KENYA Second Kenya Urban Support Program (KUSP2) Technical Assessment Report May 17, 2023 Contents A. PROGRAM DESCRIPTION................................................................................................................ 1 COUNTRY AND SECTOR CONTEXT...................................................................................................... 1 GOVERNMENT PROGRAM ................................................................................................................. 4 THEORY OF CHANGE........................................................................................................................... 4 PROGRAM SCOPE ............................................................................................................................... 5 B. ASSESSMENT OF PROGRAM STRATEGIC RELEVANCE, TECHNICAL SOUNDNESS AND INSTITUTIONAL ARRANGEMENTS........................................................................................................ 21 STRATEGIC RELEVANCE .................................................................................................................... 21 TECHNICAL SOUNDNESS .................................................................................................................. 22 INSTITUTIONAL ARRANGEMENTS.................................................................................................... 26 C. PROGRAM EXPENDITURE FRAMEWORK ..................................................................................... 30 D. ASSESSMENT OF DLIs, RESULTS FRAMEWORK AND M&E .......................................................... 32 DLIs AND VERIFICATION PROTOCOLS .............................................................................................. 32 RESULTS FRAMEWORK AND MONITORING & EVALUATION .......................................................... 33 INSTITUTIONAL ROLES AND RESPONSIBILITIES FOR M&E .............................................................. 34 ASSESSMENT OF IMPLEMENTING AGENCIES’ ABILITY TO CARRY OUT M&E ................................. 36 E. PROGRAM ECONOMIC EVALUATION .......................................................................................... 36 F. TECHNICAL RISKS AND THE PROGRAM ACTION PLAN ................................................................ 44 Annex 1: ELIGIBLE KUSP2 MUNICIPALITIES ......................................................................................... 45 Annex 2: DETAILED UDG PERFORMANCE FRAMEWORK (Component 2)........................................... 47 A. PROGRAM DESCRIPTION COUNTRY AND SECTOR CONTEXT Urban development challenges 1. Kenya is urbanizing rapidly at a rate of 4.3 percent a year; the share of Kenya’s population living in urban areas in 2019 stood at about 31 percent and is projected to reach 50 percent by 2050.1 Although urbanization has the potential to drive economic growth and improve living standards, this potential has not been fully realized or leveraged. Gains from urbanization have been limited and unevenly distributed. 2. Urban economies are growing at a slower rate than urban populations. A large share of the urban population is unemployed, underemployed or works in the informal sector.2 Close to 90 percent of those employed are working in the informal sector with limited job security, while about 19 percent of the working population are unemployed and seeking work. Urban poverty has increased in the last decade: the share of Kenya’s poor living in urban areas increased from 14 percent in 2005/06 to 23 percent in 2015-16. The pandemic has exacerbated this, with over 2 million urban households losing their livelihoods and falling back into poverty. In 2020, urban poverty went up to about 50 percent.3 The youth make up most of these new urban poor.4 3. Urban infrastructure and service delivery have not kept pace with urbanization. Access to urban services is uneven, with informal settlements being severely underserved. In Nairobi County, 84 percent of formal households have access to piped water, compared to only 36 percent of households in informal settlements. This disparity is experienced across all other infrastructure and services including sanitation, power, roads access and solid waste collection.5 Many urban areas are characterized by traffic congestion, poor road networks and non-motorized transportation facilities, unreliable public transport, inadequate water and sanitation facilities, unreliable energy supply, an absence of green areas and safe public spaces, and unorganized vending areas and markets. Limited access to essential services affects livability and the productivity of individuals and firms. 4. Limited public investment in urban development has been partly to blame for relative urban decline and the deterioration of urban infrastructure and services. Most urban areas have no budgets for operations and maintenance, leading to the decay and degradation of existing public assets, such as public housing estates, water and sewer reticulation networks and urban roads. Insufficient, over-used and under-maintained infrastructure discourages private sector investments and undermines private sector productivity and competitiveness. Reaping the full benefits of urbanization will require investments in both new and existing infrastructure and services. 5. Kenya’s urban areas are at increasing risk of climate-related hazards, particularly flooding and droughts. The frequency and severity of drought is on the rise, with devastating effects on water 1 2019 Kenya Population and Housing Census,; World Bank (2016). Kenya Urbanization Review. 2 GoK (2021) Economic Survey 2021, Kenya National Bureau of Statistics - In 2020, the informal sector employment was estimated to account for 83.4 per cent of total employment outside of small-scale agriculture. Of this, 88.6 percent employed in urban areas. According to the 2019 Housing Survey, over 1.3 million urban residents are unemployed and looking for work. 3 World Bank, Kenya Economic Update, December 2021|Edition No. 24 4 World Bank Group (2020), Kenya Economic Update: Navigating the Pandemic, November 2020 | Edition No. 22. 5 World Bank (2016). Kenya Urbanization Review. 1 and energy supply, urban food security and the economy at large.6 Urban flooding has become a frequent phenomenon due to climate change induced heavy rains. This is further exacerbated by rapid urbanization and uncontrolled development that have led to an increase in impervious surfaces and loss of green spaces. Poor drainage and inefficient waste collection systems that lead to clogging of drainage systems, have also amplified urban flooding, which has resulted in catastrophic outcomes with the most affected populations being the urban poor who tend to live along riverbanks and waterfronts, hillsides, and slopes prone to landslides, and live in unstable structures vulnerable to collapse in heavy rains. 6. Refugee populations in Kenya pose an additional and distinctive urban development challenge. The inflow of refugees into Garissa and Turkana counties, both of which are located in the Arid and Semi-Arid Lands (ASAL) of northern Kenya, has significantly changed the population, spatial, and social dynamics of the two host counties. About 233,726 registered refugees live in the Dadaab refugee camps (Garissa County) while 244,286 refugees reside in the Kakuma refugee camps and Kalobeyei Settlement (Turkana County).7 Most refugees rely on humanitarian aid for subsistence, though there are vibrant informal economies, fueled by remittances, in both camp complexes. Other basic services in the camps such as education, health, and water are provided through a parallel system funded by humanitarian actors with increasing involvement by GoK line ministries and county governments. The Dadaab and Kakuma camps have been in existence for over two decades and the current camp model creates humanitarian aid-driven market distortions and parallel services which would be more effectively and more equitably managed and delivered through county and municipal systems and processes. 7. Despite having population thresholds that qualify for municipal status, refugee camps are currently being managed separately from host communities. In Garissa, the combined population of the Dadaab refugee camps and the urban center amounts to 233,726, which would make this area the 6th largest municipality in Kenya. Kakuma-Kalobeyei is the largest human settlement cluster in Turkana County and the second largest in North Rift Kenya, after Eldoret Town.8 Up until now, however, Kakuma and Kalobeyei camps are managed separately from the nearby Kakuma Town; similarly, the three camps (Dagahaley, Hagadera, and Ifo camps) that constitute the Dadaab Refugee Complex are under a separate administration from the nearby Dadaab Town. In line with the Government’s support to durable solutions for refugees, anchored in its new legislative framework, there is potential to transform these long-standing refugee camps into urban settlements, serving both refugees and host communities, and to fully integrate them into the local administrative structures, thereby promoting resilience and inclusion. Urban institutional frameworks 8. Kenya Vision 2030 and national urban development policies recognize sustainable urbanization as key to overall national economic growth. The draft Fourth Medium Term Plan (2023 – 2027), identifies urbanization as one of the six sectors under the Social Pillar to drive socio-economic development. The National Urban Development Policy seeks to create secure, well-governed, competitive and sustainable urban areas that contribute to overall national growth. 9. Kenya adopted a devolved system of governance in 2010. The 2010 Constitution provides for two distinct but interdependent levels of government - the national government and 47 county governments. The national government is responsible for policy formulation and strategic 6 Draft Kenya County Partnership Framework FY 22-27, World Bank Group 7 UNHCR, (October 2022): https://www.unhcr.org/ke/wp-content/uploads/sites/2/2022/11/Kenya-Refugee-Population- Statistics-Package-31-October-2022.pdf 8 World Bank, 2021. Dadaab Refugee Camp: The Untapped Potential of a Vibrant Urban Centre. 2 national investments while county governments are responsible for most basic service delivery, including in urban areas. The Constitution provides for the enactment of subsequent national legislation to regulate the governance and management of urban areas and cities. The Urban Areas and Cities Act (UACA) 2011, gives effect to Article 184 of the Constitution by providing procedures for establishing cities and municipalities and urban management institutions. 10. Under UACA, the governance and management of larger urban areas (cities and municipalities) resides with urban boards, who are under delegated authority from county governments, to exercise various powers, functions and responsibilities. As per UACA, urban boards are body corporates acting on behalf of the county executive. They are responsible for the general oversight and management of urban areas, including infrastructure and service delivery, the development and implementation of policies, strategies, plans and programs. Boards submit annual budget estimates and financial accounts to their county governments, to which they are fully accountable. 11. Although county governments have now formally created municipalities and established urban boards for 69 urban areas, many of these boards require strengthening. Their effectiveness has been compromised by limited capacity, unclear functional responsibilities, inadequate financing, limited authority/autonomy and “competitive� overlap with other county government departments and agencies. Underlying these constraints are a number of factors: counties have been slow to genuinely delegate authority, to clearly define mandates, to transfer sufficient budget and human resources; ambiguities and silences in the wider legal and regulatory framework (including UACA, CGA, PLUPA); and capacity limitations inherent to newly established institutions. Urban planning, service delivery and the private sector 12. Urban planning remains weak and ineffective. Although a majority of municipalities have a spatial plan in place, most lack detailed implementation plan frameworks. Many counties also lack urban planners and development control officers to oversee the formulation, implementation and enforcement of plans. Most urban areas lack integrated spatial and economic plans to guide both public and private investments. Spatial expansion is largely uncontrolled, resulting in urban sprawl, increased infrastructure costs, environmental degradation, air and water pollution, increased floods, loss of critical natural habitats, decline of open spaces and overall reductions in the quality of life. Furthermore, unclear urban land ownership (e.g., absence or multiple ownership, lack of public land inventories and encroachment on public land or infrastructure wayleaves) and complex land administration are an impediment to effective development control and infrastructure investments. 13. Effective urban service delivery, planning and development control are also hampered by various institutional bottlenecks. These include: inadequate institutional capacity (human, technical and fiscal), political interference or lack of political good will, lack of public awareness on the existence of planning and development control regulations, bribery during the design and approval stages of infrastructure, buildings and plans as well as during implementation inspections.9 Most planning and development control departments lack adequate qualified personnel not only to formulate plans and development control tools but to also enforce regulations. In some cases, clear and transparent development application and approval processes are lacking, which in turn translates into manipulation and corruption. Most counties’ 9P. Bucha, D. Juma, J. Onyango, 2020, Influence of contextual framework on mitigating building failure in Kenya; Kenneth. K, 2001, Problems of development control in urban centres in Kenya: a case of Kericho Municipality 3 development application processes are also not automated and rely on face-to-face interaction, which makes them prone to abuse. 14. While the private sector plays an essential role in developing the urban space and creating employment, its active participation in urban planning and development is weak. Lack of structured engagement with the private sector means that cities and municipalities are unable to: (i) respond to the needs of firms and businesses through appropriate plans and regulations; and (ii) deliver the kinds of infrastructure and services that would contribute to greater private sector competitiveness. GOVERNMENT PROGRAM 15. The GoK´s program is the Second Kenya Urban Program (KenUP2, 2022 - 2026). KenUP2’s goal is to leverage urbanization as the road to national modernization, promoting effective urban planning and management systems. Its core objectives are to: (i) deliver locally determined urban Integrated Development Plans and town plans; (ii) ensure effective development control; and (iii) provide investment frameworks with resulting infrastructure and supporting services. 16. KenUP2 is aligned with the Refugee Act and the Marshall Plan currently in preparation. Following the passing of the Refugees Act and the ongoing preparation of the Marshall Plan, which outlines GoK’s plans to transition from camps to settlements, the State Department of Housing and Urban Development (SDHUD) revised KenUP2 in March 2023 to specifically address the issues of integration of host and refugee communities through the settlement approach. These settlements will require planning, development, and governance, all of which are the responsibility of urban boards. 17. The SDHUD is responsible for the implementation of KenUP2. However, as per their legal mandate, the Counties and their urban institutions, are responsible for implementation of investments in their respective jurisdictions and with their respective budget allocations. The SDHUD, and relevant Ministries, Departments and Agencies (MDAs), are responsible for the development of policies, standards, guidelines and capacity building. 18. KUSP2 is intended to support the implementation of elements of KenUP2. The Program focuses on secondary cities and municipalities, but excludes, amongst others, investments in Nairobi and Mombasa, as well as investments related to upgrading of informal settlements. It builds on KUSP1 which supported the (i) establishment of 59 municipalities, (ii) strengthening of basic municipal capacities and (iii) improvement of infrastructure and service provision. 19. KUSP2 will also support the Government in implementing its new approach to the integration of refugee settlements, in line with the Refugees Act (2021). This approach aims: (i) to encourage the shared use of public facilities, services, and institutions by refugees and host communities; and (ii) to ensure that refugees are better included in national health, education and social systems to facilitate self-reliance. KUSP2 support will be provided to Garissa and Turkana counties, both of which have drawn up integrated development plans that focus on strengthening socioeconomic development for refugees and host communities. THEORY OF CHANGE 20. KUSP2 is based on a theory of change (see figure 1 below) which identifies the key constraints for efficient and effective urban development in Kenya. These constraints include: (i) weak urban institutions and limited financing; (ii) limited capacity for inclusive and resilient urban planning 4 and development control; (iii) insufficient urban infrastructure and services; (iv) uncompetitive business environment, and (v) parallel development between refugee and host communities. The theory of change proposes to address these challenges through a range of activities undertaken and provided by both national level MDAs, county governments and urban institutions. Program activities will contribute to the delivery of outcomes in five Results Areas (RAs): (i) strengthened institutions for delivery of urban services; (ii) integrated planning for inclusive and resilient urban areas; (iii) more inclusive and resilient infrastructure and services; (iv) Improved private sector engagement, and (iv) improved integrated development between refugees and host communities. Taken together, these will lead to improved and resilient urban service delivery and improved engagement with the private sector, and, in consequence, to more livable, resilient and competitive urban areas. Figure 1: KUSP2’s theory of change PROGRAM SCOPE 21. KUSP2 will support reforms, interventions, and actions in five Results Areas (RAs): • RA 1: Strengthened institutions for urban service delivery. Strengthening the management of urban institutions for improved urban service delivery, through inter alia, institutional capacity building, enabling the delegation of functions, enhancing of municipal human resources management, and financing, and improving citizen participation. • RA 2: Integrated planning for inclusive10 and resilient urban areas. Enhancing the planning 10 Inclusive planning is a form of integrated planning that supports the creation of cities that accommodate everyone (regardless of their economic status, gender, ethnicity, disability, age, religion, nationality etc) by ensuring that: people have access to affordable and equitable basic services at their disposal usually within 15 minutes, public spaces are accessible to all, prioritises NMT and Mass Public Transit over private vehicles, provides livelihood opportunities and ensures the participation of all stakeholders in the city building process, and particularly the vulnerable and marginalized groups. 5 and development control capacity of urban institutions, through inter alia, strengthening of planning instruments, including climate change and gender considerations, and improving their implementation and monitoring through appropriate development control tools and capacity. • RA 3: More inclusive11 and resilient urban services and infrastructure. Improving the delivery of urban infrastructure and services, as well as strengthening their resilience and sustainability through inter alia, enhancing the capacity for planning, design, and implementation of climate-resilient and inclusive urban investments, developing asset registries and management plans, and enhancing the operations and maintenance capacities of urban institutions. • RA 4: Improved private sector engagement. Enhancing the private sector’s contribution to urban planning through inter alia, supporting the development and implementation of an engagement framework and promoting urban development plans being informed by dialogue with the private sector. • RA 5: Improved integrated development for refugees and host communities. Supporting the transition of refugee camps into integrated host community and refugee settlements, through inter alia, the establishment and capacity building of unified urban institutions to lead joint planning, infrastructure and service delivery and interventions supporting economic activity and social cohesion. 