Mobilizing Finance through Anticipating the Economic Impact of Urban Infrastructure Case Studies Report May 2021 © 2021 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; internet: www.worldbank.org Some rights reserved. Disclaimer This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Acknowledgments This report was prepared by HR&A Advisors under the World Bank Advisory Services and Analytics project “Mobilizing Finance through Anticipating Impact of Urban Infrastructure” (P173320). Financial support was provided by the Sustainable Urban and Regional Development program (SURGE), a World Bank Umbrella Multi-Donor Trust Fund funded by the Swiss State Secretariat for Economic Affairs (SECO). The project was led by Valerie Joy-Santos (Senior Urban Specialist) and Mark Roberts (Lead Urban Specialist) of the World Bank’s Urban, Disaster Risk Management, Resilience, and Land Global Practice. Cover photo: emattil/Shutterstock.com Cover concept: HR&A Advisors Cover design: Lincoln Lewis Recommended Citation World Bank. 2022. Mobilizing Finance through Anticipating the Economic Impact of Urban Infrastructure. Case Studies Report. Washington, DC: The World Bank. TABLE OF CONTENTS Executive Summary 3 Full Report 17 The Assignment & Approach 18 Case Study 1: Lebanon 23 • Project Review • Assessing Impacts • Case Studies Case Study 2: India 52 • Project Review • Assessing Impacts • Case Studies Appendix 73 HR&A Advisors, Inc. Mobilizing Private Investment | 2 EXECUTIVE SUMMARY Introduction Introduction | This ASA performed a case study evaluation of indirect impacts from urban infrastructure projects that mobilized private investment to inform World Bank program design and an approach to identifying partners for co-investment. In April 2021, the World Bank engaged HR&A Advisors to support an Advisory Services Completed World Bank Projects Reviewed for this ASA Activity (ASA) under Terms of Reference (TOR) P173320 to produce two case study narrative assessments of completed urban infrastructure projects in identifying how those projects Lebanon Cultural Heritage and Karnataka, India Municipal impacted private sector partners and/or economic sectors to inform opportunities for targeting Urban Development Project Reform Project and collaborating with private co-investment and enhancing Program Design for urban (CHUD) (KMRP) infrastructure projects. Cultural Heritage, 2003-2016 Urban Services, 2006-2015 HR&A’s assessment of impacts includes all direct, indirect and induced impacts, with a focus The World Bank initiated the CHUD The World Bank initiated the primarily on indirect and induced impacts as a means of catalyzing private investment. Indirect project in Lebanon to (a) create the Karnataka Municipal Reform or induced impacts are also referred to as positive externalities or “multiplier” impacts. conditions for increased local Project (KMRP) to improve the economic development and delivery of urban services through Recommendations in this report focus primarily on indirect or “multiplier” impacts enhanced qualify of life in the (a) enhancing the quality of urban associated with real estate values, development activity, business investment, jobs and historic centers of the cities of infrastructure and (b) strengthening quality of life. Real estate values and other development do not necessarily represent a Baalbek, Byblos, Saida, Tripoli, institutional and financial benefit themselves but are a quantifiable measure of the capitalized impacts of a project. and Tyre; and (b) improve the frameworks at the Urban Local Analysis within this ASA focused on three key steps: conservation and management of Body (ULB) and state levels. The 1. Project Identification | Work closely with the World Bank team to identify two completed the country’s cultural heritage. The Bank originally committed US$216 World Bank projects for review under this case study assessment. Bank originally committed US$31.5 million through the International 2. Review Impacts | Complete an analysis of available project information focused on million through an International Bank for Reconstruction and direct and indirect outputs and outcomes already evaluated as well as potential indirect Bank for Reconstruction and Development (IBRD) loan, but the impacts that mobilized private investment to inform strategies for project/program design Development (IBRD) loan, in loan was disbursed at US$204.6 in collaborating with new partners. partnership with UNESCO and the million. The Government of 3. Case Study Narrative | Produce case study narratives for each project based on those governments of Lebanon, Italy, and Karnataka contributed about findings that also reference developed world examples France. The Bank committed an US$73 million. additional US$27 million in 2012. This report reflects HR&A’s deliverable under this engagement. HR&A Advisors, Inc. Mobilizing Private Investment | 4 Approach | A three-step framework was applied to this case study review to frame findings in context of World Bank’s internal Project Cycle and two external sector-specific frameworks for designing and implementing projects. Impact Measurement Program Identification Approaches Design Infrastructure Investment Assessment Evaluation & Monitoring Approach World Bank Program Processes What critical indirect impacts are most What impact methodologies are most How do the specific impacts, partners and relevant/aligned with project-specific goals and relevant to assess those impacts and what evaluation/data needs inform the approach and tools could translate to support project investment? specific data is required to do so? utilized to design, finance and implement projects? How does that inform key partner identification? Internal External Inputs/Outputs Impact Evaluation Methodology World Bank Sector-Specific Project Cycle Framework(s) Outcomes Internal scoping and evaluation of all Key Data Needs World Bank projects Impacts Direct and Indirect Urban Services: Cultural Heritage: e.g., Land value, development activity, jobs Urban CURE Framework Regeneration Culture in City Framework Reconstruction and Recovery Key Methodologies & Tools & Partners Data Strategies HR&A Advisors, Inc. Mobilizing Additional detail of the specific sub-steps in this process can be found in the body of this report, detailing the elements that inform the impacts assessed, Private measurement Investment approaches |5 utilized, and implications for program design. Findings | As seen in the World Bank’s projects, land value creation is a critical indirect impact from urban infrastructure investments which represents the capitalization of multiple direct and indirect benefits and the mobilization of private capital. Impact Identification Measurement Approaches Lebanon Cultural Heritage and DIRECT & INDIRECT IMPACTS LAND VALUE CREATION & CAPITAL MOBILIZATION Urban Development Project • Residential unit prices in and around areas of historic/cultural importance (CHUD) ADDITION OF NEW JOBS Across the 5 cities, individuals working in the culture, tourism, and heritage sector increased by 60% across the 5 cities from 2008 to 2016, and by 67% Cultural Heritage increased from about 660 in 2002 to 1,575 in 2016 (World Bank) specifically in Byblos (World Bank). Business unit prices increased by 62% across the 5 cities and by 91% in Byblos from 2008 to 2016 (World Bank). • For every $1 invested in Byblos, the private sector mobilized $7, largely INCREASED TOURISM & SPENDING Estimated annual visitors increased from 200,000 in 2004 to 420,000 in 2016 (World through public squares, sidewalks, and rehabbed historic facades (World Bank) Bank). • Across the 5 cities, percentage of businesses investing in their business or property development increased from 6% to 27% (World Bank). IMPROVED QUALITY OF LIFE & ACCESS TO PUBLIC SPACE Across the 5 cities, rehabbed public space for pedestrians increased from approximately 10,000 m2 to 274,000 m2 (World Bank). Karnataka, India Municipal • Properties in slum areas saw a 50-75% increase in property values from Reform Project IMPROVED SANITATION Rs.250-Rs. 500 per sq. ft. after households were connected to under-ground (KMRP) 32 slums were declared open defecation free, with 100% of residents having access to toilets with underground drainage and disposal drainage. Urban Services • At the time of project closing, the Bangalore Water Supply and Sewerage IMPROVED GOVERNMENT Board revenues from water and sanitation user fees were sufficient to meet At the time of project closing, the Bangalore Water Supply and Sewerage Board the regular operating & maintenance expenditures of the system. The State revenues from water and sanitation user fees were sufficient to meet the regular committed to provide funding assistance to complete the spill over works operating & maintenance expenditures beyond the project period. • The Japan Bank for International Cooperation (JBIC) committed financing to ENVIRONMENTAL BENEFITS the Bangalore Water Supply and Sewerage Board for construction of Eliminated unsanitary overflows from septic tanks and other sanitation facilities, which sewerage treatment plants also led to cost savings and other public health benefits HR&A Advisors, Inc. ** See additional detail in the body of this report. Mobilizing Private Investment | 6 Source: World Bank Project IEG, ICRR Findings | Land value creation occurs over many years through both public and private investments. Effective measurement of land value creation and other impacts can be done multiple ways, relying on robuust data collection and a clear counterfactual. Impact Infrastructure investments by the World Bank and its public sector partners act as a catalyst early in the development process. Over many years private land developers/owners and Measurement Identification private vertical construction developers/owners capture value increases as the benefits of the infrastructure investment and private sector improvements are capitalized in land values. Approaches The World Bank can employ a variety of measurement approaches to quantify land value impacts and other Urban Infrastructure Lifecycle and Land Value Creation indirect impacts that are capitalized in those values, such as indirect jobs, gross domestic product (GDP) and quality of Public Sector Public and World Land Developer Private Land Vertical Developer Private Vertical Construction life. Bank Investment Developer/Owner Developer/Owner Input-Output Modeling Economic analysis calculating the flow of money in an economy among industries. Analyzes the direct, indirect, and induced effects on jobs, earnings, and economic output. Value Creation Cost-Benefit Analysis Value Comparison of the costs of a cultural heritage project investment to a variety of benefits, which could include increases in real estate values, tourism spending, and additional household spending from economic growth. Hedonic Price Modeling Estimates economic benefits from increased land values associated with proximity to cultural heritage sites that have undergone rehabilitation Raw Planned Entitled Infrastructure Vertical Management Qualitative Assessment Improvement Development Assesses the impacts of a cultural heritage investment on socioeconomic factors, such as quality of life, education, health, and disparate impacts on specific populations Time (10-15 years or more) HR&A Advisors, Inc. Mobilizing Private Investment | 7 Findings | Land value capture mechanisms can be designed early in World Bank program design for cultural heritage and urban service projects to leverage real estate value appreciation in support of co-funding infrastructure investments. Program Design Land Value Capture Mechanisms Approach Tools Description Potential Partners Land Value Capture Premise & Process  Betterment levies/Special Assessment Existing or additional taxing districts to  Municipality District capture value appreciation associated  Developers/investors Tax-Based  Value-added developer tax with infrastructure investments. In places  Business owners 1 Value capture Financing payments where a property tax system is in place,  Residents mechanism established  General tax revenue, property tax tools like TIF can be used and employed  Tax Increment Financing (TIF)  Land disposition and banking Successful publicly-funded infrastructure  Municipality  Long-term lease must creatively use existing public assets,  Developers/investors Public Assets such as land leasing to provide capital funding  Zoning tools Rezoning, expedited entitlement  Municipality  Land readjustment processes, additional development rights,  Developers/investors Regulatory  Development/air rights and other regulatory tools can provide Tools value to the private sector to spur contribution to infrastructure  Tax-increment financing (TIF) bonds Value-capture mechanisms can transfer  Municipality  Payment in Lieu of Taxes (PILOT) value added to fund initial infrastructure  Developers/investors Bond Financing 3 Creation of value by infrastructure project 2 Funding set aside to operate infrastructure bonds   Business owners Residents  Proceeds from private land sales Developer-led financing of development,  Municipality project Developer-  Contributions from developers through direct