Document of The World Bank Report No. 14264-BR STAFF APPRAISAL REPORT BRAZIL RECIFE METROPOLITAN TRANSPORT DECENTRALIZATION PROJECT JUNE 5, 1995 Environment and Urban Development Operations Division Country Department I Latin America and the Caribbean Regional Office CURRENCY EQUIVALENTS Currency Unit = Brazilian Reais (R$) US$1 = .85 to .90 R$ (March 15-31, 1995) WEIGHTS AND MEASURES Metric System FISCAL YEAR January 1 - December 31 PRINCIPAL ABBREVIATIONS AND ACRONYMS AGLURB - Urban Conglomerate Program (Programa de Alglomerados Urbanos) ATC - Automatic Train Control BNDES - National Economic and Social Development Bank (Banco Nacional de Desenvolvimento Econ6mico e Social) CBD - Central Business District CBTU - Brazilian Urban Trains Company (Companhia Brasileira de Trens Urbanos) CELPE - Pernambuco Electricity Company CHESF - Sao Francisco Electricity Company CIF - Cost, Insurance, Freight CNG - Compressed Natural Gas CO - Carbon Monoxide COFIEX - External Financing Commission (Comissao de Financiamento External) CPRH - Pernambuco Environmental Agency (Companhia Pernambucana de Controle a Poluicao Ambiental e de Administracao de Recursos Hidricos) CPTM - SaoPaulo MetropolitanTrain (CompanhiaPaulistade TrensMetropolitanos) CTC - Centralized Traffic Control CTU - Municipality of Recife Bus Company (Companhia de Transportes Urbanos) DER-PE - Pernambuco State Roads Directorate (Direcao de Estradas de Rodagem do Estado de Pernambuco) DETRAN-PE - Pernambuco State Transit Department (Departamento Estadual de Transito de Pernambuco) DIEESE - Social and Employment Statistics Directorate of the State of S3o Paulo EA - Environmental Assessment EBTU - Brazilian Urban Transport Company (Empresa Brasileira de Transportes Urbanos) EMTU - Metropolitan Urban Transport Company (Empresa Metropolitana de Transportes Urbanos) EMU - Electric Multiple Unit FEPASA - Sao Paulo State Railroad (Ferrovias Paulista S.A.) GDP - Gross Domestic Product GEIPOT - National Transport Planning Agency (Empresa Brasileira de Planejamento dos Transportes) HC - Hydrocarbons IBGE - Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatistica) ICB - International Competitive Bidding IERR - Internal Economic Rate of Return l/M - Inspection and Maintenance System KV - Kilovolt LRT - Light Rail Transport MDU - Urban Development Ministry METROREC - Popular name of the Central line of the Recife Train Subdivision of CBTU MR - Metropolitan Region MREC - Municipality of Recife MT - Ministry of Transport NCB - National Competitive Bidding NOx - Nitrogen Oxide OED - Operations Evaluation Department PAR - Performance Audit Report PCR - Project Completion Report PE - State of Pernambuco PEE - Pernambuco Entity PIU - Project Implementation Unit PMIC - Project Management and Implementation Consultant PMIS - Project Management Information System PMU - Project Management Unit PROPAV - Pavement Program in Low-Income Areas (Programa de Pavimentacao de Baixo Custo em Areas de Baixa Renda) RFFSA - Brazilian Federal Railways RMR - Recife Metropolitan Region RTCC - Regional Transport Coordination Commission SEAIN - State Secretariat for Foreign Affairs SECTMA - Environment and Technology Secretariat of Pernambuco (Secretaria de Ciencia e Tecnologia e Meio Ambiente do Estado de Pernambuco) SEPLAN - Secretaria Municipal de Planejamento Urbano SITURB - Integrated Urban Transport System (Sistema Integrado de Transporte) SOE - Statement of Expenses SOx - Sulfur Oxide STPP/RMR - Public Transport System for RMR Passengers (Sistema de Transporte Publico de Passageiros da RMR) STU-REC - Recife Subdivision of CBTU TRENSURB - Porto Alegre Metropolitan Rail Mass Transit (Trens Urbanos de Porto Alegre) VOC - Volatile Organic Compound BRAZIL RECIFE METROPOLITAN TRANSPORT DECENTRALIZATION PROJECT STAFF APPRAISAL REPORT TABLE OF CONTENTS Paue No. LOAN AND PROJECT SUMMARY . ........................................... i 1. URBAN TRANSPORT IN THE RECIFE METROPOLITAN REGION ..................... 1 A. Background .......................... 1 B. Urban Transport in the RMR: An Overview ............................. 1 C. Institutional Responsibilities for Urban Transport in the RMR .......... ... . 2 D. Key Sectoral Issues ........................... 3 E. Lessons from Experience in the Sector ................................ 5 F. The Bank's Strategy for the RMR .................................... 6 II. THE PROJECT . ..................................................... 7 A. Project Background ............................ 7 B. Rationale for Bank Involvement ..................................... 7 C. Project Objectives ........................... 7 D. Project Description ............................................ 7 E. Project Cost and Financing ....................................... 10 F. Project Benefits and Risks . ........................................ 10 G. Tariff Setting and Affordability by Low-Income Users ..................... 1 2 H. Project Economic Evaluation ....................... 12 1. Project Financial Evaluation . ...................................... 13 J. Environmental Impact of the Project ................................. 14 K. Private Sector Participation ....................................... 1 7 Ill. PROJECT IMPLEMENTATION ........................1 l9 A. Institutional Responsibilities ...................................... 1 9 B. Contractual Arrangements ......................... 19 C. Implementation Schedule ............. ............ 19 D. Implementation Arrangements ......................... 19 E. Decentralization Process ......................... 20 F. Procurement ......................... 21 G. Disbursement and Special Account ................ ................. 23 H. Auditing ...................... ..................... 24 1. Monitoring and Reporting ......................................... 24 J. Project Supervision ........................................... 25 IV. PROJECT AGREEMENTS AND RECOMMENDATION ........................... 26 This report is based on the findings of an appraisal mission which visited Brazil during March 1995. The mission comprised Messrs. Jorge Rebelo (Task Manager and Sr. Transport Planner, LA1 EU), Jose Baigorria (Sr. Railway Engineer, LA1 IN), Moazzam Mekan (Financial Analyst, LA1IN), Daniel Gross (Resettlement Specialist, LAlEU), and Kenneth Knight (Metro Infrastructure Consultant). Messrs. Jos6 Carvalho (Sr. Counsel, LEG LA), Roberto Laver (Sr. Counsel, LEGLA), Gerhard Menckhoff (Sr. Transport Planner, LA1EU) and Wagner C. Martins (Transport Demand Specialist) also participated in the preparation of the project. Mr. John Flora (TWUTD) was the Peer Reviewer. Mr. Craig Leisher edited the report and Ms. Marcella Schiappacasse helped prepare the report. Messrs. Asif Faiz, Orville Grimes and Gobind T. Nankani are respectively the managing Division Chief, Projects Adviser and Department Director for the operation. ANNEXES: 1. Bank Assistance to the Urban Transport Sector in Brazil and Lessons Learned ... .... 29 2. Project Coordination and Executing Agencies ............................. 37 3. Regional Transport Coordination Commission ............................. 40 4. Private Sector Participation in the Project ................................ 45 5. Infrastructure and Equipment Component ................................ 46 6. Environmental and Traffic Safety Component ............................. 54 7. Institutional Development and Policy Component ........................... 57 8. Detailed Project Costs and Disbursement Arrangements ...................... 61 9. Economic Evaluation .............................................. 68 10. Financial Evaluation .............................................. 92 11. Project Implementation Schedule, Monitoring, Evaluation and Supervision Plan ... ... 105 12. Recife Metropolitan Region: Urban Transport Characteristics ................... 114 13. Selected Documents Available in the Project File ........................... 118 MAP: IBRD No. 26915 - i - BRAZIL RECIFE METROPOLITAN TRANSPORT DECENTRALIZATION PROJECT LOAN AND PROJECT SUMMARY Borrower: Federative Republic of Brazil. Implementing Agency: Brazilian Urban Trains Company (Companhia Brasileira de Trens Urbanos, CBTU). Beneficiaries: Residents of the Recife Metropolitan Region, particularly low-income households who are major users of public transport. Poverty: Not applicable. Amount: US$102 million equivalent (including up to US$10 million in retroactive financing). Terms: Repayment in 1 5 years, at the Bank's standard variable rate, with a grace period of five years and loan amortization based on level repayments of principal. Commitment Fee: 0.75 percent on undisbursed loan balances, beginning 60 days after signing, less any waiver. Onlending Terms: Not applicable. Financing Plan: See para. 2.14. Rate of Return 28 percent for the infrastructure and equipment component which represents 98 percent of the total project cost. Staff Appraisal Report: No. 14264-BR, dated June 5, 1995. Map: IBRD No. 26915 Project ID: BRPA38882 1. URBAN TRANSPORT IN THE RECIFE METROPOLITAN REGION A. Background 1 .1 This project has its origins in two major developments at the Federal and State level: (a) the decision of the Government of Brazil (GOB) to decentralize and transfer several subdivisions of the Brazilian Urban Trains Company (Companhia Brasileira de Trens Urbanos, CBTU) from the Federal to the State/Municipal Governments as mandated by the 1 988 Constitution; (b) the willingness of the State of Pernambuco (PE) to takeover the Recife subdivision of the CBTU (STU-REC) and better integrate it with the predominantly privately-owned bus transport system. The GOB started by decentralizing the two largest CBTU subdivisions (Sao Paulo and Rio de Janeiro); once that was successfully accomplished, it decided to proceed with the decentralization of the Belo Horizonte and Recife subdivisions. 1.2 As in the case of S3o Paulo and Rio de Janeiro, the GOB requested assistance from the Bank to help in completing the STU-REC network and effectively integrating it with the other modes. PE agreed to takeover the system as long as the GOB would extend the system to Timbi (see map), modernize the South line, and build the accesses to facilitate integration at the systems main stations. The identification mission took place in early 1 994, and based on its findings, the Bank agreed to proceed with the evaluation of the project provided PE and the Municipality of Recife (MREC) would incorporate in its urban transport strategy the following two elements: (a) an effective coordination between the state and municipal governments of the Recife Metropolitan Region (RMR); and (b) a formal financing mechanisms considered crucial to create an enabling environment for the long-term financial sustainability of the RMR's urban transport systems. PE moved swiftly and diligently to include these elements in its strategy. The active interaction of PE representatives with all preparation missions indicated this project is a priority for the State and for the RMR. B. Urban Transport in the RMR: An Overview 1.3 Background. The Recife Metropolitan Region, with 2,200 sq. km, has 2.8 million inhabitants spread irregularly over 13 municipalities which are dominated by the Municipality of Recife with 1.4 million inhabitants. Annual population growth of the RMR and of MREC averaged 1.8 percent and 0.7 percent respectively in the last five years. The RMR generates roughly 55 percent of the GDP of the state of PE and is considered the fourth most important region of the country. Each day, 2.3 million person trips take place in the RMR of which 59.4 percent are by bus (90 percent privately operated), 34.0 percent by private automobile, 4.6 percent by METROREC (CBTU's metropolitan train), 0.7 percent by CBTU's suburban diesel train (South line) and the remaining 1.3 percent by trolleybus. This level of urban transport activity-dominated by the road-based motorized modes-is concentrated in eleven radial corridors (corredores estruturais) and four semi-circular rings which bisects those corridors. 1.4 The bus system is operated by 18 private companies and 1 municipal company (CTU) which also operates trolleybuses. Two-thirds of the bus routes penetrate to the MREC's central business district (CBD), adding to the congestion in the center. The main bus corridors of the RMR are: Caxanga Avenue (6.0 km), Imbiribeira Avenue (8.0 km), and Jose Rufino/PE-07 corridor (5.0 km). Of these corridors, only one has reserved bus lanes. The commercial speed of the buses is 23 km/hr in the reserved bus lane and 1 4 km/hr in the CBD. During peak periods, most highway corridors are clogged with cars and buses. Bus services are generally of low speed, and due to traffic congestion, they become unreliable. The RMR bus routes are allocated and managed by the Empresa Metropolitana de Transportes Urbanos (EMTU), a regional bus transport coordination agency. Tariffs are also set by EMTU. EMTU has been working to integrate buses with the CBTU system, and there are already 48 bus lines which are integrated with the urban rail system. 1.5 The RMR rail network consists of two separate systems operated by CBTU. The main system (the Central line also known as METROREC) was inaugurated in 1985 with 20.5 km of double track and connects the edge of the city center with Coqueiral (11 km away) where the main line splits in two branches towards Jaboatao and Rodoviaria. It is an electrified surface metro which carries 105,000 passengers/day instead of the originally planned 300,000 pass./day, mainly due to the lack of appropriate transfer terminals with the bus system. The other system is the South line (Linha Sul), a one meter gauge diesel-operated suburban train system with 32 km of track which carries only 20,000 pass./day (10 percent of trips in the corridor) although it serves an area of high demand. Along this corridor a number of intermunicipal and municipal bus services are the main mode of transport because they offer a better frequency and, unlike the South line, reach the CBD. 1.6 CBTU would like the project to finance the conversion of 14.2 km of the diesel line into an electrified railway similar to the METROREC, and extend the South line to meet the Central line. This would increase the South line's traffic in the first year of operation to 1 58,000 pass./day. During project preparation, the project team suggested that after a detailed demand analysis was undertaken, a careful evaluation be carried out to compare the present rail service with an improved reserved bus service, with an improved rail diesel service, and finally with the proposed electrified service. This was done, and the electrification of the South line proved the least-cost alternative. In addition, to make METROREC more demand responsive, CBTU proposes the construction of one additional 4.5 km link (TIP-Timbi) which would connect a predominately housing area with the CBD. 1.7 Approximately 87 percent of the urban population earns less than three minimum salaries. If successfully implemented, the project will primarily benefit the poor in the participating cities, since they depend mainly on bus, metro, and suburban rail services to commute to and from work, especially those living in the "favelas" for whom access to the areas of employment is a daily ordeal. The urban poor are the main users of public transport and bear the brunt of its problems: (a) shortage of capacity at peak hours resulting in overcrowded (> 1 2 pass/m2), often unsafe conditions; (b) long work journeys (2.5 hours/day) from the metropolitan periphery to the urban center, often with more than two modal transfers; and (c) paying over a fifth of their income in fares. 1.8 The air quality of the city is degraded by the presence of excessive levels of carbon monoxide, ozone and particulate. Vehicles account for 90 percent of most air pollutants in the RMR. In 1992, the number of vehicles registered in the RMR was 342,953. Vehicular air pollution has been somewhat mitigated by the use of alcohol fuels. Vehicular accidents, on the other hand, have become a major source of environmental risks for the MREC. In 1 993, they accounted for 6,645 accidents with 6.6 deaths/10,000 vehicles, 16 percent higher than in 1991. Congestion and overcrowding of the public transport system are also a major source of environmental stress. C. Institutional Responsibilities for Urban Transport in the RMR 1.9 There are four main government bodies responsible for overseeing the urban transport sector in the RMR: (a) the State Roads Administration (Direp§o de Estradas de Rodagem do Estado de Pernambuco, DER-PE), which regulates all the intermunicipal bus services and road network of the region; (b) the Recife Metropolitan Transport Company (Empresa Metropolitana de Transportes Urbanos, EMTU) a state agency which coordinates all the intermunicipal bus services in the RMR plus, by delegation, all the MREC municipal bus services; (c) the State Traffic Administration (Departamento de Transito do Estado de Pernambuco, DETRAN-PE) in charge of traffic engineering in the region; and (d) the Companhia Brasileira de Trens Urbanos (CBTU) which through its Recife subdivision, known as STU-REC, operates the metropolitan and suburban train services, presently under federal government jurisdiction. A more detailed description of the entities related and/or dealing with urban transport in the RMR is given in Annex 3. - 3 - 1.10 Recife was the first Brazilian metropolitan region to have a regional transport coordination body (EMTU) which effectively plans and coordinates all the integration, financing and subsidy allocation of bus services in the RMR on behalf of the municipalities of the region and of the State. Unfortunately, it does not have jurisdiction over the CBTU. CBTU is still under Federal Government jurisdiction although it works informally with EMTU to integrate bus at some of its stations. However, STU-REC is not part of EMTU's tariff clearing house ("cSmara de compensacao") and therefore, it is not compensated for the very low tariffs it charges. 1.1 1 EMTU supports the project and the improvement of bus corridors which feed the rail system because as is, the METROREC and the South line contribute very little of their potential to alleviate the heavy traffic congestion in the RMR, and instead, they are a financial burden to the GOB which must contribute US$30 million/year to keep them afloat, since revenues cover only 11 percent of the operating costs (without depreciation and cost of capital). PE considers the abovementioned rail improvements a condition for the decentralization of the rail system, i.e., to take over STU-REC from the Federal Government. 1.1 2 Since several levels of government have been formulating policies and regulating urban transport without a formal coordinating arrangement, there has been a lack of consistency in the fares charged by similar or competing modes, duplication of investments, absence of criteria to prioritize investments, and only embryonic modal integration. This has led to bus services continuing to operate in corridors where urban rail is more suited, to the lack of promotion of hub and spoke services, to disparate subsidy policies which are often based on non-economic considerations, and to the absence of user representation in the urban transport decision-making process. Recently, there has been fruitful but informal cooperation between EMTU and STU-REC. If EMTU formally includes STU- REC in its "cSmara de compensap§o" or other urban transport financing mechanisms, EMTU will truly become a Regional Transportation Coordination Commission. This must be encouraged and it is one of the main objectives of the proposed project. D. Key Sectoral Issues 1.1 3 A number of key issues must be addressed to in order to improve the supply of urban transport services in the RMR and to guarantee their orderly development and sustainability in the long term. They are: (a) capacity and safety issues; (b) institutional issues; (c) cost recovery and financial management issues; (d) targeting of subsidies; (e) environmental issues; and (f) transport planning issues. 1 .1 4 Capacity and Safety Issues. The most important concern is the need to increase the supply of adequate cost-efficient peak-hour capacity in order to guarantee an acceptable level of service to the average commuter, with reasonable safety. This can be done by: (a) rehabilitating and restructuring existing systems and by building new ones which are justified from a technical, economic and, especially, financial standpoint. Rail and bus rapid transit offer the best alternatives in this respect; (b) improving traffic management through appropriate traffic engineering equipment, in order to better manage available road space and reduce congestion; and (c) reducing accidents through transit safety education campaigns, law enforcement, and traffic engineering. The proposed project addresses this set of issues by increasing the peak-hour capacity and safety of the South line, grade separating the several at-grade crossings of that line, and extending the METROREC by 4.5 km. 1.15 Institutional Issues. The most critical institutional issues are: (a) the fine-tuning of relations between state and municipal governments and a clear definition of their respective roles in the financing, planning and operation of urban transport services in accordance with the 1 988 Constitution; (b) the transformation of EMTU into a truly all-mode regional coordination entity empowered by the RMR to plan, coordinate and set priorities for new investments and modal - 4 - integration; and (c) the appropriate modification of regulations, including the elimination of regulatory barriers which might prevent free entry and/or competition in the market for provision of public transport services. The proposed project addresses this set of issues by requiring that EMTU becomes an all-mode Regional Transport Coordination Commission (RTCC) rather than just a bus agency. 1.16 Cost Recovery and Financial Management Issues. There is a need to address cost recovery from a more commercially-oriented standpoint by: (a) setting tariffs which, when added to subsidies, cover at least the long-run variable costs (defined as out-of-pocket costs plus depreciation of equipment and cost of capital); (b) controlling fare evasion; (c) setting appropriate peak and off-peak pricing; (d) improving the financial management of the systems through wide-ranging cost-cutting measures, staff rationalization policies, and by appointing more financial managers to run the mass transit systems; and (ei revamping funding mechanisms in order to guarantee adequate financing for the implementation of new mass transit systems and the sustainability of the existing systems. The proposed project addresses this set of issues by requiring better financial management of the rail-based system which must meet financial targets, and by pushing for the introduction of formal financial mechanisms to ensure long-run sustainability of the urban transport sector. 1 .17 Targeting of Subsidies. Any remaining blanket subsidies paid to operators ought to be eliminated. Urban households have been devoting increasingly large proportions of their incomes to transport. Further, transport-related expenditures have become a considerable burden on government budgets. The appropriate targeting of urban transport subsidies and their extension to the informal sector which is not presently covered by mechanisms such as the vale-transporte is a major issue which must be addressed in the short term. ('Vale transporte' is a mechanism by which employers are required to provide their employees with a wage subsidy that covers any amount above 6 percent whenever the total costs of monthly "home to work" trips exceed 6 percent of their salaries.) Appropriate mechanisms for financing such subsidies (tariff differentiation, contractual budgetary transfers, etc.) and channelling them to target groups through tokens, multimodal passes, and differential tariffs need to be designed. Given the high number of low-income families which might not be covered by existing target subsidies such as the vale-transporte, the proposed project will examine what type of targeted subsidies can be used and are easy to administer. 1 .1 8 Environmental Issues. The increase in motorization rates of the RMR is increasing congestion, motor vehicle emissions, and noise. A strategy is needed to address these issues and develop a vehicle inspection and maintenance WI/M) program. The reduction of the environmental impacts of urban traffic congestion, and noise pollution in the urban area could be done through: (a) the allocation of responsibilities across government levels for the enforcement of existing laws and definition of tougher standards; (b) the use of cleaner and quieter transport systems; (c) where appropriate, the use of non-motorized transport; (d) the improvement of traffic management and control; and (e) the strengthening of traffic safety education and the enforcement of the traffic regulations. In the long run, assessment of the potential role of market-based incentives to address pollution and the implementation of the polluter pay principle to minimize the fiscal burden implied by de facto government subsidies to polluters ought to be considered. The proposed project would be a modest first step towards addressing this set of issues and help set the course for future actions. 1.19 Transport Planning Issues. The need to strengthen RMR's transportation planning, traffic data base, traffic management, and evaluation of new investments, could be met if there is a formal coordinating agency for urban transport in the metropolitan region. This agency should be equipped with a battery of sketch planning, demand and supply models that would test different land use, air quality and urban transport scenarios. Furthermore, an integrated land use, urban transport, and air quality strategy should be designed and periodically revised. The proposed project addresses this set of issues by strengthening EMTU and providing the funds for the integrated planning strategy. - 5 - 1.20 In the future, urban transport policies in the RMR would be geared toward the efficient and equitable provision of urban transport services, in particular for low-income groups which have traditionally received less attention. Policies would be consistent with broad transport sector objectives, as well as with the objectives of the urban subsector. In accordance with the 1 988 Constitution, the policies would support the decentralization of urban transport services from the Federal Government to the States to facilitate modal and tariff integration and respond quickly to local needs. The policies would simultaneously address the need for institutional coordination and an integrated urban transport, land use, and environmental strategy. The general approach is to restore the incentives which exist when privately-owned systems operate under competitive conditions. Redesigned regulations and concessionary agreements, and improved bidding processes will promote competition in the provision of bus services. Rates would be liberalized in the corridors where there is effective competition. Many bus companies currently managed by local governments would be privatized. Urban and metropolitan train operations would be decentralized through the reorganization ot STU-REC, and the gradual transfer of the operation and ownership of the systems to newly-created commuter train companies, managed either directly by the state and/or local governments or by private interests operating under concessionary arrangements. Appropriate tariffs and financing mechanisms would enable the efficient operation and development of the systems. Local governments would continue to be responsible for traffic regulation and management but would improve their capacity to manage the demand for road use, improve traffic management and street maintenance, protect the environment, monitor the effects of regulations and taxation, promote integration of the various transport systems, and coordination with land-use development. E. Lessons from Experience in the Sector 1.21 Initial Bank support for the urban transport sector in Brazil was provided through four urban transport projects totalling US$540 million, of which the First, Second and Third Urban Transport Projects (Loans 1563-BR, 1839-BR, 1965-BR) have been completed. The Fourth Urban Transport Project which continued the work started in the Third project was canceled because the government abolished the federal agency in charge of urban transport (EBTU). Additional urban transport projects financed by the Bank (Loans 3457-BR and 3633-BR for US$126 million and US$1128 million respectively) support the rehabilitation and decentralization of the CBTU from the federal to the state government in Sao Paulo and Rio de Janeiro. Loan 3457-BR (Sao Paulo) became effective on February 3, 1993. This loan includes an institutional and policy development component which was utilized in the preparation of the proposed project. Loan 3633-BR (Rio de Janeiro) was signed on October 14, 1993 and became effective on March 14, 1994. 1.22 To build upon the experience of past urban transport projects for the design of the proposed project, an analysis of "lessons learned" was undertaken (Annex 1). The review was based on Project Completion Reports and Performance Audit Reports (PCR/PAR) in urban transport and urban development. Recognition was made of trends and changes in project design since the PCRs/PARs were completed. The main lessons identified and incorporated in the design of the proposed project are: (a) Institutional Strengthening. The organizations dealing with urban transport at the federal, state and municipal levels should be reorganized and strengthened. Studies included in the institutional component must be carefully monitored and translated into action plans which the Borrower should implement. Adequate supervision and follow-up on the studies have been included in the project; (b) Lack of counterpart funding has greatly influenced the pace of project implementation and in some cases has led to cancellation of components. - 6 - An effort must be made to ensure that adequate provisions for counterpart funds are included in the annual budgets of federal and state enterprises. (c) Slow implementation has been a frequently occurring theme. The reasons have included: lack of familiarity with Bank procedures, over-optimistic scheduling at appraisal, lack of final engineering designs at appraisal, changes in political commitment, and lack of counterpart funds. These problems would be mitigated in the proposed project by such measures as: strengthening capacity of operating agencies for financial management and application of Bank procedures; and requiring final engineering design of the first year's works for which technical assistance should be contracted if need be with retroactive financing. (d) Weak institutional capacity for the planning, design and implementation of traffic and highway projects has been a common feature of many projects. In the proposed project, all agencies have demonstrated adequate capacity to carry out the required planning, design and implementation functions. F. The Bank's Strategy for the RMR 1.23 Subsector strategy. In view of the issues stated above, the Bank's short-term strategy will be aimed at: (a) assisting the state and municipal governments in formulating and implementing an urban transport policy consistent with the above goals; (b) strengthening the institutional framework and the decision-making process in the sector through adequate coordination between the two levels of government and proper technical, economic and especially, financial evaluation of projects and their prioritization by a regional coordination agency; (c) supporting a program to decentralize, rehabilitate and extend existing services such as metro lines and busways, which can more readily increase their efficiency and peak-hour capacity; (d) managing the demand for road use through improved traffic management and road-user taxes, in order to reduce existing congestion and the demand for travel by private single-occupancy automobiles; (e) decreasing the number of fatalities and accidents due to urban transport; (f) introducing better cost-recovery mechanisms including adequate cost-based peak-hour tariffs and fare evasion control in order to strengthen their financial base; and (g) improving the targeting of subsidies to those who need them. In the medium term, the Bank's strategy will focus on promoting a more efficient and financially sustainable market-oriented supply of public transport services, through: (a) an appropriate reform of regulations which will facilitate market entry, fare deregulation and public bidding in route allocation; (b) promoting service differentiation especially in the bus systems; (c) defining eligibility requirements and strengthening funding mechanisms for urban transport to cover operating deficits (based on pre- agreed targets in contract-plans) and finance major investments; (d) supporting the evaluation and, if justified, the introduction of new investments such as reserved busways and light rail transport; (e) reducing the environmental impacts of urban transport by setting standards for air quality, noise pollution, and visual intrusion as well as indicating who would pay for them and how; (f) assisting in projects which improve the data base required for appropriate planning such as origin/destination surveys and preparation of master plans which study land use and urban transport alternatives; and (g) creating an enabling environment to increase private sector participation in the investment and operations of urban transport systems. In the long term, the Bank's strategy will aim at reducing the travel demand and increasing the effectiveness of transport facilities by integrating land use and transport planning based on significant input by locally affected parties. II. THE PROJECT A. Project Background 2.1 As mentioned in section i, this project has its origins in two major developments at the Federal and State level: (a) the decision of the Government of Brazil to decentralize and transfer the several subdivisions of the Brazilian Urban Train Company (Companhia Brasileira de Trens Urbanos, CBTU) from the Federal to the State/Municipal Governments as mandated by the 1 988 Constitution; and (b) the willingness of the State of Pernambuco to takeover the Recife subdivision of the CBTU (STU-REC) so as to better integrate it with the predominantly privately-owned bus transport system. The GOB started by decentralizing the two largest CBTU subdivisions (Sao Paulo and Rio de Janeiro), and once that was successfully accomplished, it decided to proceed with the decentralization of the Belo Horizonte and Recife subdivisions. B. Rationale for Bank Involvement 2.2 The Bank's country assistance strategy for Brazil, discussed by the Board on June 29, 1993, is to support policies and investments that will encourage economic growth and social development in a context of macroeconomic stability. The emphasis is on efficient resource allocation, increased efficiency in the public sector and the appropriate targeting and delivery of support systems to the poor. The proposed project is fully consistent with this assistance strategy since it is designed to: (a) promote reforms and financial viability of public enterprises, including decentralization from federal to state and municipal levels; (b) foster private sector participation in the development of new infrastructure and its operation; (c) increase the efficiency of infrastructure investments; (d) contribute to poverty alleviation; and (e) reduce Government subsidies through improved tariff policies and financial management. The proposed project is also a follow-up to the efforts started with the Sao Paulo Metropolitan Transport Decentralization Project (Ln. 3457-BR) and the Rio de Janeiro Metropolitan Transport Decentralization Project (Ln. 3633-BR) which are decentralizing the federally- owned CBTU to the States of S.Paulo and Rio to allow for more effective modal and tariff integration. C. Project Objectives 2.3 The objectives of the proposed project are: (a) the development of an integrated urban transport system for the RMR under the existing regional transportation coordination commission (EMTU) established to coordinate and recommend common policies on pricing, regulation, financing, project evaluation and selection; (b) the decentralization (transfer of ownership and operational responsibilities) of the STU-REC subdivision from the federal to the state level; (c) the reduction of the negative environmental (mainly air quality and noise) impacts on the RMR due to road-based vehicles and the promotion of non-motorized transport modes; and (d) the development of special strategies and actions to improve the accessibility of the poor to employment centers, health centers and education facilities. D. Project Description 2.4 The project would consist of three inter-related components: (a) an Infrastructure and Equipment component (98.1 percent of total project cost) to help build: (i) the rail extensions / traction conversions and the additional stations required to enhance modal integration; and (ii) the transfer terminals and physical accesses required for the actual integration between buses, rail, pedestrians, automobiles and bicycles; (b) an Environmental and Traffic Safety component (0.2 percent of total project cost) to support (i) the design of an inspection and maintenance (I/M) program for vehicle emissions and noise; and (ii) the development of a traffic management control and safety program particularly in the area of influence of the rail system; and {c) an Institutional and Policy - 8 - Development component (1 .7 percent of total project cost) to help in: (i) strengthening the EMTU for the RMR; (ii) preparing an integrated Transport Policy, Land Use, and Air Quality Management strategy for the RMR to meet both transport and air quality targets and to introduce sound cost-recovery, tariff, regulatory and subsidy policies; (iii) providing an action plan to improve the financial management of the STU-REC; (iv) developing an enabling environment and financial instruments for more substantial participation of the private sector in the investment and operation of the operating agencies; and (v) strengthening air-quality planning and monitoring of vehicle-based emissions. Dl. Project Components Part A - Infrastructure and Equipment Component 2.5 This component is designed to extend METROREC's Central line from TIP to Timbi, to convert the South line from diesel to electricity, to link the South line to the Central line, and to separate RFFSA's freight line from the passenger lines (map IBRD 26915 and Annex 5). These improvements to STU-REC's infrastructure and equipment will allow it to meet the performance targets indicated in Annex 11 and are be summarized below. 