Document of The World Bank Report No: ICR00002840 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-74370) ON A LOAN IN THE AMOUNT OF US$17.27 MILLION TO THE MUNICIPALITY OF UBERABA WITH A GUARANTEE FROM THE FEDERATIVE REPUBLIC OF BRAZIL IN SUPPORT OF THE FIRST PHASE OF THE US$240 MILLION BRAZIL MUNICIPAL LENDING (APL) PROGRAM March 31, 2014 Sustainable Development Department Brazil Country Management Unit Latin America and The Caribbean Region CURRENCY EQUIVALENTS (Exchange Rate Effective January 31, 2014) Currency Unit = BRL BRL 1.00 = US$ 0.41 US$ 1.00 = BRL 2.42 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS APL Adaptable Program Loan BMLP Brazil Municipal Lending Program BOD Biochemical Oxygen Demand CEA Centro de Educação Ambiental, environmental education center CEF Caixa Economica Federal, a public sector bank CODAU The Uberaba Municipal Water Utility COFIEX Commission on External Financing CPS Country Partnership Strategy EA Environmental Assessment ETA Water Treatment Plant ETE Wastewater Treatment Plant FEAM Minas Gerais State Environmental Licensing Body FMR Financial Management Report FRL Federal Responsibility Law IPTU Local Property Tax M&E Monitoring and Evaluation OD Oxygen Demand OP Bank’s Operational Policies PAC Federal Government’s Growth Acceleration Program SIG/MIS Management Information System SIL Sector Investment Loan SNIS National System of Water and Sanitation Indicators UFMG Federal University of Minas Gerais UGP/PMU Project Management Unit WS&S Water Supply and Sanitation Vice President: Hasan A. Tuluy Country Director: Deborah L. Wetzel Sector Manager: Wambui G. Gichuri Project Team Leader: Juliana Garrido ICR Team Leader: Juliana Garrido BRAZIL BRAZIL MUNICIPAL LENDING PROGRAM, PHASE I UBERABA ÁGUA VIVA PROJECT CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph   1. Project Context, Development Objectives and Design ............................................... 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 6 3. Assessment of Outcomes .......................................................................................... 13 4. Assessment of Risk to Development Outcome......................................................... 18 5. Assessment of Bank and Borrower Performance ..................................................... 18 6. Lessons Learned ....................................................................................................... 20 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 22 Annex 1. Project Costs and Financing .......................................................................... 23 Annex 2. Outputs by Component, and Results Framework ......................................... 25 Annex 3. Economic and Financial Analysis ................................................................. 38 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 46 Annex 5. Beneficiary Survey Results ........................................................................... 48 Annex 6. Stakeholder Workshop Report and Results................................................... 51 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 55 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 63 Annex 9. List of Supporting Documents ...................................................................... 64 Annex 10. Calculation of Outcome Rating for Formally Revised Project (as per ICR Guidelines, Appendix B) .............................................................................................. 66 Annex 11. Original Components (as approved) .......................................................... 67 A. Basic Information BR Municipal APL1: Country: Brazil Project Name: Uberaba Project ID: P089011 L/C/TF Number(s): IBRD-74370 ICR Date: 02/04/2014 ICR Type: Core ICR MUNICIPALITY OF Lending Instrument: APL Borrower: UBERABA Original Total USD 17.27M Disbursed Amount: USD 16.03M Commitment: Revised Amount: USD 16.03M Environmental Category: A Implementing Agencies: Municipality of Uberaba (Secretariats of Planning and Environment) CODAU – Municipal Water and Sanitation Utility Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 03/18/2004 Effectiveness: 07/30/2008 07/30/2008 Appraisal: 03/08/2005 Restructuring(s): 07/06/2012 Approval: 03/21/2007 Mid-term Review: 11/10/2009 03/22/2010 Closing: 12/31/2012 12/31/2012 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Moderately Satisfactory Satisfactory Quality at Entry: Government: Implementing Quality of Supervision: Satisfactory Moderately Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No Moderately Satisfactory at any time (Yes/No): (QEA): Problem Project at any Quality of Yes Satisfactory time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Satisfactory D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Flood protection 41 48 Other social services 1 2 Sub-national government administration 12 3 Wastewater Collection and Transportation 31 41 Water supply 15 6 Theme Code (as % of total Bank financing) City-wide Infrastructure and Service Delivery 29 50 Environmental policies and institutions 14 3 Pollution management and environmental health 29 41 Urban services and housing for the poor 14 6 Water resource management 14 0 E. Bank Staff Positions At ICR At Approval Vice President: Hasan A. Tuluy Pamela Cox Country Director: Deborah L. Wetzel Vinod Thomas Sector Manager: Wambui G. Gichuri John Henry Stein Project Team Leader: Juliana Menezes Garrido Pereira Dean Cira / Paula Pini ICR Team Leader: Juliana Menezes Garrido Pereira ICR Primary Author: Suzana Abbott F. Results Framework Analysis1 Project Development Objectives (from Project Appraisal Document) To promote better living conditions for all residents of the municipality of Uberaba through the promotion of integrated urban sanitation, environmental preservation, and expanded parks, recreational and cultural opportunities. The Project includes components in Environmental Sanitation; Environmental and Cultural Preservation and Recovery and Planning and Management. Revised Project Development Objectives (as approved by original approving authority) Not applicable. (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Adequate water supply will be guaranteed while maintaining Uberaba River flow Indicator 1 : at minimum levels required under environmental legislation Volume of water 2/3 of has been Value 2/3 of Q7,10=490 l/s with Q7,10=490 l/s maintained and (Quantitative or 100% rationing without water rationing was Qualitative) rationing not registered for year 2013. December 31, December 31, Date achieved 2005 December 31, 2013 2012 2012 Met. Based on the available data, the minimum level of river water flow has been Comments maintained in compliance with the relevant environmental legislation, and (incl. % CODAU did not register any rationing in 2013. In previous years, rationing was achievement) registered in few city neighborhoods during dry periods. Indicator 2 : Water Quality Index of Uberaba River Stream Value 2005: WQI Medium and WQI Good, (Quantitative or Good WQI Bad, Class IV Class IV Class III Qualitative) December 31, December 31, Date achieved 2005 September 30, 2013 2012 2012 Not achieved. The volume (mass) of BOD pollution removed by the wastewater Comments treatment plant (WWTP) reached 160,200 (tons/year) in 2013 with 92 percent of (incl. % removal (greater than the originally designed target of 90 percent). However, achievement) river water quality has not yet improved, due to the fact that there are still interceptor sewers to be constructed, and there are external high polluting 1 Detailed explanation is included in Annex 2. discharges occurring upstream of the WWTP that are impacting the river water quality. This latest discharge was only identified once the current monitoring procedure started. The city environmental secretary, along with the environmental prosecutor’s office, has caused the major polluter to reduce the release of effluents into the river. Citizen understanding of environmental problems and satisfaction with Indicator 3 : environmental services (water supply and sanitation, drainage parks). Value Focus Focus Focus Group/Survey (Quantitative or Group/Survey Group/Survey Satisfactory results. Summary Qualitative) Repeats Repeats December 31, December 31, Date achieved 2005 January 31, 2014 2012 2012 Comments Met. Beneficiary surveys carried out in November and December 2013 and in (incl. % January 2014 have captured positive impressions and satisfaction by the achievement) municipality’s citizens. (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Occurrence of flooding in the city center in comparison with intensity of rains. Value Flooding with rain TR=2 (Quantitative TR=25 TR=25 See comment. years or Qualitative) December 31, December 31, Date achieved 2005 January 31, 2014 2012 2012 Met. Monitoring of high rain events in the city center that occurred in December Comments 2013 and January 2014 have shown that those avenues which have received (incl. % macro drainage interventions in the city center have not suffered any flood achievement) impacts. The study to evaluate the recurrence of flooding for different storm return periods was not conducted by the Borrower. Indicator 2 : Change in value of properties in area of influence of flood project. Value +16% + 16% (due to (Quantitative Ave=R$37,000 (2007) +244% (due to works) works) or Qualitative) December 31, December 31, Date achieved 2007 January 31, 2014 2012 2012 Met. According to personnel in charge of the appraisal of property in the municipality, the increase in the value of properties in the city center areas was Comments positively impacted by the implementation of the Project’s drainage works in the (incl. % city, which proved to be a very important factor given that the corresponding achievement) areas have not suffered from any flood events since the drainage works were implemented. Indicator 3: Decrease in water losses Value (Quantitative 38% 20% 36% 32.8% or Qualitative) December 31, December 31, Date achieved 2007 December 31, 2012 2012 2012 Met. All results for water losses were based on the data contained in the Ministry of Cities’ national water supply and sanitation database (SNIS) report. The Comments measured indicators for 2012 are still to be reported by CODAU to SNIS. The (incl. % December 2012 data was assessed by a water loss specialist who worked with the achievement) Borrower to evaluate their water loss program. The 2013 water loss data was not available at the time the ICR was prepared. Percentage of wastewater collected that is treated. (Note: Wastewater collection Indicator 4: coverage in the city is 99%). Value (Quantitative 2% - 75% 44% or Qualitative) December 31, December 31, Date achieved 2007 December 31, 2013 2012 2012 Partially met. The Uberaba WWTP implemented under the Project, along with the existing Capim WWTP and individual septic tanks treat 44 percent of all the wastewater currently collected in urban Uberaba. Once the construction of the Comments Conquistinha WWTP is concluded, the accumulated amount of collected (incl. % wastewater that is treated would reach 60 percent; furthermore, once the sections achievement) of the sewerage collectors already constructed under the Project, and those to be constructed along with the macro drainage in Santos Dumont and Santa Beatriz avenues, are all finally connected to the Uberaba WWTP, this indicator is expected to reach 90 percent, thus exceeding the original Project target value. Indicator 5: Change in the number of visitors to the Lajes Park (yearly average) Value 72,000 (50,469 in (Quantitative 0 >15,000 >15.000 2013) or Qualitative) December 31, December 31, Date achieved 2005 November 30, 2013 2012 2012 Significantly exceeded. The Park was visited by 38,692 inhabitants in 2009, Comments rising to 93,823 visitors in 2012 and with an average annual visitation rate of (incl. % 72,000 per year over the life of the Project, which is far in excess of the Project achievement) target. Management plan for a portion of the environmental protection area (APA) of Indicator 6: the Uberaba River is elaborated and main recovery actions are executed. Action Plan Action Plan Value No existing plan, 0 prepared and prepared. Recovery (Quantitative - hectares (ha) recovered 1,500 ha activities not yet or Qualitative) recovered initiated. December 31, December 31, Date achieved 2005 January 31, 2014 2012 2012 Partially met. The APA Action Plan was prepared and approved by the River Comments Basin Committee. The Action Plan has been used by the Committee to make (incl. % decisions regarding requests by new businesses to establish themselves within achievement) the APA. Key urgent activities have been identified, which are designed to help recover the APA environmentally, but their implementation has not yet been initiated. Share of city environmental licensing applications that are processed by the Indicator 7: Municipality as opposed to the State Value (Quantitative 0 100% 60% See comment. or Qualitative) December 31, December 31, Date achieved 2005 December 31, 2013 2012 2012 Apparently Met. Since June 2012 the Municipal Secretary for Environment has started to evaluate and issue licenses (Classes I-IV) at the Municipal level and has increased its capacity from 635 processes (in 2012) to 1,132 (in 2013), with Comments an average of 94 requests being processed by the municipal body per month. The (incl. % data of the licensing processes for Uberaba Municipality that are being processed achievement) by the State (related to Classes V and VI) was not available for these periods. Therefore, it became impossible to calculate the indicator as defined. Population reached by the Environmental Education & Social Communication Indicator 8: Programs Value (Quantitative 0 All All All or Qualitative) December 31, December 31, Date achieved 2005 December 31, 2013 2012 2012 Met. CODAU delivered environmental training events and social communication activities for the population at large. It delivered programs both at schools and in specially equipped classrooms in the multi-use center for Comments environmental education (CEA). Its programs disseminate information on water (incl. % management, conservation, on hand washing and tooth brushing (conserving achievement) water), and on recycling and making goods from recycled materials. CODAU also carried out a very effective social outreach campaign before and during the implementation of works in order to inform citizens, provide for complaints, and help mitigate the difficulties that construction in the city center would entail. Indicator 9: Project implementation goals are met (financial, physical, procurement, etc.) Value (Quantitative 0 - All 88% or Qualitative) December 31, December 31, Date achieved 2005 December 31, 2013 2012 2012 Comments Substantially achieved. The project listed 43 activities that were to be carried (incl. % out, of which only five were not completed by January 2014. These five achievement) outstanding activities are all expected to be concluded by December 2015. G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 06/05/2007 Satisfactory Satisfactory 0.00 2 12/18/2007 Moderately Satisfactory Satisfactory 0.00 Moderately 3 04/15/2008 Unsatisfactory 0.00 Unsatisfactory 4 10/30/2008 Satisfactory Satisfactory 0.00 5 05/04/2009 Satisfactory Moderately Satisfactory 1.29 6 05/28/2009 Satisfactory Moderately Satisfactory 1.29 7 11/16/2009 Satisfactory Moderately Satisfactory 2.92 8 05/21/2010 Satisfactory Satisfactory 4.64 9 02/13/2011 Satisfactory Satisfactory 10.90 10 07/17/2011 Satisfactory Satisfactory 13.28 11 04/04/2012 Satisfactory Satisfactory 16.37 12 11/12/2012 Moderately Satisfactory Moderately Satisfactory 16.37 Moderately Moderately 13 07/29/2013 16.03 Unsatisfactory Unsatisfactory H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions (i) application of the Bank’s safeguard policy OP 4.12 on Involuntary Resettlement; (ii) reduction in scope; (iii) revision of 07/06/2012 -X- MS MS 16.372 the results framework; (iv) increase in the Project’s total cost; (v) minor reallocation of funds between categories; and (vi) updating the Project’s Financial Management reporting instrument. 2 From July 2012 until July 2013, the Project spent resources out of the designated account with no new advance request. Once the Project closed, the unused amount of USD 0.34 million was returned to the World Bank account. Disbursement Profile BRAZIL BRAZIL MUNICIPAL LENDING PROGRAM, PHASE I UBERABA ÁGUA VIVA PROJECT 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. The Uberaba Água Viva Project (the Project) was the First Phase of the Brazil Municipal Lending Program (the Program), a horizontal Adaptable Program Loan (APL). Lending operations under the Program were to meet the following eligibility criteria: (i) focus on the priorities of urban poverty, environment, economic development, and municipal management; (ii) serve as models of innovation in municipal management and provision of services, thereby contributing to cross-municipal learning, replication, and federal policy 3 development; and (iii) comply with the Fiscal Responsibility Law . 2. The Municipality of Uberaba - Context: The Municipality of Uberaba is located in the southeastern state of Minas Gerais, the second largest state in Brazil in terms of population and the third largest economy. Uberaba was the fifth largest municipality in Minas Gerais with a population of approximately 251,000 at the time of Appraisal and currently estimated at 315,0004. Social indicators revealed important progress and indicators for water supply and sanitation (WSS) coverage were equally impressive with nearly 100 percent coverage of both water supply and wastewater collection. 3. The Municipality of Uberaba - Sector Background: The Uberaba River Basin is an important water source for agriculture, industry and municipal consumption, and a major tributary to the Rio Grande River, an important water source. Water quality of the Uberaba River varied at the time of Appraisal, particularly once it passed through the urbanized portion of the Municipality of Uberaba, where it failed to conform to Class II5 quality levels. This was primarily due to direct discharge of untreated wastewater into the river (downstream from the extraction source the city uses as its main sources of drinking water) by the Municipality of Uberaba. Changing land uses over the years, coupled with deforestation and 3 Additional controls on sub-national fiscal performance were introduced in debt renegotiation contracts signed by the Federal government with the States in 1997, and with some of the largest municipalities in 2001. Passed in 2000, the FRL established limits for personnel expenditures and indebtedness at all levels of government, only allowed new permanent spending mandates if they were based on permanent revenue increases, and forbade debt refinancing between different levels of government. 4 IBGE website 5 The river classes standards are defined by CONAMA, according to its 357/2005 resolution, based on the requirements of the main water uses. River waters are classified under 5 categories: (1) special class – waters for human consumption, with disinfection (purified); to the preservation of the natural equilibrium of aquatic species; and to the preservation of aquatic environments in integrated protection conservation areas; (ii) Class I: water for the following uses: for human consumption, after simplified treatment; to the protection of aquatic species, etc.; (iii) Class II - water for the following uses: for human consumption after conventional treatment; to the protection of aquatic species; to recreational activities with primary contact, etc; (iv) Class III: water for the following uses: for human consumption after conventional or elaborate treatment; to irrigation of trees, cereal crops and other forage species; to amateur fishing; etc; (v) Class IV: waters for the following uses: navigation and landscape harmony. 1 soil erosion, had also contributed to the worsening water quality of the Uberaba River and to a loss of biodiversity. 4. Water supply and sanitation (WSS) services were provided by the Centro Operacional de Distribuição de Águas (CODAU), an autonomous, municipal agency. Water supply coverage was high at the time of Appraisal at 99 percent, with micro metering approaching this same high level. Water supply was provided through the Uberaba reservoir, with supplemental supply through deep wells. Treatment was conventional and the distribution systems adequate, but with a problem of high water losses. 5. The Municipality’s goal was to treat 100 percent of the collected wastewater in the Municipality. At the time of Appraisal, about 95 percent of wastewater was collected, but less than ten percent of it was treated. About 90 percent of the collected wastewater was discharged untreated into the Uberaba and Conquistinha Rivers. The deterioration of the water quality of the Uberaba River was exacerbated by the city’s severe macro-drainage problems, in particular in the city center. Moreover, the city’s macro-drainage problems led to regular, severe flooding in much of the city center, resulting in high levels of property damage, losses to commercial business, the snarling of traffic, and occasional human injury. The causes of the flooding were mostly man-made, resulting, inter alia, from the accelerated urban development and the resulting increase in impermeable surfaces. The Municipality’s water resources/urban environmental sanitation strategy also contemplated a comprehensive and integrated approach to planning and environmental management. 6. At the time of Appraisal, CODAU was a municipal company whose budget was subject to the approval of the municipal legislative body. CODAU’s management structure was also considered inadequate for a service provider of its size. Revenue collection rates were high and expenses low. Despite this, CODAU had historically only invested small amounts in water supply and sanitation infrastructure. Productivity indices placed CODAU on par with similar sized utilities in Brazil. However, estimates of water losses were considered unreliable given the lack of macro metering, the lack of reliability of the micro meters and due to the fact that there was no harmonization between CODAU’s physical and commercial operations. Rationing during dry periods of the year was common, resulting in intermittent water supply in parts of the city. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 7. The Project Development Objective was to promote better living conditions for all residents of the Municipality of Uberaba through the promotion of integrated urban sanitation 6 , environmental preservation, and expanded parks, recreational and cultural opportunities. 6 “Integrated urban sanitation” was defined during preparation as comprising water supply, wastewater management (collection and treatment) and stormwater management. 2 8. The Key Indicators used in the PAD to measure the Project’s progress towards its PDO were the following: Table 1: Project development outcomes and key performance indicators. Project Outcomes Project Outcome Indicators  Citizen satisfaction levels pre and post project  Citizen understanding of environmental relevant to project objectives (survey including, problems and satisfaction with environmental inter alia, those most affected by Central City services (WSS, drainage, parks). flooding and the poorest populations).  Improvement in water quality of the Uberaba  Water Quality Index of Uberaba River is river and Conquistinha Stream. improved;  Environmental Classification of Uberaba River at a point following the discharge of treated sewage;  Water supply guaranteed without compromising  Adequate water supply will be guaranteed relevant environmental legislation (principally while maintaining Uberaba River flow at water flow of Uberaba river). minimum levels required under environmental legislation; 9. The specific indicators, including the Intermediate Results Indicators, by which progress under each component was to be measured, are presented in Annex 2. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 10. The Project’s Development Objectives were not revised. However, the Results Indicators were revised in a Level I Restructuring approved on July 6, 2012.7 The revisions to the Project’s Key Indicators were intended to streamline them and contribute to a better and more realistic monitoring of the Project’s achievements and impacts. The specific changes introduced in the Restructuring were: PDO Indicators:  The two PDO indicators related to the water quality of the Uberaba River were merged into one, which avoided repetition and simplified;  The indicator on water quality was adjusted to focus only on the Uberaba River, removing the Conquistinha Stream from the indicator, based on the realization that improvements in water quality resulting from the construction of the Conquistinha wastewater conveyance system and WWTP would only be verified after project closure; and  The target on water quality classification was changed to Class III, since more precise recent measurements had revealed that the then-current water quality classification of the Uberaba River was Class V (worse than measured at Appraisal). This change in 7 World Bank, Restructuring Paper on a Proposed Project Restructuring of the Brazil Municipal Lending Program 1: Uberaba Água Viva Project, Report No. 63727-BR dated June 26, 2012. 