN 1) and about 230,000 in poverty (SISBEN 2) in the selected UPZs, making the overall ratio for these two groups about 23%. Lourdes and Ismael Perdomo have the greatest number of persons in extreme poverty (SISBEN 1) with about 24% and 15% respectively. Ismael Perdomo and El Tesoro have the highest concentration of people in extreme poverty with 8 percent of their respective population living in marginal conditions. Lourdes, Jerusalen, La Flora, El Tesoro and Verbenal are the UPZs show relatively greater concentrations of people in SISBEN 1 and 2. Another indicator of marginal conditions is the Stratification' method which establishes six different categories according to the physical conditions of housing and its surroundings. According to this classification, just over 95% of the population in the selected UPZs live in Strata 1 and 2, the lowest two levels. This group is about 43% of the population of the city. Table 13.3 Population living in poverty (SISBEN 1 and 2 ) in selected UPZs UPZ Population in extreme Population in poverty Population in Total poverty (SISBEN I) SISBEN 2 SISBEN I + 2 Population # persons % total # persons % total % total # persons Lucero 11,933 0.05 36,008 0.16 0.21 228,212 Ismael Perdomo 7,451 0.08 11,599 0.13 0.21 90,084 Gran Yomasa 3,803 0 03 28,474 0.24 0.27 118,444 La Flora 2,070 0 13 4,358 0.26 0.39 16,523 Patio Bonito 4,385 0.04 20,476 0 20 0.24 102,709 Tibabuyes 3,669 0.04 18,442 0.19 0.23 95,108 El Tesoro 4,365 0.08 12,089 0 22 0.30 54,503 Lourdes 3,152 0.05 22,746 0 38 0.44 59,166 Bosa Occidental 1,484 0.01 14,218 0 09 0.09 166,262 Verbenal 1,658 0 03 13,559 0 27 0 30 51,148 San Blas 871 0.01 10,206 0.11 0.12 95,685 Diana Turbay 2,279 0 03 12,229 0.17 0.21 70,228 Jerusalen 3,044 0.05 25,176 0.39 0 43 64,994 San Isidro- Patios 62 0.01 605 0.07 0 08 8,311 Total 50,226 0.04 230,185 0.19 0.23 1,221,377 Source: DAPD, Sisben December 31/ 2000 Informaci6n para el Plan Local 2001 Bogota para Vivir Todos del Mismo Lado-Modulo 3, pp. 26-27 In terms of social infrastructure, there is a significant deficit of recreational facilities throughout all of the selected UPZs. Compared to international standards of about 10 M2 of green areas per inhabitant, the overall figure for the fourteen UPZs is about I M2 per inhabitant, ranging between 3.1 M2 for Diana Turbay and Bosa Occidental with 0.5 M2. Selection System for Social Programs Beneficiaries. Contains information about housing quality, services, demographic aspects, income and occupation, human capital and social security. 2Stratification is a methodology used by DAPD to classify urban areas based on the quality of habitat and it is used to establish different tariffs on public services and taxes The variables used include housing charactensdcs, urban context, zoning and pubhc services -89- Additional Annen 14 Social and Reselemenit Plans COLOMBEA: B3ogota Ujrban Snaivces ProD=t 1. Social Management Plans .1 Component A: llmproved mobility. The construction of busways and feeder routes has the strong support of residents due to the positive impact of the Transmilenio system in improving mobility in the city. Additionally, continued high ratings in opinion surveys carried out by local NGOs show a high level of pride and ownership of the transport system. IDU, as the entity responsible for the construction of Av. Suba busway and feeder routes, has incorporated in its policies a Social Management Program to prevent and mitigate any adverse impact during the construction stage. Objectives. The objectives of IDU's Social Management Program are the following: (i) to mitigate any adverse social impact resulting from physical infrastructure works; (ii) to provide the necessary information to the communities affected by the physical works; (iii) to promote participation of affected residents in development of solutions to address problems encountered during the construction process. IDU's Social Management Unit is in charge of designing and carrying out the Social Management Program. Among its main task is preparation of a diagnosis of the population to be affected by the physical works, asses socio-economic and cultural impacts generated by the project and develop strategies for comrnunity participation in addressing these impacts. Among its strategies to establish and maintain relationship with the affected communities are: (i) Puntos CREA (Centros de Reuni6n, Encuentro y Atenci6n): centers where social workers provide information, assist the community in assessing the implications of the works and work with all affected groups to develop a responsive program; (ii) CREA Committees: committees comprising leaders and members of the community who work to strengthen control mechanisms and promote sustainability of the works; (iii) Satellite Information Points: centers located in areas under the influence of the project which are visited by a majority of population (schools, supermarkets, etc.) and where information about the project is distributed and citizen feedback can be given. The activities of the Social Management Program include: information sessions with communities as well as transport, industrial and commercial sectors; information dissemination through different communication media; programs for assisting citizens, sustainability workshops to promote the adequate use and control of public space, training programs for workers and efforts to ensure local employment of a percentage of unskilled labor from the community. limplementation and Ilnstitutonol arrangements. IDU'S Social Management Unit has a team of professionals with the task of assisting the contractor and the auditor in the implementation of the Social Management Program and supervising the activities carried out under the Program. To guarantee the implementation of the Social Management Program, IDU has established procedures to include in the civil works contractor's proposal an Environmental and Social Management Annex which must contain a description of the activities to mitigate the social impacts, the methodology to be implemented according to the strategies and activities established by IDU, and a Social Team to carry out the Program. In the assessment of the bidding process, this Annex has a value of 20%. The cost of these social activities is to be included in total cost of the contract and IDU has provisions for - 90 - supervising compliance with all the activities contained in the Social Management Program and to penalize contractors for not complying with their obligations. The implementation of the Social Management Program is established in the contract and is supervised by the firm which audits the construction of the works. Budget: The cost of the Social Management Plan for each civil work is included in the total cost of the contract. 1.2. Component B: Urban Upgrading The execution of the physical components of the PM1B includes a Social Component where the main goal is to help generate social capital in the selected UPZs. In order for the proposed project to be successful, one condition is that it integrates these marginal neighborhoods into the formal city structure. To this end, assistance will be provided to strengthen capacity of community organizations to participate in all aspects of their own development. The Social Component seeks to strengthen social identity and social cohesiveness, promote a sense of responsibility for using and maintaining public goods and to develop a positive change of attitude and behavior towards the city and among citizens. To achieve these objectives, the PMIB includes the following sub-components: (i) Promotion of citizen culture: This component is of a pedagogical nature and it provides the necessary elements for the communities to facilitate social development along with management and sustainability of the physical works. It includes information sessions and community participation activities associated with the following sub-components: planning and legalization of plots, construction of water and sewerage works, access roads, parks and public space. (ii) Strengthening social organizations: An assessment of social organizations in the 14 UPZs was carried out by Fundaci6n Corona, a well-respected NGO. The organizations targeted by the PMIB include community based organizations (85%), from which 51% are Juntas de Accion Comunal. Table 14.1 shows the number of organizations by UPZ. - 91 - Table 14.1 Number of Social organizationis in selected UTP7Ls. UIZ Number of l __________________ Social organQations Lucero 232 ismael Perdomo 120 