financing or through land  Developers/investors Based Financing (building permit charges) value  In-kind developer contributions HR&A Advisors, Inc. Mobilizing Private Investment | 8 Findings | An ex-post review of the World Bank’s completed projects in Lebanon and India demonstrate a range of indirect impacts from cultural heritage and urban service investments, including land value creation. Impact Measurement Findings Identification Approach Lebanon Cultural Heritage and Indirect real estate, business Data collection was relatively Urban Development Project improvement and tourism job limited but both in the subject city Ex post analysis of the Lebanon Cultural Heritage (CHUD) impacts were measured as as well as the counterfactual. and Urban Development Project found that for Cultural Heritage meaningful. However, an increase in land values every $1 invested in Byblos, the private sector over the span of the project was mobilized $7. A small sample of Byblos quantified. In future applications, properties saw an increase in value from 2008 to implement cost-benefit analysis and 2016: 67% for residences and 91% for hedonic price modeling (ex ante + businesses. ex post) measurement approaches to narrow in on the impacts associated with real estate and tourism-related spending to both inform Program Design and the methods to collect necessary data. Karnataka, India Municipal Reform Project Indirect real estate, household time Data collection was limited and no In Bangalore, India, the Karnataka Municipal (KMRP) savings, and health impacts were counterfactual was identified at Reform Project included sewerage and road Urban Services measured as meaningful. project outset. rehabilitation investments. Properties in slum areas that were connected to underground In future applications, establish a drainage saw a 50-75% increase in property clear counterfactual and means by values. which data collection can occur. Implement input-output modeling and hedonic price modeling (ex ante + ex post) measurement approaches to narrow in on the impacts associated with real estate and household time savings. HR&A Advisors, Inc. Mobilizing Private Investment | 9 Findings | Examples from U.S. and international cultural heritage and urban service infrastructure projects demonstrate how cultural heritage and urban service projects have leveraged real estate value appreciation for funding needs. The examples below show that cultural heritage projects - in the form of urban park infrastructure – are assets that produce indirect real estate impacts that can be harnessed to co-fund investments. Investment in large-scale infrastructure tied to transit, a form of urban service, can similarly accelerate the pace of real estate development and increase real estate premiums on surrounding properties. This real estate value can be captured to fund future infrastructure investments. Real Estate Value Capture Examples Cultural Heritage (Community Parks) Urban Services (Transit) Klyde Warren Park Bond Waller Creek Park Tax- Yards Park & Capitol NoMa Transit Station Tax- Union Station Bond and Claremont Bypass Road Financing Based Financing Riverfront Bond Financing Based Financing Tax-Based Financing Tax-Based Financing Dallas, TX Austin, TX Washington, DC Washington, DC Denver, CO Cape Town, South Africa 76% office rent 3x faster property Over $8 billion in 21% residential rent 6% rent premium over $310M real estate growth 2x faster than value growth than city, economic investment increase since 2010, surrounding value increase from city, 2013-2020 2019-2021 catalyzed faster than city downtown multifamily 2008-2018 Note: HR&A uses residential and commercial rents as a proxy for value increases, depending on data availability. HR&A Advisors, Inc. Mobilizing Private Investment | 10 Klyde Warren Park, Dallas, TX | Ex post analysis has demonstrated the dramatic increases in commercial rental rates and new development since the construction of Klyde Warren Park, confirming ex ante analysis. Klyde Warren Park was originally constructed between 2009 and 2012, funded by $20 million in City of Dallas bond funds, $20 million from Texas DOT, $50 million in private donations, and $16 million in stimulus funds for transportation enhancement construction. In 2016, the Woodall Rodgers Park Foundation in Dallas, TX advanced analysis to demonstrate the economic rationale for proposed park infrastructure improvements, including a 3-12% value premium. The City created two Planned Development Districts in the surrounding area to ensure all projects would be reviewed by the City Department of Environmental Services. Ex Post Impact Klyde Warren Park has had a significant impact on the surrounding commercial district. From 2013 to 2020, assessed values in the Klyde Warren Park and Dallas Arts District Public Improvement District (PID) more than doubled from $2.5 billion to $6.2 billion. Commercial rental rates across five major developments have increased by up to 76% from 2013 to 2020, in comparison to gross rents increasing by 23% in the larger 1.5-mile radius of Klyde Warren Park and by 32% citywide in Dallas during that time period. In addition to real estate impacts, the PID has resulted in year-round security, custodial services, cultural enhancements and programming, and wayfinding that contribute to a vibrant urban core around the park. New Development and Re-Development in Klyde Warren Park PID, 2013-2020 Change in Commercial Rental Rates, Klyde Warren Park PID, 2013-2020 New development and re-development HR&A Advisors, Inc. Source: Klyde Warren Park PID, CoStar. All values are not adjusted for inflation. Mobilizing Private Investment | 11 Waller Creek, Austin, TX | Ex ante analysis informed the extension of an existing Tax-increment Zone (TIRZ) to fund development of Waller Creek park and infrastructure. Ex post analysis of increased property tax revenues surpassed expectations. In 2017, the Waller Creek Conservancy in Austin, TX performed an ex ante analysis demonstrating the economic rationale for a proposed 20-year extension of an 88- acre tax increment reinvestment zone (TIRZ) to build a chain of park and park infrastructure investments. In May 2018, City Council approved the TIRZ extension, providing $110 million in funding for the parks. The ex ante analysis to secure the $110 million calculated how one-time real estate premiums, ongoing park-oriented development, visitor spending, and local spending multipliers would accrue a total $2.3 - $9.2 billion in citywide economic impact as a result of the park improvements. Much of the zoning in the Waller Creek District was already zoned Central Business District, allowing for unlimited height, but the District Master Plan proposed rezoning for select properties to shift from auto-oriented to a full range of mixed-use development. Ex Post Impact Taxable value in the TIRZ has increased from $1.29 billion in FY19 to $1.87 billion in FY21, a 45% increase compared to a 15% increase in total citywide taxable value in the same time period. While property tax revenue in FY19 and FY20 was slightly lower than the projections estimated, FY21 values surpass expectations. Property tax revenues increased from $9.9 million in FY19 to $13.5 million for FY21. Ex Ante: Conceptual Assessed Value in the TIRZ Ex Post: TIRZ Property Tax Revenue FY19-FY21 14 13.5 11.8 12 10.9 10.5 10 9.9 10 8 Millions 6 4 2 0 FY19 FY20 FY21 Estimate 2018 Amendment Model Actual Tax Revenue Source: HR&A Advisors completed project, City of Austin Approved Budget FY19-FY21. All values are not adjusted for inflation. HR&A Advisors, Inc. Mobilizing Private Investment | 12 Capitol Riverfront, Washington, DC | A PILOT agreement and TIF district were both used to secure financing for the mixed-use neighborhood, which has since catalyzed over $8 billion in economic development investment. Formerly an industrial Navy yard, the Capitol Riverfront has transformed into a new mixed-use neighborhood along the Anacostia River with 5,000 residents, 34,000 workers, and a host of open space, retail, and signature entertainment. A payment in lieu of taxes (PILOT) agreement was negotiated between the private developer for the US DOT building and the District. Bonds were issued against these future PILOT payments and the proceeds were used to fund development of Yards Park and Canal Park, signature parks anchoring the Capitol Riverfront neighborhood. A Tax Increment Finance (TIF) district was also created around the planned Washington Nationals ballpark site; TIF funding provided the last tranche of financing for the completion of the ballpark. Capitol Riverfront Rents, 2011-2021 The master planning process for Capitol Riverfront involved rezoning from an industrial/manufacturing area to a high density, mixed-use TOD community. The Anacostia New Multifamily (Built 2010+) Rent PSF Waterfront Initiative Framework Plan and the DC Office of Planning supported these $4.00 rezoning efforts for the neighborhood. First 2 4 apartment buildings apartment Ex Post Impact $3.50 buildings deliver deliver at The first phase apartments opened in 2011 with rents intentionally low to attract residents the Yards to what was then a non-existent neighborhood. As retail was added and the $3.00 neighborhood gained traction, rents climbed to $3.36 PSF on average in 2017, Whole Foods compared to $3.15 for similar new buildings elsewhere in DC. By 2017, residential Canal Park Harris opens Teeter and buildings were 95% occupied at stabilization and 90% leased after two years. Today, $2.50 opens VIDA fitness new multifamily rents for over $3.50 PSF on average. open, 2 apartment The project attracted more than 12 million SF of mixed-use development and more than $2.00 buildings deliver $3.3 billion in public and private development that is completed or currently under construction. According to the Washington, D.C. Mayor’s Office, the Anacostia Waterfront Initiative has catalyzed over $8 billion in economic development investment to date. $1.50 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Washington, DC Capitol Riverfront Source: HR&A Advisors completed project, CoStar. All values are not adjusted for inflation. HR&A Advisors, Inc. Mobilizing Private Investment | 13 NoMa Metro, Washington, DC| Following transit investment, over $3 billion of follow-on investment occurred and rents have continued to increase faster than the rest of the city. A special assessment against landowners was used to fund investment in a new transit station to connect adjacent Ex Post Impact Estimate: communities and spur development. Landowners adjacent to the planned station funded construction through a special assessment over 30 years, with any cost overruns above initial budgets, absorbed by the City. Since construction of the station began, the economic development of the area Project Background has been robust. Many media and Given the large amount of underutilized land in the area as well as its proximity to downtown, Washington DC planners communications companies chose to identified NoMa as a prime area of redevelopment. The building of a Metrorail station was crucial for the locate around the station. From the redevelopment of NoMa to occur, as the existing street network was already congested. A feasibility study concluded that beginning of station construction at the end of 2000 through early 2006, 2.1 a station was possible with project costs expected to be around $75 million. million feet of office space were built in NoMa. The area continues to see real Public Private Partnership estate growth. New multifamily rents The new Metro station was built with funds from private landowners, the District of Columbia, and the federal government. have increased by 21.2% in NoMa In 1998, each party originally agreed to pay $25 million. The landowners funded their portion through a special since 2010, compared to a 16.5% assessment over the period of 30 years, as an additional charge on top of usual property taxes, with the understanding increase citywide. that the new station would increase the value of their land over time. The District of Columbia issued bonds to bring in the capital for the station and repays the bond using the funds collected through the special assessment. The station opened in Following development of the new 2004. station over $3 billion of follow-on investment occurred. From station In 2006, the DC Office of Planning produced the NoMa Vision Plan and Development Strategy to guide the land use mix, opening in 2004 through 2021, the open space, building design, and other development considerations. The Small Area Plan recognizes the large area has added over 5,000 residential development opportunity around the station and recommends implementing a Mixed-Use Creative Industries units and 6.5 million square feet of District, increasing use of floor-area bonuses, developing Retail Overlay Zoning, and encouraging a diversity of office development. housing products. Source: HR&A Advisors completed project, CoStar. All values are not adjusted for inflation. HR&A Advisors, Inc. Mobilizing Private Investment | 14 Denver Union Station, Denver, CO| Completed and future development includes 3,000 residential units, 4.6 million square feet of