22. KUSP2 is structured into three Components aligned towards delivering outcomes in all the RAs : a. Component 1 – Urban development national policies, capacity building and program management (IPF) will support implementation at the national level by directly financing activities that contribute towards the delivery of the Program outcomes. This Component will provide support for: (i) program management; (ii) policy and regulation development; and (iii) technical and capacity development support to counties and urban institutions. b. Component 2 – Subnational urban development capacity building and investments (P-for-R) will finance urban infrastructure and service delivery and institutional and capacity development. It will incentivize counties and urban institutions to undertake interventions that contribute to achieving the Program outcomes through performance grants accessed on the basis of their compliance with Minimum Conditions (MCs) and the extent to which they are able to achieve Performance Standards (PSs). c. Component 3 – WHR Urban Institutional development and investments (P-for-R) will establish and strengthen urban institutions and improve access to infrastructure services in refugee and host community/surrounding areas. 11 Inclusive infrastructure refers to infrastructure development that enhances positive socio-economic outcomes by accounting for the needs of everyone, ensuring equal access to quality services and enhancing access to development opportunities for the broadest segments of society, especially vulnerable and marginalized groups. 6 Table 1: KUSP2 operational structure Sub- Level of Actions and Financing Component components intervention interventions instrument Component 1: 1.1 Program Program management: Urban management technical, fiduciary and development and ESS support, APA and national policies, coordination of grant management, M&E capacity building the overall and program operation management 1.2 Urban National policies and development regulations, technical & policy support, capacity building support National technical to counties and urban IPF assistance and areas to implement capacity Component 2 building 1.3 WHR policy National policies and support, regulations, technical & technical capacity building support assistance and to counties and urban capacity areas to implement building Component 3 Component 2: 2.1 Institutional Sub-national institutional PforR – Window Subnational urban and capacity and capacity 1 Urban Sub-national development development development actions Institutional (county capacity building Grant (DLI 1) governments, and investments 2.2 Urban Urban infrastructure and PforR – Window urban development service delivery 2 Urban institutions) investments Development Grant (DLI 2 – 5) Component 3: WHR 3.1 Institutional Sub-national institutional PforR – Window Urban Institutional and capacity and capacity 3 WHR UIG (DLI development and development Qualifying development actions 6) investments Refugee Hosting 3.2 Urban areas Urban infrastructure and PforR – Window infrastructure service delivery 3 WHR UDG (DLI investments 7) 23. The P-for-R Program (P) will support some elements of the Government program (p) as presented in Table 2. On capacity development, KUSP2 will support County governments in executing their legal mandate of establishing, delegating functions to, and financing of urban areas. County support to urban institutions will include strengthening of systems and capacities for urban planning and development control, urban management and financing, climate-resilient infrastructure planning, development, and management, human resources management, and private sector engagement. On infrastructure, the ability (of infrastructure) to cope with the changing climate erodes over time, unless sufficient adaptation and mitigation measures are integrated and put in place. As such, the Program will finance core urban infrastructure that integrates climate resilience standards to improve both livability and economic opportunities in urban areas. 7 Table 2: KenUP2 and KUSP2 Government program (p) – Dimension PforR Program (P) – KUSP2 Reasons for non-alignment KenUP2 Objective Effective and empowered urban To strengthen the capacities planning and management of urban institutions to (i) systems, through their counties, improve the delivery and as primary and accountable resilience of urban lead actors of socio-economic infrastructure and services, development, public service (ii) enhance the private sector delivery and poverty reduction contribution to urban in their areas of jurisdiction; planning and development; achieving the ‘urban and (iii) support the transition management’ agenda. of refugee camps into Additionally, KenUP2 is aligned integrated host community with the objective of and refugee settlements. transitioning from camps to settlements as part of the draft Marshall Plan for Refugee Resettlement (2023-27) Duration 2022-2026 2023-2028 GoK/WB programming Geographic Nation-wide, all 47 counties, all Nation-wide except Nairobi Nairobi/Mombasa excluded due coverage urban areas and Mombasa – 45 counties to their size and unique and a total of up to 79 urban challenges. areas (including 2 refugee Focus is on municipalities and hosting areas). cities as the main engines of growth. Therefore, towns and market centers excluded Results areas Components: RA1: strengthened KenUP’s framework is not based C1. Urban space and shape institutions for urban service on Results Areas, but on six C2. Economy and livelihoods delivery Components. C3. Infrastructure provision and RA2: integrated planning for KenUP Components (Cs) and service delivery resilient and inclusive urban KUSP2 RAs overlap as follows: C1 C4. Building climate resilience areas = RA2; C2 = RA4; C3 = RA3; C4 = C5. Governance, institutions RA3: inclusive and resilient RA2 and RA3; C5 = RA1; C6 = and finance urban infrastructure and policy dimensions across all RAs. C6. Policy development services RA4: improved private sector Informal settlements engagement infrastructure is covered under RA5: improved integrated KISIP. Infrastructure provision in development between Nairobi, Mombasa as well as refugees and host towns and markets is excluded. communities SDHUD is working on a separate program Building Climate Resilience for the Urban Poor. Overall US$ 1,000 million US$486 million of which IDA financing credit US$300 million and WHR grant US$50 million Component 1 (IPF) – Urban development national policies, capacity building and program management (US$10 million GoK financing, US$25.5 million IDA financing, US$10 million WHR) 8 24. Component 1 will provide for the implementation of national-level activities through an IPF. Funding will be provided to undertake institutional and capacity building activities that have been identified through the P-for-R assessments and that are required to implement the P-for-R and achieve the objectives. These not only include program management activities, but also the establishment of necessary standards and systems to enable urban institutions perform their functions. Identified activities represent a natural step from what has been developed under KUSP to continue enhancing the capacity of urban institutions.12 The component will be structured as per the below. a. Subcomponent 1.1 Program management and coordination of the overall operation. This includes technical, fiduciary and ESS support for program implementation, the carrying out of Annual Performance Assessments (APAs), and monitoring and evaluation. b. Subcomponent 1.2 Urban development policy support, technical assistance, and capacity building. This includes support work on national level policy and regulatory frameworks, national level technical assistance and capacity building support for counties and urban institutions, including development of guidelines and training, related to implementation of Component 2. c. Subcomponent 1.3 WHR policy support, technical assistance, and capacity building. This includes support for relevant policy and regulatory developments, technical assistance, capacity building and program management activities that support the effective implementation of WHR County Activities under Component 3. Component 2 (P-for-R) – Subnational urban development capacity building and investments (US$126 million GoK financing and US$274.50 million IDA financing) 25. Component 2 (P-for-R) will provide county governments and their respective urban institutions with two types of grants (see Table 3). Participating counties will access the grants based on compliance with key institutional benchmarks (Minimum Conditions, MCs) and achieving Performance Standards (PSs) linked to the Ras. By meeting MCs and achieving PSs counties and urban institutions will access grants, which would be used to finance capacity building activities and infrastructure & service delivery. Each of these grants would flow to county governments (with urban development grants flowing into the respective urban budget votes) in the form of conditional grants in line with the existing intergovernmental fiscal system. Table 3: Component 2 grants to counties and urban institutions Allocation % of Size of grant per Subcomponent/Grant Timeframe & (US$ Component beneficiary Use type periodicity million) 2 finance institution Subcomponent 2.1 – 24.75 9% Flat rate (US$250,000 Annual for 3 Institutional Urban Institutional on Year 1, years and capacity Grant (UIG) US$200,000 on Year building 2, US$100,000 on Year 3) Subcomponent 2.2 – 249.75 91% Approx. $18.00 per Annual Urban Urban Development urban capita per infrastructure Grant (UDG) annum & service PLUS delivery 12 Some examples include the roll out of board administration and citizen engagement manuals, and the development of planning guidelines based on assessment, all done under KUSP 9 Variable Bonus Allocation (up to $40 per urban capita) Totals 274.50.00 100.00% Subcomponent 2.1 – Urban Institutional Grants (UIG) – DLI 1 – (US$24.75 million IDA financing) 26. The Urban Institutional Grant (UIG) will provide support to county governments to build core capacities required by urban institutions. Subject to compliance with Minimum Conditions (MCs) indicated in Table 4, the eligible 45 counties will access the annual UIG, set at a flat rate of US$250,000 (Year 1), US$200,000 (Year 2) and US$100,000 (Year 3) per county and made available for the first three years. Failure to satisfy any MC will disqualify any county from accessing its UIG in that year. The annual assessment of compliance with UIG MCs of all eligible counties will be conducted as an integral part of the overall APA.13 The UIG will finance core institutional and capacity building activities to address urban governance and development challenges, improving the capacity and performance of the urban institutions and helping them meet the MCs and PSs of the UDG. Basic capacities and systems to be developed relate to urban planning and development control, M&E, asset management, policy development environmental and social risk management, climate change, and private sector engagement. Counties that qualify for UIGs will be able to use them to finance a range of eligible expenditures, as per Table 5. Table 4: UIG Minimum Conditions Minimum Condition Indicator MC1: County government has committed itself to The County Governor has signed an participate in KUSP2 Intergovernmental Agreement stating that the county will participate in KUSP2 and adhere to its POM. MC2: County government has drawn up (and is County government has prepared a CUIDS implementing) its County Urban Institutional Development approved by the county executive. Strategy (CUIDS)14 that integrates aspects of climate County government has included the resilience and disaster risk management proposed UIG activities in the County Annual Development Plan and Budget. MC3: Use of previous year’s UIG has been as per approved Annual county expenditure statement shows CUIDS and is consistent with eligibility and guidelines in the that the county has followed approved POM* annual County Annual Development Plan and UIG expenditure guidelines and POM. MC4: County government has utilized at least 50 percent of Annual County Annual Development Plan the UIG towards activities benefiting eligible urban boards shows at least 50 percent of funds is participating in KUSP2* allocated towards activities benefiting eligible urban boards participating in KUSP2. MC5: County government has utilized at least 30 percent of Annual County Annual Development Plan funds for climate change related activities within the eligible shows at least 30 percent of funds is expenditure menu in categories (1) Policy/regulatory, (2) allocated for climate related activities. Urban Planning, (4) Urban Resilience, (5) Asset Management, (8) Capacity Building * *Conditions apply as of the second Annual Performance Assessment 13 Exception may be provided on the first year to be done by individual consultants. 14The CUIDS will outline the county’s overall approach to the management of urban areas within its jurisdiction, define the process the county will follow to integrate urban development into county-wide planning that incorporates climate resilience and inclusivity considerations and prepare an annual action plan and budget for achieving its objectives. 10 Table 5: UIG eligible and non-eligible expenditure menu # Area Expenditure type 1 Policy/regulatory • Policy dialogues and consultancy services for development of urban- related policies and regulations, including urban resilience and low carbon urban development 2 Urban planning, • Urban planning activities (urban spatial plans/land use plans, development control, Integrated Development Plan), including urban regeneration, climate M&E resilience and gender mainstreaming, and their dissemination • GIS mapping instruments and Information and Communications Technology (ICT) equipment relevant to urban development functions • Development control tools (zoning regulations, development control application process, approval process, development inspection process) • Setting up urban service delivery database, M&E activities • Preparation of MSWM strategies to better understand the constraints within the solid waste management chain. 3 Urban Financing • Development of revenue databases • Development of modernized billing systems • Street addressing in urban areas • Property valuation roll updates in urban areas • Analysis and design of formula for county government funding of urban areas as per the PFM Act 4 Urban Resilience • Climate change risk assessments for urban areas • Emergency response plans for urban areas for all types of emergencies 5 Asset management • Asset mapping, inventories and plans for urban areas • Operations and maintenance plans 6 Private sector • Mapping of economic activities and private sector actors engagement • Business environment diagnostic and local economy assessment • Consultative meetings and workshops between urban institutions and private sector • Business enterprise database management software 7 Environmental and social • Environmental and Social Screening, assessments and compliance management in urban audits areas • Preparation of ARAPs where applicable • Stakeholder Engagements, GRM, GBV/SEA/SH risk management in infrastructure investments. • Occupational, Health and Safety risks management in infrastructure implementation • Gender mainstreaming activities • Capacity building for enhanced E&S risk management in infrastructural development15 • Environment, Social, Health and Safety (ESHS) compliance monitoring and reporting. 8 Capacity Building, training • Training in any of the above topics for Urban Boards, municipal/city and peer learning manager, municipal staff, and other relevant county staff • In-country exchange visits and workshops related to above topics 9 Other • Municipal office furniture, renovation (painting, tiling, etc.). 15 E.g., Costing ESMP, mainstreaming E&S in feasibility designs, B.O.Q, ESHS in bidding & contractual documents, incorporate universal access to project designs to ensure all infrastructure are accessible to all persons including persons with disability. 11 • Specialized equipment and tools (e.g., surveying, environmental monitoring equipment) GENERAL • All UIG-financed expenditures should be included in the county annual budget • Expenditure on ICT equipment and “Other� category should not exceed 25% of total annual UIG NON-ELIGIBLE EXPENDITURES • Any expenditures that trigger Substantial/High Risk under the World Bank ESF. In addition, if E&S risks are high or linked to associated facilities related to the proposed investment. • Infrastructure or infrastructure maintenance, and vehicles. • Recurrent expenditures, such as salaries, utility costs (e.g., electricity, water), rent. • International travel costs. Subcomponent 2.2 - Urban Development Grant (UDG) – DLIs 2 to 5 (US$249.75 million IDA financing) 27. The Urban Development Grant (UDG) will provide financing for investments in urban infrastructure and service delivery, incentivizing enhanced performance of urban institutions in the RAs. The UDG will be available to eligible urban areas that comply with MCs and PSs for achieving good urban governance and development, including mainstreaming gender and climate resilience into planning and infrastructure development, and seeking a better understanding of the local economy. The MCs and PSs are detailed in Tables 6 and 7 which also define indicators that will ensure climate resilience and inclusion are integrated in RA 2 and RA 316. A total of 77 urban areas will be eligible to access the UDG, which qualify as municipalities or cities under UACA (detailed in Annex 1), and are home to a total population of 7.1 million residents as per the 2019 census. 28. To qualify for the UDG, eligible urban areas will need to comply with Minimum Conditions (MC). Urban areas will need to comply with all MCs in Table 6 to qualify for their annual UDGs. The MCs intend to incentivize basic institutional requirements to achieve the objectives of the Program RAs. 29. Urban areas that meet the MCs will qualify for their UDGs based on their performance, as measured against the PSs that will trigger disbursements under DLIs 2 to 5. The PS assessments will focus on Results Areas 1 to 4, plus Program implementation standards, with a total score of 100 points. MC and PS summaries are presented in Tables 6 and 7. Further details are provided in Annex 2 and the details of the verification protocol will be in the POM. Table 6: Summary of UDG Minimum Conditions and indicators Results Minimum Conditions Indicators Area RA1 MC1: The participating urban board has the • Urban Board membership. appropriate institutional setup (including a 2/3 • Urban administration. gender representation). MC2: The participating urban board has core • Full-time and/or shared staff appointed to staff available key positions. (Municipal Manager, Procurement Officer, Environmental Safeguards Officer, Social Safeguards Officer, Accountant, Engineer, and Urban Planner). 16 Climate resilience and inclusion strategies will be integrated in the development and update of planning instruments as well as in the infrastructure designs for implementation under this Program. 12 MC3: The participating urban board has a • Urban board budget is included in county budget vote which is reported on accordingly. government budget as a full vote or as a sub-vote. MC4: The participating urban board’s budget • The county government has established, includes financing from the county adopted, and applied criteria for allocation government. * of county funds to urban boards. MC5: The participating urban board engages • Citizen fora are announced and organized. with local citizens, has a framework for • Gender inclusion and participation participation and gender inclusion, has a framework is publicly disclosed. grievance redress mechanism, and publicly • Municipal GRM system developed and discloses key documents functional. • Key municipal documents are publicly disclosed. RA2 MC6: The participating urban board has an up- • Urban IDeP is prepared, includes all legally to-date Integrated Development Plan (IDeP) required elements and private sector needs and Physical and Land Use Plan. diagnostic and is annually reviewed. • Urban physical and land use plan conforms to legal requirements. * RA3 • Infrastructure designs climate change MC7: Infrastructure designed under the resilient and inclusive. program adheres to minimum technical, • Key ESS requirements for infrastructure climate resilience and ESS requirements. * design are met. RA4 MC8: The participating urban board operates • County government has developed an within the county government’s private sector engagement framework to promote public engagement framework to promote public private dialogue. private dialogue.