3 classification would, nevertheless, maintain the same level of incremental improvement that the Project had aimed to achieve from the outset. Intermediate Results Indicators:  An Indicator was added to Component One to measure the share of the collected wastewater that was to be treated as a result of project interventions (which was also a core sector indicator);  An Indicator was added to Component Two to measure the elaboration of a Management Plan and the implementation of the main recovery actions for 1,500 ha in the Uberaba River Environmental Protection Area (APA);  The indicator on “loss of treated water” was revised to decrease the anticipated target from 20 percent to a more realistic 36 percent. The initial target was too ambitious for the type of activities that were being supported by the Project, as well as for the timeframe and the resources allocated for their implementation;  The repetition of water quality indicators from the Intermediate Results portion of the Results Framework were removed;  The indicators on the “change in the number of visitors to the Fossil Research Center” and the “donations received by the Center/Museum” were removed as there were no activities planned in the Project scope that were directly linked to those results; and  Minor revisions to other Indicators were performed to clearly state the targets and data source in order to facilitate their measurement. 1.4 Main Beneficiaries 11. The Project was designed to improve the quality of life of the urban population in Uberaba. Its main beneficiaries were expected to include: (i) for investments in the wastewater system, 193,997 inhabitants in the Uberaba Basin and 81,121 inhabitants in the Conquistinha basin; (ii) for investments in urban drainage, 3,845 properties registered in the Municipality (3 percent of total real estate properties in the Municipality, including those of the greatest economic value in the city center); (iii) for investments in water supply, the total population of Uberaba (275,000 inhabitants); and (iv) for investments in the linear park, approximately 60,000 inhabitants. These inhabitants were expected to benefit from more reliable WSS services, including the elimination of rationing and intermittent water supply during dry periods, which was expected to have positive impacts on their quality of life. They would also benefit from a reduction in risks and loss to life and property due to reduced flooding, from improved environmental conditions and well-being derived from sewage collection and treatment, and from increased access to recreational activities. The population of Uberaba was also expected to benefit as a whole from improved sustainability of the Project’s investments and from other related investments through improved cost recovery (there was a low collection of property taxes in those areas of the city subject to periodic flooding) and improved institutional capacity of the Municipality and of CODAU. 1.5 Original Components (as approved) 12. The Project comprised three components, as described below. A more complete description of the Project’s original components is presented in Annex 11. 4 13. Component One: Environmental Sanitation (USD 24.83 million total Project cost8; USD 13.56 million World Bank financing 9 ) focused on an integrated package of physical investments related to urban environmental sanitation. With this component, the Municipality would provide treatment to 75 percent of collected wastewater, providing environmental, health and well-being benefits to the municipal population and to populations located downstream of the Uberaba River. In addition, the city’s severe flood problems would be corrected through the implementation of a macro-drainage program that would reduce flooding to a 25-year occurrence from the 2-year return period at the time of Appraisal. This component would also increase the efficiency and quality of water supply services through a series of investments in the water supply and distribution networks. The component included the following three subcomponents: (i) Wastewater Collection and Treatment; (ii) Urban Drainage; and (iii) Water Supply. 14. Component Two: Environmental and Cultural Preservation and Recovery (USD 0.77 million total Project cost; USD 0.72 million World Bank financing). This component included three actions aimed at improving the quality of life of Uberaba’s inhabitants by providing new recreational opportunities; preserving natural resources, in particular the water resources associated with the city’s main drinking water source; and expanding the research and tourist opportunities associated with the municipality’s rich fossil deposits and the research center that supports them. The component included the following three sub- components: (i) Environmental Recovery; (ii) The Parque da Cidade (linear park); and (iii) Fossil Vivo (live fossil) research center and museum. 15. Component Three: Planning and Management (USD 2.95 million; total Project cost financed by the World Bank). This component was designed to improve the capacity of municipal government entities. The activities under this component were intended to support actions that were directly related to the Project’s core components, and were therefore focused on environmental management, planning and project management. It included efforts to increase staff capacity in several thematic areas of the Project’s focus, and activities to reinforce the municipality’s capacity in the fields of integrated urban sanitation, preservation and recovery. The component comprised the following four sub-components: (i) Sanitation and Environmental Preservation; (ii) Environmental Education and Social Communication; (iii) Institutional Strengthening; and (iv) Project Management. 1.6 Revised Components 16. Project Restructuring reduced the Project scope by dropping two activities under sub- component three (Water Supply) of Component One (Environmental Sanitation), which had yet to be procured and/or had engineering designs still under preparation at the time of restructuring. Due to funding and time limitations encountered during supervision, the following two water supply activities were removed from the Project scope: (i) regularization of the flow of the Uberaba River by making permanent the seasonal transfers of water from 8 Complementary activities originally proposed were not included in the project’s PAD costs, which included the implementation of wastewater works (Conquistinha and Uberaba wastewater conveyance systems and Treatment Plants) and the Leopoldino Retention Pond – for a total estimated original cost of USD13.27 million as counterpart financed activities. 9 Numbers indicated for each component do not considered the front end fee of USD 0.04 million. 5 the Claro River to the Uberaba River 10 ; and (ii) modernization of CODAU’s commercial operations and the automation of their water supply system11. 1.7 Other significant changes 17. Project Restructuring also introduced the following modifications to the Project (and to the Loan Agreement): (i) application of the Bank’s safeguard policy OP4.12 on Involuntary Resettlement, with regard to land acquisition activities (no relocation of people nor displacement of economic activities were envisaged); (ii) increase in the Project’s total cost through an increase of counterpart funds; (iii) minor reallocation of funds between categories of expenditure; and (iv) updating of the Project’s Financial Management reporting instrument. The Project Paper for the Restructuring also corrected a typing error on the safeguard table of the original project documents in which the box related to safeguard policy OP 4.37 on the Safety of Dams was inadvertently not checked, even though the policy itself had been triggered during Appraisal, as indicated in the PAD’s Datasheet and in the fact that its implementation was underway during project preparation and supervision. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 18. Rationale for World Bank Involvement: The rationale for World Bank involvement was strong. The World Bank had been supporting different approaches to urban and municipal development and service provision in Brazil for the preceding years, and had conducted extensive analytical work and provided technical assistance in these fields. The Brazil Municipal Lending Program APL was an important element for the implementation of a municipal lending strategy that was based on this previous work. The Federal Government had requested the World Bank’s support in focusing strategically on a number of economically important and creditworthy municipalities (each with at least 100,000 inhabitants). The Bank was seen as uniquely positioned to provide global experience in municipal management, promoting a holistic approach to municipal planning and investment. 19. The Municipality of Uberaba met all the criteria for participation under the APL. The Municipality was considered committed, with a reputation of strong leadership and good local governance. The Project concept was a strong fit with the Program’s broad objective of promoting an integrated approach to addressing the urban environmental agenda and was expected to serve as an example of how medium-sized municipalities could tackle environmental problems, solve infrastructure deficits, improve social conditions, and reduce poverty through sustained commitment and good governance. 10 The Borrower has accessed PAC resources to implement the water transfer from the Claro River to the Uberaba River. These works are currently estimated at around BRL 66 million to be implemented in 24 months, and are expected to start in April 2014. 11 The automation of 18 sites of the water supply system was estimated at around BRL 13 million, to include activities such as technical visits, equipment inspection, development of engineering designs for a Control and Supervision System, IT system supply and install, staff training and preparation of user manuals. Improvements to the technical bidding documents are being discussed and finalized by the Borrower based on recommendations provided by the World Bank team. 6 20. The Program was designed to contribute to the objectives of the Bank’s 2004-2007 Brazil Country Assistance Strategy 12 that emphasized equity, sustainability, competitiveness and macroeconomic stability. The Program, as devised, was especially suited to support the CAS’s equity pillar through targeted improvements in basic urban services in low-income areas, and its sustainability pillar through improvements in water supply, sewerage, drainage, reducing risks from flooding and improving urban pollution management and preservation of natural areas. 21. Government Commitment and Participatory Processes: The Federal Government showed strong ownership of the Program and demonstrated its ownership by, inter alia, articulating guiding principles for the selection of participating municipalities. The Borrower incorporated stakeholder input into the Project design through stakeholder workshops and seminars held during preparation to define the Project’s Results Framework and to identify priority actions needed to improve CODAU’s management capacity. 22. Lessons Learned: Both the Program and the Project incorporated lessons learned from earlier water supply, sewerage, municipal and urban operations, generally; more specifically: (i) took into account the capacity of the implementing agencies by financing the services of a management firm to support the Project Management Unit, and by focusing on only three implementing agencies, which were all part of the municipal government with a history of working well together (CODAU, the Environmental Secretariat and the Planning Secretariat); (ii) focused on a single geographical location for project implementation as a successful way to finding common objectives among a multi-agency run project, namely the Uberaba River basin. The Project was demand driven and its components and activities were proposed by its implementing agencies. It included activities aimed at strengthening their capabilities, and the Results Agreement emerged from a multi-sector stakeholder workshop. 23. Project Design: The Project design was focused, comprehensive and incorporated the lessons described above. A number of technical, environmental and social analyses were carried out in the course of project preparation, resulting in the major redesigning of several of the projects components. Two important results of this due diligence by the World Bank team were: (i) the elimination of the need to construct a new proposed water flow control dam and associated reservoir in an environmentally sensitive area of the municipality, which was originally presented as an alternative to increase water supply; and (ii) the reconfiguration of the original macro drainage scheme that proposed a series of four storm water retention ponds. The following aspects of Project design, however, negatively affected its implementation: (i) the cost tables did not include costing for important, large works which were to be financed with counterpart resources, but which were nonetheless central to the achievement of its PDO; (ii) the original disbursement and cost schedules did not take into account that the first two years of implementation would be spent in preparing detailed engineering designs for the sewerage and drainage which would provide the technical and cost information required for procuring the works and which were necessary to allow implementation and disbursements to proceed; (iii) the Results Framework was ambitious, especially in expecting that a project implemented over 4,5 years, with multiple activities/works needed to produce results, could produce the expected outcomes; (iv) CODAU did not have in place the mechanisms and instruments needed to monitor outcomes; and (v) most of the land required for the 12 World Bank, Brazil Country Assistance Strategy 2004-2007, Report No. 27043-BR dated November 10, 2003. 7 implementation of the works had not been acquired at the time of loan approval, and the project preparation process had not included the elaboration of an involuntary resettlement framework to identify the needed procedures if land acquisition would entail the relocation of people or displacement of economic activities. 24. Risks and Mitigation Measures: The risk analysis carried out during preparation did not consider several risks that materialized during implementation, including: (i) the possibility of cost escalations from the Appraisal estimates; (ii) difficulties in obtaining counterpart funds; and (iii) issues with a future change in municipal administration. The counterpart funds risk was significant given the high share of funding that the Borrower needed to provide, both for activities included in the PAD cost estimates and for those not included but needed to achieve the PDO. With an implementation period spanning the period of routinely scheduled municipal elections, the possible impacts that a change could have brought to implementation could have been identified as a risk, albeit one that actually resulted in very minor delays. 2.2 Implementation 25. The Brazil Municipal Lending (APL) Program, and the USD 17.27 million loan to the Municipality of Uberaba (with a Guarantee from the Federative Republic of Brazil) in support of the Uberaba Água Viva Project, was approved by the World Bank’s Board of Directors on March 21, 2007. The Loan and Guarantee Agreements were signed on May 19, 2008, and became effective on July 30, 2008. 26. There was a fourteen-months initial delay in signing of the Loan and Guarantee Agreements, and in declaring effectiveness due to a lengthy congressional approval process and the time required for the issuance of the necessary certificates for the sovereign guarantee13. Despite these initial delays, however, the Municipality began implementing the Project with counterpart funds, for activities supporting the improvement of wastewater collection and treatment, as well as other minor ones which were well advanced even before signing. By the time of effectiveness, the Project Management Unit (PMU) was formally organized and fully staffed, and project implementation evolved significantly, although disbursements were still behind schedule. Subsequently, the Project made good implementation progress despite the financial constraints it faced. The Project’s ISRs rated DO and IP as either Satisfactory or Moderately Satisfactory throughout most of the implementation period, although individual project ratings (monitoring and evaluation, procurement and financial management) were occasionally rated Moderately Unsatisfactory or Unsatisfactory. 27. During a process of intensive supervision leading up to and immediately following the Loan’s December 31, 2012 Closing Date, the Municipality assured the World Bank that the resources required (totaling about 20 percent of total project costs) to complete all of the Project’s remaining activities after the Closing Date were committed and sources of funding were secured. A newly elected mayor demonstrated commitment to finalizing the works under 13 The guarantee by the Federative Republic of Brazil required not only congressional (Senate) approval, but also approval of the Brazilian Treasury and issuance of required certificates to that effect. One of the reasons for the delay in the issuance of the Treasury’s certificate was the expiration of the certificate of “no outstanding social security debts”, based on information submitted by the municipality. In addition, during Congress approval, due to political reasons, Senators requested more time to evaluate the proposal. 8 implementation both in meetings and in writing. However, when the new municipal administration entered office in January 2013, it advised the World Bank that the municipality was facing financial difficulties and that the remaining works could not be completed before December 31, 2013, as originally planned. In view of these developments, the final ISR dated July 29, 2013 downgraded both the DO and IP ratings to Moderately Unsatisfactory. 28. Project Funding The cost of the Project, at Appraisal, was estimated at USD28.78 million. With the addition of counterpart-financed activities in the amount of USD13.27 million that were described as part of the Project, yet not reflected in the Project’s costs14, the total cost was expected to amount to USD42.05 million. In addition to this issue related to the definition of the actual Project costs, three additional factors caused a further increase in cost over the life of the Project (see Annex 3 for more details):  Construction Costs. Construction costs throughout Brazil increased significantly from the time of Appraisal, due to specific circumstances in the civil construction market including high demand caused by economic growth; public and private investments in infrastructure, housing and other civil construction activities; and the effects of vast amounts of federal infrastructure investments that were being implemented during this period, especially through the Federal Government’s Growth Acceleration Program (PAC) and the building of infrastructure for the World Cup. The National Indices for Civil Construction (INCC) increased by some 73 percent, as a national average, between 2005 and 2013 (see Annex 3).  Appreciation of the Brazilian Real. The Brazilian Real (BRL) appreciated 12 percent against the US Dollar (USD) between Appraisal and Project Closing, increasing in value from BRL 2.5 per USD initially to a low of BRL 1.59 and fluctuating to an average of BRL 1.99 over the Project lifetime (see Annex 3).  Actual Cost of Works. The ex-post economic analysis of the Project shows that the real increase of costs that were controllable by the Borrower and Bank teams is, in fact, estimated at 75 percent. 29. These factors resulted in an increase in the Project costs from the original estimate of USD 42.05 million to USD 112.00 million. Throughout Project implementation the Municipality strived to secure additional funding to bridge this gap, and was able to increase its counterpart contribution to USD 62.97 million by tapping Federal Government resources from the PAC as well as funds from CODAU. Despite these efforts, the Project’s implementation timeframe proved to be too short, and the amount of additional counterpart resources mobilized within this period insufficient, to allow the Municipality to implement all of the originally planned Project activities by the Closing Date. This situation resulted in a reduction of the Project scope under Component One at restructuring, and in a few project activities not completed by Project closure. As result, the total Project cost totaled USD 79 million. 30. Closing Date: When it became clear that the Borrower would not be able to complete the Project by the December 31, 2012 Closing Date, the World Bank supervision team and the Municipality began looking for ways of completing it beyond this date by leveraging alternative sources of financing. Although implementation had slowed down in the period pre 14 Wastewater related works (Conquistinha and Uberaba wastewater conveyance systems and treatment plants) and the Leopoldinho Retention Pond. 9 and post October 2012 elections, the incoming Mayor had stated his commitment to the Project. However, it did not prove possible to obtain an extension to the Closing Date, which required the concurrence of both the Federal Government and the World Bank. The Borrower subsequently committed itself to complete the remaining works by December 31, 2013 using CODAU funds (for the conclusion of the sewerage system) and resources secured from the Federal Government’s PAC Program (for the macro drainage works), and formally requested that the World Bank therefore delay the preparation of this ICR by nine months to allow it to better capture the Municipality’s efforts to conclude the Project and achieve the expected results. This extension of the ICR due date was approved by the World Bank. 31. Although the remaining civil works initially progressed well, the Municipality subsequently decided to deliberately delay the implementation of the sewerage works so they could be executed simultaneously with the PAC-financed drainage works in the busy commercial center of Uberaba, thus minimizing construction disruptions. In early to mid-2013, it became clear that, even with PAC-secured funding, the Municipality did not have the necessary counterpart resources required by PAC to allow the completion of all the Project activities by December 2013. In January 2014, the Borrower nevertheless restated its commitment to the full completion of all Project activities, as it had managed to access more PAC funds and secure the necessary CODAU and Municipality resources needed. Therefore, at the time of writing of the ICR, the Borrower was expecting to be able to conclude all Project works and activities by December 2015. 32. OP 4.12 Involuntary Resettlement: The Project documents (PAD, Loan Agreement and Environmental Assessment Report) indicate that land acquisition would take place to implement the works under Component One to be financed with counterpart funds. The amount of land and value of transactions was small and the majority of the acquisitions had been carried out on a voluntary/amicable basis (through land donation, land swaps, and purchases at mutually agreed market prices). During preparation, the documentation of the land acquired by the Borrower was considered sufficient to comply with the requirements of OP 4.12 and as a result, the policy was not formally triggered. In January 2010, as part of a portfolio review exercise, a formal assessment of the land acquired for the Project was carried out. As a result, the Involuntary Resettlement safeguard was triggered and the Municipality prepared (i) a detailed assessment (a retroactive Involuntary Resettlement Action Plan) covering all of the land acquisition processed that had occurred as a result of the Project since preparation, and (ii) an Involuntary Resettlement Policy Framework to govern the possibility of further land acquisition that may have been needed in the course of implementation. Apart from the administrative time and effort in preparing and processing the necessary paperwork, there was no real impact of this retrofitting process on Project implementation. 