2.6 Civil Works Program would consist of: (a) Urban Bus Terminals, entailing the construction of three terminals in the Center line and seven in the South line; (b) Road Accesses to improve the access to selected stations in both lines; (c) Passenger Stations consisting of the construction of one station at Timbi on the Central line, ten new stations and modernization of two existing stations on the Recife-Cajueiro Seco link of the South line, and minor rehabilitation of five stations on the Cajueiro Seco-Cabo section on the South line; and (d) Bridges, Road Viaducts and Pedestrian Over/Underpasses including the construction of sixteen bridges, four road viaducts, and ten pedestrian over/underpasses. 2.7 Permanent Way Program would consist of: (a) works in the Central line, including the construction of a 4.5-km double electrified track extension from the TIP terminal station to Timbi; and (b) works in the South line, including the construction of 13.5 km of double electrified track from Recife to Cajueiro Seco. To carry out these works, provisions have been made for the necessary land expropriations and resettlements to: (a) build 500 m of tracks, linking the Central with the South line at Recife and Joana Bezerra stations; (b) relocated 11 km of one of the existing tracks from Afogados to Cajueiro Seco for exclusive dedication of RFFSA's freight traffic; and (c) construct 11 km of a second track from Pontezinha to Cabo. 2.8 Systems Program would consist of: (a) an Electric System on the Central line, including: (i) circuit breakers; (ii) 4.5 km of transmission lines and overhead catenary; and (iii) relocation of feeder lines at Cavaleiro yard; (b) an Electric System on the South line consisting of: (i) 13.5 km of overhead catenary; (ii) 14.5 km of transmission lines; and (iii) construction of two sub-stations, two sectionalizing cabins; (c) a Signaling Program that requires the installation of: (i) a signaling system on the 4.5-km TIP-Timbi extension, with the same characteristics of the signaling system operating in the Central line (centralized traffic control (CTC), relay interlocking and automatic train control (ATC)); and (ii) track circuits and related elements and remote boxes in the CTC, and eight automatic level crossing barriers on the South line; and (c) Telecommunications would include the installation of: (i) a central telephone station for the entire network; (ii) a telecommunication system on the TIP-Timbi extension on the Central line; and (iii) 13.5 km of fiber optic cable, a VHF radio network, public address system, ticketing control, clock and track telephone sub-systems, and a radio communication sub-system at five stations in the Cajueiro Seco-Cabo on the South line. 2.9 The Workshop Program would consist of: (a) construction of an additional area in the Cavaleiro workshop for major overhauls of the electric multiple unit (EMU) fleet; (b) construction of a small maintenance shed for the maintenance of diesel locomotives at Cajueiro Seco; and (c} miscellaneous equipment and spare parts for the rolling stock, and maintenance equipment for the track and catenary. 2.10 The Rolling Stock program would include: (a) general overhaul of 25 EMUs and 11 diesel locomotives; (b) rehabilitation and/or modernization of two diesel locomotives; (c) installation of air conditioning systems in the EMU fleet; {d) rehabilitation of 21 passenger coaches; and le) miscellaneous spare parts for the entire fleet. Part B - Environmental and Traffic Safety Program 2.11 The environmental and traffic safety program will consist of: (a) the design of an inspection and maintenance (I/M) program for vehicle emissions and noise to recommend the facilities and equipment required to monitor and enforce national/state standards; and (bl the development of a comprehensive traffic management and safety program to reduce traffic congestion and decrease accidents in the RMR but with particular emphasis on the area of influence of the rail system. Part C - Institutional Development and Policy 2.12 STU-REC's decentralization is not by itself a guarantee that the individual subdivisions will be better managed than its predecessors. A package of institutional and policy reforms are needed to induce modernization changes and motivate management and staff. The financial management and administration, especially in regard to cost-recovery mechanisms must also be reformed. Otherwise, the cycle for another emergency program of rehabilitation will repeat itself with negative impacts on the ridership and on the RMR as a whole. Furthermore, actions are needed to change the environment in which STU-REC operates to facilitate the modal integration and sustainability desired in the long term. The basic sub-components of the institutional and policy package proposed are described in detail in Annex 7 and are summarized below: (a) Decentralization. The first set of Actions Plans concerns the actual decentralization process: (i) institutional and organizational arrangements; {ii) patrimonial-agreement on the valuation and assets to be transferred; (iii) aspects relating to transfer of personnel, pension benefits, and miscellaneous human resource-related issues; and (iv) legal and administrative aspects for decentralization; (b) Management. The second set of Action Plans are designed to improve the management of the new entity which will succeed STU-REC: {i) preparation and implementation of a manpower development and organization plan to streamline the management and operations staff in each of the new subdivisions that would propose concise job descriptions and staff them accordingly; (ii) a study and then implementation of a cost accounting, management information systems, and financial management so that timely and adequate cost management is possible; (iii) preparation of an action plan to improve inventory management since lack of spares is one of the main causes for the low rolling stock availability rates; (iv) preparation of an action plan to subcontract maintenance and other operations to the private sector; (v) preparation of an action plan to increase non-operating revenues by renting station space, advertising, and development of subdivision's real estate; (g) technical assistance and training for staff at all levels as proposed in the manpower development plan; and - 1 0 - (c) Modal Integration. The objective of the third set of Action Plans is to support the policy framework and provide practical recommendations for implementing modal integration. This will include studies of existing transport agencies with a view to reducing cross inefficiencies, namely: (i) a financing mechanisms study focused on achieving formal sources of funds for the urban transport sector, including a tariff study to propose multimodal tariff integration schemes based on the new route structure along with its operationalization; (ii) updating of the Transport, Land Use, and Air Quality portion of the Master Plans of the RMR with emphasis on route rationalization and modal and tariff integration; and (iii) a study to propose changes to EMTU's organization structure in view of its expanded role. E. Project Cost and Financing 2.13 The total cost of the project is estimated US$203.8 million including physical and price contingencies, with an estimated foreign component cost of US$103.2 million or 50 percent of total cost. Taxes and duties are expected to account for about 13 percent of total cost or US$27.5 million equivalent. Physical contingencies add up to US$1 6.9 million, or 10 percent of the base cost and price contingencies are estimated at US$16.9 million or 9 percent of the base cost plus physical contingencies. The contingencies are estimated on the basis of the disbursement schedule (an estimated implementation period of six years) and on the following forecast of price escalation for both local and foreign expenditures expressed in US dollars: 1.5 percent in 1995, 1.8 percent in 1996, 2.6 percent in 1997, 2.5 in 1998, 2.5 percent in 1999, 2.5 percent in 2000, and 2.5 percent in 2001. Base costs correspond to March 1995 prices. The cost of goods are based upon supplier quotations for similar Brazilian-made items and recent prices of imported items. The cost of several components of the works program such as, urban bus terminals, passenger stations, bridges, permanent way, systems and workshop buildings are based upon preliminary engineering designs and prevailing unit prices from recent tenders under Loans 3457-BR and 3633-BR. Cost estimates for consultant services are based upon prevailing local and foreign staff-month rates; they provide for the cost of local transportation, office equipment and other minor items and, where appropriate, international travel and per diem. 2.14 The project would be financed from the proposed Bank loan of US$102.0 million equivalent (50 percent of the total project cost) and GOB contributions of US$101.8 million equivalent, including US$27.5 million in taxes and duties (50 percent of the total project cost). During loan negotiations, agreement was reached on: (a) the project financing plan; and (b) the guarantee of the GOB regarding all necessary counterpart funds for the project. F. Project Benefits and Risks 2.15 Project Benefits. Quantifiable and non-quantifiable benefits are expected from the provision of an integrated rail and bus network including cost savings, time savings for the users, fewer accidents and fatalities, and employment generation through better spatial integration of markets. Important effects on the urban structure are expected if the STU-REC network becomes an axis fed by the major bus routes. In addition, there will be a positive environmental impact through the reduction of fossil fuel consumption, reduction of motor-vehicle related emissions, and a reduction in road congestion with a consequent improvement in air quality and noise pollution. The project will facilitate access to employment and services, particularly for the poor. Development of an integrated public transport system under a regional coordination body in charge of combining state and municipal pricing and subsidy policies, prioritizing major investments and proposing common demand management measures in the RMR, are also important non-quantifiable benefits. Finally, by encouraging greater private sector participation in the development of aerial and ground station space, the proposed project will be a first step towards decreasing the investment burden on the state. An economic evaluation of the project shows an IERR of 27.9 percent for the infrastructure and equipment component which represents 98 percent of the project. - 11 - Table 2.1: Project Cost Estimates and Bank Financing (US$ million) Breakdown of Cost Base Cost Bank Participation STU-REC PROJECT Local Foreign Excl. Duties Duties Total Value o' 1 - LAND EXPROPRIATION 7.80 - 6.86 0.94 7.80 0% 2 - RELOC. TRANSMISSION LINES 2.41 1.30 3.26 0.44 3.70 - 0% 3 - CIVIL WORKS 32.70 17.61 44.26 6.04 50.30 26.56 * Urban Bus Terminals 3.51 1.89 4.75 0.65 5.40 2.85 60% ' Road Accesses 1.95 1.05 2.64 0.36 3.00 1.58 60% ' Stations 17.29 9.31 23.41 3.19 26.60 14.04 60% * Brdges and Pedestrian O/P 9.36 5.04 12.67 1.73 14.40 7.60 600/0 ' Workshops 0.59 0.32 0.79 0.11 0.90 0.48 60% 4 - PERMANENT WAY 11.64 6.27 15.76 2.15 17.91 9.73 * Infrastructure 10.31 5.55 13.96 1.90 15.86 8.37 60% * Superstructure 1 .33 0.72 1.80 0.25 2.05 1.35 75% 5 - SYSTEMS 10.46 6.64 15.05 2.05 17.10 9.03 Electrification 2.64 1.42 3.58 0.49 4.07 2.15 - Catenary 1.31 0.70 1.77 0.24 2.01 1.06 60% - Substations 1.34 0.72 1.81 0.25 2.06 1.09 60% * Signaling 7.23 4.82 10.60 1.45 12.05 6.36 60% * Telecommunications 0.59 0.39 0.86 0.12 0.98 0.52 60% 6 - ROLLING STOCK 3.30 7.71 9.69 1.32 11.01 5.78 * Diesel (Locomotives) 0.68 1.58 1.98 0.27 2.25 - 0% * EMUs 2.25 5.25 6.60 0.90 7.50 4.95 75% Passenger Cars 0.38 0.88 1.11 0.15 1.26 0.83 75% 7 - GOODS 8.74 42.62 42.63 8.73 51.36 29.21 * Permanent Way Materials 3.57 10.72 11.86 2.43 14.29 8.90 75% * Catenary Materials 2.38 5.56 6.59 1.35 7.94 3.95 60% . Substations Materials 0.29 1.16 1.21 0.25 1.45 0.72 60% i Signaling Materials 1.45 8.23 8.03 1.65 9.68 4.82 60% ' Telecommunications Materials 0.47 2.68 2.61 0.54 3.15 1.57 60% e Workshop Equipments 0.46 1.84 1.91 0.39 2.30 1.43 75% Spare Parts for Locos / EMUs 0.11 0.44 0.46 0.09 0.55 0.34 75% * Air Conditioning for EMUs 0.00I 12.00 9.96 2.04 12.00 7.47 75% 8-CONSULTING 6.76 3.89 9.37 1.28 10.65 4.69 * Projects 0.14 0.08 0.19 0.03 0.22 0.10 50% * Institutional Development 1.97 1.31 2.89 0.39 3.28 1.44 50% * Project Management 1.43 0.77 1.94 0.26 2.20 0.97 50% * Supervision 3.22 1.73 4.36 0.59 4.95 2.18 50% BASE COST 83.80 86.03 146.88 22.95 169.83 84.99 PHYSICAL CONTINGENCIES 8.38 8.60 14.69 2.29 16.98 8.50 PRICE CONTINGENCIES 8.38 8.60 14.69 2.30 16.98 8.51 TOTAL 100.57 103.23 176.26 27.54 203.80 102.00 - 12 - 2.16 Project Risks. The main risks involved are the delays in the actual transfer of STU-REC ownership to the State, the political reluctance of the State in forcing bus integration due to the bus operators' lobby, the possible delays in the procurement process, and the timely availability of counterpart funds. To minimize delays in the actual transfer of ownership of the STU-REC to the State, the loan agreements link the disbursements with the date set for the transfer. All parties have agreed on the need to takeover the system and for an integrated network which will be implemented as the key stations become available for operation. At this stage, there is strong commitment to the environmental and safety program from the governments involved. The delays in the procurement process were minimized by starting at pre-appraisal the pre-qualification for lots in the critical path of project implementation, by the use of standard bidding documents, and by requiring the borrower to produce the major tender documents by negotiations. The timely availability of counterpart funds will be addressed by seeking assurances that they are included in the GOB's CY96 budget and subsequent years. G. Tariff Setting and Affordability by Low-income Users 2.17 Poverty, Affordability and Subsidies. The growing crisis in urban transportation in Brazil, especially in the MRs, demands a close look at alternatives for financing services in a more predictable and sustainable way while, at the same time, targeting subsidies more directly to low- income ridership. The various initiatives already underway within STU-REC to improve efficiency through tariff increases, service improvements and trip reliability, as well as efforts focused on reducing operating costs, are planned to continue while the implementation of the proposed project takes place. 2.1 8 Approximately 87 percent of the urban population earns less than three minimum salaries (US$300/month). If successfully implemented, the project will primarily benefit the poor in the RMR, since they depend mainly on bus and rail services to commute to and from work, especially those living in the "favelas" for whom access to the areas of employment is a daily ordeal. 2.19 To make urban transport affordable to the poor, it is necessary to strengthen and expand the eligibility of the vale-transporte program to low-income residents which are not formally employed, to substantially promote integrated (bus-rail) fares, which should always be lower than the sum of individual fares, and to increase the overall level of service provided to the users. This will imply lower travel times due to higher frequencies and operating speeds, bringing down therefore, the overall transport cost to the user and thus alleviating the burden that urban transportation imposes on poor households. It is noteworthy that annual bus and train passenger surveys indicate even low-income riders are willing to pay higher tariffs if the service provided is faster, waiting times are less, and the system is more reliable. 2.20 Review of Financing Mechanisms. During project preparation it was agreed that efforts should be focused on seeking solutions that would: (a) generate sufficient resources to maintain stable and predictable funding for urban transport investments; (b) establish mechanisms to generate adequate operating cross-subsidies from transport-related taxes, user charges, etc. so as to provide adequate coverage for operating deficits; and (c) use a study undertaken by consultants to make concrete recommendations and propose draft legislation on financing mechanisms. 2.21 In the meantime, agreement was reached at negotiations so that: (a) prior to the transfer of STU-REC to the State, the GOB will meet the cost of capital investments plus debt service (interest and amortization) of the STU-REC incurred before the transfer; (b) during the period prior to the transfer, the GOB will cover the difference between the working costs and operating revenues of STU-REC; and (c) that after the transfer is effected, the GOB operating subsidy (shortfall between operating revenues and working expenses) will be discontinued. - 13 - H. Project Economic Evaluation 2.22 A standard cost-benefit analysis was performed to evaluate the economic impact of the implementation of the proposed South line modernization and extension and the construction of the TIP-Timbi link, which together represent 98 percent of the total cost of the proposed project. Direct user benefits include travel time and operating costs savings; indirect benefits arise from the reduction of negative externalities such as accident and air pollution costs. Investments which will be avoided due to the implementation of the proposed project are also considered as benefits. Investment costs comprise civil works, land expropriation, operational systems, rolling stock and project studies. 2.23 Substantial direct benefits are expected to arise from travel time savings, operating cost savings, bus system control savings, and road maintenance cost savings. Travel time savings result mainly from the transfer of bus passengers into the modernized system and from existing STU-REC passengers who can save time in their trips by taking advantage of the new transport facility. Travel time savings also result from the increased operating speeds and shorter trips of the buses and cars which will be feeding the rail system. Operating cost savings for the non-rail modes derive principally from the improved commercial and traffic speeds, which can be achieved by buses and cars, respectively. In addition, indirect benefits will arise from the reduction in negative externalities, such as accidents and air pollution. 2.24 The IERRs obtained in the economic evaluation are summarized in the Table 2.2. For the South line component, the worst scenario (12.9 percent IERR) is caused by an increase of 80 percent in construction costs. The best scenario 26.7 percent IERR) is given by a 10 percent increase in the value of time. For the TIP-Timbi link the worst scenario (17.9 percent IERR) assumes an 80 percent increase in construction costs. The best scenario (33.1 percent IERR) assumes a 10 percent increase in the value of time. Table 2.2: Economic Evaluation Corridors IERR t%) Base Case Worst Case Best Case South line 25.8 12.9 26.7 TIP-Timbi 32.0 17.9 33.1 South line + TIP-Timbi 27.9 n.a. n.a. I. Project Financial Evaluation 2.25 STU-REC. STU-REC has historically relied on the Federal Government to finance its operational deficits and its capital program. These operational deficits have been attributed to low traffic, a social tariff imposed by the Government, not enough compensation for free ridership granted by law, significant rates of evasion (South line), and high operating costs. The service in the South line is generally poor and infrequent due to insufficient security in the right-of-way and a large number of level crossings which prohibit frequent and fast service. Furthermore, the South line does not extend to the center of the city and does not provide for integration with other modes of transport especially the Central line. In 1994, the South line accounted for about 4 million trips or about 12 percent of STU-REC's total traffic volume. The demand on the Central line is also low because of insufficient integrated stations. As a result of these low volumes of traffic and low tariffs, in 1 994, STU-REC could barely earn enough money to cover 1 8 percent of its working cost. High labor costs which accounted for 77 percent of the working costs also contributed to the poor working ratio of 5.62. The GOB's operational subsidy in 1994 was US$40 million. - 14- 2.26 Upon completion of the proposed Bank project, service on the South line is expected to improve because of enhanced security on the permanent way and in the stations as well as from the removal of at-grade crossings. With the extension of the South line to the Center line and the construction of integrated stations on both lines, traffic is expected to increase more than 200 percent between 1 994-2001. Additional revenue would be provided by increasing tariffs 75 percent between 1994-2001 and another 12.5 percent between 2001-2005. On the other hand, increases in working costs are limited to 5 percent during this period because of a reduction in total staff which is expected to decease the personnel expenses by 3 percent during 1994-2001. By 2001, the working ratio is expected to improve to 1.11 and the cost recovery should be 94 percent. Performance targets to monitor STU-REC's financial situation during the project are given below: Table 2.3: Performance Targets for STU-REC 1996 1997 1998 1999 2000 2001 2002 Total number of passengers carried 42 45 47 49 52 102 103 per year (millions of linked trips) Staff costs as a % of total revenue 235% 230% 225% 188% 184% 84% 83% Revenue Cost Coverage 30% 29% 30% 37% 38% 94% 95% Working Ratio 3.37 3.45 3.36 2.81 2.75 1.11 1.09 2.27 State of Pernambuco. In 1993 PE had current revenues (own sources plus constitutional transfers) of US$1,064 million of which about 64 percent were from the State's own resources and the rest was contractual from the Federal Government. To augment the State's own revenues, Pernambuco also received US$83 million in federal grants that year. On the expenditure side, personnel expense was only 38 percent of total current expenditure or 54 percent of net current revenue (current revenue less constitutional transfers) which is considerably less than the legally mandated maximum of 65 percent. Nearly 1 5 percent of expenditures were transfers to the municipalities and the rest to state enterprises and the social security fund. Total capital expenditure of US$176 million was a meager US$25 per capita. 2.28 Transfer of the STU-REC to the State will force the burden of providing operational subsides on the State. Given the requirement of operational subsidy by STU-REC, between 1996-2000, the State will have to add another US$30-35 million to the current level of transfers to state enterprises or an increase of 14-16 percent over that in 1993. Starting in 2001, the subsidy requirements are expected to fall by about two-thirds to US$10 million (US$7 million if the non- operational income of STU-REC were also to be considered). The annual subsidy requirement during 2001-2005 would thus be less than 1 percent of the total current revenue. It is worth nothing that the 1 993 current account surplus equaled the projected subsidy in 2001. The State is also expected to compensate STU-REC US$3-4 million per year for carrying gratuitos (free riders) during the projection period. This compensation should, however, not be considered a subsidy as it refers to purchase of STU-REC's services by the government. J. Environmental Impact of the Project 2.29 Since the main objective of the proposed project is to increase the capacity offered by the RMR rail system, it is expected that a substantial percentage of the passengers now carried by bus will return to their original mode of transportation, that is, rail. This is especially true for passengers who live within walking distance from the stations, who switched to bus because in the last five years the capacity and safety offered by the trains decreased considerably. However, it is not so obvious for those passengers who are not within walking distance. Nevertheless, it is estimated that by project completion about 285 fewer buses/day will be required in the streets of the RMR, because the - 15- integration with rail will shorten the present bus routes. The main expected positive environmental impacts stem from this reduction in bus services, given their present negative impact on the air quality, noise levels, traffic congestion, and road accidents. As discussed below, other positive impacts include the effect of the rail system rehabilitation on passenger safety at the stations, on the land use around the right of way, and the decrease of fatal accidents resulting from lack of fencing along the right-of- way 2.30 The impact on air quality is due to a reduction of emission by the buses which will be removed from circulation or which will have their route-kms shortened because they will be operating feeder services for the rail system rather than duplicating their routes. The impact on air quality was estimated at US$0.59 million per year in RMR. A positive impact on noise levels is also due to the removal of buses, especially in Recife, where the older vehicles predominantly owned by the public sector are noisy and when bunched together, cause very high decibel (dB) levels, which hardly allow people to speak at normal voice levels on the street. The impact on traffic congestion was conservatively estimated at US$20.3 million per year in Recife and is mainly due to the shorter waiting time for commuters using their automobiles and buses and also due to the savings in fuel consumption since the vehicles consume more when they are idle. The effect on road accidents is based on statistics which suggest that, in the metropolitan region, the number of bus accidents is a function of the number of buses on the road. It is estimated that the savings due to fewer accidents are US$0.56 million per year in Recife. In addition, the fencing of the right-of-way is expected to decrease the number of fatal accidents due to people crossing the tracks. Even if the benefits estimated were cut in half because the bus operators would, in some cases, continue to run the buses at lower load factors, the project would contribute positively to the environment. Benefits which were not quantified are those related to the improved living environment which will result from safer and cleaner stations, crossovers from the sidewalks to the stations, space for queuing up at the wickets, ramps for the handicapped, and in some cases, modal integration with taxis, buses and private automobiles. Other non-quantified benefits are those related to the structuring effect of a revamped rail system which will attract housing in the surrounding areas. Furthermore, real estate development on the air space above the stations and on land owned by CBTU is also expected. Additional non-quantified benefits relate to the diminished stress which the road system and congestion will impart on the road users and the better ambience expected in trains. Shorter trip times and faster home-to-work trips will also have a positive effect on the rail users' welfare. J1. Environmental Impact of the Construction 2.31 The proposed extension of the system will have only limited negative environmental impacts. Most materials used will not affect the environment; the contractors will be responsible for proper disposal of old materials; the earthworks are mainly in CBTU's existing right-of-way. Wooden ties will only be procured from contractors who are allowed by their national agencies to sell them and, wherever feasible, concrete ties will be used. The visual impact of the stations will be enhanced with appropriate architectural designs which will blend with the environment, and the same will be done with the overhead catenary, wherever possible. Assurances will be sought that the project will be executed, and the system subsequently operated in accordance with Bank guidelines and sound environmental practices. 2.32 An environmental impact assessment of the TIP-Timbi and South line links undertaken by independent consultants is required by Brazilian law. A preliminary analysis following Bank guidelines was provided during the Bank mission in March 1 995 and has been reviewed and subsequently approved by the Bank. During pre-appraisal, the following were made available: (a) a typology of the affected population and of proposed solutions; (b) the institutional matrix, which supports the expropriation process, specifying for each activity the responsibilities of CBTU's various units as well as those of other agencies and the relationship of social and environmental management - 16 - within the overall project coordination arrangements; (c) a chronogram of all activities pertaining to expropriation and related activities to be carried out by CBTU or other agencies; including consultations with the affected population and the possibilities of delays in beginning of construction if compensation offered to the affected population were to be rejected; and (d) a budget estimate and sources of funds required for expropriation and other related activities. 2.33 The terms of reference for preparing the final engineering designs for future stations and proposed terminals require that existing environmental (noise and visual intrusion) conditions be reviewed and that the final designs include specific measures for alleviating conditions where they fail to meet existing or proposed standards. In addition, an environmental assessment will be required on all proposals for new works, indicating any adverse environmental consequences and proposing measures to eliminate them or at least reduce their impact to acceptable levels. These assessments and proposals will relate principally to vehicle emissions, vehicle noise, and visual intrusion. 2.34 To ensure that environmental impacts are properly evaluated and adequate mitigating measures are proposed, CBTU's Project Implementation Unit (PIU) would hire a firm of experienced professionals in resettlement as well as have environmental specialists in charge of reviewing and monitoring all phases of project preparation and implementation. CBTU has accumulated some experience with land expropriation during the construction of the Central line. More specifically, CBTU would: (a) ensure that terms of reference (TOR) for feasibility studies include a preliminary environmental impact evaluation or screening of the proposed solutions; (b) review the feasibility studies and determine, according to sound environmental practices, whether a specific and detailed environmental impact assessment and development of mitigation measures, such as a relocation plan, are required; (c) hire consultants to carry out appropriate analyses and propose mitigation measures; (d) in the latter case, seek the Bank's approval for the proposed measures; (e) include the proposed measures in the TOR for final engineering design, review the final engineering design from an environmental standpoint, and clear the project for implementation; and (f) supervise the implementation of the project to ensure that the participating operating agencies carry it out in accordance with the design approved by CBTU. Since all the project designs will be financed and approved by CBTU, it is expected that this arrangement will ensure that subcomponents are carried out according to environmental practices acceptable to the Bank. J2. Population Relocation 2.35 This project has been rated "B" by the Bank for environmental assessment (EA) purposes. As such, only selective evaluation and proposals for mitigation of environmentally or socially relevant impacts are required by the Bank for appraisal. However, in accordance with Brazilian legislation, a full EA was prepared. TORs were developed by CBTU in consultation with the state licensing agency, Companhia Pernambucana de Controle a Poluicao Ambiental e de Administracao de Recursos Hidricos (CPRH). The extension of the TIP-Timbi link (4.5 km, one station at Timbi) and the extension of the South line (13.5 km, 10 stations) was analyzed by an independent consulting firm. A consulting firm has been hired and work started in December 1994 and was concluded in mid-April 1995. CBTU has also hired independent resettlement and environmental assessment specialists to assist in project preparation. 2.36 CBTU is an experienced company and engineering designs are well advanced. Preparation of assessments and the design of programs addressing environmental and social impacts have only recently begun due to the requirements of the project cycle, which call for these activities to be carried out only after an expropriation decree is issued. This decree in turn depends on a precise definition of the location and area requirements of all facilities. 2.37 At-grade or elevated structures will be used along the full extent of the South to Central link, significantly reducing expropriation requirements and environmental impacts as compared to traditional cut-and-cover methods. Stations have similarly been designed with special attention to reducing above-ground space requirements. Locations (i.e., buildings and plots) which need to be acquired to implement the Bank-financed segments are at this point clearly identified. Table 2.4 summarizes their distribution by site and use. 2.38 Whereas the initial layout at-grade called for the acquisition of more buildings and plots, alternative sites and designs and an elevated structure of 500 meters to link the South and Central lines were sought in an attempt to minimize public acquisition. The current proposal has clearly managed to minimize project impact. Of the 495 locations to be expropriated, 1 57 are middle-to-low income houses. 