Gran Yomasa 61 La Flora 8 Patio Bonito 53 Tibabuyes 27 El Tesoro 75 Lourdes 57 Bosa Occidental 102 Verbenal 29 San Blas 17 Diana Turbay 39 Jerusalen 103 San Isidro- Patios 18 Total 941 Source: Fundaci6n Corona This sub-component provides the necessary tools to improve the capacity of social organizations to participate effectively in planning and implementation of infrastructure projects. The organizations are grouped into community nodes, which are contracted by the CVP to publicize the PMILB program before, during and after the execution of physical works. These include workshops and community participation activities associated to the following sub-components: consultation for the design of an updated urban design framework, plans for morphological and environmental recuperation and design of public spaces under the methodology of projects with pedagogical purposes (Obras con Saldo Pedag6gico). (iii) Assistance to vulnerable groups: this consists of social, technical and legal assistance aimed at reducing the socioeconomic vulnerability of population groups that are located in areas at risk, or those without secure tenure. This component includes information sessions, community participation activities, training programs for housing reinforcement and job generation among unskilled community residents through programs aimed at encouraging contractors to use workers from within the communities. There are three lines of action associated with three levels of intervention: (i) Before execution of physical works, there are actions developed through the participatory processes carried out by the central and local administrations and related to planning and community legalization; (ii) During execution of physical works there are actions directly associated to physical interventions, such as working with communities to identify issues and develop action plans to address such issues; and (iii) After execution of physical works there are complementary social activities aimed at promoting sustainable operation and maintenance of the physical works. limplementation and institutional arrangements. The CVP, as the coordinating entity of the PMIB, has the role of coordinating the activities of the different institutions (DAPD; DAMA; EAAB, IDU; CVP; IDRD; DAAC; JB) as they implement their respective components and for following up and monitoring the implementation process to ensure efficiency, avoid duplication and promote post construction activities within the community. -92- Budget. CVP has a budget US$ 3.96 millions to implement the Social Component of the PMIB. 2. Resettlement Plan and Framework 2.1 Component A: Improved mobility The construction of lanes for the second phase of Transmilenio in Av. Suba from Calle 80 to Av. Ciudad de Cali will require the acquisition of 470 properties. These properties account for 591 social units, including families and businesses. During the preparation of the project, IDU carried out a census and socioeconomic diagnosis of the affected population as shown in Table 14.2 below. Table 14.2 Socioeconomic diagnosis of the population to be displaced in Av. Suba busway construction Type of social unit TOTAL No. % Households 195 33 Economic unit 323 55 Socioeconomic unit 61 10 Vacant unit 12 2 TOTAL 591 100 Source: IDU Resettlement Plan. Based upon the result of the diagnosis, IDU designed a Resettlement Plan. The objectives of the Resettlement Plan are to: (i) mitigate and compensate the adverse socioeconomic impacts caused by involuntary displacement, (ii) provide legal and social support for the acquisition of new property, (iii) provide support and guidance conducive to the reestablishment of the socioeconomic condition for the affected groups. The Resettlement Plan comprises the following programs: Communication. The focus here is to maintain a permanent communication mechanism in order to: (i) inform those affected of the process and requirements for the negotiation of acquisition of their properties and the acquisition of the new ones, (ii) keep affected groups informed of the progress in their case, and (iii) take and respond to questions and concerns of these groups. This program will be developed through meetings, workshops, roundtable discussions and individualized assistance as well as print and other media programs. Housing. This program seeks to support the families to sell the affected property to IDU and to acquire a replacement unit. This program has three projects: Legal and Social Assistancefor selling the affected property. IDU will pay market value for the affected properties. The acquisition process has many stages and requirements. In order to facilitate this process, IDU will provide information, advise and support to the owners through these stages. Technical, Legal and Social Assistance to acquire or rent a replacement unit. IDU will provide information on the real state market as well as legal and technical assistance for owners and renters. Architectonical and Normative Assistance. In those cases where some properties will only be partially affected, urban norms and standards will be disseminated and architectonical assistance will be provided for the reconstruction of the affected units. - 93 - Socioeconomic Reestablishment. This program includes the following components: Economic reestablishment. The process of selling the affected property and buying a replacement unit implies expenses for real state registration and taxes. The families and business owners also have to pay moving costs. Business owners and renters will face income loss during the transition stage. For these reasons, the Plan includes the payment of compensation for moving, registration and taxes, and temporary loss of income. Such compensation will be paid considering the degree of economic dependency of the affected resident upon the property and his or her years of residence at that site. Additionally, the owner of the business will receive training and assistance to reestablish his or her business activity. Social Reestablishment. All of the assistance programs will be according to the socioeconomic characteristics, needs and expectations of the families. For example, some families will receive psychological support to help with the stress associated with the involuntary displacement. The most vulnerable persons (widows, female household heads, handicapped and elderly residents) will receive special support geared to their specific needs. The families will also receive assistance to reestablish their access to such social services as education and health benefits. Monitoring and evaluation. The Resettlement Plan includes a monitoring and an ex-post evaluation system. Institutional Arrangements. IDU will contract a specialized team to implement the Resettlement Plan. The team will be composed of I director, 3 social specialists, 3 lawyers, I economist, 1 real state professional, 2 certified public accountants, and 3 assistants. IDU has a Social Management Unit which is responsible for contracting and supervising the implementation of the Plan. From the previous Bogota Urban Transport Project, IDU has strengthened its capacity to design and implement resettlement plans. Additionally, IDU has adopted the resettlement procedures for all of its non Bank-financed works which result in involuntary displacement. Budget. Table 14.3 shows IDU's budget for compensation of properties, compensation of economic losses and for the implementation and audit of the Resettlement Plan. Table 14.3 IDU's budget for compensations and Resettlement Plan Concept Cost (Colombian $) Compensation of properties 91.300.000.000 Compensation of economic losses 6.062.000.000 Implementation of Resettlement Plan 685.000.000 Audit of implementation of Resettlement Plan 374.000.000 Total 98.421.000.000 Source: IDU 2.2 Component B: Urban Upgrading Due to the lack of adequate urban planning and rural-urban migration to Bogota, fueled primary by the ongoing conflict, a large number of human settlements is located in risk-prone or in protected areas. The Department for Disaster Prevention and Emergency Assistance (DPAE) has identified about 4,200 families located in risk-prone areas and the Water and Sewerage Company of Bogota (EAAB) has identified about 10,000 families living in floodplain areas. - 94 - The process of disaster prevention includes the following stages: (i) identification of areas at risk; (ii) assessment of the possibility to mitigate the risk through civil works; (iii) delimitation of areas with no possibility of risk