33. Mid-Term Review: The Project’s Mid-Term Review (MTR) was carried out from March 22- 26, 2010, at which time the implementation issues described above had been identified, and the MTR consequently discussed a proposal for restructuring the Project. Although none of the changes proposed in the Restructuring were delaying implementation, its approval entailed a lengthy process. The restructuring proposal was officially sent by the Municipality to the Federal Government for approval in November 2010, but the incoming administrations at the Federal and State levels, coupled with increased overall demands from State Governments for external financing, led to a backlog in the clearance of new lending and restructuring requests by the Federal Government’s inter-ministerial Commission on External Financing (COFIEX). As a result, the Federal Government only approved the restructuring package in June 2011, following which it needed to undergo a process to update costs and progress. The package was approved by the Bank’s Board of Directors in July 2012, along 10 with other LAC region projects that needed Level 1 restructuring as result of the Portfolio Review Exercise. 34. Municipal Elections: Municipal elections were held in October 2012, with a new administration taking office in January 2013. Although the administration remained fully committed to the Project and its objectives, it took a more cautious approach to municipal finances, resulting in the slowing down of some of the works and the partial suspension of others. During 2013, the Municipality sought additional funds to finalize all Project activities; by January 2014 it had secured the needed financing to do so. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 35. Design: The Project’s Results Framework provided the basis for its monitoring and evaluation. The Municipality was meant to have put in place a Management Information System intended to monitor the Project’s physical and financial progress, as well as allowing the Key Development and Intermediate Outcome Indicators to be input in order to facilitate the M&E process. The PMU was to play a critical role in assisting the Municipality and CODAU in maintaining the system and ensuring that information would be properly input to permit continuous review of implementation and impacts. The original PDO and some of the original Intermediate Outcome Indicators were judged ambitious. Although adjusted during the MTR, the targets were still ambitious and the mechanisms were not in place during the Project lifetime to assure their routine monitoring. 36. Implementation and Utilization: The PMU assisted the Municipality and CODAU in setting up the framework and systems for Project monitoring and reporting. However, the Project’s ISRs repeatedly mentioned that progress reports lacked consistent information and did not report on the monitoring of Project indicators. No significant improvement was achieved during Project implementation to these M&E, despite efforts during supervision. 37. The difficulties became more evident upon completion of the Bank financing: more than one year after the Project Closing Date the Borrower was unable to deliver its Completion Report, even though a consultant was hired to prepare a draft. Information used as input to this ICR was consequently collected from a myriad of individual reports and documents on different aspects of project activities and components. Nevertheless, data on several indicators were still not available at the time of finalizing the ICR. 2.4 Safeguard and Fiduciary Compliance 38. Safeguard Compliance: The Project was classified as Category A for environmental impacts. During preparation, an Environmental Assessment was carried out to identify potential impacts, recommend mitigation and compensatory measures of the negative impacts and maximize the largely positive environmental impacts that it was expected to have. The environmental assessment included an Environmental Management Plan, which was incorporated into Project design. In addition to OP 4.01 (Environmental Assessment), the Project also triggered safeguards related to Natural Habitats (OP 4.04), Cultural Property (OP 4.11) and Safety of Dams (OP 4.37), which were addressed, included in the Environmental Assessment, and reflected in the project design. Overall, while the negative impacts were expected to be temporary ones related to large civil works interventions, the Project’s overall environmental impacts were expected to be positive, especially in view of expected outcomes that included the collection and treatment of wastewater, flood control, separation of 11 wastewater collection from storm water collection, improved efficiency of water supply systems, increasing cultural and recreational opportunities, and the management of environmentally protected areas. 39. The World Bank implementation support adequately incorporated supervision of compliance with safeguard aspects. The Environmental Management Plan was addressed satisfactorily during implementation, including the compliance with the Natural Habitats and Cultural Property policies (Uberaba is one of the largest and most important paleontology sites in Brazil). Even before MTR, monitoring of land acquisition processes was incorporated into project supervision. Public consultations were held during the environmental licensing of the Project components and during preparation of the social assessment. The Municipality, with solid performance and high quality material, carried out communication, information and environmental education campaigns throughout implementation. The World Bank team considered the environmental education campaigns, which the Municipality developed and carried out as good practice. The Municipality followed environmental evaluations and licensing processes closely. The Project reviewed the final evaluation report prepared by the Dam Safety Panel, which demonstrated that the Leopoldino retention pond was in safe operating condition. Two activities to enhance the safety of the surrounding pond area recommended by the Panel (the implementation of an alert system and the establishment of riparian forest) are still to be implemented, but are expected to be concluded by December 2014. 40. Fiduciary Compliance Full financial management (FM) compliance was problematic, in part due to the requirements that the World Bank had set for the use of an automated FM system. Minor shortcomings in financial management existed but did not prevent the timely and reliable provision of the information required to manage and monitor the Project. Procurement post-reviews were carried out routinely, and during supervision the World Bank team consistently reported that procurement actionswere well processed and documented, although they took longer than expected. 2.5 Post-completion Operation/Next Phase 41. There are five remaining activities to be carried out that were part of the Project: (i) the Conquistinha WWTP is 78 percent concluded – funds have been secured from CODAU and from the federal government to complete the works, which CODAU will carry out directly; (ii) CODAU has secured additional resources to conclude the sewerage collectors within the scope of the ongoing works contract; (iii) funds have been secured from the Municipality and the federal government to conclude the macro-drainage activities in Santa Beatriz and Santos Dumont avenues within the ongoing works contract; and (iv) the implementation of an alert system and the establishment of riparian forests around the retention pond will be carried out by the Municipality using transferred resources from savings from the loan account. At the time of writing the ICR, the Municipality was planning to complete all of these remaining Project activities and works by December 2015. 42. The Municipality continues to carry out capacity building activities and environmental licensing and supervision. In March 2012, the Municipality secured approval of a Municipal Law to structure the PMU permanently to support Project implementation. The Unit includes 15 professionals who provide continuity in managerial support and supervision of works in order to ensure the satisfactory completion of Project implementation, albeit without Bank supervision. In addition, the PMU will manage, supervise and monitor ongoing PAC- financed investments. Upon completion of the ongoing works, the Municipality, through its 12 Environmental Secretariat, the Infrastructure Secretariat and CODAU, will assume full responsibility for operation of Project-financed works and other interventions, including their funding and maintenance. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 43. Relevance of Objectives: The Project objectives were clearly defined, were consistent with the Federal Government and Borrower priorities at the time of Appraisal and were highly relevant. They continue to be relevant today. Increases in public and private investments are still needed in Brazil to address existing infrastructure bottlenecks, inter alia in water supply, sanitation and drainage. The Federal Government established its PAC program in 2007 to help states and municipalities address infrastructure deficits. The Municipality was able to mobilize around USD 32.5 million from PAC to support Project activities. The federal government also prioritized making growth more inclusive and environmentally sustainable, inter alia by increasing the country’s resilience to climatic shocks, whose results are becoming increasingly evident in the increased recurrence of flooding and droughts that have caused, and continue to cause, significant social and economic impacts in Brazil. The World Bank’s FY12-15 Brazil Country Partnership Strategy (CPS) is aligned with the strategies of the Government of Brazil that took office in 2011. Although the CPS prioritizes assistance to the poorer Northeast Region of Brazil, and towards larger broader projects to states and to larger municipalities, the Project’s objectives (and those of the Program) are nonetheless fully compatible with the development priorities presented in the CPS. 44. Relevance of Design and Implementation: By incorporating well the lessons of earlier operations, the Project components were well designed such that they could reachexpected outcomes. It was well within the Borrower’s capacity to implement, with the support of the pre-identified and loan-financed technical assistance. The Project was impacted, however, by the way it presented and accounted for the counterpart funds in the PAD and in the Project cost estimates themselves. In addition, as mentioned above, the initial costs were affected by factors that could not have been foreseen during preparation. The Project’s original implementation schedule was also optimistic, especially since the detailed engineering designs were to be financed during implementation and the resultant civil works could only be procured and implemented once these designs were finalized. 45. Its relevance during implementation, is confirmed by the constant, and mostly successful, efforts by the Borrower to mobilize additional resources to bridge the funding gap and complete the Project, reflected the tremendous commitment and priority that the Municipality attached to the objectives. 46. The Borrower requested additional financing during the MTR and a Closing Date extension in mid-2011 which was not granted. The World Bank agreed to an extension for the delivery of the ICR to allow the Borrower additional time to advance with project activities with the additional resources it was able to mobilize. The Municipality consequently allocated resources from its own budget, and obtained PAC resources though not sufficient to complete the Project within the original timeframe. 3.2 Achievement of Project Development Objectives 13 47. The achievement of the Project Development Objective is rated as Moderately Satisfactory based on the fact that the Project made great progress towards its stated objective through the promotion of integrated urban sanitation, environmental preservation, and expanded parks, recreational and cultural opportunities. Nevertheless, issues related to M&E made it difficult to undertake a complete evaluation of progress regarding the PDO indicators, both as originally defined and as restructured. The main activities carried out and some of the results reached are highlighted below (see details in Annex 2). 48. Improvement of Water Quality: Detailed engineering designs for the wastewater interceptors were concluded and land was acquired for the construction of the conveyance systems and for the Uberaba WWTP. The wastewater conveyance systems for both Conquistinha and Uberaba WWTPs have been completed, as have the works for the Uberaba WWTP. The Uberaba plant has been operating since 2009 with efficiency levels of greater than 85 percent on the abatement of BOD, COD and suspended solids. The WWTP works were to be complemented by the construction of 26 kilometers of wastewater interceptors in the city center, for which, at the time of the ICR, over 82 percent of the works have been concluded. 49. Flood control: The Leopoldino retention pond was constructed and the area surrounding it was upgraded into a pleasant urban park setting. The retention pond is designed to mitigate the impact of downstream flooding by 11 percent. The Project also financed engineering designs for several activities, including macro drainage works in the city center, and micro drainage works in three key micro basins (works not originally intended to be financed by the Project). The micro drainage works in three critical flood prone areas have been completed (Exposição, Olinda and Cartafina) as well as the macro and micro drainage works in the city center (Leopoldino de Oliveira, Pedro Salomão and Guilherme Ferreira avenues). 50. Adequate Water Supply: Measures to ensure adequate levels of water supply focused on efforts by CODAU to reduce water losses. A consultant was contracted to support CODAU develop its water loss control plan, with proposed activities prioritized into short- medium- and long-term actions. CODAU has successfully implemented several operational improvements as part of these water loss reduction efforts, including: (i) the replacement of about 102,000 micrometers (representing 100 percent of their micrometer base); (ii) the substitution of three critical water mains in the city center that needed urgent replacement due to their excessive maintenance needs; and (iii) updated the technical water system cadaster. The actions implemented have reduced water losses from an estimated 38 percent in 2006 down to 32.8 percent in 2012. This equates to some 1.2 million m3 of water per year, or enough to supply around 19 thousand inhabitants annually. CODAU reported that despite population increases in the Municipality, it has not suffered water shortages in 2013 due in part to CODAU’s efforts to reduce losses and to reduce demand for water, as identified and supported by the Project. 51. Understanding of Environmental Problems: Addressing this sub-objective, the Project financed the establishment of a 25-ha linear park along the Uberaba River, in addition to a 12-ha urban park, through re-forestation, landscape improvements, paths and trails, and play areas. It also financed the installation of a multi-use center for environmental education (the Centro de Educação Ambiental, CEA), with educational playrooms for children, a library, laboratories for water and soil monitoring, a fully equipped geo-processing center, and a multi-use conference center aimed at housing seminars, courses, and symposiums on environmental themes in the urban Park. From 2009 through 2013, the urban Park received 14 an average of 72,000 visitors, of which most part was children participating in environmental playgroups in CEA, numbers which greatly exceeded the Project’s original expectations. 52. A Priority Action Plan was prepared that includes a system for monitoring the use of water resources and environmental mapping, and key urgent recovery activities were identified to support the conservation of the Uberaba River APA. Under the Action Plan, the following activities have been completed: (i) an image mapping exercise that permits the geo- processing of the APA; (ii) a prioritization of the recovery actions in the APA; and (iii) establishment of a fully equipped geo-processing center in CEA. 53. CODAU has also assumed responsibility for the monitoring of the quality and quantity of water resources in the Municipality. CODAU had acquired the necessary equipment to do so, including boats with Doppler systems, and assigned and trained staff to undertake weekly monitoring exercises. The resultant data will be made widely available through CODAU’s internet site. 54. A business plan to support the Llewellyn Ivor Price Paleontology Research Center was prepared, but no other specific activities were supported by the Project as the administrative responsibility of the Center’s was transferred to the University during Project implementation, and the University made the necessary arrangements to improve the Center’s sustainability with its own resources. 55. Planning and Management: After equipping and staffing an Environmental Secretariat in June 2012, the Municipality signed an agreement with the state environmental authority granting the Municipality the authority to issue environmental licenses up to Class IV15; for licenses above this class, the Municipal Environmental Secretariat conducts the background analysis together with state authorities. 56. One of the Project’s most successful results was its comprehensive program of environmental education and social outreach. CODAU using CEA as one of its delivery mechanisms, has developed environmental training events and social communication activities for the population at large, and especially for children aged eight to eleven. CODAU also carried out a very effective social outreach campaign before and during the implementation of its major civil works under the Project in order to inform citizens, provide mechanisms for complaints, and help mitigate the difficulties that construction in the city center inevitably encountered. 3.3 Efficiency 15 Decree 44,309/2006, Deliberação Normativa Copam 74/04 defines the classification of the enterprises following 6 categories: Classes I-IV range from small-medium-large size enterprises with small-medium polluting potential; and, Classes V and VI are related to large size enterprises with medium to large polluting potential. 15 57. A comprehensive economic analysis was carried out for the works implemented under the project. The evaluation was conducted for the same components analyzed during Appraisal, namely: (i) sanitation (wastewater collection and treatment); (ii) drainage; (iii) water supply; and (iv) the linear park. The same approach used during Appraisal – a cost benefit analysis – was also used for this ICR evaluation. 58. The ex-post economic analysis of the Project transformed all Project costs to 2005 prices in order to eliminate the exchange rate fluctuation and civil works inflation, and shows that, project costs increased by 88 percent, being 21 percent related to the real increase of costs – the remaining is explained by an exchange rate fluctuation of 12 percent and an average inflation rate of 39 percent during the implementation of the Project. However, if the two activities dropped at restructuring were included as actual Project costs to compare with Project appraisal costs, the project costs increase would reach 166 percent, of which 75 percent is related to the real increase of costs, and remaining 52 percent explained by exchange rate and inflation. 59. During Appraisal the fluctuations resulting from the subsequent macroeconomic volatility were not foreseen, were beyond the control of the Municipality of Uberaba and the Bank, and would have been difficult to predict. The real increase of costs that were controllable is, in fact, estimated at 75 percent and is attributed to (i) the adjustments in the cost estimates emerging from the detailed engineering designs; (ii) the final costs emerging from the works contracts themselves of the major Project interventions, resulting from, among other things, the Borrower’s efforts to coordinate interventions in the city center to minimize disruptions; and (iii) scaling up of original activities to include the implementation of micro drainage in key basins and creation of 12 ha of an urban park including the construction of a multi-use center for environmental education. 60. The Project’s water supply, the wastewater and the drainage components reached a great number of beneficiaries and in some cases, have actually exceeded the Appraisal beneficiary targets (see following table). Table 1 – Beneficiaries expected at appraisal versus actual by components Components Beneficiaries foreseen at Actual Beneficiaries (percentage of Appraisal Appraisal target)   Drainage 3,845 properties 3,021 properties (nearly 79%) Water Supply Total population of Uberaba: Total population of Uberaba: 275,000 315,000 (114.5%) Water losses: 38% Water losses: 32.8% Wastewater System 193,997 inhabitants in Uberaba 217,847 inhabitants in Uberaba basin basin (112%) The full intervention was not 81,121 in Conquistinha basin concluded in Conquistinha basin (0%) Linear Park (number of 60,000 72,000 (120%) yearly average visitors) 61. Project Outcome Impact: The results of the economic analysis show that those works already implemented have generated benefits twice as large as their costs. The Project’s net benefits were as much as R$ 73 million, and its economic rate of return was 22.5 percent. The benefits 16 were lower than expected at appraisal (R$ 270 million) for the following main reasons: (i) some of the civil works were not implemented and led to project delays; and (ii) the higher investment costs. However, despite these factors, the Project’s actual economic return was higher than the 18 percent estimated at Appraisal. When compared to the results of other similar municipal projects, such as Betim (which had a final EIRR of 18 percent for its infrastructure investments, and 15 percent of the other components), the results of the Uberaba project were greater. 62. Drainage and sewerage works were still being implemented at the time the ICR preparation, and were scheduled to be completed by December 2015. When these are concluded, it is estimated that the benefits will increase by R$ 28 million for the sewerage activities and by R$ 50 million for the drainage activities, with internal rates of return of 16 percent and 36 percent, respectively. With these additional benefits, it is estimated that the Project will generate R$ 102 million of overall benefits and a return of 25 percent. 3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 63. The Overall Outcome Rating is Moderately Satisfactory. The Project is still very relevant to the development priorities of Brazil and of the Municipality. The Borrower has demonstrated great commitment throughout Project implementation. The majority of Project activities were completed and the greater part of its objectives was achieved by the time the Bank loan formally closed. 64. Even with the difficulties pointed out above regarding monitoring the Project results indicators, the evaluation of the indicators as presented in this ICR indicates that the Project has successfully achieved most of the PDO and Intermediate targets at the time of ICR preparation. 65. The results of the economic analysis confirm the positive outcomes by showing that the implemented works have generated benefits twice as large as their costs. The Project’s net benefits were as much as R$ 73 million, and its economic rate of return was 22.5 percent (higher than originally estimated). 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 66. The Project’s objectives and interventions were not targeted at a specific group of residents, but are designed to impact the lives of all 315,000 residents of Uberaba alike. (b) Institutional Change/Strengthening 67. The Project did not have a specific institutional capacity building objective, although some of its activities did have an impact on the Municipality’s long-term institutional development. Specifically, the capacity of the Environmental Secretariats to evaluate and issue environmental licenses has been strengthened, and its mandate for doing this has been legally approved in an agreement between the State of Minas Gerais and the Municipality. (c) Other Unintended Outcomes and Impacts (positive or negative) 17 68. On March 23, 2012, the Municipality issued a decree formalizing the role of the PMU as well as the staffing. The decree also maintained the existing staff in their positions in the event of a change in administration following municipal elections. The PMU remains in place to oversee the implementation of the remaining Project and PAC activities. It is possible that the PMU will also now be used for reaching out for new sources of financing to support the Municipality’s investment needs. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 69. Three beneficiary surveys were carried out by the PMU in November and December 2013, and in January 2014. The surveys documented very positive impressions of the beneficiaries with regard to the urban park surrounding the Leopoldino retention pond, the drainage works in the city center, and CODAU’s service delivery. More details of the results of these surveys are presented in Annex 5. A workshop was held in June 2013 for representatives of the Project’s main implementing units 16 and the World Bank team members with the aim of learning lessons from the Project design, management and implementation. A translated summary of the conclusions of this workshop is included in Annex 6. 4. Assessment of Risk to Development Outcome Rating: Moderate 70. The Risk to Development Outcome is considered Moderate. The Municipality continues to assign high priority to the Project, which is fully aligned with those of the Federal Government. The Project is well designed technically, and those components that have not been concluded are at an advanced stage of implementation, with needed resources secured and contracts underway. Many of its components and activities have been completed successfully, and are in operation by CODAU or related Secretaries. The Municipality continues to carry out or is seeking more resources to complement Project activities in line with the Project’s objectives e.g. the implementation of the water transfer from the Claro River and the automation system; installation of a new water treatment plant and rehabilitation of the two old ones, hiring of a specialized consulting firm to assist CODAU to implement the water loss reduction plan, among others. In addition, the PMU has been maintained and will assist the Municipality in the implementation of above listed activities, among others. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 71. Bank Performance in Ensuring Quality at Entry is rated Moderately Satisfactory. The World Bank’s support to Program and Project preparation was timely, responsive and well-focused on an important priority of the Municipality of Uberaba. The process was participatory, and 16 It included participants from the PMU, the Municipal Government and CODAU, in addition to the World Bank. 18 the institutional and other implementation arrangements well within the Borrower’s capacity to handle... In addition, technical and environmental due diligence analyses carried out avoided the need for the Municipality to invest in some very major and costly infrastructure investments (e.g. analyses provided evidence that the proposed new dam was not necessary). There were also some shortcomings in the preparation process, however, such as the underestimation of project costs (some of it was beyond the control of the Municipality of Uberaba and the World Bank). As the engineering designs were to be financed with the Loan funds, the cost estimates could have included higher contingency funding. The Project Results Framework was ambitious, especially insofar as expecting that a project to be implemented through multiple activities/works needed to produce results that could yield the expected outcomes over a relatively short implementation period. Furthermore, CODAU did not have in place at Appraisal, the necessary mechanisms and instruments required to monitor Project outcomes. Finally, preparation failed to take into account the fact that the Project would acquire land therefore OP 4.12 related instruments should have been prepared – however, in the end, this was not a significant issue affecting implementation. (b) Quality of Supervision Rating: Satisfactory 72. The Quality of Supervision is rated Satisfactory. The World Bank team comprised well- qualified technical, social, environmental and fiduciary teams who performed intensive, hands-on and comprehensive supervision. When needed, experts in specific themes (such as water loss and automation) were hired to give the client specialized technical assistance. Reporting in the ISRs was clear; results focused, and highlighted the main issues affecting the Project and progress towards their resolution. The Project restructuring correctly addressed issues that had surfaced with respect to the Project’s preparation (i.e., application of the Involuntary Resettlement safeguard). (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 73. The Overall Bank Performance rating is Moderately Satisfactory, based on the ratings for Quality at Entry and Quality of Supervision; and on the overall outcome rating. 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory 74. The Borrower’s performance is rated Satisfactory. The Borrower is taken to mean the Municipality of Uberaba, and its broader government units, including CODAU. Despite delays in signing, the Borrower demonstrated strong ownership of the Project, and gave its commitment to its early implementation by starting counterpart funds activities first and to its completion following the formal closing of the World Bank loan. It was fully committed to Project objectives, especially to the safeguard aspects. Throughout Project implementation, the Municipality involved stakeholders and beneficiaries through consultations and environmental education programs, which were judged as good practice by the Bank. The Municipality put in place the staff required to coordinate implementation in a unit with Secretariat level status. Despite continued funding constraints, the Municipality continuously sought to arrange alternative sources of funding, and did so successfully. 19 (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 75. The Implementing Agency Performance is rated Moderately Satisfactory. The Implementing Agency is taken to mean the Project Management Unit. It was also fully committed to the Project’s objectives, created specifically for the purpose of coordinating activities and works. The Implementing Agency, with support from an external management firm and later from a works supervision firm, was able to coordinate the Project in a timely manner, despite the significant financial constraints the Project faced and the considerable challenges these posed to Project implementation. It absorbed full responsibility for coordination in December 2011, when the funding for the external management firm came to an end. Implementation had slowed down during (a longer than expected) transition period, however in view of the capacity that had been created in the PMU it picked up – but never with the same timely response as initially. The main shortcomings the PMU faced were in the areas of monitoring, reporting and financial management. The PMU will remain in place to complete the outstanding Project activities and the complementary activities under way. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 76. Overall Borrower Performance is rated Moderately Satisfactory, based on the ratings for Government Performance and for Implementing Agency Performance. 6. Lessons Learned 77. The Project offers several lessons that are relevant to project design, generally, and to integrated water sector projects in particular. They are as follows: Project Design 78. In order to provide a timely response to Borrowers’ needs, projects contemplating large civil works could be appraised on the basis of conceptual/preliminary engineering designs, but the project’s costing, disbursement and implementation schedules need to clearly reflect this. There is always a tradeoff between preparing a project quickly and having the time to undertake preliminary or detailed engineering designs, which can add another 12-24 months to a preparation schedule. Where the engineering designs are not finalized during preparation, then the large disbursement lag that will result from having them undertaken during project implementation and the related impacts on the project’s overall implementation timeline and risks on costs estimates, need to be fully taken into account in project design. 79. Project design needs to ensure the coordination of civil works interventions so as to minimize their impact on the community. Project implementation designs and works management schedules should take into consideration the location and sources of financing of works under separate components. The Project contemplated both macro-drainage works and the installation of wastewater interceptors in the same location in the city center. As these were packaged as two separate works contracts, with two different sources of financing, procurement processes and construction contracts needed to be well coordinated to minimize disruption in the same location twice, but also resulted in reduction of cost of works. Civil works planning which combines and coordinates such interventions not only reduces disruption and inconvenience, but can also help reduce the overall cost of the works. 20 80. The use of an external management support firm can be positive in transferring knowledge to the local team, but the knowledge transfer can take time and a transition period is needed to ensure the local team is fully operational. A management firm can help professionalize project management and improve the efficiency of project execution, generally, and works implementation more specifically, especially during the critical start-up months of a project. However, the transfer of knowledge from the management firm to the local team (which was an explicit element of the firm’s contract in this case) takes time and a transition period is needed to avoid gaps until the local team is fully up to speed on all aspects of project management. 81. Results frameworks need to be designed (i) candidly to present what a project can actually achieve during its timeframe; and (ii) taking into account Borrowers’ capacity for measuring results and the availability of reliable baseline data. In of this Project, the targets for the outcome indicators were too ambitious to be achieved within the Project’s implementation period, especially considering that multiple works needed to be first completed for many of the targets to be monitored and finally met. Furthermore, the design of indicators and the targets established did not take into account that other, exogenous, factors could have an impact on their achievement (i.e., pollution of the river by a third party unrelated to the Project). In addition, the World Bank implementation support should focus from the start on operationalizing Project monitoring with the client – to internalize monitoring and reporting among Project priorities, and have in place the staff, equipment and processes required for monitoring. The World Bank team may also consider including an M&E specialist in the team to support the Borrower throughout project implementation. 82. The design and implementation of a strong and effective communication plan is a key instrument to address citizen demands regarding impacts from large infrastructure investments. With multiple large works expected to disrupt activities in the city center, CODAU had expected numerous complaints, and proactively adopted a strong program to communicate works plans with the citizens. The pamphlets distributed announcing these plans, the complaint line that was set up, and the efforts to reach out to the population to hear their concerns through community meetings, all went a long way to building the acceptance of the citizens for the inconvenience they would be facing. Integrated water sector projects 83. Complex urban development projects can be managed effectively by medium-sized municipalities with a reasonable institutional and operational capacity 17: (i) municipalities are the primary actors in urban development and in the provision of local urban services such as wastewater management, water supply, drainage and urban parks – such interventions require strategic planning and considerable resources and should be developed in strict collaboration with the key municipal stakeholders to ensure their relevance and full ownership across the administration; (ii) integrated urban development projects such as these enhance local governments’ capacity to manage complex interventions as well as strategic thinking on how cities must be shaped, institutionally and physically; and (iii) complex urban development projects can be managed effectively by medium-sized municipalities; however, external support (by the Bank and consultants) is critical, especially in key areas such as 17 As in similar projects such as Betim Municipal Project (P082328, Ln 7246-BR). 21 project design, monitoring, institutional strengthening, complex engineering tasks, and fiduciary issues. 84. An integrated urban water management approach is effective, creates synergies among financing and implementation institutions, and allows local stakeholders to understand project objectives and results. The Project followed an approach to integrated urban water management (IUWM), in which water supply, wastewater management, drainage and related aspects were all effectively incorporated in the Project’s analyses, planning and interventions. In the case of Uberaba, the Project’s efforts to ensure adequate levels of water quality by collecting and treating wastewater, to reduce flooding in the city center, and to combat potable water losses, were complemented with activities to educate the population on the benefits of water and environmental conservation while providing the inhabitants with much- needed green spaces and leisure areas around associated with the city’s water bodies. Each of these activities was complementary and provided a synergistic approach which resulted in easier understanding of the rationale for the Project objectives and for local stakeholder commitment. World Bank assistance 85. The relevance of the World Bank’s assistance for achieving impact and sustainability is high even when it is not the main source of funding. The Project involved a multitude of complementary civil works, but the amount of financing provided by the World Bank loan was relatively small. Nevertheless, the Bank financed critical components, such as the detailed engineering designs, under each of the components. The Bank assistance therefore assumed an important, catalytic role in assisting the Municipality in bringing the Project’s activities to a new strategic level, in strengthening the institutions in charge of the various aspects of municipal development, and in facilitating the leverage of funds to allow for the full completion of the Project. From the Municipality’s perspective, this is an attractive arrangement, through which the Bank provides strong technical assistance and advice as well as a ‘stamp of approval’ which facilitated the leveraging of further funding. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 86. The Borrower reviewed a draft copy of the ICR and provided comments agreeing on the relevance of the Project and main aspects affecting its implementation. The Borrower agrees with the ratings of the ICR, states the main results reached and activities implemented (including complementary activities that contribute to the Project objectives). In addition, the Borrower reaffirmed its commitment to completion of the Project and thanked the Bank for the support provided. The Borrower highlights, however, that if an extension of closing date had been granted, results could have been even greater. No updates or corrections were requested (see details in Annex 7). (b) Cofinanciers Not applicable. (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) Not applicable. 22 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Estimated at restructuring Actual/Latest Appraisal Estimate (USD millions) – Percentage of Components Estimate (USD (USD millions)18 July, 201219 Appraisal millions) 1. Environmental Sanitation 1A. Waste Water Collection and 8.70 39.77 35.98 413.56 Treatment 1B. Urban Macro Drainage 11.78 27.55 33.84 287.27 1C. Water Supply 4.35 4.94 4.71 108.27 2. Environmental and Cultural Recovery and Preservation 2A. Environmental Protection Area 0.32 0.29 0.34 106.25 (APA) 2B. Linear Park 0.40 1.98 1.27 317.50 2C. Fossil Vivo 0.05 0.03 0.03 60.00 3. Management and Planning 3A. Sanitation and Environmental 0.16 0.09 0.08 50.00 Protection 3B. Environmental Education and 0.15 0.20 0.18 120.00 Outreach 3C. Institutional Development 0.21 0.17 0.17 80.95 3D. Project Management 2.43 2.28 2.36 97.12 Total Baseline Cost 28.52 77.30 78.96 276.85 Physical Contingencies 0.00 0.00 0.00 0.00 Price Contingencies 0.00 0.19 0.00 0.00 Total Project Costs 28.61 77.30 78.96 275.99 Front-end fee IBRD 0.17 0.04 0.04 23.53 Total Financing Required 28.78 77.34 79.00 274.50 * Activities still to be concluded amount to BRL 33.53 million (USD 13.85 million or 17.5 percent of the total Project cost). (b) Financing 18 Complementary activities originally proposed were not included in the project’s PAD costs, which included the implementation of wastewater works (Conquistinha and Uberaba wastewater conveyance systems and Treatment Plants) and the Leopoldino Retention Pool – for a total estimated original cost of USD13.27 million as counterpart financed activities. This would increase the total cost at appraisal to USD 42.05 million. 19 Complementary activities originally proposed were included with their actual cost of USD29.73 million. 23 Estimated at Appraisal Actual/Latest restructuring Type of Estimate Estimate Percentage of Source of Funds (USD Cofinancing (USD (USD Appraisal millions) – millions) millions) July, 2012 Borrower Municipality of Uberaba, CODAU and 20 - 11.51 60.0721 62.97 547.09 PAC International Bank for Reconstruction - 17.27 17.27 16.03 92.82 and Development 20 Complementary activities originally proposed were not included in the project’s PAD costs, which included the implementation of wastewater works (Conquistinha and Uberaba wastewater conveyance systems and Treatment Plants) and the Leopoldino Retention Pool – for a total estimated original cost of USD13.27 million as counterpart financed activities. 21 Complementary activities originally proposed were included with their actual cost of USD 29.73 million. 24 Annex 2. Outputs by Component, and Results Framework (a) Summary table of Component’s activities and Status in January/2014 Component/Sub-component PAD-Financing Plan Restructuring (PP) Financing Plan Status in Bank Borrower Bank Borrower January/2014 Component One: Environmental Sanitation A. Waste Water Collection and Treatment Engineering designs for all √ Engineering Completed subcomponent’s activities designs of wastewater interceptors in the city center. (Completed) Wastewater conveyance system for Completed Uberaba wastewater treatment plant (WWTP) and wastewater Completed conveyance system for Conquistinha WWTP, works √ Uberaba WWTP, works √ Completed Operating Conquistinha WWTP, works 20 percent Ongoing-is delayed in completed; view of contracted √ expected firm’s financial 6/2013 difficulties; expected 12/2014 (78% concluded) Construction of 26 km of √ 74 percent completed; expected Ongoing-expected to wastewater interceptors in the city 6/2013 be concluded center, works 12/2015, along with macro drainage to avoid disturbing the city center (82% concluded) Expropriation of land needed for the Completed Completed construction of conveyance systems Land and Uberaba wastewater treatment acquisition plant. B. Drainage Engineering designs for all subcomponent’s activities Engineering Completed √ designs for the macro drainage system in the city center (Completed) Leopoldino retention pool and its √ Completed Operating urbanization, works Macro drainage system in city center Ongoing; One contract has been expected concluded. Another √ 6/2013. is ongoing-affected by Financed with financial constraints; counterpart expected to be (PAC) concluded by 12/2015. Micro drainage works in six key 20 percent (of Works for three key micro basins three) neighborhoods have √ completed; been concluded. The expected works on three others 6/2012. have been cancelled. Financed with counterpart (PAC) Engineering designs for micro √ Being Completed. drainage in key critical areas prepared; 25 expected 6/2012 System of flood alert and a safety √ Will be Still to be procured ring for the Leopoldino retention purchased using counterpart pool once the financing. Expected current system until 12/2014. proposal is evaluated by dam safety experts; expected purchase and installation 6/2012 C. Water Supply Engineering designs for √ Completed Completed subcomponent’s activities Update of the technical water system √ Completed Completed cadaster Rehabilitation of three critical water √ Completed Completed pipelines Rehabilitation of two water √ Dropped from Project although Completed treatment plants works initiated and expected 6/2014 Replacement of micrometers √ Replacement Replacement of 100% of 74% of of 102 thousand 91,000 micrometers micrometers completed. ongoing Regularization of the flow of the √ Works are expected to Uberaba River through making Dropped start in April 2014 permanent the transfer of water from with secured the Claro River resources from PAC. Automation of the water system √ Dropped, but bidding process Activities are being ongoing revised based on TA given by the Bank. TA to CODAU to develop its water √ Dropped, water loss control Consultant was hired loss control program program still being developed to support CODAU to develop its water loss control program— product was delivered Component Two: Environmental and Cultural Preservation and Recovery A. Environmental Recovery (APA) Monitoring of water resources (quantity and quality) and signing agreements with local universities to √ Ongoing Completed assist CODAU with its operation (and equipment acquired) Action plan agreed and implemented to support the recovery and Expected by conservation of 1,500 ha in the √ 6/2012 Action plan Uberaba Environmental Protection completed. Recovery Area22 actions not started yet. B. Parque da Cidade (re-named Parque das Lajes) Urbanization of the Lajes Stream √ Completed Completed, creating a leisure park used by 22 An Action Plan was agreed and is ongoing to support the conservation of the Uberaba Environmental Protection Area (APA) which includes: (i) acquisition of an image of the area-concluded; (ii) treatment of the image by a specialist-concluded; (iii) preparation of an emergency action plan based on the results of (i) and (ii)-concluded; and (iv) preparation of the TOR for a full management plan for the area-concluded. This TOR will be used by CODAU to carry out such activities using own resources; and (v) implementation of a geo-processing center at the Urban Park-under way. 26 people living in the neighborhood Implementation of the Lajes √ Completed, including (Barriguda) Urban Park an Environmental Education Center Implementation of a geo-processing center at the Lajes (Barriguda) Under way Urban Park √ C. Fossil Vivo Preparation of Business Plan for the √ Completed Completed Live Fossil Project Component Three: Planning and Management A. Sanitation and Environmental Preservation Environmental Secretariat √ Capacity to Capacity to start established start evaluating and issuing evaluating environmental and issuing licenses strengthened; environmental started issuing licenses licenses in June 2011 strengthened B. Environmental Education and Social Communication Programs of environmental √ Completed Completed education developed Environmental training events and Ongoing, Ongoing, being social communication activities being carried carried out carried out to the population at large √ out C. Institutional Strengthening Capacity building activities carried Implemented Implemented; out for the Secretariats of Strategic Plan for Environment, Tourism, Planning √ CODAU prepared; and Infrastructure PMU and municipal staff received training D. Project Management Specialized management consultant Implemented; firm hired to support and transfer Ongoing contract expired capacity to PMU √ during implementation, PMU staffed by Municipal Law 27 (b) Detailed description of Component’s outputs Improvement of Water Quality 1. Several activities under the Project were expected to work together to improve the water quality in Uberaba: 2. Wastewater Collection and Treatment. Two independent sewage treatment systems, including two sewage treatment plants (Uberaba expected to attend 75 percent of the population and Conquistinha expected to attend 15 percent of the population) were expected to be a key factor in improving the water quality and class rating on the Uberaba River and Conquistinha Stream. Detailed engineering designs for the wastewater interceptors were concluded, and land was acquired (financed by the Municipality) for the construction of the conveyance systems and for the Uberaba WWTP. The wastewater conveyance systems for both plants have been completed, as have the works for the Uberaba WWTP (completed with counterpart resources). The Uberaba plant has been operating since 2009 with efficiency levels of greater than 85 percent on the abatement of BOD, COD and suspended solids. The volume (mass) of BOD pollution removed by the WWTP reached 160,200 (tons/year) in 2013; with 92 percent of removal (greater than the originally designed target of 90 percent). Works for the Conquistinha wastewater treatment plant are still ongoing with financing obtained through the Federal Government, but delayed in part due to financial difficulties by the contractor (that has now been resolved). At present, all equipment has been acquired and works are about 78 percent completed. The plant is expected to be concluded in December 2014. When the WWTP starts operating, an estimated 60 percent of wastewater collected in Uberaba will be treated. 