275 are "favela houses," 49 are small shops and 14 are industrial establishments. The total affected population is estimated to be under 1,980 people. Table 2.4: Expropriation Requirements (buildings and plots) "Favela" houses Residential Commercial Industrial Total houses (shops) establishments No. Area (m2) No. Area (m2) No. Area (m2) No. Area (m2) No. I Area (m2) 2_75 11,612 1 157 T18,267 49 10,752_1 14 10,450 1495 51,o81 Source: CBTU Resettlement Report 2.39 CBTU's usual practice in the case of middle-income residences is to expropriate at market value, which is established according to criteria defined by ABNT (Associacao Brasileira de Normas Tecnicas) in accordance with local real estate transactions. The CBTU's Civil Works Department follows a standard set of internal procedures, comprising preparation of a physical cadastre, calculation of the asset's value, and presentation of CBTU's purchase proposal to the proprietor. The Legal Department carries out the purchase if the stipulated price is accepted by the proprietor, or takes the case to court if an agreement is not reached. Over the past 20 years, CBTU has carried out over 5,000 expropriations. In roughly 70 percent of these, the proposed buying price was accepted. The adequacy of compensation at market value is not difficult to establish since monitoring and evaluation studies to verify how the affected population relocated were carried out for the line which is in operation. In case of "favela" houses, the practice adopted is either to resettle the affected population to houses which are equal or better than the ones expropriated-preferably to sites which are close to the ones being affected-or to offer a financial compensation for those families which prefer to receive money instead of being relocated. The company also provides, in the case of low-income families, assistance in finding replacement housing, logistical support for moving, legal support to regularize property titles, relocation grants and other services. The total amount estimated for resettlement and expropriation was estimated at US$7.8 million plus contingencies. This amount has been included in the project costs and will be fully financed by the GOB. 2.40 An Environmental Assessment Report, following Bank guidelines, including a detailed resettlement plan wherever it is applicable, was prepared and approved by the Bank in April 1 995. To prepare the report: (a) a meeting with residents was held to present and discuss project characteristics, expropriation requirements and other relevant impacts, expropriation procedures and timing, proposed valuation criteria and other forms of compensation and assistance (see para. (d) below); (b) minutes of the meeting were sent to the Bank; (c) the exact number and socio-economic profile of affected families was finalized; (d) a clear policy statement pertaining to the concession of other grants and services which the company will make available to the affected population was also competed, including addressing the case of non-proprietors; (e) the final version of the expropriation program, including compensation and mitigation actions, institutional matrix, chronogram, budget, funding - 18 - arrangements, all reflecting agreements reached with the affected population, was made available prior to negotiations; and (f) a monitoring and evaluation program was presented prior to negotiations, to be carried out until the conclusion of the relocation process of all households. Evidence that the State licensing agency has approved the environmental impact statement and has issued the license to initiate the works in the South line is a condition of loan disbursement. It is a condition of disbursement for the TIP-Timbi link that the State licensing agency issues the license to initiate its construction. K. Private Sector Participation 2.41 To examine the financial instruments which can encourage private participation in the construction and operation of selected parts of the mass transit systems, CBTU has created a high- level working group of entrepreneurs and financiers. Many aspects of this program appear to be appropriate for private or joint public/private development, which could result in considerable savings. Station development is the most obvious, but consideration should also be given to leasing of some existing stations and transfer points for private sector development and operation. Disposition of excess railway land, and air rights would also be explored. CBTU has invited a high-level group, including respected outsiders such as elected officials, investment bankers, prominent developers, civil works contractors, and Chamber of Commerce representatives, to explore this as well as other ways to -capture- some of the added value of railway real estate development and prepare proposals for inclusion in the program. 2.42 It was agreed between CBTU and the Bank that to foster the participation of the private sector in the system, the Shareholder's Agreement will contain a clause which will require that the State will cause the PE Entity to offer to the private sector, through at least four invitations to bid, satisfactory to the Bank, the exploitation of trains, station space, aerial space, parking areas, automatic ticket collection, and other areas. The first bid should be launched not later than one year after the transfer of STU-REC. - 19 - IIl. PROJECT IMPLEMENTATION A. Institutional Responsibilities 3.1 The Government of Brazil will be the Borrower. CBTU will be responsible for implementing the project, in accordance with: (a) contractual arrangements; (b) the implementation schedule; (c) implementation arrangements; (d) the decentralization implementation process; (e) procurement arrangements; (f) disbursement arrangements; (g) auditing arrangements; and (h) monitoring and reporting arrangements. These arrangements were confirmed during negotiations, and detailed guidelines, satisfactory to the Bank, will be prepared by CBTU. The Bank will monitor the implementation of the project in accordance with a monitoring and supervision plan (Annex 11). 3.2 The overall coordination and supervision of the proposed project will rest with the CBTU, which has established a Project Implementation Unit (PIU) supported by consultants. CBTU and the State agreed that the PIU will continue to manage the execution of the project after the transfer of the STU-REC system to the State. This will ensure the continuity of project management experience acquired with the ongoing Sao Paulo and Rio de Janeiro Metropolitan Transport Decentralization projects, and will prevent delays which could occur due to a change of the project implementation team before the conclusion of the project. To manage and guide the 'non-hardware' aspects (political, legal, administrative, institutional, and so forth) through the transition and until December 1 996, an intergovernmental General Coordination Committee will coordinate the work of a number of task forces, which will carry out strategic studies on terms of reference agreed with the Bank during negotiations. B. Contractual Arrangements 3.3 In order to ensure a smooth transition to decentralization, (the formal legal transfer and start of operations by the PE Entity), and to support its subsequent consolidation, the following legal arrangements will apply: With the Bank: Bank and GOB (Borrower) Loan Agreement Bank and CBTU (Executing Agency) Project Agreement Bank and PE (State of PE) Shareholder's Agreement Between governments and agencies: GOB and PE (Convenio Basico and Termos Aditivos) CBTU and PE Entity (Decentralization Contract) C. Implementation Schedule 3.4 The implementation of this project has been tentatively scheduled over a six-year calendar period (1995-2001). The project would be completed by June 30, 2001 and the closing date would be December 31, 2001. The Bank has recommended that CBTU should take special care in finalizing the project implementation schedule, which is directly linked to the procurement process, and indicated that according to the Bank's experience, the bidding process for each bid may take from 7 to 12 months, including the approval of bidding documents, advertisement in the Development Business journal and local press, bid evaluation, recommendations for award, contract signature, and contract effectiveness. - 20 - D. Implementation Arrangements 3.5 Project Implementation Unit. CBTU will establish and maintain a Project Implementation Unit (PIU) headed by a Project Coordinator to manage the implementation of the several components of the Bank project. The Project Coordinator would report directly to CBTU's President. Project Management and implementation consultants financed under Part C of the project would act as full- time advisers to the Project Coordinator to provide the technical support and cross-country experience required for managing the project. These consultants should be hired immediately after pre-appraisal. In addition to the Project Coordinator who will be responsible for the overall financial management of the project, the PIU will include: (a) a transport economist and policy studies coordinator responsible for overseeing the execution of all the studies and transport economics aspects of Parts B and C of the project; (b} an engineer, with experience in procurement, to coordinate part A of the project; (c) a management information systems specialist responsible for the reporting and supervision of the project; and (d) a resettlement specialist. The PIU would be supported by a small secretariat which would include an accountant responsible for project accounts and disbursements. 3.6 PE Entity Project Management Unit. This Project Management Unit (PEE/PMU) will be the counterpart of the PIU in STU-REC, and will follow closely the procurement, implementation and supervision of the PE Entity related works and acquisition of goods. E. Decentralization Process 3.7 The transfer of the STU-REC subdivision from the GOB to the State of Pernambuco has been agreed through the execution of an Agreement of Intent (Convenio Basico) on June 1, 1 995. This agreement was reviewed by the Bank and found to be satisfactory. 3.8 Transitional Phase to Decentralization. As the successful decentralization transfer will be subject to detailed negotiations, and will involve political considerations in addition to financial and technical issues, the detailed steps and transition to decentralization are viewed as a dynamic process involving the full and transparent participation of all levels of government. In order to support this process, joint and parallel strategic studies, administrative and legal actions, organizational changes, and key political decisions will have to be undertaken in a logical and sequential manner, and synchronized with the timetable for processing and executing the proposed Bank Loan and eventually for transfer of the system to PE no later than the target date of December 31, 1 996. The following steps should be included: (a) General Coordination and Completion of Strategic Studies. Immediately following the signing of the Convenio Basico, the General Coordination Committee (CG) will manage and guide the decentralization process. The CG will incorporate a number of task forces. The CG, with representatives from the CBTU and PE, will report to the Conselho Diretor through the Representantes Executivos. The task forces will work on the strategic studies and Actions Plans outlined in the Convenio Basico. (b) Transfer to Public Corporation. In accordance with the Federal Government's policy for modernization of the economy, and PE's long-standing tradition for efficiency, the STU- REC will be transferred to a Public Corporation (Sociedade Anonima de Economia Mista known as the PE Entity). Assurances were sought at Negotiations that not later than June 30, 1 996, PE would set up such Public Corporation, under an independent Board with management autonomy, and thereafter, not later than December 31, 1996, the STU-REC will be fully transferred to the Corporation. The articles of incorporation would include, among other things, that: (i) the Corporation will be managed by professionally-trained Chief Executive Officers; (ii) the management will adhere to - 21 - specific operating financial and performance targets set forth in annual contract plans; (iii) management will abide by agreed personnel and administrative policies; and (iv) the Corporation will follow sound commercial practices. Draft Articles for the Corporation will be reviewed by the Bank. 3.9 Timetable and Phasing for Decentralization. The project has been prepared to take into account the Federal Government's objective to complete the legal and institutional transfer (Decentralization) of the STU-REC by the target date of December 31, 1996, or when 60 percent of the loan funds have been disbursed (which ever is earlier). The term "Transfer" means the transfer of ownership and operational responsibilities of the STU-REC System to the PE Entity including the enactment and execution of all legal, contractual and administrative acts and documents required under the legislation of the Borrower and the State for these purposes. F. Procurement 3.10 All project components financed under the proposed Bank loan would be procured in accordance with the Bank's Guidelines for Procurement (January 1995). 3.11 Procurement procedures would be as follows: (a) contracts for goods estimated to cost more than US$350,000 equivalent and contracts for works including civil works, systems, permanent way and rolling stock, estimated to cost more than US$5.0 million equivalent would be procured through ICB procedures in accordance with Bank guidelines. In ICB procurement of goods, domestic manufacturers may be granted a margin of preference by adding 1 5 percent (or the applicable custom duties, whichever is lower) to the CIF value of the foreign bids.1' Although it is not foreseen, the procurement of some goods valued below US$350,000 would be through National Competitive Bidding (NCB) procedures up to an aggregate amount of US$0.5 million; (b) works of US$5.0 million equivalent or less, up to an aggregate amount of US$21.0 million (Table 3.1) would be awarded through national competitive bidding procedures and foreign bidders would have the opportunity to compete. In addition: (i) project components for civil works and systems, permanent way, and rolling stock have been packaged, and would be procured under supply and installation procedures; and (ii) prequalification procedures would be followed for the supply and installation of the signaling component; and (c) consultants, which are expected to aggregate to about US$12.6 million (including supervision of investments under the project), would be selected and engaged following the Bank's Guidelines for the Use of Consultants (August 1981) using the Bank's standard contract form for complex assignments. 1/ A local bidder is a Brazilian firm (or a consortium) offering goods containing components manufactured in Brazil and representing at least 50 percent of the value of the goods. - 22 - Table 3.1: Procurement Arrangements (Estimated cost in US$ million) a/ Expenditure Category lCB NCB Other N.B.F. d/ TOTAL COST 1. WORKS Civil Works and Systems 108.15 19.41 13.13 140.69 (56.22) (10.10) (66.32) Permanent Way 19.74 19.74 (12.38) (12.38) Rolling Stock 23.62 1.57 2.83 28.02 (15.03) (1.03) (16.06) 2. GOODS 2.68 2.68 (1.67) (1.67) 3. CONSULTANT'S SERVICES Technical Assistance b/ 11.52 11.52 (5.07) (5.07) Training _ Travel and Expenses c/ 0.35 0.35 (0.151 10.15) Consultants 0.80 0.80 (0.35) (0.35) TOTAL 154.19 20.98 12.67 15.96 203.80 (85.30) (11.13) (5.57) (102.00) a/ Figures in parentheses are the respective amounts financed by the Bank loan. b/ Services to be procured in accordance with World Bank Guidelines: Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency (Washington, DC, August 1981). c/ Items not involving procurement. d/ Not Bank-financed. Includes land expropriation, resettlements and rehabilitation of 13 diesel locomotives. 3.12 All procurement aspects were confirmed during negotiations, in particular on the use of: (a) standard bidding documents for NCB procedures for the procurement of goods and or civil works satisfactory to the Bank; and (b) standard contract forms for consulting services issued by the Bank for complex, time-based consulting assignments. The procurement schedule for major contracts is shown in Annex 8, Table 8.5. 3.13 Procurement Review. All contracts for goods estimated to cost the equivalent of US$350,000 or more, and all contracts for works estimated to cost US$5.0 million or more would be subject to the Bank's prior review of the procurement documentation (advertising, bidding documents, bid evaluation and contract award). The total value of these contracts would be US$154.2 million and would represent about 83 percent of all Bank-financed goods and civil works. CBTU's management have the capabilities to handle adequately the procurement processes required for this project. Procurement information would be recorded as follows: (a) prompt reporting of contract award by the borrower; and (b) comprehensive biannual reports to the Bank by the borrower, indicating: (i) revised cost estimates for individual contracts and the total project, including best estimates of allowances for physical and price contingencies; (ii) revised timing of procurement actions, including advertising, bidding, contract awards, and completion time for individual contracts; and (iii) compliance with aggregate limits on specified methods of procurement. - 23 - Table 3.2: Procurement Thresholds (US$ '000) Description Type of Procurement Prior Review Limit Contract Value WORKS - Civil Works ICB/NCB All ICB ICB > 5.000 l Systems ICB/NCB and NCB 500 to 5,000 l Rolling Stock ICB/NCB First NCB contract * Permanent Way ICB All iCB > 5.000 Price Quotations from at least three Bidders None < 500 GOODS ICB All > 350 NCB First two contracts 50 to 350 Price Quotations from at least three Bidders None < 50 CONSULTING SERVICES l Firms Local & Foreign All > 100 consulting firms * Individuals Local & Foreign All < 50 individual consultants G. Disbursement and Special Account 3.14 All disbursements under contracts of less than US$5.0 million equivalent for works and systems and less than US$350,000 equivalent for goods would be made on the basis of certified statements of expenditures (SOEs) prepared by CBTU. SOE limits for consultant services contracts would be US$100,000 for firms and US$50,000 for individuals. Supporting documentation for the SOEs would be retained by CBTU and made available for examination by Bank staff during supervision missions. To expedite project execution, a Special Account would be opened in a commercial bank under terms and conditions acceptable to the Bank with an authorized allocation of up to US$6 million equivalent. This account will be replenished for the amount of withdrawals on account of eligible expenditures. Authorization is sought for retroactive financing of up to US$10 million equivalent (10 percent of loan funds) in accordance with the Bank's standard guidelines. This retroactive financing would be for expenditures made after March 31, 1995, but no earlier than 12 months prior to loan signing(expected date October 31, 1995). Claims for retroactive financing would have to be made no later three months after loan effectiveness. The disbursement arrangements were discussed and agreed during negotiations. Table 3.3 presents the percentage to be disbursed by loan category. - 24 - Table 3.3: Disbursement by Category Amount IUS*4 Disburement Rate 1. WORKS Ia) Civil Works and Systems 55b000.000 60% of total expenditures lb) Rolling Stock and Permanent Way 24,000,000 75 % of total expenditures 2. GOODS 1,500,000 75% of foreign expenditures and 75% of local expenditures (ex-factory costs) 3. CONSULTANT'S SERVICES AND TRAINING 5.000,000 (a) Training abroad 100% of foreign expenditures lb) Training in Brazil 50%6 of local expenditures 50% of local expenditures for services of consultants residing within the _c_ Consultants territory of the Guarantor and 100% of foreign expenditures for services of other consultants 4. Unallocated 16,500,000 TOTAL 102.000.000 H. Auditing 3.15 CBTU would prepare financial statements, the Special Account audit, and the SOE's audit using external auditors acceptable to the Bank. The Bank would review the external auditors' terms of reference. CBTU's audit report and the audit report of the PE Entity would be presented to the Bank annually no later than June 30 of each year. The project auditing arrangements were discussed and agreed during negotiations. I. Monitoring and Reporting 3.16 Annual Review and Project Plan of Action. In November of each year, the Bank, CBTU and the PE would conduct a formal joint review of the progress made in reaching the objectives and in the implementation of the proposed project. The annual review would provide an opportunity to discuss project issues, in particular: compliance with covenants; institutional development advancements and performance of CBTU, implementing agencies, and technical assistance; execution and analysis of further needs of the training program; the quality of subproject implementation, including environmental analyses; implementation of studies, sector policies and actions; and the implementation of a monitoring program (proposed monitoring indicators are presented in Annex 11). The discussion and analysis of the issues addressed during the year under review would lead to the formulation of adjustments and, if necessary, remedial actions satisfactory to the Bank. The timing and scope of the annual review was confirmed during negotiations. 3.17 The project places great emphasis on institutional development in the sector and as such, implementation must be closely monitored and evaluated. It is proposed that a Mid-term Review of the project be held 24 months after loan effectiveness. At the review, the performance of - 25 - the project would be assessed and the second period implementation program would be amended as necessary based on the results of that evaluation. 3.18 Reporting. It was agreed during appraisal, and confirmed at negotiations, that CBTU with the assistance of participating operating agencies, would prepare biannual progress reports on June 30 and December 31 of each year and submit them within 60 days. The reports would cover past institutional development and project execution achievements and compare them with the appraisal projections and goals set forth in Annex 11. They would present a critical assessment of problems and issues arising during project execution. The reports would also discuss compliance with dated covenants and other conditions by each agency and actions taken to enforce compliance. In cases of unsatisfactory progress, the reports would also describe proposals for adjustments and remedial actions. The case for more periodic (quarterly) reporting would be reviewed at the Mid-term Review. To facilitate adequate monitoring of the project, CBTU has agreed to install no later than 90 days after loan signing a management information system to track the physical, financial and environmental status of each component of the project. J. Project Supervision 3.19 The responsibilities for supervising project implementation and a supervision plan are shown in Annex 11. It is expected that at least three supervision missions per year staffed by an urban transport engineer/planner, a railway engineer, a metro infrastructure engineer, and a resettlement specialist and a financial analyst will be required to supervise the proposed project during the first three years of execution (1995-1998). In addition, specialists in traffic engineering and procurement would accompany the supervision missions as required. Supervision requirements are expected to be intensive, particularly in the initial years, as Bank missions would aim to visit every operating agency at least once a year. For the first three years, the supervision requirements are estimated at about 20 staff weeks, reducing to 1 3 staff weeks in the fourth year, and 1 2 staff weeks in the fifth and sixth years. - 26 - IV. PROJECT AGREEMENTS AND RECOMMENDATION 4.1 The following Project Management assurances were obtained at appraisal and confirmed at negotiations: (a) that the Project Implementation Unit (PIU) will be structured and adequately staffed and otherwise supported in the implementation of its responsibility under the project. CBTU provided the Bank with the names and curricula vitae of the staff assigned to the PIU (para. 3.5); (b) that Procurement will be carried out in accordance with Bank guidelines, including: (i) the use of standard bidding documents for the procurement of goods and works, under NCB and ICB procedures; (ii) use of Bank's guidelines for the selection of consultants; and (iii) the procurement limits (para. 3.11); (c) that a Special Account in a commercial bank will be opened and maintained (para. 3.14); (d) that the Special Account and Statements of Expenditures (SOEs) (i) will be audited according to procedures, and by independent auditors acceptable to the Bank; and (ii) audits will be submitted by April 30 of each year (para. 3.15); (e) that: (i) within 90 days of loan signing a Project Management Information System satisfactory to the Bank be installed; (ii) pre-agreed operational and financial performance targets will be included in biannual reports to the Bank (para. 3.18); (f) that the project will be executed, and the system subsequently operated in accordance with sound environmental practices (para. 2.31); and (g) that the Environmental Assessment for the South line and the TIP-Timbi link be submitted to the Bank as well as State and Municipal Authorities (para. 2.40). 4.2 The Convenio Basico satisfactory to the Bank and completion of final engineering and technical specifications of works and goods for the first year of the program were submitted to the Bank during negotiations. 4.3 The following is a Condition of Loan Effectiveness: the registration of the Loan Agreement by the Central Bank (para. 3.14). 4.4 The following are Conditions of Disbursement for the South line and the TIP-Timbi link respectively: (a) the approval by the State and Municipal environmental authorities of the Environmental Assessment of the South line and evidence that the license to build has been issued by those authorities (para. 2.40); (b) the approval of the Environmental Assessment for the TIP-Timbi link by the State and Municipal authorities and the granting of the necessary licenses for the works (para. 2.40). 4.5 Dated covenants to be included in the Legal Agreements are: - 27 - (a) Decentralization and Operational Efficiency: (i) that the transfer of STU-REC will be completed by the target date of December 31, 1996 or when 60 percent of the loan funds have been disbursed, whichever date is earlier, in accordance with a phased program previously agreed with the Bank (para. 3.9); {ii) that not later than June 30, 1996 PE establish or designate a juridically independent public corporation (the PE Entity) with sufficient powers and authority to accept the transfer of STU-REC and to own and operate all assets included therein. That PE not later than December 1 5 each year after the Transfer and until December 15. 2001, execute agreements with the PE Entity, satisfactory to the Bank (the Contract Plans), including specific performance targets for the following fiscal year and the financial contributions and other actions required from the State to enable the PE Entity to attain such targets. (para. 3.8); (iii) that CBTU will actively pursue actions to meet the agreed basic performance targets until the transfer of STU-REC and cooperate with the PE Entity thereafter to achieve the agreed targets until the end of the project by ensuring that the implementation of the project is on schedule (para. 3.16). (b) Financial Policy and Modal Integration: (i) that prior to the transfer of STU-REC to the State, the GOB will be responsible for the cost of capital investments plus debt service (interest and amortization) of the STU-REC incurred before the transfer and the costs of the proposed Loan (para. 2.21); (ii) that during the period up to December 31, 1996, the GOB: (a) will cover the difference between the working costs and operating revenues of the STU-REC; and (b) that after the transfer is effected, the GOB operating subsidy (shortfall between operating revenues and working expenses) to the PE Entity will be discontinued (para. 2.21); (iii) that the CBTU and PE undertake to ensure completion of the financing mechanisms study (under terms of reference approved by the Bank) at least one month before the Mid-term Project Review, so that an Action Plan on the agreed recommendations can be prepared (para. 2.12); and (iv) that not later than 1 2 months from the date of signing of the Loan Agreement, PE will present a plan (financial, technical and institutional) and a timetable, satisfactory to the Bank, for the transfer, integration and consolidation of the municipal and metropolitan bus system with the STU-REC (para. 2.12). (c) that a Mid-term Project Review will take place 24 months after effectiveness to review pre-agreed institutional, operational and financial performance indicators, and compliance with covenants (including tariffs, subsidies, and progress on studies) of the Loan and Project Agreements, to assess project performance and progress on decentralization, and as necessary, agree on remedial actions. Particular importance will be given, during the Mid-term Review, to the agreed working ratios and the status of the studies and action plans required to ensure a smooth transfer (para. 3.1 7); and - 28 - (d) Private Sector Participation: the State shall cause the PE Entity, starting no later than one year after the STU-REC transfer is effective to issue at least four invitations to bid, satisfactory to the Bank, for the exploitation of trains, station space, aerial space above stations, parking terminals, automatic fare collection and other investments (para. 2.42). 4.6 Retroactive Financing of up to US$10 million equivalent (10 percent of loan funds) is recommended because certain project activities for expenditures made after March 31, 1995, such as preparation of final engineering designs, will have to be undertaken immediately. Claims for retroactive financing would have to be made no later than three months after loan effectiveness. 4.7 Recommendation. With the above Agreements and Conditions, the proposed project would be suitable for a Bank loan of US$102 million equivalent, to be repaid in 15 years, at the Bank's standard variable rate, with a grace period of five years and loan amortization based on level repayments of principal. - 29 - ANNEX 1 BRAZIL RECIFE METROPOLITAN TRANSPORT DECENTRALIZATION PROJECT BANK ASSISTANCE TO THE URBAN TRANSPORT SECTOR IN BRAZIL AND LESSONS LEARNED 1. This Annex outlines the Bank's past support for the Brazilian urban transport sector and the experience gained. The lessons learned can be summarized as: (a) the coordination between the three levels of government in urban transport should be dealt with very carefully at the project preparation level and reviewed in detail during the Mid-term Project Review; (b) policy for the sector should be strengthened to minimize distortions resulting from inefficient physical and financial coordination between modes and to promote multi-modal integration; (c) the tariff levels should allow for significant cost recovery of working costs and should be complemented by financing mechanisms which cover the shortfall; (d) demand levels are often overestimated and should therefore be carefully scrutinized; and (e) more attention should be given to the management of infrastructure maintenance. A. First Urban Transport Project (Ln. 1563-BR, US$88 million, May 1978) 2. Project Objectives. The objectives were to: (a) finance investments that would improve urban transport services, with emphasis on the provision of public transport, especially to the poor; (b) promote and support the development and implementation of appropriate urban transport policies; and (c) strengthen municipal, state, and federal capacity to prepare, appraise, and execute sound urban transport projects. 3. Project Content. The project was broad in scope and included traffic engineering and management measures in central urban areas and at critical points, the introduction of exclusive bus lanes and segregated busways, widening of critical links, or construction of missing links in the road network, reorganization or construction of bus terminals, paving of bus routes in low-income areas, and training, technical assistance and institutional strengthening to improve the delivery of transport services. Project beneficiaries included five metropolitan regions (Belo Horizonte, Curitiba, Porto Alegre, Recife and Salvador). Nine different agencies were involved in implementation and overall coordination was the responsibility of Brazilian Urban Transport Company (EBTU). 4. Implementation Experience. The project experienced various delays due to: (a) lack of institutional support to the cities from EBTU, and Government changes in 1 979 wnich led to staff changes in the various implementing agencies; (b) the preparation of final engineering designs and tendering; (c) land acquisition; (d) availability of counterpart funds; (e) local level coordination; and (f) quality control of the works. The closing date for the project was extended twice, resulting in implementation period changing from three years to five years and nine months. This suggests that the appraisal schedule estimate was overly optimistic. Even so, the implementation period was still substantially shorter than both worldwide and LAC region profiles which were above eight years. The only specific covenant not met was the one requiring the five municipalities to take the necessary steps to revise the valuation for tax purposes of properties whose values had been affected by the project. In the early stages of the project, EBTU staff were less forceful than expected in solving local problems and bringing difficulties to the attention of decision-makers. It must be recognized, however, that EBTU was in its formative stages. This was a first project for them and there was a learning process involved. As part of this process, and in order to achieve institutional improvement, EBTU prepared several operational manuals to assist in the appraisal and supervision processes. These manuals and the experience gained by EBTU (and the Bank) provided the basis for the development procedures applied in the Third Urban Transport Project (1981), which did much to improve the quality and efficiency of EBTU's operations. -30- ANNEX 1 5. Results. The project was timely and helped to focus the Government's growing concern about urban transport problems. The support given to the institutional development of EBTU, following its creation in 1 976, improved federal-level urban transport planning. The project was successful in providing improved urban transport services, particularly public transport to serve the poor. The OED concludes that "the project was successful in implementing some of the most imaginative and radical bus priority measures carried out anywhere in the world. These experiences have relevance for Bank-financed urban transport projects worldwide." The bus priority measures included the development of the bus corridor concept. Bus corridors were designed to accommodate passenger demand levels which were difficult to satisfy by conventional bus services. Schemes involved segregated busways introduced into the existing road system, facilities for passengers and pedestrians, bus system reorganization (usually trunk/feeder), traffic management measures and integrated bus fare systems. The project was also generally successful in providing institutional support at the metropolitan region (MR) level where there has been a significant improvement in the capacity of the agencies to tackle urban transport issues. The success was most particularly noted in those cities in which plans for future urban transport investments existed, not necessarily financed by the Bank, which provided the scope for continued institutional support. Finally, the studies and institutional strengthening financed under the project, coupled with the successful implementation of the physical components, have led to policy changes affecting urban transport in Brazil as whole and, in particular, have resulted in increased emphasis on public bus transport and greater attention to cost-effective policies of traffic management. 6. Sustainability. Institutional, technical and financial resources are required to sustain the types of investments included in the First Urban Transport Project. Although there were some institutional and technical weaknesses, the project clearly provided support to strengthen EBTU and the local agencies. In the case of EBTU, this support was continued in the Third Urban Transport Project. The major constraint with respect to sustainability has been the lack of provision for cost recovery, or other funds to cover maintenance of the physical schemes implemented under the project. The failure to make provision for maintenance of the investments is seen in practically all the city projects. 7. However, the project had a substantial institutional impact overall. It assisted EBTU at a critical and formative stage of its development, by providing strong technical and financial support, which enabled it to play a catalytic role in transport improvements in urban areas. EBTU subsequently took increasing responsibility in the appraisal and supervision of Bank-financed urban transport projects, a process which began with the five metropolitan regions included in the First Urban Transport Project, and which culminated with full responsibility for appraisal and supervision of eleven of the fourteen urban centers included in the Third Urban Transport Project. 