office, 550 hotel rooms, and 15 acres of parks and plazas. A combination of federal grants, loans, and value capture strategies paid for the Union Station and surrounding area Ex Post Impact Estimate: infrastructure projects. In 2004, Denver metropolitan area voters approved a .4 percent sales tax increase for the FasTracks transit expansion. The FasTracks sales tax, TIF revenue, RTD contributions, and a lodger's tax covered the debt The construction of Denver Union Station service for two major federal loan programs. The total project cost $488 million and was completed in 2014. has had a significant impact on surrounding real estate. Completed and Project Background future development includes 3,000 Union Station is the gateway to downtown Denver. Redevelopment of the Station was a large-scale transit investment for residential units, 4.6 million square feet Denver that has anchored larger redevelopment efforts. The 127-acre Union Station district consists of three areas that of office, 550 hotel rooms, and 15 acres of parks and plazas. are a mix of public and private ownership: Union Station Redevelopment (43-acre transit district that includes Union Station); the Commons (58-acre planned unit development); and Commons Park (26-acre open space amenity). Multifamily rents in the half mile Public Private Partnership around the station have grown by Denver Union Station is a public-private partnership with a jointly funded Intergovernmental Agreement among the 15% since completion in 2014 and hold a 6% premium over rents in the Regional Transportation District (RTD), the City and County of Denver, the Colorado Department of Transportation and the surrounding downtown submarkets. Denver Regional Council of Governments. RTD acquired the station facility and adjoining 20 acres and rezoned it for mixed-use development. RTD then joined with several other entities from local, regional, and state levels to form the Denver Union Station Project Authority (DUSPA) to oversee project execution. DUSPA selected Union Station Neighborhood Company (USNC), a joint venture, as the master developer. USNC in turn assembled a design-build team to facilitate decision-making and ensure project delivery. In 2008, Denver City Council approved a 3-year TIF district comprised of the entire Union Station and surrounding 20 acres. The City of Denver also approved a rezoning of the site to Transit Mixed-Use 30 zoning to encourage denser, mixed- use development around the planned transit station. Source: HR&A Advisors completed project, CoStar. All values are not adjusted for inflation. HR&A Advisors, Inc. Mobilizing Private Investment | 15 Claremont SRA, Cape Town, South Africa| Since the public investment, the total value (in ZAR2018) of property within the SRA rose from R2.3 billion ($160 million USD) in 2008 to over R7 billion ($470 million USD) in 2018. The Claremont Improvement District Company (CIDC) in Cape Town arranged to finance the construction of a bypass road Ex Post Impact Estimate: to ease traffic around an office node’s main artery in (total cost $46 million). The CIDC used a Special Rating Area (SRA) public-private partnership to take out a loan with the municipal lender and collect levies from residents and businesses Since the construction of the bypass, over the 15-year span of the loan. “Special Rating Areas” (SRAs, used interchangeably with “City Improvement District” the total value (in ZAR2018) of or CID) are a legal mechanism designed to levy additional property rates within a defined area, to finance additional property within the SRA rose from R2.3 municipal services that enhance the physical and social environment. billion ($160 million USD) in 2008 to over R7 billion ($470 million USD) in 2018, with 6 new developments As a first of its kind, this Public Private Partnership strategy required a number of financial and institutional innovations. scheduled for completion as of 2018. The CIDC approached South Africa’s largest municipal lender, the DBSA, for a loan to fund the project. The DBSA had never before lent to a private entity. To overcome legal and risk challenges: Property value increases are attributed to higher office and residential rentals, • The Claremont Road Bypass Company (‘Roadco’) was established as a Special Purpose Vehicle sharing a board and lower neighborhood risk, and new staff with the CIDC to collect levies in addition to municipal rates and the SRA levy. private sector developments. • Whereas SRAs are only guaranteed for 5 years, the City agreed to allow Roadco’s lifespan to be equal to the tenor of the loan (i.e., 15 years). • Cape Town undertook to pay the CIDC the rates collected from ratepayers, who in turn paid Roadco the portion allocated to repayment of the $22 million DBSA loan. • The DBSA required a cessation agreement in terms of which the CIDC relinquishes all rights and title to the infrastructure levy, and Cape Town required bank guarantees from Roadco to ensure it bears all construction risks. Cape Town also played an important role in conducting two planning studies around urban upgrade projects in the Claremont CBD. Changing citywide land use regulations helped stimulate further development in the SRA. Source: HR&A Advisors. All values are not adjusted for inflation. HR&A Advisors, Inc. Mobilizing Private Investment | 16 REPORT Introduction THE ASSIGNMENT Introduction Introduction | HR&A was engaged to produce a case study evaluation of impacts from urban infrastructure projects that mobilized private investment, to inform program design and potential partners for co-investment. In April 2021, the World Bank engaged HR&A Advisors to support an Advisory Services Activity (ASA) under Terms of Reference (TOR) P173320 to produce two case study narrative assessments of completed urban infrastructure projects in identifying how those projects impacted particular private sector partners and/or economic sectors to inform opportunities for targeting and collaborating with private co-investment and enhancing Program Design for urban infrastructure projects. HR&A’s assessment of impacts includes all direct, indirect and induced impacts; however, recommendations focus primarily on indirect and induced impacts as a means of catalyzing private investment. Indirect or induced impacts are also referred to as positive externalities or “multiplier” impacts. Recommendations in this report focus primarily on indirect or “multiplier” impacts associated with real estate values, development activity, business investment, jobs and quality of life. Impacts on real estate values and other development/investment do not necessarily represent a benefit themselves but are a quantifiable tool to measure overall impacts of a project. HR&A’s work focused on a three-step process: 1. Work closely with the World Bank team to identify two completed projects (World Bank or non-World Bank) for review under this case study assessment, 2. Complete an analysis of available project information focused on direct and indirect outputs and outcomes already evaluated as well as potential indirect impacts that mobilized private investment to inform strategies for project/program design in collaborating with new partners. 3. Produce case study narratives for each project based on those findings. This report reflects HR&A’s deliverable under this engagement. HR&A Advisors, Inc. Mobilizing Private Investment | 19 Approach | HR&A collaborated with the World Bank to identify two completed World Bank urban infrastructure projects, one focused on cultural heritage in Lebanon and the other on provisioning of urban services in India. Working in close collaboration with the World Bank team, HR&A evaluated a range of completed projects to identify two case studies in the realm of cultural heritage and urban services (water & sewerage infrastructure). Additional detail on this project review process can be found in the appendix of this report. Lebanon Cultural Heritage and Karnataka, India Municipal World Bank narrowed down from 541 urban Urban Development Project Reform Project infrastructure projects to identified 12 potential case studies in cultural heritage, urban development, (CHUD) (KMRP) neighborhood upgrading, and resilient waterfronts,. Cultural Heritage Urban Services HR&A evaluated 12 World Bank and 11 other non-World Bank case studies based on availability of data, contacts, isolated impacts, and relevant indirect impacts. HR&A and World Bank narrowed down to Two Projects Source: World Bank HR&A Advisors, Inc. Mobilizing Private Investment | 20 Approach | For each case study HR&A applied a three-step framework to identify 1) key indirect impacts from each project, and 2) approaches to measuring those impacts, to 3) inform strategies to enhance project/program design. Impact Measurement Program Identification Approaches Design Infrastructure Investment Assessment Evaluation & Monitoring Approach World Bank Program Processes What critical indirect impacts are most What impact methodologies are How do the specific impacts, partner relevant/aligned with project goals and most relevant to assess those identification and evaluation/data needs could translate to support project impacts and what specific data is inform the tools used to design, finance investment? How does that inform required to do so? and implement projects? project partner identification? HR&A’s assessment of indirect impacts focused primarily on real estate values and development activity, business investment, jobs and quality of life. Key Methodologies Tools & Partners & Data Strategies Informs which partners should be Informs the methodologies that Potential tools and strategies to engaged early in project design: may be used, and data over connect program design to desired public, private, other. particular periods that should be impacts assessed. HR&A Advisors, Inc. Mobilizing Private Investment | 21 Approach | Program Design recommendations were applied in context of the World Bank’s internal Project Cycle as well as two sector-specific World Bank frameworks for designing and implementing Urban Services and Cultural Heritage projects. Sub-steps in this process provide a more granular assessment of the elements that inform impacts, measurement approaches, and program design. Impact Measurement Program Identification Approaches Design Infrastructure Investment Assessment Evaluation & Monitoring Approach World Bank Program Processes Internal External Inputs/Outputs Impact Evaluation Methodology World Bank Sector-Specific Project Cycle Framework(s) Outcomes Internal scoping and evaluation of all Key Data Needs World Bank projects Impacts Direct and Indirect Urban Services: Cultural Heritage: e.g., Land value, development activity, jobs Urban CURE Framework Regeneration Culture in City Framework Reconstruction and Recovery Key Methodologies & Tools & Partners Data Strategies HR&A Advisors, Inc. Mobilizing Private Investment | 22 CASE STUDY 1: LEBANON Lebanon Cultural Heritage and Urban Development Program (CHUD) Introduction Introduction | The World Bank’s Cultural Heritage and Urban Development (CHUD) Project in Lebanon sought to support cultural heritage as a tool for economic and post-conflict recovery, urban regeneration and advancing social cohesion. Project Origins. Byblos World Heritage Site Following the end of the Lebanon civil war in 1995, the Lebanon Ministry of Tourism developed a comprehensive plan for cultural heritage conservation and cultural tourism development. The Government of Lebanon requested the World Bank’s assistance in elevating its urban heritage rehabilitation efforts to a national level to support fiscal and economic recovery, as well as to improve quality of life in Lebanon. Project Overview. In 2003 the World Bank initiated the Cultural Heritage and Urban Development project in Lebanon to (a) create the conditions for increased local economic development and enhanced qualify of life in the historic centers of the cities of Baalbek, Byblos, Saida, Tripoli, and Tyre; and (b) improve the conservation and management of the country’s cultural heritage. The Bank originally committed US$31.5 million through an International Bank for Reconstruction and Development (IBRD) loan, in partnership with the Government of Lebanon, Government of Italy, the Government of France, and UNESCO. The Bank committed an additional US$27 million in 2012. Project Context. At the time of the World Bank project appraisal in the early 2000s, Lebanon’s cultural heritage was making limited contributions to local and national socio-economic and civic development. Cultural assets were facing physical and environmental degradation, backed by under-funded sector institutions. Although many of Lebanon’s renowned cultural heritage assets are in urban areas, they had low tourist visitation due to safety hazards, traffic congestion, poor wastewater management, and scarce accommodations. Further, many residents of these urban areas were negatively impacted by a lack of green areas and open public space. The project experienced various delays in implementation and outcome measurement due to past and active conflict, as well as political and economic instability. Cultural heritage was promoted as an inclusive