3. The above works were to be complemented by the construction of 26 kilometers of wastewater interceptors in the city center. The interceptors were financed by the loan, but works were put on hold to coordinate their execution with the macro drainage works (see below) that would be carried out in the same locations in the city center. At the time of the ICR over 82 percent of the works have been concluded. When the works for the interceptors are concluded (expected to December 2015), an estimated 90 percent of wastewater collected in Uberaba will be treated. Flood control 4. Drainage. The Project aimed to improve Uberaba’s urban drainage system through several activities. The Leopoldino retention pond was constructed and the area surrounding it was upgraded into a pleasant urban park setting (financed by the Municipality before the Project began implementation). The retention pond is designed to mitigate the impact of downstream flooding by 11 percent. A system of flood alert for the pool as well as a safety ring is being procured. The Project also financed engineering designs for several activities, including macro drainage works in the city center, and micro drainage works in three micro basins (works not originally intended to be financed by the Project). The micro drainage works in key three critical flood prone areas have been completed (Exposição, Olinda and Cartafina) as well as the macro and micro drainage works in the city center (Leopoldino de Oliveira, Pedro Salomão and Guilherme Ferreira avenues). There are macro drainage works currently expected to be restarted in two locations (Santos Dumont and Santa Beatriz avenues) with resources mobilized from the Federal Government. In financing these works, the Municipality (and later the Public’s Hearing Office reinforced) made the effort to proceed only if the macro drainage works were executed together with the installation of wastewater 28 interceptors, as this not only produced a reduction in the cost of works, but also reduced the inconvenience to the affected population. Monitoring reports of high rain events in the city center that occurred in December-2013 and January-2014 have shown that those avenues which have received macro drainage interventions in the city center have not suffered any flood impacts. Adequate Water Supply 5. The provision of adequate levels of water supply contemplated a program to reduce water losses, including an update of the technical water system cadaster and rehabilitation of three critical water pipelines. Measures to ensure adequate levels of water supply focused on efforts by CODAU to reduce water losses that were estimated at 38 percent at appraisal. A consultant was contracted to support CODAU develop its water loss control plan, with proposed activities prioritized into short, medium and long-term actions. CODAU has successfully implemented several operational improvements as part of these water loss reduction efforts, including: (i) the replacement of about 102,000 micrometers (representing 100 percent of their micrometer base); (ii) the substitution of three critical water mains in the city center that needed urgent replacement due to their excessive maintenance needs; and, (iii) updated the technical water system cadaster. The actions implemented have reduced water losses to 32.8 percent in 2012. This equates to some 1.2 million m3 of water per year, or enough to supply around 19 thousand inhabitants annually. CODAU has expressed its intention to continue implementing the water loss control plan, by addressing the medium- and longer-term issues identified in the plan, including finalizing the cadaster, tackling internal management and human resource issues and hiring a specialized firm to provide technical assistance. CODAU also intends to continue replacing micrometers that have a five-year useful life on a rolling basis. CODAU reported that despite population increases in the Municipality, it has not suffered water shortages in 2013 due in part to CODAU’s efforts to reduce losses and to reduce demand for water, as identified and supported by the Project. Understanding of Environmental Problems 6. The objective of these activities was to improve the quality of life in the Municipality and provide sustainability to the investments supported by the Project. Addressing this sub- objective, the Project financed the establishment of a 25-ha linear park along the Uberaba River, in addition to a 12-ha urban park, through re-forestation, landscape improvements, paths and trails, and play areas. It also financed the installation of a multi-use center for environmental education (the Centro de Educação Ambiental, CEA), with educational playrooms for children, a library, laboratories for water and soil monitoring, a fully equipped geo-processing center and a multi-use conference center aimed at housing seminars, courses, and symposiums on environmental themes in the urban Park. CODAU has signed agreements with the State Secretariats of Health and Education, and with several universities for conducting activities in and providing outreach from the CEA. From 2009 through 2013, the urban Park received an average of 72,000 visitors, of which most part was children participating in environmental playgroups in CEA, numbers which greatly exceeded the Project’s original expectations. 7. The Project made progress towards developing the terms of reference to prepare a full Management Plan for the APA Uberaba, however it fell short of original targets for actually preparing the Management Plan and recovering 1,500 hectares within the APA. A Priority Action Plan was prepared that includes a system for monitoring the use of water resources and environmental mapping, and key urgent recovery activities were identified to support the 29 conservation of the Uberaba River APA. Under the Action Plan, the following activities have been completed: (i) an image mapping exercise that permits the geo-processing of the APA; (ii) a prioritization of the recovery actions in the APA; and (iii) establishment of a fully equipped geo-processing center in CEA. The APA Action Plan was approved by the River Basin Committee. It has been used by the Committee to take decisions regarding requests for new businesses to establish themselves within the APA. Key urgent activities have been identified, which are designed to help recover the APA environmentally, but their implementation has not yet been initiated. CODAU has secured funding for preparation of the full Management Plan, and expects to complete the process in eighteen months. The Municipality has signed agreements with several universities to conduct courses using the geo-processing center, which define the responsibilities of CODAU and the PMU and of the universities. The Municipality is supporting this initiative through the purchase of additional equipment for an additional room for the center. The first course is expected to begin in August 2014. 8. CODAU has also assumed responsibility for the monitoring of the quality and quantity of water resources in the Municipality. Having acquired the necessary equipment to do so, including boats with Doppler system, and assigned and trained staff to undertake weekly monitoring exercises. The resultant data is being made widely available through CODAU’s internet site. 9. A business plan to support the Llewellyn Ivor Price Paleontology Research Center was prepared, but no other specific activities were supported by the Project as the administrative responsibility of the Center’s was transferred to the University during Project implementation, and the University made the necessary arrangements to improve the Center’s sustainability with its own resources. Planning and Management 10. After equipping and staffing an Environmental Secretariat in June 2012, the Municipality signed an agreement with the state environmental authority granting the Municipality the authority to issue environmental licenses up to Class IV23; for licenses above this class, the Municipal Environmental Secretariat conducts the background analysis together with state authorities. In 2013, it was able to process 1,132 licensing requests; increasing its capacity from original 635 in 2012. The Secretariat has been staffed with biologists, geologists and forestry engineers, and counts on adequate office space, equipment and vehicles to adequately carry out its supervision and inspection functions. It is also implementing several other measures to strengthen its capacity, including, signing agreements with universities to provide support in areas where it needs specialized input and having its staff benefit from several learning events provided by the state secretariat. 11. One of the Project’s most successful results was its comprehensive program of environmental education and social outreach. CODAU using CEA as one of its delivery mechanisms, has developed environmental training events and social communication activities for the 23 Decree 44,309/2006, Deliberação Normativa Copam 74/04 defines the classification of the enterprises following 6 categories: Classes I-IV range from small-medium-large size enterprises with small-medium polluting potential; and, Classes V and VI are related to large size enterprises with medium to large polluting potential. 30 population at large, and especially for children aged eight to eleven. It has signed agreements with the Municipal Secretariats of Education and Health, and delivers programs both at schools and in specially equipped classrooms in the CEA. Its programs disseminate information on water management, conservation, on tooth brushing (conserving water), and on recycling and making goods from recycled materials. A specifically designed mascot, “Clarinha”, is used in pamphlets, publications and video distributed to children, and is apparently now synonymous with water conservation. The environmental education program developed and implemented by CODAU was considered good practice by the Bank supervision team. 12. CODAU also carried out a very effective social outreach campaign before and during the implementation of its major civil works under the Project in order to inform citizens, provide mechanisms for complaints, and help mitigate the difficulties that construction in the city center inevitably encountered. It routinely provided folders announcing the works, the purpose, the duration, etc., held meetings with residents in areas that would be affected, mobilized parking for the residents, and incorporated their suggestions in the works areas where possible. 31 BRAZIL MUNICIPAL LENDING PROGRAM UBERABA ÁGUA VIVA PROJECT Results Framework Project Development Objective (PDO): To promote better living conditions for all residents of the Municipality of Uberaba through the promotion of Status integrated urban sanitation, environmental preservation, and expanded parks, recreational and cultural opportunities. during Original Revised Target restructuri PDO Level Results Indicators Unit of Measure Baseline Target in PAD in Actual ng Restructuring PP Indicator One: 2/3 of 2/3 of Volume of Adequate water supply will be guaranteed while Volume of water Q7,10=49 100% Q7,10=490 l/s water has Revised in maintaining Uberaba River flow at minimum levels 0 l/s with without rationing been PP required under environmental legislation rationing maintained and water rationing was not registered for year 2013. Comment: Met. CODAU is not yet measuring the water available in the Uberaba river upstream or downstream of the water intake. CODAU has acquired the equipment needed and has trained its staff to start monitoring the water quantity. This is conditionality at CODAU’s water rights permit. However, considering that the average water intake volume by CODAU is 905 l/s, ranging from the maximum of 975l/s and minimum of 756 l/s; and that the minimum average Uberaba river flow based on calculations from 2007 appraisal documents is 1,700 l/s (no recent data is available); results that the minimum levels of water required under environmental legislation (490 l/s) has been adequately complied with. CODAU did not register rationing events in 2013; once all water project activities were concluded as well as operational improvements were carried out by CODAU (based on the Water Loss Reduction Plan). In previous years, rationing was registered in few city neighborhoods during dry periods. Indicator Two: WQI, and Water 2005: WQI Bad, Revised in Water Quality Index of Uberaba River and Conquistinha Quality Classification WQI Good WQI Good, Class IV PP to read: Stream Medium Class III Water and Class Quality IV Index of Uberaba River is 32 improved Comment: Not achieved. The Uberaba wastewater treatment plant has been operating since June 2009. The volume (mass) of BOD pollution removed by the wastewater treatment plant (WWTP) reached 160,200 (tons/year) in 2013 with 92 percent of removal (greater than the originally designed target of 90 percent). The WWTP has been receiving an average volume of 232 l/s. It has the capacity of treating up to 480 l/s of wastewater, but was expected to treat around 280 l/s in the first years of implementation. The volume of sewerage will increase once the remaining interceptors are finalized and connected to the WWTP. The analysis of the water quality of the river Uberaba compared the data of BOD, DO and fecal coliforms levels in the following situations: a) simulation results of water quality-2005 year average flow conditions in the stretch downstream (about 60 km) from Lajes stream (data from project appraisal); and, b) results of water quality monitoring of river Uberaba in the period from October 2012 to September 2013, in the downstream stretch of Lajes stream, in a stretch of 36 km. The analysis of these results does not allow considering that improvements in water quality have occurred in the Uberaba River until an average stretch of about 20 km downstream of Lajes stream and the discharge point of the Uberaba WWTP. So, in general, the conditions simulated in 2005 remains the same, demonstrating that the river in this stretch is still in class IV. The current monitoring data demonstrate the significant increase of BOD and fecal coliforms in points immediately downstream of the Lajes and Juca streams (both tributaries located immediately upstream of the Uberaba WWTP discharge point), with decreasing levels of DO. This situation is due to (i) the discharge, still significant, of raw sewage in urban drainage channels and in the Lajes stream provided mainly by the drainage basins of Santos Dumont and São Bento avenues; and, (ii) the existence of external polluting discharges (e.g. Fridge that inadequately treats its effluents and discharges with high organic load) to the Juca stream. This latest discharge was only identified once the current monitoring procedure started. This inadequate discharge is causing the deterioration of the water quality of the river in the stretch which masks any positive results of all investments made by the Project. The city environmental secretary, along with the environmental prosecutor’s office, has caused the major polluter to reduce the release of effluents into the river. Indicator Three: Water Quality Environmental Classification of Uberaba River at points Certification Class IV Class II Dropped in following discharge of treated sewage 2005 PP Indicator Four: Focus Focus Focus See Citizen understanding of environmental problems and Group/Sur Group/Survey Group/Survey comment. satisfaction with environmental services (WS&S, drainage - vey Repeats Repeats parks) Summary Comment: Met. Beneficiary surveys carried out in November and December-2013 and in January-2014 have captured positive impressions and satisfaction by the municipality’s citizens. See full results in project files and a summary in item 3.6 and Annex 5. INTERMEDIATE RESULTS Intermediate Results (Component One): By year 3 the micro drainage works for the city center are completed Revised Intermediate Result (Component One): By year 3 the Uberaba wastewater conveyance system and WWTP is completed, that will permit the flow of sewage for treatment. By year 6: (i) the Conquistinha wastewater conveyance system and WWTP are completed, and (ii) drainage works and sewerage system in the urban center are completed, thereby reducing the incidence of flooding and improving the water quality. 1. Change in the water quality of the Uberaba River WQI and Water WQWI WQI Good, 33 Quality Classification 2005 Class II Dropped in Medium PP and Class IV 2. Change in the water quality of the Conquistinha stream WQI and Water WQWI WQI Good, Quality Classification 2005 Class III Dropped in Medium PP and Class IV 3. Occurrence of flooding in the city center in comparison Years Flooding See Frequency with intensity of rains with rain TR=25 TR=25 comment. of TR=2 Monitoring years Revised in PP Comment: Met. Monitoring reports of high rain events in the city center that occurred in December-2013 and January-2014 have shown that those avenues which have received macro drainage interventions in the city center have not suffered any flood impacts. There are still macro drainage interventions to be finalized in the Santos Dumont and Santa Beatriz avenues. There were not many raining events to be measured after conclusion of the macro drainage structures. The study to evaluate the recurrence of flooding for different storm return periods was not conducted by the client. 4. Change in value of properties in area of influence of Brazilian Ave=R$3 +16% + 16% (due to +244 flood project Reals 7,000 (due to works) works) (2007) Comment: Met. According to personnel in charge of the appraisal of property in the municipality, the increase in the value of properties in the city center areas was positively impacted by the implementation of the Project’s drainage works in the city center, which proved to be a very important factor given that the corresponding areas have not suffered from any flood events since the drainage works were implemented. The area evaluated around the Leopoldino Retention Dam and the urban park have presented even larger property increase (+313) not only because of the intervention, but also due to Brazil’s housing boom during project implementation. 5. Decrease in water losses % 38% 20% 36% 32.8% Revised in PP Comment: Met. During restructuring, this indicator was revised and the target decreased from 20 percent to a more realistic 36 percent. The initial target was too ambitious for the type of activities that were being supported by the Project, as well its timeframe and resources allocated. For instance, SABESP, Sao Paulo State’s water supply and sanitation company and one of Brazil’s most sophisticated utilities, has been implementing a water loss reduction program since 2008 that is investing a total of BRL 2.7 billion (approximately USD 1.56 billions) to reduce in a 10 year period their water loss percentage by 16.4 (from 29.5 percent in 2008 to 13.1 percent in 2018). Comparing this to the Project’s reality indicates that the target set during Project preparation to reduce the water loss percentage from 38 to 20 percent in a 5 year period with an original investment of USD 4.35 million (USD 4.94 million at restructuring) was unrealistic. 34 All results for water losses were based on the data contained in the Ministry of Cities’ national water supply and sanitation database (SNIS) report. The measured indicators for 2012 are still to be reported by CODAU to SNIS. The December 2012 data was assessed by a water loss specialist who worked with the Borrower to evaluate their water loss program. The 2013 water loss data was not available at the time the ICR was prepared. 6. Percentage of wastewater collected that is treated. New (Note: Wastewater collection coverage in the city is 99%) % 2% 75% 44% indicator added in PP Comment: Partially met. The Uberaba WWTP implemented under the Project, along with the existing Capim WWTP and individual septic tanks treat 44 percent of all the wastewater currently collected in urban Uberaba. Once the construction of the Conquistinha WWTP is concluded (expected until December 2014), the accumulated amount collected wastewater that is treated would reach 60 percent; furthermore, once the sections of the sewerage collectors already constructed under the Project and those to be constructed along with the macro drainage in Santos Dumont and Santa Beatriz avenues, are all finally connected to the Uberaba WWTP (expected until December, 2015), this indicator is expected to reach 90 percent, thus exceeding the original Project target value. Intermediate Result (Component Two): By end of year 2 the Parque da Cidade is completed Revised Intermediate Result (Component Two): By end of year 2 the Parque das Lajes is completed 1. Volume of water in the Uberaba River for compliance 2/3 of Dropped in with environmental regulations Q7,10=49 100% PP 0 l/s 2. Change in the number of visitors to the Parque da Changed Cidade (yearly average) 0 >15,000 >15.000 park name 72,000 to “Parque das Lajes” Comment: Significantly exceeded. CODAU, using the Environmental Education Center at the Parque has developed environmental training events for the population at large but especially children aged eight to eleven. The Park was visited by 38,692 inhabitants in 2009, rising to 93,823 visitors in 2012 and with an average annual visitations rate of 72,000 per year over the life of the Project, which is far in excess of the Project target. 3. Change in the number of visitors to the Fossil Research +50% Dropped in Center 21,000 (31,500 total) PP (2004) 4. Increase in donations to Center/Museum R$100,00 +50% Dropped in 0 PP 5. Management plan for a portion of the environmental No Action Plan Action Plan New protection area (APA) of the Uberaba River is elaborated Hectares (ha) covered existing prepared and prepared. indicator and main recovery actions are executed plan, 0 ha 1,500 ha Recovery added in PP of area recovered activities not recovered yet initiated. Comment: Partially met. The APA Action Plan was prepared and approved by the River Basin Committee. The Action Plan has been used by the Committee to make decisions regarding requests 35 by new business to establish themselves within the APA. Key urgent activities have been identified, which are designed to help recover the APA environmentally, but their implementation has not yet been initiated. Intermediate Result (Component Three): (a) Management plan for Municipal Secretariat of Environment is concluded, and (b) Physical and financial implementation of the plan is undertaken on schedule Revised Intermediate Result (Component Three): Half of the courses and training for Secretariat of Planning and SMA will be completed by year 3. Municipal licensing has started in year 4. 1. Share of city environmental licensing applications that See Revised in are processed by the Municipality as opposed to the State 0 100% 60% comment. PP Comment: Apparently Met. Since June 2012 the Municipal Secretary for Environment has started to evaluate and issue licenses (Classes I-IV) at the Municipal level and has increased its capacity from 635 processes (in 2012) to 1,132 (in 2013), with an average of 94 requests being processed by the municipal body per month. The data of the licensing processes for Uberaba Municipality that are being processed by the State (related to Classes V and VI) was not available for these periods. Therefore, it became impossible to calculate the indicator as defined. 2. Population reached by the Environmental Education & All Social Communication Programs 0 All All Comment: Met One of the Project’s most successful results to date has been its program of environmental education and social outreach. CODAU delivered environmental training events and social communication activities for the population at large. It has signed agreements with the Municipal Secretariats of Education and Health, and delivers programs both at schools and in specially equipped classrooms in the CEA. Its programs disseminate information on water management, conservation, on hand washing and tooth brushing (conserving water), and on recycling and making goods from recycled materials. A specifically designed mascot, “Clarinha”, is used in pamphlets, publications and videos distributed to children, and is apparently now synonymous with water conservation. The environmental education program developed and implemented by CODAU was considered good practice by the Bank supervision team. CODAU also carried out a very effective social outreach campaign before and during the implementation of works in order to inform citizens, provide for complaints, and help mitigate the difficulties that construction in the city center would entail. It routinely provided folders announcing the works, the purpose, the duration, etc., held meetings with residents in areas that would be affected, mobilized parking for the residents, and incorporated their suggestions in the works areas where possible. 