8. The institutional support resulting from the technical assistance and studies, coupled with the experience gained generally from the successful implementation of the physical components included in the First Urban Transport Project, have led to urban transport policy changes which affect Brazil as a whole. These include more emphasis on traffic management, on the provision of public bus transport, and on the functioning of coordinating bodies at the local level to implement urban transport policy. B. Second Urban Transport (Porto Alegre) Project (Ln. 1839-BR, US$159 million, June 1980) 9. Project Objectives. The objectives were: (a) to establish a new company to own, manage, and operate a suburban rail mass transit system on a commercial basis without operating subsidies; (b) to achieve a significantly more efficient modal distribution of traffic and use of all transport facilities in the metropolitan region's North-South corridor; and (c) to promote the -31 - ANNEX 1 development of selected employment growth poles in the North-South corridor near urban railway stations. 10. Project Content. The project consisted of the construction of a surface suburban rail mass transit system using electric unit trains between the central business area in Porto Alegre and the municipality of Sapucaia, 26.7 km to the north, the establishment of a new company to own, manage and operate this service, and a complementary program of policies and studies. 11. Implementation Experience. Despite some serious problems of procurement, passenger services started in March 1985, one year after the originally planned starting date. The railway company, TRENSURB, was successfully established and during the course of project implementation changed its nature from a construction organization to a railway operating company. The Project Closing Date was extended once by one year to December 31, 1986. 12. Results. The Project Completion Report sums up well the principal lessons: (a) It is not sufficient that the railway service has been successfully implemented. The success of the project depends upon the service attracting sufficient passengers to make the investments economically viable and the railway profit- able. This will be highly contingent upon the resumption of economic growth in Porto Alegre and in the evolution of the fares for the users of alternative transport modes. In addition, the attractiveness of the system would be enhanced by the implementation of the recommendations of the studies carried out under the project (bus integration, car parking restrictions, etc.). (b) One major lesson to be learned from this project is that, in cases in which there is a need for substantial policy decisions and the implementation of measures involving different Government agencies subject to conflicting pressures, their commitment should be realistically assessed during project preparation. The steps to ensure that these policies are implemented on time should be carefully identified at the same time. In the particular case of the Second Urban Transport Project, a more detailed action program including specific policv implementation targets and appropriate measures for its enforcement should have been agreed upon during appraisal. (c) Regarding the original objective of TRENSURB covering its working costs, the appraisal was unrealistic to expect that this would take place during the initial operation period. Only after the system has demonstrated its reliability to the users, will the application of a revenue maximizing policy be feasible. In the meantime, TRENSURB should review its staff needs in order to streamline costs and carry out a tariff study to determine the optimal user charges. The Bank should closely follow-up the implementation of these tasks in the context of its ongoing and future involvement in the sector and continue to impress upon the Government the benefits to be gained from a financially healthy public enter- prise as well as the existence of tools much more effective than transport subsidies to achieve income distribution objectives. - 32 - ANNEX 1 C. Third Urban Transport Project (Ln. 1965-BR. US$90 million, March 1981) 13. Project Objectives. The objectives were: (a) to improve the quality and efficiency of EBTU's operations through changes in its structure, procedures, and staff allocation; (b) to improve transport infrastructure and operations in 14 medium-sized cities and conurbations (AGLURB); and (c) to pave bus routes in low-income areas in medium-sized cities, state capitals, and metropolitan regions {termed PROPAV). 14. Project Content. The project consisted of three subprojects: (a) the institutional subproject included EBTU's reorganization, training, technical assistance and studies; (b) the AGLURB subproject consisted of the establishment and operation of an urban transport management unit in each of the 14 cities and various components in low-cost improvements to existing urban transport infrastructure, with emphasis on public transport operations and improvements of planning and operation of urban transport infrastructure and services at the local level; and (c) the PROPAV subproject included the paving of about 850 km of bus routes in low-income areas. 15. Implementation Experience. Project implementation delays were experienced as a result of numerous political changes, limited counterpart funds, the transfer of EBTU to the Ministrio de Desenvolvimento Urbano (MDU) from the Ministerio dos Transportes (MT) and, soon thereafter, the Federal Government's Economic Package, which delayed the signing of the 1986 Convenios by about six months. The project was amended twice, which included the addition of four cities to the AGLURB subproject and of 350 km of bus routes in low-income areas to the PROPAV subproject, and resulted also in an extension in the implementation period from four years and three months to five years and nine months. EBTU was in compliance with all loan covenants. 16. Results. The AGLURB subproject has done much to create a realistic and effective transport planning environment in Brazilian medium-sized conurbations. The design of the physical components drew heavily on the successful experience of the First Urban Transport Project. Emphasis of the project was placed on cost-effective, traffic management-based schemes in which assistance to public transport (buses) has been the primary objective in the majority of components. The institutional development of the AGLURB areas was achieved through the establishment of management units specifically to coordinate project implementation. Transport companies were formed to coordinate transport planning and operation. Retention of the management units would depend on decisions by individual cities, but selected personnel would be transferred from the management units to the transport companies. At the time of project completion, the implementation delays arising from the political, financial, and organizational factors meant that comprehensive ex-post evaluations were not yet available. As with the First Urban Transport Project, there is a risk that the institutional gains may not be sustained unless a flow of funds is made available to AGLURB cities to continue purposeful transport planning. 1 7. The PROPAV program was innovative and was a significant step in EBTU's development. PROPAV was essentially a subsectoral component and EBTU was responsible for all aspects of the program. The program utilized local materials and labor-intensive construction methods to the maximum practical extent, with the result that the costs were initially overestimated. This permitted a greater than targeted program to be undertaken, and to date all 850 km of paving have been implemented. The PROPAV program is regarded as a highly successful program. To an extent, the success of the program is demonstrated by the fact that similar paving programs have been undertaken in other countries in Latin America. 1 8. The institutional strengthening comprised two main aspects: (a) EBTU reorganization; and (b) training and studies. The reorganization of EBTU proposed under the Third Project was completed in 1 984. In general, the reorganization was judged to have increased EBTU's - 33 - ANNEX 1 effectiveness. However, with the changing demands arising from federal government policy on decentralization and from the needs of the Fourth Urban Transport Project, additional changes were considered necessary. 1 9. The training program comprised a conventional approach (of courses, seminars, etc.) to transport planners and an imaginative training program for bus operators and personnel. The latter program has been successful in lowering bus operating costs, reducing accidents, and improving public acceptability for bus services. 20. The general delays in project implementation affected the commencement of the studies proposed for inclusion in the project. Furthermore, EBTU did not initially give high priority to the studies. However, in the last year of the project, the study program was revised and additionally provided inputs to the preparation of the Fourth Urban Transport project. In particular, the Financial Study enabled EBTU to form a policy for on-lending, the vehicle operating cost study (carried out by GEIPOT) provided data for incorporation in the EBTU Operations Manual (OM), and the bus information system program (SITURB) furnished an initial data base for evaluating bus operating costs. D. Fourth Urban Transport Project (Ln. 2822-BR, US$200 million, May 1987) 21. Project Objectives. The objectives were: (a) improve the operating efficiency of the urban transport systems in the nine metropolitan regions (MRs) through savings in transport costs and time; (b) seek to pass savings from improvements in the urban transport systems on to users, many of whom were among the urban poor, in the form of lower tariffs and/or improved levels of service; (c) conserve energy and encourage substitution of diesel fuel by promotion of domestic energy sources, wherever economically justified; (d) strengthen the role of financial aspects in urban transport policy; (e) strengthen the major institutions, in particular for coordinated investment planning for the sector as a whole; and (f) increase the responsiveness of transport planning to local needs. 22. Project Content. The proposed project would have financed components selected from EBTU's rolling urban transport investment plan (1986-1 990) in Brazil's nine MRs (Belo Horizonte, Belem, Curitiba, Fortaleza, Porto Alegre, Recife, Rio de Janeiro, Salvador and S3o Paulo). Components would include a Corridor Program, comprising investments, including design and supervision, to improve public transportation (mainly bus systems, but also some trolley bus and ferry systems) and to correct weaknesses in road networks. The Corridor Program would include infrastructure (including extensive rehabilitation and reconstruction), traffic management measures and supporting organizational improvements; and a system-wide Maintenance Program, including civil works, equipment, the establishment of maintenance management systems, and institutional strengthening. The project would also finance a sector-wide Institutional Program which would involve EBTU, MRs, MDU, and CBTU. This component would include technical assistance and training for improved planning and operational practices, studies and organizational measures to strengthen and improve sector coordination, financial planning and urban transport policy development and pilot technological development programs. 23. Results. There was a considerable delay in declaring the project effective. Institutional problems at the level of the Federal Government resulted in a very poor environment for the project's implementation. The Fourth Urban Transport Project was canceled when the EBTU was abolished by the Government in 1 989. -34- ANNEX 1 E. Silo Paulo Metropolitan Transport Decentralization Project (Ln. 3457-BR, US$126 million, September 1992) 24. This project was signed in September 1992, became effective on February 1 993, and its Closing Date is June 30, 1 996. The project is underway and several major institutional hurdles, such as a federal law to transfer the assets of all the CBTU subdivisions from the Federal to the State Governments, have been overcome. The rehabilitation of CBTU-SP, the Sao Paulo subdivision of the CBTU, is underway. Sao Paulo established a new company (CPTM) to take over the decentralized CBTU-SP and also the FEPASA metropolitan train. So far, the main problems of the project have been associated with problems at the Federal level, including delays in the opening of the special account, and several changes in ministers and their immediate advisors. These constant changes delayed the signing of conv6nios which regulate the transfer of operations and assets. The actual takeover of CBTU by CPTM took place on May 27, 1994. The project is now disbursing very well and some of the infrastructure and equipment components have been completed. As of February 21, 1995, 68 percent of the total project cost had been committed. F. Rio de Janeiro Metropolitan Transport Decentralization Project (Ln. 3633-BR, US$128.5 million. October 1993) 25. This project was signed in October 1 993, became effective on March 14, 1 993 and its Closing Date is December 31, 1997. Most of the bids for track work and rolling stock rehabilitation are underway. The actual decentralization which involved the takeover of CBTU-Rio de Janeiro by the State of Rio de Janeiro, and took place on January 1, 1995. As of February 21, 1995, 40 percent of the total project cost had been committed. G. Conclusions and Lessons Learned 26. Despite the considerable achievements of the First Urban Transport Project and the success of the Third Urban Transport Project, the projects have led to the conclusion that several specific issues in the urban transport sector require attention and should be addressed within the context of overall sector reform. The main issues are discussed below. 27. Cost Recovery. Direct cost recovery is difficult in the urban transport sector, other than for self-financing infrastructure and passenger vehicles and vessels. Therefore, transportation infrastructure investments (urban and interurban) conventionally recover costs indirectly through transport-related taxes. In the First Urban Transport Project, it was envisaged that partial cost recovery would take place by the revaluation of properties whose values were affected by the project. No such revision in valuation, however, has apparently taken place in any of the five MRs, partly because of the difficulties in assessing an increase in property values through the low-cost improvement schemes provided under the project, when alternative policies or conditions encourage the provision of essential municipal infrastructure, at little or no cost to the beneficiaries. In retrospect, the project should have also addressed the indirect cost recovery mechanisms. 28. Maintenance. Lack of maintenance is clearly a problem in each of the five MRs in the First Project, and is now apparent in the components implemented early in the Third Urban Transport Project. Problems apply to a wide range of components. Maintenance covenants were included in the agreements for both projects, but this has proved an ineffective mechanism for ensuring adequate maintenance levels. While there is increasing awareness of the problem and while improved maintenance standards are an objective of the Federal Government. there is a need to develop an institutional and financial framework and capability to provide the necessary funding and to carry out the appropriate maintenance. In hindsight, this problem probably reflects the limitation of addressing narrow sectoral issues, in isolation of a broader policy framework for the urban sector as a whole. - 35 - ANNEX 1 29. Bus Regulation. There has been a trend in some cities toward the creation of integrated bus systems, controlled and regulated by a central, public authority. The central authority plans the system and contracts with operators to provide services according to standard cost schedules. "Excess revenue" is taken from operators on profitable routes to cross subsidize those operating unprofitable routes. The feeder/trunk concept may make this increased regulation easier to achieve. There are several areas of concern. First, there are signs that the determination by the central authority of all operating parameters is tending to lead to standardized solutions which may stifle innovation and reduce passenger choice. Second, the contribution of the private sector is limited. Third, the needs of the passenger do not always receive adequate attention; for example, feeder/trunk systems force passengers to change buses and in cases where full integration has not been achieved, passengers can be worse off since they have to pay twice and are further inconvenienced by the change. A thorough review of the regulatory framework is urgently required, to ensure improved accessibility, greater equity and efficiency, and a stronger role for private sector operators of public transport. H. Lessons Learned and the Proposed Recife Metropolitan Decentralization Transport Project 30. The proposed urban transport project is the seventh to be considered in Brazil. Thus, there is considerable "in-country" experience to draw upon. In addition, the design of the proposed project has attempted to recognize the findings and experience from similar projects outlined in this Annex. The main features of the proposed project which respond to the lessons learned are described in the following paragraphs. 31. Institutions. A successful institutional arrangement will be the key to project success and project sustainability. In the past in Brazil, there has been little incentive for cities/municipalities to undertake cost-effective transport planning and investment. Cities have been starved of resources for transport investment. The expansion of the Recife Regional Transport Coordination Commission (RTCC) will be a major advance. In addition to insuring that major projects are in line with an approved integrated air quality, land use and urban transport strategy, RTCC's key role will be to facilitate service and tariff integration between the several modes. It is expected that no urban transport project in Recife will be considered in the future by the Bank without prior approval by the RTCC. 32. To further support the long-term development of traffic and transport planning, the project will include funding for the preparation of an Integrated Air Quality, Land Use and Urban Transport strategy and the updating of the metropolitan data base. Staff from participating implementing agencies will benefit from this work. 33. Counterpart Funding. In Brazil, lack of timely counterpart funding is often the main cause of delays in project implementation. Several steps were taken to mitigate this problem. As a condition of negotiations, GOB indicated in writing that counterpart funds for the proposed project will be available. Although an analysis of the State finances reveals that the sources of funds exist, the challenge will be to ensure that they are available when the system is decentralized to cover in a timely fashion the operating deficit of the system. 34. Implementation Schedule. Long implementation, and thus slow disbursements, have been problems in previous projects. This may be traced to: (a) Lack of familiarity of local staff with Bank procedures. A training program is proposed but training programs take time for benefits to be realized and, even then, there is no substitute for practical application. CBTU's PIU has gained -36- ANNEX 1 considerable experience with the ongoing S3o Paulo and Rio de Janeiro Metropolitan Transport Decentralization loans (Lns.3457-BR and 3633-BR). (b) Uncertain political commitment. The expansion of the RTCC's responsibilities gives grounds for confidence that all levels of government of the metropolitan region are committed to the project. During preparation the level of support was excellent. (c) Lack of final engineering designs for physical works. It is proposed that participating agencies should have the first year of final engineering designs (including bidding documents) available at negotiations. 35. Environment. In the past, urban transport projects with the exception of the Mexico Transport Air Quality Management Project (Ln. 3543-ME) and the Teheran Transport Emissions Reduction Project (TF 028642-GET) have had few or no specific measures to improve air quality project. The proposed project contains an Air Quality and Traffic Safety component which together with the infrastructure components is expected to set the foundations for further development in those areas in the Recife Metropolitan Region. - 37 - ANNEX 2 BRAZIL RECIFE METROPOLITAN TRANSPORT DECENTRALIZATION PROJECT PROJECT COORDINATION AND EXECUTING AGENCIES 1. The overall coordination and supervision of the proposed project rests with the CBTU which has established a Project Implementation Unit (PIU). To assist CBTU to carry out its obligations, the PIU will be supported by a Project Management and Implementation Consultant (PMIC). CBTU will be the implementing agency for all components but will be helped in some cases by the State/Municipal Agency in charge of the specific area addressed by the component. Table 2.1 Implementing Agency for Each Component Component Implementation Assisting Agency Agency PART A - Infrastructure and Equipment CBTU CBTU PART B - Environmental and Safety CBTU Part B1 - Air Quality subcomponent CBTU CPRH Part B2 - Traffic Safety and Control subcomponent CBTU DETRAN PART C - Institutional Development and Policy CBTU EMTU 2. All procurement will be the responsibility of CBTU and will be carried out by the PIU until the completion of the proposed project. - 38 - ANNEX 2 Figure 2.1: Flow of Funds Federal Government IBRD _ Commercial National Bank Treasury I CBTU Figure 2.2: Legal Agreements IBRD Loan Prjc hareholder's Agreement Agreement Agreement | Federal | T | | Convenio Government Basico Fi g.re Z 3: M lamgnt nd Cooperat i an Arrangments - 39 - ANNEX 2 MT F|C I GOVERNO ESTADO coNSELHO SNT -- - - - - - - - - - - - - - - - - - - - - - -- - - SECRETARIAS DIFETOR cmJ FEP -rmrAN 'Jr IVOS FEDERAL ESTADUJAL ~~~TRATACAO~~MNIORCA I~~~~~~~~~~~~~~~~~~~cN. , I GO C DIRETORIA -TECNICA I~~~~~~~~~~~E~+A hXLNAO COORDENIACO I DA ------------------------------------ FEDERAL ESTADUAL rABI 1LITA(;40_= NUCLEO DE PLANEJAMENTO CONTRATACAO PRtOGRAMACAO CENTRALIZADA E CONTROLE NUCLEO DE COOPOENAr,40 COORPDENACAO -- - - - - - -- -- - - - --- - --- --DA DE REC IFE DESCENTRALIZACAO SISTEMA F I |FNANCE IR Pt H I NST ITUCIONAL| 1 | ~~~~~~~~~~~PATR I MONI i o IJU[DICA OBRAS I ~-- ------------ - ---------|-I- PtECURSOS I C I,VIS e |L ENGENHAR IA F_ 1 FrANO |DEENVINTG E | EDACAO E I |MEIO MBIENE F HCONSOLIDACAO0 I - 40 - ANNEX 3 BRAZIL RECIFE METROPOLITAN TRANSPORT DECENTRALIZATION PROJECT REGIONAL TRANSPORT COORDINATION COMMISSION A. Institutional Responsibilities for Urban Transport in the RMR 1. The Recife Metropolitan Region (RMR) has 13 municipalities: Recife, Cabo, Moreno, Jaboatao, Paulista, Sao Lorenco, Olinda, Igarassue, Abreu e Lima, Itamaraca, Camaragibe e Ipojuca. Al. Development Council for the Recife Metropolitan Region (CONDERM) 2. In the 1 994 the State of Pernambuco established the Development Council for the Recife Metropolitan Region (Conselho de Desenvolvimento de Regiao Metropolitana do Recife, CONDERM), as part of the Planning State Secretariat. CONDERM functions are to: (a) define the activities, investments and sectors which are in public interest of the RMR; (b) establish policies and guidelines for development of the RMR and targets for the performance of services; (c) stimulate integrated action of public agencies, with the objective of ensuring efficiency in the promotion of development of the RMR; (d) discuss plans, programs and projects of interest to the RMR, as well as the proposals contained in these plans; (e) supervise the execution of public functions in the RMR; (f) channel to the competent authorities the proposals for public functions, including recommendations on: (i) the establishment of normative, administrative and technical instruments necessary for the development of the RMR; and (ii) the basic metropolitan guidelines to be considered in the Laws of the Multi-year plans, Budget Guidelines, and Annual Budgets. (g) deliberate on the institution of planning instruments amongst which are the Development Plan, the Sectoral Master Plans, the Sub-Regional Plans, the Metropolitan Information System, and the Metropolitan Financing System; (h) deliberate on the Annual Investment Program and the Annual Budget Proposal for the Development Fund of the RMR (FUNDERM); (i) maintain a system to continue sharing information with City Halls and the Legislative Assembly about activities in the metropolitan administration; and (j) deliberate about the inclusion of other areas of activity of common public interest. - 41 - ANNEX 3 A2. Metropolitan Transport Chamber 3. CONDERM established in 1994 the Metropolitan Chamber of Transport (Camara Municipal de Transportes) and defined its functions which apply except for those which are the responsibility of the State Council of Transport (Conselho Estadual de Transportes, CET) and the Metropolitan Council for Urban Transport (Conselho Metropolitano de Transportes Urbanos, CMTU). Among the functions of the Camara Metropolitana de Transportes are to: (a) give its views on the proposals for planning and operational guidelines for the metropolitan transport infrastructure system and its integration with the municipal/local networks. (b) cooperate from the technical standpoint in the planning and setting of operational guidelines for the several modes of transport; and (c) suggest the establishment of operational parameters for the freight transport system, especially in its terminals. 4. The CMTU was established in October of 1985 with the following functions: (a) evaluate and set the policies and guidelines applicable to the RMR insofar as tariffs are concerned; (b) introduce guidelines and general norms for the Deliberative Council of the RMR insofar as the STPP is concerned; (c) propose policies and general guidelines for the EMTU\Recife insofar as transport is concerned in the RMR; (d) give an opinion on the work progress and to monitor the performance of EMTU\Recife; and (e) promote the integration of activities and services undertaken by the bodies and entities which are part of the Chamber, as well as the interface with other components of the levels of government, directly or indirectly related to the transport system. 5. CMTU is composed of: • The Secretary of State for Transport (President) v The Secretary of Planning of the State (Vice-President) * The President of EMTU\Recife. * The Mayors of the RMR (3) v The Superintendent of the Legislative Assembly * The Representative of the MREC * Representatives of the other municipalities (2 on a rotating basis) * The Superintendent of the CBTU * The President of CTU • The President of the Union of Bus Transport Companies (SETRANS) • The President of the Union of Bus Operating Personnel 4 Representatives of the Communities (3) - 42 - ANNEX 3 * The President of the Commercial Association or of the Federation of Industries of Pernambuco (on rotating basis). A3. Empresa Metropolitana de Transportes Urbanos (EMTU) 6. It is the responsibility of EMTU\Recife to: (a) exercise the powers which were attributed to the State to discipline, delegate and supervise the operation of services which integrate the system; (b) control the performance of the several modes in the system; (c) define in detail the networks for the modes which are part of STPP\Recife; (d) administer and coordinate terminals and yards, public and private, which are part of the system; (e) promote the technical and operational upgrading of the staff and operation companies of the STPP; (f) propose and execute the tariff policy for all the modes which are part of the system; (g) give its opinion about the economical, technical and financial feasibility and priority of the projects dealing with services to the public and the transport infrastructure system; (h) apply the penalties established for non compliance with the services contracted with the companies operating the STPP; and (i) execute the services related to its functions which were delegated to the state by the Federal and Municipal governments. 7. Basically EMTU\Recife serves as the planning secretariat for CMTU which is actually a type of RTCC. What the proposed project would like to achieve is the inclusion of the Recife branch of CBTU in the EMTU rather than just its participation as an observer. B. Present Financing Mechanisms for Urban Transport in the RMR 8. The RMR has basically four modes in operation: (a) diesel buses; (b) electric buses (trolleybus); (c) electric train (CBTU-METROREC); and (d) diesel train (CBTU-South line). 9. The diesel buses serve basically all the RMR and the trolleybuses are concentrated in Caxanga Av. with expansion forseen to highway PE-1 5. - 43 - ANNEX 3 10. The STPP\RMR carries 34.5 million passengers per month of which 89 percent are by diesel bus, 3 percent by trolleybus, 7 percent by Metro and 1 percent by diesel train. The financial administration of the diesel bus system is made through a clearing house (Ca^mara de Compensacao Tarifaria, CCT) managed by EMTU\Recife. The trolleybuses have a separate accounting. The METROREC and the diesel train are also administered separately by CBTU, they are not included in the CCT. 11. In the case of diesel buses the overall revenues are roughly US$9.5 million\month. The main sources of financing are: (a) the integral tariff paid in cash by the user; (b) the revenue received with the sale of the vale-transporte; and (c) the revenue obtained with the student pass at 50 percent of the integral tariff. 12. There are non-operational revenues which come from: (a) revenues due to the financial application of money obtained with the sale of the vale-transporte and the Student Pass; and (b) revenues from tickets which are bought and are not utilized. 13. The non-operational revenues are now 7 percent of operational revenues, but depends on the interest rate. The revenues with the diesel bus system cover 95 percent of the total cost of the system. The trolleybus system does not have a strict cost spreadsheet as the diesel system has, and they are operated by the public operator CTU. EMTU believes that the trolleybus operation covers its operating cost (without depreciation). The METROREC and the diesel train operated by CBTU cover only 1 5 percent of their operating cost (without depreciation). The CBTU tariff is equal to the lowest bus tariff. The deficit is roughly US$2.4 million\month and is paid by the Federal Government. 14. The main challenge for the STPP\RMR and EMTU will be to integrate in its CCT the train system once it is complete, and find additional extra-operational sources of revenues to help offset the deficit. The depreciation and cost of capital should be part of multi-year programs included in the budget which should be funded either by general tax revenues or earmarked revenues. C. Transformation of EMTU into a Regional Transport Coordination Commission (RTCC) 1 5. To facilitate coordination of investment and operation among the major providers of urban transport services, the proposal to create a regional coordinating body is being given priority. This would not be a new level of government and would not usurp the powers of the State or the Municipality. It would provide a forum, however, to formally review all proposals with respect to their compliance with an agreed-upon transport strategy, evaluate alternatives, and make recommendations based on a regional, intermodal point of view. The RTCC would include representatives of the Governor of the State and Mayors of the RMR, in particular the Mayor of the Recife Municipality, as well as STU- REC, DER-PE, DETRAN and bus operators association and those agencies responsible for municipal and regional planning. An Executive Secretariat in charge of actually developing and/or evaluating proposals and carrying out day-to-day activities would be established. RTCC would be responsible for developing an integrated urban transport, and air quality strategy for the RMR compatible with the land use policies jointly developed with the land use agencies of the RMR. - 44 - ANNEX 3 16. The following questions must be asked when defining the functions of the RTCC: (a) How are transport plans prepared, and how often are they updated? Is a single entity responsible for their preparation across all modes (highways, metro, suburban rail, bus/busways) and the entire region, or are separate plans prepared by the respective municipalities, building and operating companies and then put together by a coordinating agency? (b) Who monitors the condition and performance of the transport systems, and how do the results of the monitoring feed into the planning process? (c) What is the relationship between the transport plan(s) and the respective land use plans developed by the municipalities? (d) What is the relationship between the plan(s) developed under question (a) above, and the multi-year capital program developed by the various implementing authorities? Is the project flow top-down (i.e., emanates from the plan), bottom-up (generated by the implementers/operators), or both? and (e) Do the various operating companies have direct access to funding or should their capital budgets be approved either by the PE or the new RTCC? 17. It was agreed that EMTU will ensure that bus routes will be re-routed to the stations of the system and that such re-routing will occur as each link of the South line and the TIP-Timbi becomes available for operation. It was also agreed that EMTU will curb the use of clandestine bus operations especially if they serve routes parallel to the rail lines. Finally, it was agreed that the State should not later than 12 months after signing, submit evidence to the Bank that STU-REC or its successor will be included as part of EMTU and that financing mechanisms are in place to ensure coverage of the PE Entity's operating subsidy if any. Figure 3.1: Institutional Framework of the Urban Transport Sector in RMR Federal Government State Municipality Sec. of Transport Transport, Energy Prefeitura Ministry and Communications Metropolitan CBTU Transport Council (C MTUIJ Municipal Bus STU-REC EMTU ( Company (CTU) - 45 - ANNEX 4 BRAZIL RECIFE METROPOLITAN TRANSPORT DECENTRALIZATION PROJECT PRIVATE SECTOR PARTICIPATION IN THE PROJECT A. Background 1I. In an effort to increase private sector participation in the project, CBTU has met with the Chamber of Commerce, associations of civil works contractors, equipment manufacturers and real estate specialists. The latter indicated that they are interested in exploring mechanisms for developing real estate in and around the stations and have initiated a series of meetings with CBTU and STU-REC personnel to examine the most suitable sites. In general, the associations indicated that there is a need for some changes in municipal legislation to capitalize on the additional floor space created by new buildings in the aerial space of the right-of-way and surrounding areas. 2. Although there are at least two projects for the development of shopping areas and for apartment buildings, the participants indicated that they are reluctant to commit themselves until they see some progress in the works of the South line. The general consensus was also that in view of the very high cost of credit to buy houses, it is unlikely that there would be a substantial number of buyers. Participants asked the pre-appraisal mission whether the Bank could help with housing credits as it was done in previous urban development loans. The representatives of the associations indicated that they are interested in exploring mechanisms to develop real estate in and around the stations and asked STU-REC personnel to provide them with more detailed data on the most interesting sites. They also indicated that in the past the long delays in the completion of STU-REC works made any substantial investments in real estate in the surrounding areas very risky. Bank financing of the proposed project changes the picture and will create incentives for private sector participation but they want to wait until the project is in progress. B. Recommendations 3. To examine the financial instruments which can encourage private participation in the construction and operation of selected parts of the mass transit systems, CBTU has created a high- level working group of entrepreneurs and financiers. Many aspects of this program appear to be appropriate for private or joint public/private development, which could result in considerable savings. Station development is the most obvious, but consideration should also be given to leasing of some existing stations and transfer points for private sector development and operation. Disposition of excess railway land and air rights would also be explored. CBTU has invited a high-level group, including respected outsiders such as elected officials, investment bankers, prominent developers, civil works contractors, and Chamber of Commerce representatives, to explore this as well as other ways to "capture" some of the added value of railway real estate development and prepare proposals for inclusion in the program. 