Philippines - Third Municipal Development Project

 ICRR 11070 Report Number : ICRR11070 ICR Review Operations Evaluation Department 1. Project Data: Date Posted : 08/10/2001 PROJ ID : P004592 Appraisal Actual Project Name : Third Municipal Project Costs 113.7 99.6 Development Project US$M ) (US$M) Country : Philippines Loan/ Loan US$M ) 68 /Credit (US$M) 62.9 Sector (s): Board: UD - General water Cofinancing sanitation and flood US$M ) (US$M) protection sec (27%), Roads and highways (26%), Central government administration (20%), Agro-industry (17%), Sub-national government administration (10%) L/C Number : L3455 Board Approval 92 FY ) (FY) Partners involved : Closing Date 06/30/1999 12/31/2000 Prepared by : Reviewed by : Group Manager : Group : Anna Amato Ridley Nelson Alain A. Barbu OEDST 2. Project Objectives and Components a. Objectives The principal objectives of the loan were to assist Philippine cities and municipalities in expanding and upgrading their infrastructure, services and facilities by : (a) strengthening the National Government ’s institutional framework for assisting local governments; (b) strengthening the local governments ’ planning, financing and implementation capacity; (c) strengthening the local government ’s maintenance capacity; and, (d) improving local fiscal performance . b. Components (With share of total final costs ) (a) Subprojects. (77.8%) Locally implemented, nationally funded construction and /or rehabilitation of basic infrastructure and facilities (communal faucets, wells, communal sanitation facilities, drainage canals and pipes, alleys, footpaths and local roads, public markets, slaughterhouses and motorpools ) and provision of equipment (road and drainage maintenance equipment; utility vehicles and computers ). (b) Maintenance Program: (2.9%) Improved maintenance planning and implementation in selected pilot cities and municipalities; (c) Real Property Tax Administration: (10.75%) Assistance to Local Government Units (LGUs) to improve the preparation of tax maps, to improve real property tax records management, to increase real property tax collection and to computerize the management of real property information; (d) Municipal Training Program: (3.3%) Training of local officials in, among others, municipal planning, fiscal management, contract management and environmental assessment; and (e) Technical Assistance: (5.22%) for (i) a study of institutional options for further lending to local governments; and (ii) an environmental sanitation and solid waste study . c. Comments on Project Cost, Financing and Dates This is the third in a line of satisfactory Municipal Development projects in the Philippines . Final costs were 87.5% below those estimated at appraisal . The project was approved on March 31, 1992. US$5.1 million of the Bank loan was cancelled, due mostly to lack of counterpart funding by Local Government Units (LGUs) for the Maintenance program, cost-savings during bidding and peso devaluation .The TA component was dropped from the project when funding was made available through grants from the Japanese government and the Bank . The project was completed a year and a half after its expected closing because of a ) Bank delays in approving contract documents; b) political changes following elections; c ) repercussions from Asian Financial Crists of 97/98.. 3. Achievement of Relevant Objectives: a) The project successfully established national support mechanisms for financial and technical assistance to LGUs . The Municipal Development Fund has established itself as a long -term credit window for eligible LGUs. b) LGUs gained both knowledge and hands -on experience in project planning and preparation, development and partial supervision, financial management, resource mobilization, environmental management and operation of municipal services and enterprises . c)The project only partially achieved its objective of strengthening the maintenance capacity of LGUs due to the inability of interested LGUs to provide the required counterpart funds . d) The Real Property Tax Administration program enabled the significant expansion of the tax bases in rapidly urbanizing LGUs and emerging urban centers and provided a basis for increasing locally generated resources . It was implemented in 427 LGUs, covering more than 6.6M real property tax units (RPTU), double the targets of 233 LGUs and 3.3 M Real Property Tax Units respectively . This represents a 128% increase in total assessed values . Collectibles increased 75% and actual collections increased 64%. 4. Significant Outcomes/Impacts: The positive spillover from construction of public markets has exceeded expectations . These markets triggered development of adjacent areas and increased property values and property tax collection . The Municipal Training Program conducted 219 training courses, exceeding the appraisal estimate of 156 training courses, and resulted in 9,169 technical staff and elected officials in 74 LGUs being trained. The project led LGUs to re-evaluate their management styles to adapt to the needs of rapidly urbanizing centers in light of the government’s decentralization policies. 5. Significant Shortcomings (including non-compliance with safeguard policies): Project design did not provide incentives for LGUs to provide counterpart funds for the maintenance component . The poverty impact was lessened because of a lack of incentives for LGUs to do non -revenue generating infrastructure projects in social and environmental sectors, especially for lower income communities . 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev .: Substantial Substantial Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Even so, the Bank's delays in approving pro forma contract documents and in approving the policies for determining the loanable amounts to LGUs set back project start-up by almost two years. Borrower Perf .: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness. 7. Lessons of Broad Applicability: 1. The "bottom-up" project design-- with sub-projects locally chosen on a demand -driven basis -- proved to be effective and efficient, as it allowed LGUs to select the size and complexity of projects to most suit their technical and fiscal capacities. 2. To improve local fiscal performance, future bank projects should assist LGUs in exploring a wider range of fund mobilization such as user charges, business licensing, development impact fees, management contracts, franchises, etc. 3. Close coordination between the LGUs and the national agencies is necessary to ensure smooth project execution. 4. Tools, grants and incentives which induce LGUs to consider investments in non -revenue generating infrastructure should be included in this type of municipal development project . 5. Appropriate and timely budgetary support must be made available to minimize delays in project implementation and disbursements. 8. Assessment Recommended? Yes No Why? This is a good example of decentralization and efficiently funding local municipalities . A field assessment can bring to light additional lessons of importance to similar operations elsewhere . 9. Comments on Quality of ICR: The ICR overall was well done. However the ERR/FRR analysis could have been better and revealed more about the efficiency of the project .