Urban upgrading

Evaluation covered the period 11/82-9/86 and was based on document review, site visits, and interviews. The project has had a significant impact. It has provided infrastructure improvements (primarily water and sewer systems) to some 30 low-income neighborhoods (84,000 people), generated 500,000 days of employment through private contractors, helped 6,000 families obtain secure property titles, and enabled the two municipalities to markedly improve their financial and administrative systems. Health officials report reductions of up to 78% in the incidence of waterborne diseases in children aged 0-5. Further, by developing Honduras" first betterment tax system, the project has begun to institutionalize a workable cost recovery program; this system, however, has had many implementation problems, pointing to the need for better interagency coordination to ensure proper service delivery and payment mechanisms. Evidence of the project"s success is the recent request by the Honduran Government to continue the project and expand it to other municipalities. The project clearly shows that upgrading can dramatically improve living conditions for the poor and that municipal governments have the capacity to finance and deliver services when cost recovery is built into the system. In this case the time needed to develop municipal capacities was severely underestimated, taking nearly 3 years; once the capacity was established, however, the project proceeded in a timely fashion. Also, TA should be provided not only to direct implementation units but also to other entities that affect implementation, e.g., in this project, the cadaster departments and the national utilities. Cost recovery was impeded by ineffective social promotion and by lack of counterpart funding for off-site infrastructure. The completion of on-site infrastructure far ahead of either off-site works, social promotion, or institutional development forced the municipality to carry interim finance charges longer than should have been necessary, showing the need to promote interagency coordination and to determine off-site financing early on or include it in the finance package. The project also has taught the need to resolve land tenure problems before initiating construction; to include funding for impact studies; and, given repayment periods of 12 years, to consider extending the provision of external resources for municipalities without sufficient capital reserves to continue financing an upgrading program on their own, and thus ensure that the program will become institutionalized over the long term.