urban development approach to promote social cohesion and inclusive economic growth in this context. Source: World Bank, UNESCO HR&A Advisors, Inc. Mobilizing Private Investment | 24 Project Overview | The World Bank advanced small scale cultural heritage infrastructure investments and local capacity building in five cities across Lebanon. Priority World Bank Investments Tripoli The second-largest city in Lebanon Improve water supply, sanitation, and features the historic Tripoli utilities in historic city, rehab Khan al-Askar marketplace and Khan al-Askar. and markets, establish public space Byblos The coastal town north of Beirut Rehab of old city entrance, improve contains the ruins of many ancient appearance of public spaces and civilizations. sidewalks, renovate entrance to historic site Baalbek The town features the Temple of Integrate historic sites with city, rehab Bacchus, at the site of the ancient cultural sites, revive market areas, Roman city of Heliopolis. reorganize traffic and city entrances Saida The ancient city is home to several Enhance Old City appearance, enhance archeological sites, including the appearance of sea façade, promote Crusader Castle and Old City. interaction with community Tyre The coastal town has thousands of Waterfront improvements, upgrade public years of history and cultural spaces, create cultural promenade, coastal heritage centered around an zone protection, housing rehabilitation ancient harbor. Source: World Bank HR&A Advisors, Inc. Mobilizing Private Investment | 25 Project Overview | The project cost a total of US$119 million, with three major components and objectives spanning from 2003 to 2016. The World Bank focused its investments across the following three components: 1 Rehabilitation of Historic City Centers and 2 Archeological Sites Conservation and 3 Institutional Strengthening Improvements Urban Infrastructure Improvements Management Improvements Total Cost: $7.7 million Total Cost: $90.1 million Total Cost: $20.8 million Focused activities in the old towns of each of Focused activities primarily at UNESCO World Focused activities at the municipal and national the cities: Heritage sites in Baalbek and Tyre, as well as level: • Improvements of public spaces in Tripoli: • Management of historic centers by • Conservation of monuments and historic • Research and documentation municipalities and DGU buildings • Conservation of structures • Strengthening municipal support to local • Support to commercial activities related to • Presentation of site to visitors economic development cultural heritage • Management of sites • Reform of the cultural heritage institutional • Rehabilitation of the heritage housing stock • Conducting further archeological studies and regulatory framework • Enforcement of city center zoning • Restructuring and strengthening of the regulations Directorate General of Antiquities • Improvements to traffic and parking at • Project management by the Council for historic centers Development and Reconstruction • Protection of coastal and green areas • Studies of urban redevelopment potential near historic cores Source: World Bank IEG HR&A Advisors, Inc. Mobilizing Private Investment | 26 Project Overview | The project achieved particular success in Byblos where investments were concentrated in the first component of the CHUD project and included improvements to public space, streetscapes, and pedestrian access to cultural heritage. The World Bank focused its Byblos investments across the following projects: 1 Rehabilitation of Historic City Centers and Urban Infrastructure Improvements Byblos Investments Total Cost: $90.1 million • City Entrances and Interfaces: Visitor and bus parking, pedestrian access, pedestrian crossings, Focused activities in the old towns of each of removal of gas station, access to Old City and Ottoman Souq, reopening Tripoli gate, reorganized the cities: Municipal Parking, access to harbor • Improvements of public spaces • Conservation of monuments and historic • Rehabilitation of Public Spaces and Infrastructure in the Historic Center: Main square rehabilitation buildings including separate parking, Gardent Fossil Museum, sewerage networks and pump stations • Support to commercial activities related to cultural heritage • Improvements to the Harbors Areas and Coastal Zone: Access bollards, restriction of vehicles, • Rehabilitation of the heritage housing stock upgrading of pier with lighting and wooden promenade • Enforcement of city center zoning regulations • Support to Local Economic Development, Cultural Tourism, Private Sector Participation, and • Improvements to traffic and parking at Communication: Equipment for municipal services, pedestrian bridge over the highway, parking in the historic centers northern part of the city, DGA House, Aqua Lina Street rehab and infrastructure, playground at Beirut • Protection of coastal and green areas Park Horsch, Souq rehabilitation, public garden, shuttle services • Studies of urban redevelopment potential near historic cores Source: World Bank IEG HR&A Advisors, Inc. Mobilizing Private Investment | 27 Project Overview | The project was originally introduced in the 1990s as part of post-war reconstruction and the long implementation timeline represents the project’s adaptability amidst a volatile and evolving national context. The project end date was extended five times, from December 2009 to December 2016. Additional financing was necessary due to original cost estimates being below market cost at the point of implementation, high national inflation from 2003-2010, soaring construction material prices in the international market, and difficulty in originally assessing the full extent of repairs needed for historical buildings and structures. 1999 2003 2006-2009 2011 2012 2016 Project concept Project approved in April 2003 as an Baseline CHUD data Syrian crisis begins. Additional financing for $57 Project Closing. introduced in 1999 after IBRD Investment Project Financing and collection. million was approved ($27 the Lebanon Ministry of became effective in February 2004 million from the World Bank) Tourism developed a with an initial commitment from the Bank and key performance Baalbek International Festival, comprehensive plan for of US$31.5 million in addition to indicators were revised to post-project cultural heritage US$6.5 million from Lebanon, US$10 reflect the fragility of the conservation and cultural million from Italy, and US$12 million country and changes in the tourism development. from France. Bank’s evaluation approach. Tyre street, pre-project Tripoli apartments, post-project Source: World Bank Project Performance Assessment Report HR&A Advisors, Inc. Mobilizing Private Investment | 28 Project Overview | The World Bank collaborated with national and local government entities to implement the project. An interministerial Committee for the Conservation of Historic Cities Tripoli – Khan Al Askar before and after oversaw project management and implementation in Lebanon, with local coordination committees established as well. The main institutions involved included: • Council for Development and Reconstruction (CDR) – government authority for planning and implementing economic development projects and rehab and reconstruction of public infrastructure • Municipalities - municipal implementation units in each city • Directorate General of Antiquities (DGA) - very limited resources, relies on support from UNESCO • Director General of Urban Planning (DGU) of the Ministry of Public Works Private associations that also contributed to the project include the Tyre – Marketplace before and after National Association for the Preservation of Patrimony and Historic Residences (APSAD), Hariri Foundation, Audi Foundation, and Rene Mouawad Foundation. Source: World Bank Project Appraisal Document HR&A Advisors, Inc. Mobilizing Private Investment | 29 Project Results | The project saw great success - businesses investment in property development adjacent to the investments increased from 6% to 27% across all five cities. In the City of Byblos, for every $1 invested, the private sector mobilized $7, largely through public squares, sidewalks, and rehabbed historic façades. • Residential unit prices in and around areas of historic/cultural importance increased by 60% across the 5 cities from INCREASE IN PROPERTY VALUES 2008 to 2016, and by 67% specifically in Byblos (World Bank) • Business unit prices increased by 62% across the 5 cities and by 91% in Byblos from 2008 to 2016 (World Bank) • Across the 5 cities, individuals working in the culture, tourism, and heritage sector increased from about 660 in 2002 to 1,575 in 2016 (World Bank) ADDITION OF NEW JOBS • In Byblos, 150 new jobs from increased tourist expenditure, business investment, and residential investment are fully or partially attributable to the CHUD project (Macquarie) • Across the 5 cities, estimated annual visitors increased from 200,000 in 2004 to 420,000 in 2016 and the number of INCREASE IN TOURISM VISITS & seats in restaurants and cafes nearly quadrupled (World Bank). SPENDING • Tourist expenditure increased by approximately $3 million in Byblos, and by a total of $6 million across the 5 cities (Macquarie). • Across the 5 cities, rehabbed public space for pedestrians increased from approximately 10,000 m2 to 274,000 m2 IMPROVED QUALITY OF LIFE & (World Bank). ACCESS TO PUBLIC SPACE • 96% of businesses in Byblos agreed that the restoration of the old city has improved as a place to visit and live in (World Bank) • For every $1 invested in Byblos, the private sector mobilized $7, largely through public squares, sidewalks, and MOBILIZATION OF PRIVATE rehabbed historic facades (World Bank) INVESTMENT • Across the 5 cities, percentage of businesses investing in their business or property development increased from 6% to 27% (World Bank) Source: World Bank HR&A Advisors, Inc. Mobilizing Private Investment | 30 Assessing Indirect Impacts to Inform Program Design Introduction Evaluating Impacts | Working with the World Bank, HR&A applied the framework assessment to the Lebanon CHUD project. HR&A applied the project evaluation framework to the Lebanon CHUD program to inform a bottom-up approach to program design through the World Bank’s internal Project Cycle, as well as within the Culture in City Reconstruction and Recovery (CURE) Framework used in World Bank cultural heritage projects. Impact Measurement Program Identification Approaches Design Infrastructure Investment Assessment Evaluation & Monitoring Approach World Bank Program Processes What critical indirect impacts are most relevant/ aligned with What impact methodologies are most How do the specific impacts, partner identification and project goals and could translate to support project investment? relevant to assess those impacts and what evaluation/data needs inform the tools used to design, How does that inform project partner identification? specific data is required? finance and implement projects? Internal External Inputs/Outputs Impact Evaluation Methodology Outcomes World Bank “CURE” Framework Key Data Needs Project Cycle Culture in City Reconstruction Impacts and Recovery Framework Direct and Indirect Internal scoping and evaluation of all Cultural Heritage-specific e.g., Land value, development activity, jobs framework used to identify, World Bank projects scope, implement and evaluate broader projects Key Methodologies Tools & Partners & Data Strategies HR&A Advisors, Inc. Mobilizing Private Investment | 32 Evaluating Impacts | The Lebanon “CHUD” Project comprised a range of Cultural Heritage investments. Cultural heritage investments are typically implemented at relatively smaller scale and area-wide across a broader geography. CULTURAL HERITAGE INVESTMENTS Site, building Streetlights & Streetscaping & Urban Roadway improvement/ Capacity Building Paving open space Investment restoration Lebanon CHUD Project Interventions All facets of cultural heritage investment were implemented across cities in the Lebanon Cultural Heritage and Urban Development Program. Priority rehabilitation efforts: 1) City entrances and interfaces, new public spaces and parking 2) Rehabilitation of public spaces and infrastructure in the historic center 3) Improvements to the harbor areas and to the coastal zone 4) Support to local economic development, cultural tourism, private sector participating, and communication Source: World Bank Project Appraisal Document HR&A Advisors, Inc. Mobilizing Private Investment | 33 Evaluating Impacts | The Lebanon CHUD project saw robust outcomes in tourism jobs, tourism visitation, business investment and increases to real estate values. Impact Identification The World Bank Implementation Completion and Results Report (ICRR) details the project inputs, outputs, and outcomes of the Lebanon Cultural Heritage and Urban Development Project. These indicators were assessed primarily through support by a local consultant, the Consultation and Research Institute (CRI), which used four measurement tools. Lebanon CHUD Outcomes Measurement Approaches Taken in Lebanon to Determine Outcomes Inputs Outputs Outcomes Tool Type Sample # Waves 1) City entrances and • Rehabbed public space • # of individuals working in Opinion Survey Field survey of residents, 498 in 2006, 501 4 waves interfaces, new public increased from 9,840 the culture, tourism and businesses and visitors, in 2016 spaces and parking m2 to 274,000m heritage sectors increased quantitative from 662 in 2002 to 1,575 2) Rehabilitation of public • Rehabbed facades of in 2016 Business Census Field survey, quantitative 338 in 2009, 313 4 waves spaces and historic buildings infrastructure in the increased from 43,000 • Visitation doubled from in 2016 historic center m2 to 300,000. 