Tunisia - Second Municipal Development Project

Report No. PIC4351 Project Name Tunisia-Second Municipal(@+) Development Project Region Middle East and North Africa Sector Urban Development Project ID TNPA46832 Borrower Government of Tunisia Implementing Agencies Ministry of Interior (MOI) and CPSCL Contact M. Mjeri, Director-General, Caisse de Prets et de Soutien des Collectivites Locales (CPSCL) Tunis, Tunisia.. Tel. 216.1.797.097 Fax. 216.1.797.467 Date initial PID prepared September 1996 Date this update prepared February 1997 Project Appraisal date February 1997 Project Board date June 1997 Country and sector background. 1. During the Eighth Plan (1992-1996), the Tunisian Government promoted, as part of the macroeconomic reform program, the rationalization of public sector management and the development of the municipal sector. However, Tunisia still has a highly centralized administration. To further promote municipal and regional development, the Government of Tunisia (GoT) will have to find a balance among intergovernmental powers and strengthen the management capacity of local governments (LGs). On December 12, 1996, the Code de la fiscalite locale was approved by the Parliament. This reform of the local tax system (property tax, business tax, hotel tax, and others), prepared under the MIP, aims at simplifying, rationalizing, and eliminating major distortions in the local taxation system and across municipalities. Its effective implementation will have a limited but positive impact on LG budgets (10-15 percent increase in revenues, including additional revenues due to expected improvements in recovery rates). Furthermore, the existing system of revenue transfers from the central budget to the local budgets needs to be reformed in order to play a more important equalization role and help poorer communities to reach minimum standards of infrastructure and services. Project Objectives and Description  2. The objectives of the proposed project are to: (a) enhance infrastructure and services in Tunisian local governments (LG); and (b) increase efficiency of public sector management at the local level. These objectives will contribute to the long-term goals of municipal and regional development that the Tunisian Government (GoT), with the help of the World Bank, initiated with the Municipal Investment Project (MIP) and will be pursuing with the proposed project and future projects. Such objectives will be achieved by focusing, in particular, on: (a) financing, through a credit line to the Caisse de prets et de soutien des collectivites locales (CPSCL) part of the Programme d'investissement communal (PIC) which include investment priorities for LGs, to be carried out during the Ninth Plan (1997-2001); (b) strengthening the financial viability and management of CPSCL; (c) (i) strengthening LGs' finances through implementation of the local taxation reform, and targeting the finances of poorer LGs by increasing the equalization role of the system of transfers from the central budget; (ii) promoting efficiency in the administration of LGs, and in the management and supervision capabilities of the Direction generale des collectivites publiques et locales (DGCPL, part of MoI) and the Direction generale des affaires regionales (DGAR, part of MoI); (d) strengthening the role of the Training Center for LG staff; (e) improving the quality of life for mostly disadvantaged neighborhoods and increasing involvement of communities in microprojects for local development; and (f) facilitating private participation, particularly in solid waste management (SWM). 3. Components will include: (a) a credit line to CPSCL to finance priority municipal investments and microprojects; (b) training, technical assistance, and equipment to strengthen CPSCL management; (c) training, technical assistance, and equipment to improve management of LGs, DGCPL, DGAR; (d) technical assistance and equipment for Training Center; (e) technical assistance and equipment for community participation programs; and (f) advisory services for private participation in municipal services. The project will target local governments, rural councils, regional councils, neighborhood associations, low-income populations targeted by low-income neighborhood upgrading programs within the PIC. Implementation 4. The borrower will be GoT, which will on-lend to CPSCL. MoI will have overall responsibility for project coordination. CPSCL will be responsible for evaluating and financing LGs' investments, following eligibility criteria for subprojects and subborrowers satisfactory to the Bank. Project Cost and Financing 5. The total project cost is currently estimated at US$219.2 million, with a Bank loan tentatively placed at US$80 million. Rationale for Bank Involvement -2-  6. The Second Municipal Development Project will contribute to the Bank's country assistance objective of strengthening public sector management and provision of infrastructure and services. By enhancing infrastructure in underequipped areas, the project will help diffuse gains from economic growth and reduce regional disparities. By upgrading further LGs' human resources and introducing information technologies and cost-accounting practices in LGs' administration, it will improve efficiency in the management of LGs' operations. Furthermore, by improving CPSCL financial intermediation and LGs' revenue mobilization and allocation it will promote the decentralization process and increase autonomy of LGs. Project Sustainability 7. The implementation of the following measures, including those improving LGs' revenues, should generate a sustainable mechanism for project financing and implementation of the LG investment programs: (a) increasing managerial efficiency of LGs (introduction of a cost accounting system, design and implementation of municipal data bank systems, computerization of the local fiscal system, and improved qualification of human resources); (b) introduction of appropriate cost recovery schemes (i.e., user fees) for municipal services; and (c) further strengthening of CPSCL financial viability. Contact Point: Ms. L. Raimondo, Task Manager The World Bank 1818 H Street N.W. Washington D.C. 20433 Telephone No.: (202)458-5454 Fax No.: (202)522-1500 Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. Processed by the Public Information Center week ending April 4, 1997 - 3 -  Annex Environmental Assessment CPSCL has made constant improvements in its internal procedures under MIP to achieve an effective environmental screening process. Recently it adopted a checklist of environmental impacts for large urban projects, to identify activities that require mitigation. It intends to expand this screening checklist approach for additional large projects. CPSCL also routinely requires that summary evaluations of environmental impacts be prepared for basic municipal infrastructure subprojects (e.g., roads, sidewalks) which constitute the majority of subprojects. CPSCL usually finances these types of projects without any formal approval by the Tunisia environmental regulatory agency, the Agence nationale de protection de l'environnement (ANPE). For certain pre- identified projects (solid waste, slaughterhouses, wholesale food markets), as specified in the Tunisian regulations on environmental impact assessment, more extensive environmental impact studies are required as part of the technical studies. These environmental impact studies must be submitted to ANPE for review and approval before CPSCL finances the subproject. For the Municipal Investment Project, these procedures ensured adequate screening to manage the environmental risks associated with the subprojects. During appraisal for the Second Municipal Development Project (MDP II), CPSCL will agree to upgrade its approach to the environmental review of subprojects, to more systematically manage the environmental risks of a larger volume of more complex subprojects. Since the environmental legislation and regulations are adequate in Tunisia, the main objective will be to ensure that subprojects comply with Tunisian laws and regulations. The principle tool for review will be an environmental review manual, which will become an annex to CPSCL's operations procedures manual. During pre-appraisal, several environmental assessment (EA) reports for proposed landfills were reviewed; to facilitate effective implementation, additional work is recommended on the EA reports. To allow solid waste landfills to be eligible for Bank financing under MDP II, the Bank will seek agreement with CPSCL on the special conditions for approval of the EAs. Once the review is completed and any recommended revisions completed, each EA report will be approved by ANPE, and then forwarded to the Bank for review. After a no objection is issued by the Bank for each report, disbursements for the landfills will be approved. - 4 -