* Program MC7: Infrastructure designed under the • Intergovernmental agreement is signed by program adheres to minimum technical, County Government and National Treasury. climate resilience and ESS requirements.* • Annual urban area investment plan for next FY. • UDG use in previous FY in accordance with investment menu. * • Procurement and contracting are consistent with procedures. * • Timely release of UDG funds from the CRF to the SPA. * • County and urban board has complied with all program reporting requirements. * *Applicable as of the second Annual Performance Assessment Table 7: Summary of UDG Performance Standards and indicators Results Performance Standards Score Indicators Area RA1 PS1: Urban service delivery functions 10 • Functional analysis undertaken. transferred. • Official transfer of functions to urban board. • Functions budgeted for and financed. PS2: Effective human resource and 5 • Municipal organizational structure is performance management. approved/authorized. • Performance contracts for staff are in place and reviewed annually. PS3: Quality/scope of 5 • Citizen fora include female citizens and participation/accountability. private sector representatives. • Timely response to grievances. 13 • Annual IDeP review involves citizens and private sector. RA2 PS4: Technical quality/- 10 • Urban PLUP is GIS-based, shows comprehensiveness of spatial/physical housing needs, connectivity networks, and land use plans. strategic investment needs, areas for urban renewal and conservation/protected areas. PS5: Climate risk informed planning. 10 • Climate risk profile is developed, published, and informs updated/revised urban plans. PS6: Development control. 10 • Development control instruments prepared and approved. • Building and zoning inspections are undertaken and recorded. • Verification of compliance and occupation/completion certificates. RA3 PS7: Climate resilient and inclusive 10 • Completed infrastructure sub-projects infrastructure. comply with design standards, are handed over on time and are ready for use. PS8: Operationalization of urban solid 10 • SWM policy implementation is waste management policies. monitored, maintains/increases coverage and is reported on. PS9: Asset management and O&M. 5 • Updated asset inventories. • Asset maintenance planning. PS10: Implementation of UDG financed 10 • UDG-funded investment projects are investments. completed in accordance with ESS requirements. RA4 PS11: Implementation of the county 15 • Annually updated database of local government’s private sector engagement businesses. framework. • Public-private dialogue (PPD) meetings held. • Private sector needs diagnostic completed and publicly disclosed. Total PS score 100 Note: some PS indicators will only be measured in APA2 and APA3. 30. UDG allocations. The allocation of the UDG for an eligible urban board will be a formula-based allocation determined by the scores in the performance framework and the number of urban residents according to the 2019 population census. In order to ensure that smaller urban areas have meaningful resources, the minimum allocation will be set at KSh. 50,000,000 (approx. US$ 400,000) for full performance. Only urban boards that comply with all MCs will access the UDG. The annual allocation will be calculated as follows: (i) 70 percent of UDG resources allocated using a linear formula based on the points obtained in the PS with a maximum allocation of US$18 per resident per year following the results of the Annual Performance Assessment (APA), and (ii) 30 percent of the allocation distributed on APA 2 and 3 (with a pool of US$37,462,500 for each year) as a bonus allocation to those urban boards that score above the average, following an exponential formula. The actual level of total UDG allocations each year will depend on the achievement of MCs and the performance score attained on the PS. The actual UDG bonus grant allocation received by each qualifying urban board is a function of its relative performance on the 14 PS (i.e., Annual Bonus Pool x Relative Bonus Score), although the bonus is capped at KSh. 5,000 per urban resident to prevent problems with absorption.17 31. UDG investment menu, ineligible expenditures. Urban boards will be able to use their UDGs to finance investments in seven key areas of urban infrastructure and service delivery, based on the board’s prioritization of urban needs. These are: (i) connectivity, mobility, and accessibility; (ii) municipal solid waste management; (iii) wastewater and fecal sludge management; (iv) water supply; (v) storm water drainage; (vi) urban social and economic infrastructure; and (vii) fire and disaster management. All these eligible expenditures are commonly municipal and are consistent with UACA provisions. The table below provides a summary of the eligible and non-eligible investment menu. Counties and urban areas will be expected to adhere strictly to this menu; failure to adhere will result in non-compliance with MCs, preventing an urban area from accessing its UDG in the following year. In addition, the prioritization and selection of urban investments will consider: (i) citizen participation; (ii) social inclusion requirements (including gender and disability considerations); and (iii) climate change and disaster adaptation, following a checklist provided in the POM. Table 8: UDG eligible and non-eligible expenditure menu FUNCTIONAL AREA INDICATIVE ELIGIBLE INVESTMENTS Connectivity, Mobility and • County urban roads, pedestrian walkways and bicycle paths, street and Accessibility security lights (solar) and road furniture (Land acquisition is excluded) • Universal access adaptations in main transport stations including access, internal circulation, ticketing, toilets, access to platforms and specialized services. • Street improvements to meet the needs of all users (pedestrians and cycles lanes). • Converting roundabouts to Signalized junctions (traffic lights). • Piloting NMT means of transport (cycling and pedestrian walkways) Municipal Solid waste • Solid waste: collection equipment, collection bins, transfer stations, management collection points (construction of sanitary landfill, incinerators and (MSWM) decommissioning of dumpsites excluded). • Community sensitization campaigns on improved MSWM. Wastewater and fecal • Safe and emptiable public toilets/latrines, community septic tanks, sludge management emptying and transportation services and equipment e.g., vacuum trucks, vacuum handcarts, and others (construction of waste water treatment facility is excluded) Water supply • Community connections (kiosks and storage tanks not exceeding 10m3), water reticulation systems (construction of water treatment facility and private connections is excluded) Storm water drainage • Urban drainage systems; flood control methods (along existing channels e.g., protection of drainage channels). • Rehabilitation of storm water drainage (drainage must have compliant outfall) Urban social and • Urban greenery and public open spaces, social retail markets, community economic infrastructure halls, childcare facilities. 17 Relative bonus score = (Population-weighted bonus score for the qualifying urban board) / (sum of the population-weighted bonus scores for all qualifying urban institutions). Population-weighted bonus score = (Population of qualifying urban boards) x (Bonus score of the qualifying urban institution) Bonus score of a qualifying urban boards (for those performing above average) = [(Total score for PSs for the qualifying urban board) – (Average score for PSs for all qualifying urban boards)] raised exponentially to the power of 2. Urban boards performing below average on their performance standards have a bonus score of zero. 15 Fire and Disaster • Fire control stations and disaster management equipment (firefighting Management trucks, rehabilitation and/or construction of new firefighting station and facilities) GENERAL POINTS TO NOTE i. Proposed investments must be included in the annual Urban Area Investment Plan, aligned with the Physical and Land Use Plan, and take place on public land. ii. Proposed investments must follow urban resilience, gender and universal design requirements defined in the POM, following a checklist. iii. Investments can include both rehabilitation and construction of public infrastructure investments iv. To avoid the fragmentation of urban investments (and limit procurement efforts), investment projects are subject to a minimum investment of US$500,000 (except if the UDG allocation has been lower). v. At least 80 percent of the grants shall be spent on non-moveable infrastructure assets. Up to 20% can be used for equipment (fire engines, solid waste equipment, etc.) and consultancy services. vi. To finance investment preparation costs, urban boards shall be permitted to spend up to 10% of UDG allocations on feasibility studies and designs, preparation of ESIA/ESMP, ARAP and supervision of investment projects through hiring of consultancy services, obtain the NEMA license, supervision of project implementation including ESMP and ARAP. vii. Investments need to be accompanied by O&M plans. viii. Facilities (e.g., markets, fire stations) need to have a management plan. NON-ELIGIBLE INVESTMENTS i. Any investment projects that trigger Substantial/High Risk under the World Bank ESF. The following types of investment: power plants; dams; highways; urban metro systems; railways and ports; engineered landfills, construction and installation of incinerators; activities linked to management of solid waste dumpsites; decommissioning of dumpsites; office buildings; land acquisition; projects with potentially significant risks to protected areas or national parks; and manufacturing or industrial processing facilities. ii. Investments which may be considered temporary in nature, e.g., murram/gravel roads, temporary relocation sites. iii. Investment projects not included in the urban IDeP and not approved by the urban boards. iv. Additionally, if E&S risks are high or associated facility is linked to the proposed investment. Component 3 (P-for-R) – WHR Urban Institutional development and investments (US$40 million WHR financing) 32. Component 3 will aim to establish and strengthen urban institutions and improve access to infrastructure services in refugee hosting areas. The Program, through SDHUD, will work closely with the Department of Refugee Services and County administrations to incentivize the establishment of two municipalities, namely Kakuma-Kalobeyei and Dadaab, with charters granted (delegation of functions), municipal board and administration appointed and ensure clarity on issues of management and accountability. Support to the refugee hosting counties would include an Urban Institutional Grant (WHR UIG) and an Urban Development Grant (WHR UDG) as per the table below, in accordance with the design of KUSP2. The definition the of MCs and PSs is unique to the refugee window, due to their particular situation. Both grants will be disbursed based exclusively on the APA process, as part of the overall Program APA. Table 9: Component 3 grants to Refugee Hosting areas Program % of Size of grant Timeframe Subcomponent/Grant allocation Component per & Use type (US$ 3 finance beneficiary periodicity million) (all grants) institution Subcomponent 3.1 - WHR 5.00 12.5% Flat rate Annual for 5 Institutional and Urban Institutional Grant ($500,000) years capacity (WHR UIG) building 16 Subcomponent 3.2 - WHR 35.00 87.5% Approx. $20 Annual for 4 Urban Urban Development Grant per urban years infrastructure (WHR UDG) capita per and service annum delivery Totals 40.00 100% Subcomponent 3.1 - WHR Urban Institutional Grant (WHR UIG) - DLI 6 (US$5 million WHR financing) 33. The WHR UIG will be accessed by Turkana and Garissa Counties to support capacity building activities in select municipal core competence areas including but not limited to revenue collection and financial management; spatial planning and development control; environmental and social risk management; and Public Investment Management. To access their WHR UIGs, Turkana and Garissa County governments will need to comply with MCs in the table below. Counties that satisfy all the MCs below will access their WHR UIG allocations for each year. Failure to satisfy any MC will disqualify the county from accessing the WHR UIG grant under the refugee window. The eligibility menu for the WHR UIG activities is the same as that for Subcomponent 2.1 UIGs shown in Table 10, except additional activities for the development of plans for sustainable management of services such as water and sanitation as included in the POM. The WHR UIG will only be eligible to be used for the capacity building of urban institutions established in refugee and hosting areas. Table 10: WHR UIG minimum conditions Minimum Condition Indicator Minimum Condition Indicator MC1: County government has committed itself to The County Governor has signed the participation KUSP2 Intergovernmental Agreement to participate in KUSP2 and adhere to its POM. MC2: County government has drawn up (and is County government has prepared a CUIDS approved implementing) its County Urban Institutional by the county executive. County government has Development Strategy (CUIDS) that integrate aspects included the proposed UIG activities in the County of climate resilience and disaster risk management, Annual Development Plan and Budget. and sustainable development of refugee hosting areas. MC3: Use of previous year’s UIG has been as per Annual county expenditure statement shows that the approved CUIDS and is consistent with eligibility and county has followed approved annual County Annual guidelines in the POM* Development Plan and UIG expenditure guidelines and POM. *Conditions apply as of the second Annual Performance Assessment Subcomponent 3.2 – WHR Urban Development Grant (WHR UDG) - DLI 7 (US$35 million WHR financing) 34. The WHR UDG will enable beneficiary urban boards to finance critical infrastructure investments that improve the accessibility and quality of basic services for both refugees and host communities. The WHR UDG will finance infrastructure investments in seven key areas of urban infrastructure and service delivery, based on the prioritization of urban needs. The selection of investments will be anchored in the CIDP. Urban boards will need to comply with all MC to qualify for their annual WHR UDG. If any of the two urban boards meet all the MCs, they will receive an initial allocation of 50% of their indicative formula based WHR UDG ceiling. 17 Table 11: WHR UDG minimum conditions (MCs) Minimum Conditions Indicator MC1: Municipal status has been County Governor, upon resolution of the county assembly, has granted granted municipal charter MC2: Municipal Board is appointed Urban board has been appointed by County Governor upon approval by county assembly in accordance with the UACA (amendments of 2019) (Camp Manager is appointed member of the Urban Board). MC3: Urban board has core staff A municipal manager and core municipal staff (Procurement Officer, available. Environmental safeguards Officer and Social Safeguards Officer, Accountant, Engineer, and planner) has been appointed. MC4: County government has The County Governor has signed the Intergovernmental Agreement committed itself to participate in stating that the county government will participate in KUSP2 and KUSP2 adhere to its POM. MC5: Annual Urban Area Annual Urban Area Investment Plan is available for the Fiscal Year Investment Plan is available and provides the budget for UDG investments. MC6: Use of previous annual WHR UDG for the previous FY has been used in accordance with the UDG is in compliance with eligibility eligible [positive] investment menus (as described in POM) criteria* UDG MC7: Environmental and Social All subproject feasibility reports to include E&S screening reports a. assessments conducted for UDG as per POM guidelines investments and compliance with b. Site specific environmental and social impact assessment's Environment and Social Safeguards prepared and obtain NEMA license before start of civil works. (ESS) minimum requirements* c. All Contract documents include NEMA license/approval conditions and ESMP with budget allocation. d. All subprojects involving temporary physical or economic displacement and relocation to include consulted ARAP/Reinstatement/Restoration Plan before award of contracts. e. GRM constituted and grievances records being maintained at Municipality level. f. At least two stakeholder’s consultations with Project Affected Persons were undertaken at preparation stage and two at implementation stage. *Conditions apply as of the second Annual Performance Assessment 35. The urban boards that meet the MCs may qualify to receive additional financing upon meeting the WHR UDG performance standards (see the table below). The size of the indicative (maximum) WHR UDG annual grant pool is US$10 million, based on an allocation of US$20.00 per refugee and host community resident. The actual level of total UDG allocations each year will depend on the achievement of WHR UDG PS. The summary of MCs and PS is presented below; further details will be provided in the POM. The detailed verification protocol will be in the POM. The eligibility menu for the WHR UDG activities is the same as that for Subcomponent 2.2 UDGs, with additional eligible items: (i) water storage capacity increased from 100m3 at public land and facilities (schools, hospitals), for public use and from functional existing boreholes, (ii) construction of trunk water infrastructure servicing public water kiosks and community facilities,18 and (iii) re- afforestation activities and tree nurseries in restoration of environmentally degraded areas, as detailed in the POM. 18 Water storage tanks are dependent on design approvals the water storage for public institutions should be on public land. 18 Table 12: WHR UDG Performance Standards (PS) Performance Area Performance Standard and Indicator Score 1. Municipal board PS1: Urban board meetings have been held at least once every three 10 functionality months and citizen PS2: Citizen fora (public consultations between urban board and 10 engagement residents, including plan and budget consultations) have been held at least once every quarter, with representatives from refugee communities forming 50% of the participating stakeholders. 2. Public disclosure PS3: Urban board has made key documents publicly available: 10 and municipal charter, contact information for board and key officials, transparency urban IDeP (and other plans, as relevant), budget vote proposal (including appropriate annexes), and final budget statement. 3. Municipal PS4: Urban board budget is included in county government budget as 15 budgeting a full vote or as a sub-vote. 4. Climate resilient PS5: Urban IDeP submitted by the municipal administrator, and 15 municipal reviewed and approved by the municipal board, including municipal planning level climate change profiles, and integration of investments that achieve higher climate co-benefit and improve mitigation and adaption PS6: Urban spatial plan completed or under review for the area 20 delineated as the municipal area, including refugee hosting areas , integrating urban resilience and climate change issues[3] 5. Municipal PS7: An operational waste collection and disposal plan has been drawn 10 services up and adopted/endorsed by the municipal board, with an implementation plan and costings of priority investments in place. 6. Municipal PS8: Infrastructure designs developed on the previous year complies 10 infrastructure with standards to ensure they are climate change resilient and delivery inclusive (following checklist in the POM) PROGRAM DEVELOPMENT OBJECTIVE(S) (PDO) AND PDO LEVEL RESULTS INDICATORS 36. The Program’s PDO is to strengthen the capacities of urban institutions to (i) improve the delivery and resilience of urban services, (ii) enhance the private sector contribution to urban planning; and (iii) support the transition of refugee camps into integrated host community and refugee settlements. 