mitigation; (iv) identification and census of families living in the risk area; (v) formulation of a Resettlement Plan; (vi) implementation of Resettlement Plan; and, (vii) control of areas where population was resettled. The resettlement of the families living in areas at risk is included in the Urban Upgrading Program adopted by the POT and the District Development Plan. The areas at risk and the families to be resettled will be identified during the implementation of the Urban Upgrading Component. For this reason, CVP has prepared a Resettlement Framework, which will be the guide used to prepare the Resettlement Plans needed. Resettlement Framework. The Resettlement Framework establishes the principles and objectives of the resettlement of population located in areas at risk, defines the eligibility criteria, the methods for appraising assets, the organizational procedures, the components of the resettlement process as well as the budget and the institutional arrangements. The methodology to implement the resettlement of population located in areas at risk seeks to provide social, legal and technical assistance to assist this population in their efforts to select a housing alternative in a safe and legal place, according to their economic resources, needs and expectations. The methodology has five components: territorial, environmental, housing and social development. - The territorial component comprises the identification of risk areas, the type of risk and the families to be resettled. - The environmental component develops a methodology to make the population aware of the risk, to control and help establish mitigation measures for areas at risk. - The economic component includes the payment at replacement value of the affected property as well as finding financial alternatives when the replacement value is not enough to acquire a housing alternative in a safe and legal place. - The housing component assists the families to find a housing alternative according to the resource they have, their needs and expectations. It includes several alternatives: new units, used units, and plot with service facilities. Through this component, the affected families will receive assistance to select alternatives and to negotiate the replacement property and improve such properties, if needed. In the case of plot with facilities, the families will receive architectonical assistance to construct their houses. - The social component helps in the socioeconomic reestablishment of the resettled population and the improvement of their standards of living. Institutional Arrangements. DPAE is the entity responsible for the identification and assessment of the areas at risk, EAAB is the institution responsible for the control and management of floodplain areas and the CVP is the entity responsible for the resettlement of families located in risk-prone areas. The CVP was created in 1942 and during the last seven years it has specialized in resettlement. It thus has extensive experience in housing and resettlement of families at risk. Budget. DPAE and CVP have a budget of US$7,372,600 to resettle families at risk during the next four years. - 95 - Additional /Annan 15: Enkroonmental Analysis COLOMBPA: Bogota Urban Sarvicas roDct Descriptron of the Program and its Cornluonents The objective of the Bogota Urban Services Project is to assist the Municipality of Bogota in implementing a strategic portion of its three-year Development Plan (PD), consistent with the ten-year spatial plan (POT), aimed at improving urban livability by increasing access, coverage, quality, reliability and inter-agency coordination in the provision of transport, water, sanitation and related basic services, particularly for residents in low-income areas. There will be three components: A. Iminproved Mobility. This component will finance the continued expansion of the second phase of the Transmilenio system and will have a positive impact by improving access to public transport. It comprises the following investments: (i) construction of busways in Avenida Suba from Calle 80 to Avenida Ciudad de Cali; (ii) improvement, upgrading and rehabilitation of feeder routes which connect neighborhoods to the Transmilenio system as part of an integrated system; (iii) construction of bicycle paths and sidewalks as part of non-motorized transport; and (iv) measures for improving public transport, road safety and traffic administration in the city of Bogota. Total cost of this component is approximately US$180.87 million. B. Uirban Upgrading. This component will construct/improve basic urban infrastructure in fourteen selected UPZs. The investments comprise a full compliment of infrastructure works: (i) planning and neighborhood plot legalization; (ii) construction of storm water drainage systems, water and sewerage systems (iii) improving, upgrading and rehabilitation of access roads; (iv) resettlement of population located in high risk areas, including flood plains; (v) construction and rehabilitation of public space and community services; (vi) improvement of environmental conditions; and (vii) technical assistance for home improvement and land titling activities. Social activities associated with the physical works include: (i) promoting citizen culture; (ii) strengthening social organizations; and (iv) assisting vulnerable population. The approximate cost of this component is US$76.34 million. C. Elnstitutional Strengthening and Technical Assistance. This component is aimed at improving the performance of the District's institutions in delivering urban services through activities that will guarantee the social, environmental and financial sustainability of the works undertaken by the proposed project. This component will finance: (i) equipment and consulting services to develop an information system for road infrastructure administration (IDU); (ii) creation of mechanisms to improve the coordination among District institutions, community organizations, NGOs and the private sector for the implementation of neighborhood improvement programs (CVP); (iii) environmental studies for improving air quality as well as controlling and monitoring gas emissions (DAMA); (iv) preparation of mobility, housing and regional policies which would provide input for the development of future policy measures in the city (DAPD); (v) studies and consulting services for strengthening fiscal management and increasing District revenue (SH); and (vi) consulting services and equipment for the coordinating unit of the proposed project. The total cost of this component is approximately US$12.43 million. The Program entails resources of around $268 million, of which US$100 million will be financed by the World Bank. Project execution will span 4.5 years. -96- Environmental Assessment An Environmental Assessment was conducted for the construction of busways in Avenida Suba from Calle 80 to Avenida Ciudad de Cali under Component A. The Environmental Assessment associated with the feeder routes, bicycle paths and sidewalks under Component A and the urban upgrading works including construction of water and sewage systems and access roads under Component B, is addressed under the environmental guidelines of EAAB and IDU. The Environmental Assessments were complemented with an analysis of the main sources of urban pollution arising from the transport sector and the urban upgrading activities. Based on this analysis, Component B includes technical assistance to DAMA for the environmental restoration of degraded areas in two UPZs and risk mitigation activities in three UPZs, and Component C includes technical assistance to DAMA for (i) the acquisition of equipment to improve the air quality network, (ii) studies aimed at evaluating District programs to control and diminish air pollution and identifying complementary programs to more effectively prevent pollution; (iii) studies to evaluate the effectiveness of current emissions control programs and determine required improvements; and (iv) education and awareness programs on air pollution prevention. An EMP was included with the EA for the Suba trunk line. This EMP will be implemented by IDU, through the civil work's contractor, and supervised by an environmental auditor also hired by IDU. With respect to the EMPs for the urban upgrading works implemented by EAAB and IDU under Components A and B (feeder routes, bicycle paths, water and sewage systems, etc.), both EAAB and IDU have established guidelines and environmental technical specifications that will be the basis of the