203,000 in 2004 to 420,000 in 2016 3) Improvements to the • # of seats in harbor areas and to the restaurants and cafes • % of businesses investing in Real Estate In-depth interviews with 7 residential units, 4 waves coastal zone increased from 5,846 their businesses or property Monitoring real estate agents, semi- 8 businesses in in 2002 to 20,550 in development increased from quantitative 2009 & 2016 4) Support to local 2016 6% to 27% economic development, cultural tourism, private • # of rehab permits • 60% Increase in residential sector participating, increased from 36 in unit prices Interviews with In-depth interviews, 2 waves and communication 2002 to 863 in 2016 Stakeholders qualitative • 62% Increase in business unit prices Source: World Bank, Consultation and Research Institute HR&A Advisors, Inc. Mobilizing Private Investment | 34 Evaluating Impacts | Identification of meaningful indirect project impacts informs potential partners for implementation. Impact Identification These outputs and outcomes further translate to direct and indirect impacts in each Lebanese city. Indirect impacts, like real estate value and activity, can have a substantial effect on the economy and quality of life in a city. Real estate values may represent the capitalization of other direct and indirect impacts rather than independent benefits themselves but provide a quantifiable tool to measure impact. Lebanon CHUD Outcomes & Impacts Opportunities to Mobilize Private Investment Key Impact Identification Outcomes Direct Impacts Indirect Impacts Investments in areawide cultural heritage infrastructure can • # of individuals working in • Temporary jobs & GDP • Real estate values mobilize adjacent private investment in real estate and jobs. the culture, tourism and from direct capital As shown on the following page of this report, Lebanon heritage sectors increased expenditures • Real estate activity and CHUD cities saw a particularly significant increase in real from 662 in 2002 to 1,575 investment estate-related value increases. in 2016 • Ongoing jobs & GDP from • Visitation doubled from operations and • Indirect and induced jobs Key Partners 203,000 in 2004 to maintenance of cultural 420,000 in 2016 heritage sites, increased The impacts inform important influences by key partners: tourism spending • Indirect and induced GDP • Commercial operators/developers/investors • % of businesses investing in their businesses or property • Business owners (hotel, restaurant, supporting businesses) development increased from • Leisure options • Quality of life • Municipalities 6% to 27% • Residents • 60% Increase in residential unit prices Identification of these partners will be revisited later in • 62% Increase in business unit this process when considering the holistic approach to prices Program Design and the tools that can be implemented at project outset – targeting these partners – to link program design with desired impacts. Source: World Bank, Vivid Economics HR&A Advisors, Inc. Mobilizing Private Investment | 35 Evaluating Impacts | Indirect real estate value increases were particularly meaningful in proximity to cultural heritage investments. Impact Identification The CHUD project saw significant increase in real estate values in areas where cultural heritage investments were made, based on a small sample of 7 residential and 8 business units in each city. Impacts were noticeably significant in Byblos. The Macquarie University study of the Lebanon CHUD project also evaluated the city of Bcharre as a counterfactual to Byblos and Tyre (Sour), to frame the impact from cultural heritage investments. The Macquarie assessment included a survey that estimated the project had an impact on residential property values in Byblos, with 22% of Byblos respondents indicating an increase in values more than elsewhere in Lebanon, compared to only 5% of respondents in Bcharre. Survey respondents in Byblos also reported a 30% increase in prospects for earning additional household income from renting out property since 2009, compared to little change in Bcharre. Lebanon CHUD Impacts Lebanon Real Estate Impacts Across CHUD Cities Residential Sales Business Sales Indirect Impacts 100 2000 62% Increase 72% Increase • Real estate values 80 • Real estate activity and 1500 Price Per Square Meter Price Per Square Meter investment 60 • Indirect and induced jobs 1000 40 • Indirect and induced GDP 500 20 • Quality of life 0 0 Baalbek Saida Sour Byblos Tripoli Baalbek Saida Sour Byblos Tripoli Source: World Bank 2009 2016 2009 2016 HR&A Advisors, Inc. Mobilizing Private Investment | 36 Evaluating Impacts | A range of evaluation methodologies are relevant to quantifying impacts tied to real estate values and other indirect impacts including jobs, GDP, and quality of life. Impact Identification Measurement Approach The World Bank can employ a variety of measurement approaches to evaluate indirect impacts like real estate values, indirect jobs and GDP, and quality of life. These assessments inform how to think about mobilization of private investment. In the case of Opportunity to quantify and link the Lebanon CHUD project, the World Back ICRR and CRI reports largely focused on outputs and outcomes with a qualitative mobilization of private investment. assessment component. Macquarie University conducted an input-output model for the City of Byblos that analyzed the direct and To be revisited in Program Design indirect impact of the project on jobs and economic output. Indirect Conducted Impact Evaluation Methodologies Data Collection Needs Impacts for CHUD? • Indirect and 1. Input-Output Modeling Yes, conducted by - Detailed industry multipliers at the city level induced jobs Economic analysis calculating the flow of money in an economy Macquarie University - Operational spending on cultural heritage among industries. Analyzes the direct, indirect, and induced in 2016 - Tourism spending • Indirect and effects on jobs, earnings, and economic output. induced GDP 2. Cost-Benefit Analysis Not conducted for - Residential and commercial property sale Comparison of the costs of a cultural heritage project CHUD data before and after project • Real estate values investment to a variety of benefits, which could include Consider for future implementation increases in real estate values, tourism spending, and projects - Tourism spending • Real estate additional household spending from economic growth. - Additional household spending activity and investment 3. Hedonic Price Modeling Not conducted for - Residential and commercial property sale Estimates economic benefits from increased land values CHUD data before and after project • Quality of life associated with proximity to cultural heritage sites that have Consider for future implementation undergone rehabilitation projects - Neighborhood/city statistics and amenities 4. Qualitative Assessment Yes, conducted by CRI - Socioeconomic data Assesses the impacts of a cultural heritage investment on and Macquarie - Neighborhood/city statistics and amenities Source: World Bank, CRI, Macquarie University, Vivid socioeconomic factors, such as quality of life, education, health, University in 2016 Economics, HR&A Analysis and disparate impacts on specific populations HR&A Advisors, Inc. Mobilizing Private Investment | 37 Evaluating Impacts | Data collection is difficult in developing world contexts but is critical to assess indirect impacts. CHUD’s restructuring in 2011 - and a shift in the World Bank’s required indicators – made baseline data collection difficult. Measurement Approach The World Bank, CRI and Macquarie University made great efforts to collect significant data for the project assessment. CHUD project indicators changed between project inception and project restructuring in 2011, due to a shift in the indicators required by the World Bank, making it difficult to conduct a cost- benefit analysis or hedonic price modeling given the lack of baseline data. Additional data collection in future projects would allow for even more robust analysis of indirect impacts. Impact Evaluation Data Collected in Lebanon CHUD Additional Data In an ideal scenario, the following data is critical to Methodologies Informing indirect impact assessment accurately assessing indirect project impacts. 1. Input-Output Modeling - World Bank/CRI: One-time cultural heritage rehabilitation costs (project construction - Ongoing operational spending on cultural heritage Ex ante or ex post spending), Business/residential investment - Additional public and private investment in heritage Conducted by Macquarie University - Macquarie: Detailed industry multipliers at the city level, Tourism visitation (Ministry of conservation and surrounding area in 2016 Tourism), Tourism spending (survey), Counterfactual comparison 2. Cost-Benefit Analysis - World Bank/CRI: One-time cultural heritage rehabilitation costs, limited real estate data - Additional public and private investment in heritage Ex ante or ex post given availability, business/residential investment conservation and surrounding area Not specifically conducted for - Macquarie: Tourism visitation (Ministry of Tourism), tourism spending (survey), increased - More detailed residential and commercial property CHUD cultural sector spending sale data before and after project implementation (around project area and city-wide) 3. Hedonic Price Modeling - World Bank/CRI: Limited real estate data, relative change in commercial and residential - More detailed residential and commercial property Ex ante or Ex post property values compared to elsewhere in Lebanon sale data before and after project implementation Not specifically conducted for (around project area and city-wide) CHUD - Neighborhood/city statistics and amenities 4. Qualitative Assessment - Macquarie: Social cohesion, city cultural identity, accessibility to recreational and visitor - Education data Ex post facilities and activities, social equity, cultural heritage education, intrinsic value of cultural - Health data Conducted by CRI and Macquarie capital (surveys) University in 2016 - Other: Labor Force and Housing Living Conditions Survey 2018-2019 Source: World Bank, Vivid Economics, HR&A Analysis HR&A Advisors, Inc. Mobilizing Private Investment | 38 Evaluating Impacts | For real estate values and activity, alternative data collection approaches can support a more robust assessment. Measurement Approach Public data “scraping” exercises, before and after the project can provide more robust data. Lebanon CHUD Impacts In addition to sampling conducted by CRI, real estate impacts can also be measured through sales and rental data pulled or “scraped” - using specific querying approaches - from real estate agencies and publicly available information. This results in Indirect Impacts a more robust data set beyond the more manual approach of direct property surveying. The map below shows residential and commercial real estate data from one real estate source in May 2021. This exercise could be implemented at the • Real estate values beginning and end of a cultural heritage investment – both in the areas targeted for investment and in counterfactual locations - to better quantify and isolate the indirect impacts of cultural heritage investments. • Real estate activity and investment • Indirect and induced jobs • Indirect and induced GDP • Quality of life Byblos Source: Property Finder, ArcGIS HR&A Advisors, Inc. Mobilizing Private Investment | 39 Applying to Program Design | There are opportunities to align the World Bank’s internal and external existing processes with strategies to assess indirect impacts that mobilize private investment. Program Design HR&A reviewed the World Bank’s internal and external program design processes to align findings and recommendations from our analysis to the specific processes that the Bank follows in project scoping. In the context of the Lebanon cultural heritage project, our team reviewed both the World Bank’s internal Project Cycle and external CURE Framework to identify steps in each process that can align with strategies to mobilize private investment. Internal External The World Bank Project Cycle is used as a The World Bank Culture in City Reconstruction framework to design, prepare, implement, and and Recovery (“CURE”) Framework was supervise projects in partnership with low and designed to reflect the World Bank’s middle-income countries to support development. commitment with UNESCO to promote cultural heritage as a critical tool for urban The World Bank may consider the evaluation of reconstruction and recovery in post-conflict and Project Cycle CURE Framework indirect impacts specifically in the (2) Preparation, post-disaster situations. Culture in City Reconstruction (3) Appraisal, and (6) Completion and Evaluation and Recovery Framework stages of this process to inform program design. The World Bank may consider tying private 1. ID Stage During the Preparation and Appraisal stages, the Damage & Needs partner identification, and impact assessment Bank assesses the capacity to collect certain Assessment data needs, which are tied to specific direct 2. Preparation Stage Phase 1 impact data points before the project starts and and indirect impacts, to the (1) Scoping and (2) Scoping 3. Appraisal Stage throughout its implementation. Policy & Strategy phases of the CURE Setting Policy & Strategy framework when advancing cultural heritage 4. Negotiations/ Phase 2 Board Approval (or Planning) program design. 