37. Proposed PDO level results indicators are as follows: Table 13: PDO-level indicators PDO-level result PDO-level indicators Strengthened urban institutions capacities 1. Urban boards that have strengthened institutional performance as demonstrated in the average Annual Performance Assessment score (Percentage) Improved delivery and resilience of urban 2. People provided with improved infrastructure and services infrastructure and services delivered under the Program (Number) • People provided with improved infrastructure and services delivered under the WHR window (Number) • People provided with improved infrastructure and services delivered under the Program ( % being Women) (Percentage) 19 3. Infrastructure completed under the Program that complies with design standards to ensure they are inclusive and climate resilient (Percentage) Enhanced Private sector engagement 4. Participating urban boards with urban IDePs informed by private sector diagnostic (Percentage) Transition of refugee camps into integrated 5. Established municipalities which include refugee camps and host community and refugee settlements settlements, and host community areas (Number) 20 B. ASSESSMENT OF PROGRAM STRATEGIC RELEVANCE, TECHNICAL SOUNDNESS AND INSTITUTIONAL ARRANGEMENTS STRATEGIC RELEVANCE 38. KUSP2 is assessed as being of strategic relevance. With its focus on urban development, the Program is aligned with Kenya Vision 2030 and national medium term planning priorities; the draft Fourth Medium Term Plan (2023-2027) identifies urbanization as one of the six priority sectors driving socio-economic development in Kenya. Kenya’s rapid rate of urbanization means that by 2050, almost half of the country’s population will live in urban areas.19 While increased urbanization holds out the promise of economic development and structural change, its full advantages will only be reaped if urban growth is properly planned and managed and if urban infrastructure and services are well-planned, keep up with growing needs and are able to ensure that Kenya’s expanding cities and towns are livable. In addition, by seeking to strengthen the role of the private sector in urban planning and development, KUSP2 addresses the strategic need for urban areas to engage with the private sector and to ensure that urbanization provides firms and entrepreneurs with an enabling environment. Finally, the Program addresses the strategic need to integrate large and longstanding refugee communities into Kenya’s wider urban development framework, in a way that is mutually beneficial. 39. The Program is fully aligned to the National Urban Development Policy (NUDP) which seeks: (i) to promote effective governance and management of urban areas, efficient financial management systems, and systems for economic growth and development; (ii) to mainstream spatial planning and improve access to land for urban development; (iii) to promote urban infrastructure and services, urban environment planning, management and climate change adaptation; and (iv) to mainstream urban safety, security and disaster risk management in urban planning and development. 40. Through its focus on five Results Areas, KUSP2 will address major challenges and constraints to urban development in Kenya, namely: (i) weak and poorly financed urban institutions; (ii) poor planning and development control; (iii) limited inclusiveness and resilience in urban infrastructure and service delivery; (iv) limited private sector engagement in urban development; and (v) lack of integration between refugee and host communities. The Program’s five RAs respond to each of these major issues. The Program is operationally structured to address urban development challenges and to deliver on its five RAs at both the national and the sub-national levels. In order to do this, KUSP2 includes three distinct but inter-related Components. 41. Component 1 (IPF) enables the Program to address issues that require national level actions. Activities within each of the five RAs will be focused on: (i) policy development issues; (ii) strengthening regulatory frameworks; and (iii) the provision of institutional and capacity development support. Through such activities, KUSP2 will facilitate improvements in the policy and regulatory environment so as to deliver Program results and enable national MDAs to provide counties and urban institutions with appropriate technical assistance and capacity building support. 42. Through Component 2 (P-for-R) KUSP2 will provide counties and urban institutions with incentives to undertake institutional and capacity strengthening activities and grants to finance 19United Nations, Department of Economic and Social Affairs, Population Division (2018). World Urbanization Prospects: The 2018 Revision. 21 urban infrastructure and services, in line with the Program’s RAs. Program grants will incentivize counties and urban institutions to: (i) improve their core institutional performance (in areas such as public financial management, human resource management, and citizen participation); (ii) make planning more effective and more climate resilient; (iii) improve infrastructure and service delivery and make it more climate-resilient and more inclusive; and (iv) engage effectively with the private sector, and thus promote enhanced competitiveness. 43. Component 3 (P-for-R, financed through a WHR grant) will address the challenge of integrating urbanized refugee and host communities. It: (i) incentivizes the establishment of two municipalities, namely Kakuma-Kalobeyei and Dadaab, with charters granted (delegation of functions), municipal boards and administrations appointed to ensure management and accountability, and: (ii) improves infrastructure and service delivery in refugee and host communities. 44. The case for government intervention is threefold. First, many urban development challenges need public sector actions (in the form of policies, plans, regulations, public investments, etc.) and are thus underpinned by government intervention at both national and sub-national levels. Recognizing this, KUSP2 will support the national and subnational public sectors in taking the lead on all its activities. These types of public goods are typically not delivered through the market and are very unlikely to be delivered unless the public sector provides them. However, KUSP2 clearly recognizes that the private sector has a fundamental role to play in driving economic growth and in urban area investments – but that the public sector needs to ensure that it enables this to happen (through appropriate institutional/regulatory frameworks, the provision of catalytic infrastructure, support for skills development and innovation, and enterprise support). Second, government intervention is required to achieve redistribution objectives, because national funds through equitable shares are shared between national government and County governments only. This leaves urban areas without any form of predictable financing mechanism. However, these urban areas generate more than half of the country’s GDP. Thirdly, government intervention is warranted in order to address social and political concerns, as about 31 percent of the country’s national population reside in urban centers. The urban population is also a major contributor to national revenues, yet there is no direct allocation of financial resources from the national government to improve urban conditions. TECHNICAL SOUNDNESS 45. Overall, KUSP2 is assessed as being technically sound. The Program is underpinned by a coherent theory of change, its design is informed by lessons learned from similar Bank operations, and its approach and activities are based on delivering results. 46. KUSP2 has been designed based on a robust theory of change, which is assessed as being persuasive and coherent. The theory of change posits that a range of activities/inputs, undertaken and provided by national level MDAs, county governments and urban institutions, will contribute to the delivery of outcomes in five Results Areas (see the summary table below). 22 Table 14: Results Areas and core results Results Area Core results RA 1: Strengthened institutions for urban • Clear roles and responsibilities in urban service delivery development. • Strengthened accountability, management and financing of urban institutions. • Greater capacity of urban institutions to deliver infrastructure and services. RA 2: Integrated planning for inclusive and • More inclusive urban plans. resilient urban areas • More effective development controls. • Strengthened urban planning instruments, incorporating climate and gender considerations. • improved implementation and monitoring of plans. RA 3: More inclusive and resilient urban • More accessible urban infrastructure and services. services and infrastructure • More resilient and sustainable urban infrastructure and services. RA4: Improved private sector engagement • Public-private dialogue. • Participation of private sector in urban planning. • Stronger county and urban area institutional capabilities to support private sector investments and enhance local firms' competitiveness. RA 5: Improved integrated development • Establishment of an urban institutional framework between refugees and host communities to enable unified planning and unified infrastructure and service delivery. • Interventions supporting joint economic activity and greater social cohesion. 47. Overall, results delivered in these five areas will contribute to strengthened institutional capacities, improved and climate-resilient planning, better and more climate-resilient infrastructure and service delivery, greater private sector engagement and improved integration between refugee and host communities – all of which will contribute to Kenya’s urban areas becoming more livable and more economically dynamic, and thus to achieving the program’s development objective. Program activities are assessed as being appropriate to the delivery of Program results – and have been identified through extensive preparatory discussions aimed at prioritizing activities that contribute most clearly to the delivery of results. 48. The design of KUSP2 takes into account lessons learned from previous/ongoing and similar operations in Kenya, as well as being informed by the Bank’s global experience of financing urban performance grants. Lessons learned from KUSP1 and KDSP and factored into the design of KUSP2, include: (i) the need to link incentives to planning and budgeting statutory requirements and timelines; (ii) the importance of independent and verifiable performance assessment protocols as the basis of grant allocations; (iii) the usefulness of different types of grants targeted at sub-national level institutions; (iv) the effectiveness of using the IPF instrument to finance national level program coordination; (v) the need to include national level agencies responsible for safeguards in program design; and (vi) the value of active participation of political and administrative leaders of implementing agencies during Program design.20 The conceptualization and design of KUSP2 has also been informed by the Bank’s worldwide experience of urban performance grants. Bank experience in this area underlines, inter alia: (i) the need to ensure that grants provide adequate incentives and are sufficient to finance 20 KDSP ICR. 23 meaningful investments; and (ii) the need to align capacity building support and technical assistance with the incentives provided by grants.21 49. KUSP2 is also designed based on Bank Programs supporting local governments hosting refugee communities. For example, the Uganda Support to Municipal Infrastructure Development Program Additional Financing (P163515) shows the importance of: (i) using IPF modalities to provide national level support to local governments, which historically have no experience in handling refugees; (ii) clear and well capacitated engagement forums in refugee and host communities; and (iii) the need for technical support provided by agencies experienced with working with refugees to avoid delays.22 50. Component 1 national level actions for program coordination and management, policy and regulatory development, and capacity building are assessed as being necessary for Program implementation. Program management functions will ensure that APAs are conducted rigorously and on time, and that grants are released. Policy/regulatory development actions will be focused on issues directly related to the Program’s five RAs. Capacity building support and technical assistance will be provided to counties and urban institutions to strengthen their performance across the five RAs and to respond to the incentives offered by KUSP2’s performance grants. 51. The largest share of Program resources is allocated to Component 2 to finance grants for counties and urban institutions. Access to UIGs and UDGs will be determined by the results of APAs, which will be conducted by an Independent Verification Agent (IVA) and will evaluate the performance of all eligible counties and urban areas with respect to MCs and PSs. UIGs have been designed to incentivize counties and urban boards to undertake core institutional reforms and to finance a range of institutional and capacity building activities, some of which will strengthen their ability to access larger UDGs. 52. UDGs will be accessed by urban boards based on meeting MCs and PSs, which are linked to the RAs and the Program’s performance framework. The Program’s performance framework, covering all MCs and PSs (and included in Annex 2), has been drawn up on the basis of reviews of the previous framework used in KUSP, the results of the APAs carried out during KUSP, and extensive discussions during Program preparations. KUSP2’s MCs are a mix of: (i) fiduciary and environmental/social safeguards (intended to mitigate Program-related risks); (ii) core capacity requirements which mitigate risks associated with Program implementation, as well as being aligned with KUSP2 results (e.g. urban board staffing); and (iii) key institutional development benchmarks that are directly linked to KUSP2 results (e.g. urban board structure and membership, urban budget votes, county funding for urban boards, urban development and spatial plans, private sector engagement). PSs, on the other hand, reflect results that are important to achieving the Program’s development objective and the achievement of which would signal progress with respect to KUSP2’s Results Areas. The Program’s performance framework covers the main aspects of all RAs and is thus fairly comprehensive; however, the number of MCs and PSs has been kept as low as possible, in order to prioritize what is being incentivized and to enable counties/boards to focus their attention on achieving key benchmarks. 53. Annual UDG allocations to urban areas will be determined in line with their scores in the performance framework and the number of urban residents according to the 2019 population 21 Hyunji Lee, Sohaib Athar, Jesper Steffensen, Roland White and Ayah Mahgoub. 2022. Gearing Up for Better Local Outcomes: Lessons from World Bank Financing for Urban Performance Grants to Local Governments . Washington, D.C.: World Bank. 22 USMID AF MTR. 24 census (see above – paragraph 30 for a description of the UDG allocation method). Key features of UDG allocations are as follows: • Only those urban areas that comply with all MCs will access UDGs. • UDG allocations are structured in two parts: - The UDG Performance Allocation, through which qualifying urban areas are allocated a maximum amount (US$18.00 per urban resident per year), adjusted on a linear basis in line with their PS scores. Thus, a qualifying urban area with a population of 100,000 which achieved a PS score of 50/100 will be allocated US$900,000 ([100,000 X US$18] X [50/100]). To ensure that smaller urban areas access UDG Performance Allocations that are meaningful and large enough to finance modest investments, there is a minimum allocation of US$400,000.23 Annual UDG Performance Allocations will be made in years 2, 3 and 4 of the Program. In total, KUSP2 sets aside US$174.825 million (or 70% of all available UDG funding) to finance UDG Performance Allocations. - The UDG Bonus Allocation, through which urban areas that have achieved PS scores higher than the average PS score will access bonus grant allocations. These bonuses will be allocated to urban areas (with a better-than-average PS score) according to their score above the average, multiplied by an exponential factor and weighted according to their population size. Qualifying urban areas are allocated a corresponding share of the annual UDG Bonus funding pool, subject to a grant cap of US$40 per urban capita (to mitigate the risk of non-absorption). Annual UDG Bonus Allocations will be made in years 3 and 4 of the Program; in each year, the annual UDG Bonus funding pool (of US$37.462 million) will be shared amongst qualifying urban areas as function of their weighted exponential scores. In total, KUSP2 sets aside US$74.925 million (or 30% of all available UDG funding) to finance UDG Bonus Allocations. 54. In general, KUSP2’s UDG resource envelope will be spread relatively thinly across counties and eligible urban areas. This is an unavoidable consequence of GoK’s policy preference for an approach that includes/covers all counties and the majority of cities and municipalities in the country. There is a trade-off between this strategic policy option and the quantum of UDG resources that will be channeled into urban investments and urban areas and used to incentivize changes. On the plus side, there are gains to be made in: getting “political� buy -in from all counties; incentivizing all counties to make positive steps towards strengthening an institutional framework for urban development (by meeting MC/PS benchmarks and thus accessing UDGs); and aiming for nation-wide impact. However, KUSP2 resources get spread thinly and are able to finance fewer investments per city/municipality, the incentives offered are diluted by the relatively small size of UDG allocations, and the scope and depth of what can be expected in the way of county-level reforms is narrowed/lessened (in line with weaker incentives). 55. Nonetheless, this assessment finds that KUSP2’s proposed approach to the allocation of UDGs should encourage counties (and urban areas) to respond to (limited) incentives and to undertake important reforms and actions. Despite resource limitations, KUSP2’s grant system is assessed as offering relatively robust incentives for counties and urban boards to improve their performance, based on performance criteria that can be met by all eligible institutions, and allocating UDGs that will finance useful urban investments. 23 Thus an urban area with a population of 20,000 would have a “floor� or minimum UDG Performance Allocation of $400,000, rather than $360,000, which would be its per capita allocation (20,000 X US$18). 25 56. Overall UDG allocations should enable urban areas (cities/municipalities) to finance meaningful (albeit sometimes modest) urban investments. Very small urban areas, such as some county capitals, would access at least US$200,000 per year as UDG Performance Allocations, assuming that they comply with MCs and attain a PS score of at least 50/100. In addition, they may also access UDG Bonus Allocations (up to a maximum of US$40 per capita), depending on their exponential scores. Larger urban areas would access up to US$18 per urban capita as UDG Performance Allocations; in the case of a municipality with a population of 100,000, the maximum annual UDG Performance Allocation would amount to US$1.8 million. In addition, urban areas, depending on their exponential scores, may also access (substantial) UDG Bonus Allocations, further increasing their annual investment budget envelopes. 57. As a percentage of county government development spending, UDG Performance Allocations will vary greatly, depending on the size of each county’s urban population (and the performance of their urban areas), but overall UDGs will potentially increase significantly (for “high performers�) as a result of UDG Bonus Allocations. Counties with large urban populations (e.g., Kiambu, Kajiado) will potentially access UDG Performance Allocations that amount to 50% to over 100% of their recent total annual development spending; counties with very small urban populations (e.g. Marsabit, Makueni, Nyamira), on the other hand, will access UDG Performance Allocations that are 2-10% of their development spending. UDG Bonus Allocations, which are based on a formula that exponentially scales up grant allocations to urban areas that perform above the average, will substantially increase the size of UDGs, both in absolute terms and relative to county development spending as a whole. The exponential formula for UDG Bonus Allocations thus offers considerable incentives to those counties and urban areas which are prepared to “go the extra mile� in terms of their performance. 