4. Since the project involves a decentralization and therefore a change of asset ownership, it was agreed that any concessions to the private sector should be made preferably after the transfer of ownership. On the basis of the above, it was agreed between CBTU and the Bank that to foster the participation of the private sector in the system, the State/Municipality shareholder's agreement will contain a clause which will require that the State cause the PE Entity to issue at least four invitations to bid for private sector exploitation of trains, station space, aerial space, parking areas, automatic ticket collection and other areas within a year of the transfer. - 46 - ANNEX 5 BRAZIL RECIFE METROPOLITAN TRANSPORT DECENTRALIZATION PROJECT INFRASTRUCTURE AND EQUIPMENT COMPONENT 1. General. The CBTU Recife sub-division system (STU-REC) has a network of 52.5 km of trackage (map IBRD 26915) organized in two corridors which converge near the Recife downtown area: (a) the Central line inaugurated in 1 985, is electrified, with 20.5 km of double, broad gauge (1.60 m) track dedicated exclusively to passenger services; it consists of a 10 km line from Recife to Coqueiral which continues with 6.5 km to Jaboatao. From Coqueiral it diverts 4.0 km to TIP (Integrated Passenger Terminal), the main bus terminal for intercity traffic; and (b) the 32-km South line is used for both the operations of RFFSA's freight services and STU-REC's diesel services for passengers. It is composed of 21 km of double, one meter gauge track, which starts at the Recife downtown station and goes to Pontezinha, then continues with 11 km of single track to Cabo. The overall project has been designed to foster intermodal integration of both lines with the bus network and to provide for separation of passenger services from RFFSA's freight traffic. It consists of the extension of the STU- REC electrified system from TIP to Timbi and from Recife to Cajueiro Seco in the Central and South line respectively. In addition, it includes the relocation of the existing 1.00 m gauge track from Afogados to Cajueiro Seco, for exclusive dedication of RFFSA's freight traffic, and the duplication of the track from Pontezinha to Cabo. A brief description of the investments included in the project is presented in the next paragraphs. 2. Civil Works. A summary of the main works is shown in Table 5.1 and described below: (a) Urban Bus Terminals. This program is designed to improve the intermodal integration of the STU-REC system with urban buses serving the metropolitan region, and entails the construction of three terminals in the Central line and seven in the South line. The terminals will facilitate and speed up the transfer of passengers between bus and rail modes thus minimizing overall passenger trip times. They consist of bus roadways, parking and passenger queuing areas and are an integral part of the rail stations. This component, including contingencies, has been estimated to cost about US$6.6 million or about 3 percent of the total cost of the project. (b) Road Accesses. This project component aims at improving the road access to selected stations in both lines, as well as redirecting road traffic in the area of influence to the stations. The proposed works amount to about US$3.6 (including contingencies) or about 2 percent of the total cost of the project. (c) Passenger Stations. The existing 1 7 passenger stations in the Central line were built during the period 1983-1 985, and are functional, of modern design, well maintained, and can cope with the existing and projected passenger demand. There are ten stations in service on the South line. The passenger stations program calls for the construction of the Timbi station in the Central line and ten new stations and modernization/enlargement of two existing stations (Recife and Joana Bezerra) on the section Recife-Cajueiro Seco. In addition, five stations on the section Cajueiro Seco-Cabo would be subject to minor rehabilitation. This component envisages expenditures of about US$32.3 million (including contingencies) or 1 6 percent of total project cost. (d) Bridges, Road Viaducts and Pedestrian Over/underpasses. The entire right-of- way of the STU-REC system in the Central line is fenced and is not subject to - 47 - ANNEX 5 road traffic interferences. In contrast, the diesel service provided in the South line has several at-grade crossings and the toll on pedestrian safety and train reliability is high. This program is designed to eliminate these problems by constructing 1 6 bridges, 4 road viaducts, and 1 0 pedestrian over/underpasses. The cost of these works has been estimated at about US$17.1 million (including contingencies) or 8 percent of total project cost. (e) Workshops. The STU-REC network is served by strategically located workshops and depots to provide overall maintenance and heavy overhaul facilities. They are located at Cavaleiro (for the electric multiple units (EMUs) fleet) in the Central line, Werneck (for diesel locomotives) and Cinco Pontas (for passenger coaches). From site visits to these facilities, it can be noted that some re- equipping and a expansion of Cavaleiro workshop is needed to cope with the maintenance requirements of the 25 units that would be operating once the project is completed. Facilities for the maintenance of the systems (catenary, sub-stations, automatic ticketing equipment, signaling and telecommunications, laboratory electronics, etc.) and permanent way equipment, wash track, wheel turning facilities, storage for spare parts, and an administration building are located at Cavaleiro workshop. The workshop program includes: (i) the construction of an additional area in the Cavaleiro workshop for the major overhaul and future maintenance of EMUs; (ii) construction of a maintenance shed for the diesel locomotives at Cajueiro Seco. The proposed works amount to US$1 .0 million (including contingencies) or 0.5 percent of total project cost. 3. Permanent Way. The double, broad gauge (1.60 m) track in the Central line has its right-of-way fenced and is laid with 57 kg/m welded rails. Sleepers are monoblock of prestressed concrete with elastic rail fastenings laid on crushed stone ballast. The track is in good condition and permits speeds up to 90 km/h. The track in the South line is laid with 45 kg/rails, bi-block concrete sleepers with elastic rail fastenings and crushed stone ballast. The track is in poor to fair condition. The Permanent Way program included in the project entails: (a) Central line. The construction of a 4.5 km electrified, double, broad gauge (1.60 m) track extension of the Central line, from TIP terminal station to Timbi. A double track with maximum grades of 2 percent and minimum radius of 300 m, would be built with the same standards as the existing main line and laid with 57 kg/m welded rails, monoblock prestressed concrete sleepers with elastic rail fastenings and crushed stone ballast. These works also include the construction of fences along the new right-of- way, and of a 1 km by-pass to separate RFFSA's freight line to Ago Norte installations. The realization of these works would demand the relocation of the existing high voltage transmission lines, which belong to the energy companies CHESF and CELPE and are currently located in their right-of-way, to a new pathway in a neighboring area; and (b) South line. The program entails: (i) the construction of a 13.5 km of double broad gauge (1 .60 m) electrified track, from Recife to Cajueiro Seco with the same standards as the Central line, including a fenced right-of-way, with a maximum grade of 1 percent and a minimum radius of 300 m, allowing speeds up to 90 km/h. To carry out these works, provisions have been made for the necessary land expropriations and resettlements to build 500 m of tracks, linking the Central with the South line at Recife and Joana Bezerra stations; (ii) the reallocation of 11 km of one of the existing 1.0 m gauge track from Afogados to Cajueiro Seco, for exclusive dedication of RFFSA's freight traffic; and (iii) the construction of 11.0 km of a second 1.0 m gauge track from Pontezinha to Cabo, this section would continue to be diesel operated for RFFSA's - 48 - ANNEX 5 freight and CBTU-REC passenger services. The proposed works have been estimated to cost about US$38.5 million (including contingencies) or 19 percent of the total project cost. 4. Systems. A summary description of the systems currently operated by CBTU-RE and related components included in the project are presented below: (a) Electrification. For the Central line the electric energy generated by CHESF is transmitted to sub-stations owned by the concessionaire CELPE which in turn feeds five sub-stations for the operations of the STU-REC system. The network of overhead contact lines with power supplied at 3.0 kV DC is well maintained. The energy is provided through five sub-stations strategically located in the Recife, Ipiranga, Coqueiral, TIP and Jaboatao areas. There are three section cabins to reduce the effects of voltage drops and sectionalize the line. The entire system is telecommanded through the operational control center (CCO). Presently the electric systems are well maintained. This program includes: (i) Central line: (a) two circuit breaker feeders for the catenary system; (b) 4.5 km of 13.8 kV transmission lines; (c) 4.5 km of overhead catenary (double line) of 3 kV DC; and (d) relocation of feeder lines at Cavaleiro yard; and (ii) South line: (a) the installation of 14.5 km of overhead catenary (double line) with 3 kV DC, and motorized switches, and 13.5 km transmission lines of 13.8 kV; and (b) the construction of two sub-stations at Castelo Branco and Cajueiro Seco, and two sectionalizing cabins at Afogados and Armindo Moura; and the relocation of various equipment from existing sub-stations (Jaboatao, TIP, Ipiranga and Coqueiral) and two existing cabins (Alto do Ceu and Cavaleiro). The cost of the proposed program has been estimated to cost about US$16.2 million (including contingencies) or 8 percent of total project cost. (b) Signaling. The existing signaling system in the Central line which includes the following components: Ci) Centralized Traffic Control (CTC) which allows a Central Operator to set routes for trains by controlling eight remote interlocks and to monitor headways and train positions; (ii) Interlocking Relays consisting of eight signaling relay rooms located at selected passenger stations to confirm the vital interlocking relaying circuits for the traffic safety of STU-REC's trains and allow local control of switches in case of failure in the link to CTC; and (iii) Automatic Train Control (ATC) consisting of special equipment such as transmitters along the track and a cab signaling system on board the EMUs to control train speeds within safety limits. The signaling system is in good working condition. The traffic in the South line is radio controlled. The proposed signaling program would include the installation of: (i) a system with the same characteristics as the existing signaling system operating in the Central line for the TIP-Timbi extension; and (ii) for the South line: (a) track circuits, relay rooms in the stations, code transmitters along the line and remote boxes in the CTC; (b) facilities at the Operation Control Center for CTC and control of sub-stations; and (c) eight automatic level crossing barriers. This component has been estimated to cost US$26.8 million (including contingencies) or 13 percent of total project cost. (c) Telecommunications. The telecommunications in the Central line are carried out by a special underground cable along the right-of-way. A radio system, links the CCO with trains, stations, and maintenance workshops. In addition, the system provides telephone communications for general administration and - 49 - ANNEX 5 operations and also supports clock and public address sub-systems in the stations. All communications are recorded. Telecommunications in the South line are worked through bare open-wire lines which are unreliable, fault-prone, and exposed to weather conditions. They are subject to vandalism and theft, requiring continuous repairs and the reinstallation of wires in sections that are stolen. The proposed project would include the installation of: (i) a telephone exchange system; (ii) a telecommunication system for the TIP-Timbi section, with the same characteristics of the existing system operating in the Central line; and (iii) a new telecommunication system for the South line consisting of: (a) 13.5 km of fiber optic cable and a VHF radio network; (b) public address system, ticketing control, clock and track telephone sub-systems; and (c) a radio communication sub-system at five stations in the Cajueiro Seco-Cabo section. The cost of this component has been estimated at US$5.0 million (including contingencies) or 2.5 percent of total project cost. 5. Workshop Equipment. The project includes the provision of miscellaneous equipment for the maintenance of the track and catenary. The cost of this component has been estimated at US$2.7 million (including contingencies) or 1 percent of total project cost. 6. Rolling Stock. The existing passenger train fleet or Electric Multiple Units (EMUs) of STU-REC in the Central line, consists of 25 broad gauge (1.60 m) units with nine years in service. Each unit is composed of four cars (two with motors and two trailers). The units are of stainless steel, have 61 and 72 seats (cars with motors and trailer cars respectively) with a maximum capacity of 1,278 passengers per EMU. Their main characteristics are 276 kw per engine (2.2 Megawatts), electric controlled, 3 kv overhead feeder, and dynamic brakes all designed to run at a maximum speed of 90 km/h. Currently, there are 1 2 units operating in service. This is an average availability of 70 percent, which is low when compared with international standards (90 to 92 percent availability). The EMU fleet has never been subject to general overhauls. Each unit has as an average of 1.2 million travelled km. This fact, together with deferred routine maintenance, is affecting the reliability of their performance. STU-REC has a fleet of 13 diesel locomotives (900 HP) for the passenger traffic in the South line which have been in service since 1958 and 41 ex-RFFSA's coaches, in service since 1957, originally designed for long distance passenger service. The train composition consists of one locomotive and four to five coaches. Because of the lack of spare parts, obsolete maintenance practices, and some old plant equipment with high operating costs, the locomotive and coaches availability is at a low 60 percent and 66 percent respectively. In general, the current situation of the locomotive and rolling stock fleet is in a precarious situation. The rolling stock program aims at improving the availability and reliability of STU-REC entire fleet and includes: (a) the general overhaul of 11 diesel locomotives; (b) the rehabilitation and modernization of two diesel locomotives; (c) the general overhaul of 25 EMUs; (d) the installation of air conditioning systems in the EMUs; (e) the rehabilitation of 21 passenger coaches for the diesel service; and (f) the provision of selected spare parts for the entire fleet. The cost of this component has been estimated at US$28.0 million (including contingencies) or 14 percent of total project cost. 7. Engineering Designs. Final engineering designs for the infrastructure works (track works, civil works including fencing of the right-of-way, stations, integrated terminals, road accesses, bridges, viaducts and pedestrian over/underpasses) required for the extension of the system from TIP to Timbi and for the South line sections Recife-Cajueiro Seco and Cajueiro Seco-Cabo are well underway. Related documentation needed for the bidding process together with technical specifications are scheduled to be available in July 1 995. The technical specifications for the provision of the electrification, signaling, and telecommunications systems, maintenance equipment, and rolling stock are programmed to be available by June 1995. -50- ANNEX 5 8. Supervision. The project includes the provision of consultants (2,475 staff/months) for the implementation and supervision of each of the project components mentioned above. The cost of these services have been estimated at US$6.0 million (including contingencies) or 3 percent of total project cost. - 51 - ANNEX 5 Table 5.1: Main Civil Works Staion Nv. Conrtruiton Enl"monit Rir Acceo Trn* WBi" Vd Umn dp (a) CENTRAL LINE 1 2 TIMBI X - AFOGADOS X BARRO X SANTA LUZIA X (b) SOUTH LINE 12 3 8 RECIFE/CAJUEIRO SECO 10 2 8 RECIFE X X X JOANA BEZERRA X X LARGO DA PAZ X X PINHEIROS X X IMBIRIBEIRA X X SHOPPING X X TANCREDO NEVES X X X BOA VIAGEM X X X PORTA LARGA X X MONTE GUARARAPES X X PRAZERES X X X CAJUEIRO SECO/CABO 2 1 CAJUEIRO SECO X X X ANGELO DE SOUZA X PONTEZINHA X PONTE DOS CARVALHOS X SANTO INACIO X CA BO X I_I Table 5.2: List of Workshop Equipment Item Quantity Estimated Cost (US$'000) Tamping Aligner and Leveling Unit 1 1,400 Motorized Rail Car and Tower 1 450 Motorized Rail Car and Crane 1 450 Total a/ 2,300 a!/ Without contingencies. Figure 5.1: Distance teween Stations ANNEX 5 SO UTH I N E STATION DISTANCE BETWEEN STATION - km D REC I FE 1.31 D JOANA BEZERRA D LARGO DA PAZ PINHEIROS D IHMBIRIBEIRA 0.70 Li SHOPPING Li TANCREDO NEVES 1. 30 Li BOA VIAGEM 1.50 Li PORTA LARGA Li MONTE DOS GUARARAPES 1.04 Li PRAZERES 1.12 Li CAJUEIRO SECO D I ESEL EXTENSION LINE Li CAJUEIRO SECO 3.85 L0iJ ANGELO DE SOUZA 3.20 L J PONTEZINHA Li PONTE DOS CARVALHOS 7.60 Li SANTO INACIO 1.60 LLJ ~~~~~~~~~~~~~1.60 L-iJ CABO Li EXISTING STATIONS L NEW STATIONS L STATIONS TO ADAPT -53- ANNEX 5 Figure 5.2: Distance Between Stations CENTRAL LINE STATION DISTANCE BETWEEN STATION - km D REC I FE 1,31 ELi JOANA BEZERRA Ei AFOGADOS :~~~~~~~~~~~~~~~~~0 O81 D IPIRANGA Li MANGUEIRA Lo SANTA LUZIA 0,73 :_ ~~~~~~~~~~~~0,73 EDGARD WERNECK mi BARRO 1,12 - . ~~~~~~~~~~~~1,23 Xi TEJIPIO 0,91 COQUEIRAL CAVALEIRO Li ~~~~~~~~~~~~2, 97 Li FLORIANO 1,41 1, 41 Xi ENGENHO VELHO ; ~~~~~~~~~~~~~~~~~1, 12 JABOATAO BRANCH -LINE COQUE I RAL/T IMB I .1 COQUEIRAL Li ALTO DO CEU - ~~~~~~~~~~~~~1,03 CURADO 1,42 L TIP (RODOVIARIA) 4,70 D } TIMBI D EXISTING STATIONS NEW STATIONS D STATIONS TO ADAPT - 54 - ANNEX 6 BRAZIL RECIFE METROPOLITAN TRANSPORT DECENTRALIZATION PROJECT ENVIRONMENTAL AND TRAFFIC SAFETY COMPONENT A. Overview 1. This section describes the environmental and traffic safety component of the proposed project which includes: (a) the design of a vehicle inspection and maintenance program; and (b) the development of a comprehensive traffic management and control program for the RMR with emphasis on the area of influence of the STU-REC. In addition, the proposed project includes studies and technical assistance to support improvements in motor vehicle emissions control and the development of an integrated transport/environmental strategy for the RMR. 2. The electrification of the South line and the construction of the TIP-Timbi link would result in direct and indirect benefits concerning air quality. Direct benefits would result from the reduction in auto and bus traffic due to the new train links; the design of an inspection/maintenance program will set the foundations for the implementation of a comprehensive program which will be the first step towards curbing vehicle emissions in the RMR. The development of a traffic management, control, and safety program would also have a beneficial effect on vehicle emissions and accidents, especially in and around existing at-grade crossings which would be grade separated. Indirect air quality benefits would result from the development and implementation of an integrated transport and air quality strategy, and from strengthening of vehicle emissions planning, regulation, and enforcement. B. Environmental Sub-Component 3. Inspection and maintenance (I/M) serves two purposes in a vehicle emissions control program. First, it helps to identify vehicles in which maladjustments or other mechanical problems are causing higher emissions than necessary. Second, it ensures that the emission control equipment on vehicles so equipped remains in place and operational, so that the emissions benefits of that equipment are realized. The first purpose applies mostly to older vehicles without emission controls; for emission- controlled vehicles, the second is much more important. An effective l/M program is essential to ensure that the emissions benefits projected for the adoption of new vehicle emissions standards are actually attained. The project finances the design of an l/M program and will recommend how the l/M program can be implemented through concessions to the private sector. C. Traffic Safety Program 4. The objective of the traffic management component is to design and put in place a number of traffic management and safety policies and investments which, when coupled with the rail and air quality component, will enhance the quality of public transport, reduce congestion, and greatly improve safety. 5. The Traffic management component of the proposed project would comprise the design of: (a) the Traffic Control subcomponent; and (b) the Traffic Safety subcomponent. They are described below in detail. - 55 - ANNEX 6 Cl. Traffic Control Subcomponent 6. Semi-actuated Traffic Lights. Electro-mechanical "old style" traffic light controllers make coordination among separate locations difficult without interconnections. In some locations the causes of accidents have been traced to this limitation. Such is the case, for example, with the intersection between a main road with high traffic volume and a very low volume secondary road, which however presents significant flows at peak periods. During off-peak hours, long periods of red for the main road, without a corresponding traffic flow from the side street, often prompt drivers to "go through" the red light, which will eventually lead to an accident. It is estimate that 95 percent of the locations across the city area require replacement of the existing traffic signal controller by a semi-actuated model, with loop detectors, which will be able to adequately handle demand variations throughout the day. Twenty other unsignalized intersections require implementation of semi-actuated traffic light systems, some with a cycle that will include phases to accommodate pedestrian crossing movements. C2. Traffic Safety Subcomponent 7. Traffic Management and Safety. An important objective of the project is to reduce congestion and improve safety. A new traffic signal system is proposed. However, a more definitive safety program needed to be defined to complement the on-going efforts of the Municipality. As a minimum, this program includes: (a) a description of current safety activities; (b) identification of most serious accident locations and their deficiencies, and selection of those to be included in the project; (c) definition of a program to specifically address the high rate of pedestrian accidents; Id) approximate costs and implementation schedule to correct the deficiencies in (b) and implement the program in (c). Identify the agency responsible for implementation of the program(s); and (e) prepare designs for any civil work required. This program is summarized in documents which were submitted to the Bank and the proposed component was based on that program. C3. Policy Issues 8. The importance of appropriate policy measures to achieve the ultimate objective of reducing the rate of motorization in RMR and consequent delays, pollution, and excessive use of fuel was emphasized by the Bank. DETRAN will develop an action plan and TOR for studies which call for (among other issues identified in the appraisal process) the following: (a) a parking policy and implementation plan which correctly charges for the use of valuable downtown space for "automobile storage" and provides a disincentive for people to drive to the central area rather than use public transport. This implies the need for a comprehensive, safe and comfortable public transport system into which the public and private sector are currently investing hundreds of millions of dollars. The action plan calls for specific - 56 - ANNEX 6 implementation of the recommendations of the parking plan by the third or fourth year of the project with some measures beginning earlier; (b) pricing mechanisms which will ultimately be the only real deterrent to continued automobile traffic growth in the central area. Experience throughout the world indicates that the effect of metros is temporary if at all; the metro provides the alternative mode which allows appropriate pricing and provides some disincentive to drive into the central area. Without the ultimate achieve- ment of a reduction in the growth of automobile traffic in the city, the investment in the metro is questionable. A pricing policy and plan of imple- mentation is to be developed as part of the project, and implementation will begin as the metro is nearing completion; and (c) frequently circulating vehicles (taxis, buses, government vehicles) contribute to pollution in the city and provide a controllable environment within which to test the value of alternative fuels as a measure of reducing harmful emissions. A pilot program using Compressed Natural Gas (CNG) will be developed and initiated, with the objective of testing the proposal of not allowing buses or taxis to operate in the city center unless they use clean-burning fuels. - 57 - ANNEX 7 BRAZIL RECIFE METROPOLITAN TRANSPORT DECENTRALIZATION PROJECT INSTITUTIONAL DEVELOPMENT AND POLICY COMPONENT 1. This Annex describes the studies and training to be undertaken as a basis for the policy and institutional development action plan. The studies will be divided in three categories: (a) studies which are related only to CBTU; (b) studies to enhance modal integration; and (c) studies which examine the decentralization and financing mechanisms aspects. The training component should contribute to the skill upgrading of staff at all levels through recycling as well as training in-house and abroad. 2. A list of the proposed studies and training is presented below. Draft Terms of Reference for each study were agreed at appraisal and were ready by negotiations. A. CBTU Studies 3. Preparation and implementation of a manpower development and organization plan with staff rationalization. This study will review the organization of each of the new systems by functional area and as a whole. It will provide job descriptions for each of the main posts and a strategy to rationalize the staff. It will review the salary scale and benefits and, based on equivalent positions in the private sector, propose a new salary scale and a chronogram for its implementation. It will also define the training requirements and recycling to be undertaken under the training component. Finally, it will propose a new admissions policy based on needs. 4. Preparation of a cost accounting, tariff, management information systems, and financial management study. At this stage, it is clear that the existing systems need a good costing group which is capable of determining the long-run variable costs of the system and for that purpose separate the fixed costs from the variable costs. In addition, the accounting and finance directorate should be equipped with the required management information systems to allow a timely analysis of the costs. Finally, the Planning Department should be prepared to estimate and operate on a regular basis the tariff schedule, integrated tariffs, multi-trip tariffs, etc., using the information from the cost systems, information from the competitive modes and socio-economic constraints. 5. Preparation of an action plan (and its implementation) to improve the management of stocks. The system should have a computerized inventory management which will allow internal control and prevent lack of spares due to poor programming. This action plan should be implemented soon and will contribute to better rolling stock availability. 6. Preparation of proposals to subcontract maintenance and other operations to the private sector. This study should examine the operational activities which could be subcontracted to the private sector at competitive prices (at least two competing sources) and indicate the staff reductions which can be achieved and potential operating savings if those activities are subcontracted. 7. Action and revenue plan through promotion of station space, advertising and real estate development on CBTU's real estate, and action plan for their implementation. This plan should indicate very clearly what are the non-operating revenues which each of the CBTU new systems can earn through promotion of station space, advertising and real estate development. The study should provide a detailed estimate of income and costs and suggest how the proposed plan should be implemented, i.e., in-house or through outside parties. - 58 - ANNEX 7 8. Marketing STU-REC's Image. STU-REC's image is very poor especially insofar as the South line is concerned. After the system is decentralized, management must undertake a marketing campaign to improve CBTU's image and attract new ridership. This study will discuss proposals to improve CBTU's image, the marketing plan to implement them, and the incentives to attract new ridership. B. Modal Integration Studies 9. A study to update the Transport portion of the Master Plan for RMR with emphasis on route rationalization, modal and tariff integration. The RMR Master Plan should be updated to account for the Municipality of Recife's Master Plan and recent changes in land use. Basic guidelines for the development of future systems must be prepared. 10. Feasibility study and preliminary design of integration terminals in the RMR, with identification of private sector participation. Modal integration is one of the main priorities of this project. In the RMR, the lack of integration terminals has not facilitated modal integration. Exploration of integration terminals by the private sector may induce rerouting of buses to the railway stations, thereby reducing congestion. This study will examine main integration terminals in the RMR and identify opportunities for their management by the private sector. C. Financing Mechanisms 11. Financing mechanisms study with recommendations on how to cover operating deficits and capital investment, action plan and chronogram for implementation. This study will identify the financing mechanisms available and those proposed to cover the operating subsidies and capital investment requirements of STU-REC. Federal, State and Municipality contributions should be clearly identified. The study should make concrete recommendations and prepare a draft of Decrees to be discussed by the State legislature to provide the funds required. The study should also discuss how these funds should be allocated and the role of the RTCC in assigning these subsidies. 12. EMTU strengthening. This study will recommend how EMTU's functions should be expanded to include the rail mode and will make concrete recommendations on how EMTU will interact with the STU-REC. D. Decentralization Studies 13. Preparation and implementation of a plan to hand-over STU-REC, including the legal, financial and institutional arrangements. This study will produce a detailed action plan for the transfer of the CBTU subdivision to the State. In the action plan, all legal, financial and institutional arrangements to be undertaken at each step will be identified. Preparatory work, such as inventory of assets of STU-REC, will be done at this stage. E. Management Information Systems 14. This component is intended to provide each of the new CBTU system with the basic software and hardware required to perform the needed accounting, financial management and planning functions. -59- ANNEX 7 F. Training 15. Training will take place at all levels of the organization as proposed in the recommendations of the Manpower Development studies. The training may consist of in-house, on-the- job training, or visits and courses abroad in specific areas. G. Implementation Program 16. Policy and Institutional Development Action Plan (a) Decentralization Action Plan of the STU-REC System. In carrying out the decentralization of the System, CBTU and the State shall: {i) not later than September 30, 1996 complete a study and an action plan for the transfer of the STU-REC System to the State. In the action plan, all legal, financial and institutional arrangements to be undertaken, as well as the inventory of assets of STU-REC, will be included (CBTU, State); (ii) not later than September 30, 1 996 complete a study which will determine the long-run variable costs of the STU-REC System, using the most appropriate methods available, and will propose the creation of a data base for more accurate costing and recommend a tariff system which is cost-based and takes into account modal integration and affordability issues (CBTU, State); (iii) not later than October 31, 1 996 complete a study and an action plan for the setting up of a cost accounting system and management information systems for the STU-REC System (State, CBTU); (iv) not later than October 31, 1 996 complete a study on the financing mechanisms required to cover operating deficits and capital investment and propose an action plan and chronogram for their implementation in the STU-REC System. Federal, State and Municipal contributions should be clearly identified (CBTU, State); and (v) not later than October 31, 1996 complete the preparation of contract plans between STU-REC or its successors and the State. This study is intended to prepare a detailed contract plan document with basic performance and financial targets and note the obligations of each of the parties (State). (b) Management Action Plan of the STU-REC System. In carrying out a management action plan to improve the performance of the System, CBTU and the State shall: {i) not later than June 30, 1996 prepare and implement a manpower development and organization plan to streamline the management and operations staff in STU-REC, to propose concise job descriptions and to staff them accordingly (State, CBTU); (ii) not later than June 30, 1 996 prepare and implement an action plan to improve the management of stocks for STU-REC which will include a - 60 - ANNEX 7 computerized inventory management to improve internal control and prevent lack of spares due to poor programming (State, CBTU); (iii) not later than December 31, 1996 prepare and implement an action plan to subcontract maintenance and other operations to the private sector. This study should examine the operational activities which could be subcontracted to the private sector at competitive prices (at least two competing sources) and indicate the staff reductions which can be achieved and potential operating savings if those activities are subcontracted (State, CBTU); (iv) not later than December 31, 1996 prepare and implement an action and revenue plan through promotion of station space, advertising and real estate development for the STU-REC. This plan should indicate clearly what are the non-operating revenues which STU-REC can earn through promotion of station space, advertising and real estate development. The study should provide a detailed estimate of income and costs and suggest how the proposed plan should be implemented, i.e., in-house or through outside parties (State); and (v) not later than December 31, 1996 prepare an action plan to market the STU-REC. After the system is decentralized, management must undertake a marketing campaign to improve the STU-REC System's image and attract new ridership. This study will discuss proposals to improve the System's image, the marketing plan to implement them and the incentives to attract new ridership (State). (c) Modal Integration Action Plan of the STU-REC system. In carrying out the modal integration component of the project, the CBTU and the State shall: (i) not later than March 31, 1996 complete a study and plan of action to integrate STU-REC and the bus system. CBTU's integration with the bus system is an objective already set by the State. This study will propose alternatives for the physical, organizational, and financial merger of the two systems. It will make recommendations to the State on how to proceed with the merger (State, CBTU); and (ii) not later than December 31, 1 996 complete a study to update a proposed master plan for integration of transport services in the RMR (the Master Plan) with emphasis on route rationalization, modal and tariff integration. The Master Plan will be updated to emphasize the integration between buses and the rail system. If need be, an origin- destination traffic survey will also be included. Basic guidelines for the development of new systems and integration terminals must be outlined. (d) Training Action Plan of the STU-REC system. In carrying out the training action plan of the project, the CBTU and the State shall: (i) not later than June 30, 1 996 initiate a training action plan at all levels of the STU-REC organization taking into account the recommendations of the manpower development and organization study. -61- ANNEX 8 BRAZIL RECIFE METROPOLITAN TRANSPORT DECENTRALIZATION PROJECT DETAILED PROJECT COSTS, PROCUREMENT AND DISBURSEMENT ARRANGEMENTS (see following pages) Table 8.1: Detailed Cost Estimates IUS$ millions) Bnmikdown of Cost Quantky Unk Base Cost Total lkichcSs Cm*ksguicIs hskx*N2g Contksgsncl.s Paunetife Un.L Cost Forulgp Lomal Duties Ptiy For Tax 1995 11996 1997 1999 1999 200,0 2001 TOTAL (US$) 1995 1996 1997 1998 1999 2000 2901 TOTAL 1995 1996 1997 1993 1999 2900 2901 TOTAL Con . Cor . Taxes 1% % 1% I - STUDIES AND PROJECT m.mon 60.00 50.00 110 2,000 0.12 0.10 0.00 0.00 0.00 0.00 0.00 0.22 0.13 0.11 0.00 0.00 0.00 0.00 0.00 0.25 0.00 0.10 0.03 10 35 12 2 -LAND EXPROPIRIATIONS % 40% 40% 20% 1 7,000,000 3.12 3.12 1.56 0.00 0.00 0.00 0.00 7.90 3.51 3.50 1.84 0.00 0.00 0.00 0.00 9.93 0.00 0.03 1.07 10 0 12 3 - RELOC. TRANS. LINES % 50% 50% 1 ,0,0 .5 18 .0 0.00 0.010 0.00 0.00 3.70 2.00 2.12 0.00 0.00 0.00 0.00 0.00 4.20 1.47 2.73 0.50 1 0 35 1 2 4 - CML WORKS 0.72 5.90 13.70 14.33 0.70 4.53 1.33 00.30 0.81 0.70 10.24 17.30 12.00 5.75 1.73 60.00 21.21 30.39 7.27 4.1.