5. Implementation & Support Phase 3 Financing 6. Completion & Evaluation Phase 4 Implementation HR&A Advisors, Inc. Mobilizing Private Investment | 40 Applying to Program Design | The World Bank can incorporate further economic analysis of indirect real estate benefits when designing cultural heritage projects. Program Design The World Bank can incorporate further economic analysis of indirect benefits into its internal and external processes when approaching cultural heritage projects. Anticipating impacts of urban infrastructure can help the World Bank mobilize more public and private sector investment. Internal External Impact Identification - In the case of cultural heritage investments, like that seen in the Lebanon CHUD project, indirect real estate, business improvement and tourism job impacts were measured as meaningful. - In the case of indirect real estate and business improvement impacts, this presents an opportunity to identify key real estate owners/operators and developers/investors earlier in the Preparation (Internal) and Scoping (External) stages of Program Design Project Cycle CURE Framework as potential partners in project implementation. At minimum, these groups will remain (‘Culture in City Reconstruction priority stakeholders throughout the process. and Recovery”) 1. ID Stage Damage & Needs Measurement Approach Assessment - Implement cost-benefit analysis and hedonic price modeling (ex ante + ex post) 2. Preparation Stage Phase 1 measurement approaches to narrow in on the impacts associated with real estate and Scoping tourism-related spending to both inform Program Design and the methods to collect 3. Appraisal Stage necessary data. 4. Negotiations/ Setting Policy & Strategy Phase 2 (or Planning) - In prioritizing these ex ante and ex post indirect impact measurement approaches, it Board Approval requires that data collection efforts are enhanced and better informed with large 5. Implementation & Support Phase 3 Financing sample sizes, leading to more robust collection efforts and project assessment. 6. Completion & - Identify counterfactual options at project start to allow for robust data collection, as Evaluation Phase 4 Implementation well as evaluation that isolates project impacts. HR&A Advisors, Inc. Mobilizing Private Investment | 41 Applying to Program Design | In some contexts the indirect impacts of cultural heritage projects on real estate can be harnessed through value capture tools to leverage investment in support of funding infrastructure or ongoing O&M. Program Design Identifying real estate value capture opportunities in program scoping and establishing the tools to facilitate value capture in program design can align mobilization of private capital with funding cultural heritage projects. Land Value Capture Strategies Internal External 1 Value capture mechanism established and employed Project Cycle CURE Framework (‘Culture in City Reconstruction and Recovery”) 2 Funding set aside to develop or operate infrastructure project 1. ID Stage Damage & Needs Assessment 2. Preparation Stage Phase 1 Scoping 3. Appraisal State 4. Negotiations/ Setting Policy & Strategy Phase 2 (or Planning) Board Approval 5. Implementation & 3 Creation value by of Support Phase 3 Financing infrastructure 6. Completion & project Evaluation Phase 4 Implementation HR&A Advisors, Inc. Mobilizing Private Investment | 42 Applying to Program Design | Different stakeholders have a claim on the creation of value that allows the transfer of surplus future value to fund cultural heritage projects. Program Design The public sector acts as a propelling stakeholder early in the development process to create significant land value in the planning and entitlement phases. The land developer then captures future land value and can allocate a share of it to deliver infrastructure in cooperation with the public sector. The top structure developer captures value in later phases of the development process through sale of property to end users and operators. Stakeholder Share of Land Value Creation Public Sector Land Developer Vertical Developer Value Raw Planned Entitled Infrastructure Vertical Management Improvement Development Time HR&A Advisors, Inc. Mobilizing Private Investment | 43 Value Capture Tools | A range of value capture tools can leverage existing partnerships and assets to further mobilize private investment. Approach Tools Description Benefits Considerations Potential Partners Case Studies  Betterment levies/Special Existing or additional taxing Effective mechanism to co- Requires a robust property tax system in  Municipality • Baranquilla, Colombia Assessment District districts to capture value fund capital infrastructure place and pathways to implement tax-  Developers/investors • Klyde Warren Park, Dallas  Value-added developer tax appreciation associated with (TIF) or districts that can based mechanisms for value capture  Business owners • Waller Creek, Austin Tax-Based payments infrastructure investments. In places collect a tax tied to funding  Residents • Bayfront Park, Sarasota Financing  General tax revenue, where a property tax system is in operations of improvements. • Detroit Watershed District property tax place, tools like TIF can be used. • Gentilly District, New Orleans  Tax Increment Financing (TIF) • Dunkeld, Johannesburg  Land disposition and banking Successful publicly-funded Leverages existing assets and Requires public sector – or key partner  Municipality  Cosmo City, Johannesburg Public  Long-term lease infrastructure must creatively use allows public sector to inform ownership of strategic assets  Developers/investors  Lideta, Addis Ababa, Ethiopia existing public assets, such as land strategy and use of public Assets leasing to provide capital funding land  Zoning tools Rezoning, expedited entitlement Adjusting regulatory tools like Requires a robust existing zoning  Municipality  Ciudad Verde, Bogotá,  Land readjustment processes, additional development land use management and regime.  Developers/investors Colombia Regulatory  Development/air rights rights, and other regulatory tools development fee collection Tools can provide value to the private enables municipalities to sector to spur contribution to apply a range of value infrastructure capture instruments  Tax-increment financing (TIF) Value-capture mechanisms can Initial infrastructure can help Most successful in high-value  Municipality  Hudson Yards, New York City Bond bonds transfer value added to fund initial enhance the physical and developments with an established  Developers/investors  Los Angeles River Financing  Payment in Lieu of Taxes infrastructure social environment around a surrounding context  Business owners (PILOT) bonds development  Residents  Proceeds from private land Developer-led financing of Developer contributions can Private investment in infrastructure is more  Municipality  Budiriro, Harare, Zimbabwe sales development, through direct provide necessary common in high-value developments,  Developers/investors  Riverstone Villas, Cape Town Developer-  Contributions from developers financing or through land value infrastructure for the component likely require public  Canary Wharf, London Based (building permit charges) development that is also a incentives and subsidies are likely  Riverhorse Valley/Bridge City,  In-kind developer broader public benefit. needed in exchange for private financing Durban Financing contributions for developments with a large social Source: HR&A Advisors component HR&A Advisors, Inc. Mobilizing Private Investment | 44 Value Capture Examples | Examples from the U.S. show that cultural heritage projects - in the form of urban park infrastructure – are assets that produce indirect real estate impacts that can be harnessed to co-fund investments. Cultural heritage is an effective means of preserving urban public spaces, which have economic benefits. Examples from Texas and Washington, DC demonstrate how investment in areawide small scare infrastructure tied to signature urban parks, a form of cultural heritage, can accelerate the pace of real estate development and increase real estate premiums on surrounding properties. This real estate value can be captured to fund future infrastructure investments. Public Space as an Asset Reviewed in more detail on the following pages - The Economics of Uniqueness Real Estate Value Capture Examples A literature review on the economic value of Klyde Warren Park Bond Waller Creek Park Tax- Yards Park & Capitol public space preservation also highlights the Financing Based Financing Riverfront Bond Financing ways urban public space can contribute to cities undergoing post-conflict reconstruction or rapid Dallas, TX Austin, TX Washington, DC urbanization. "An urban heritage area—including the network of streets and public spaces, the built structures, and the land-use pattern—comprises material assets that carry different values for different actors.“ “There are also indirect use values, such as the value gained by non-heritage properties that benefit from their location in proximity to 76% office rent 3x faster property Over $8 billion in heritage properties.“ growth 2x faster than value growth than city, economic investment city, 2013-2020 2019-2021 catalyzed Source: HR&A Advisors. All values are not adjusted for inflation. Note HR&A uses residential and commercial rents as a proxy for value increases, depending on data availability. HR&A Advisors, Inc. Mobilizing Private Investment | 45 Klyde Warren Park, Dallas, TX | Ex ante analysis of Klyde Warren Park expansion and infrastructure improvements estimated a 3-12% premium on properties adjacent to the investments. In 2016, the Woodall Rodgers Park Foundation in Dallas, TX advanced analysis to demonstrate the economic rationale for proposed park infrastructure improvements and expansion at Klyde Warren Park. The park was originally constructed between 2009 and 2012, funded by $20 million in City of Dallas bond funds, $20 million from Texas DOT, $50 million in private donations, and $16 million in stimulus funds for transportation enhancement construction. The City created two Planned Development Districts in the surrounding area to ensure all projects would be reviewed by the City Department of Environmental Services. Ex Ante Impact Estimate The ex ante analysis calculated how one-time real estate premiums, ongoing park- oriented development, visitor spending, and local spending multipliers would accrue a total $875 million in economic impact in the community as a result of the park improvements. Klyde Warren Park ultimately secured $10 million in city bond funding for the $76 million expansion. Real Estate Premiums: Based on precedent park improvement projects, and real estate premiums from the original park construction, it was estimated that there would be a premium ranging from 3-12% for the existing $3B market value in the ¼ mile area from the park infrastructure, leading to $160M in new real estate value. The 3% premiums were projected for areas that already saw substantial premiums from park construction and would not intersect with the ¼ mile buffer of the new improvements, whereas the 12% premiums would apply to areas newly within the ¼ mile buffer of the park after improvements. Source: HR&A Advisors completed project. All values are not adjusted for inflation. HR&A Advisors, Inc. Mobilizing Private Investment | 46 Klyde Warren Park, Dallas, TX | Up to $160M in new real estate value was estimated. Ex Ante Impact Estimate (continued) Potential Development: Precedent park improvements demonstrate that parks can accelerate the build out of undeveloped sites with higher density development. HR&A used market conversations with CBRE and analysis of CoStar and Dallas Central Appraisal District data to project new development on 16 parcels within the study area. The projections isolated the impact of Klyde Warren Park on absorption rates by evaluating the historical pace of development in the study area vs. the Uptown and Downtown Dallas areas and establishing baseline projections to compare against. Assuming an increase in FAR from 4 to 5 and 40% increased absorption as a result of the park improvements, HR&A estimated 1M SF net new development would create $390M in new development value. Visitor Spending: By enhancing capacity throughout the park, strengthening the connectivity with institutions, and adding signature programs, the