3. Project implementation goals are met (financial, 88% physical, procurement, etc.) 0 N/A All Comment: Substantially achieved. The project listed 43 activities that were to be carried out, of which only five were not completed until by January 2014. These five outstanding activities are all expected 36 to be concluded by December 2015. 37 Annex 3. Economic and Financial Analysis Summary 1. This annex presents in detail the economic evaluation carried out for the works implemented under the Uberaba Agua Viva Project. The evaluation was conducted for the same components analyzed during Appraisal, namely: (i) sanitation (wastewater collection and treatment); (ii) drainage; (iii) water supply; and (iv) the linear park. The same approach used during Appraisal – a cost-benefit analysis – was also used for this ICR evaluation. 2. The ex-post economic analysis of the Project transformed all Project costs to 2005 prices in order to eliminate the exchange rate fluctuation and civil works inflation, and shows that, project costs increased by 88 percent, being 21 percent related to the real increase of costs – the remaining is explained by an exchange rate fluctuation of 12 percent and an average inflation rate of 39 percent during the implementation of the Project. However, if the two activities dropped at restructuring were included as actual Project costs to compare with Project appraisal costs, the project costs increase would reach 166 percent, of which 75 percent is related to the real increase of costs, and remaining 52 percent explained by exchange rate and inflation. 3. During Appraisal the fluctuations resulting from the subsequent macroeconomic volatility were not foreseen, were beyond the control of the Municipality of Uberaba and the Bank, and would have been difficult to predict. The real increase of costs that were controllable is, in fact, estimated at 75 percent and is attributed to (i) the adjustments in the cost estimates emerging from the detailed engineering designs; (ii) the final costs emerging from the works contracts themselves of the major Project interventions, resulting from, among other things, the Borrower’s efforts to coordinate interventions in the city center to minimize disruptions; and (iii) scaling up of original activities to include the implementation of micro drainage in key basins and creation of 12 ha of an urban park including the construction of a multi-use center for environmental education. 4. The Project’s water supply, the wastewater and the drainage components reached a great number of beneficiaries and, in the cases of the water supply improvements, the linear park, and one of the wastewater basins, actually exceeded the Appraisal beneficiary targets (see following table). Table 1 – Beneficiaries expected at appraisal versus actual by components Actual Beneficiaries (percentage Components Beneficiaries of Appraisal target) Foreseen at Appraisal Drainage 3,845 properties 3,021 properties (nearly 79%) Total population of Uberaba Total population of Uberaba Water Supply 275,000 315,000 (114.5%) Non-revenue water losses: 38% Non-revenue water losses:32.8% 193,997 inhabitants in Uberaba 217,847 inhabitants in Uberaba Wastewater System basin basin (112%) 38 81,121 in Conquistinha basin The full intervention was not concluded in Conquistinha basin. Linear Park (number of 60,000 72,000 (120%) yearly average visitors) 5. Project Outcome Impact. The results of the economic analysis show that those works already implemented have generated benefits twice as large as their costs. The Project’s net benefits were as much as R$ 73 million, and its economic rate of return was 22.5 percent. The benefits were lower than expected at appraisal (R$ 270 million) for the following main reasons: (i) some of the civil works were not implemented and led to project delays; and (ii) the higher investment costs. However, despite these factors, the Project’s actual economic return was higher than the 18 percent estimated at Appraisal. When compared to the results of other similar municipal projects, such as Betim (which had a final EIRR of 18 percent for its infrastructure investments, and 15 percent of the other components), the results of the Uberaba project were greater. Table 2 - COMPARISON OF EXPECTED AND ACTUAL RESULTS (R$ 000) Expected PAD ACTUAL Net benefit Net benefit (R$ 000) EIRR (R$ 000) EIRR Drainage 45,848 20.8% 44,089 34.9% Water Supply 122,754 45.5% 20,405 54.0% Sewer Mains &WWTP 98,404 16.6% 7,254 13.3% Parque da Cidade 3,384 19.3% 1,937 23.4% Total 270,390 18.2% 73,685 22.5% 6. Drainage and sewerage works were still being implemented at the time the ICR preparation, and were scheduled to be completed by December 2015. When these are concluded, it is estimated that the benefits will increase by R$ 28 million for the sewerage activities and by R$ 50 million for the drainage activities, with internal rates of return of 16 percent and 36 percent, respectively. With these additional benefits, it is estimated that the Project will generate R$ 102 million of overall benefits and a return of 25 percent. Table 3 - ECONOMIC RESULTS WHEN ALL THE WORKS CONCLUDE Net benefit (R$ 000) EIRR Drainage 50,473 36.7% Sewer Mains &WWTP 28,741 16.4% Water 20,405 54.0% Parque da Cidade 1,937 23.4% Total project 101,556 24.7% Methodology 7. A cost benefit analysis was carried out for the works implemented in the following components: a) drainage; b) water supply; c) wastewater collection and treatment; and d) linear park. Costs and benefits were included as they actually occurred during and after the implementation. To make them comparable with those used at appraisal, both costs and 39 benefits were adjusted to 2005 prices for the impact of inflation and exchange rate 24 differences . Net benefit of the project was estimated as the incremental benefit from two scenarios: with and without project. The without project scenario was projected assuming that the situation existing at time of appraisal remained; while the with project scenario was projected including benefits already attained with the works. The cash flows were discounted using the same discount rate used at appraisal, which was 12 percent. 8. Benefits. Among the benefits already seen from the works are: a) reduction in risk and losses to life and property due to flooding control in specific areas of the city; b) efficiency improvement of water service provision through water losses reduction; c) environmental and health improvements derived from wastewater collection and treatment; d) increased access to recreational activities and to the environmental education center; and e) improved institutional capacity. 9. Costs include investment and operation. For each component, investment cost consisted of its actual costs plus the institutional component, which was added in proportion to the investment cost. This evaluation used the investment cost expressed at 2005 prices. 10. Actual Investment costs were transformed to 2005 prices to eliminate exchange rate differences and inflation rate. Table 4 compares the expected cost at appraisal plus counterpart fund (totaling USD 42.05M) to the actual investment cost (USD 79M), which results in 88% increase. Three reasons explain this increase: (a) 12% appreciation of the Brazilian Real to the USD. At appraisal the exchange rate was about BRL 2.5 per USD and it fluctuated to an average of 1.99 (figure). (b) 39% Inflation rate. This inflation was calculated as the average between construction price index and consumer price index. The construction price increased 73 percent from 2005 to 2013; the average corresponded to 46 percent (figure). The consumer price had a 33% average increase. This analysis worked with the resulting average of both, that is 39%. (c) After eliminating the exchange rate difference and the inflation rate, the resulting increase is 21%, which corresponds to real cost increase. Table 4. Investment Cost. Expected and Actual Appraisal Actual Increase % USD (000) 42,050 79,005 88% Breakdown of the cost increase: Appreciation of the Brazilian Real 2.25 1.99 12% Inflation Rate 112,692 39% Real cost increases 21% 24 According to IBGE, Consumer Price Index during the period was: 2005: 5.69%, 2006: 3.14%, 2007: 4.46%, 2008:5.90%, 2009: 4.31%, 2010: 5.91%, 2011: 6.50%, 2012: 5.84%, 2013: 5.91%. Construction Price Index was: 2006: 5.4%, 2007: 5.2%, 2008: 9.1%, 2009:7.7%, 2010: 6.5%, 2011: 7.75%, 2012: 7.0%, 2013: 8.0%. According to the Brazilian Central Bank Annual average exchange rates were: 2005:2.53 ; 2006: 2.25 , 2007: 1.93, 2008: 1.62; 2009: 21.96; 2010: 1.81; 2011: 1.59; 2012: 2.05; 2013: 2.17. 40 Actual Works (000 R$), Exchange Rate and Construc on Price Index INCC (2005‐2013) Valor contratado (000R$) Índice INCC (mai 2005=1) Câmbio (R$/US$) 18000.0 3.000 16000.0 2.53 2.25 2.500 14000.0 2.17 2.05 1.93 1.96 12000.0 1.81 2.000 1.62 1.59 000 R$ 10000.0 1.728 1.500 1.600 8000.0 1.495 1.387 1.303 6000.0 1.210 1.000 1.054 1.109 1.000 4000.0 0.500 2000.0 .0 0.000 2005 2006 2007 2008 2009 2010 2011 2012 2013 Ano 11. However, if the costs of the two activities that were dropped from the project at restructuring are also considered to compare Project appraisal estimates against final total Project actual costs, the figures results would be changed to: Table 5. Investment Cost with dropped activities. Expected and Actual Appraisal Actual Increase % USD (000) 42,050 112,000 166% BRL (000) 94,541 236,128 - Breakdown of the cost increase: Appreciation of the Brazilian Real 2.25 2,11 6% Inflation Rate 43% Real cost increases 75% 12. Operating costs corresponded to actual costs of operation of each component. CODAU provided information for sanitation and water components; while the municipal prefecture and the Secretariat of the Environment provided information for drainage, linear park and the educational center. Current costs were also transformed to 2005 prices using the inflation rate during the period. Financial prices were transformed to economic prices using the same conversion factors as at the appraisal. Estimation of benefits 13. A summary of the methodologies used at appraisal and at the ICR for estimating the benefits of each component is presented in Table 5. Table 5. COMPARISON BETWEEN METHODOLOGIES USED AT APPRAISAL AND ICR COMPONENTS BENEFITS METHODOLOGY TO ESTIMATE BENEFITS PAD ICR PAD ICR Sanitation Increase of Tariff paid by customers for Increase of (main sewers sewage WTP treated sewage as an sewage treated and WWTP) treated approximation of WTP 41  Reduction of operating WTP of having cost of cubic meter Guarantee continue supply, produced and distributed Reduction of Water adequate water eliminating when physical losses UFW supply rationing and reduce intermittence  Increase of revenue when commercial losses reduce Reduction of Reduction of Increase of Drainage Increase of property values flooding flooding property values Educational Park Avoided cost.   Center Approximation of WTP based Park Park WTP on entry payment in similar   parks Sanitation. Sewer Mains and WWTP 14. The works foreseen at appraisal included two sewage treatment plants: Uberaba, and Conquistinha, which would have served the almost the whole population of Uberaba. The works actually implemented consisted of the conveyance system for both systems and the Uberaba wastewater treatment plant. Projected beneficiaries at appraisal corresponded to the whole population of Uberaba. Actual benefits are related to 480 l/s of sewage treated, which correspond to about 75% of total population. Currently the WWTP is treating 232 l/s, which corresponds to about 106 thousand inhabitants. New customers are being connected and some sewers pipes are being concluded to allow the plant to operate at full capacity. This evaluation worked in two stages: a) current beneficiaries; and b) total beneficiaries when the works are concluded. 193,997 inhabitants in the Uberaba 217,847 in Uberaba basin and no Wastewater System basin and 81,121 in the investment was concluded in Conquistinha basin Conquistinha basin 15. The benefits at appraisal were estimated using Contingent Valuation Method to estimate the Willingness to Pay for the investments that would create a better environment in the city. The results showed a WTP of R$ 8.60 per household per month. 16. For this evaluation, benefits were estimated using the tariff actually paid by customers for sewage treatment. In 2009 CODAU established a tariff for sewage treated as a percentage of water tariff. Before 2009 CODAU charged 50% of water tariff for sewerage service. From 2010 and on, CODAU has been increasing this percentage to cover operating expenses of sewage treatment. The percentage has increased from 50% to 60% in 2010, to 70% in 2012 and it will be 100% in 2014. 17. Table 6 presents average tariffs charged by CODAU for sewerage and sewage treatment, as well as corresponding bill per household per month for sewage treatment. This value is converted to 2005 prices and the result for 2014 (R$ 8.8/hh/month) shows a similar value to the WTP obtained at appraisal (R$ 8.6/hh/month) Table 6. Tariffs Charged by CODAU for Sewerage and Sewage Treatment Tariff for Sewerage Sewerage Sewage Sewage treatment Sewage treatment sewage treatment Tariff treatment Per hh per hh 42 as % of water tariff R$/m3 R$/m3 R$/hh/month 2005 R$/ month/hh 2,009 50% 0.75 2,010 60% 0.78 0.15 2.28 1.81 2,011 50% 0.83 0.18 2.72 2.04 2,012 70% 0.91 0.34 4.77 3.36 2,013 50% 0.83 0.33 5.13 3.42 2,014 100% 0.91 0.91 14.02 8.81 Water supply 18. This component was expected to secure the system’s main water supply regularizing the flow of the Uberaba River through the transfer of water from the river Claro. It included also a program to reduce water losses including modernization of commercial operations and automation of the operation of the supply system and water treatment plants. The benefits were estimated through the willingness to pay for having continuous supply. 19. The actual water component consisted of works for reducing unaccounted for water. No works for regularizing the flow of the Uberaba river were implemented nor any automation of the operation of the water system. The benefits consisted of those related with the reduction of losses, which are: a) reduction of costs of producing water when physical losses decreased; and b) increase of revenues when commercial losses reduced and so volume of water billed increases. Table 7. Benefits of reduction of unaccounted for water Unaccounted For water Operating cost Water Tariff % R$/m3 produced R$/m3 billed 2008 42.86% 0.63 1.37 2009 39.39% 0.65 1.51 2010 37.79% 0.75 1.55 2011 33.50% 0.79 1.67 2012 32.80% 0.92 1.82 20. It was assumed that 50 percent of losses go to physical losses, and the remaining 50 percent goes to commercial losses. Costs and tariffs were converted in 2005 prices. Savings in operating cost corresponded to reduction of volume produced times operating cost; increase in revenue corresponded to increase in volume billed times tariff. Net benefits consisted of the sum of savings in production costs plus increase in revenue. Drainage 21. The drainage component was supposed to benefit 3,845 real estate properties located in flooding areas. The component included macro drainage investment to reduce the incidence of flooding for rain events with recurrence period of 25 years. The benefits were estimated based on real estate prices, which were about 16% lower in properties located in flood prone areas. The difference in property value was estimated as R$ 6,053 per registered property. Beside the property value, damages costs were estimated as R$ 2,509 per property per year. 22. For this evaluation, the property value was also used to estimate the benefits. Information from the registry of property values used to calculate property taxes by the municipality (IPTU) was used. Value of property from 2008 and 2013 was compared in the areas where drainage works were implemented and the results are shown in table 8. 43 Table 8. Increase in Property value benefited with drainage woks 2008 2014 Increase BRL per m2 BRL per m3 % Value- Leopoldino de Oliveira Ave. BRL/m2 300 1,500 BRL/m2 2005 prices 263 943 258% Value - Guilherme Ferreira Ave. BRL/m2 250 1,200 BRL/m2 2005 prices 220 755 244% Value - Clarecida Almirante Ave. BRL/m2 140 1,000 BRL/m2 2005 prices 123 629 411% Value - Professor Francisco Ave. BRL/m2 60 500 BRL/m2 2005 prices 53 314 497% 23. According to personnel in charge of properties’ appraisal in the municipality, the increase was due to drainage works, which indeed was very important as these areas have not had any flooding since the works were implemented. As there is no study that proves that, this evaluation estimated the benefits with a lower increase and in order to go on the conservative side it uses 50% of the increase of the property value. Linear Park 24. At appraisal, the benefits were calculated using Contingent Valuation Technique to estimate the WTP, which was estimated at R$ 18.69/hh/month. 25. The evaluation for the ICR used two parameters to measure the benefits: (a) entry value for another park in Uberaba; and (b) price of renting rooms with same characteristics of those available at the educational center. (a) Benefits of the park. The park has had in average 72 thousand visitors per year in the period 2009-2013. They do not pay any fare for entering to the park. As approximation of the willingness to pay, the entry fee of R$ 3 per person paid at Peiropolis park located at 20 km of Uberaba was used. Table 9. Visitors to the Park Kids Adults Total 2009 28,692 10,000 38,692 2010 76,788 15,000 91,788 2011 52,663 29,300 81,963 2012 56,523 37,300 93,823 2013 36,669 13,800 50,469 (b) Renting prices. The educational center has been used for courses and events. If the education center had not been built, other rooms would have to be rented for the courses. There are 2 rooms and 2 auditoriums. The rooms are used weekdays all yearlong; while the auditoriums are used weekdays during the school calendar, which is 9 months per year. The price of renting a room of the same characteristics is R$ 2,000 per month, and the auditorium R$ 500 per day. The prices were transformed to 2005 prices and applied 44 to the number of rooms and auditoriums. Results 26. As foreseen at appraisal results show that the project is economically feasible with return of 22 percent and benefits of R$ 73 million. Drainage and water supply generate 88 percent of the benefits with returns of 35 and 54 percent respectively. Table 10 - COMPARISON OF EXPECTED AND ACTUAL RESULTS (R$ 000) Expected PAD ACTUAL Net benefit Net benefit (R$ 000) EIRR (R$ 000) EIRR Drainage 45,848 20.8% 44,089 34.9% Water Supply 122,754 45.5% 20,405 54.0% Sewer Mains &WWTP 98,404 16.6% 7,254 13.3% Parque da Cidade 3,384 19.3% 1,937 23.4% Total 270,390 18.2% 73,685 22.5% 27. The results are very satisfactory given that actual investment costs -without inflation and exchange rate differences- were21 percent higher than expected at appraisal. Net benefits obtained were as much as R$ 73 million with returns of 22 percent. Despite the good results, these benefits were lower than expected at appraisal (R$ 270M) due mainly to : a) some of the works were not implemented; b) higher investment costs; and c) project delays. Yet actual returns were higher than the 18 percent expected. 28. There are some works in drainage and sewerage that are being implemented and will be completed by 2015. When they are concluded benefits will increase to R$ 28M in sewerage and R$ 50M in drainage with internal rates of return of 16% and 36 % respectively. With the additional benefits the project will be generating R$ 102 million benefits and return of 25%. Table 11 - ECONOMIC RESULTS WHEN ALL THE WORKS CONCLUDE Net benefit (R$ 000) EIRR Drainage 50,473 36.7% Sewer Mains &WWTP 28,741 16.4% Water 20,405 54.0% Parque da Cidade 1,937 23.4% Total project 101,556 24.7% 45 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Fernando Andres Blanco Cossio Senior Economist AFTP4 Jose Augusto Carvalho Consultant LCSPT Dean A. Cira Lead Urban Specialist AFTU1 Martin P. Gambrill Lead Water and Sanitation Specialist LCSWS Luiz C. Gazoni Consultant LCSPT Kathy A. Lindert Sector Leader LCSHD Yasuhiko Matsuda Sr Public Sector Specialist EASPW Claudio Mittelstaedt Consultant LCSFM Lilian Pena Pereira Weiss Water & Sanitation Specialist LCSWS Paula Dias Pini Senior Urban Development Specialist AFTU1 Ricardo Rocha Silveira Senior Operations Officer HDNHE Bernice K. Van Bronkhorst Sector Manager SASDC LCSUW- Carlos E. Velez Lead Economist HIS Supervision/ICR Joao Vicente Novaes Campos Financial Management Specialist LCSFM FMS Frederico Rabello T. Costa Senior Procurement Specialist LCSPT PS Juliana Menezes Garrido Pereira Sr Water & Sanitation Specialist LCSWS Current TTL Menahem Libhaber Consultant (WSS infrastructure Spec.) EASIS Paula Dias Pini Senior Urban Development Specialist AFTU1 Former TTL Alexandre Fortes Consultant (Environmental Spec) LCSEN Eri Watanabe Consultant (Operations Analyst) LCSWS Julian Thorton Consultant (Water loss Spec.) LCSWS Guilhermo Hernandez Consultant (WSS management Spec.) LCSWS Soraya Melgaço Consultant (Social/resettlement Spec) LCSOS Adauto Santos Consultant (WSS infrastructure Spec.) LCSWS Clarisse Dall’acqua Sr. Environmental/Social Specialist LCSEN Lizmara Kirchner Sr. Water and Sanitation Specialist LCSWS Current co-TTL Suzana Abbott Consultant (ICR main author) LCSWS Consultant (Economic & Financial Luz Maria Gonzalez LCSWS Analysis at ICR stage) (b) Staff Time and Cost 46 Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY04 1.10 7.74 FY05 21.13 114.51 FY06 5.81 25.80 FY07 7.38 60.66 Total: 35.42 208.71 Supervision/ICR FY07 3.85 21.10 FY08 12.43 49.58 FY09 16.25 62.97 FY10 14.58 74.37 FY11* 7.81 39.55 FY12* 9.99 58.13 FY13* 9.74 45.08 Total: 74.65 350.78 * The Staff Time and Costs for FY11-FY13 do not include procurement, financial management or safeguards supervision time as these were funded off-the-top, nor do they reflect the time spent by Management on Project oversight nor for legal services as these were covered by the CMU. 47 Annex 5. Beneficiary Survey Results The PMU has carried out three simple satisfaction surveys: November 2013, December 2013 and January 2014. The detailed surveys are on Project files. The main results of these surveys are: First survey: November 2013 Sample: not informed Flood aspects in the areas surrounding: Trevo São Marcos, Guilherme Ferreira, Leopoldino de Oliveira, Santa Luzia Church and Fernando Costa. Summary results: Question Percentage Unit Perception on the reduction of 78 Inhabitants noted the change water volume in the streets during raining events Any impacts of the raining events 4 Responded positively from October 01-05, 2013 Was the odor during the raining 58 Good odor events normal Satisfaction about the civil works 76 Satisfied Second survey: December 2013 (A) Urban park around the Leopoldino retention dam (sample – 80 inhabitants) Summary of main results: Question Percentage Unit How frequent do you come to the 89 During weekends and up to 3x park? per week. Is it better than before the works? 70 Yes What do you usually do in the 89 Walk, run and leisure activities Park? with family Is the area well conserved? 88 Think great and regular (B) Flood aspects in the city center (sample – 100 inhabitants) Summary of main results: Question Percentage Unit Before the works, were you 59 Yes. impacted by raining events? Do you know about the drainage 67 Yes works that were carried out? After the works, did things get 48 Yes or didn’t know. better? 48 After the works, does flood 83 No or didn’t know. occur? Third survey: January 2014 (A) Flood aspects in the city center where works have taken place (sample – 250 inhabitants) Summary of main results: Question Percentage Unit Before the works, were you 91 Yes. impacted by raining events? Do you know about the drainage 98 Yes works that were carried out? After the works, did things get 77 Yes. better? After the works, does flood 61 No or didn’t know. occur? (B) Flood aspects in the neighborhood where works have taken place (sample – 100 inhabitants) Summary of main results: Question Percentage Unit Before the works, were you 59 Yes. impacted by raining events? Do you know about the drainage 67 Yes works that were carried out? After the works, did things get 48 Yes. better? After the works, does flood 83 No or didn’t know. occur? (C) Flood aspects in the city center where works have NOT taken place (sample – 100 inhabitants) Summary of main results: Question Percentage Unit Are you impacted by raining 99 Yes. events? What happens during flood 64 Flood in the street only events? 