- URBAN BUS TERMINAL un 2.0O 4.00 3.00 1.00 10 540.000 0.00 0.00 1.00 2.16 1.62 0.54 0.00 5.40 0.00 0.00 1.27 2.61 2.00 0.68 0.00 6.57 2.30 4.27 0.70 10 35 12 4.2 - ROAD ACCESS % 40% 40% 20% 1 3,000.000 0.00 0.00 1.20 1.20 0.00 0.00 0.00 3.90 0 00 0.00 1.41 1.45 0.74 0.00 0.00 3.00 1.26 2.34 0.43 1 0 35 1 2 4 3 -STATIONS I 80 4 50 4.50 3.60 2 70 0.90 10 1.477.778 0.00 2.00 6.65 6 65 5.32 3.00 1.33 26.60 0.00 3.05 7.63 0.03 6.50 5.00 1.73 32.29 11.30 20.00 3.07 10 35 12 4.4 -BRIDGES AND PE0.0 Of 1.00 4.00 6.00 6.00 3.00 20 720.000 0.72 2.90 4.32 4.32 2.10 0.00 0 00 14.40 0.01 3.31 5.00 5.21 2.67 0 00 0.00 17.09 5.06 11.11 2.05 10 35 12 4.5 -WORKSHOPS in 0.00 1.20 2 5,0 .00 0.36 0 54 0.00 0.00 0.00 0.00 0.90 0.00 0.41 0 64 0.00 0.00 0.00 0.00 1.05 0.37 0.60 0.13 10 35 12 5-PERMANENT WAY 07 .2 79 .6 72 .3 01 22 .9 61 .3 1.1 90 5.1 - INFRASTRUCTURE Ikm 1.50 6.00 9.00 9.00 4 50 30 520,667 0.79 3 17 470 4 76 2.30 0.00 0.00 15.86 0.99 3.64 5.60 5.74 2.94 0.00 0.00 19.92 6.50 12.24 2.26 10 35 12 5.2- SUPERSTRUCTURE .0 21 317 47 4. 13 .0 1.4 00 246 33 56733 ' SERVICES -km 4.35 5.90 9.70 0.70 1.45 20 70,090 0 00 0.00 0.31 0.41 0.62 0.62 0.10 2.605 0 00 0.00 0.36 0.49 0.76 0.79 0.13 2.53 0 85 1.65 0.30 10 35 12 'MATERIALS kmn 4 35 5.00 0.70 0 70 1 45 29 492,759 0.00 2.14 2.06 429 4.29 0.71 0.00 14.29 0.00 2.6 33 .0 03 .1 00 721 12.91 4.30 2.93 10 75 17 6-SYSTEMS 0.00 1.83 6006 1099 9.70 7.12 2.91 39.32 0.00 2.10 8000 13.27 12.01 9.03 3.05 4.4 2.1 1.3 71 61 -ELECTRIFICATION 0 00 1.19 3.04 4.54 2.50 1.30 0.20- 13.46 0.00 1.37 4.29 5.48 .0 16 .6 62 .2 64 2.02 * CATENARY ___0.00 1 19 I 89 2 70 2.59 1.30 0.20 9.95 0.00 1.37 2.23 330 3.20 1.04 0.26 12.00 7.57 4.49 1.93 INSTALLATION kmn 2.05 3.90 0.70 4.75 1.90 19 105,700 0.00 0.00 0.30 0.40 0.60 0.50 0.20 2.01 0 00 0.00 0.36 0.49 0.7 06~4 06 24 0.7 1.62 0.0 10 35 12 MATERIALS k_ In 205 300 5.70 4.75 1.50 1 _9 0417,995 0.00 119 1 59 2.30 1.99 0.70 0.00 7.94 0 00 1.37 1.07 2.90 2.46 1.01 00 9.0 67 297 13 10 70 17 ' SUESTATIONS 0 00 0.00 1.76 1.70 0.00 0.00 00 3.1 00 .0 20 .2000 0.00 0.00 4.19 2.24 1.94 0.50 0 INSTALLATION I _ 00 1 00 2 1,029,000 0.00 0.00 1.03 1 03 0.00 0.00 0.00 2.06 0.00 0.0 11 12Z.0 00 .0 245 0.56 1 60 0.29 10 35 12 MATERIALS _ i1.00 1 00- 2 726.000 0.00 0.00 0.73 0 73 0.00 0 00 0.00 1.45 0.00 0.00 0.96 0098 0.00 0 00 0.00 1.73 1.39 035 0.29 10 00 17 6.2 - SIGNALING ___ ____0.00 049 2.04 5 31 6.04 4.95 2.41 21.73 0.00 0.6 29 4 .4 .9 31 682 16.04 10.79 3.91 ' INSTALLATION kmIa 0.00 3.00 5 40 4.50 300 10 609,444 0.00 0.00 0.60 2.41 .3.62 3.01 2.41 12.95 0.00 0.00 0.71 2091 4.47 3.02 3.13 15.04 6.02 9.03 1.91 10 40 12 'MATERIALS In 0 90 3.00 5.40 4.50 3.60 19 537.770 0 00 0.40 1.94 2.90 2.42 1.94 0.00 9.69 0.00 0.56 2.20 3.51 2.99 2.46 0.00 11.79 10.02 -1.77 2.00 10 95 17 6 3 - TELECOM ~~~~~~~~~~~~~~0.00 016 0.69 1.14 1 09 0.00 0.20 4.13 0.00 0.19 0.00 1.30 1.34 1.11 0.25 5.00 3.75 1.31 0.90 ' INSTALLATION ___ Inn 0.90 3.060 0.40 4.00 23.00 19 8 54.4 44~ 0.00 0 00 0.05 0.20 0.29 0.25 0.20 0.99 0.00 0.00 0.00 0.24 0.30 0.31 0.25 1.22 0.49 0.73 0.15 1 0 40 1 2 ' MATERIALS kan 090 300 5 40 4.50 3 60 19 175.000 0.00 016_ 0.63 0.95 070 0.63 0.00 3.15 0.00 0.10 0.74 1.14 0.07 0.00 0.00 3.64 3.20 0.50 0.60 10 95 17 7 - WORKSHOPS ~~~~~~~~~~~~~~~~~0.00 0.92 1.39 0.00 0.00 0.00 0 00 2.30 0.00 1.00 1.63 0.00 0.00 0.00 5.00 2.69 2.15 0.54 0.49 ' EQUIPMENT _ % 40% 60% 1 2,300,000 0 00 0 92,,13_0 .0 00 .0 23 0.00 1 06 1.63 0.00 0.00 0.00 0.00 2.60 2.15 0.54 0.49 10 00 _17 - ROLLING STOCK1 35 0.29 0.14 3.05 4.29 1.29 0.35 23.56 1.52 7.22 7.23 4.05 5.31 1.64 0 40 26.02 23.96 4.06 4.11 DIESEL (Locomotives loco _____ _ 050 5.20 1.30 1 3 173,0 7 7 0~00 0.00 0 00 0 00 1.13 0.510 0.23 2.29 0 00 0.00 0.00 0.00 1.30 1.14 0.29 2.53 1.00 0.05 0.34 10 70 12 EMUs EMU 2.50 12.50 10.00 _ 25 300.000 0.75 3.70 3.00 0.00 0.00 0.00 0.00 7.50 0.04 4.31 3.53 0.00 0.00 0 00 0.00 9.69 0.00 2.00 1.034 10 70 12 'PASSENGER CANS car 4.20 10050 4.20 2 10 21 60.000 0 00 0.00 0.00, 0.25 0.63 0.25 0.13 1.26 0.00 0.00 0.00 0.30 0.70 0 32 0.16 1.57 1.10 0.47 0.19 10 70 12 SPARE PARTS % 25% 25% 25% 25% 1 55000 0 00, 014 0 14 0.00 0.14 0.14 0.00 0.95 0.00 0.10 0.16 0.00 0.17 0.17 0.00 0.66 0.53 0.13 0.11 10 90 17 'AIR CONDITIONING EMU 1.25 5.00 6 25 7 50 5 00 25 480.000 0.90 2.00 2.40 2.0 .0 000 100 0.67 2.76 3 53 4.35 2.07 0.00 0.00 14.29 14.20 0.010 2.43 10 100 17 9 - INSTITTIONAL DEV_ mrrworI316 00 81700 5104002,000 0.63 1063 1 01 0.00 0.00- 0.00 0.00 32.8 0 71 1.00 1.19 0.00 0.00 0.00 0.00 2.79 1.51 2.27 0.45 10 40 12, 10_- PROJECT MANAI3EMEN m.mon 44.00 90.00 220.00 220.60016.00 00.00 44 00 000 2,500 0.11 0.22 0.55 O.5,4 02 01 .0 01 0.25 0.65 6.0 0.54 0.20 0.14 2.65 0.93 1.73 0.32 1 35 12 I11- SUPERVISION mmonI123.75_24790_010.75 618075 495 00 247.50 123 75 2475- 2.0000.2i5 0.5-s0 124 1.24 099 0.50 0.25 4.95 0.20 0.57 1.46 1.49 1 22 0.63 0.32 5.97 2.09 3.90 0.72 10 35 1 2 TOTAL BASE COST 8~~~~~~~~~~~~~~~~.04 27.07 40.45 40.42 32.41 14.098 4.96 109.83> PHYSICAL CONTINGENCIES 0.09 2.77 4.05 4.04 3.24 1.50 0.49 10.99 Z z SUB TOTAL 9.04 30.44 44.50 44.46 30.69 108.40 0.44 196.91 m PRICE CONTINGENCIES 0.21 1.34 3.1 4 4.33 4.45 2.52 0.90 10.98 0 GRAND TOTAL 10.05 31.78 47.64 48.79 40.10 19.00 6.43 203.90 10.05 31.78 47.64 48.79 40.10 19.00 6.43 203.00 103.40 100.40 27.54 - 63 - ANNEX 8 Table 8.2: Allocation of Loan Proceeds Category Anount of the Loan % of Exp.nditur, to be Finnced Allocated (in US$ Equivalent) (1) WORKS (a) Civil Works and Systems 55,000,000 60% (b) Rolling Stock and Permanent Way 24,000,000 70% (21 GOODS 1,500,000 75% of foreign expenditures and 75% of local expenditures (ex-factory cost) (3) CONSULTING SERVICES AND TRAINING 5,000,000 (a) Training Abroad 100% of foreign expenditures (b) Training in Brazil 50% of local expenditures (c) Consultants 50% of local expenditures for services of consultants residing within the territory of the Guarantor and 100% of foreign expenditures for services of other consultants (4) UNALLOCATED 16,500,000 TOTAL 102,000,000 Table 8.3: Estimated Disbursements (US$ millions) Bank FY 1996 a/ 1997 1998 1999 2000 2001 Annual 12.5 19.5 24.5 22.5 15.0 8.0 Cumu ativ 12.5 32.0 56.5 79.0 94.0 102.0 e a/ Including initial deposits into Special Account totaling USM60 million. - 64 - ANNEX 8 Table 8.4: Schedule of Estimated Disbursements (US$ millions) IBRD FY Semester Estimated Estimated Cumulative Estimated Disbursements per Disbursements Cumulative as % of Semester Total 1996 December 31, 1995 10.0 10.0 10 June 30, 1996 2.5 12.5 12 1997 December 31, 1996 7.5 20.0 20 June 30, 1997 12.0 32.0 31 1998 December 31, 1997 12.0 44.0 43 June 30, 1998 12.5 56.5 55 1999 December 31, 1998 12.5 69.0 68 June 30, 1999 10.0 79.0 77 2000 December 31, 1999 10.0 89.0 87 June 30, 2000 5.0 94.0 92 201 December 31, 2000 5.0 99.0 97 June 30, 2001 3.0 102.0 100 Table 8.5: Procurement Schedule for Major Contracts a/ Contract 1 . . . Componen Vialue .Type o N° of Typeof. Documents BidsVProp. Contract De6livery Iniatio S__._._.________... 4US$ '000) :Contract Contracts Bidding Ready Invited Signature of Goods b/ of Works A - CIVIL WORKS * Lot I 21,096 Works 1 ICB 6/95 7/95 10/95 11/95 * Lot II 11,829 Works 1 ICB 6/95 7/95 10/95 11/95 * Lot III 10,279 Works 1 ICB 6/95 7/95 10/95 11/95 * Lot IV 17,611 Works 1 ICB 11/95 12/95 2/96 3/96 * Lot V 2,936 Works 1 NCB 1/96 2/96 5/96 6/96 * Lot VI 12,798 Works 1 ICB 11/95 12/95 3/96 4/96 * Lot Vll 2,876 Works 1 NCB 1/96 2/96 5/96 6/96 B - PERMANENT WAY * Superstructure | 19,7441 Supp./Works 1 ICB 12/95 1/96 4/96 5/96 C - SYSTEMS * Electrification 12,061 Supp./Works I ICB 5/96 6/96 9/96 10/96 * Signaling 22,475 Supp./Works 1 ICB 5/96 6/96 9/96 10/96 * Telecommunication 2,981 Supp./Works 1 NCB 1/96 2/96 5/96 6/96 D - WORKSHOP * Workshop Equipments | 2,6821 Supply | 4 - 6 ICB 8/95 | 9/95 12/95 1/96 E - ROLLING STOCK * Locomotives 3,169 Supp./Works 1 NCB 9/98 10/98 12/98 1/99 * EMUs 9,003 Works 1 ICB 7/95 8/95 11/95 12/95 *Air Conditioning 14,278 Supp./Works 1 ICB 7/95 8195 11/95 12/95 F -TECH. ASSISTANCE | 11,5041 Services I Several I Other |/ 6/95 | 6/95 9/95 10/95 a/ Items to be financed under the Bank Loan. > z b/ Start of delivery. z m c/ Bank's Guidelines for Selection of Consultants. x 00 - 66 - ANNEX 8 Table 8.6: Implementation Schedule - Estimated Annual Payments (US$ millions) PROJECT ELEMENT PROJECTYEAR TOTAL REMARKS 1995 1996 1997 1998 1999 2000 2001 PAYMENT 1 - LAND EXPROPRIATION 3,506 3,583 1,837 8,926 2 - RELOC. TRANSM. LINES 2,079 2,125 4,204 3 - CIVIL WORKS 1,700 10,417 21,846 23,042 14,946 5,746 1,728 79,425 * Lot I 610 2,786 5,631 5,840 4,353 1,471 403 21,094 ICB * Lot II 420 1,270 3,239 3,321 2,202 1,029 350 11,831 ICB * Lot III 670 974 2,489 3,127 2,048 761 208 10,277 ICB * Lot IV 2,185 4,666 4,777 3,433 1,940 611 17,612 ICB * Lot V 600 834 969 533 2,936 NCB * Lot Vt 2,144 3,851 3,726 2,377 545 156 12,799 ICB * Lot ViI 458 1,136 1,282 2,876 NCB 4 - PERMANENT WAY 2,462 3,728 5,670 6,065 1,686 133 19,744 * Superstructure 2,462 3,728 5,670 6,065 1,686 133 19,744 ICB 5 - SYSTEMS 2,105 8,081 13,272 12,007 9,030 3,647 48,142 5.1 - ELECTRIFICATION 1,368 4,292 5,480 3,202 1,644 261 16,247 * Catenary 1,368 2,225 3,361 3,202 1,644 261 12,061 ICB * Substations 2,067 2,119 4,186 NCB 5.2 - SIGNALING 556 2,990 6,415 7,467 6,276 3,131 26,835 * ATC & RI 466 2,504 5,373 6,254 5,256 2,622 22,475 ICB * CTC & CPC 90 486 1,042 1,213 1,020 509 4,360 NCB 5.3 - TELECOMMUNICATIONS 181 799 1,377 1,338 1,110 255 5,060 * Cable & Radio Network 181 445 650 751 815 139 2,981 NCB * Public Address & Clock Systems 37 64 62 52 20 235 NCB * Ticketing Control System 175 302 293 243 96 1,109 NCB • Telephone Central Station 142 361 232 735 NCB 6 - WORKSHOPS 1,057 1,625 2,682 ICB 7 - ROLLING STOCK 1,517 7,221 7,227 4,650 5,312 1,635 456 28,018 * Locomotives 1,562 1,315 292 3,169 NCB * EMUs 843 4,465 3,695 9,003 ICB *Passenger Cars 304 780 320 164 1,568 NCB * Air Conditioning 674 2,756 3,532 4,346 2,970 14,278 ICB 8 - TECHNICAL ASSISTANCE 1,030 2,241 2,934 2,158 1,769 907 465 11,504 * Projects 135 115 250 * Supervision 278 568 1,457 1,494 1,225 628 322 5,972 * T.A. & Studies 617 1,558 1,477 664 544 279 143 5,282 9 - TRAINING 217 572 364 1,153 * Travel & Expenses 65 171 109 345 * Consultants 152 401 255 808 TOTALS 10,049 31,783 47,642 48,792 40,099 19,004 6,429 203,798 (Bank Financed) (5.0) (15.9) (23.8) (24.4) (20.1) (9.5) (3.2) (102.0) - 67 - ANNEX 8 Table 8.7: Procurement Arrangements (Estimated cost in US$ million) a/ Expenditure Category ICs NCB Other N.B.F. d/ TOTAL COST 1. WORKS Civil Works and Systems 108.15 19.41 13.13 140.69 (56.22) (10.10) (66.32) Permanent Way 19.74 19.74 (12.38) (12.38) Rolling Stock 23.62 1.57 2.83 28.02 (15.03) (1.03) (16.06) 2. GOODS 2.68 2.68 (1.67) (1.67) 3. CONSULTANT'S SERVICES Technical Assistance b/ 11.52 11.52 (5.07) (5.07) Training Travel and Expenses el 0.35 0.35 (0.15) (0.15) Consultants 0.80 0.80 (0.35) (0.35) TOTAL 154.19 20.98 12.67 15.96 203.80 (85.30) (11.13) (5.57) (102.00) a/ Figures in parentheses are the respective amounts financed by the Bank loan. b/ Services to be procured in accordance with World Bank Guidelines: Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency (Washington, DC, August 1981)1. c/ Items not involving procurement. d/ Not Bank-financed. Includes land expropriation, resettlements and rehabilitation of 13 diesel locomotives. - 68 - ANNEX 9 BRAZIL RECIFE METROPOLITAN TRANSPORT DECENTRALIZATION PROJECT ECONOMIC EVALUATION A. Background 1. Separate standard cost-benefit analyses were performed to evaluate the economic impact of the implementation of the proposed South line modernization and extension and the TIP- Timbi link, which together represent 98 percent of the total proposed project. This Annex describes the demand analysis and the set of benefits and costs that have been considered in the economic evaluation, as well as the assumptions adopted regarding key inputs, such as the value of time. Direct user benefits include travel time, operating cost savings, and the investments avoided due to the proposed project; indirect benefits arise from the reduction of negative externalities (accident and air pollution costs). Investment costs comprise civil works, land expropriation, operational systems, rolling stock and project studies. Both benefits and costs are defined as incremental compared to the situation without the project. Throughout the analysis, and for illustrative purposes, the proposed investments were evaluated with and without the accident and air pollution externalities. A more detailed description of the data and assumptions supporting the economic evaluation summarized in this annex can be found in Reports No. 7, 8 and 9 in the Project Files. 2. This economic evaluation estimates the discounted expected present value of the infrastructure investment's net benefits, the expected internal economic rates of return, as well as the expected benefit/cost ratios for a set of discount rates, which includes the 1 0 percent discount rate, which has been defined by SEAIN (Secretary of Planning for the Federative Republic of Brazil), as well by its Commission of External Financing (COFIEX) for the project appraisal of foreign investments. In addition, the sensitivity analysis included in this annex provides an idea of how the economic rates of return would change due to deviations from the value of benefits and costs used in the base case. The analysis is then complemented by a table of impacts of the project which are evaluated on a qualitative basis. B. Choice of a Project Base Case 3. Mass Transit Options. Following current Bank policy recommendations for the appraisal of mass transit investments contained in the Urban Transport Policy Paper (World Bank, 1 986) the proposed investments for the electrification and extension of the South line were compared against a total segregated busway with regular buses, a total segregated busways with articulated buses, and an improved rail diesel service. In all cases, the analyses showed that the proposed investments had a higher internal rate of return. Similarly, the proposed investments for the TIP-Timbi link was compared against a segregated busway with regular buses and with articulated buses. C. Demand Analysis 4. Current Demand Levels. The 1994 peak-hour demand levels in the area of influence of the TIP-Timbi link (Caxanga Avenue corridor) were: 21,850 bus passengers/hour/inbound. The 1994 peak-hour demand levels in the area of influence of the South line (Mascarenhas de Morais corridor) were 28,632 bus passengers/hour/inbound. - 69 - ANNEX 9 Demand Modelling 5. The demand estimates used in the economic evaluation are the result of a simulation of the Recife Metropolitan Region transport network, performed with the Mantra System 21 microcomputer program. The urban transport demand model used by this program is a classical aggregate four-stage transport planning model, which comprises trip generation, trip distribution, modal split, and trip assignment. This model estimates peak (6 hours) and off-peak (10 hours) periods of public transport demand, which are assigned to bus, rail and Metro lines. 6. The model Mantra is integrated with a Geographic Information System, GisPlus.3' In order to use the model, it was necessary to create a GIS database for Recife Metropolitan Region, which comprises a Zoning layer and a Transport network layer (made up of line and node layers). 7. The zoning system adopted is based in the 51 RMR districts, which were digitized into GisPlus. Some districts were disaggregated near the rail/metro transit lines and others in the more distant areas were aggregated. The demand study considered the EMTU Public Transport workday origin/destination (OD) matrix for 1 994. The total number of trips of this matrix is close to the current 1.7 million public transport passenger trips in the region. The matrix break down into trip purposes was based in a survey carried out by CBTU/Recife, showing that 59 percent of the trips are commuting, 1 2 percent are business and 29 percent are related to other trip purposes. 8. Public transport demand data was available on a daily basis. The break down into peak and off-peak periods was done using information from the EMTU/Recife. This authority has provided information for each bus line, and on the number of passenger being transported per hour of day. Peak hour periods considered were the following: 06:00 - 09:00 a.m. and 16:00 - 19:00 p.m. The number of trips in this period corresponds to 55 percent of the weekday ridership. 9. The steps in the demand modelling exercise were: (a) Trip Generation. This step consists of the estimation of the number of trips which will be produced by and attracted to the area of influence of the investments considered in the study. It was conservatively assumed that the current EMTU OD matrix is a good estimate up to year 2001. After this year, a yearly demand growth of 1 percent per year was considered. Car and walking trips were not considered at all. (b) Trip Distribution. This step consists of the determination of the origin zone and destination zone for each trip based on the types of trips produced by and attracted to each zone and the interzonal "impedance" values (typically travel times). Also in this case there is the assumption of using the current matrix as an estimate up to the year 2001. (c) Modal choice consists of the calculation of which trips will use the bus network, the metro system and the railway lines. The Mantra model allows the competition between single modes and combined modes. The modal choice model used is the hierarchical multi-nomial Logit model. It is important to point 2/ Mantra Computer System was developed by Logit - Logistica Informitica a Transportes, Brazil, and SDG - Steer Davies Gleave, England. 3/ GisPlus is a Gaographic Information System developed by Caliper Corporation, USA. - 70 - ANNEX 9 out that for each zone pair of interest, for the area of influence of the Central line or the South line, there will always be competition between bus, metro+bus and rail+metro+bus. The model utility functions considered the same values of travel time used in the economic evaluation. (d) Trip assignment consists of the "loading" of the passenger trips onto the multimodal public transport network. The method used to assign the trips made within each single (bus) or combined mode (metro + bus and rail + metro + bus), is the "all or nothing" procedure, with no capacity restraint iterations. The reason to use this procedure is the fact that car trips were not considered in the present transport demand modelling exercise. 10. The transport model was applied for the situation "without" and "with" the project in both cases using the South line and the TIP-Timbi link. The outputs obtained from the application of the model are the number of trips, passenger-kms and passenger-hours by each individual mode: bus, rail and metro. By running the model for the situation "without" and "with," data were obtained on the additional trips in the metro and rail modes, and also the decrease in bus trips which result from the construction of the proposed project. The following paragraphs summarize the situation "without" and "with" the South line project. The results in terms of passenger-trips, passenger-kilometers, passenger- hours and average speeds are summarized below: (a) Situation "Without Project" (Year 2001). The main traffic characteristics of the study area in the situation "without" the project are: average bus speeds of 16.97 km/hour with a daily total of 1,481,380 passengers and 29,329,705 passenger-kms generated by bus trips with origins or destinations in the RMR. The corresponding number of passenger hours is 1,727,838. The metro trips generated for origins/destinations in the study area a total of 147,584 passengers and 1,376,844 passenger-kms, corresponding to 30,597 passenger-hours. Rail trips generated by origin/destinations in the study area corresponds to 38,290 passengers and 392,189 passenger-kms and 12,326 passenger-hours. The transit modal choice in terms of trips generated by the study area would be 88.9 percent bus, 8.9 percent metro and 2.3 ,percent rail. (b) Situation "With Project - South Line" (Year 2001). On a daily basis, the average bus speeds in the study area would rise to 17.04 km/h and demand for bus transportation would go down to 1,351,509 passengers, with 27,736,278 passenger-kms and 1,627,641 passenger-hours. The demand for metro trips in the study area (Central line and South line) will go up to a total of 315,745 passengers with 3,108,320 passenger-kms and 69,076 passenger- hours. Rail demand, considering only the diesel line to Cabo shall be of 29,641 passengers, with 400,644 passenger-kms and 12,592 passenger-hours. The transit modal choice will then be 79.7 percent bus, 18.6 percent metro (including South line), and 1.7 percent rail. (c) Situation "With Project - TIP-Timbi link" (Year 2001). The average bus speeds in the study area would rise to 1 7.55 km/h and demand for bus transportation would go down to 1,447,667 passengers with 25,770,552 passenger-kms and 1,455,853 passenger-hours. The demand for metro (Central line) trips in the study area will go up to a total of 181,300 with 1,804,165 passenger-kms and 40,094 passenger-hours. Rail demand shall remain with 38,290 passengers, 392,1 89 passenger-kms and 1 2,326 passenger-hours. The transit modal choice - 71 - ANNEX 9 will then 86.8 percent bus, 10.9 percent metro (Central line), and 2.3 percent rail Demand Estimates 11. The demand estimates for the "do-nothing" situation (to be understood as the present situation plus an estimated US$10 million/year over 5.5 years to make remedial improvements such as road bypasses, small bridges, lane widening) in the year 2001 indicate a total of about 186,000 weekday boardings and an annual ridership of more than 60 million passengers. 12. The demand estimates for the Central line (TIP-Timbi link alternative) in the year 2001 indicate: (a) a peak-hour inbound volume of about 19,958 passengers; (b) a peak-hour outbound volume of 3,266 passengers; (c) a total increase over the "do-nothing" alternative of about 33,769 weekday boardings (for the whole system); and (d1 an annual ridership increase of more than 10 million passengers. 13. The demand estimates for the South line investment in the year 2001 indicate: (a) a peak-hour inbound volume of about 1 5,591 passengers; (b) a peak-hour outbound volume of 3,482 passengers; (c) a total increase over the "do-nothing" alternative of about 129,927 weekday boardings; and (d) an annual increase of ridership of more than 42 million passengers. Table 9.1: Demand Levels in the "Do-nothing" Alternative in Year 2001 Year 2001 Average weekday boardings 185,818 Average Annual Ridership 60,205,032 Table 9.2: Demand Levels in the Central Line (TIP-Timbi link) Year 2001 Peak hour Inbound Passengers 19,958 Peak hour Outbound Passengers 3,266 Increase in Average Weekday Boardings 33,769 Increase in Annual Average Ridership 10,941,156 Table 9.3: Demand Levels in the South Line Year 2001 Peak hour Inbound Passengers 15,591 Peak hour Outbound Passengers 3,482 Increase in Average Weekday Boardings 129,927 Increase in Annual Average Ridership 42,096,348 - 72 - ANNEX 9 D. Benefits Value of Time 14. Mass transit projects can hardly be economically justified without accounting for the real resource savings that economies of time represent. The monetary value of time by which the time savings are multiplied to obtain the benefits from time savings is a key input in the economic evaluation of the infrastructure components of this project. Individual values of time are traditionally considered to be a function of income, in particular a function of the individual wage level. Thus, the value of time used in the calculation of time savings is derived from the income distribution of users, disaggregated by transport mode and trip purpose, and from information on wage levels. Table 9.4 shows the income of public transport users, in the zone of influence of the South line and disaggregated by mode. The information was obtained from the Bus and CBTU surveys of their users conducted in 1 994. 15. The minimum wage used was R$70 which at the shadow price of 1 is equivalent to US$ 70. From this minimum wage base, the value of fringe benefits was considered separate from payroll taxes. Fringe benefits in Brazil include vacation and the 1 3th month of salary; both entail scaling the base salary by a factor of 1 .25. Commuting and other purpose trips are valued as a proportion of net wages. This implies subtracting direct taxes paid by the employee from the base wage, which includes fringe benefits. The employee is subject to a payroll tax that varies between 8 percent and 10 percent. In addition, the income tax should be subtracted. By assuming that one-third of passengers are not tax-exempt and do not evade taxes, the net wage deflating factor will be in the 0.92-0.88 range. An average factor of 0.9 was used. Business trips are valued at gross wages, where fringe benefits and payroll taxes are taken into account. Payroll taxes in Brazil vary between 38 percent and 45 percent and about 35 percent are paid by the employer. By combining fringe benefits and employer contribution on payroll taxes, the base wage must be scaled by a factor of 1.60 (1.25 plus 0.35). 1 6. Hourly wages for each transport mode users are estimated by multiplying the individual wage (in minimum wages) by the value of the minimum wage and dividing the result by 1 57, the assumed average number of hours worked in a given month. Common practice in the appraisal of urban transport projects is to use a proportion of the hourly wage rate to approximate the value of time saved. This proportion as well as the wage rate base chosen for the calculation-whether gross or net wages-depend on the type of trip. Three types of trip can be distinguished for the purposes of the analysis: home-to-work trips (or commuting trips), work-related trips (or business trips), and non-work related trips (or other trips), for example shopping or visiting the doctor. Economic theory indicates that both commuting trips and other trips should be valued as a proportion of the net wage. Empirical evidence suggests that this proportion may vary between 20 and 1 00 percent. The value adopted in the economic evaluation was a value of 1 7.5 percent based on a study undertaken a few years ago for a similar city of the northeast with the same type of population. A 20 percent value was tested as part of the sensitivity analysis. Economic theory also indicates that business trips during working hours be valued at 1 00 percent of the gross wage rate."' The resulting values of time used in the economic evaluation are summarized in Tables 9.8 and 9.14 and the proportion of passenger-hours spent travelling by type of trip is summarized in Tables 9.9 and 9.10. 4/ In developed countries, estimates of the value of time for journey to work ranges from 20 to 100 percent of the gross wage rate. A recent review of the literature concludes that a reasonable average value of time for journey to work is 50 percent of the gross wage rate. See Kenneth Small, Urban Transportation Economics, Harwood Academic Publishers 1992; page 44. - 73 - ANNEX 9 Direct Benefits 17. Direct benefits estimated in the economic evaluation are travel time savings, opreting cost savings, bus system control savings, and road maintenance cost savings: (a) Travel time savings result mainly from the transfer of bus passengers into the new lines, and from existing metro and rail passengers who can save time in their trips by taking advantage of the new transport facility. Travel time savings also result from the increased operating speeds of the buses that continue operation and, to a lesser extent, of car traffic. The program used to model the demand works with an origin-destination matrix where the number of trips is fixed. The number of "legs" comprising those trips may vary. When the new South line (or TIP-Timbil is introduced in the network, the modal split is affected and some trip itineraries change. Thus, the demand model estimates the diverted demand, but it does not estimate the so-called generated demand, that is, the additional trips that will be potentially generated throughout the RMR, but particularly in the corridors directly affected by the investment. Omission of generated demand yields a conservative level of demand and, consequently, results in a lower rate of return. Travel time savings are measured for each mode by the difference between the total number of morning peak passenger-hours spent without the project and those spent with the project. These peak-hour estimates are converted to annual values and then multiplied by the assumed value of time to obtain a monetary value of time savings. The net change in travel time across the four modes is considered to be the overall measure of the travel time savings; {[Pass-hr (w/o) - Pass-hr (w)I x VoT x PHF x ND} - 1,000, where Pass-hr are passenger-hours, VoT is the value of time, PHF is the peak-hour factor, and ND is the number of operating days in a year. (b) Operating cost savings for the non-rail modes derive principally from the improved commercial and traffic speeds, which can be achieved by buses and cars, respectively. Operating cost savings are measured for each mode by the difference between the morning peak passenger-kilometers carried without the project and those carried with the project. All trips were considered irrespective of their purpose. These peak-hour estimates are converted to annual values and then multiplied by the assumed values of operating cost per passenger- kilometer for each mode to obtain a monetary value of operating cost savings. The net change in operating costs across the four modes is considered to be the overall measure of operating cost savings. Operating cost savings include wages and salaries, materials, energy and general expenditures. An alternative method to estimate these savings was to calculate the actual number of buses eliminated at peak hour due to the construction of the line and estimate the savings due to the elimination of the buses and reduction in bus kilometers produced. Tables 9.5 and 9.11 show the calculations used. {[Pass-km (w/o) x OC (w/of] - [Pass-km (w) x OC (w)] x PHF x ND) . 1,000, where OC are operating costs per passenger-kilometer. (c) Bus system control cost savings depend critically on the reduction of the bus vehicle fleet, which is assumed to follow from the reduction in bus patronage - 74 - ANNEX 9 after the metro line opens. Bus system control cost savings are measured by a given percentage (8 percent) of bus operating costs. (d) Road maintenance cost savings derive from the possibility of delaying periodic maintenance mainly because of reduced bus traffic on the corridors under consideration. The benefits from reduced vehicle operating costs resulting from reduced pavement damage are not considered. {[Pass-km (w/o) - Pass-km Iw)] x RMC x PHF x ND} - 1,000 where RMC are road maintenance cost savings per passenger-kilometer. Indirect Benefits 1 8. Indirect benefits arise from the reduction in externalities, such as accidents and air pollution: (a) Accident cost savings are measured for each mode by the difference between the morning peak passenger-kilometers carried without the project and those carried with the project. These peak-hour estimates are converted to annual values and then multiplied by the assumed values of accident costs per 1,000 passenger-kilometer for each mode to obtain a monetary value of accident cost savings. The net change in accident costs across the four modes is considered to be the overall measure of accident cost savings. Accident costs include property damage, injuries and loss of life. ([(Pass-km (w/o)) . 1,000 - (Pass-km (w)) - 1,0001 x ACC x PHF x ND) - 1,000, where ACC are accident cost savings per 1000 passenger kilometer. (b) Air pollution cost savings are measured for bus and cars by the difference between the morning peak passenger-kilometers carried without the project and those carried with the project. These peak-hour estimates are deflated by the average vehicle occupancy (to obtain costs per vehicle-kilometer) then converted to annual values, and finally multiplied by the assumed values of air pollution costs per vehicle-kilometer to obtain a monetary value of air pollution cost savings. The air pollution factor (US$/gram) of emission reduction) represents the total health and welfare benefits associated with the reduced pollution emissions resulting from the proposed investments. Health benefits include reduced morbidity and mortality whereas welfare benefits include the reductions in soiling and corrosion of buildings and other structures. The net change in air pollution costs in the bus and car modes is considered to be the overall measure of air pollution cost savings. The set of air pollutants considered include carbon monoxide (CO), hydrocarbons (HC), nitrogen oxides (NO.), sulphur oxides (SO.) and fine particulate matter (PM 10). (([Pass-km (w/o) - Pass-km (w)] x APC x PHF x ND) . AOF} 1,000 x where APC are air pollution cost savings per passenger-kilometer and AOF is the average vehicle occupancy factor. E. Costs 19. Investment Costs. Investment cost components were grouped for the economic evaluation into land expropriations, civil works, operating systems, rolling stock, and costs of projects -75- ANNEX 9 and studies. Annex 8 contains a detailed breakdown of the capital cost structure. To obtain the economic cost stream for both links, taxes were subtracted from the total costs (including physical and price contingencies) shown in Annex 8 and multiplied by a shadow value factor of 0.9. 20. Operating Costs. The incremental operating costs due to the investments are wages and salaries, materials, energy and general expenditures (e.g., auditing, legal costs, transport, and cleaning services). 21. Discount Rate. In calculating the net present value for the underground and rail integration components of the project a discount rate must be selected which represents the opportunity cost of capital in Brazil. The discount rate used as "benchmark" by SEAIN (Secretary of Planning) for foreign investments, as well as COFIEX (Commission of External Financing) is 10 percent. F. Results of Economic Evaluation 22. Separate economic evaluations were performed for the South line and for the TIP-Timbi links. Internal economic rates of return (IERR), net present values (NPV), and Benefit/Cost ratios (B/C) were calculated. The assumed project life is 25 years. Residual values were estimated at the end of the project life for the civil works, operating systems and rolling stock. These residual values were calculated following CBTU accounting procedures that assume a linear depreciation rate, which vary according to the expected operational life of the components. Distribution of Costs and Benefits 23. Table 9.7 shows the annual series of expected benefits and costs for the South line in the base case scenario. 