58. All else being equal, more urbanized counties will have greater incentives to improve their performance by meeting MCs and achieving PSs. However, the design of KUSP2’s MCs/PSs has been informed by the need for these to be potentially within the reach of all counties/boards, irrespective of city size. Experience from KUSP also shows that counties have other (non-financial) incentives to access UDGs. In KUSP, a significant number of counties with low rates of urbanization scored as well as more urbanized counties, even though UDGs were based on a per urban capita formula, pointing to the existence of other incentives to good performance. 59. The UDG investment menu is assessed as being aligned to the Program’s purpose, consistent with urban development needs and medium to low risk. Urban boards will be able to use their UDGs to finance a wide range of basic municipal infrastructure. However, proscribed items include most recurrent expenditures, environmentally and socially negative investments, and “non-productive� capital spending (such as construction of administrative facilities and purchase of vehicles for administrative purposes). INSTITUTIONAL ARRANGEMENTS 60. KUSP2 will be implemented through institutional arrangements similar to those that applied to KUSP1, but adjusted in line with lessons learned, such as having a leaner PSC and PTC membership to ensure efficient decision making and strengthening the role of Council of County Governors (CoG). These structures are consistent with constitutional and legal structures, policies, systems, and processes at the national, county, and urban levels. 61. At the national level, the SDHUD will provide overall program leadership, coordination and management. Given its institutional mandate (which was re-affirmed in the most recent structuring of national government MDAs) and its experience in overseeing the implementation 26 of KUSP1, SDHUD is well-placed to take on this leadership role. It has a recognized expertise in urban development and (through KUSP and other programs) a well-earned track record of working with county governments. 62. SDHUD will establish a National Program Coordination Team (NPCT), responsible for day-to-day program operations and management. The NPCT will be responsible for: (i) coordinating and preparing the annual work and capacity building plan and budget, (ii) the management/coordination and implementation of activities under Component 1; (iii) procurement and management of APAs; (iv) authorizing the disbursement of UIGs/UDGs on the basis of APA results; (v) M&E and reporting; and (vi) ensuring county resources are budgeted for and disbursed as per the expenditure framework and properly accounted for. 63. The NPCT will be led by a Program Coordinator, assisted by Results Area teams and other technical specialists. The NPCT will include: Program Coordinator; Program Implementation Specialist; five Results Area Leads and five Deputy Results Area Leads; Grants management Officer; Procurement Specialist; Program Accountant; Finance Officer; two Social Safeguards Officer; two Environmental Safeguards Officers; one Health and Safety Officer; M&E Officer; Communications Officer; Urban Planning and Governance Specialist (at CoG); and Department for Refugee Services (DRS) representative. Where possible, these team members will be assigned to the NPCT from within SDHUD, ensuring functional relevance and facilitating inter-departmental coordination and synergy. This will ensure that institutional knowledge is built and retained within the department, beyond the life of the program. 64. To coordinate and facilitate the implementation of activities by other MDAs, the NPCT will prepare an annual work program and annual capacity building plan agreed by the agencies supporting program implementation, endorsed by the PTC and approved by the PSC. At the national level, other key partners will include CoG, DRS, TNT&EP, State Department of Public Service, Public Service Commission, NLC, NEMA, DOHS and other MDAs with relevant sector functions. These national institutions will provide specialized capacity building support to counties and municipalities. 65. The PSC will provide policy guidance, strategic leadership, broad oversight of the operation, and and endorsement of APA results. The committee will consist of Principal Secretary SDHUD (Chair), Chair Lands, Housing and Urban Committee at CoG (co-Chair), Principal Secretary TNT&EP, Principal Secretary Lands and Physical Planning, Principal Secretary Immigration and Citizen Services, and Chief Executive Officer of the CoG. Representatives from other MDAs will participate as needed. The PSC will meet at least bi-annually. 66. The PTC will deliberate on and prepare motions for decision-making by the PSC. It will meet at least once every three months to deliberate on issues and prepare motions for decision-making by the PSC, review implementation progress and financial accountability reports, review and verify APA reports, identify and address any emerging technical issues and challenges in implementation of the operation. The PTC composition will include Secretary Urban and Metropolitan Development (Chair), Chair of CECM Urban caucus (co-Chair) , Director Urban Development (Coordinator, Secretary), Secretary of the Lands, Housing and Urban Committee at CoG, , Chair of CECM Finance caucus, , Commissioner of Refugee Affairs and a representative from TNT&EP. PTC members have important technical and capacity responsibilities relevant to urban management, infrastructure, and service delivery. They have been engaged in KUSP1 and are familiar with the program; incorporating them into the PTC will build critical buy-in and facilitate inter-agency coordination. 27 67. CoG will be responsible for coordinating counties and municipalities and co-chairing the PSC. CoG will be responsible for inter-governmental coordination between national and county governments, coordination between counties, and for coordinating county capacity building interventions, communications, policy advocacy and knowledge management. The CoG’s Urban Development Committee will serve as the interlocutor between the Program and CoG. The CoG has core strengths and a unique comparative advantage in: convening counties; coordinating county capacity building; county policy advocacy; and knowledge management. The CoG Secretariat (and its Urban Coordinator) will provide day-to-day support for Program implementation. Based on an agreed annual work plan, the NPCT will provide financial support to the CoG Secretariat to fund activities related to KUSP2 implementation. 68. The National Treasury and Economic Planning (TNT&EP) will exercise fiduciary responsibilities, as is the case with other WB-funded P-for-R and IPF operations. It will be signatory to the financing agreement, recipient of the WHR grant, responsible for disbursements to implementing agencies and for fiduciary management and reporting to the World Bank. It will be represented on the PSC and PTC. The NT&P will ensure timely disbursement of grants which is critical to Program implementation. 69. At the sub-national level and within their respective jurisdictions, county governments will be responsible for coordination, undertake institutional and capacity building and oversee the use of UIGs and UDGs. They will implement relevant institutional reforms, undertake capacity development activities and be responsible for fund management at county level. They will be responsible for implementing the UIGs and accountable for the use of program grants as a whole. All counties in Kenya have experience of P-for-Rs (through KUSP and KDSP) and are familiar with the types of institutional and infrastructure grants that will be made available in KUSP2. 70. Counties will establish County Program Coordination Teams (CPCTs). The CPCT shall be responsible, at the Participating County level, for inter alia, overall program management, coordination, monitoring and evaluation and reporting to the NPCT; coordination of capacity development, and implementation of the Urban Institutional Grant; support procurement, supervision and technical backstopping of works funded by the Urban Development Grants and supporting urban institutions to prepare for the Annual Performance Assessment; and mobilizing and coordinating relevant county departments toward Program implementation. CPCTs will be headed by the county government director responsible for urban development (acting as Program Coordinator at the county level) and will consist of the local municipal manager(s) as well as county government staff with expertise in engineering, planning, public finance, internal auditing, public procurement, HRM, environmental safeguards and social safeguard, and industry and trade. In the case of counties accessing Component 3, the CPCT will include a representative from DRS (i.e., Camp Manager), NLC County Coordinator, Community Land Registrar, and UNHCR. CPCTs will report to the CEC responsible for Urban Development. 71. Cities and municipalities will be largely responsible for the planning, implementation, and reporting on UDG-financed investments. This will include participating in the technical, procurement, contract management and supervisory functions related to the implementation of works and services financed through UDGs. Urban boards will be responsible for performing their institutional roles in the governance and management of urban areas including holding citizen fora and structured public private sector dialogues to inform the development plans and actions related to urban service delivery and to local firm competitiveness. The boards will report on their activities to their respective county government, to whom they are directly and formally accountable. Under KUSP, 59 urban boards were established and have developed some nascent capacities. 28 Figure 2: Summary of Implementation Arrangements WB PSC CoG and DRS MDAs PTC Implementation Specialist Coordinator Liaison RA1- Institutional Procurement RA Lead + Deputy RA2- Planning Audit RA Lead + Deputy Grants RA3- Infrastructure RA Lead + Deputy NPCT Accounts RA4- Private sector Finance RA Lead + Deputy CPCT M&E RA5- WHR RA Lead + Deputy ICT & Comms Urban Boards ESRM & OHS 5no. Support staff 72. Overall, the proposed institutional arrangements underpinning KUSP2 are assessed as robust and fit for purpose, based on the following considerations: • SDHUD has substantial experience in implementing Bank-financed programs. It is currently implementing KUSP1 and the Second Kenya Informal Settlements Improvement Program (KISIP2) (P167814). Earlier, SDHUD implemented the Kenya Municipal Program (P066488) and KISIP1 (P113542). Through KUSP1, SDHUD is also fully familiar with hybrid IPF/P-for-R financing modalities and has a track record of managing and administering performance- based grants. • KUSP1 management structures serve as a tried and tested model for the proposed KUSP2 institutional arrangements. • Through KUSP1, SDHUD has established solid working relations with key national stakeholders, such as COG, the National Treasury, NEMA, and DOSH. • SDHUD has gained significant experience of working with counties on urban development issues and has been instrumental in facilitating the emergence of urban institutions. • NPCT staff will be departmental officials and will use their experience of KUSP2 beyond the life of the Program. • SDHUD has recently taken on over 20 new technical staff, all of whom have prior experience of KUSP1 through the capacity enhancement program. 29 • CoG has substantial experience of KUSP and a full understanding of Program modalities. It has a vital role to play in KUSP2 and, in recognition of this, CoG will co-chair the PSC. • Counties have CPCTs and have experience with performance-based grants. C. PROGRAM EXPENDITURE FRAMEWORK 73. The proposed Program will provide support for implementation of the Government’s overall Kenya Urban Program (KenUP2, with a total budget of US$ 1 billion). Within this wider national program, the KUSP2 expenditure framework will amount to $486 million, budgeted as shown in table 15. Table 16 summarizes the different sources and amounts of Program funding, as well as the types of expenditure to be financed. IDA and WHR grant funding ($350 million in total) accounts for 72% of total planned program spending, while national and county government funding (US$136 million) account for 28%. Table 15: KUSP2 Expenditure Framework (US$ million) FY23/24 FY24/25 FY25/26 FY26/27 FY27/28 Total Program (PforR) National Level Expenditures (A) Current expenditures to Urban and 1.67 2.33 2.33 2.33 1.34 10.00 Metropolitan Development County Level Expenditures Recurrent expenditures in urban budget 22.96 25.69 26.95 25.20 25.20 126.00 vote for participating cities/municipalities (B) Urban Institutional Grants (UIG) 11.25 9.00 4.50 - - 24.75 Urban Development Grants (UDG) - 27.00 95.31 127.44 - 249.75 WHR Urban Institutional Grants (WHR 1.00 1.00 1.00 1.00 1.00 5.00 UIG) WHR Urban Development Grants (WHR 7.56 8.31 9.07 10.07 35.00 UDG) Total Transfer to Counties (C) 12.25 44.55 109.12 137.51 11.07 314.50 Subtotal County Level (B+C) 35.21 70.24 136.07 162.71 36.27 440.50 Program Total (A+B+C). 36.88 72.57 138.40 165.04 37.61 450.50 Project (IPF) Project support to National Urban 3.00 6.50 6.00 6.00 4.00 25.50 Development Functions (IPF) Project support to refugee host areas (IPF) 2.00 2.00 2.00 2.00 2.00 10.00 Total IPF 5.00 8.50 8.00 8.00 6.00 35.50 Total (PforR and IPF) 41.88 81.07 146.40 173.04 43.61 486.00 Table 16: Operation Financing Source Amount (USD Million) % of Total International Development Association (IDA) 350.00 72.02% Component 1 - IPF 35.50 7.30% Component 2- P-for-R 274.50 56.48% Component 3 – P-for-R 40.00 8.23% GoK Counterpart National 10.00 2.06% GoK Counterpart Counties 126.00 25.93% 30 Total Program Financing 100.00% 74. IDA and WHR funding will provide additional resources in SDHUD’s urban development and planning sub-program budget. This IPF funding will appear as a separate project in the development budget, in support of UDD activities under KenUP2. These resources will be used to finance national government expenditures for program implementation. 75. All P-for-R resources will be allocated to counties in the form of conditional grants. Conditional grants form part of the national share of government resources and will therefore appear under the SDHUD budget. Actual disbursement of the grants will depend on the APA results. These conditional grants will need to appear in the County Governments Additional Allocations Bill and be transferred by the National Treasury directly from the Consolidated Fund to the counties on the notification of the APA results by SDHUD. UIGs and UDGs will be reflected in the annual budgets of counties that qualify. SDHUD will ensure that counties are informed of their UIG/UDG allocations on a timely basis. 76. National government funds (US$10 million) will be drawn from SDHUD’s Urban and Metropolitan Development Program budget . These national government funds will be used to finance spending on recurrent items (salaries, operations, goods and services) related to Program implementation at the national level. 77. County government funding (US$126 million) will consist of urban area recurrent spending budgets. Urban area recurrent spending has been calculated using financial reports from 59 municipalities. These expenditures, while varying by municipality, typically include office maintenance and operating costs, salaries, staff training, solid waste collection, and infrastructure operation and maintenance costs. Urban board recurrent spending is either directly managed by the boards themselves (through their administrative arms) or indirectly managed by Urban CECs. Recurrent urban board spending is financed out of county government budgets, either through transfers from the CRF to Urban CECs or to urban boards. Over the last three years, annual recurrent spending by these urban areas has amounted to an average of about US$0.350 million (per municipality). Given that more municipalities are expected to allocate recurrent spending resources (in response to KUSP2’s incentives and performance framework), the total projected expenditure of participating municipalities is projected to be around US$126 million over the 5- year Program period. These expenditures will be considered as county counterpart funding. In summary, the total sub-national contribution to the Program is estimated as US$126 million. Such expenditures will be necessary for KUSP2 implementation and are therefore considered as county government counterpart funding. 78. The assessment notes that national and sub-national budgeting and accounting systems are sufficiently robust to allow for proper monitoring and auditing. All funding for KUSP2 will be on budget and fully incorporated into Kenya’s PFM system and IFMIS. 79. The fiscal sustainability of the Program is assessed as being adequate. Firstly, national and sub- national counterpart funding for the Program reflects current and projected recurrent expenditures on urban development (staffing, operations, maintenance). Secondly, the Program (through Component 1) will seek to lay the institutional foundations for establishing a National Urban Development Fund, with the long-term aim of using national government and other resources to finance urban infrastructure investments. Third, Component 2 of the Program will incentivize counties to design and then institutionalize a formula for the allocation of county budget resources to urban institutions. 31 D. ASSESSMENT OF DLIs, RESULTS FRAMEWORK AND M&E DLIs AND VERIFICATION PROTOCOLS 80. P-for-R disbursements will be triggered by a set of seven DLIs designed to reflect progress in the delivery of results in the Program’s five RAs (see table below); disbursements will finance UIGs or UDGs, made to counties and urban areas, respectively. APA results, which will be disaggregated by RA, will provide the basis for measuring such progress. This links sub-national performance to the Program’s results framework and to disbursements. Table 17: Disbursement Linked Indicators MC/PS and Results Amount (US$ Disbursement Linked Indicators (DLIs) Area million) DLI 1: Participating counties have developed and UIG MC 24,750,000 are implementing a climate-resilient County Urban Institutional Development Strategy (CUIDS) DLI 2: Participating urban boards have UDG PS 54,092,000 strengthened their institutional performance for RA1 inclusive and resilient service delivery and have adequate staffing and financing DLI 3: Participating urban boards have UDG PS 78,206,000 strengthened their urban planning systems by RA2 incorporating climate change resilience24 considerations, enhancing inclusiveness, and improving development control DLI 4: Participating urban boards have improved UDG PS 87,744,500 delivery of inclusive and climate change resilient RA3 urban infrastructure and services DLI 5: Participating urban boards have enhanced UDG PS 29,707,500 engagement with private sector and improved its RA4 participation in urban planning DLI 6: Participating refugee hosting Counties have WHR 5,000,000 set up urban institutions for integrated UIG MC development RA5 DLI 7: Participating urban boards have developed WHR 35,000,000 urban planning tools and have improved access to UDG PS inclusive and climate change resilient urban RA5 infrastructure and services for host communities and refugees 81. Program DLIs will be structured around APA results. Disbursements will be calibrated against APA scores and qualification for the different types of grants. DLI 1 will be annual and scalable and will trigger disbursements that are multipliers of the number of counties that comply with UIG MCs. DLIs 2 to 5 will trigger disbursements on the basis of APA results (compliance with UDG MCs and PS scores) within the framework of the Program’s RAs 1 to 4; these DLIs will also be annual and scalable. DLIs 6 and 7 will be applicable to qualifying refugee hosting counties and municipalities. These will be triggered exclusively on the APA results. DLI 6 will trigger disbursements based on county compliance with the MCs for WHR UIG MCs, while DLI7 will trigger disbursements based on urban area performance scoring with respect to WHR UDG PSs. 24A checklist will be defined in the POM providing guidance for urban climate resilience, gender and universal design requirements. 