32 Flood in the street and at home. Did any flood event occur 95 Yes recently? Do you know about the drainage 56 Yes works that will be carried out? After the works, do expect things 55 Yes. to get better? 49 After the works, does flood will 60 No or didn’t know. still occur? (D) Urban park around the Leopoldino retention dam (sample – 80 inhabitants) Summary of main results: Question Percentage Unit How frequent do you come to the 90 During weekends and up to 3x park? per week. Is it better than before the works? 70 Yes What do you usually do in the 89 Walk, run and leisure activities Park? with family Is the area well conserved? 89 Think great and regular (E) CODAU performance (sample – 400 inhabitants) Summary of main results: Question Percentage Unit Water quality 80 Highly satisfied or Satisfied Continuity of water service 69 Highly satisfied or Satisfied. provision Proactive water rationing 89 Is aware awareness Sewage system 70 Highly satisfied or Satisfied Time to deliver maintenance 66 Highly satisfied or Satisfied services Quality of the services delivered 74 Highly satisfied or Satisfied Parque das Barrigudas as a 12 Satisfied leisure park 46 Don’t know. 50 Annex 6. Stakeholder Workshop Report and Results 1. This report presents and structures the main results/recommendations of the Workshop on Lessons Learned from the Água Viva Project—Municipality of Uberaba/Minas Gerais, carried out in the Municipal Library of Uberaba, Minas Gerais on June 17, 2013. Please find the full report on Project files. 2. The Workshop, organized by the World Bank, was attended by representatives of the UGP (Project Implementation Unit) of the Água Viva Project, of the Municipality of Uberaba and of CODAU—Centro Operacional de Desenvolvimento e Saneamento de Uberaba, in all 31 participants. In addition to the above representatives, World Bank mission staff also participated. 3. The complete findings and conclusions of each of the phases and tables, followed by a synthesis of lessons learned in each of the phases carried out during the Workshop. A. Design/Preparation, Implementation and Monitoring of the Água Viva Project 4. In relation to the design/preparation of the Água Viva Project, the following principle lessons were presented:  The structure of the UGP and the training of its staff at the start and periodically throughout is fundamental to the success of the Project in each of its phases;  Avoid the distancing of the UGP and achieve greater integration with the personnel of the Municipality from the start and in all phases of the project;  The lack of data and information, and the lack of prior diagnostics associated to incipient activities lead to difficulties in identifying needs, developing proposals and integrating actions in the project’s design phase;  There is a need to focus on realistic objectives and targets, compatible with the amount of resources and execution capacity and counterpart funding so that the commitments made can be realized;  Exchange rate risks should be considered in project design and preparation 5. In relation to the implementation of the Água Viva Project, the following principle lessons were presented:  The implementation of a program depends to a large extent on having a well-structured UGP, and of the training of its staff for planning and management of projects, as well as its appropriate relationship and placement in the structure of the municipal government;  Planning is fundamental to ensure good physical and financial implementation;  Exchange rate risks that were not appropriately identified affected the availability of needed resources in accordance with budgeted amounts and complicated project implementation and increased the demands on the UGP to obtain additional resources  The challenges of a project financed by an international organization leads to the development of local capacity and in the case of the UGP for the Água Viva Project transformed it into a unit charged with mobilizing resources from other sources  The implementation of a program financed by an international organization requires the following and applying of procedure of the financier, and consequently changes in municipal norms, practices and processes. The requirements of the international 51 organization many times conflict with legal requirements of the municipality, leading to concern and delays. It is not easy to learn and accept to work with international norms;  It is important to expand the use of resources and capacities existing in the municipality, to avoid distancing the UGP and to avoid conflicts between the project and the local public bureaucracy;  Working with different financing sources, like the IBRD and CEF, makes planning and coordination difficult, especially when the activities are interdependent like the interceptors and water mains. 6. Finally, in relation to monitoring of the Água Viva Project, the following principle lessons were presented:  Monitoring should be seen as a permanent, continuous process, starting with the beginning of implementation, and it is important since then to count on SIG to support monitoring and evaluation activities. Without this, each IBRD mission requires an overload of work to obtain data at the last minute;  The definition of appropriate indicators is fundamental for monitoring. Multiple or ambitious indicators, associated to precarious information systems/data bases complicated the monitoring for the Água Viva Project. These issues were only resolved towards the end of the project, with the procurement research tools and the handling of data. B. Findings from the Implementation of Components of the Água Viva Project 7. Following is a summary of the lessons learned with relation to results of Component 1 – Environmental Sanitation Services:  Although the works were not concluded, the Project produced significant results for the resident of Uberaba, reducing in a significant albeit incomplete manner the adverse impact of flooding in the city center and improving the quality of water in the Uberaba River. Residents have also benefited from an increase in the collection and treatment of sewage, even though the effectiveness of the sewage treatment plants is not as expected due to the phasing in installing the interceptors.  The improvement in water losses through replacement of water mains and improvements in management and collections in CODAU though replacement of micro meters are important accomplishments, but would have been even more significant if the implementation of the Water Loss Control Program had been prioritized  The integration and coordination of works, under all components/activities is of fundamental importance to ensure results. The increased odors in the city center, resulting from the installation of drains with the completion of other works that would eliminate sewage, for example, affect the perception of results by the population  Integrated actions of drainage and sewage should constitute the focus of activities aimed at ensuring environmental improvements  The basic requirement for sustainability of interventions is the coordination of activities by the different actors and levels of government. It is necessary to provide for the operation and maintenance of equipment installed and services provided, and to ensure the availability of resources for this  Supervision and legal provisions constitute other essential factors for the sustainability of results of environmental sanitation services  Dissemination and environmental education are essential for the efficient use of services and equipment installed, and their maintenance 52  Good social communication, well developed as under the Project, contributed greatly to reduce potential conflicts during construction and the normal inconveniences it entailed  Good project designs are essential for this component 8. Following is a summary of the lessons learned with relation to results of Component 2 – Environmental and Cultural Preservation and Recovery:  The results under this component fell well short of original targets. The strategy of beginning with works, appeared the correct one, but turned out to be inappropriate. This was because it attracted the population to use areas that did not yet possess conditions of environmental sustainability as the result of other factors such as the discharge of sewage from the treatment plant resulting from delays in connections and effectiveness of the treatment plants and others  Although the implementation of this component improved in large measure the perception of project actors to the issue of environmental, historic and cultural preservation, this was not sufficient to overcome the general tendency of viewing the activities it supported as a second priority in comparison to the works, which in the end resulted in the use of the small amount of resources for this component  Good planning, conducive to existing conditions and the possibilities of improvement and transformation are much more complex for activities aimed at environmental, historic and cultural preservation which combine different elements than for works projects  Continued environmental education is fundamental for this component, but this is something still new and incipient in our society  The establishment of dedicated structures, like the APA and the Environmental Secretariat, and the increase in technical and financial resources for these structures are fundamental for the sustainability of the activities required. Some progress was made on this, like the initial structuring of the environmental activities, the purchase of equipment for geo-processing and the establishment of a database for APA management, but more is needed. 9. Following is a summary of the lessons learned with relation to results of Component 3 – Planning and Project Management:  The mastery of project technology and of management and supervision by the UGP and its influence among the broader municipal administration is among the main results obtained under Component 3, creating a local capacity for negotiation, mobilization and expansion of resources and monitoring  The increase in local capacity for management was also relevant in the environmental aspects, as a result of the component, by the establishment and environmental monitoring in relevant units, resulting in a data base and the strengthening of the municipal administration that began to analyze and issue environmental licensing  Not being able to implement the Water Loss Control Program was an important frustration under the component, repeating the similar challenge reported for Component 1. This reflection, nevertheless and at the same time, reveals a learning experience with respect to project management that created new insights into the importance of prioritizing activities  It is worth repeating here, like other activities evaluated, the importance and success of social communication activities and their importance in mitigating social impacts during works execution in urban areas  Different groups viewed the withdrawal of the management and supervision consultants during the end of the first year of the project differently. For the UGP, it was seen as a loss that led to difficulties and delays for project management. For the municipal 53 administration, which saw this as an opportunity to save resources, which was apparently the motivation behind the decision, it was beneficial, both in terms of saving resources for the works, but also by having internalized the functions for the municipality, demonstrating the capacity to implement, and producing lower-cost technical solutions for the works. A third group considered that the problems with the consultants resulted from the duplication of roles between the consulting firm, the UGP and the municipal administration, that led to a duplication of efforts and generated additional work. In the discussions on this subject, it became evident that the differences in views with respect to the organization and strategy for project implementation and supervision were not addressed effectively during preparation, and remained an issue until the end. The difference in remuneration between the consultants and the municipal professionals was apparently at the root of this issue  Related to the above, the importance of strengthening the municipalities own units, including the need for the rational use of human resources was highlighted as a lesson and prospect for sustainability. C. Management of the Água Viva Project 10. The lessons learned with the management of the Água Viva Project can be summarized as follows:  The pace of work of a municipal administration is determined by norms and practices of a bureaucratic nature. This makes it difficult to respond to the needs of a project’s implementation. One of the solutions is to structure a UGP with dynamic individuals, knowledgeable of administrative requirements in several areas, from among the municipality’s staff  The integration of the UGP with the various secretariats is fundamental for the satisfactory progress of the project. As a temporary structure, the UGP runs the risk of becoming alienated, and this risk is increased with its offices outside of the municipal offices  The big lessons of the Água Viva Project in respect to relationships with society were the emphasis given to communication programs, the establishment of an open channel and a constant dialogue, informing the population and its representative agents of the purposes, concepts, requirements and disturbances of the project, discussing together solutions that respond to both their needs and those of implementation  Project management needs to work closely with suppliers/contractors, defending and demanding compliance with contracts, but cognizant of issues faced by suppliers, building, to the extent possible a partnership. Supervision and monitoring are important instruments to ensure compliance with contracts. Changes in project design and scheduling priorities are a constant challenge in supervising contracts and maintaining relationship with suppliers/contractors  The full understanding and knowledge by the UGP of the procedures of financiers represents a challenge and precondition for a productive relationship with them. In the case of the Água Viva Project the disposition of the financiers to respond to, orient and resolve problems that arose were fundamental throughout implementation. Training staff to master the project technologies, following the procedures of each financier and a positive attitude of municipal staff to respond to demands are both necessary. Compliance with deadlines and good projects are needed for this. 54 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR (Translation of the Borrower’s letter 049/2014, dated March 17, 2014, signed by the Municipal Mayor, regarding comments to the draft ICR. Original letter is on Project files) The Municipality of Uberaba, through the Project Management Unit (UGP – in Portuguese), presents to you this document, our comments on the Final Implementation and Conclusion Report (ICR) for the Agua Viva Project. The Municipality of Uberaba has advanced substantially in the area of environmental sanitation: in the last few years, more than 300 million BRL were invested in works and activities for improving public water supply, sanitation, urban drainage, and environmental preservation with the aim of securing the improvement of our community’s environmental quality. The audacious Agua Viva Project grew out of the initiative of the Municipal Prefecture of Uberaba – PMU and the Operational Center of Development and Water and Sanitation of Uberaba – CODAU, to broaden and modernize existing urban services, taking care that the municipality improved and maintained its social, economic, and environmental indicators. The initiative to seek the World Bank resources was evaluated as favorable, because “the justification for the participation of the World Bank was strong. The World Bank had been supporting the development of cities in Brazil over the course of the years, and had realized extensive analysis and technical assistance works in the area. The Brazil Municipal APL Loan Program was an important element for the implementation of a strategy for municipal lending.” All these efforts sought to promote better living conditions for all the residents of the municipality of Uberaba through the promotion of integrated urban environmental sanitation, environmental conservation, and the expansion of parks and recreational and cultural opportunities. Due to the occurrence of problems identified in the Municipality of Uberaba arising from flooding in the city center, environmental degradation of the banks of the Uberaba River, the Conquistinha stream and its offshoots perceived principally through the high levels of pollution of its water bodies (due to wastewater discharge and silting), and an insufficient water supply (pumped from the Uberaba River) to fill the needs of the population (drought of 2002 and the railway accident of 2003), the Municipal Prefecture of Uberaba- PMU and the Operational Center for Development and Sanitation of Uberaba – CODAU, together requested this financing from the World Bank. The Project was formatted with three initial components: Component (I) Environmental Sanitation; Component (II) Environmental and Cultural Preservation and Recuperation Component; and (III) Planning and Management; initially 40% counterpart funding on the part of the Municipality and 60% on the part of the IBRD, although some changes were made during the preparation period. The report considerations regarding the Project Preparation were pertinent, since fundamental issues were addressed for consideration for the final evaluation of the success of project implementation, including: 1. Underestimated initial costs; 2. Necessity of an initial phase for preparation of detailed engineering designs for sewage and drainage systems, which would then alter the time frame for disbursement; 55 3. Ambitious project result framework; 4. Short implementation time period, with multiple actions to be executed; 5. CODAU and PMU have not implemented, as of the current time, the mechanisms and instruments necessary for monitoring the results; 6. The majority of the land necessary for the implementation of the works was not acquired at the time of loan approval, and an involuntary resettlement plan to identify the necessary procedures was not initially elaborated; 7. The transitions, following municipal elections, that took place during implementation, as well as other national transitions during approval of the Loan Guarantee.. This is an important point to highlight in this report “the initial delays in the signing of the loan and guarantee agreements, and the efficacy (due to such a long process of Congressional approval and the time necessary for the issuance of the certificates needed for the sovereign guarantee)resulted in the Project Development Objective (PDO) and Implementation Progress (IP) ratings to be downgraded to Unsatisfactory and Moderately Unsatisfactory, respectively, for a short period (of six months) in 2008.” These delays motivated first by technical questions occasioned by the change in management and second by politics, related to the approval by the Senate, came to be a substantial negative influence on the effectiveness of project implementation. Despite this, however, the Municipality began to implement the Project financed with counterpart funds, with the object of improving and modernizing existing urban services. During implementation the Municipality always maintained the commitment to conclude the works pre-established in the Project program; however, these and other factors like the devaluation of the dollar during the period had an impact. This being the case, it was necessary to bring in resources from other sources, in a larger part from the Federal Government’s Programa Pro Saneamento and Programa de Acerleração do Crescimento – PAC I and II. With this, the institutional structure began to work with two management demands, with the same local team and the same sites to implement the works, making the operationalization of the processes of the two sources of financing more difficult; slowing even more the expected results. The majority of the activities and works of the Project were satisfactorily concluded, as described in the World Bank report, resulting in a general assessment of moderately satisfactory. “The project is still very relevant for the priorities of the Municipality of Brazil and the borrower has shown great commitment throughout implementation of the project. The major part of the Project activities was concluded before project closing. As the monitoring had been a Project difficulty since the beginning, the indicators were not measured in the best way possible; however the majority of the targets were achieved. The evaluation of the efficiency of the project was already better than expected during preparation.” The World Bank had a fundamental role in this process, and as such the Municipality completed a great set of works using resources from diverse sources, such as the Federal Government, through PAC I and II; FHIDRO; the State government and others, as well as counterparts of the Municipality and CODAU. These activities were the following: 56 Sanitation: Specifically with regard to sanitation, the actions proposed to implement an absolute separation system in the city center for the conduction of sewage, without drainage, to reach the wastewater treatment. In the Uberaba River System, the Francisco Velludo Wastewater Treatment Plant (WWTP) in the Uberaba River and the Rio Uberaba waste water conveyance system were constructed to receive the wastewater interceptors from the city center. The engineering designs for the interceptors were financed by the World Bank and the works were almost completed. Due to the decision of the Municipality, it was not fully completed in order to make its implementation together with drainage canals more viable, and 17% of the works are still to be completed. To complete the system, a service order will be issued by the second half of March for the construction of the Pumping Station and Conveyance System of Jardim Sao Bento. FOMENGE – SP was awarded the contract for these works. In the Conquistinha system, the construction of the pumping station; the Jardim Maracana waste water conveyance system that will drain into the Conquistinha WWTP basin; and the Conquistinha waste water conveyance system, were all already completed. The conclusion of the works for the Conquistinha WWTP remains to close the cycle. Complementing the improvements to and increased capacity of the existing Recreio dos Bandeirantes WWTP, called Capim WWTP, studies of the sludge treatment produced at WWTP were also conducted, for usage in agriculture, which is being implemented. In this way, the environmental impact of discharging raw sewage in water bodies, which is, currently practiced, is compensated by ensuring cleaning of the urban water streams and the Uberaba River, Conquistinha Stream and Rio Grande River, providing improvements to the population. Urban Drainage: The World Bank financed the main study of this component, the feasibility study and project alternatives. The municipality deployed two storm water reservation ponds – Reservatorio and Piscinao Leopoldino de Oliveira – that work simultaneously and contribute as part of the flood control system, and are supplemented by the duplication of drainage channels already installed on the main roads in the city center. At the Piscinao an upgraded urban park was created, which contributed greatly to the valorization of real estate in the area, and will receive an alert and security systems to be installed this year. These systems will be funded by the Municipality, with savings from project resources, and where indicated by a Dam Safety Panel in compliance with Bank Safeguards. The drainage channels are still in the final stage of implementation, with secured resources. In this component the Municipality also invested in micro drainages in the high areas of the city, causing the storm water to flow in the system to arrive at the canals. In addition, using counterpart funds, streams were channelized, completing this macro drainage system, significantly improving management of storm water and eliminating flooding in central areas of the city. 57 Water Supply services: Collection and distribution The World Bank financed, through a donation from the Japanese Bank, a study of alternatives for water source conducted by Prof. Mario Cicarelli in 2005, which chose the Claro River as the best alternative for the region as it presented the best technical, social, environmental, economic, and maintenance conditions to respond to growing demand for water in the Municipality, along with the Uberaba River. With this, CODAU invested in a