design, improvement and operation of the upgrading works undertaken under these components. Both EAAB and IDU have institutionalized their environmental guidelines; both have environmental departments staffed with qualified specialists that have experience in managing the environmental impacts of similar projects. EA for Improved Mobility Component (Suba trunk line) A stand-alone Environmental Assessment (EA) was prepared for the Project which establishes the required guidelines and methodologies to manage and mitigate pertinent environmental impacts resulting from the construction of dedicated lanes for Transmilenio buses and car traffic in the Avenida Suba (between Calle 80 and the Avenida Ciudad de Cali), as well as the construction of an integration station and operation platform. The EA, as well as the Environmental Management Plan (EMP) was contracted by IDU and prepared by a consortium comprising Silva Fajardo y CIA Ltda., Silva Carrepo & Asociados, and SEDIC S.A. The reports, which are summarized in this Annex, include: (i) an identification of the current characteristics of the area in which the road works will be constructed and operated; (ii) probable impacts resulting from the civil works; (iii) recommendations for measures to control, prevent, mitigate and correct the identified negative impacts; and (iv) the planned components and programs, including estimated costs, of implementing the environmental management plan during both construction and operation. Environmental Impacts Air Quality and Noise Pollution Given that the baseline data shows that current air quality and noise pollution levels exceed sector norms along the Suba corridor, the environmental impacts during construction and operation are not expected to be significant. Currently, particulate concentrations exceed the annual average norm by 40 to 100% along most of the corridor, and in the southern and western sections of the future busway entrance where most of the public transport of this zone is concentrated air quality levels exceed the daily maximum norm. Noise levels due to traffic, generally ranging from 65 to 80 dB(A) and in some cases peaking to 100 dB(A), also currently exceed sector norms. Although there will be a temporary increase in the concentration of particulates and in noise levels while construction equipment is in use, IDU will ensure -97 - that the contractor complies with air quality and noise level standards. To minimize negative impacts, construction debris will be moistened, construction activities will be scheduled during the day, and IDU and the environmental auditor will ensure that construction equipment is well maintained, to help guarantee that particulate concentrations and noise levels fall within sector norms. In addition, positive, long-term environmental impacts are expected during project operation, such as reductions in sulfur dioxide, carbon monoxide, and nitrogen oxide emissions. Protected Areas and Sites of National Patrimony The project's area of influence includes two small protected areas, located 1 - 4 kilometers from the right of way (the Coardoba and Conejera wetlands), which are subject to sewage discharges. However, construction will take place away from fragile ecosystems, and areas of high sensitivity, such as the Cardoba wetlands, will be prohibited from any type of intervention. In addition, the area of influence includes the Jost Marva Military School, which has been declared a site of cultural interest and national patrimony. Given its cultural value, it also will be prohibited from any type of intervention. Additional Positive Environmental Impacts The project is expected to have additional positive environmental impacts during construction, in which trees and shrubs will be replanted along the Suba corridor in accordance with an ordered landscape plan and the arborization guidelines of the Jardvn Botanico. There will also be improvements to pedestrian walkways along the corridor. During operation, an overall improvement of mobility within the corridor is expected. Urban Upgrading Component Environmental impacts will arise during the improvement and upgrading of feeder routes, bicycle paths and sidewalks (under Component A) and urban infrastructure works under Component B. Most impacts will be associated with construction nuisances, such as noise, dust, and traffic congestion, in populated areas. Both IDU and EAAB have prepared operational manuals with environmental guidelines to ensure that during the construction phase, appropriate steps would be taken to address such problems as dust and noise from construction activities, disposal of construction wastes, safety (workers and the public), and timing of construction works. To ensure compliance with the Bank's safeguard policies, environmental specifications for contractors will be included in the bidding documents. Environmental Management Plan Building on the project's environmental impact analysis, an Environmental Management Plan was prepared to address potentially negative environmental impacts during construction of the Suba corridor as well as operation. In addition, work-specific environmental management plans for the project's urban upgrading works will be prepared by the contractors, subject to IDU's and EAAB's approval before works begin. The environmental management components and programs planned during construction and operation of the Suba trunk line, including estimated costs, are presented below: - 98- Environmental Management Plan - Construction Phase Component Programs Executor Cost Colombian Pesos Environmental Management Contractor $2,235,704,000.00 System Social Management - Community outreach Contractor $1,509,993,050.00 - Sustainability - Training of personnel - Occupational health and industrial safety - Archeological management Forestry, Vegetation and - Removal Contractor $438,059,600.00 Landscape Management - Moving - Compensation - Conservation and maintenance nvironmental Management - Construction waste management Contractor $1,624,517,758.00 of Construction Activities - Storage area management - Machinery and equipment management - Excavation management Surface water management Construction works management Rehabilitation of public service networks Management and final disposal of solid wastes Management of liquid wastes and oils Sign placement and transit management Control of air and noise pollution - Management of pedestrian bridge installation Contingency Plan Contractor $60,036,000.00 Monitoring Plan - Monitoring of socioeconomic indicators Contractor $205,906,800.00 - Monitoring of personnel training plan - Monitoring of air quality and pollution contro - Monitoring of water and soil quality, and llution control of fuels, oils and toxic substances Monitoring of solid waste management Monitoring of fuel, oil and grease management - Monitonng of corrective and preventative maintenance of vehicles and equipment Oversight Plan* - Oversight of social management Environmental - Oversight of forestry management and Social - Oversight of environmental management Auditor during construction AIU (25% $1,538,554,302.00 Total Direct Cosl $7,692,771,510.00 * Costs of oversight plan included in the Auditor's contract. - 99 - Environmental Manage ent Plan - Oeration Phase Component Programs Executor Cost _Colombian Pesos Environmental Management Contractor System Environmental Management Training Plan Contractor $176,024,000.00 f Construction Activities Occupational health and industrial safety Vegetation conservation Water resources management Solid wastes management Fuel Management Sign placement - Maintenance plan for bus fleet ~ontingency Plan Contractor $16,953,000.00 Wonitoring and Oversight Monitoring and oversight of air quality and Contractor $116,910,000.00 ?Ian Ilution control Monitoring and oversight of quality of water resources and soil, and of prevention of pollution caused by fuels, oil, and toxic ubstances Monitoring and oversight of solid waste management Monitoring and oversight of noise Monitoring and oversight of fuel and oil management _Total Direct Cos_ $309,887,00.00 -100 - Additional Annex 16: Bogota District Finances COLOMBIA: Bogota Urban Services Project 1. Background The Capital District of Bogota, with about 7 million residents, is the largest among the country's approximately 1,100 municipalities. There are several special characteristics, which should be clarified before discussing District finances. The District has a unique form of government within Colombia in that it is considered both a