32 82. DLIs and DLRs will be directly derived from the outcomes of APAs, conducted on an annual basis by an independent verification agent (IVA), hired by SDHUD. To avoid the persistent delays experienced with KUSP1 and KDSP APAs, the contract for the IVA will be on a multi-year basis, renewed every year subject to performance to the satisfaction of the IDA and SDHUD. APAs will: (i) identify the counties that meet UIG access conditions; and (ii) measure the performance of counties/municipalities against the Program’s UDG MCs and PSs. Based on the assessment findings, the IVA will assign a score to each county and municipality and calculate the formula- based allocation that will be awarded to each qualifying institution. The IVA will then submit its report to SDHUD and the PTC for verification. 83. Once verified by SDHUD/PTC, the IVA’s APA report will be submitted to the Bank for quality assurance and verification. Through its staff and consultants, the Bank will conduct a quality assurance review (QAR) to ascertain the veracity of the APA results. The QAR will: (i) review the APA report and accompanying evidence; (ii) review findings related to DLR achievement; and (iii) sample a few Counties and municipalities to ground-truth APA results. The Bank’s final review will prevail in the case of any differences between the IVA and QAR results. The World Bank will communicate the results of the QAR to the PTC. The PTC will submit the final APA report to the PSC for endorsement. The details and timelines of the APA process will be captured in the POM. 84. The APA tool and compliance timeframes will be communicated in advance to the counties and municipalities. SDHUD will provide counties and municipalities with any clarification needed with respect to the evidence to be provided for APAs before the IVA commences its work. Counties and municipalities will be required to keep all copies of the evidence they have furnished to the IVA until completion of the Bank’s QAR. RESULTS FRAMEWORK AND MONITORING & EVALUATION 85. The KUSP2 Results Framework reflects the Program’s Theory of Change and is structured around the PDO and the five main Results Areas. The Results Areas and indicators are directly linked to DLIs. Results Framework indicators are assessed and updated by APA results, except for those related to Component 1 activities. The M&E framework is intended to reinforce achievement of Program results. 86. The Program will be monitored and reported on using existing Government systems. Other than the results of APAs, the main elements of the monitoring and reporting process will include audits, the mid-term review report and other regular reports submitted by NPCT and counties, including bi-annual reports, supervision reports, and technical audits. Monitoring and reporting will take place at both the national and county government levels and will be based on the Program Results Framework and DLI reporting requirements. 87. APAs will be the principal source of data for tracking results indicators and the main basis for tracking progress with respect to the Program’s Results Framework at the sub-national level. Additional information on sub-national results indicators will be provided through M&E/reporting systems at municipal and county levels, which will be regularly consolidated by SDHUD. National level indicators (linked to component 1) will be tracked through bi-annual M&E reports produced by SDHUD. 88. M&E officers in CPCTs will be responsible for collecting information from urban institutions and county departments and for six-monthly reporting on program implementation to the NPCT. The use of the Geo-Enabling Initiative for Monitoring and Supervision (GEMS) tools will be 33 integrated in CPCT semi-annual reporting. CPCTs will also document program results and information on beneficiaries, which will be consolidated in their semi-annual reports. They will prepare semi-annual reports and transmit them to the NPCT for further consolidation and monitoring. 89. The NPCT’s M&E unit will consolidate CPCT six-monthly reports and monitoring reports on national level activities/results into a single semi-annual Program progress report, to be submitted to the PSC, PTC and the Bank for review. Consolidated and other reports will use standard templates, which will be included in the POM. 90. A mid-term review (MTR) will be conducted halfway into Program implementation to evaluate progress and make any adjustment to Program design. The MTR will reassess Program relevance, efficiency, sustainability, effectiveness of Program design, including the PDO and implementation arrangements. If needed, the MTR will also provide the basis for Program restructuring. 91. The Program will commission an End of Program Evaluation (EPE) and Value for Money (VfM) Audit during the final year of Program implementation. The EPE will assess program results against the stated objectives, evaluate the appropriateness of implementation strategies and provide evidence-based recommendations for future programs of a similar nature. The VfM will provide evidence-based judgements on how well Program resources have been used and assess whether the value derived from results is sufficient to justify the Program’s costs. Both the EPE and VfM will be conducted by an external entity (or entities). INSTITUTIONAL ROLES AND RESPONSIBILITIES FOR M&E 92. The Government and the World Bank have shared M&E responsibilities (as shown in the table on the following page). Within government, each level for example national, county and municipalities will have clearly defined responsibilities regarding M&E. 34 Table 18: Program M&E framework and institutional roles and responsibilities Respon- Activity Frequency and timing Output Purpose sibility APA SDHUD Annually APA Reports To inform grant allocation among Counties and Municipalities. To verify achievement of DLRs and inform Bank disbursements. To inform progress on Results Framework indicators. Annual Reporting SDHUD Annually Annual Reports To review implementation experience, achievement of the key results indicators, and progress towards the PDO. Bi-annual SDHUD Bi-annually Bi-annual Reports To review implementation experience, achievement of the key results indicators, and Reporting progress towards the PDO. Quarterly SDHUD Quarterly Quarterly Reports To review implementation experience, achievement of the key results indicators, and Reporting progress towards the PDO. MTR WB Halfway into Program MTR Report To review implementation SDHUD implementation experience, achievement of the key results indicators, progress towards the PDO and inform any restructuring. Beneficiary and SDHUD Halfway into Program Beneficiary and Economic To document the benefits, areas of improvement, and socio-economic impacts so far Economic implementation (to inform Assessment Report achieved because of implementation of the Program. Assessment MTR) Infrastructure SDHUD Once every 6 months (to be Infrastructure Reports To review implementation progress for all Program supported infrastructure Reporting completed before ISM) investments (for the UDG). ESS Reporting SDHUD Once every 6 months (to be ESS Reports To review compliance to ESS Guidelines on all investments and capacity building completed before ISM) activities. Financial SDHUD Once every 6 months (to be FM Reports, To review compliance to FM and Procurement Guidelines on all investments and Management & completed before the ISM) Procurement Reports capacity building activities. Procurement Reporting End of Program SDHUD Once to be completed EPE Report To assess program results against the stated objectives and appropriateness of Evaluation within the last 6 months of implementation strategies and provide evidence-based recommendations for future Program implementation programs of similar nature. VfM Audit SDHUD Once to be completed VfM Audit Report To obtain evidence-based judgements on how well Program resources have been within the last 6 months of used and assess whether the value derived from the program results is good enough Program implementation to justify the costs. Joint ISMs WB Once every 6 months Aide Memoires and To check implementation progress and compliance to ESS, and Fiduciary guidelines. SDHUD Management Letters, ISRs. 35 ASSESSMENT OF IMPLEMENTING AGENCIES’ ABILITY TO CARRY OUT M&E 93. The SDHUD has solid experience with various M&E tools for both P-for-R and IPF programs. In KUSP, SDHUD was responsible for the following M&E activities: (i) APA; (ii) quarterly and biannual reporting; (iii) infrastructure reporting; (iv) ESS reporting; (v) EPE; (vi) VfM Audit; (vii) beneficiary and economic assessment; and (viii) FM reporting. In conjunction with the World Bank, SDHUD has conducted ISMs and MTRs. 94. Through their engagement in and implementation of KUSP1 and KDSP, counties/municipalities have gained considerable M&E experience. Through KUSP, CPCTs have prior experience of using the P-for-R M&E frameworks and have been responsible for data collection and reporting on: (i) infrastructure and investment sub-projects; (ii) local level capacity building; (iii) ESS; and (iv) FM. They have also provided information/data for and been involved in three APAs. 95. To fill any remaining M&E gaps, the Program will provide capacity building support to national and sub-national stakeholders. In particular, the Program will build on county M&E systems and provide training and assistance on: (i) data collection; (ii) data quality and integrity control; and (iii) linking data to informing decision-making processes. The Program will require that an M&E specialist be included in CPCTs and in the NPCT. The M&E specialists in the NPCT will provide training and backstopping support to relevant county and municipal staff in the use GEMS and M&E and results monitoring tools, to ensure that reporting is comprehensive, accurate and timely. E. PROGRAM ECONOMIC EVALUATION Summary 96. KUSP2 will deliver two main benefit streams: (i) tangible and quantifiable benefits in the form of infrastructure and services, financed out of Program grants; and (ii) non-quantifiable benefits in the form of outcomes related to the provision of infrastructure/services and related to improvements in institutional capacity. By prioritizing investments based on the Program’s eligible expenditure menus, counties and urban institutions will be able to directly finance infrastructure and service delivery by using UIG and UDG funds. In addition, they will improve their institutional performance by meeting MCs and by attaining PSs, and by benefiting from the Program’s capacity building support. 97. The economic evaluation of the Program indicates that there will be substantial benefits to be gained from the financing of eligible infrastructure sub-projects and service delivery activities. Based on analyses of previous infrastructure investments in Kenya and elsewhere: • The construction of urban road networks has a positive net present value ranging from US$ 11- 47 million and a positive internal rate of return (IRR) ranging from 16-65%. • Investing in streetlighting with various modules of power supply (solar, grid and hybrid) has a cost benefit ratio of 1.8 – 2.5 and NPV of 93-126 million. • Construction of an automated central bus park would have a positive NPV of Kshs. 154.6 million and an IRR of 104%. • Storm drainage systems have the positive effect of reducing flooding, property destruction and loss of lives due to drowning. Based on the simulations, the NPV varies by size of town from Kshs. 394 – 6,400 million, with an IRR ranging from 14-22%. 36 Sensitivity analysis indicates that such infrastructure and service delivery investments remain feasible even with an increase in costs or a reduction in benefits. 98. There are many non-quantifiable benefits associated with the provision of various services . These include: reduced health infections during the rainy season with the improvement or development of solid waste management systems and facilities; reduced destruction of property with proper drainage and storm water harvesting and storage systems; improved living conditions for those dwelling in informal settlements in cases of slum upgrading programs; institutional strengthening of urban boards/town committees will result in a better informed citizenry; inclusive decision making due to transparency in governance; and protection of lives associated with firefighting services. Introduction 99. Rationale for public intervention and the Bank’s value added. In order to provide urban infrastructure and services, KUSP2 will require close coordination between the National and the County Governments. The Bank’s support will improve the management of urban areas and strengthen urban institutions through capacity building initiatives. The outcome of the project is expected to improve county competitiveness, livability and productivity. The World Bank has provided GoK with long-standing support for several urban development programs and projects, such as the Nairobi Metropolitan Services Project (NAMSIP), the Kenya Informal Settlements Improvement Projects (KISIP I and II), the Kenya Municipal Project (KMP), and the Kenya Urban Support Program (KUSP). The proposed program is also aligned with the Country Partnership Framework (CPF FY22-27) since the proposed activities will: strengthen public sector effectiveness transparency and accountability; create incentives that target reforms for improved county business climates; extend power, digital solutions and transport to the last mile; and increase household resilience to, and national preparedness for, shocks. 100.Investments in urban infrastructure and services reduce poverty. Investing in infrastructure has been argued to positively affect poverty since it enhances the connectivity of previously isolated areas and opens up investment and employment opportunities. The impact of infrastructure on poverty can be viewed from income, access and time perspectives. The urban poor tend to take more trips to work/school on foot since they are unable to meet the daily cost of transport. They also live on the outskirts of cities, making them ‘access poor’ since they are unable to access city or urban facilities such as hospitals and schools. In addition, it takes more time to reach the city or urban areas25. Empirical evidence indicates that in Africa a 10 percent increase in road infrastructure (measured by paved roads) leads to a 5.16 percent decline in the poverty headcount or the share of people living in poverty26. This is explained by the fact that paved roads increase connectivity for the urban poor to economic activities that allows them to access productive opportunities. Investment in new roads also promotes the creation of new jobs. KUSP2’s Urban Development Grants (UDGs) are therefore expected to reduce urban poverty by financing an array of infrastructure and services investments. 101.Quantifiable benefits of investments in infrastructure and service delivery. One of the main objectives of the performance based UDGs is to improve urban institutions and governance practices while also financing urban infrastructure and services in order to achieve the economic 25 Seetanah B. Ramessur S and Rojid S (2009) “Does Infrastructure Alleviate Poverty in Developing Countries? International Journal of Applied Econometrics and Quantitative Studies V6-2 26 Anyanwu, John & Erhijakpor, Andrew. (2009). The Impact of Road Infrastructure on Poverty Reduction in Africa. https://www.researchgate.net/publication/263662244_The_Impact_of_Road_Infrastructure_on_Poverty_Reduction_in_Af rica 37 and social transformation of secondary cities in Kenya. This objective is in line with Kenya Vision 2030, which has outlined strategies for the development of infrastructure that ensures connectivity of previously marginalized areas in order to reduce transport and other costs. The UDG investment menu includes water and sanitation, waste management, storm water drainage, connectivity (roads, non- motorized transport facility and street lighting), urban economic and social infrastructure, fire and disaster management. The choice of investments will largely depend on urban area development priorities, as identified in their Integrated Development Plans (IDePs). This economic evaluation is based on investments that have been made in the past in Kenya and in other countries. Investments in urban roads 102.Potential benefits of investments in urban roads. Investments in road networks result in reduced vehicle maintenance and operation costs from regular traffic, as well as savings in travel time. Examples of investment in urban roads include lane extension, repaving or reinforcement of the current pavement, grade separation of the roadways, and bypass building. The economic internal rate of return (EIRR) and net present value (NPV) for investments in urban road segments in various Kenyan urban areas are summarized in Table 19. This analysis demonstrates that, in general, investments in urban roadways and related infrastructure provide returns which are much higher than costs. Table 19: Costs and benefits of road networks (US$ millions) Road Section NPV EIRR (%) JKIA junction to southern bypass and associated roads (17.7 kilometers) 469.97 65.4 Southern bypass to James Gichuru road junction (11.5 kilometers) 190.5 36.6 James Gichuru road junction to Rironi (25.2 kilometers) 148.6 33.9 Kisumu northern bypass (9.0 kilometers) 53.3 23 Meru bypasses (21 kilometers) 11.6 17.2 Source: Kenya Urban Transport Improvement Project estimates. 103.Sensitivity Analysis. Road construction projects remain beneficial in unfavorable economic conditions, where either costs increase or benefits decrease, or both costs and benefits decrease by 20%, as shown in table 20. 38 Table 20: Sensitivity analysis of construction of road networks Road Section Benefits (US $ M) NPV EIRR (%) JKIA junction to Base case 469.97 65.4 Southern Bypass Costs up by 20% 454.7 57.7 Benefits down by 20% 390.57 58.7 Costs up by 20% and benefits down by 20% 375.3 51.6 Southern Bypass to Base case 190.5 36.6 James Gichuru Road Costs up by 20% 170.1 30.7 Junction Benefits down by 20% 132 29.5 Costs up by 20% and benefits down by 20% 111.6 24.7 James Gichuru road Base case 148.6 33.9 junction to Rironi Costs up by 20% 132.1 28.8 Benefits down by 20% 102.3 27.7 Costs up by 20% and benefits down by 20% 85.8 23.3 Kisumu northern Base case 53.3 23 bypass Costs up by 20% 44.4 20.2 Benefits down by 20% 33.7 19.6 Costs up by 20% and benefits down by 20% 24.9 16.9 Meru bypasses Base case 11.6 17.2 Costs up by 20 percent 7.1 14.8 Benefits down by 20 percent 5.6 12.4 Source: Kenya Urban Transport Improvement Project estimates. 104.The construction of the 75-kilometer long Elwak-Rhamu road, which is part of the 344 kilometer road development program, financed by the Northern Kenya Transport Improvement Project (NETIP), is expected to have several direct benefits for the surrounding community. Benefits include: savings on vehicle maintenance costs, reduction in travel time for passengers and goods, reduction in number and severity of accidents, reduction in negative environmental effects and increase in value of goods being moved across towns and the region in general. These benefits tend to have longer term positive effects on activities such as agricultural production or tourism; new or better road networks also increase the mobility of local populations and lead to improved access to social services, such as education and health. This urban road improvement project is expected to have positive returns, as presented in table 21. Sensitivity analysis, with a 20% increase in costs and a 20% decrease in benefits, shows that the road project will still yield positive returns. Table 21: Economic benefits of urban road networks Sensitivity Analysis 20% increase 20% decrease 20% increase Economic Indicator in costs in benefits in costs & 20% benefit decrease in benefits Net Present Value (Kshs. million) 5,132.20 3,123.30 2,096.90 88.00 Internal Rate of Return 16.2% 14.3% 13.9% 1.21% Benefit Cost Ratio 1.51 1.26 1.21 1.01 Source: Gibb Africa (2020)27 27GIBB Africa (2020) “The Design Review of Elwak -Rhumu (A13) Road- Final Feasibility Economic Report� Report Prepared for KeNHA. 39 Investments in street lighting 105.Potential benefits due to street lighting include the reduction in fatal accidents on roads by approximately 31-46 percent (Plainis et al 2006)28. Where there are streetlights on motorways, out of the accidents that occur, only 2.6% of accidents are fatal; however, where there are no streetlights, 4.3% of the accidents that take place are fatal. On roads with streetlights in built up areas, 1.3 percent of accidents are fatal, compared to 1.9 percent of accidents where there is no street lighting, implying a 31.6 percent reduction in fatal accidents due to street lighting. On other roads, 3.1 percent of accidents were fatal in lit conditions, compared to 4.9 percent in areas without streetlights, representing a 36.7 percent reduction due to street lighting. While this analysis was conducted in the UK, it is clear that street lighting has a positive impact by reducing injuries on motorways. 