water treatability study with the aim of defining the water quality of the Claro River and the best way to treat it, focusing on finding a solution with an independent system for the Claro River and not a combination of the two systems. The water transfer from the Claro River, in times of drought, was adopted as the best alternative in the medium term and so an engineer design for the water intake s with the aim of the construction of a direct pipeline from the Claro River to the Water Treatment Plant (WTP) was prepared, as well as for the construction of a new WTP. The funding for the implementation of the Claro River pipeline was ensured by the PAC - 2, with resources from the Federal Government’s Budget (OGU- Orcamento Geral da Uniao). The works described are the construction of 35.25 Km of pipeline from the Claro River to the WTP, with a pipeline and pumping system with an 800 l/s capacity. The water intake from the Claro River is a way to meet the growing demands of the city up to 500,000 inhabitants. Today, the city is experiencing a unique moment of economic and social development, which will be enhanced with the finalization of large investments by the Federal Government (Ammonia plant/Petrobras), the State Government (Gas Pipeline) and the Municipal Government (Agua Viva Project). For a city above this size of population there is a proposal for a large engineering design for using water from the Grande River. Treatment There are currently two Water Treatment Plants. The first station was constructed in 1940, with an initial capacity of 300 l/s, and Station II was inaugurated in December of 1971 with an initial capacity of 600 l/s. Rehabilitation works are being carried out in the treatment processes of WTPs I and II and construction of WTP III which will deal individually with the Claro River system. In addition, there are investments in an environmentally friendly form for disposal of sludge produced in the WTP processing (Works Report in Annex - I of this Report). All these will expand the treatment capacity from 900 to 1,700 l/s, also with funds from the Federal Government. Investments were made to reform the chemical testing center, and further adjustments will be made using CODAU resources. Distribution The World Bank resources were invested in the replacement of 3 water mains that were already compromised over their period of use and contributed to a high water loss rate, compromising the system. These pipelines total 3.6 km and are located in the Boa Vista, Estados Unidos, and Fabricio neighborhoods. As of today the construction of a new pipeline between the WTP and R6 (reservoir 6), which will 58 separate the distribution system in that area, is already on going. Networks were also replaced in rural districts. Control of Losses The networks mentioned above are part of an antiquated system of distribution, often in precarious condition and difficult to operationalize. The World Bank funded a consultant to support the elaboration of a Municipal Loss Control Plan, which was concluded in December 2012, which gives guidelines for actions and projects aiming at the reduction of losses in the whole supply system. The actions indicated above are part of the plan. Other actions in this Plan are already being implemented, such as the updating of the network cadaster and others for which, beyond the results already obtained, more positive results are expected. For this reason, CODAU also implemented a broad program of replacing water meters that was executed with its own investments and achieved replacement of about 99 % of water meters. Today, the process is beginning again, replacing those meters which were exchanged at the beginning of the program. The automation of the operating system was the object of an assessment of the World Bank consultants, who gave guidelines for the contracting of a company that is already starting to process of reexamination of the system throughout CODAU for later implementation. Storage Currently Uberaba still faces water shortage crises of in various areas of the city. As catchment and treatment works are not yet completed, storage and distribution of water widely throughout the city is still necessary. A large urban expansion is being identified in the southeast and southwest sectors of Uberaba, which forces the widening of these investments to ensure the integrity of the public water supply in the city; because of this, the Municipality obtained resources for three additional reservoir centers with an independent pipeline system. The R12 will be built on the confluence of BR 050 and BR 262 towards southwest, and the R13 is to be built on the corner of Bandeirantes Avenue and Ponta Grossa Street, southeast region. These two will be metallic reservoirs, partially buried, with a storage capacity of 5,500 cubic meters and also an elevated reservoir for 500 cubic meters, with their mains independent of WTP. A R14 will also be constructed next to R4—a metallic reservoir, with a capacity of 5,500 cubic meters, with counterpart resources. Environment and Sustainability All these works and actions will undoubtedly improve the environmental and social indicators of the Municipality of Uberaba; however, they also necessitate investments in the sectors that will ensure the sustainability of the implemented projects. First, the Municipality highlights the larger environmental education program developed by CODAU. Environmental education is a tool capable of raising awareness and educating the population about the importance of preserving natural resources. As a way to contribute to the process of superseding environmental degradation, which is ever increasing, these works involve an approach capable of integrating educational practices with environmental proposals, fostering greater comprehension of the importance of the role of mankind regarding nature. The environmental practices proposed in this program permit the enhancement of already existing positive aspects in the Municipality of Uberaba relating to sustainable attitudes, and seek to 59 sensitize the population regarding the importance of possessing, in our city, spaces which preserve the environment with its natural characteristics that contribute to the quality of life of the population. Moreover, such practices allow changes to habits and attitudes essential to the parsimonious use of existing resources. The team for Clarinha, the CODAU mascot, has produced many events and actions aimed at changing habits and raising awareness in children, through educational campaigns, videos, tours, books, events such as a water week, and others. The cost of this program is fully financed by CODAU. Several other activities related of environmental education are being developed by Municipality, which play an important role in the sustainability of the works, such as in solid waste sorting for example, which plays a key role in the Municipal drainage system, reducing the incidence of floods, and others that we could emphasize, being important baselines in this project. The Parque da Cidade project, financed by IBRD in 2009, corresponds to the environmental component of the Agua Viva Project and also integrates the structural designs of the Uberaba Technology Park that was installed in Alameda das Barrigudas and houses the Center for Environmental Education of the Agua Viva Project, CETA, designed to accommodate public activities, as well as activities by the non-governmental and the private sector, to promote environmental education with a local and regional focus. CETA, the Center for Environmental Technological Education, has an area with classrooms; a library; a geo processing center; and laboratories for soil, water, and environment intended for education, human and professional capacity-building, and lending of information and services. It was conceived as a space for events that can be held in Central Gallery or Auditorium. The Green Room was installed in partnership with the Municipal Secretariat of Education and Culture, and offers workshops and environmental education activities for students of schools of the Municipal Education System and the Federal University students who use the space; The Park is open to visits from the Municipal Schools Education system, and offers environmental activities, guided visits scheduled in advance and didactic materials for students; The use of the space for environmental events such as seminars, courses, and project culminations: the space houses the meetings of the Araguari Basin Committee, a Hidroex capacity-building course, capacity-building for CODAU staff, open environmental events and houses the headquarters of the Lower Rio Grande Basin GD- 8 Committee. The Park was funded by the World Bank, and the operation and maintenance activities are supported by CODAU. Several studies were also conducted through the World Bank to propose activities and actions that will contribute to the recovery and maintenance of the Uberaba River environmental protection area, an area which comprises, from the river source to water intake, an extent of 528 km2 and a vast natural diversity of the Brazilian cerrado. These actions are intended to ensure the quality, and improve the quantity, of water in the Uberaba River in the coming years. An Action Management Plan for the Uberaba Environmentally Protected Area (APA) was prepared using geo-processing which defined actions for 2 years of planning. A definitive plan is drafted, which is already in the final stage to be bid by CODAU. The Terms of Reference for 60 this new Management Plan was also funded by the Bank. The Bank financed, through CETA, the installation of a Municipal Georeferencing Center, in agreement with the Public’s Hearing Office and Universities, to be the center of reference and storage of data from the Uberaba APA region - funded by CODAU, through a legal agreement (TAC) with the Public’s Hearing Office. The center is receiving more investments and is expected at the beginning of the second semester to create the first class in Geoprocessing for the Universities, in capacity-building and post-graduate courses. This center is being structured to manage the environment of the region. Another great contribution by the Bank was the monitoring of the necessary environmental indicators for quality management of the Project. Because of this, CODAU structured and staffed a team, and the Bank financed equipment to control water quantity of the water sources. Now there is periodic monitoring of water quantity and quality for the Uberaba, Conquistinha, and Claro rivers by CODAU, which was, initially, an specific training carried out through an agreement with the Federal University of Uberaba (UFU),. CODAU is executing some actions for recovery of degraded areas, still randomly, however they will be restructured based on the results of the georeferecing diagnostic and of the Management Plan for the Uberaba APA. The CODAU also funded the creation of an Environmental Civil Police, which will work in partnership with CODAU and the Public’s Hearing Office in enforcement of actions in the Uberaba APA. Another important point is the capacity building in the Secretary of Environment, which assumed responsibility for municipal environmental licensing, providing independence and flexibility to municipal processes. The Secretary has the capacity to evaluate Processes of Classes I to IV, with an average of 94 requests per month, and, in more complex areas, with the support of the State and of local Universities. To conclude, the Municipal Water and Sanitation Plan will be financed with funds from the PAC- 2 and will provide guidelines for actions and investments in environmental sanitation in the city for the coming years. The Plan is in final stages of completion. Thus the Municipality shows its effort in meeting the initial goals set by the Project and goes still further in its commitment to ensure for Uberaba an adequate structure to receive economic development while maintaining the quality of life of the population. With regard to the completion of the works, the Municipality commits to concluding them by the end of 2015. Regarding monitoring, all means of monitoring the Project are already in place and functioning to be monitored periodically. The Municipality of Uberaba would like to emphasize our gratitude to the World Bank for their support during the years of the project, for the partnerships made, for the learning and for the long legacy left us. However, our request for an extension remains, which could have made this one of the greatest projects that the Bank financed in Brazil due to the diversity of actions, the commitment of the borrower, the efforts of Bank and Municipal staff and the greatness of our work, with the 61 addition, we could have concluded all the works, improved our indicators and added much to what was reached. You have our thanks and our aspiration for new projects together with this institution. 62 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders (Not applicable) 63 Annex 9. List of Supporting Documents Legal documents:  Loan Agreement- 7437-BR (May 2008)  Amendment Letter (August 2012) Preparation documents:  Project Appraisal Document (Feb. 2007)  Environmental Assessment (May 2005)  Evaluation of Hydrology of Minimum Flows of the Uberaba River Basin and the Conquistinha Stream Basin (2005)  Water Quality Studies and the Impact of Treated Wastewater on the Uberaba and Conquistinha rivers (2005)  Economic and Financial Evaluation (Volumes I-II) (2005)  Study of Frequency, Intensity and Duration of Heavy Rains in Uberaba (2005) Supervision documents:  Restructuring Paper (June 2012)  Implementation Status Report 1 – June 05, 2007  Implementation Status Report 2 – December 18, 2007  Implementation Status Report 3 – April 15, 2008  Implementation Status Report 4 – October 30, 2008  Implementation Status Report 5 – May 04, 2009  Implementation Status Report 6 – May 28, 2099  Implementation Status Report 7 – November 16, 2009  Implementation Status Report 8 – May 21, 2010  Implementation Status Report 9 – February 13, 2011  Implementation Status Report 10 – July 17, 2011  Implementation Status Report 11 – April 04, 2012  Implementation Status Report 12 – November 12, 2012  Implementation Status Report 13 – July 29, 2013  Aide Memoire (May 2007)  Aide Memoire (April 2009)  Aide Memoire (August 2009)  Aide Memoire Mid Term Review Mission (March 2010)  Aide Memoire (October 2010)  Aide Memoire (May 2011)  Aide Memoire (November 2011)  Aide Memoire (May 2012)  Aide Memoire (November 2012)  Notes from mission (March 2013)  Notes from mission (June 2013)  Aide Memoire (January 2014)  Resettlement Action Plan (2010, updated in 2012))  Resettlement Framework (2010, updated in 2012)  Relatório Sobre Resultados do Workshop (Lições Aprendidas) (Junho 2013)  Update on land expropriation status, January 2014. Documents from the Borrower: 64  Progress reports 2008, 2009, 2010, 2011.  Satisfaction survey results from November and December, 2013; January 2014  Summary table of monthly rain measures from 2001-2011  Civil Defense Reports 2008-2013; 2011; 2012-2013;  Pictures and reports of rain events of December, 2013 and January, 2014;  Final Project costs and schedule of payment;  Copies of Agreements signed by the Municipality with Universities (IFTM, UFU, UFTM and UNIUBE) and Research Institute (IADES);  Copy of the Agreements signed by CODAU and the Public Hearings Office;  Environmental Action Plan for the Uberaba APA and Terms of Reference for the Management Plan;  Reports on river water quality levels, WWTP efficiency and volume treated; and WWTP O&M costs;  Reports on activities, costs and results of the Environmental Education Center;  Report on the status of project works, January 2014;  Reports on potable water production and network;  Informative reports 1 to 4 prepared by the PIU unit;  Reports on the evolution of property values;  Report on goods acquired by the project;  Report on Environmental Secretary institutional structure;  Emails with information regarding: (i) the Claro River water transfer project; (ii) the automation of the water supply network; and (iii) licensing issuance; 65 Annex 10. Calculation of Outcome Rating for Formally Revised Project (as per ICR Guidelines, Appendix B) Against Against Overall Comments Original PDOs Revised PDOs 1. Rating PDO has not Moderately Moderately - been changed Satisfactory Unsatisfactory during restructuring. Unforeseen financial constraints have impacted project’s final results. 2. Rating Value25 4 3 _ 3. Weight (% This reflects disbursed $16.37m $0m $16.03M disbursement before/after PDO 100% 0% 100% cutoff as of July change 6, 2012. The project spent resources from the designated account in the period from July, 2012 until July, 2013. No new disbursement was carried out. Unused amount was returned to the Bank account. 4. Weighted value 4 0 4 (2X3) 5. Final Value - - Moderately The restructuring (rounded) Satisfactory has not impacted project results. 25 HS=6; S=5; MS=4; MU=3; U=2; HU=1 66 Annex 11. Original Components (as approved) 1. The Project comprised three components, as described below. 2. Component One: Environmental Sanitation (US$ 24.83 million total Project cost 26 ; US$ 13.56 million World Bank financing) was to focus on an integrated package of physical investments related to urban environmental sanitation. With this component, the Municipality would provide treatment to 100 percent of collected wastewater, providing environmental and health benefits to the municipal population and populations downstream of the Uberaba River. In addition, the city’s severe flood problems would be corrected through the implementation of a macro drainage program that would reduce flooding to a 25- year occurrence from the current 2-year rate. This component would also increase the efficiency and quality of water supply service through a series of investments in the water supply and distribution networks. This component included three subcomponents, as follows: A. Waste Water Collection and Treatment: This sub-component included construction of interceptors in the central city to separate wastewater from rainwater, interceptor sewers for the Uberaba and Conquistinha systems, the wastewater treatment plants of Uberaba (attending about 75 percent of Uberaba’s urban population) and Conquistinha (attending the rest of the population), as well as the engineering projects and land acquisition costs for these works. B. Urban Drainage: This sub-component included macro drainage investments to reduce the incidence of flooding in the city center. The system included the already constructed Leopoldino retention basin, and the reinforcement of the actual system of canals and galleries, the urbanization of the area around Leopoldino and a system of flood control in the Lajes basin. C. Water Supply: This sub-component included making permanent the seasonal transfer of water from the river Claro to the Uberaba River in order to regularize the flow of the Uberaba River and secure the system’s main water supply. It also included a program to reduce water losses, including modernization of commercial operations program along the lines of PMSS, improvements and automation in the operations of the supply system and water treatment plant. The proposed improvements related to the water treatment plant aimed at assuring the quality of treated water, operational costs reduction and implantation of a residue treatment unit, eliminating the practice of discharging into the city’s rainwater drainage network without any control. And the acquisition of land where needed for works. 3. Component Two: Environmental and Cultural Preservation and Recovery (USD 0.77 million total Project cost; USD 0.72million World Bank financing). This component include three actions aimed at improving the quality of life by providing new recreational opportunities, preserving natural resources, in particular the city’s main drinking water source and expanding the research and tourist opportunities associated with the municipality’s rich 26 Complementary activities originally proposed were not included in the project’s PAD costs, which included the implementation of wastewater works (Conquistinha and Uberaba wastewater conveyance systems and Treatment Plants) and the Leopoldino Retention Pool – for a total estimated original cost of USD13.27 million as counterpart financed activities. 67 fossil deposits and the research center that supports them. The component included three sub-components, as follows: A. Environmental Recovery (APA): This sub-component aimed to provide the municipal government with the tools to better manage the area’s natural resources in a more sustainable manner, in particular its water resources. This sub-component supported a group of activities aimed at improving collection of information regarding occupation and uses of the resources within the APA with the specific aim of better managing and protecting water resources. Actions included, inter alia: development and implantation of an environmental management plan of the APA, development of a system of water resources management/monitoring, including environmental mapping, as well as environmental recovery actions that included recovery of river banks and development of a risk reduction plan. B. The Parque da Cidade: This sub-component developed an at least 25 acre linear park to serve as an environmental enhancement of land acquired for the installation of part of the interceptor sewage network. It included re-forestation actions as well as landscape improvements and public facilities such as a bike/waling path, installation of equipment to create an urban park for a population with few such opportunities. C. Fossil Vivo: Areas within the administrative boundaries of the Municipality of Uberaba include some of the world’s richest deposits of fossil between 65-80 million years old. It is a rich cultural asset of the municipality and one that warrants investment and protection. This sub-component supported the Llewellyn Ivor Price Paleontology Research Center by supporting the development of marketing, communications and business plan aimed at leveraging resources for: restructuring the rescue and salvage capacity; reforming and expanding the dinosaur museum; reforming the geo-paleontology research labs; reforming the Center for Tourism, Learning and Educational Extension; improve the grounds around the center; purchase of equipment for the thematic children’s park; and improvement of the Paleontology Garden27. 4. Component Three: Planning and Management (US$ 2.95million total Project cost totally financed by the World Bank). This component included actions aimed at improving the capacity of municipal government entities. These activities supported actions that were directly related to the Project’s core components, and were therefore focused on the environment, planning and project management. It included efforts to increase personnel qualification in several thematic areas of the Project’s interest and activities for reinforcing actions within environmental sanitation, preservation and recovery areas (by equipping the Environmental Guard and the Environmental Municipal Secretariat and developing technical and operational procedures manuals). It included four sub-components, as follows: A. Sanitation and Environmental Preservation: The municipality had created an Environmental Secretariat. This sub-component was to support the strengthening of the Environmental Secretariat including, inter alia, development of the agency’s strategic plan. 27 Annex 7.4 of the PAD (page 102) included a note that “Not all of these actions will be financed under the Project. The aim is (sic) use the business plan to leverage additional resources from other potential sources, such as foundations, public agencies and private-sector investors.” It provided no specification as to which activities would be financed. 68 B. Environmental Education and Social Communication: This sub-component supported a public education campaign aimed at creating an environmental culture in the municipality, with particular emphasis on water resources. The social communication activities was used to make people aware of the program, and in particular to serve as a public awareness campaign regarding the investments. C. Institutional Strengthening: This sub-component was aimed at providing technical training for personnel in key areas, such as the water company (CODAU), the Planning Secretariat and the Environmental Secretariat. It provided capacity building in planning and management, aimed at the agencies most involved with the Project. D. Project Management: This sub-component covered the cost of a third party, specialized management firm to assist the municipality in the management and execution of the Project’s relatively large, multi-sector investment program. The services of the management consulting firm would be structured in a way so as to transfer capacity to the Project Management Unit. It also include works supervision. 69