municipality and the equivalent of a state (departamento). Bogota is also the only jurisdiction in Colombia which has its own charter or local constitution to specifically regulate many local affairs, such as tax collection and size of the city council. The latest city charter was enacted in 1993 by presidential decree and it can only be amended by Congress. As with all other municipalities in Colombia, the mayor and city council of the District of Bogota are elected in citywide elections held every three years. The city charter allows for some political and admninistrative decentralization of the District by dividing it into twenty localities (localidades), each having a local government. While local councilors (ediles) are elected by popular vote, the Mayor of Bogota appoints the local mayors (alcalde local) from short lists submitted by the local councils. Under the current charter, while the District has overall responsibility for meeting the needs of residents, the central administration must transfer at least 10% of its recurrent revenues to the localities, such transfers being allocated according to needs as measured by poverty levels in each locality. Not all central-local responsibilities are clearly defined and occasionally local and city administrations have difficulty coordinating their actions and policies. All mayors in Colombia are currently elected for three-year tenns; they can be reelected but for a non-consecutive term. Beginning in 2004 the term of mayors will be four years; however, no changes to the consecutive term requirement are contemplated at this time. Several national decentralization initiatives over the past two decades gave municipalities in Colombia a high level of autonomy in several financial, operational, policy and related areas. Municipalities can raise their own revenue through local taxes and surtaxes, but the main source of revenue for many continues to be transfers from the national and state governments. Before elections, all mayoral candidates are required to prepare their platform which, if they win, serves as basis for the city Development Plan (Plan de Desarrollo). These Development Plans detail the objectives, policies and projects which the administration will have during the tenure of the mayor and such plans are required by law to be consistent with the nine-year long-term physical development plan (Plan de Desarrollo Teritorial or POT). Development Plans are supposed to be approved by the city councils; however, after certain established legal deadline, mayors can enact their plans by decree. According to the Constitution, mayors can be held accountable for non-compliance with their Development Plans. While the law has provisions for their impeachment in such cases, impeachment attempts made so far have not been successful. In Bogota, the current mayor has no established party affiliation while the forty-two council members belong to several political parties. Excluding education and health workers, the city has about 10,000 municipal employees, many with strong union and political affiliation. While the mayor can use decrees to bypass the council, for such actions as tax increases, he must have council approval through city laws ( acuerdos). The current administration has recently managed to win council approval for such actions as a business tax increase, but several other attempts to increase taxes and reduce costs have met with strong council opposition. - 101 - Table 1: Historical and Projected Icicome and Expenditures, 1998-2006 (in millions of 2002 pesos) 1998 1999 2000 2001 2002 2003 2004 2005 2006 1. Current Revenues A. Tax revenue 1,101,849 1,179,098 1,274,278 1,346,904 1,461,322 1,585,534 1,720,305 1,866,530 2,025,185 Property tax 295,769 344,720 342,176 348,359 377,969 410,097 444,955 482,776 523,812 Business Tax 482,720 477,744 528,319 578,730 627,923 681,296 739,206 802,039 870,212 BeerTax 122,361 120,588 142,717 137,662 149,363 162,059 175,834 190,779 206,996 Motor Vehicle tax 71,875 72,168 80,848 79,244 85,980 93,288 101,217 109,821 119,155 Gasoline tax 106,090 131,896 154,311 173,581 188,335 204,344 221,713 240,559 261,006 Gainng and Entertain 3,800 5,971 5,511 5,070 5,501 5,968 6,476 7,026 7,623 Urban Zoning tax 9,587 4,673 5,849 6,621 7,184 7,795 8,457 9,176 9,956 Imported cigarrete tax 7,464 9,284 10,359 17,574 19,068 20,688 22,447 24,355 26,425 Other taxes 2,183 12,055 4,189 64 0 0 0 0 0 B. Non-tax revenue 73,108 82,916 63,747 55,134 59,821 64.05 70,422 76,408 82,903 Registration fee 21,747 19,486 21,229 23,187 25,158 27,297 29,617 32,135 34,866 Transit nghts 21,692 8,924 7,120 4,612 5,005 5,430 5,891 6,392 6,936 Other non tax 29,668 54,506 35,397 27,334 29,658 32,178 34,914 37,881 41,101 C. Transfers (C1+C2) 642,699 716,318 739,289 920,089 1,020,141 1,119,947 1,200,048 1,301,785 1,411,153 C.1 National Government 592,997 703,905 735,413 866,802 1,010,307 1,096,183 1,189,359 1,290,454 1,400,143 SGP Education 188.499 214,842 226,425 243,552 621,663 674,505 731,838 794,044 861,538 SGP Health 90,404 100,214 103,054 117,282 247,373 268,400 291,214 315,967 342,824 SGP General Purpose 221,261 281,820 268,488 341,423 114,742 124,495 135,077 146,559 159,016 SGP School Lunch 3,515 3,814 4,138 4,490 4,872 Fondo Nal Regahas 2,036 10,410 3,510 3,078 14,066 15,262 16,559 17,967 19,494 Confinancing 12,937 9,169 3,321 6,165 5,502 5,970 6,478 7,028 7,626 Other transfers 77,860 87,450 130,615 155,302 3,444 3,737 4,055 4,400 4,77 C.2 District, Department, other 49,70 12,413 3,876 53,287 9,834 23,764 10,690 11,331 11,010 Total Current Revenues (A+B+C) 1,817,656 1,978,332 2,077,314 2,322,127 2,541,28 2,770,386 2,990,775 3,244,72 3,519,24 11. Current Exenditure Labor and adve + pension fund 264,120 311,228 341,724 398,947 368,113 341,339 361,820 383,529 406,541 Transfers to decent agencies 336,419 365,476 368,039 399.512 428,620 444,486 469,433 467,159 479,138 otal current expenditure 600,54 676,703 709,763 798,460 796,733 785,826 831,253 850,688 885,678 Ill. Debt Service Internal 123,873 126,967 82,319 215,441 172,279 143,207 260,142 224,257 230,690 Extemal (pesos) 50,012 57,823 195,523 180,941 234,000 291,119 314,409 188,645 533,421 Total Debt Service 173,885| 184,790 277,842 396,382 406,279 434,327 574,551 412,903 764,111 IV. Net current savines (1-11-111) 1,043,231 1,116,839 1,089,708 1,127,286 1,338,272 1,550,234 1,584,97 1,981,132 1,869,452 V. Investnents or capital expenditures otal miveatments 1,581,438 2,547,303 2,394,918 1,977,579 2,095,813 2,221,116 2,353,910 2,494,64 2,643,791 VI. Finandin needs (IV-V) -538,206 -1,430,464 -1,305,210 -850,293 -757,541 -670,882 -768,938 -513,511 -774,339 VIl. Capital Receipts Financial, extras 334,060 1,292,598 826,772 417,102 716,473 421,880 323,428 342,834 313,116 Intemal borrowing pesos 257,128 281,936 328,785 229,472 26,000 0 0 0 141,85 External borrowing pesos 0 0 0 100,832 29,399 160,244 17,396 0 0 BIRF pesos 58,812 95,275 102.898 74,086 Bonos Intemos DTF 43,658 245,747 257,062 141,852 Total capital receipts 591,188 1,574,534 1,155,557 747,405 771,873 684,595 681,846 702,793 670,906 Vil. Suroius (deficit) (VI+Vll) 52,982 144,070 -149,653 -102,888 14,331 13,713 *87,092 189,282 -103,433 IX. Cununuhtive Surplus (defidt) 187,516 331,586 181,933 79,045 93,377 107,089 19,997 209,279 105,846 X. Ratios and Indexes Current exp/revenue 0 33 0 34 0 34 0 34 0 31 0.28 0.28 0.26 0 25 Debt servicelcurrent revenue 0 10 009 0 13 0 17 0 16 0 16 0 19 0.13 0.22 Net current savings/current rev. 0 57 0 56 0.52 0 49 0 53 0 56 0 53 0 61 0 53 Net current savings/investment 0 66 0 44 0 46 0 57 064 0 70 0 67 0 79 0 71 Debt servicecoverage ratio 1045 1071 7 48 5 86 6 26 6 38 5 21 786 461 Dollar mid year 1,364 1,732 2,139 2,299 2,600 2,941 3,176 3,430 3,704 Devaluation 25% 27% 23% 7% 13% 8% 8% 8% 8% Inflation 16 7%f 9 2% 8 8% 7 7% 6 0% 60% 6.0% 60% 60% Source:"Historical data are from SHB; data for 2003-2006 are mission estimates." Basic assumptions rate of growth of revenue 2 5% above inflaton; devaluation 2 5% above inflation, tranfers 2.5% above inflation - 102- 2. City Finances Table I of this annex contains historical data of the receipts and expenditures of the District between 1998 and 2002, along with projected figures for the period 2003-2006. As the table shows, the District has access to both its own sources of revenue as well as to Central Government transfers. While the national constitution prohibits revenue earmarking, several earmarking characteristics still exist in the budget process. For example, the use of transfers by municipalities and states is specified in the law, which determines the sectors to spend in and the proportions to allocate to each sector. These conditions generally result from social surveys which identify the type of service deficiencies existing in the cities. Sometimes, the goal is to make municipalities more efficient (e.g., by restricting transfers to capital expenditures). Overall, transfers from the national government are to be used mostly to cover education and health expenditures. In Colombia these expenditures, including salaries to teachers and health workers, are considered to be capital investment done by municipalities. The system also provides for surtaxes earmarked to cover identified expenditures (gasoline surtax for public transport), considering these a payment for specific services. 