106.Street lighting, provided by various types of power supply ((solar, grid powered and hybrid), has a positive cost benefit ratio ranging from 1.8-2.5. The costs associated with street lighting for the three schemes (solar, grid powered and hybrid) were calculated by obtaining Life Cycle Costs, which included: electricity costs; investment costs; and annual operating, maintenance and repair costs. Under the Kenya Municipal Program (KMP), street lighting was evaluated in three towns: Kericho, Garissa and Kakamega. The results are presented in the following table. Solar street lighting has the highest cost benefit ratios in Garissa and Kakamega towns. The negative present value in Kericho town can be associated with climatic conditions in the area (high rainfall with minimal sunshine. Table 22: Cost benefit analysis of street lighting in selected Kenyan towns by source of power supply (Kshs.) Town Grid Power Hybrid Solar Power Garissa Total Benefits 182,006,695 185,392,440.57 188,674,540.83 Total Costs 73,572,702.83 94,792,572.68 102,480,847.94 BCR 2.4738 1.9558 1.8411 NPV@12% 108,433,992.17 90,599,867.89 86,193,692.89 Kakamega Total Benefits 197,205,826 200,729,765.29 204,150,059.19 Total Costs 74,168,213.89 95,975,711.35 112,337,487.97 BCR 2.6589 2.0915 1.8173 NPV@12% 123,037,612.11 104,754,053.94 91,812,571.22 Kericho Total Benefits 158,060,926 160,824,846.53 68,752,108.50 Total Costs 62,994,886.94 78,809,903.72 90,916,618.10 BCR 2.5091 2.0407 0.76 NPV@12% 95,066,039.06 82,014,942.81 -22,164,509.60 Source: Kenya Municipal Program Feasibility Study on Street Lighting29 28 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2564438/pdf/125.pdf 29Consultancy Services for Carrying Out Feasibility Studies, Detailed Designs and Preparation of Tender Documents for the Supply and Installation of Solar Panel Street Lighting Garissa, Kakamega and Kericho Towns. Urban Development Department (2013) Contract No. MOLG/KMP/COMP3/GARISSA, KAKAMEGA & KERICHO/STL-02/2011/2012 40 107.A sensitivity analysis of a 20 percent increase in costs for each source of power supply shows that provision of street lighting still remains economically beneficial. Even with changes in costs (i.e., initial investment, replacement and operations, maintenance and repair costs), all three street lighting options (grid/solar/hybrid) remain economically viable choices, as presented in the following table. Table 23: Sensitivity analysis of 20 percent increase in cost of street lighting. TOWN Grid Power Hybrid Solar Power Garissa Total Benefits 182,006,695.00 185,392,440.57 188,674,540.83 Total Costs 93,727,335.29 119,678,320.17 128,795,864.32 BCR Scenario 1.94 1.55 1.46 NPV@12% 88,279,359.71 65,714,120.40 59,878,676.51 IRR Kakamega Total Benefits 197,205,826.00 200,729,765.29 204,150,059.19 Total Costs 94,442,112.89 147,114,807.87 140,647,734.77 BCR Scenario 2.09 1.36 1.45 NPV@12% 102,763,713.11 53,614,957.42 63,502,324.42 IRR Kericho Total Benefits 158,060,926.00 160,824,846.53 68,752,108.50 Total Costs 80,333,223.14 122,440,784.71 113,935,165.10 BCR Scenario 1.97 1.31 0.60 NPV@12% 77,727,702.86 38,384,061.82 -45,183,056.60 IRR Source: Calculation from KMP Feasibility Study on Street Lighting (Ibid) Investments in bus parks 108.Analysis of the potential benefits due to an automated central bus park indicate a positive NPV of Kshs 154.6 million and an IRR of 104 percent. An automated central bus park has several benefits, including: ease of accessing transport services thus saving time for travelers; improving safety of travelers and their baggage since the movement of vehicles is organized; reduced congestion in the bus terminus, making it easier for travelers to locate transport for their destination. The automation of a bus park would also enhance revenue collection for the local government and reduce cases of fraud and corruption. It would also provide better working conditions for businesses and the labor force in general. The benefit of a central automated bus park was estimated from data collected under KMP. The following assumptions are made: 1) Economic life of 10 years (2022-2033). 2) One-off implementation cost of Kshs 13,540,039.00; this includes signalization and civil works, adjusted for inflation up to 2021. 3) A discount rate of 12 percent, based on World Bank (2005). 4) An estimated monthly income of Kshs 1,500,000, derived from usage fees by Public Service Vehicles (PSV), adjusted for inflation up to 2021. 5) Monthly costs of operation and maintenance of Kshs 391,666.00 (inclusive of salaries), based on personnel communication (2013, adjusted for inflation up to 2021). 6) Yearly increments of 5% on the cost of operation and maintenance and the bus park usage fees. 41 The table below provides a summary of the costs and benefits of construction of an automated central bus park. The NPV was estimated as Kshs. 154,570,924.00 with an internal rate of return of 104 percent. Table 24: Cost and benefits of construction of an automated central bus park (Kshs). Year Costs Returns Net cash flow 0 13,540,039.00 (13,540,039.00) 1 4,723,167.79 18,088,758.50 13,365,590.71 2 4,959,326.18 18,993,196.43 14,033,870.25 3 5,207,292.49 19,942,856.25 14,735,563.76 4 5,467,657.12 20,939,999.06 15,472,341.95 5 5,741,039.97 21,986,999.02 16,245,959.04 6 6,028,091.97 23,086,348.97 17,058,257.00 7 6,329,496.57 24,240,666.42 17,911,169.85 8 6,645,971.40 25,452,699.74 18,806,728.34 9 6,978,269.97 26,725,334.72 19,747,064.76 10 7,327,183.46 28,061,601.46 20,734,417.99 NPV 154,570,924.64 IRR 104% Source: Calculations from KMP Feasibility Study30 109.A sensitivity analysis shows that the construction of an automated central bus park remains viable even when there are increases in costs or decreases in benefits. A 20% increase in initial costs reduced the NPV to Kshs. 151.8 million with an IRR of 87 percent. When the benefits were reduced by 20 percent, the NPV reduced to Kshs 84.8 million with an IRR of 89 percent. Table 25: Sensitivity analysis of 20 percent increase in cost and benefits associated with central automated bus park. Scenario Sensitivity factor NPV (Kshs.) IRR Scenario 1 20% increase in cost 151,862,916.84 87% Scenario 2 20 % reduction in benefits 84,767,613.87 89% Investments in storm water drainage 110.Storm water drainage has the benefit of reducing the risks of flooding to people and property. Under KMP, these benefits were measured for their economic efficiency by comparing the costs and benefits of constructing storm water drainage facilities in five towns (Eldoret, Kericho, Kisumu, Nyeri and Thika). The following assumptions were made: 1) The investments and benefits were calculated over a 30-year analysis period and discounted back to the investment year at 12% per annum. 2) The annual average damage was calculated by considering three return periods: 10, 20 and 100 years. 3) The benefits were arrived at by establishing the difference between the cost of damage due to inundation with and without the project. An average annual benefit was then established for each of the five towns. 30Final Feasibility Study Report for Feasibility Studies, Detailed Designs, and Preparation of Tender Documents for the Supply and Installation of Traffic Lights for Eldoret Town & Automation of Central Bus Park. PROJECTMOLG/KMP/COMP3/ELDORET/TMS-02/2011/2012. 42 4) The costs were estimated from quotations from manufacturers, after which the initial investment cost and annual maintenance cost (2 percent of initial investment) was calculated in order to derive the total costs. The summary of the results is presented in the table below. All towns included in the study have BCR ratios greater than 1 and an IRR greater than the discounted rate, making the construction of storm water drainage facilities economically viable. Table 26: Cost and Benefit of Construction of Storm Water Drainage in Selected Towns (Kshs) NPV- Total IRR Town Total Costs Total Benefits NPV - Benefits BCR Costs (%) Eldoret 5,473,622,503 3,605,614,796 22,542,714,968 6,235,630,592 1.729 20.22 Kericho 466,000,496 306,966,416 1,427,250,973 394,250,973 1.286 14.30 Kisumu 7,537,831,234 4,965,361,753 23,187,007,310 6,413,850,875 1.292 14.48 Nyeri 762,910,225 502,548,430 2,354,612,822 651,318,875 1.296 14.44 Thika 4,186,479,578 2,575,740,912 19,952,037,700 5,519,012,986 2.001 23.77 31 Source: KMP Feasibility Study 2016 Non-quantifiable benefits of urban investments 111.There are several benefits associated with urban institutional support and provision of infrastructure services; unfortunately, some of these benefits are not easily quantifiable. Proper management of urban areas will ensure enhanced efficiency gains for urban boards/town committees. Proper planning and development controls will enhance the attractiveness of urban areas, making them attractive tourist destinations, which in turn attracts investments. The provision of basic infrastructure and services has the following benefits: (a) reduced health infections during rainy seasons with the improvement or development of solid waste management systems and facilities; (b) reduction in destruction of property with proper drainage and storm water harvesting and storage systems; (c) improved living conditions for those dwelling in informal settlements in cases of slum upgrading programs; and (d) institutional strengthening of urban boards/town committees will result in a better informed citizenry and more inclusive decision making, due to transparency in governance32. 112.The provision of firefighting services has numerous benefits. Firefighting is a critical urban public service with immense benefits associated with the protection of lives and property. Other potential benefits associated with firefighting services include the provision of ambulance services to the local community, the provision of water services to the community and employment creation. 113.County absorption of both development and recurrent expenditures has been increasing over time and contributes to more effective use of UDGs33. Total county government expenditure in FY 2020/21 was Kshs.398.01 billion, which translates to an absorption rate of 79.3 percent of the total county government annual spending budget. In FY 2020/21, total recurrent expenditure was Kshs.281.95 billion, representing an 89.5 percent absorption rate. Development expenditure amounted to Kshs.116.07 billion, representing an absorption rate of 62.1 percent. While this is 31 KMP Feasibility Study 2016ltanrvices for Storm Water Drainage Facilities
In Eldoret, Kericho, Kisumu, Nyeri 32 KUSP PAD – Economic Analysis 33 Annual County Government CBIRR-FY-2020/21 43 still low, it is an improvement from the previous FY (2019/20), when total development expenditure was Kshs. Kshs.104.51 billion, translating to a 55.6 percent absorption rate. F. TECHNICAL RISKS AND THE PROGRAM ACTION PLAN 114.Due to prior national and sub-national experience with PforR modalities and an established institutional framework for urban development, the technical risk associated with KUSP2 is assessed as moderate. Through KUSP1, some 60 urban institutions have been established and these are already performing diverse service delivery and other functions. Similarly, County governments have experience of managing the UIGs and UDGs financed by KUSP1; KUSP2’s grant structure is based on the same principles and is therefore familiar to counties. 115.Despite this generally positive assessment, there are several technical risks . The following technical risks have been identified: (i) procurement delays, especially at the national level; (ii) fund flow delays from CRF to SPAs; (iii) limited O&M budgets; (iv) weak capacity on ESS; and (v) delays in financial reporting. These risks will be mitigated through (i) capacity building activities; (ii) a performance framework that incentivizes mitigation of the identified risks; and (iii) the Program Action Plan. 116.The Program Action Plan (PAP) includes a range of priority actions that will need to be taken to mitigate risks. Proposed actions can be categorized into the following types: • Actions intended to strengthen Program coordination and implementation teams at the national and sub-national levels (NPCT staffing, CPCTs, development of capacity building plans, guidance/templates on M&E). • Preparation of guidelines (for counties and urban institutions) to provide frameworks for key institutional and technical processes and benchmarks (including model law for the allocation of county funds to urban areas, municipal human resource management, IDeP preparations and factoring in climate resilience, private sector database). Most of these guidelines are to be included in the Program Operations Manual (POM). • Actions intended to strengthen national and sub-national ESS management (guidelines, training, etc.), as detailed also in the Environmental and Social Systems Assessment. • Actions intended to reinforce national and sub-national PFM, procurement and fiduciary capacities, as detailed in the Integrated Fiduciary Assessment. 44 Annex 1: ELIGIBLE KUSP2 MUNICIPALITIES ELIGIBLE URBAN AREAS FOR THE UDG (DLI 2 to DLI 5) Urban Urban population population COUNTY URBAN CENTRE (2019) COUNTY URBAN CENTRE (2019) Baringo 1. Kabarnet 22,474 Machakos 2. Machakos 63,767 Bomet 3. Bomet 11,765 Machakos 4. Mavoko 12,396 Bungoma 5. Bungoma 68,031 Machakos 6. Tala/Kangundo 25,057 Bungoma 7. Kimilili 56,050 Makueni 8. Wote 19,725 Busia 9. Busia 71,886 Makueni 10. Emali/Sultan 27,043 Busia 11. Malaba 15,581 Mandera 12. Mandera 114,718 Elgeyo Marakwet 13. Iten 12,630 Mandera 14. El Wak 60,732 Embu 15. Embu 64,979 Marsabit 16. Marsabit 36,289 Garissa 17. Garissa 163,399 Meru 18. Meru 80,191 Homa Bay 19. Homa Bay 44,949 Meru 20. Maua 50,826 Homa Bay 21. Oyugis 19,947 Migori 22. Migori 71,668 Isiolo 23. Isiolo 78,650 Migori 24. Rongo 20,688 Kajiado 25. Kitengela 154,436 Migori 26. Awendo 16,815 Kajiado 27. Ngong 102,323 Migori 28. Kehancha 22,194 Kajiado 29. Kajiado 24,678 Murang'a 30. Murang'a 43,314 Kakamega 31. Kakamega 107,227 Murang'a 32. Kenol 44,086 Kakamega 33. Mumias 41,942 Nakuru 34. Nakuru 570,674 Kericho 35. Kericho 53,804 Nakuru 36. Naivasha 198,444 Kiambu 37. Ruiru 490,120 Nakuru 38. Gilgil 60,711 Kiambu 39. Kikuyu 323,881 Nandi 40. Kapsabet 41,997 Kiambu 41. Karuri 194,342 Narok 42. Narok 65,430 Kiambu 43. Juja 156,041 Narok 44. Kilgoris 10,845 Kiambu 45. Kiambu 147,870 Nyamira 46. Nyamira 24,483 Kiambu 47. Limuru 81,316 Nyandarua 48. Ol Kalou 13,234 Kiambu 49. Thika 251,407 Nyandarua 50. Engineer 9678 Kilifi 51. Malindi 119,859 Nyeri 52. Nyeri 80,081 Kilifi 53. Kilifi 74,270 Samburu 54. Maralal 31,350 Kirinyaga 55. Kerugoya/Kutus 39,188 Siaya 56. Siaya 33,153 Kisii 57. Kisii 112,417 Siaya 58. Bondo 22,712 Kisumu 59. Kisumu 397,957 Taita Taveta 60. Mwatate 9,572 Kisumu 61. Ahero 16,853 Tana River 62. Hola 20,912 Kitui 63. Kitui 29,062 Tharaka Nithi 64. Kathwana 59,599 Kitui 65. Mwingi 17,025 Tharaka Nithi 66. Chuka 22,388 Kwale 67. Ukunda 77,686 Trans Nzoia 68. Kitale 162,174 Kwale 69. Kwale 10,063 Turkana 70. Lodwar 82,970 Laikipia 71. Rumuruti 13,056 Uasin Gishu 72. Eldoret 475,716 Laikipia 73. Nanyuki 72,813 Vihiga 74. Mbale 17,404 Lamu 75. Lamu 25,385 Wajir 76. Wajir 90,116 West Pokot 77. Kapenguria 28,469 45 ELIGIBLE MUNICIPALITIES FOR THE WHR UDG (DLI 7) COUNTY URBAN CENTRE Total urban population (2019) Refugee Population (UNHCR) Garissa Dadaab 11,52434 233,726 Turkana Kakuma 24,97835 244,28636 34 Urban population in Dadaab Town (Census 2019) 35 Urban population of 22,978 in Kakuma Town and 2,000 in Kalobei Town (Census 2019) 36 Estimated 197,437 in Kakuma Camp and 48,795 in Kalobei Settlement (UNHCR 2022) 46 Annex 2: DETAILED UDG PERFORMANCE FRAMEWORK (Component 2)37 MINIMUM CONDITIONS RESULTS START MINIMUM CONDITION INDICATOR(s) DATE ASSESSMENT PROCEDURE & MEANS OF VERIFICATION AREA RA1 MC1: The participating urban • Urban Board membership: APA1 • Obtain approved list of members of urban board. board has the appropriate a) appointed and approved as per provisions of • Verify: institutional setup (including UACA. a) that membership (number, qualifications etc.) is adequate gender b) not more than two thirds of the same gender. consistent with UACA provisions. representation). c) includes private sector representation. b) gender of all board members and that less than • Urban administration: APA1 two thirds of members are of the same gender. a) city/municipal manager appointed as head of c) that private sector is represented by at least one Urban Administration. board member. b) City/municipal manager designated as • Obtain letter of appointment of city/municipal city/municipal accounting officer. manager. • Obtain signed CEC letter designating the city/ municipal manager as the accounting officer for the participating urban board. MC2: The participating urban • Full-time staff appointed to following positions: APA1 • Obtain: board has core staff available. a) registered engineer. a) urban area staff list (indicating full-time and b) registered planner. shared positions). c) environment officer. b) urban area staff appointment letters/transfer of d) social development officer. service document for listed staff to establish that e) finance/accountant officer. they are filled. f) procurement officer • Verify that: • Full-time or shared (with other urban areas or APA1 a) full-time staffing profiles and appointments are as county departments) staff appointed to following required. positions: b) staffing profiles and appointments of shared a) human resources officer. positions are as required. MC3: The participating urban Either: APA1 • Obtain: board has a budget vote which • Urban board budget: a) urban board budget (as developed by board), as a is reported on accordingly. a) is included in county budget as a sub-vote under sub-set of the county Urban Development the Urban Development Department’s full county Department’s full budget vote. 37 Will be included in the Program Operations Manual. 47 RESULTS START MINIMUM CONDITION INDICATOR(s) DATE ASSESSMENT PROCEDURE & MEANS OF VERIFICATION AREA government budget vote. b) county government spending reports submitted to b) spending is reported on by the county and received by Controller of Budget. government to the Controller of Budget. c) EITHER: COB quarterly and annual reports on c) is publicly available. county budget execution, showing urban board Or: sub-vote execution. • Urban board budget: d) AND/OR: county government report (submitted to a) is included as a full department-level budget vote. and received by COB) on urban board budget b) in counties with ONE OR MORE eligible urban execution. board, urban board budgets can be included e) evidence of public disclosure of urban board together in a full department-level budget vote. budget and budget execution (as part of COB reports or independently). Options enable counties that have already established • Verify that: department-level urban board budget votes to maintain a) urban board budget is a sub-vote [or sub- them and provides flexibility for other cases. program] of Urban Development Department’s budget vote. b) financial reporting on urban board budget is provided by county government. c) urban board budget and budget reporting has been disclosed. • Obtain: a) urban board budget vote in county budget (COB reports) b) COB reports on county urban board budget vote expenditure • Verify that: a) in counties with only ONE eligible urban board, the urban board’s budget is included in county budget as a department-level vote. b) in the case of counties with more than one eligible urban board, their budgets are included together in a single department-level budget vote (“urban boards/areas�). c) County government reports urban board budget vote spending to the Controller of Budget 48 RESULTS START MINIMUM CONDITION INDICATOR(s) DATE ASSESSMENT PROCEDURE & MEANS OF VERIFICATION AREA accordingly. MC4: The participating urban • The county government has: APA2 • Allocation criteria (formula): board’s budget includes a) officially established and adopted criteria a) Obtain official county government notice financing from the County (formula) for the allocation of county funds to concerning criteria to be used in allocating funds Government. urban institution budgets on the basis of a county to urban boards. legislation, as per Section 173 of the PFM Act. b) Verify that criteria used are consistent with PFM b) made publicly available the above criteria Act. (formula) in a gazette notice. c) Verify that above county government formula is adopted and gazetted/published. • In subsequent years: a) the county government has allocated funds to the APA3 • Actual allocation of funds: participating urban board on the basis of agreed a) Obtain information on urban board budget vote criteria (formula). [or sub-vote] in county budget. b) Verify that county allocation to urban board budget vote is consistent with allocation criteria (formula). MC5: The participating urban • Citizen engagement: the urban board has: APA1 • Review local media reports and website to board engages with local a) publicly announced its annual calendar of citizen confirm that the annual calendar of citizens’ fora citizens, has a framework for fora meetings. was published and announced. participation and gender b) has held at least quarterly urban fora. • Review minutes of urban fora to confirm that an inclusion, has a grievance c) made publicly available its official framework for redress mechanism, and urban fora was held at least once in every gender inclusion and participation. publicly discloses key quarter, as per the schedule announced at the d) publicly disclosed its reports on each citizen documents. forum. beginning of the year. • Municipal GRM system developed and functional. APA1 • Review list of participants to urban fora to • Disclosure: urban board has publicly disclosed key APA1 establish engagement of women, youth and documents: persons with disabilities. a) municipal charter. • Verify that minutes/reports of the fora meetings b) contact information. are publicly available. c) board and staff members. • Verify that urban board website and/or county d) highlights of Board meeting deliberations. website provides guidance on submission of e) urban board budget. grievances. f) urban board annual investment plan. • Verify that the municipality has an official gender g) urban board annual financial report. inclusion and participation framework. h) up-to-date urban IDeP and spatial/land use plans. 