24. Table 9.13 shows the annual series of expected benefits and costs for the TIP-Timbi link in the base case scenario. Net Present Values 25. The discounted expected present value of benefits for both investments net of costs, are positive in the relevant range, which includes the discount rate of 10 percent (see Tables 9.7 and 9.13). Internal Economic Rates of Return 26. The estimated IERR for the base case selected for the South line is given in Table 9.4. The estimated IERR for the base case selected for the TIP-Timbi is given in Table 9.10. 27. A combined IERR calculation for the South line and TIP-Timbi link was carried out adding the individual net present value flows for each part yielding a combined IERR of 27.9 percent under base case scenarios. First-year Benefit Test 28. A "first-year" benefit test was performed to assess whether the investments are premature. Tables 9.9 and 9.15 show the results of the test for discount rates of 10 percent and 12 percent. For both discount rates the proposed investments have benefits larger than the rate of discount multiplied by the net present value of total investment costs in the planned year of start-up - 76 - ANNEX 9 of operations. This suggests that there are no additional net benefits to be gained if the implementation of the project is delayed from the schedule assumed in the base case scenario. Sensitivity Analysis 29. A sensitivity analysis was performed for both investments to estimate the variance of the IERR in relation to the calculated value (base case) if deviations occur in the major benefit and cost components (travel time savings, operating cost savings, wages and salaries, general expenditures, investment costs). Tables 9.8 and 9.14 summarize the results for both investments and show the switching values (values that reduce the IERR below the 10 percent threshold): Qualitative Analysis of the Infrastructure and Equipment Component 30. Table 9.17 is an impact matrix which summarizes the impact of the proposed investment on a number of aspects which could not be quantified in the standard benefit cost analysis. Table 9.4: Basic Inputs - South Line BASIC INPUTS RECIFE-LINHA SUL IERR= 25 8 Peak-hour factor (HOURS) work other Yen 1994 Ipsak hour) Metro 11.76 11.76 METRO RAIL BUS AUTO Rail 11.76 11.76 PASS-HOURS Work without/p 1865.17 754.73 109136.2 Bus 11.76 11.76 with/p 4200.36 763.96 102766.1 Auto 11.76 11.76 netchange 2335.19 9.23 -6370.12 0 -4026 Peak-hour factor (VEHICLE) 11.76 11.76 Other without/p 761.83 308.27 44576.77 Metro 11.76 11.76 with/p 1715.64 312.04 41974.89 Rail 11.76 11.76 netchange 953.81 3.77 -2601.88 0 -1644 Bus 11.76 11.76 Auto 11.76 11.76 Operating costs (w/o) $/p-km Metro 0.046114 PASS-KMS Work without/p 83936.2 23799.2 1769118 Rail 0.032280 with/p 188996.3 24358.7 1672403 Bus 0.025208 net change 105060.1 559.48 -96715.5 O Auto 0.255174 Other without/p 34283.8 9720.8 722597.6 Operating costs (with) $/p-km with/p 77195.68 9949.32 683094.1 Metro 0.043347 net change 42911.88 228.52 .39503.5 0 Rail 0.030343 Bus 0.019835 Nettotal 147972 788 -136219 0 Auto 0.209655 < Road maintenance costs S/p-km Bus 0.000118 PASS-HOURS METRO RAIL BUS AUTO Auto 0.000278 Commuting without/p 1550 664 90692 0 Accident costs $/1000p-km with/p 3490 672 85399 0 Metro 0.06 net change 1941 8 -5294 0 Rail 0.06 Businers without/p 315 91 18444 0 Bus 0.80 with/p 710 92 17367 0 Auto 40.00 net change 395 1 -1077 0 Costs of air pollution US$/km Other without/p 762 308 44577 0 Bus 1/5 OF SP 0.0754698 with/p 1716 312 41975 0 Auto (INCLUDES ALC. FLEET) 1/5 OF SP 0.018876 = net change 954 4 -2602 0 Inputs to estimate Time Savings $US Note: Auto volumes were not used although auto speeds will increase with the project MINIMUM WAGE (AS OF 11/11/94) 70 REAIS I$US 1 5 OR 1) 70.0 increasing therefore the time savings of a richer market segment and reducing auto operating cost # HOURS/MONTH 157 The model used tested only the demand shift between buses, TIME SAVINGS FACTOR COMMUTE 0.175 the metro and the train only and therefore the benefits are conservative. OTHER 0.175 BUSINESS 1 > z HOUSEHOLD (MW) 8 OF MEMBERS INDIV)DUAL M. WAGES SALARY (US) z SALARY BUS USER/M (MW) 6.21 2.163 2.87 201 X X SALARY TRAIN USER/M 3.81 2.163 1.76 123 CO SALARY AUTO USER/M 21.63 2.103 10.00 700 jr DAYSIYEAR 324 _ - 78 - ANNEX 9 Table 9.5: Estimation of Buses Saved With and Without the South Line Estimating the buses which will not be needed in the situation "with the project". peak off-peak Hours of oper./day 6 10 WITHOUT PROJECT Pass-km 2,491,716 1,437,941 Pass-hr 153,713 80,556 1 Speed 16.21 17.85 Pass-hr 922,278 805,560 Pass/bus 48 40 Bus-hr 19,214 20,139 Bus-km 311,465 _ 359,485 Bus-km/hr 51,911 35,949 Buses 3,202 2,014 WITH PROJECT Line Formula Peak Hours of oper 17 6 6 Pass-km 18 =1L13+L16 2,355,497 Pass-hr 19 =L4+L7 144,741 Speed 20 =1B18/B19 16.27 Pass-hr 21 =1B19*B17 868,446 _ X Pass/bus 22 48 48 Bus-hr 23 =B21 /B22 18,093 Bus-km 24 =1B23*B20 294,437 Bus-km/hr 25 =1B24/B17 49,073 Buses 26 =B23/B17 3015 l _________________________ 28 Factors Pass-hr 29 11.76 Bus-km 30 11.76 = 32 __ _ _ _ _ _ Totals_ _ _ _ _ _ Pass-hr 33 1702154 Bus-km 34 577097 Bus-km/bus-yr 35 62582 37 Off-peak Hours 38 | 10 Pass-km/hr 39 1360330 Pass-hr/hr 40 75920 Speed 41 17.92 __ Pass-hr 42 759195 Pass/bus 43 40 Bus-hr 44 18980 Bus-km 45 340082 Bus-km/hr 46 34008 _ - Buses 47 1898 km/hr km/hr peak off-peak Number of buses w/o 16.21 17.85 Without project 3202 with 16.27 17.92 With project 3015 Difference 187 USc/km USc/km Fixed cost per bus-year $47,273 peak off-peak Inflation 1.0000 w/o 28.70 27.00 Fixed cost savings $8,836,112 with 28.00 26.20 Operating cost savings $4,829,978 Total annual cost savings $13,666,089 mn km mn km w/o 100.91 116.47 with 95.40 110.19 $m $m total w/o 28.96 31.45 with 26.71 28.87 diff -2.25 -2.58 -4.83 MAR 29, 1995 = Operating costs based on hdm relations. Table 9.6: Estimation of Other Benefits - South Line mw/hou"_ hous six. mwtrndividu-I wage rt. wage/hour HourlMonth BENEFITS (US$ 10001 BUS 6.20781 2.163 2.87 70.0 1.28 157 Legend: Iw/ol=without project; Iwl=with project METRO 3.80888 2.163 1.78 70.0 0.78 167 Convemi,on Vot=velue of time; PHF=p.ak-hour factor; AUTO 21.83 2.103 10 70.0 4.46 157 factor: 1 NDY = number of operating days per year VoT PHFt NDY VoTT I./ol VoTT (wl TTS Not TRAVEL TIME SAVINGS ITTSI in US$1000: METRO Commuting 0.15 11.76 324 812.38 2054.87 -1142.29 TTS = (Paw-hoursw/ol - Pat-hour.lwl) x VoT x PHFt x NDY Business 1.28 11.76 324 1507.98 3385.91 -1887.96 Other 0.15 11.78 324 448.45 1008.90 -51.46 RAIL Commuting 0.15 11.78 324 390.96 385.74 -4.78 Business 1.2B 11.78 324 433.27 438.57 -5.30 Other 0.15 11.76 324 181.48 183.82 -2.22 BUS Commuting 0.25 11.78 324 87054.89 81973.82 5081.281 Bus,ne.s 2.05 11.7e 324 143882.59 135484.38 8398.21 Other 0.25 11.78 324 42788.97 40281.44 2457.53 AUTO Commuting 0.88 11.76 324 0.00 0.00 0.00 Business 7.13 11.76 324 0.00 0.00 0.00 Other 0.88 11.78 324 0.00 0.00 0.00 0 TTS Total 277500.91 265227.91 12373.00 0 0 0 OPERATING COSTS SAVINGS /OCS) in US$1000: OCS = (P..s-kmelw/ol - Pess-kms.[w) x OC x PHFv x NOY These benefits mere estimated on ths basis of buses saved s shown in the previous pege. ACCIDENTS COSTS SAVINGS iACS) in US5 1000: PHFt NDY AC Iw/ol AC Iwm ACS Net OCS = (Pese-km.lw/ol PPee-kmelwj) x AC e PHFt x NDY METRO 11.78 324 27.03 e0.86 -33.83 FERROVIA 11.78 324 7.66 7.84 -0.1 8 I 1 BUS 11.76 324 7895.23 7180.01 415.22 tD AUTO 11.78 324 0.00 0.00 0.00 0 ACS Total 7829.92 7248.71 381.21 0 0 0 ost. AIR POLLUTION COSTS SAVINGS (APCS) IN US51000: AO PHFv NDY APC [w/o) APC Iwl APCS Not APCS = l(Pa.e-kmslw/ol - Pase-km.l1J) x APC x PHFv x NDYI/ BUS 48 11.76 324 14927.35 14111.29 818.06 AUTO 1.45 11.76 324 0.00 0.00 0.00 0 APCS Total 14927.35 14111.29 816.06 0 0 0 BUS SYSTEM CONTROL COSTS SAVINGS IBSCCS) IN US$1000: BSCCS Iw/o) BSCCS [wm BSCCS Net 0 0 BSCCS Total _ 20342.68 15131.84 5211.04 0 0 0 ROAD MAINTENANCE COSTS SAVINGS (RMCS) IN US$1000 PHFv NDY RMC Iw/ol RMC lw) RMCS Net RMCS = I(Pe*s-kmsIw/o) - Pan-kmoll) x RMC x PHFv NDY) BUS 11.78 324 1120.30 1069.05 81.2b AUTO 11.76 324 0.00 0.00 0.00 0 RMCS Total 1120.30 1058.05 61.25 0 0 0 INVESTMENT COSTS (US$1000) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR S YEAR 8 YEAR 7 TOTAL 4749 14939 24980 26620 21485 10458 3429 10681Z ECONOMIC CONV. FACTOR 0. TOTAL PRICES EXCLUDING DUTIES 5277 18698 277b5 29578 23872 11621 3810 118612 m m INFLATION FACTOR 0.50% 1.80% 2.80% 2.60% 2.60% 2.60% 2.60% X BASE + PHYSICAL AND PRICE CONTINGENCIES 5303 1e982 29136 31824 28327 13137 4414 PERCENT. OF PRICE CONTINGENCIES 2.18% 4.40% 7.08% 9.74% 12.48% 15.29% 18.12% PHYSICAL CONT. + BASE PRICE - SOUTH LINE 6191 1828B 27212 28999 23405 11394 3737 118204 PHYSICAL CONT. + BASE PRICE - TOTAL 8623 28380 38486 38309 30710 14273 4790 181571 PRICE CONTINGENCIES 186 1161 2719 3732 3834 2183 888 14683 Table 9.7: Benefits and Costs of South Line (US$ Thousands) DIRECT BENEFITS EXTERNALITIES INVESTMENT OPERATING COSTS Road Bus Invest. COSTS BENEFITS Travd Opwating Maintenance System which Air TOTAL TOTAL minus PROJECT CALENDAR Time Cost Cost Cost will be Accident Pollution BENEFITS Wages & Operating Maintenamce COSTS COSTS YEAR YEAR Savings Savings Savings Savings avoided Savings Savings (BI Salaries Cost Cost (C) lB-C) 1 1995 0 4,749 4,749 (4.749) 2 1996 10000 10,000 14,939 14,939 14,939) 3 1997 10000 10,000 24,980 24,980 114,980) 4 1998 10000 10,000 26,620 26,620 (16,620) b 1999 10000 10,000 21,485 _ 21,485 (11,486) 6 2000 6,187 6,833 31 b47 191 408 14,196 10,469 566 1,075 183 12,282 1,913 7 2001 12,373 13,666 61 1,093 381 816 28,391 3,429 1,131 2,150 365 7,075 21,316 8 2002 12,497 13,803 62 1,104 385 824 28,676 0 1,142 2,172 369 3,682 24,992 9 2003 12,622 13,941 62 1,115 389 832 28,962 O 1,154 2,193 372 3,719 26,242 10 2004 12,748 14,080 63 1,126 393 841 29,251 0 1,165 2,215 376 3,756 25,495 11 2006 12,876 14,221 64 1,138 397 849 29,544 0 1,177 2,237 380 3,794 25,750 12 2006 13,004 14,363 64 1,149 401 858 29,839 0 1,189 2,260 384 3,832 26,007 O 13 2007 13,134 14,607 66 1,161 405 866 30,138 0 1,201 2,282 387 3,870 26,267 14 2008 13,266 14,652 66 1,172 409 876 30,439 0 1,213 2,305 391 3,909 26,530 16 2009 13,398 14,798 66 1,184 413 884 30,743 0 1,225 2,328 395 3,948 26,795 16 2010 13,532 14,946 67 1,196 417 893 31,051 0 1,237 2,351 399 3,988 27,063 17 2011 13,667 15,096 68 1,208 421 901 31,361 0 1,249 2,375 403 4,027 27,334 18 2012 13,804 15,247 68 1,220 425 910 31,675 0 1,262 2,399 407 4,068 27,607 19 2013 13,942 15,399 69 1,232 430 920 31,992 0 1,274 2,423 411 4,108 27,883 20 2014 14,082 15,553 70 1,244 434 929 32,311 0 1,287 2,447 415 4,149 28,162 21 2015 14,222 15,709 70 1,257 438 938 32,635 0 1,300 2,471 420 4,191 28,444 22 2016 14,365 15,866 71 1,269 443 947 32,961 0 1,313 2,496 424 4,233 28,728 23 2017 14,508 16,026 72 1,282 447 967 33,291 0 1,326 2,521 428 4,275 29,015 24 2018 14,663 16,186 73 1,295 451 966 33,623 0 1,339 2,546 432 4,318 29,305 25 2019 14,800 16,347 73 1,308 456 976 33,960 (14,932) 1,353 2,672 437 (10,571) 44.531 IERR= 25.8 growth rates 1.010 ---> 1994-2010 NPV @ 10% 87103.3731 1.010 --> 2011-2018 Ben PV @ 10% 179721.396 Cos PV @ 10% 92618.0226 BIC @ 10% 1.94 z z m x Co - 81 - ANNEX 9 Table 9.8: Sensitivity Analysis of South Line NPV IRR (US$ million) B/C | % r=10% ratio BASE CASE 25.75 87.10 1.94 BENEFITS Value of time 10% higher 26.70 93.68 2.01 10% lower 24.80 80.53 1.87 50% lower 20.80 54.22 1.59 60% lower 19.70 47.64 1.51 Operating cost savings 10% higher 26.80 94.95 2.03 10% lower 24.60 79.26 1.86 50% lower 19.70 47.88 1.52 100% lower 12.10 8.65 1.09 Externalities 100% lower 24.80 80.74 1.87 (accident and air pollution savings) Growth rate .5% higher 1999-2010 26.00 90.41 1.97 base case = 1 % per year .5% higher 1999-2018 26.10 91.24 1.98 1.0% higher 1999-2010 26.30 93.83 2.00 Incremental Traffic 10% higher 29.30 105.71 2.14 20% lower 19.10 50.23 1.54 50%lower 9.20 -4.21 0.95 COSTS Construction costs 50% higher 16.00 50.48 1.39 80% higher 12.90 28.51 1.19 (including physical and price contingencies) Operating costs 1100% higher 22.90 67.72 1.60 1230% higher 18.80 42.53 1.31 Start-up of operations Investment costs stream (US$ 1000) one year delay 1995 4749 (benefits start 1996 13445 accruing in 2001) 1997 21478 1998 23630 1999 20877 2000 13824 2001 6601 2002 2057 21.60 72.95 1.82 accruing in 2002) 1997 19727 1998 22135 1999 20573 2000 15506 2001 5572 2002 3986 12003 1714 18.60 59.48 1.69 - 82 - ANNEX 9 Table 9.9: First-Year Return Test for the South Line Link Discount Discount NPV in year 6 NPV in year 6 Project Calendar Investment rate rate at 10% at 12% Benefits in Year Year Costs 10% 12% (US$ 1000) (US$ 1000) Year 7 1 1995 4,749 1.772 1.974 8,413 9,374 2 1996 14,939 1.611 1.762 24,059 26,327 3 1997 24,980 1.464 1.574 36,573 39,306 4 1998 26,620 1.331 1.405 35,432 37,400 5 1999 21,485 1.210 1.254 25,997 26,951 6 2000 10,459 1.100 1.120 11,505 11,714 TOTAL 145,407 154,500 Annual 14,541 18,540 21,316 Table 9.10: Basic Inputs - TIP-Timbi BASIC INPUTS RECIFE-TIP-TIMBI IERR= 32.1 Peak-hour factor (HOURS) work other YEAR 1994 (peak hour) -3172.3 Metro 11.76 11.76 3METRO AIL BUS AUTO Rail 11.76 11.76 PASS-HOURS Work without/p 1865.17 746.92 95166.98 Bus 11.76 11.76 with/p 2447.37 336.54 91822.88 -1295.7 Auto 11.76 11.76 not change 582.2 -410.38 -3344.1 0 Peak-hour factor (VEHICLE) 11.76 11.76 Other without/p 761.83 305.08 38871.02 Metro 11.76 11.76 with/p 999.63 137.46 37505.12 Rei 11.76 11.76 net change 237.8 -167.62 -1365.9 0 Bus 11.76 11.76 Auto 11.76 11.76 Operating coats (w/o) S/p-Irn Metro 0.046114 . PASS-KMS Work without/p 83943.3 23758.7 1596151 Red 0.032280 with/p 110116.7 10708.9 1553982 Bus 0.025208 net change 26173.44 -13049.8 42169.03 0 Auto 0.255174 . Other without/p 34286.7 9704.27 651949 Opeting cos (with) */p-Ion with/p 44977.26 4374.07 634725.03 Metro 0.043347 net change 10690.58 -5330.2 -17223.97 0 RPl 0.030343 . Bue 0.019835 Net total 36864 -18380 -59393 0 Auto 0.209655 Road nmwit wence costs s/p-Ion . CO Buo 0.000118 . PASS-HOURS AMETRO RAIL BUS AUTO Auto 0.000278 Cofnrnuting without/p 1550 857 79084 0 AcoirJnt cos /11OOOp-Ion with/p 2034 296 76305 0 Metro 0.06 w net change 484 -361 -2779 0 Rai 0.06 Businees without/p 315 90 16083 0 Bus 0.80 with/p 414 40 15518 0 Auto 40.00 net change 98 -49 -565 0 Costa of ir pition US$/kmn Other without/p 762 305 38871 0 Bus 1/5 OF SP 0.0754698 .with/p 1000 137 37505 0 Auto (INCLUDES ALC. FLEETI 1/5 OF SP 0.018876 nwt change 238 -168 -1366 0 Inputs to estkrwte Tirne Savkig $US Note: Auto volkmes were not used aithough auto speak wil incre_ with the propot MNIMUM WAGE (AS OF 11/11/94) 70 REAIS (OUS 1 = SR 1) 70.0 increasing therefore the tifns savinW of ato useme nd reducing their opereting codt. # HOURS/MONTH 157 The model used tested only the demwnd shift between buse. TIME SAVINGS FACTOR COMMUTE 0.175 the retro end the train only dtherfo the bwenfit we conersvtive. OTHER 0.175 BUSINESS 1 HOUSEHOLD (MW) I OF MEMBERS INDIVIDUAL M. WAGES ALARY (SUS) SALARY BUS USER/M (MW) 8.21 2.163 2.87 201 Z SALARYTRAIN USER/M 3.81 2.163 1.76 123 Z SALARY AUTO USER/M 21.63 2.163 10.00 700 x .__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _(0CD 5 DAYS/YEAR 324 - 84 - ANNEX 9 Table 9.11: Estimation of Buses Saved With and Without TIP-Timbi Estimating the buses which will not be needed in the situation "with the project". I ___L __I_ peak off-peak | Hours of oper./day 6 10 WITHOUT PROJECT Pass-km 2,248,100 1,297,325 Pass-hr 134,038 70,371 Speed 16.77 18.44 Pass-hr 804,228 703,705 Pass/bus 48 40 Bus-hr 16,755 17,593 Bus-km 281,013 324,331 Bus-km/hr 46,835 32,433 Buses 2,792 1,759 = WITH PROJECT _ Line Formula Peak Hours of oper 17 6 6 Pass-km 18 =L13+L16 2,188,707 _ _ Pass-hr 19 = L4 + L7 129,328 = Speed 20 =1B18/B19 16.92 Pass-hr 21 =B19'B17 775,968 = Pass/bus 22 48 48 Bus-hr 23 = B21 /B22 16,166 Bus-km 24 = B23 I B20 273,588 Bus-km/hr 25 =8324/817 45,598 = Buses 26 =8323/817 2694 _ 27 28 Factors _ Pass-hr 29 11.76 Bus-km 30 11.76 _ _ __ _ _ _ __ _ _ _ _ 1 311 r __ __ 3 ___|__32 _ Totals _ = Pass-hr 33 1520897 _ Bus-km 34 _ 536233| Bus-km/bus-yr 35 _ 65080 | 36 . = 37 Off-peak Hours 38 10 _ Pass-km/hr 39 | 1263831 ! _ Pass-hr/hr 40 _ 67989 Speed 41 18.59 _ Pass-hr 42 679885 Pass/bus 43 40 _ Bus-hr 44 16997 Bus-km 45 315958 Bus-km/hr 46 31596 Buses 47 1700 km/hr km/hr ______________________ _______ peak off-peak Number of buses w/o 16.77 18.44 Without project 2792 with 16.92 18.59 With project 2694 Difference 98 USc/km USc/km Fixed cost per bus-year $47,273 peak off-peak Inflation 1.0000 w/o 29.00 16.05 Fixed cost savings $4,638,663 with 28.50 16.00 Operating cost savings $1,627,410 Total annual cost savings $6,266,074 mn km mn km w/o 91.05 105.08 with 88.64 102.37 $m $m total w/o 26.40 16.87 with 25.26 16.38 _ diff -1.14 -0.49 ### MAR 24, 1995 operating costs based on hdm relations Table 9.12: Estimation of Other Benefits TIP-Timbi mwlhouea house vize mwlndiofdual ..g. ete wegethour Hourmonth. BENEFITS (US$ 10001 BUS 6.20781 2.183 2.87 70.0 1.28 167 Legend: Iw/oJ = without projeot; Iw = with project METRO 3.80e88 2.163 1.78 70.0 0.78 157 Convers on Vot=v lu. of time; PHF=peak-hour factor; AUTO 21.83 2.183 10 70.0 4.46 157 factor: NDY = number of operating days per yera VsT PHFt NOY VoTT Iw/.I VoTT Iw) TTS Net TRAVEL TIME SAVINGS ITTS) in US$1000: METRO Commuting 0.1 11.7e 324 912.38 1157.17 -284.79 TTS = IP.e-hou-lw/ol - P.ss-houslwIl) x VoT x PHFt x NDY Business 1.28 11.78 324 1507.98 1978.06 -470.70 Other 0.15 11.70 324 448.45 688.43 -139.98 RAIL Commuting 0.16 11.70 324 380.91 174.33 212.88 BuSin-ee 1.20 11.78 324 428.78 193.20 235.69 Other 0.15 11.70 324 179058 80.92 98.07 BUS Commuting 0.25 11.70 324 75912.01 73244.52 2007.49 Business 2.05 11.70 324 125460.87 121057.09 4408.78 Other 0.25 11.70 324 37312.05 30000.93 1311.12 AUTO Commuting 0.88 11.70 324 0.00 0.00 0.00 Buiness 7.13 11.76 324 0.00 0.00 0.00 Other 0.88 11.70 324 0.00 0.00 0.00 0 TTS Total 242553.99 234515.23 8038.76 0 0 0 OPERATING COSTS SAVINGS lOCSIin USf 1000: OCS = IPass.-k-lw/oI - Pese-km-1mll x OC x PHFv x NDY METRO Th.se b-nefits mere estimated on the basis of buses saved RAIL shown on the previous page BUS AUTO OCS Total =C ACCIDENTS COSTS SAVINGS iACS) in US$ 1000: PHFt NDY AC lwlol AC iwl ACS Net OCS = IPs.-k-slm/o - Fe-AmsIWl x AC . PHFI .NDY METRO -11.70 324 27.03 35.40 .8-.43 FERROVIA 11.70 324 7.05 3.45 4.20 BUS 11.78 324 0852.84 0871.80 181.04 AUTO 11.70 324 0.00 0.00 0.00 0 ACS Totel _e_ e87.32 0710.50 178.82 0 0 0 AIR POLLUTION COSTS SAVINGS IAPCSI IN US$ 1000: AO PHFv NDY APC Iw/oI APC Iwl APCS Net APCS = IlPase-k-dw/oI - Pes-krme,w]l x APC x PHFv x NOY1/ BUS 48 11.70 324 13407.50 13112.09 355.81 _AUTO 1.46 11.76 324 0.00 0.00 0.00 0 APCS Total 13487.90 13112.09 355.81 0 0 0 BUS SYSTEM CONTROL COSTS SAVINGS IBSCCSI IN USS 1000: BSCS BSCCS lw1I SSCCS IwI BSCCS Not 0 0 BSCCS Total 18353.77 14080.19 4293.58 0 O 0 ROAD MAINTENANCE COSTS SAVINGS IRMCS) IN US$ 1000 PHFv NDY RMC Iw/ol RMC Iwl RMCS Net RMCS = IFPas-krm,lw/oI - Pase-kr,Iwl) x RMC x PHFv x NDYI BUS 11.70 324 1010.70 984.00 28.70 AUTO 11.70 324 0.00 0.00 0.00 0 RMCS Total 1010.78 984.06 28.70 0 0 0 INVESTMENT COSTS 1US51000) Y VEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR S YEAR I YEAR 7 TOTAL ______________________ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~OTL z OTHER DUTIES FACTOR 3142 9290 10351 8540 .704 2038 800 41038 Z 0.8 m TOTAL PRICES EXCLUDING DUTIES 3492 10322 11501 9490 7449 2932 1073 40205 X INFLATION FACTOR 0.50% 1.80% 2.80% 2.50% 2.50% 2.80% 2.50% BASE + PHYSICAL AND PRICE CONTINGENCIES 3508 10580 12073 10217 8215 3315 1244 PERCENT. OF PRICE CONTINGENCIES 2.1e% 4.40% 7.00% 9.74% 12.48% 15.29% 18.12% PHYSICAL CONT. + BASE PRICE. SOUTH LINE 3435 10115 11278 9310 7303 2875 1053 45307 PHYSICAL CONT. + BASE PRICE - TOTAL 8623 20380 38480 38308 30710 14273 4790 101571 PRICE CONTINGENCIES 18e 1101 2719 3732 3834 2183 808 14083 Table 9.13: Benefits and Costs of TIP-Timbi (US* Thousands) DIRECT BENEFITS EXTERNALITIES INVESTMENT OPERATING COSTS Road Bus Invest. COSTS BENEFITS Travol Operating Maintenance System which Air TOTAL TOTAL minus PROJECT CALENDAR Time Cost Cost Cost will be Accident Pollution BENEFITS Wages & Operating Maintenance COSTS COSTS YEAR YEAR Savings Savings Savings Savings avoided Savings Savings (B) Salaries Cost Cost (Cl (B-C) 1 1995 0 3,142 3,142 (3,142) 2 1996 5,000 5,000 9,290 9,290 (4,290) 3 1997 3,000 3,000 10,351 10,351 17,351) 4 1998 5,000 5,000 8,546 8,546 (3,5461 5 1999 5,000 5,000 6,704 6,704 (1,704) 6 2000 4,019 3,133 13 251 88 178 7,683 2,639 50 251 28 2,969 4,715 7 2001 8,039 6,266 27 501 177 356 15,365 966 100 501 56 1,623 13,742 8 2002 8,119 6,329 27 506 179 359 15,519 0 101 506 57 664 14,856 9 2003 8,200 6,392 27 511 180 363 15,674 0 102 511 57 670 15,004 10 2004 8,282 6,456 28 516 182 367 15,831 0 103 516 58 677 15,154 11 2005 8,365 6,521 28 522 184 370 15,989 0 104 521 58 684 15,306 12 2006 8,449 6,586 28 527 186 374 16.149 0 105 527 59 691 15,459 O) 13 2007 8,533 6,652 28 532 188 378 16,311 0 106 532 59 697 15,613 14 2008 8,619 6,718 29 537 190 381 16,474 0 107 537 60 704 15,769 15 2009 8,705 6,785 29 543 191 385 16,639 0 108 543 61 711 15,927 16 2010 8,792 6,853 29 548 193 389 16,805 0 109 548 61 719 16,086 17 2011 8,880 6,922 29 554 195 393 16,973 0 110 553 62 726 16,247 18 2012 8,969 6,991 30 559 197 397 17,143 0 112 559 62 733 16,410 19 2013 9,058 7,061 30 565 199 401 17,314 0 113 565 63 740 16,574 20 2014 9,149 7,131 30 571 201 405 17,487 0 114 570 64 748 16,740 21 2015 9.240 7,203 31 576 203 409 17,662 0 115 576 64 755 16,907 22 2016 9,333 7,275 31 582 205 413 17,839 0 116 582 65 763 17,076 23 2017 9,426 7,347 31 588 207 417 18,017 0 117 587 66 770 17,247 24 2018 9,520 7,421 32 594 209 421 18,197 0 118 593 B6 778 17,419 25 2019 9,616 7,495 32 600 211 426 18,379 (5,829) 120 599 67 (5,044) 23,423 IERR = 32.1 growth rates 1.010 ---> 1994-2010 NPV@ 10% 61326.41744 1 01 -> 2011-2018 Ban PV @ 10% 94576.91227 Cos PV @ 10% 33250.49483 B/C @ 10% 2.84 > z z m x co - 87 - ANNEX 9 Table 9.14: Sensitivity Analysis of TIP-Timbi NPV IRR (US$ million) B/C % r=10% ratio BASE CASE 32.08 61.33 2.84 BENEFITS Value of time 10% higher 33.10 65.60 2.97 10% lower 31.00 57.05 2.72 50% lower 26.30 39.96 2.20 60% lower 25.00 35.69 2.07 Operating cost savings 10% higher 32.90 64.92 2.95 10% lower 31.20 57.73 2.74 50% lower 27.30 43.34 2.30 100% lower 21.50 25.36 1.76 Externalities 100% lower 31.40 58.50 2.76 (accident and air pollution savings) Growth rate .5% higher 1999-2010 32.30 63.29 2.90 base case = 1 % per year .5% higher 1999-2018 32.30 63.78 2.91 1.0% higher ,1999-2010 32.60 65.32 2.95 Incremental Traffic 10% higher 35.50 71.08 3.14 20% lower 25.40 41.98 2.26 50% lower 15.30 13.37 1.40 COSTS Construction costs 50% higher 21.50 46.45 1.97 80% higher 17.90 37.52 1.66 (including physical and price contingencies) Operating costs 100 % higher 31.20 57.83 2.57 [230% higher 30.00 53.29 2.29 Start-up of operations Investment costs stream (US$ 1000) one year delay 1995 3142 (benefits start 1996 8361 accruing in 2001) 1997 9210 1998 8053 1999 6586 2000 4001 2001 1706 2002 580 26.60 52.84 2.64 accruing in 2002) 1997 8639 1998 7806 1999 6527 2000 4682 2001 1416 2002 1046 2003 483 22.80 76.50 2.42 - 88 - ANNEX 9 Table 9.15: First-Year Return Test for the Tip-Timbi Link Discount Discount NPV in year 6 NPV in year 6 Project Calendar Investment rate rate at 10% at 12% Benefits in Year Year Costs 10% 12% (US$ 1000) (US$ 1000) Year 7 1 1995 3,142 1.772 1.974 5,567 6,203 2 1996 9,290 1.611 1.762 14,961 16,372 3 1997 10,351 1.464 1.574 15,155 16,288 4 1998 8,546 1.331 1.405 11,375 12,007 5 1999 6,704 1.210 1.254 8,112 8,409 6 2000 2,639 1.100 1.120 2,903 2,956 TOTAL 59,039 63,200 Annual 5,904 7,584 13,742 Table 9.16: Benefits and Costs of Recife South Line and TIP-Timbi (US$ Thousand) DIRECT BENEFITS EXTERNALITIES INVESTMENT OPERATING COSTS Road Bus Invest. COSTS BENERTS Travel Operating Maintenance System which Air TOTAL . _TO TAL minus PROJECT CALENDAR Time Cost Cost Cost will be Accident Pollution BENEFITS Wages & Operating Maintwnanc COSTS COSTS YEAR YEAR Savings Savings Savings Savings avoided Savings Savings BI . Salaries Cost Cost (Cl (B-Cl 1 1995 0 0 0 0. 0 0 0 0 7,891 0 0 0 7,891 (7,8911 2 1996 0 0 0 0 15,000 0 0 15,000 24,228 0 0 0 24,228 (9,228) 3 1997 0 0 0 0 13,000 0 0 13,000 35,331 0 0 0 35,331 (22,331) 4 1998 0 0 0 O 15,000 0 0 15,000 35,167 0 0 0 35,167 (20,1671 5 1999 0 0 0 0 15,000 0 0 15,000 28,189 0 0 0 28,189 (13,189) 6 2000 10,206 9,966 44 797 0 279 586 21,878 13,098 616 1,326 211 15,250 6,628 7 2001 20,412 19,932 88 1,595 0 558 1,172 43,756 4,395 1,231 2,651 421 8,698 35,058 8 2002 20,616 20,131 89 1,611 0 564 1,184 44,194 0 1,243 2,678 425 4,346 39,848 9 2003 20,822 20,333 90 1,627 0 569 1,195 44,636 0 1,258 2,704 429 4,389 40,246 10 2004 21,030 20,536 91 1,643 0 575 1,207 45,082 . 0 1,268 2,731 434 4,433 40,649 11 2005 21,241 20,741 92 1,659 0 581 1,219 45,533 0 1,281 2,759 438 4,478 41,0b5 12 2006 21,453 20,949 92 1,676 0 586 1,232 45,988 0 1,294 2,786 442 4,522 41,466 tD 13 2007 21,667 21,158 93 1,693 0 592 1,244 46,448 0 1,307 2,814 447 4,568 41,881 14 2008 21,884 21,370 94 1,710 0 598 1,256 46,813 0 1,320 2,842 451 4,613 42,299 15 2009 22,103 21,584 95 1,727 0 604 1,269 47,382 0 1,333 2,871 456 4,660 42,722 16 2010 22,324 21,800 96 1,744 0 610 1,282 4 6 0 1,346 2,899 460 4,706 43,150 17 2011 22,547 22,018 97 1,761 0 616 1,294 48,334 0 1,360 2,928 465 4,753 43,581 18 2012 22,773 22,238 98 1,779 0 623 1,307 48,818 0 1,373 2,958 470 4,801 44,017 19 2013 23,000 22,460 99 1,797 0 629 1,320 49,306 0 1,387 2,987 474 4,849 44,457 20 2014 23,230 22,685 100 1,815 0 635 1,334 49,799 0 1,401 3,017 479 4,897 44,902 21 2015 23,463 22,912 101 1,833 0 641 1,347 50,297 0 1,415 3,047 484 4,946 45,351 22 2016 23,697 23,141 102 1,851 0 648 1,361 50,800 0 1,429 3,078 489 4,996 45,804 23 2017 2 23,372 103 1,870 0 654 1,374 51,308 0 1,443 3,109 494 5,048 46,262 24 2018 24,174 23,606 104 1,988 0 661 1,388 51,821 0 1,458 3,140 499 5,096 46,726 25 2019 24,415 23,842 105 1,07 0 667 1,402 52,339 (20,762) 1,472 3.171 504 (l5,615) 87,954 _ __ _ I_______ I___I IERR= 27.9 growth rates 1.010 ---> 1994-2010 NPV@ 10% 148429.791 1.01 ---> 2011-2018 Ben PV @ 10 274298.308 Cos PV @ 10 125868.517 B/C @ 10% 2.18 z z m x CD - 90 - ANNEX 9 Table 9.17: Proposed Infrastructure and Equipment Component: Project Impacts and Standard Cost-Benefit Analysis Type of Impact Project Impact Captured by Standard Cost-Benefit Analysis? Accessibility and 1. Promotes the interconnection between 1. No. creation of new residential and employment areas and social opportunities equipment (hospitals, schools) facilities. 2. Strengthens existing subcenters. 2. No. 3. Creates new employment poles in the 3. No. periphery. 4. It favors the development of new housing 4. No. poles. 5. It softens the effects of the radial concentric 5. No. structure of the city. 6. It will alter the distribution of the 6. No. destinations which were previously concentrated in the central business district and shift them to the north, south, east and west of the RMR. 7. It will encourage new subcenters of economic 7. No. activity which otherwise would not be started. Land Use and 1. It increases land values due to lower 1. Partially through the Value generalized travel costs by public transport and operating cost savings. by auto even without changes in the zoning law. 2. No. 2. It increases the dynamics of the real estate market which is reflected by the occupation of empty lots and the renewal of older buildings in the area of influence of South line. Employment 1. It will promote the creation of jobs with 1. No. Generation multiplier effects in several sectors of the economy, with an estimate of 7000 direct and indirect jobs. Trip Quality 1. It will improve trip quality insofar as 1. No. It can be by reliability, comfort and safety are concerned. considering a saving of four minutes for each new metro trip. Road Use 1. It will reduce congestion by eliminating a 1. Yes, through the time great number of buses from the area of savings. influence. 2. Yes, through the 2. It will increase the average vehicle speed in operating cost savings. the RMR. 3. Yes. 3. It will reduce the number of road accidents. Air Quality 1. It contributes to a reduction of 14 percent in 1. Yes. bus emissions. - 91 - ANNEX 9 Type of Impact Project Impact Captured by Standard Cost-Benefit Analysis? Noise 1. It will reduce the level of noise in the area of 1. No. influence of the South line from 70 decibels to 55 decibels which is the level recommended by the WHO. Fuel Consumption 1. It will be reduced by 14 percent. 1. Yes. - 92 - ANNEX 10 BRAZIL RECIFE METROPOLITAN TRANSPORT DECENTRALIZATION PROJECT FINANCIAL EVALUATION 1. Past Financial Performance. STU-REC operates two different systems in the Recife metropolitan area: A relatively small (20.5 km) mass transit system and a suburban diesel service (South line) of 32 km in length. While the financial and economic statistics for the two services are very different, the network as a whole is highly dependent on external cash infusion for its operations. Internally generated cash (from farebox revenues) has traditionally been able to cover a maximum 1 8 percent of the working costs. In 1994, the system had a working ratio of 5.62. 2. Annual traffic volumes of about 5 million passengers on the South line are just 1 2 percent of the total traffic of the system and with very high operational cost. The small traffic volume is mainly due to four reasons: (a) slow service; (b) low frequency; (c) lack of access to the center of the city; and (d) insufficient integration with other modes especially with the Central line. A major problem contributing to long headways is the large number of at-grade crossings where the road traffic must be stopped to allow for the passage of the train. The resulting poor service has spurred a number of parallel bus services which have been contributing to the general traffic congestion in the area. 3. Low tariffs along with depressed demand and high evasion in the South line have negatively affected the revenue generating capacity of STU-REC. Metro/train tariffs are usually set 10- 20 percent below the lowest bus tariff and the level of revenue sharing in the case of integrated travel also short changes STU-REC because the bulk of the receipts are allocated to the bus companies. Realistically, a combination of measures geared towards increasing demand and tariffs are needed to enhance the internal cash generation capacity. Evasion, although high in the South line (21 percent) is negligible for the whole network as most of the current demand (88 percent) comes from the Central line. On the other hand, as the South line is electrified the evasion rate becomes more of a problem. It is expected to go down to near zero because of less open access to the line (fencing the right-of- way) and the stations. Demand is expected to increase due to the re-routing of buses to the system. 4. On the cost side, drastic measures would be required to balance the costs with revenues. In 1 994, personnel cost (salaries plus benefits) was four times the farebox revenue. The South line which carried about 1 2 percent of all passengers accounted for about 20 percent of labor cost; the rest was associated with the Central line. With 1,785 employees of which about 500 are in administration, STU-REC is considered overstaffed. 5. Financial Projections. With the proposed improvement and integration of the mass transit network and the extension of the South line to the center of Recife in 2001, annual traffic is expected to reach in excess of 102 million passengers-an increase of more than 250 percent over 1 994. A parallel increase in average tariff of about 75 percent would be needed to realize a working ratio of 1.23 in 2001, a five-fold improvement over 1994. The increase in traffic is expected to result from the construction of TIP-Timbi section of the Central line which is expected to bring in commuter traffic. In the South line, extension of the system to the center, construction of integrated stations, improvements in the infrastructure design that will eliminate at-grade crossings, and the fencing of the right-of-way would allow increases in the frequency of train service as well as its access to the center. - 93 - ANNEX 10 Table 10.1: STU-REC's Projected Income Statement l _________________________ 1994 1998 1999 2000 2001 2002 Operating Income 8,612 14,276 17,488 18,362 41,296 42,751 Working Expenses 48,425 45,774 46,899 48,053 50,948 52,057 Working Ratio 5.62 3.21 2.68 2.62 1.23 1.22 Operational Income 554 350 571 750 2,065 2,138 Working Cost Coverage 19% 32% 39% 40% 85% 86% Passengers (millions) 39 47 49 52 102 103 6. With increased and enhanced service, tariffs are expected to increase in order to better represent the true economic value of the system and increase the availability of the internally generated funds. The proposed increase in average tariff-from US$0.23 in 1994 to US$0.40 in 2001 - takes into account the surrounding economic environment, and the financial forecast is based on tariff values which are less than those charged in some of the other mass transit systems in Brazil. It also takes into account passenger surveys in which they indicate that they are willing to pay more for better and more frequent service. With more integrated stations, a greater increase in the number of transfer passengers is expected. Farebox revenue from integrated passengers is expected to be nearly three times that generated by non-integrated passengers. 7. While the farebox revenues are expected to increase by 390 percent between 1 994- 2001, working costs are projected to increase by only 5 percent due largely to a 3 percent decrease in the personnel costs because of the expected reduction in administrative staff. As the proposed project includes major overhaul of the current system, maintenance requirements for the network between 2001-2005 are expected to be marginally over that in the pre-project years. Because of a higher rate of increase in internally generated revenue compared to the working costs, by 2001 STU- REC should have enough revenues to cover 85 percent of its working costs. Annual subsidy requirement is therefore expected to fall from US$39 million in 1 994 to US$3 million in 2001. 8. Financial Forecast Assumptions. The financial forecast was prepared using March 1995 values. The forecast is based on the following major assumptions: * Between 1 994-2000 demand is expected to grow at 5 percent per annum. After the start of the improved service in 2001, growth in demand is expected to slow down to 1 percent per year; * Tariffs are expected to increase in real terms during 1995-2005. Average tariff is expected to increase by 75 percent between 1995-2001 and another 12.5 percent between 2001-2005. Since average tariff is derived after discounting for promotional and incentive tickets, integrated tickets, and multi-passes, the selling price of tickets (face-value) may be different from the average tariff. * Students are expected to pay 65 percent of the value of the full fare ticket. The remainder will be compensated to STU-REC by the government along with the compensation for gratuitos based on the full face-value of one-way ticket; - 94 - ANNEX 10 * Non-operational revenue is expected to be about 5 percent of the operational income by 2001, and includes the income from selling advertisement space. These results are similar to those observed in other rapid transit systems; * Salaries and benefits are expected to increase by 5 percent per year during the projection period. The total personnel cost is, however, expected to decrease due to a reduction in staff; * Energy cost is assumed to vary in direct proportion to car-km during the projection period; * STU-REC's share of the integrated ticket is assumed to be 60 percent; * Spares and material cost is expected to be about 14 percent of the working costs. * The state would be responsible for the replacement of assets and thus no provision has been made in the analysis for covering depreciation from operating revenues. Nonetheless, in order to ensure that the funds for replacement of assets are timely available, the financial forecast envisages creation of an escrow fund by directing non- operational income to it. - STU-REC is not expected to have any liabilities as these will be assumed by the Federal Government. 