2.1 Revenue As Table I of this Annex shows, in 2001 Bogota received about 2.5 trillion pesos in revenue and spent about 3.3 trillion. About 58% of its income is derived from own-sources while the remaining 42% comes from transfers primarily from the Central Government. The combination of increased Central Government surtax funds and a weakening economy has resulted in a trend where transfers are an increasingly larger share of the city's revenue base. There are two primary own-source of funds for the District, the business and the property taxes which contribute about 70% of its tax receipts. Three other taxes, on beer, motor vehicles and gasoline represent another 27% of total tax revenue. Over the past five years the business tax has been the main source of income followed by the property tax. The 1999 recession, which hit District's economy especially hard, slowed the pace of growth of these taxes, particularly of the business tax. The gasoline surtax, introduced in 1995, has grown in importance to become the third main source of tax revenue, thanks to increases in the rate of the surtax (from 13% to 20%) and higher gasoline prices. Business Tax. Locally known as the Industry, Commerce and Advertisement Tax, this tax is levied on net revenues generated in Bogota by companies and individuals operating in the industrial, retail, financial and services sectors. It contributed 578.73 billion pesos to the District in 2001, accounting for 43% of total tax revenues. Between 1998 and 2001 the business tax was on average 42.1% of total tax revenue. In 1999, income from this tax decreased by more than 9% in real terms as a result of the deep recession of that year. Recovery thereafter has been slow and revenue is still not at its 1998 level in real terms. Colombian law allows municipalities to set the business tax rate, with an allowed maximum of 3%. Bogota has rates that rarely exceed 1.2% and vary according to the activity taxed. In 2002 the city council approved increasing the business tax rates by 20% in the last quarter of 2002 and by 15% for fiscal year 2003. The District expects to collect an additional 206 billion pesos in 2003 from this tax. Business-tax collection improved dramatically in 1993 when bimonthly collection replaced annual collection. In 1994 proceeds from this tax was almost twice the in 1993 figure. Since 1995, the District has enacted several policies to improve the collection of the business tax and reduce evasion. It has simplified procedures and assigned a minimum expected income to activities such business such as motels which tend to evade their liabilities. The rates of the business tax are higher in Bogota than in the other main cities in Colombia (Medellin, Cali, Barranquilla) and higher than in the municipalities which surround the District. While there is a trend of industries moving out of Bogota and locating in neighboring municipalities, the differential in business tax rates does not seem large enough to explain this pattern. However, large industries can negotiate the payment of the business tax (not as a percentage - 103- of net revenue but as a fixed amount per year), more easily in small towns than in the District. This arrangement reduces tax payments and hence favors such firms, while it benefits the smaller towns. Property Tax. The property tax is based on the value of the approximately 1.6 million real estate plots located in the District. Rates fluctuate between 0.1% and 1.6% of the property value, depending on the use of the property (residential, conmmercial, industry, banking, etc.). Other criteria, however, such as household income also determine the tax rate charged. For properties owned by lower-income groups, the value of the property tax is set in terms of daily minimum wage and not as a percentage of property value. The area of the property is another criteria, the larger the area, the higher the rate, but only for upper-income groups. The District tries to discourage undeveloped lots by charging a rate of 3.3% . In an effort to improve its property-tax system, Bogota introduced several important changes in 1993. Owners were required to self-appraise their property and declare a value. Incentives were offered to encourage owners to value their property as closely as possible to the commercial value and this helped the city to begin updating its cadastre system. The City also eliminated the differentials in property tax rates between properties already incorporated in the cadastre and those not incorporated, thus eliminating incentive for owning a non-incorporated property. As shown in Chart 1, until 1997, the number of property-tax declarations filed always exceeded the number of properties incorporated in the cadastre. After 1998, and particularly in 1999, the number properties incorporated in the register exceeded the number of property tax returns, implying an increase in non-payment. This could be the result of several inter-related reasons. First, the 1999 recession resulted in income per capita falling by 8% in real terms, affecting ability to pay. Second, the law specifies that the value of properties already incorporated have to be automatically readjusted at least by the inflation of the previous year. In a recessionary environment this could create a mismatch between the commercial value and the cadastral value which would make owners reluctant to pay their taxes. Under the project, several of these issues will be studied under the TA component. Chart 1. Properties incorporated in eadastre and property tax returns declared per year in Bogota 18000001 1600000 O a 1400000 r 1200000$ _rs n o; | I_ I ncorporated 800000 * ffl f 400000._ 200000: a _* - 1994 1996 1998 2000 Source: SHD Overall, the weak national and District economic situation have had an adverse impact upon District finances with the average value of an incorporated plot falling from about 20 million pesos in 1999 to about 14 million pesos in 2002. Notwithstanding this situation, the current mayor felt that property tax -104- contribution should be greater and he highlighted increased property taxes as a prominent feature of his platform. Soon after entering office he eliminated several exemptions and proposed a property tax increase in line with his platform but the council did not approve his proposal. A modified proposal for a 30% rate increase for 2003 is currently under consideration by the council but its chances of being approved without further changes are not great. In any case, recent sample property valuations show that property values are beginning to recover and this should result in increased tax collection. Gasoline surtax. The surtax on fuel consumption is levied at the pump on the consumption of gasoline and diesel fuel in the District. By law, it is to be used exclusively for financing road maintenance and construction of mass transit systems. In 1996 the rate was 13% and by 1998 it went to 20%. Originally each municipality could set its rate and compete with other jurisdictions. After many drivers in Bogota began to fuel in adjacent municipalities with significantly lower rates, Congress stepped in and established rates that can vary only between 18% and 20%, a differential which is not enough to encourage widespread fueling in a different jurisdictions. Even with a recession and license plate restrictions and the impact of the Transmilenio system resulting in decreased vehicle use, gasoline surtax revenue grew by 80% in real terms between 1996 and 2000, reflecting a low price elasticity. Beer Tax. It is collected from beer producers and importers in the District, based on the wholesale price of beer to distributors. The tax contributed 137.66 billion pesos in 2001, equivalent to 10.22% of the city's