49 RESULTS START MINIMUM CONDITION INDICATOR(s) DATE ASSESSMENT PROCEDURE & MEANS OF VERIFICATION AREA • Verify that the gender inclusion and participation framework is publicly available. • Verify that all the listed information is available on the website of the county and/or urban board. RA2 MC6: The participating urban • Urban IDeP: APA1 IDeP: board has an up-to-date a) prepared. • Obtain online or physical copies of most recent IDeP Integrated Development Plan b) reviewed annually. from planning department/municipality. (IDeP) and Physical and Land c) includes key elements, as per UACA section 38, • Verify that IDeP: Use Plan. Schedule 3. a) has been approved. d) includes principal findings and proposals of private b) has been reviewed in previous year. sector dialogues and diagnostic (from APA3). c) includes all key elements (as per UACA 2011, CGA 2012 and other regulations). d) includes principal findings and proposals of private sector needs diagnostic (from APA3). • Urban physical and land use plan developed in APA2 Physical and land use plan: accordance with PLUPA, UACA and CGA (APA2). • Obtain online or physical copies of most recent urban physical and land use plan from planning department/municipality. • Verify that physical and land use plan: a) has been approved. b) is consistent with provisions of PLUPA 2019, UACA 2011 and CGA, 2012. RA3 MC7: Infrastructure designed • Infrastructure designs developed in the previous APA2 Project design specifications. under the program adheres to year comply with design standards to ensure they Checklist in POM incorporating climate change and minimum technical, climate are climate change resilient and inclusive universal design standards. resilience and ESS (following checklist in the POM). requirements. • Environmental and Social assessments conducted APA2 for preparation of UDG investments and compliance with Environment and Social Safeguards (ESS) minimum requirements: a) all subproject feasibility reports to include E&S screening reports as per POM guidelines. b) site specific environmental and social impact assessment's prepared and obtain NEMA license 50 RESULTS START MINIMUM CONDITION INDICATOR(s) DATE ASSESSMENT PROCEDURE & MEANS OF VERIFICATION AREA before start of civil works. c) all contract documents include NEMA license/approval conditions and ESMP with budget allocation. d) all subprojects involving temporary physical or economic displacement and relocation to include consulted ARAP/Reinstatement- /Restoration/Reposition Plan before award of contracts. . e) At least two stakeholder consultations with Project Affected Persons (PAPs) were undertaken at preparation stage. RA4 MC8: The participating urban • The county government has developed an APA2 Obtain copy of county private sector engagement board operates within the engagement framework38 to promote public framework. county government’s private private dialogue. sector engagement framework • Obtain copy of county private sector needs to promote public private diagnostic. dialogue. • Verify that: a) diagnostic exists and has been undertaken in the prescribed format. b) diagnostic has been made publicly available on the county or urban board website. Program MC9: County government has • An intergovernmental agreement is signed by the APA1 • Obtain copy of intergovernmental agreement. committed itself to County Government and the National Treasury. • Annual urban board investment plan (or strategic participation in KUSP2 and • The annual urban board investment plan (or APA2 plan): adheres to all program annual strategic plan39) for next FY is available a) obtain copy of annual investment plan (or annual conditions. strategic plan). and provides the budget for UDG-financed investments, with feasibility (or pre-feasibility) b) verify that plan provides budget for UDG-financed studies as per the POM, for the proposed investments. c) Verify that annual investment plan includes (pre- 38 The framework will identify private sector needs and priority interventions building on the Competitive Counties Toolkit, and based on the public-private forum discussion. 39 See UACA 2011, Section 36 (d) (iv); and PFMA 2021 section 175. 51 RESULTS START MINIMUM CONDITION INDICATOR(s) DATE ASSESSMENT PROCEDURE & MEANS OF VERIFICATION AREA investments completed and attached to the )feasibility studies. document. • Use of UDG in previous FY: • UDG for the previous FY has been used in APA2 a) obtain urban board reports and financial accordance with the eligible investment menu statements. (as described in POM). b) verify that investments financed out of UDG APA2 allocation are consistent with positive/negative • Procurement methods used and contracts issued investment menu. for UDG funded investment project(s) were • Procurement: consistent with prescribed budget thresholds and a) obtain urban board reports, procurement notices contracting procedures. and contracts. • Following disbursement of UDG grant by NT and APA2 b) verify that procurement methods used were confirmation of urban board budget provision, consistent with budget thresholds and release of UDG funds from the County Revenue procedures. Fund to the Special Purpose Account took not • Release of UDG funds: more than 30 working days from the day the a) obtain information on date of release of UDG SDHUD issues the confirmation of disbursement funds by NT to CRF. letters to the county. b) obtain information on urban board budget provision. c) obtain information on date of transfer of UDG funds from CRF to SPA. d) verify that period between NT release and CRF/SPA transfer is not more than 30 working days. 52 PERFORMANCE STANDARDS RESULTS START PERFORMANCE STANDARD INDICATOR(s) and SCORING DATE ASSESSMENT PROCEDURE MEANS OF VERIFICATION AREA RA1 PS1: Urban service delivery • Steps taken to transfer and • Obtain: Municipal reports. functions transferred. undertake functions to the a) report on analysis of municipal Gazette notices. participating urban board: service delivery functions. Urban board budgets and financial a) county government and urban APA1 b) gazette notifications. reports. board undertake a functional c) urban board budgets. Municipal charters. analysis of the delegated d) urban board financial reports. functions of municipal • Verify that: infrastructure and service a) county and urban board undertook delivery and identify/review analysis of municipal service functions (and resources delivery functions. including assets) to be b) functions officially transferred to transferred. urban board by gazette notice. [SCORE = 3] c) urban board budget indicates that b) county gazette notification of APA1 funds allocated to transferred transfer of functions [SCORE = 1] functions. c) urban board budget developed in APA2 d) urban board expenditure reflects line with transferred service spending on transferred functions. delivery functions. [SCORE = 3] d) urban board budget execution APA2 reflects implementation of transferred service delivery functions. [SCORE = 3] TOTAL SCORE = 10 PS2: Effective human resource • Municipal organizational structure APA2 Organizational structure & staffing Minutes of county public service board and performance (with job specifications) and staff • Obtain: meetings (showing approvals). management. establishment of the urban a) approved organizational structure Minutes of County Executive Committee (and job descriptions) and staff meetings (showing approvals). administration is: establishment for the participating Annual performance contracts, targets a) prepared, with all technical and urban board. and evaluation reports. administrative positions identified. b) approved staff appointments. • Verify that: 53 RESULTS START PERFORMANCE STANDARD INDICATOR(s) and SCORING DATE ASSESSMENT PROCEDURE MEANS OF VERIFICATION AREA b) prepared with priority positions a) organizational structure and identified. staffing establishment have been c) approved by the County approved. Executive Committee. b) job descriptions for staff are in d) authorized by the County Public place. Service Board. c) staffing appointments have been e) Implemented through made for all priority positions and appointment of all priority at least 60% of technical level positions and at least 50% of positions as per approved approved technical positions. establishments. [SCORE = 3] • Performance contracts between (i) APA1 Performance contracts: Board chair and CECM; (ii) • Obtain: annual performance contracts, Municipal Manager and Board; targets and evaluation reports. and (iii) Municipal Manager and • Verify that: Heads of Departments, are: a) performance contracts for the a) in place. Board Chair with CECM; Manager b) evaluated/reviewed annually. with the Board; and Manager with [SCORE = 2] Heads of Departments are in place. b) performance contracts have been TOTAL SCORE = 5 reviewed/evaluated on an annual basis. c) staff performance appraisal system exists for technical level staff working under the Heads of Departments. PS3: Quality/scope of • Urban board has a functioning APA1 Gender Mainstreaming Committee: Minutes of gender committee participation/accountability. committee mandated with • Obtain: Urban area grievance management addressing Gender Mainstreaming a) ToRs documentation. (including ToR) b) minutes of committee meetings. Minutes and attendance list of IDeP [SCORE = 2] • Verify that: annual review consultations. a) Committee is meeting regularly and reporting adequately. • All grievances during past year APA1 Grievances: submitted to urban area • Obtain: 54 RESULTS START PERFORMANCE STANDARD INDICATOR(s) and SCORING DATE ASSESSMENT PROCEDURE MEANS OF VERIFICATION AREA administration are responded to a) documentation (all grievance within 14 working days. submissions during past year, [SCORE = 2] response to grievances). • Verify that: a) all grievances during the past year were responded to within 10 working days. • Annual review of IDeP for current APA1 IDeP annual review: FY includes consultation session • Obtain: with citizens and private sector a) minutes of IDeP annual review representatives and diagnostics. consultations. [SCORE = 1] b) attendance list of IDeP review consultations. TOTAL SCORE = 5 • Verify that: a) consultations took place. b) private sector was consulted. RA2 PS4: Technical • Updated urban spatial/physical APA1 • Obtain urban spatial/physical and Spatial/physical and land use plans. quality/comprehensiveness of and land use plan is prepared Land use plan from Municipal spatial/physical and land use according to principles stated in Manager/Planning Dept. plans. PLUPA, CGA, and UACA and is: • Using a spatial plan checklist, verify a) GIS-based. that plan: b) provides clear depiction of - is GIS-based (using either urban connectivity networks and areas board or county government GIS). of strategic urban infrastructure - provides clear depiction of investments. connectivity networks. c) spatially indicates housing areas - indicates housing areas and and housing requirements. housing requirements. d) provides for any Special Planning - provides basis for prioritization of Areas and/or urban renewal/ strategic urban investments. redevelopment areas. - provides for any Special Planning e) spatially indicates environmental Areas and/or urban protection and conservation renewal/redevelopment areas. areas, - Indicates areas of environmental protection and conservation [FOR EACH OF THE ABOVE SCORE = 2] 55 RESULTS START PERFORMANCE STANDARD INDICATOR(s) and SCORING DATE ASSESSMENT PROCEDURE MEANS OF VERIFICATION AREA TOTAL SCORE = 10 PS5: Climate risk informed • Climate risk profile for the urban • Obtain: Urban area climate risk profile. planning. area: a) urban area climate risk profile. Urban area IDeP. a) is developed and published. APA2 b) urban area IDeP. LPLUDP. b) informs updated/revised urban APA3 c) urban area physical/spatial/land IDeP and physical/spatial/land use plan. use plan. • Verify that: a) urban area climate risk profile has [SCORE = 5 for each requirement] been developed in line with guidelines in POM. 40 TOTAL SCORE = 10 b) urban area climate risk profile has been published online. c) revisions of urban area IDeP and physical/spatial/land use plan are informed by climate risk profile. PS6: Development control. • Development control instruments APA1 • Obtain development control Zoning tools; Zoning regulations, (zoning regulations for the instruments from county planning development permission application and participating urban board): director/municipal manager. approval process software, building inspection flow charts. - prepared according to applicable • Verify that development control laws (PLUPA, UACA, CGA). Development permission applications and instruments: approvals/permits reports. - approved by County Assembly. a) are in accordance with PLUPA, [SCORE = 5] Building inspection reports (annually). UACA and CGA. • Building/construction inspections APA1 b) have been approved by County of adherence to zoning and Assembly building regulations are: • Obtain reports/summaries of - undertaken. development permission - compiled/recorded in monthly applications and building inspection reports. reports from the Planning [SCORE = 5] Director/Municipal manager. TOTAL SCORE = 10 • Verify that these reports have been compiled on a monthly basis. 40 See also: AECOM guidelines. 56 RESULTS START PERFORMANCE STANDARD INDICATOR(s) and SCORING DATE ASSESSMENT PROCEDURE MEANS OF VERIFICATION AREA RA3 PS7: Climate resilient and • Infrastructure sub-projects APA2 • Obtain: Sub-project implementation monitoring inclusive infrastructure. 41 completed under the Program a) sub-project contract documents reports. during the previous fiscal year: (specifications etc.). Sub-project contract documentation. a) comply with design standards b) sub-project completion/handover (following checklist in the POM) reports. to ensure they are climate • Verify that sub-projects: resilient and inclusive. a) have been completed in [SCORE = 5] accordance with initial design b) have been handed over on time. specifications. [SCORE = 2] b) were completed on time (as per c) are already in use. contract). [SCORE = 3] • Verify (physically) that sub-projects are either ready to be used or are in TOTAL SCORE = 10 use. PS8: Operationalization of • Urban area SWM policy APA1 Overall policy implementation Bi-annual SWM policy implementation urban solid waste implementation is monitored and • Obtain: report. management policies. reported on annually (in POM- a) urban area SWM monitoring Municipal SWM monitoring reports. system/plan. Urban area budget and financial reports. defined format). [SCORE = 6] b) annual SWM policy implementation report. • Urban area SWM policy • Verify that: APA2 a) SWM monitoring system/plan implementation: a) maintains/increases coverage exists and provides meaningful (geographical, % of households quantitative data. and other service users) of b) annual SWM policy municipal waste collection. implementation report has been [SCORE = 4] delivered on time and in prescribed format. TOTAL SCORE = 10 Scope/quality of service delivery • Obtain: a) annual SWM policy implementation report. 41 “Inclusiveinfrastructure� means universally accessible through the application of universal design to infrastructure and service delivery and/or prioritization and implementation of subprojects through a participatory, inclusive process (i.e., inclusive design). 57 RESULTS START PERFORMANCE STANDARD INDICATOR(s) and SCORING DATE ASSESSMENT PROCEDURE MEANS OF VERIFICATION AREA b) SWM monitoring reports. • Verify that: a) geographical/household coverage of waste collection services has been maintained/increased. PS9: Asset management and • The participating urban board • Obtain: Asset inventories. O&M. actively manages its fixed a) asset inventories. Asset maintenance plans. infrastructure assets through: b) asset maintenance plans. Documentation on assets. a) asset inventories that are APA1 c) annual reviews of maintenance updated on an annual basis. plan implementation. [SCORE = 3] d) documentation on assets. b) annual asset maintenance plans APA2 • Verify that: (for all assets in inventory) are a) asset inventories have been drawn up and plan annually updated. implementation reviewed at the b) assets in the asset inventory have end of the year. an annual maintenance plan. [SCORE = 2] c) Implementation of annual maintenance plan has been TOTAL SCORE = 5 reviewed. PS10: Implementation of UDG • All completed investment projects APA2 TBD (with ESS team). TBD (with ESS team). financed investments. financed out of UDG funds fulfil the following: a) all ARAP actions undertaken before completion of respective subproject, where applicable. [SCORE = 3] b) regular supervision of ESMP implementation conducted and quarterly progress reports on environment, social, health and safety aspects as per POM, were prepared. [SCORE = 3] c) stakeholder consultations with project affected persons during start and end of construction 58 RESULTS START PERFORMANCE STANDARD INDICATOR(s) and SCORING DATE ASSESSMENT PROCEDURE MEANS OF VERIFICATION AREA stage undertaken. [SCORE = 2] d) no pending ESMP/ARAP actions before closing of the specific sub- project [SCORE = 2] TOTAL SCORE = 10 RA4 PS11: Implementation of the • The participating urban board has: APA2 Up-to-date business enterprise Up-to-date business enterprise county government’s private a) developed a database of local database. Obtain a database of database. Online database of sector engagement businesses. businesses for each participating board businesses for each participating framework. b) updated the database on an and review whether the database is board (updated annually) annual basis. clustered by economic activity, [SCORE = 6] contains basic business information PPD meetings/consultations. Reports (name of the business, business code on meeting’s deliberations and private • The participating urban board has APA2 per sector/industry, time in operation, sector input to inform urban held at least two public-private nature of business, contact address development plans (minimum 2 dialogue (PPD) meetings during including geo-location), is publicly engagements per year) the past 12 months. [SCORE = 4] available (in accordance with Data Protection Act of 2019) and has been • Private sector needs diagnostic: updated (annual verification). This APA3 includes adding or removing the participating urban board has: a) completed a comprehensive businesses and updating their private sector needs diagnostic. information (change in activity, etc.) b) publicly disclosed the private sector needs diagnostic. PPD meetings/consultations. Records [SCORE = 5] and minutes of the meetings that include a list of participants, a TOTAL SCORE = 15 summary of deliberations, including private sector input to urban development plans. Minimum of two meetings per year (annual verification). 59