park improvements would increase visitation by over 1M visitors. Through assumptions about day/overnight visitor spending, HR&A estimated an annual benefit of $11M from visitor spending, accruing to $150M (present value) over the next 30 years. Source: HR&A Advisors completed project. All values are not adjusted for inflation. HR&A Advisors, Inc. Mobilizing Private Investment | 47 Klyde Warren Park, Dallas, TX | Ex post analysis has demonstrated the dramatic increases in commercial rental rates and new development. Ex Post Impact Klyde Warren Park has had a significant impact on the surrounding commercial district. From 2013 to 2020, assessed values in the Klyde Warren Park and Dallas Arts District Public Improvement District (PID) more than doubled from $2.5 billion to $6.2 billion. Commercial rental rates across five major developments have increased by up to 76% from 2013 to 2020, in comparison to gross rents increasing by 23% in the larger 1.5-mile radius of Klyde Warren Park and by 32% citywide in Dallas during that time period. In addition to real estate impacts, the PID has resulted in year-round security, custodial services, cultural enhancements and programming, and wayfinding that contribute to a vibrant urban core around the park. New Development and Re-Development in Klyde Warren Park PID, 2013-2020 Change in Commercial Rental Rates, Klyde Warren Park PID, 2013-2020 New development and re-development Source: Klyde Warren Park PID, CoStar. All values are not adjusted for inflation. HR&A Advisors, Inc. Mobilizing Private Investment | 48 Waller Creek, Austin, TX | Ex ante analysis informed the extension of an existing Tax-increment Zone (TIRZ) to fund development of Waller Creek park and park infrastructure. In 2017, the Waller Creek Conservancy in Austin, TX performed an ex ante analysis demonstrating the economic rationale for a proposed 20-year extension of an 88-acre tax increment reinvestment zone (TIRZ) to build a chain of park and park infrastructure investments. In May 2018, City Council approved the TIRZ extension, providing $110 million in funding for the parks. Another $42 million in public sources and $94 million in philanthropy and private investment funded the park in total. Much of the zoning in the Waller Creek District was already zoned Central Business District, allowing for unlimited height, but the District Master Plan proposed rezoning for select properties to shift from auto-oriented to a full range of mixed-use development. Ex Ante Impact Estimate The ex ante analysis to secure the $110 million calculated how one-time real estate premiums, ongoing park-oriented development, visitor spending, and local spending multipliers would accrue a total $2.3 - $9.2 billion in citywide economic impact as a result of the park improvements. HR&A’s analysis assumed that Waller Creek’s potential ROI could correspond to projects with similar capital cost intensity and total benefits, quantifying a range of real estate impacts of the Park to inform and leverage funding. Real Estate Premiums: Based on precedent park improvement projects (see below), HR&A estimated a 20% value premium on existing and new properties in the TIRZ and a 5% premium in a Secondary boundary, which could generate $550 million in total enhanced value over a 20-year period. Summary of Park Impacts on Real Estate Premiums Increased Pace of New Drivers of New Development & Park Study Area Value Premium Development Implications for Waller Creek 12-60% Major development opportunities in the downtown core previously hindered Klyde Warren Adjacent x8.0 2009-2014 by highway adjacency 10% High Line ½ mile x3.0 High potential for densification and strong market conditions 2007-2014 25% Similar boundary as Waller Creek District with a similarly low FAR, high Katy Trail ¼ mile x2.1 1997-2014 baseline development trends 31% Limited capacity for new development in a high-demand market, increased Rose Kennedy ¼ mile x1.4 2005-2009 values of existing properties Waller Creek District estimated 20% estimated x2.0 Source: HR&A Advisors completed project. All values are not adjusted for inflation. HR&A Advisors, Inc. Mobilizing Private Investment | 49 Waller Creek, Austin, TX | A 20% value premium on existing and new properties adjacent to improvements was quantified, along with a 2.0x increase in pace of development. Ex Ante Impact Estimate (continued) Potential Development: Areas adjacent to Waller Creek started experiencing increased development activity in anticipation of the new Park. The study found that, based on precedent park impacts, Waller Creek could cause development activity to double in pace. Accelerated new demand could also trigger denser typologies and increase the area’s FAR by 25%. These impacts could increase overall development capacity in the TIRZ to up to 585,000 SF of new development annually, valued around $2 billion over 20 years. The total real estate benefits created by the park would lead to $370 million in new tax revenues for the City of Austin and Travis County over a 20-year period. Ex Post Impact Taxable value in the TIRZ has increased from $1.29 billion in FY19 to $1.87 billion in FY21, a 45% increase compared to a 15% increase in total citywide taxable value in the same time period. While property tax revenue in FY19 and FY20 was slightly lower than the projections estimated, FY21 values surpass expectations. Property tax revenues increased from $9.9 million in FY19 to $13.5 million for FY21. Ex Ante: Conceptual Assessed Value in the TIRZ Ex Post: TIRZ Property Tax Revenue FY19-FY21 14 13.5 11.8 12 10.9 10.5 10 9.9 10 8 Millions 6 4 2 0 FY19 FY20 FY21 Estimate 2018 Amendment Model Actual Tax Revenue Source: HR&A Advisors completed project, City of Austin Approved Budget FY19-FY21. All values are not adjusted for inflation. HR&A Advisors, Inc. Mobilizing Private Investment | 50 Capitol Riverfront, Washington, DC | A PILOT agreement and TIF district were both used to secure financing for the mixed-use neighborhood, which has since catalyzed over $8 billion in economic development investment. Formerly an industrial Navy yard, the Capitol Riverfront has transformed into a new mixed-use neighborhood along the Anacostia River with 5,000 residents, 34,000 workers, and a host of open space, retail, and signature entertainment. A payment in lieu of taxes (PILOT) agreement was negotiated between the private developer for the US DOT building and the District. Bonds were issued against these future PILOT payments and the proceeds were used to fund development of Yards Park and Canal Park, signature parks anchoring the Capitol Riverfront neighborhood. A Tax Increment Finance (TIF) district was also created around the planned Washington Nationals ballpark site; TIF funding provided the last tranche of financing for the completion of the ballpark. Capitol Riverfront Rents, 2011-2021 The master planning process for Capitol Riverfront involved rezoning from an industrial/manufacturing area to a high density, mixed-use TOD community. The Anacostia New Multifamily (Built 2010+) Rent PSF Waterfront Initiative Framework Plan and the DC Office of Planning supported these $4.00 rezoning efforts for the neighborhood. First 2 4 apartment buildings apartment Ex Post Impact $3.50 buildings deliver deliver at The first phase apartments opened in 2011 with rents intentionally low to attract residents the Yards to what was then a non-existent neighborhood. As retail was added and the $3.00 neighborhood gained traction, rents climbed to $3.36 PSF on average in 2017, Whole Foods compared to $3.15 for similar new buildings elsewhere in DC. By 2017, residential Canal Park Harris opens Teeter and buildings were 95% occupied at stabilization and 90% leased after two years. Today, $2.50 opens VIDA fitness new multifamily rents for over $3.50 PSF on average. open, 2 apartment The project attracted more than 12 million SF of mixed-use development and more than $2.00 buildings deliver $3.3 billion in public and private development that is completed or currently under construction. According to the Washington, D.C. Mayor’s Office, the Anacostia Waterfront Initiative has catalyzed over $8 billion in economic development investment to date. $1.50 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Washington, DC Capitol Riverfront Source: HR&A Advisors completed project, CoStar. All values are not adjusted for inflation. HR&A Advisors, Inc. Mobilizing Private Investment | 51 CASE STUDY 2: India Karnataka Municipal Reform Project (KMRP) Introduction Introduction | World Bank’s Karnataka Municipal Reform Project (KMRP) sought to improve the delivery of urban services through quality urban infrastructure and institutional strengthening. Project Origins. At the point of project appraisal in 2005, India’s cities had nearly 300 million Bangalore, Nagawara area urban residents, contributed to over 60% of national GDP, and accounted for over 90% of government revenues. A gap in provision of urban services was increasing in these urban center and implementation of the Government of India’s Tenth Five-Year Plan (2002-2007) Project Overview. The World Bank initiated the Karnataka Municipal Reform Project (KMRP) to improve the delivery of urban services through a) enhancing the quality of urban infrastructure and b) strengthening institutional and financial frameworks at the Urban Local Body (ULB) and state levels. In 2005, the Bank originally committed US$216 million through the International Bank for Reconstruction and Development (IBRD) loan, but the loan was disbursed at US$204.6 million. The Government of Karnataka contributed about US$73 million. The project started in March 2006 and was completed in March 2015. Project Context. Karnataka is a rapidly urbanizing state in India. A growing population, rising incomes and a business-friendly environment made the demand for quality services very strong. Infrastructure investments in Bangalore specifically were a crucial priority. In addition to delivering new infrastructure services, a major focus of the project was to improve government effectiveness through a decentralization process that strengthened the financial and administrative capacity of ULBs to deliver services with fiscal sustainability. Source: World Bank, Karnataka Urban Infrastructure Development & Finance Corporation (KUIDFC) HR&A Advisors, Inc. Mobilizing Private Investment | 53 Project Overview | World Bank advanced large-scale sewerage infrastructure investments in eight Urban Local Bodies (ULBs) around Bangalore City and local capacity building in 32 ULBs across Karnataka. Yelahanka Priority World Bank Investments • The eight ULBs in Bangalore that received investment are: • Yelahanka • Krishnarajapura • Mahadevapura Krishnarajapura • Bommanahalli • Kengeri • Byatarayanapura • Rajarajeshwarangagar • Dasarahalli Mahadevapura • Bangalore Sewerage Investment: Construction of a sanitary sewerage system covering about 2.7 million people in eight ULBs. Comprises 1750 km of main and trunk sewers and branch sewers and laterals, with 3 intermediate sewage pumping stations, and about 120,000 sewerage service connections • Bangalore Road Rehabilitation: Improvement of about 140km of medium- Bommanahalli and high-density roads within Bangalore, including to pavement, footpath and side drains, cross drainage, and traffic management. Restoration of about 2,000 km of urban roads affected by the sewerage construction in the 8 ULBs. • Institutional Development: Creation of a municipal e-governance platform Kengeri to improve the delivery of public services in the state through the following: • Property Taxation with GIS • Fund-based double entry accrual accounting • Public Grievance Redressal • Birth and Death Registration Source: World Bank HR&A Advisors, Inc. Mobilizing Private Investment | 54 Project Overview | The project cost a total of US$277.1 million, with four major components spanning from 2006 to 2015. The World Bank focused its investments across the following four components: 1 Institutional Development 2 Municipal Investment Support 3 Bangalore Development 4 Project Management Total Cost: $16.2 million Total Cost: $74.9 million Total Cost: $171.1 million Total Cost: $14.4 million Supported institutional capacity Provided performance-based Provided financing support for: Supported the project building initiatives to improve loans and grants to ULBs outside of • Rehabilitation of the implementation, including: transparency and accountability at Bangalore for investments in urban Bangalore City road network • Incremental operating costs of the urban local body (ULB) and services, including: • Construction of a sanitary relevant implementing units state levels, including: • Water supply sewerage system in the eight • Project development advisory • Computerization • Urban roads ULBs around Bangalore City facility to support preparation • Urban land management and • Street lighting • Construction of pro-poor and implementation of planning • Slum upgrading sanitation facilities at the subprojects by the ULBs • Financial management reforms • Solid waste disposal community and individual • Training to ULB and state-level • Sewerage levels in the eight ULBs around staff • Storm water drains Bangalore City Source: World Bank IEG HR&A Advisors, Inc. Mobilizing Private Investment | 55 Project Overview | This massive infrastructure project was implemented over a total of nine years, including two project extensions. The project end date was extended twice, from April 2012 to March 2015. 