tax revenue. In 1999 proceeds diminished substantially and recovery was hurt by a long strike in the main beer manufacturer in 2001. Motor Vehicle Tax. This is a relatively new tax which resulted from consolidation of several previously-levied taxes. In 2001 it was just under 6% of the city's tax revenue. Between 1998 and 2001, it had a negative growth rate primarily because of current economic conditions and the fact that the Transport Ministry establishes the official value of vehicles which the local administrations have to use for determining the amount of taxes paid. Transfers. Until 2001, the GOC automatically transferred 45.5% of all current revenues to municipalities and departments for use in education, health, water and sanitation and recreation, with a small fraction for discretionary expenditures. The law also specified the proportion of each transfer that was to be used in each expenditure category, leaving municipalities with little flexibility. Central government transfers continued to grow in real terms despite reduced National Govemment tax receipts, primarily because several responsibilities were not fully transferred to the local authorities and were still being funded nationally. This aggravated the national fiscal situation and led to a constitutional amendment in 2001 under which there will be a seven-year transition period between 2002 and 2008. During this period, transfers will continue to grow in real terms but at a slower rate and there will be clearer lines of responsibility and criteria governing the system. Because of the surtax and a declining national economy, transfers became a relatively more important share of the District finances, growing from 30.8% of total current revenue in 1996 to 39.6% in 2001, while tax revenue dropped from 65.2% to 58.0% in the same period. Tax revenue grew at a 1.4% per year (in real terms) between 1996 and 2001 while transfers from the national government grew at 9.2%. Transfers are expected to continue growing in real terms over the next four years; however, with the new transfer policy and renewed efforts by the District authorities to increase their tax base, this trend is expected to weaken. Other sources of revenue: Capital Receipts. The District has other sources of revenue, which are not recurrent. They are mainly the financial income from investments and dividends, and extras, such as the - 105- capital reduction of the city Power Company, EEB, which facilitated the large investment by the District in 1999 and 2000. By 2001, however, this source of revenue was 9.6% below its real values in 1996. Revenue: Generral Situation. The District significantly improved its fiscal positions during the 1990's, thanks to the successful implementation of reforms to its tax code that simplified and improved tax collection and expanded the tax base. Tax collected per capita (a measure of fiscal effort) increased between 1990 and 1998 by 155%. Analogously, the revenue raised by the District passed from being less than 2% of the city's GDP to being well above 3%. In 1997, both national and local economy were growing. Income per capita was almost US$4,000 per year; however, by 2001 this figure was down to US$2,690. The 1998 slowdown and the 1999 recession marked an important turning point. Per-capita income levels continue to suffer (perhaps at a declining rate), with the poverty level growing from 42% of the population below the poverty line in 1997 to 55% in 1999. Under these circumstances the city found it difficult to collect taxes and revenue in real terms fell for three consecutive years. Tax revenue for the first three quarters of 2002 indicates that this trend might be reversing and that tax revenue might increase in 2002. Increased transfers and one-time receipt from privatization of the power company helped to keep the District on an even keel and assisted in launching several important citywide improvements in transport, education and other social sectors. Revenue projections. The main assumption underlying revenue projections is that income per capita would hold steady between 2002 and 2006. With a slow real economic growth rate of about 2%, the District should have moderate increase in its tax revenue. Transfers will continue their growth trend, but at a lower rate, reflecting the 2001 constitutional amendment. 2.2 Expenditures. The budget process. The city finance department, Secretaria de Hacienda Distrital (SHD), develops a financial plan with information on expenditure requirements of the Development Plan and expected revenues and debt situation. This plan is approved by the Concejo Distrital de Polftica Econ6mica y Fiscal (CONFIS), a committee composed of the mayor, the secretary of finance, the head of the planning office (DAPD) and three other public officials also appointed by the Mayor. SHD establishes spending limits (operational, debt service and investment) for each city agency based on the financial plan. Agencies can justify changes provided that sufficient revenues are available for increased expenditures. SHD and DAPD, together with legal representatives from each agency covered under the budget, develop a Plan Operativo Annual de Inversiones (Annual Operative Investment Plan) which ranks the proposed investment projects with their cost. Legal representatives of each of the decentralized entities together with SHD prepare a draft budget, which is submitted to the CONFIS for approval. After approval, the budget is submitted to the City Council for consideration and approval at the beginning of the November sessions. The Council has until December 10 to vote on the budget. After that, the draft submitted by the Mayor comes into effect, subject to any modifications already approved by the Council. Expenditure classification. City expenditures are divided into current, debt service (interest and amortization), and capital expenditures. Current expenditures include personnel costs, goods and services acquired, and transfers to cover the operating expenditures of some of the agencies in the decentralized sector, such as IDU and Transmilenio. Debt expenditures include amortization of capital and payment of interest on bank loans and on bonds issued by the District. Capital expenditures refer to city expenditures in infrastructure, education and health, which by Colombian law are considered investments. This system makes it difficult to separate capital investments from some recurrent ones and it also makes it difficult to identify maintenance outlays, derive ratios and to make comparisons over time or with other cities. Indications are that this approach probably overstates capital expenditure figures by about 50%. Finally, the data does not show use of the mandatory transfers which the District has to make - 106- to the 20 local governments within its jurisdiction. These transfers currently represent 10% of recurrent income and for 2001 they were approximately 135 billion pesos, or 12% of current savings. Current expenditures. As Table I shows, until 1998 current expenditures grew less than tax revenue, a trend which was reversed after 1999 and sustained primarily by increased transfers which the District received. In an effort aimed at improving municipal efficiency, in 2000 the GOC approved a law for municipalities, including the District, to reduce operating expenditures to 58% of unrestricted current revenues (transfers not included) by 2001 and to 50% by 2004. To comply with the law, Bogota had to reduce the number of people in its payroll by 27.5% to less than 11,000 (not including health and education sector workers). Further reductions in personnel are taking place mostly by attrition. Current expenditures include payments by the District to a pension fund (FONPET) to cover liabilities estimated in 1,743 trillion pesos. The District expects to have sufficient funds in the FONPET after 2020 to completely fund its pension obligations. Overall, the District expects to keep the growth of current expenditure below inflation. While this seems possible, it is critical for the overall fiscal sustainability of the District, given the limited amount of resources for investments as discussed below. Debt expenditures and debt. Debt expenditures declined in the period 1996-2001, except in 1999, when the rate of interest in Colombia increased dramatically in an attempt by the Central Bank to stop capital flight, and in 2001, when the District's debt stock increased by 23.1 % in real terms. Total real financial expenditure has decreased at an annual rate of 