9. Sensitivity Analysis. The financial forecast assumes a reduction in total personnel expense of about 3 percent between 1 994-2001 due to a reduction in the administrative staff. A failure to decrease the size of the labor force and restrict its further growth will negatively affect the financial results. In the case that the assumed reductions in staff do not take place, the working ratio would worsen to 1.19 and the system will require additional subsidies of US$27 million over the projection period. On the other hand if the employment actually grows by 30 percent in 2001, the working ratio will be 1.40 and the revenue cost coverage would decrease to 75 percent compared to 94 percent in the base case. 10. Assuming that the working costs were underestimated in the forecast by 20 percent, the resulting working ratio would be 1.34 and the revenue cost coverage would decrease to about 79 percent. The public treasury would, however, have to contribute another US$100 million in subsidies between 1 996-2005 as the underestimation in costs is considered uniform over the projection period. In order to mitigate the risk of cost underestimation, the project envisions contracting out of a number of services to lower the operational costs. 11. The projected financial performance would also be adversely affected if there were a reduction in revenue due to: (a) low traffic volumes; (b) increased implementation period for the project; and (c) low tariffs. Assuming that the actual traffic were 20 percent below the projected volume, farebox revenues would fall and the resulting working ratio would be pushed up to 1.39. The revenue coverage ratio would thus drop down to 75 percent. This loss in traffic is calculated to cost the state about US$44 million during 2001-2005. On the other hand, if the loss in traffic is temporary due to construction delays, the promised financial performance would simply shift by similar number of years as the delay in starting the operations. It is estimated that each year delay in construction would cost STU-REC about US$20 million. 1 2. The loss in revenue due to STU-REC's inability to increase the average tariff is the most likely risk that the project faces due to the political unpopularity of the measure. If the average tariff is forced - 95 - ANNEX 10 to remain at its projected 1 996 level, STU-REC will have sufficient revenues only to cover 71 percent of its working costs during 2001. In this case, the working ratio would increase to 1.49 and the system would require an additional US$80 million in operating subsidies between 2001-2005. - 96 - ANNEX 10 Table 10.2: Income Statement 1990-1994 (Thousands of US$) 1990 1991 1992 1993 1994 OPERATING REVENUE Farebox Revenue 5,427 6,391 6,825 7,277 8,612 Gratuities Imposed by Govt. 0 0 0 0 0 Total Operating Revenue 5,427 6,391 6,825 7,277 8,612 NON-OPERATING INCOME Rental 170 195 71 93 89 Advertisement Space 0 0 0 0 0 Other t 414 761 859 400 465 Total Non-operating Income 584 956 930 493 554 Total Income 6,011 7,347 7,755 7,770 9,166 OPERATING EXPENSES Personnel 38,198 25,725 30,705 39,788 37,411 Spares and Materials 5,196 4,415 3,793 6,284 4,805 Electricity/Diesel 2,001 1,657 2,442 2,885 2,889 Administration/Other 3,975 3,190 2,589 4,004 3,320 Total Working Costs 49,369 34,986 39,529 52,961 48,425 Net Working Income (43,942) (28,595) (32,704) (45,684) (39,813) Depreciation 2,414 17,387 15,143 15,045 16,715 Defered Expense 3,154 69 20,687 800 2,206 Total Operating Expenses 54,937 52,442 75,359 68,806 67,346 Net Operating Income (49,510) (46,051) (68,534) (61,529) (58,734) Net Income for the Year (48,926) (45,095) (67,604) (61,036) (58,180) FINANCIAL INDICATORS Working Ratio 9.10 5.47 5.79 7.28 5.62 Working Cost Coverage 11% 18% 17% 14% 18% Personnel Cost: % of Total Revenue 635% 350% 396% 512% 408% % of Working Costs 77% 74% 78% 75% 77% t Mainly monetary fluctuations due to inflationary changes. - 97- ANNEX 10 Table 10.3: Annual Passenger Trips 1990-1994 1990 1991 1992 1993 1994 TOTAL SYSTEM Daily Traffic 144,750 143,494 118,586 121,995 120,005 Annual Traffic ('000) 46,983 46,574 38,488 39 595 38,504 Full Fare Passengers 29,765 28,778 16,047 17,667 16,815 Transfers 11,738 11,323 17,022 16,376 17,531 Students 0 903 745 765 546 Gratuitos 4,305 4.260 3,516 3,618 2,579 Evasion 1,175 1,308 1,158 1,169 1,033 METROREC Daily Traffic 128,862 125,639 102,686 105,979 104,285 Annual Traffic ('000) 41,751 40,707 33,270 34,337 33,788 Full Fare Passengers 26,125 24,795 12,755 14,408 13,853 Transfers 11,738 11,308 16,752 16,047 17,232 Students 0 813 665 685 473 Gratuitos 3,889 3,792 3,099 3,198 2,196 Evasion 83 82 66 69 34 SOUTH LINE Daily Traffic 15,888 17,854 15,900 16,016 14,556 Annual Traffic ('000) 5,148 5,785 5,152 5,189 4,716 Full Fare Passengers 3,639 3,984 3,292 3,259 2,962 Transfers 0 15 270 329 299 Students 0 91 80 80 73 Gratuitos 417 469 418 421 383 Evasion 1,091 1,227 1,091 1,100 999 Average Tariff (US$) Full Fare Passengers $0.12 $0.15 $0.23 $0.21 $0.27 Transfers $0.07 $0.08 $0.12 $0.11 $0.19 Students $0.10 $0.15 $0.14 $0.18 Trips refers to "linked trips' only, i.e., from origin to destination is considered one single trip. - 98 - ANNEX 10 Tablel'0.4: Personnel Costs (Thousand of US$) 1990 1991 1992 1993 1994 WORKFORCE (count) Maintenance 661 559 519 524 520 Operations 914 880 875 886 863 Administration 406 406 409 379 381 Total Workforce 1,981 1,845 1.803 1.789 1,764 TOTAL SALARY Maintenance 7,899.6 5,205.1 4,100.7 8,997.3 5,060 Operations 8,599.5 6,506.3 5,200.8 11,696.5 7,305 Administration 8,199.6 4,904.8 10,401.7 4,998.5 3,648 Total Workforce 24,698.7 16,616.1 19,703.2 25,692.3 16,013 BENEFITS Maintenance 4,299.8 2,902.8 2,300.4 4,998.5 3,882 Operations 4,699.8 3,603.5 2,900.5 6,398.1 5,584 Administration 4,499.8 2,602.5 5,800.9 2,699.2 2,815 Total Workforce 13,499.3 9,108.9 11,001.8 14,095.7 12,281 TOTAL PERSONNEL COST Maintenance 12,199 8,108 6,401 13,996 8,942 Operations 13,299 10,110 8,101 18,095 12,889 Administration 12,699 7,507 16,203 7,698 6,463 Total Workforce 38,198 25,725 30,705 39,788 28,294 38,198 25,725 30,705 39,788 28,294 COST PER EMPLOYEE (US$) Maintenance 18,456 14,504 12,333 26,710 17,196 Operations 14,551 11,488 9,259 20,423 14,935 Administration 31,279 18,491 39,615 20,310 16,964 Total Workforce 19,282 13,943 17,030 22,240 16,040 - 99 - ANNEX 10 Table 10.5: Energy Costs (Thousand of US$) 1990 1991 1992 1993 1994 ELECTRIC SERVICE Car Km ('000) 6,790 6,387 6,360 6,452 6.604 Passenger Kilometers (mil.) 347 344 281 279 285 Total Electric Cost 1,710 1,449 2,132 2,478 2,160 DIESEL SERVICE Car Km ('000) 2,041 2,921 2,622 2,599 2,275 Passenger Kilometers (mil.) 117 162 84 109 75 Total Fuel Cost 278 198 295 388 351 Total System Car Km ('000) 8,831 9,308 8,982 9,051 8,879 Passenger Kilometers (mil.) 464 506 365 388 360 Total Fuel/Electricity Cost 1,987 1,647 2,427 2,866 2,511 Other (Lubrication/Water) 14 10 15 19 18 Total Cost 2,001 1,657 2,442 2,885 2,529 -100- ANNEX 10 Table 10.6: Income Statement 1995-2005 (Thousands of March 1995 US$) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 OPERATING REVENUE Farebox revenues 9,198 12,118 12,012 12,613 15,451 16,223 42,240 43,729 45,243 46,783 49,449 Gratuities Imposed by Govt. 218 957 949 996 1,220 1,281 3,473 3,595 3,720 3,846 4,066 Students 106 186 184 193 237 249 654 677 701 725 766 Total Operating Revenue 9,415 13,075 12,961 13,609 16,671 17,505 45,712 47,324 48,963 50,630 53,515 NON-OPERATING INCOME Rental 0 64 127 200 327 429 1,371 1,420 1,469 1,519 1,605 Advertisement 0 43 85 133 218 286 914 946 979 1,013 1,070 Total Non-operating Income 0 107 212 333 544 715 2,286 2,366 2,448 2,531 2,676 Total Income 9,415 13,182 13,173 13,943 17,216 18,219 47,998 49,690 51,411 53,161 56,190 OPERATING EXPENSES Personnel 29,709 30,728 31,776 32,851 33,954 35,086 36,245 37,333 38,453 39,606 40,794 Spares and Materials 6,727 6,727 6,327 6,327 6,327 6,327 6,986 6,986 6,986 7,621 7,621 Electricity/Fuel 2,529 2,529 2,443 2,443 2,443 2,443 3,463 3,463 3,463 3,463 3,463 Contract Work 779 800 811 832 854 877 934 956 978 1,014 1,038 Other 3,320 3,320 3,320 3,320 3,320 3,320 3,320 3,320 3,320 3,320 3,320 Total Working Costs 43,064 44,104 44,677 45,774 46,899 48,053 50,948 52,057 53,200 55,024 56,236 Net Working Income (33,649) (31,029) (31,716) (32,164) (30,228) (30,548) (5,236) (4,733) (4,237) (4,394) (2,721) Depreciation 21,042 21,529 21,575 21,575 21,575 21,575 25,865 25,865 25,865 25,865 25,865 Deferred Expenses 1,805 1,069 0 0 0 0 1,685 1,685 1,685 1,685 1,685 Total Operating Expenses 65,911 66,702 66,252 67,349 68,474 69,628 78,498 79,607 80,749 82,574 83,786 Net Operating Income (56,496) (53,627) (53,291) (53,740) (51,803) (52,123) (32,786) (32,283) (31,787) (31,944) (30,271) Net Income for the Year (56,496) (53,520) (53,079) (53,406) (51,258) (51,409) (30,500) (29,917) (29,339) (29,413) (27,596) FINANCIAL INDICATORS Working Cost Ratio 4.57 3.37 3.45 3.36 2.81 2.75 1.11 1.10 1.09 1.09 1.05 Working Cost Coverage 22% 30% 29% 30% 37% 38% 94% 95% 97% 97% 100% Personnel Costs: % of Total Revenue 316% 233% 241% 236% 197% 193% 76% 75% 75% 75% 73% % of Working Costs 69% 70% 71% 72% 72% 73% 711% 72% 72% 72% 73% - 101 - ANNEX 10 Table 10.7: Passenger Trips 1995-2005 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Daily Traffic 126,005 132,306 131,149 137,706 144,592 151,821 349,515 353,010 356,540 360,106 363,707 Total Passengers C000) 40,826 42,867 42,492 44,617 46,848 49,190 113,243 114,375 115,519 116,674 117,841 Full Fare Passengers 17,829 18,720 18,556 19,484 20,459 21,481 27,178 27,450 27,725 28,002 28,282 Transfers 18,588 19,517 19,347 20,314 21,330 22,396 75,873 76,631 77,398 78,172 78,953 Students 612 857 850 892 937 984 2,265 2,288 2,310 2,333 2,357 Gratuitos 817 2,871 2,846 2,988 3,138 3,295 7,814 7,892 7,971 8,051 8,131 Evasion 1,095 1,286 1,275 1,339 1,405 1,476 113 114 116 117 118 Transport Tariff (US$) Full Fare $0.27 $0.33 $0.33 $0.33 $0.39 $0.39 $0.44 $0.46 $0.47 $0.48 $0.50 Transfer Fare (Metro's share) $0.23 $0.29 $0.29 $0.29 $0.34 $0.34 $039 $0.40 $0.41 $0.42 $0.44 Student Fare $0.17 $0.22 $0.22 $0.22 $0.25 $0.25 $0.29 $0.30 $0.30 $0.31 $0.33 Average Tariff $0.23 $0.31 $0.31 $0.31 $0.36 $0.36 $0.40 $0.41 $0.42 $0.43 $0.45 ASSUMPTIONS Average Tariff (R$) Full Fare $0.24 $0.30 $0.30 $0.30 $0.35 $0.35 $0.40 $0.41 $0.42 $0.43 $0.45 Integrated Fare $0.35 $0.44 $0.44 $0.44 $0.51 $0.51 $0.58 $0.60 $0.61 $0.63 $0.66 Students $0.16 $0.20 $0.20 $0.20 $0.23 $0.23 $0.28 $0.27 $0.27 $0.28 $0.29 Exchange Rate 0.9 Number of Days/Year 324 Annual Growth Factors: 1994-2000 5% 2001-2010 1% Fare sharing ratio 60% 60 Student Discount 65% 65 Passenger Types: Full Fare Passengers 44% 44% 44% 44% 44% 44% 24% 24% 24% 24% 24% Transfers 46% 46% 46% 46% 46% 46% 87% 67% 67% 67% 67% Students 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% Gratuitos 2% 7% 7% 7% 7% 7% 77% 7% 7% 7% 7% Evasion 3% 3% 3% 3% 3% 3% 0% 0% 0% 0% 0% -102- ANNEX 10 Table 10.8: Personnel Costs 1995-2005 (Thousands of March 1995 US$) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 WORKFORCE (count) Maintenance 523 519 515 512 508 504 500 500 500 500 500 Operations 762 760 758 756 754 752 750 750 750 750 750 Administrabon 500 475 450 425 400 375 350 350 350 350 350 Total Workforce 1,785 1,754 1,723 1,693 1,662 1,631 1,600 1,600 1,600 1,600 1,600 TOTAL SALARY Maintenance 5,313 5,538 5,772 6,015 6,269 6,533 6,807 7,011 7,222 7,438 7,661 Operabons 7,670 8,033 8,412 8,809 9,225 9,661 10,117 10,421 10,733 11,055 11,387 Administration 3,830 3,821 3,801 3,769 3,725 3,666 3,593 3,701 3,812 3,926 4,044 Total Workforce 16,814 17,391 17,985 18,594 19,219 19,860 20,517 21,133 21,767 22,420 23,092 TOTAL BENEFITS Maintenance 4,076 4,248 4,428 4,614 4,809 5,011 5,222 5,378 5,540 5,706 5,877 Operabons 5,863 6,140 6,430 6,734 7,052 7,385 7,733 7,965 8,204 8,451 8,704 Administrabon 2,956 2,949 2,933 2,909 2,875 2,830 2,773 2,856 2,942 3,030 3,121 Total Workforce 12,895 13,337 13,791 14,257 14,735 15,226 15,728 16,200 16,686 17,187 17,702 TOTAL PERSONNEL EXPENSE Maintenance 9,389 9,786 10,200 10,630 11,078 11,544 12,029 12,390 12,761 13,144 13,538 Operabons 13,533 14,173 14,842 15,543 16,277 17,046 17,850 18,386 18,938 19,506 20,091 Administrabon 6,786 6,769 6,734 6,678 6,599 6,496 6,366 6,557 6,754 6,956 7,165 Total Workforce 29,709 30,728 31,776 32,851 33,954 35,086 36,245 37,333 38,453 39,606 40,794 COST PER EMPLOYEE (US$) Maintenance 17,952 18,850 19,792 20,782 21,821 22,912 24,057 24,779 25,523 26,288 27,077 Operations 17,760 18,648 19,581 20,560 21,588 22,667 23,801 24,515 25,250 26,008 26,788 Administration 13,573 14,251 14,964 15,712 16,498 17,323 18,189 18,734 19,296 19,875 20,472 Total Workforce 16,644 17,517 18,438 19,410 20,434 21,514 22,653 23,333 24,033 24,754 25,496 -103- ANNEX 10 Table 10.9: Energy Costs 1995-2005 (Thousands of March 1995 US$) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 ELECTRIC SERVICE Car Km ('000) 6,604 6,604 6,604 6,604 6,604 6,604 9,460 9,460 9,460 9,460 9,460 Pass-km (millions) 299 314 359 377 395 415 877 886 895 904 913 Total Electric Cost 2,160 2,160 2,160 2,160 2,160 2,160 3,095 3,095 3,095 3,095 3,095 DIESEL SERVICE Car Km ('000) 2,275 2,275 1,747 1,747 1,747 1,747 2,275 2,275 2,275 2,275 2,275 Pass-km (millions) 78 82 61 64 67 71 130 131 132 134 135 Total Fuel Cost 351 351 270 270 270 270 351 351 351 351 351 Total System Car Km ('000) 8,879 8,879 8,351 8,351 8,351 8,351 11,735 11,735 11,735 11,735 11,735 Pass-km (millions) 378 397 420 441 463 486 1,007 1,017 1,027 1,038 1,048 Total Fuel/Electricity Cost 2,511 2,511 2,430 2,430 2,430 2,430 3,446 3,446 3,446 3,446 3,446 Other (Lubrication/Water) 18 18 13 13 13 13 18 18 18 18 18 Total Electricity/Fuel Cost 2,529 2,529 2,443 2,443 2,443 2,443 3,463 3,463 3,463 3,463 3,463 - 104- ANNEX 10 Table 10.10: Balance Sheet 1994-2005 (Thousands of March 1995 USS) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 ASSETS Current Assets 2,943 2,943 2,943 2,943 2,943 2,943 2,943 2,943 2,943 2,943 2,943 2,943 Permanent Assets 787,843 775,045 784,230 810,297 837,513 856,037 853,468 1,020,788 798,366 770,816 743,266 715,716 Net Fixed Assets 753,173 751,535 749,487 729,749 708,173 686,598 665,023 810,751 784,886 759,022 733,157 707,292 Fixed Assets 822,282 841,686 861,167 863,004 863,004 863,004 863,004 1,034,597 1,034,597 1,034,597 1,034,597 1,034,597 Acc. Depreciabon (69,109) (90,151) (111,680) (133,255) (154,631) (176,406) (197,981) (223,846) (249,711) (275,576) (301,440) (327,305) Work in Progress 31,796 22,441 34,743 80.548 129,340 169,439 188,443 194,872. 0 0 0 0 Net Deferred Assets 2,874 1,069 0 0 0 0 0 15,165 13,480 11,795 10,110 8.425 Deferred Assets 18,053 18,053 18,053 18,053 18,053 18.053 18,053 34,903 34,903 34,903 34,903 34,903 Acc. Deferred Expense (15,179) (16,984) (18,053) (18.053) (18,053) (18,053) (18.053) (19,738) (21,423) (23,108) (24,793) (26,478) Total Assets 790,786 777,988 787,173 813,240 840,456 858,980 856,409 1,023,731 801,309 773,759 746,209 718,659 LIABILITIES AND EQUITY Current Liability 3,669 3,669 3,669 3,669 3,669 3,669 3,669 3,689 3,669 3,669 3,669 3,669 Equity 787,117 774,319 783,504 809,571 836,787 855,311 852,740 1.020,062 797,640 770,090 742,540 714,990 Capital 327,339 327,339 327,339 327,339 327,339 327.339 327,339 327,339 327,339 327,339 327,339 327,339 Additional Contribubon 551,114 594,812 657,624 736,981 817,938 888,265 888,265 88,2685 948,288 953,021 957,258 961,652 Accumulated Deficits (91.336) (147,832) (201,459) (254,750) (308,489) (360,292) (412,416) (445,201) (477,987) (510,270) (542,057) (574,001) Total Llabilities and Equity 790,786 777,988 787,173 813,240 840,456 858,980 856,409 1,023,731 801,309 773,759 746,209 718,659 Table 10.11: Sources and Applications of Funds 1994-2005 (Thousands of March 1 995 US$) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 SOURCES Internal Cash Generation Net Operating Revenue (58.734) (56,496) (53.627) (53,291) (53.740) (51,803) (52,123) (32.786) (32,283) (31,787) (31,944) (30,271) Net Non-Operatng Income 554 0 107 212 333 544 715 2,286: 2,366 2,448 2,531 2,676 Depreciation 16,715 21,042 21,529 21,575 21,575 21.575 21,575 25,885 25,865 25,865 25,865 25,865 Deferred Expense 2.206 1,805 1,069 0 0 0 0 1,685: 1,685 1,685 1,885 1,685 Torai rom Operations (39,259) (33,649) (30,922) (31,504) (31,831) (29,683) (29,834) (2,950) (2,367) (1,789) (1.863) (46) Other Sources Capital Subsides 0 10,049 31,783 47,642 48,792 40,099 19,004 8,429 WB Loan 0 2,529 17,506 32 24,741 20,066 9,510 3,217 Counterpart Funds 0 7,520 14,277 47,610 24,051 20.033 9,494 3,212 Operating Sutsidy 39 259 33,649 30,922 31,504 31.831 29,683 29,834 2,950 2,367 1,769 1,863 46 Total Sources ot Funds 0 10,049 31,783 47,642 48,792 40,099 19,004 8,429 0 0 0 0 APPLICATIONS Investment Program 0 10,049 31,783 47,642 48.792 40.099 19,004 6,429 Total Uses of Funds 0 10,049 31.783 47.642 48.792 40,099 19,004 6,429 0 0 0 0 - 105 - ANNEX 11 BRAZIL RECIFE METROPOLITAN TRANSPORT DECENTRALIZATION PROJECT PROJECT IMPLEMENTATION SCHEDULE, MONITORING, EVALUATION AND SUPERVISION PLAN A. Project Implementation Schedule 1. The implementation schedule for individual components are shown in Annex 8. Those schedules and the detailed cost tables of Annex 8 provide the basis for project monitoring and for the disbursement profile. 2. Implementation Monitoring. CBTU will monitor compliance with the individual implementation schedules by defining target dates for key actions. The target dates for key actions for the first two years of the project (to about mid-1 997) are shown in the Action Plan in this Annex. In November of each year CBTU will prepare, with the agreement of the Bank, a similar action plan for the following year of implementation, and so on throughout the life of the project. In the event of delays, CBTU will be responsible for identification of the constraints and for devising and executing policies to resolve problems. 3. Financial progress will be monitored by CBTU in the same manner as implementation progress. Estimates of the South line and Central line costs have been made but final costs will be dependent on consultants' final engineering designs and on bid prices (for equipment etc.). Thus, it will be the responsibility of CBTU to update cost schedules as contracts and bids are finalized, and to monitor financial progress in relation to the updated schedules. 4. CBTU will report on both implementation and financial progress in the biannual progress reports. 5. Evaluation of the South and Central lines of the project will attempt to determine the extent to which original construction schedules and costs are respected. B. Monitoring and Evaluation of Project Components 6. Monitoring would identify the physical, institutional and financial status of each subproject component, as appropriate, on a periodic basis. The aim would be to identify implementa- tion problems and the extent of deviation from the targets proposed at appraisal. The results of the monitoring program (the comparison of achieved performance with appraisal targets) will be prepared, coordinated and presented by CBTU. The results of each subcomponent monitoring program will provide the basis and information for implementing agencies to prepare measures and actions to resolve implementation problems, if any, and at the same time, to update project costs, disbursement and implementation schedules if necessary. Monitoring indicators to be employed will vary by type of component but the general guidelines are set out in the following paragraphs. 7. The general guidelines given below would be followed: (a) each implementing agency would prepare, as part of its component preparation report, an implementation schedule which sets out target dates for key actions for physical works, equipment supply and institutional components. Where components are not fully prepared at appraisal, it would be a condition of their subsequent inclusion that an implementation schedule be prepared as an integral part of the component; -106- ANNEX 11 (b) for physical works (and equipment) progress the implementation schedule will define target dates (to the nearest quarter) for the start and finish of key actions involved in the implementation of physical works (and supply of equipment). Thus indicators are likely to include: (i) start/finish dates for final engineering design and documents for works (or equipment); (ii) date of issue of bid documents; (iii) date of contract signature; and (iv) start/finish dates for works (or supply of equipment). (c) for financial performance since works (or supply of equipment) are likely to extend over some time, the component implementation schedule will also be required to give target "percentage completed" by quarter. Thus target expenditures can be estimated and will be used to monitor financial (disbursement) performance on a quarterly basis; (d) for institutional measures (technical assistance, training and studies), the monitoring targets will be the progress reports and the dates of completion indicated in the implementation plan of Annex 7; and (e) monitoring of resettlement and property values in the area of influence of the STU-REC before, during and after construction. 8. Ex-post evaluation would be aimed at determining the effectiveness and efficiency of measures in meeting the objectives determined at appraisal. In the event that objectives are not met and previously anticipated improvements in performance are not achieved, the data would be used: (a) to identify why components had not been fully successful; and (b) to modify future components proposed for subsequent implementation which were based on similar premises. Furthermore, the ex- post evaluation would be used as a major input to the Project Implementation Report. 9. Operating and financial performance targets have been established for STU-REC. They are given below. Table 11.1: Performance Targets for STU-REC . ..... 1996 1997 1998 1999 2000 2001 ::2002 Total number of passengers carried 42 45 47 49 52 102 103 per year (millions of linked trips) Staff costs as a % of total revenue 235% 230% 225% 188% 184% 84% 83% Revenue Cost Coverage 30% 29% 30% 37% 38% 94% 95% Working Ratio 3.37 3.45 3.36 2.81 2.75 1.11 1.09 j 10. The qualitative monitoring indicators will be: (a) the date of the establishment of the Regional Transport Coordination Commission as compared to the agreed date on Section IV of the main text and its effectiveness in meeting the basic objectives described in Annex 3 for the EMTU; (b) the date of the completion of a financing mechanism study and an action plan to carry out its recommendations which should take place before the Mid-term Project Review; (c) the pace of implementation of the bus integration plan after the entry into operations of each link and the completion of any of the proposed accesses to the stations of the metro line; these should be done - 107 - ANNEX 11 not later than 30 days after entry into operations of the link or stations; and (d) the results of a train user survey, to be carried out every two years after effectiveness until project completion, to gauge the satisfaction of the users with the level of service offered by the system. The above qualitative monitoring indicators would be rated on a scale of 0 (unsatisfactory) to 5 (excellent). C. Supervision Plan 11. The main emphasis during the initial project phase would be to: (a) review the development and implementation of the project monitoring system; (b) make certain that CBTU's staff is familiar with Bank procurement guidelines, Bank disbursement procedures (i.e., Special Account transactions), and Bank independent auditing requirements; (c) ensure that all steps towards decentralization of STU-REC to the State are being taken; and (d) help CBTU/RTCC's development of a strategy to properly promote the project to the RMR public. Many of these items would be addressed in the first supervision mission scheduled for November 1995. During project implementation, the supervision missions would need to conduct the following activities in the field on a regular basis in addition to monitoring project progress: (a) review a sampling of contract bids and awards; (b) inspect disbursement procedures and record-keeping; (c) inspect adequacy of supervision and monitoring of the implementing agencies and respective subprojects; (d) review performance and accuracy of the Project Monitoring System; and {e) complete a Mid-term Review 24 months after project effectiveness to examine the progress made, especially in the Integrated Land Use, Urban Transport, and Air Quality Strategy and policies to assess the relevance of project objectives and actions, and recommend appropriate revisions (as needed). Supervision missions in the field should attempt to visit all the agencies dealing with the project during each trip. A preliminary schedule of supervision missions including key activities is indicated in the table on the following page. The key activities shown are in addition to the regular supervision needs, which include a review of: (a) progress reports; (b) procurement issues; (c) disbursements; (d) Project Implementation Plan; (e) project costs; (f) yearly independent audits; (g) correspondence; and (h) unforeseen issues. 1 2. The Bank project team would consist of the Task Manager (Sr. Transport Plan- ner/Economist), a Railway Engineer, a Metro Infrastructure Specialist, a Resettlement Specialist and a Financial Analyst. Consultants are anticipated to be required on a short-term basis to assist in specific areas, such as analysis of monitoring system, and review of institutional development programs. Supervision requirements for the project are expected to be high due to: (a) the complexity of the institutional arrangements; (b) the anticipated large number of small-scale subprojects; and (c) the institutional weakness of CBTU (requiring significant training and technical assistance). Supervision requirements are anticipated to be about 20 staff-weeks during the first year and about 1 2-1 5 staff- weeks thereafter. A summary of key inputs is provided on the following page. 13. Borrower's Contribution to Supervision. CBTU is expected to: Ca) be responsible for project monitoring and coordination, to keep the Project Monitoring System accurate, and to follow-up and address all issues which are "signaled" by the system; (b) be responsible for properly managing all procurement and disbursement considerations, keeping procurement and disbursement records up to date; (c) prepare progress reports in June and December of each year; and (d) be responsible for coordinating arrangements for the Bank supervision missions. - 108- ANNEX 11 Table 11.2: Bank Supervision Input into Key Activities Approx. Key Activities Expected Skill Staff Dates Requirements weeks 11/95 Supervision Mission - Project Effectiveness Transport Planner 4.5 (Review: (il conditions for project effectiveness - PIP, Railway Specialist POM, and Monitoring system; (ii) special coordinating Metro Inf. Specialist arrangements devised among several sectoral agencies Resettlement Specialist participating in project implementation; and (iii) existing financial and accounting systems/procedures) 12/95 Supervision Mission Transport Planner 5.0 (Project launch workshop, review Project Monitoring Disbursement Specialist System, selection of consultants) Procurement Specialist 3/96 Supervision Mission Transport Planner/Economist 5.5 (Review Project Monitoring System, Railway and Metro Engineer Training/implementation, institutional development in- Resettlement Specialist cluding training programs) 6/96 Supervision Mission Transport Planner 8.0 (Review results of first year Independent audit) Railway and metro Engineer 11/96 Supervision Mission Transport Planner 7.0 (Concentrate on subprojects: (i) contracts; (ii) eligibili- Railway and metro Engineer ty/limits; (iii) costs; and (iv) status) 1/97 Supervision Mission Transport Planner 8.0 (Concentrate on disbursements, financial status, Railway and metro Engineer Institutional development, public transport studies) Consultant 6/97 Supervision Mission Transport Planner 7.0 (Concentrate on subproject status and implementation Railway and metro Engineer of recommendations of public transport study) 1998 Two Supervision Missions Transport Planner 13.0 Railway and metro Engineer Consultant 1999 Three Supervision Missions Transport Planner 12.0 (Begin negotiations of follow-up loan, if Mid-term Railway and metro Engineer Review is favorable) Consultant 2000 to Two Supervision Missions-Loan Closing Transport Planner 12.0 2001 (Project closing, final negotiations for follow-up loan) Railway and metro Engineer D. Action Plan 14. The Action Plan is based on the assumption that Negotiations will be held in May 1995, Board Presentation in June 1 995, and Effectiveness in October 1 995. The Action Plan represents key actions to be taken in the first year; the second year action plan will be developed in March 1 996. Table 11.3: FY96 Action Plan Action Date Status Observations Submission to Bank of "Convenio April 30, 1995 Done "Convenio" must be Bssico" updated Confirmation of engineering April 1 5, 1 995 Done designs/costs for first year Submission of draft resettlement report April 15, 1995 Done - 109 - ANNEX 1 1 Action Date Status Observations Submission of draft environmental April 30, 1995 Done impact statement Negotiations May 22, 1995 Done Board Presentation June 29, 1995 Loan Effectiveness October 25, 1995 Table 11.4: Project Implementation Schedule STU - REC 1995 1996 1997 1998 1999 2000 2001 _ I II Ill IV I II I I I IV I III I IV I I Ill IV I 11 I V I - LAND EXPROPRIATION 2 - RELOC. TRANSM. LINES Prpsaono Bdin ocmnt [|- ||- ---L| 3 -CIVL WORKS • Lot I Preparation of Bidding Documents L Bidding Works • Lot II Preparabon of Bidding Documents v Bidding Works • Lot IlI Preparation of Bidding Documents V Bidding Works * Lot IV Preparation of Bidding Documents Bidding Works *Lot V Preparation of Bidding Documents Bidding Works z *Lot V!Z m Preparation of Bidding Documents Bidding Works Table 114: Project Implementation Schedule (con't) STU - REC 1995 196 1807 1998 1999 2000 2001 1 II I 1 V I 11 III IV I 11 III IV I 11 IIIl 11 I IV I III I V I 11 III IV * Lot Vil Prepruston of Bidding Documents IT Bidding Works 4.- PERMANENT WAY *Superstructure Proparatton of Bidding Documents Bidding SupplyNVorks 5-SYSTEMS 5.1 ELECTRIFICATION * Catenary Prpepration of Bidding Documents Bidding Supply/Works * Substatons Preparation of Bidding Documents M Bidding Supply/Works 5.2 - SIGNALING *ATC & RI Prpepration of Bidding Documents Bidding Supply/Works - - - - - - -- * CTC & CPC Prpepration of Bidding Documents m Bidding SupplyNVorks . . . . . . I I I - - I I I I J - - - - - Table 11.4: Project Implementation Schedule (con't) STU - REC 1995 1996 1997 1998 1999 2000 2001 _ I I III I\V I I III IV I I III IlV l I I III IV I II III IV I II III IV I II III IV 5.3 - TELECOMMUNICATIONS * Cable & Radio Network Preparation of Bidding Documents Bidding Supply/Works * Public Address & Clock Systems Preparaton of Bidding Documents Bidding Supply/ Works * Ticketing Control System Preparaton of Bidding Documents Bidding SupptylWorks __ * Telephone Central Station Preparaton of Bidding Documents Bidding Supply/Works 6 -WORKSHOPS Equipments Preparaton of Bidding Documents V Bidding Supply 7 - ROLLING STOCK *Refurbishment of EMUS> z Bidding m Supply/Works- Table 11.4: Project Implementation Schedule (con't) STU - REC 1995 1996 1997 1998 1999 2000 2001 I_ _ 11 I IV I I II 11IV I II Ill IV I I11 Ill IV I I11 III IV I II III IV I 1I III IV * Modernization of Locos Preparation of Bidding Documents Bidding SupplyNVorks * Refurbishment of Passenger Cars Preparabon of Bidding Documents Bidding Works * Air Conditioning Preparaion of Bidding Documents V Bidding Works 8 - TECHNICAL ASSISTANCE • Supervision Preparaion of Bidding Documents V Selection Services * T.A & Studies Preparation of Bidding Documents V Selection Services 9 - TRAINING *Consultants> Preparation of Bidding Documents V z z Selection m X Services - 114- ANNEX 12 BRAZIL RECIFE METROPOLITAN TRANSPORT DECENTRALIZATION PROJECT RECIFE METROPOLITAN REGION: URBAN TRANSPORT CHARACTERISTICS 1. This Annex contains basic socio-economic and transport data on the RMR and provides a snapshot of the modal split and involvement of each agency in the urban transport sector. A. Demographic Data Table 12.1: Population Growth in Brazil (Thousands of Inhabitants) Annual Anrnual Annual Annual Entity 1960 Growth (%) 1970 Growth (%) Growth (%) 1991 Growth (%) 2000 2010 RMR 1,240 3.75 1,790 2.91 2,390 1.8 2,910 1.8 3,400 4100 Brazil 70,119 2.9 93,139 2.5 119,003 1.9 143,449 2.2 183,627 223,673 Source: STU-REC/IBGE. Table 12.2: RMR and Recife Municipality Population (Thousands of Inhabitants) Area 1987 2000 2010 Recife Municipality 1,260 1,370 1,460 Recife Metropolitan Region 2,700 3,400 4,100 B. Household Income and Ridership Profile Data Table 12.3: STU-REC Ridership Income Profile Monthly Income Range in US$ $0 $0-100 $100-200 *200-300 $300-400 $400-700 $>700 US$ Amount 0 0-1 1-2 2-3 34 4-7 > 7 Min. Salary l l | | _ __ Central Line 33.1 15.6 9.8 16.7 10.8 10.0 4 South Line 31.0 23.2 9.8 15.5 7.5 8.9 1 3.3 1 Future South Line 33.1 15.6 9.8 15.5- | 7.5 T 89 3.3 Source: CBTU, March 1995 -_ _ _ _ _ _ _ _ _ _ _ _ _ _ _-_ _ _ _ _ _ -115- ANNEX12 Table 12.4: Population Growth in Municipalities Served by STU-REC Municipalities 1980 1990 Annual Average Total # of Density % of Tota Total # of Density % of Total Population Inhabitants (Inhab./ha) Inhabitants (Inhab./ha) Growth 1%) (000's) (000's) Recife 1,200.4 574 50.3 1,200.1 617 44.4 0.66 Jaboatao 330.4 141 13.8 482.4 206 16.6 3.50 Cabo 104.2 23 4.36 125.8 28 4.3 1.70 Table 12.5: RMR'S Urban Transport Modal Split Mode Number of Trips/year (000's) and % of Total Trips 1987 % 1994 % Public Transport 504,912 77 497,149 59 Bus 467,413 71 458,355 54 Metro 29,800 5 34,078 4 Rail 7,699 1 4,716 1 Private Transport 150,705 23 345,170 41 Automobile 150,705 23 313,140 37 Taxi and Jitney --- --- 13,730 2 Others --- --- 18,300 2 Total 655,617 100 842,319 100 Total/day 1,796 2,307 ____ Source: EMTU and CBTU. Table 12.6: RMR's Motorization Rate Motorization Rate Actual Forecast 1987 1994 2000 2010 Autos per 1000 Inhabitants 51.57 94.97 138.7 260.81 - 116- ANNEX 12 Table 12.7: Number of Motorized Trips/Day (millions) [ Area 1987 2000 2010 E [ Recife Metropolitan Region 1.8 3.3 4.5 -117- ANNEX 12 Table 12.8: Annual Passengers and Passenger/Kilometers Carried and Forecast Year Parameter Unit Value 1989 PASSENGERNEAR PASS. 47,617,866 PASSENGER.KM/YEAR PAS.KM 469,952,000 1990 PASSENGERNEAR PASS. 46,899,158 PASSENGER.KM/YEAR PAS.KM 464,060,000 1991 PASSENGERNEAR PASS. 46,491,916 PASSENGER.KM/YEAR PAS.KM 474,838,000 1992 PASSENGER/YEAR PASS. 38,421,925 PASSENGER.KM/YEAR PAS.KM 397,743,000 1993 PASSENGER/YEAR PASS. 39,526,426 PASSENGER.KM/YEAR PAS.KM 371,795,048 1994 PASSENGERNEAR PASS. 38,504,475 (BASE YEAR) PASSENGER.KM/YEAR PAS.KM 359,690,000 1996 PASSENGER/YEAR PASS. 42,451,184 PASSENGER.KMNEAR PAS.KM 396,557,408 1998 PASSENGERNEAR PASS. 44,616,990 PASSENGER.KMNYEAR PAS.KM 440,723,930 2000 PASSENGER/YEAR PASS. 49,190,231 PASSENGER.KM/YEAR PAS.KM 485,898,133 2001 PASSENGER/EAR PASS. 113,242,860 PASSENGER.KM/YEAR PAS.KM 1,275,306,120 2002 PASSENGER/YEAR PASS. 114,375,289 PASSENGER.KMNYEAR PAS.KM 1,288,058,071 2003 PASSENGER/EAR PASS. 115,519,041 PASSENGER.KM/YEAR PAS.KM 1,300,938,652 2004 PASSENGER/EAR PASS. 116,674,232 PASSENGER.KM/YEAR PAS.KM 1,313,948,038 2005 PASSENGER/EAR PASS. 117,840,974 PASSENGER.KMNEAR PAS.KM 1,327,087,519 2010 PASSENGER/EAR PASS. 123,852,048 PASSENGER.KM/YEAR PAS.KM 1,394,782,319 -118- ANNEX 13 BRAZIL RECIFE METROPOLITAN TRANSPORT DECENTRALIZATION PROJECT SELECTED DOCUMENTS AVAILABLE IN THE PROJECT FILE 1. Sistema de Transporte da Regi3o Metropolitana do Recife - Aspectos Gerais, Propostas e Avaliac3o, STU-REC, CBTU, Recife, Abril de 1 994. 2. Segundo Manual de Operac3o dos Transportes Puiblicos de Passageiros por Onibus da Regi3o Metropolitana do Recife - RTPP/RMR, EMTU/RECIFE, Fev. 1991. 3. Sistema Integrado de Transporte de Massa de Recife, CBTU, 1991 4. Opini6es e Atitudes sobre Transportes Colectivos em Recife, Instituto de Pesquisas Sociais e Econ6micas, Maio 1993 5. Avaliac,o do Servico de Metr6 Segundo os Usuarios, 7a. Pesquisa, STU-REC, Dezembro de 1991. 6. Programa Estruturador do Recife, Prefeitura de Recife, 1 994. 7. Economic Evaluation of Technological Alternatives for the South Line and the TIP- Timbi links. Bank mission and CBTU, November 1994. 8. Detailed Economic Evaluation of the South Line and TIP-Timbi Proposed Projects. Bank mission, March 1995. 9. Review of Basic Engineering Design, Recife and Belo Horizonte, Toronto Transit Consultants, March 1995. IBRD 26915 60 GUYANA 40' 35 00 34 50' IVENEZUELA,/ SURINAME COLO BA_ ) ',/,B FRENCH GUIANA _j? .V' /BRAZIL 0, ok o - R-:u RECIFE METROPOLITAN TRANSPORT BRAZIL Ref DECENTRALIZATION PROJECT PERU S U IBRASILIA STU-REC 2 BOLIVIA 20' \ 20'- CHILE ' 0' ---- \8L0 URLGUAY1 ,0 Sao Lourenso I O Da0M0al 0 DM 8 00'- Comoragibe t S Tinnbi tAL.00 MORENO tt~~~~~~~~~~0 . 5 N. Sro. 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Agostinho - -INTERNATIONAL BOUNDARIES show on b, mop do -oi imply on Ph. p.t of The Wori Eok0 Croup ony j.dq-et on th. legd d-hs loy ?.IilToy, or -ny ^ endrseen:or sceoone osuh b .. d-ies 35-00- 4,0 I A I9 .5 / ~ ~ ~ ~~~~~~~~MY19 IMAGING Report No; 14264 BR Type: SAR