5.5% over this period. The District can resort to bank loans or issue bonds both in the local and foreign markets. Bogota's debt with local banks was estimated to be close to 847 billion pesos by September 2002. On average, loans have four year maturity dates and every 0.2 years the rates of interest changes. The foreign debt of the District by September 2002 was 1.136 trillion pesos with average maturities of 3.5 years and interest rate changes every 1.4 years. Locally, the District sold bonds in 1994, 1995, 1997 and 1999, with all bonds having a rating of AA+ from Duff and Phelps de Colombia. Rating by different institutions has reflected some differences. For example, in November 2002 Duff and Phelps rated BogotA's overall local debt at AAA, the highest possible rating, while Moody's rated it at Baa3, the lowest rating within the "invest" category. For international bonds, in December of 2001 the District placed US$ 100 million in the international market and it was oversubscribed. These bonds were rated BB by Standard and Poor's Rating Services, and BB+ by Fitch LBCA. These ratings could have been higher had it not been for the provision that non-sovereign debt ratings cannot exceed the rating given to the debt issued a sovereign government. Overall, the share of the District's debt in dollars has been increasing and by September 2002, 57.3% of the debt was in dollars. This exposes the District to relatively higher exchange rate risk. External debt payments in constant pesos grew at an average annual rate of 31.9% between 1996 and 2001, while internal debt payments were decreasing. Dollar denominated debts have at least two advantages for the District. First, the effective rate of interest for external debt changes less frequently than for internal debt. On average the effective rate of interest changes seven times as frequently for internal than for external debt. Second, the rates can be lower, particularly if real devaluation is low or below inflation. This, however, is also the main weakness of such exposure since a major devaluation can create huge additional obligations without any District dollar-denominated earnings being there to balance this exposure. The District is aware of these issues and it is pursuing a careful policy of portfolio and risk management in order to minimize any adverse impact of a huge foreign debt exposure. It is also designing instruments to smooth out its payment schedule; currently there are important payment peaks in 2004 and 2006, when several bond obligations are due. - 107- Capit expenditures. These consist of direct investment, mostly in education and health, and transfers to city agencies such as IDU and Transmilenio, which invest in construction and maintenance of roads, busways and other capital projects. Total capital expenditures grew between 1996 and 2001 at an average rate of 4.5% per year. The peak, however, was during FYI999 when the District sold off several assets and invested more than 3 trillion pesos, an amount almost 50% higher than figures for the previous year (Chart 2). Chart 2. lnvestrnent or capia expenditures by the District in real tems ei 35SO(O ~300 0 C 2500 - 'o 1500- 1000* 31 500 I* 996' '9712 902000' 2001 Source: SHD Expenditure projectdons. Table 1 shows estimated expenditures of the District over the next five years. These figures are based upon a review of the debt exposure of the District, its recurrent expenditure and investment plans. The main assumptions are that current expenditures will increase with inflation and that the exchange rate will increase two-percentage points above inflation. Net current savings are the result of subtracting from total current revenue (tax, non-tax plus transfers) current expenditures and debt payments. It is a measure of the amount the city can invest to finance its development plan and finance expenditures in education and health, sectors that are considered investment in Colombia and are not part of the recurrent expenditure figures. Net current savings grew in real terms at an average rate of 6. 1% between 1996 and 2002, with a peak in 1998. In 1999, 2000 and 2001 net current savings decreased in real terms. Because the transfers to the District are earmarked for health and education, only a fraction of the net current savings is left for discretionary investment. If transfers continue to be an increasingly important revenue source of the District, then there will be less funds available for discretionary expenditure, such as the those needed to fund most of the Development Plan and the POT. Conclusions After significantly improving its financial position during the 1990s, the 1999 recession led to reduced tax revenues for the District; however, this was partly offset by increased national transfers, bearing in mind that such transfers are generally earmarked for specific uses. The District's investment capacity grew until 1999, partly because of one-time income from sales of assets. Even with the current weak -108- economy, the District's finances appear to be solid, an indication supported by the rating it has received from several international debt-rating entities. Forecasts done for this analysis, and projections shown in Table 1, suggest that the District will be able to sustain its current level of investment provided it controls its current expenditures and transfers continue to follow the recently-revised law. The District, however, will have to pay attention to three areas which are crucial to its continued financial well being. First is economic growth, specifically, growth of per capita income. The projections shown in Table I assume that income per capita will remain constant. After four years of continuous decrease in per capita income, it is assumed that conditions will improve, an assumption supported to some degree by preliminary evidence for 2002. With a stabilization of income comes increase possibility for tax payments to improve and the need for greater assistance to those who slip into poverty will also decline. The second area of focus is national transfers. If the expected transfers do not materialize as currently assumed, it could seriously affect the District's ability to finance its obligations. The GOC promise to finance subsequent stages of Transmilenio is a very important part of the District's investment strategy and its hope of promoting economic growth. The third area of importance is the ability of subsequent municipal administrations to continue building upon the foundation set over the past decade. Continuity of focus will be crucial for both maintaining the District's assets as well as for providing the complementary investments required to maximize use of existing ones. In an effort to help the District in the above-mentioned areas, the project contains TA resources to assist the District in improving its fiscal and financial operations and in integrating the regional economy so that it is better able to generate more of its own resources and gain from a broader economic base. - 109- - 110 - COLOMBIA BOGOTA URBAN SERVICES PROJECT MAP A: IMPROVED MOBILITY COMPONENT < MAP B: URBAN UPGRADING MAP C: BIKE PATHS NETWORK BUSWAYS AND FEEDER ROUTES ¾ - COMPONENT . -. CICLORRUTAS CIRCUITOS DE MOVILIDAD LOCAL I PROGRAMA MEJORAMIENTO / IEXISTING BIKE PATHS EXISTING BUWAYS / INTEGRAL DE BARRIOS ,PM,1) /--. BIKE PATHIS UNDER =°.... BUSWAYS UNDER CONSRUCTION / PROJECTUITZo / /U , FZ- CONSTRUCTION , .7 ~~PROPOSED EUSWAY1EUBAI - ~ V\ (BK PTATHSINANED= -- …-- FEEDER RIOUjTES BYTHEIPROJECT -MARIN ROADS - /~. r -SECONDARY ROADS V7 rb jI / / - RAIILROADS Tibf),obuyes ~ / j VBt8O ----URBAN PERIMETER * Tibabuyes 'N 4> - ADMINISTRATIVE EMI CI UERA TIACRNI I LEA IOO. ,P4C UMIT 0 ROO ASEIL. DISTRICT _l~~~~~~~~~~~~~~~~- l" IC -XT 'L f Y'/. 'N I-~~~~~~~L to 5- - 4 ~~~~~~t~~I I,o 'N, A~~~~~~~~~~~N -- - *noro~~~~~~~~~~~~~~~* Perdomo V:w.pZ'~~~~~~~~~~~~~~~~~~~~~~. ;t~~~~~~TAFE I ~ ~ ~ ~ ~ ~ ~ ~~S )AF 'C ~~~~~~~~~ ~ ~~~ ~~Jerusalen SAN SAN~~~~~~~~~fTA ~K-' \C, 9' CRITalo 004 ' CEISTOE )B\ICNETOA ID - u CI~'- I A R kd. Tesoro CIDA J ODUVAB C' VENEZUELA I N C' / '1 CILIT~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~OUATR p1 tI . ~~~~~~~~~~~~~~~~~~0 FIc~~~~~~~~~~~~,~~~~~ J BOLEVUR~ ~ ~ ~~~~~~~Tn~J bh ~ ~~ / r:~~~~~~~~ OMBIA ->~~~~~~~~~~~~~~- tOfI~~~~~~~~~~~~~~ ~~~, ;NIfl L~ ~ ~~ ~AW.z - ---JO -~~~~~~~~~~~~~~~~~~~~Zlt u 17~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~d E I~~DOR Th. W1,1d M G."~~~~~`F,.-.c DECEMBER 2052 flVVUM tM-'- ' , 1 J \sfl~ U a.~ ReporS No.: 24941 CO Type: PAD UB6] ne-MflRB