1999-2003 2006 2009 2011 2015 Project concept introduced in 1999, Project approved in March 2006 as an Bangalore Road Rehabilitation The project scope was modified in Project Closing in March and subsequent scoping worked to IBRD Investment Project Financing and completed. March 2011. The number of ULBs 2015. The ICR rated the support implementation of became effective in June 2006. The across Karnataka receiving overall bank and borrower decentralization in accordance with World Bank loan was disbursed at loans/grants was reduced from performances as Moderately the Government of India’s Tenth $204.6 million, and the Government of 50 to 32 and the number of ULBs Satisfactory. Five-Year Plan. Karnataka contributed $73 million in with geo-referenced large-scale collaboration with the ULBs and the mappings was reduced from 202 Bangalore Water Supply Sewerage to 49. Board. Source: World Bank Project Performance Assessment Report HR&A Advisors, Inc. Mobilizing Private Investment | 56 Project Overview | Multiple project partners were involved across Karnataka; World Bank advanced local capacity building in targeted neighborhoods within Bangalore. The main institutions involved in project implementation included: • Urban Development Department (UDD) of Karnataka had ultimate responsibility for the project, managed through various implementing agencies. • Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC) is a state-owned financial corporation, responsible for the Municipal Investment Support. An Empowered Committee (EC) was constituted in KUIDFC to coordinate agencies and departments. • Department of Municipal Administrate (DMA) was responsible for implementation of the Institutional Development Component. • Bruhat Bengaluru Mahanagara Palike (BBMP) was responsible for the Bangalore Urban Roads Rehabilitation Component. A Municipal Reform Cell (MRC) was created to implement the computerization and other • Bangalore Water Supply and Sewerage Board (BWSSB) was reforms in the ULBs. The Karnataka Government created the Karnataka Municipal Data responsible for implementing the Greater Bangalore Under Society in 2007 to manage e-governance initiatives in ULBs, ensuring that the initiatives were Ground Component, including the road restoration works. sustainable after the external World Bank support ended. • Department of Town Planning (DTP) supported the urban mapping components. • ULBs supported Municipal Investment Support in their respective locations. Source: World Bank Project Appraisal Document HR&A Advisors, Inc. Mobilizing Private Investment | 57 Summary Findings | The project was successful in improving sanitation and government efficiency but did include counterfactuals to contextualize results. • Properties in slum areas saw a 50-75% increase in property values from Rs.250-Rs. 500 per sq. ft. after households INCREASE IN PROPERTY VALUES were connected to under-ground drainage • 32 slums were declared open defecation free, with 100% of residents having access to toilets with underground drainage and disposal IMPROVED SANITATION • An estimated 610,000 residents of Greater Bangalore and its poor peri-urban areas have benefited from the sewerage connections and reduced contamination of ground water resources • At the time of project closing, the Bangalore Water Supply and Sewerage Board revenues from water and sanitation IMPROVED GOVERNMENT user fees were sufficient to meet the regular operating & maintenance expenditures EFFICIENCY • Over 18 million beneficiaries are estimated to benefit from the municipal e-governance reform, with ULBs seeing increased revenues from local services and reduced financial leakages • Reduced pollution in about 70 lakes, as well as in other storm water channels, tanks, and ground water aquifers. ENVIRONMENTAL BENEFITS • Eliminated unsanitary overflows from septic tanks and other sanitation facilities, which also led to cost savings and other public health benefits • The State committed to provide funding assistance to complete the spill over works beyond the project period MOBILIZATION OF ADDITIONAL • The Japan Bank for International Cooperation (JBIC) committed financing to the Bangalore Water Supply and Sewerage FINANCING Board for construction of sewerage treatment plants Source: World Bank Project IEG, ICRR HR&A Advisors, Inc. Mobilizing Private Investment | 58 Assessing Indirect Impacts to Inform Program Design Introduction Evaluating Impacts | HR&A applied a similar framework assessment to the Karnataka Municipal Reform Project, replacing the CURE framework with one for Urban Regeneration. HR&A applied the three-step framework to evaluate the impacts of urban service improvements in Bangalore. Impact Measurement Program Identification Approaches Design Infrastructure Investment Assessment Evaluation & Monitoring Approach World Bank Program Processes What critical indirect impacts are most relevant/ aligned with What impact methodologies are most How do the specific impacts, partner identification and project goals and could translate to support project investment? relevant to assess those impacts and what evaluation/data needs inform the tools used to design, How does that inform project partner identification? specific data is required? finance and implement projects? Internal External Inputs/Outputs Impact Evaluation Methodology Outcomes World Bank Urban Regeneration Framework Key Data Needs Project Cycle Framework used with Impacts Direct and Indirect Internal scoping and clients/partners to guide the e.g., Land value, development activity, jobs evaluation of all process for sustainable World Bank projects regeneration of underutilized urban land Key Methodologies Tools & Partners & Data Strategies HR&A Advisors, Inc. Mobilizing Private Investment | 60 Evaluating Impacts | The Karnataka Municipal Reform Project comprised a range of urban service investments across Bangalore and Karnataka more broadly. URBAN SERVICE INVESTMENTS Urban Roadway Sewerage Investment & Downtown Municipal investments transportation revitalization capacity Building planning Karnataka Municipal Reform Project Interventions in Bangalore Many facets of urban service investment were implemented across Bangalore and more broadly in Karnataka through the KMRP. Priority urban regeneration investments: 1) Institutional capacity building initiatives to improve transparency and accountability at ULB and state levels 2) Rehabilitation of the Bangalore City road network 3) Construction of a sanitary sewerage system in the eight ULBs around Bangalore City 4) Construction of pro-poor sanitation facilities at the community and individual levels in the eight ULBs Source: World Bank Project Appraisal Document HR&A Advisors, Inc. Mobilizing Private Investment | 61 Evaluating Impacts | The project delivered powerful outcomes in terms of institutional reform at the state level and infrastructure investments in Bangalore. Impact Identification The World Bank Implementation Completion and Results Report (ICRR) details the project inputs, outputs, and outcomes of the Karnataka Municipal Reform Project. These indicators were assessed through a commissioned study, third-party evaluators, and the Karnataka Infrastructure Development and Finance Corporation (KUIDFC). Bangalore KMRP Outcomes Measurement Approaches Taken in Bangalore Inputs Outputs Outcomes Tool Type Sample 1) Institutional capacity • E-governance platform • All 164 project-supported Economic Cost benefit analysis and cost- 63% of KMRP investments were building initiatives to completed and rolled ULBs undertook institutional Assessments effectiveness analysis of covered by economic analysis improve transparency out to 164 ULBs and financial reforms to Bangalore development & and accountability at better finance urban services municipal investment support, • 25,000 staff trained at including field interviews for ULB and state levels • The GIS-based property tax state and ULB levels property values 2) Rehabilitation of the • 152,167 sewerage system has brought 1.2 Bangalore City road million previously unassessed Pro-Poor Sanitation Case studies and focus group Focus group discussions with 67 connections provided Survey discussions about pro-poor adults and 15 adolescents and network properties (32% of total) into • 125 km of roads built the tax net, increasing sanitation project components case studies with 10 individuals/ 3) Construction of a beneficiaries; selected across 4 • 15,778 households municipal revenues by 30- sanitary sewerage slums, 2 community organizers, reached in awareness 40% system in the eight ULBs and 2 site engineers around Bangalore City campaigns for • 29 ULBs received municipal improved hygiene infrastructure services, Third-Party Course observations, interviews 12 out of 17 training programs; 4) Construction of pro-poor practices benefitting 2 million citizens Evaluation of of program trainees 20 trainees interviewed per sanitation facilities at the Training Activities program community and • 32 slums declared open individual levels in the defecation free ULB Assessments of Questionnaire for participating 15 ULBs completed the eight ULBs Institutional Reforms ULBs on the usefulness of 10 questionnaire • 610,000 residents benefited areas of municipal reform from sewerage connections Source: World Bank, Consultation and Research Institute HR&A Advisors, Inc. Mobilizing Private Investment | 62 Evaluating Impacts | Identification of significant indirect project impacts inform potential partners for implementation. Impact Identification These outputs and outcomes further translate to direct and indirect impacts in Bangalore. Indirect impacts, like real estate value and activity, can have a substantial effect on the economy and quality of life in a city. Opportunities to Mobilize Private Investment Bangalore KMRP Impacts Key Impact Identification Outcomes Direct Impacts Indirect Impacts Investments in sewerage and road infrastructure can mobilize adjacent private investment in real estate and jobs. As shown • All 164 project-supported • Temporary jobs & GDP • Real estate values ULBs undertook institutional from direct capital on the following page of this report, Bangalore households and financial reforms to expenditures connected to the UGD saw a significant increase in real • Real estate activity and better finance urban investment estate-related value. services • Ongoing jobs & GDP from • 29 ULBs received municipal operations and Key Partners • Indirect and induced jobs infrastructure services, maintenance of cultural The impacts inform important influences by key partners: benefitting 2 million citizens heritage sites, increased • Commercial operators/developers/investors tourism spending • Indirect and induced GDP • 32 slums declared open • Business owners (hotel, restaurant, supporting businesses) defecation free • ULBs • Leisure options • Quality of life • 610,000 residents benefited • Residents from sewerage connections Source: World Bank, Vivid Economics HR&A Advisors, Inc. Mobilizing Private Investment | 63 Evaluating Impacts | Sewerage and road investments in Bangalore led to indirect real estate value increases. Impact Identification The KMRP project saw significant increase in property values in areas where sewerage and road investments were made, based on field interviews. Property value increases were not compared to a counterfactual. Bangalore KMRP Impacts Bangalore UGD Real Estate Impacts 35% Increase in Property Values Indirect Impacts For Bangalore households newly connected to the Under-Ground 3500 35% Increase • Real estate values Drainage Network, based on field interviews with BWSSB. Every capital investment of Rs. 1 yielded a property value increase of Rs. 3000 1.4 for each household that is connected to the network • Real estate activity and investment Price Per Square Foot 2500 30-40% Increase in Municipal Revenues Across Karnataka, as a result of the GIS-based property tax system • Indirect and induced jobs 2000 bringing1.2 million previously unassessed properties (32% of total) into the tax net • Indirect and induced GDP 1500 1000 100% Increase 500 0 Under-Ground Drainage Network Pro-Poor Sanitation Component (Slums) Before After Source: World Bank, Vivid Economics HR&A Advisors, Inc. Mobilizing Private Investment | 64 Evaluating Impacts | A range of evaluation methodologies are relevant to quantifying indirect impacts from KMRP. Impact Identification Measurement Approach The World Bank can employ a variety of measurement approaches to evaluate indirect impacts like real estate values, indirect Opportunity to quantify and link jobs and GDP, and quality of life. The World Back ICRR reports focused on outputs and outcomes with economic and qualitative mobilization of private investment. assessment components. Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC) conducted cost-benefit To be revisited in Program Design and cost-effective analyses that analyzed the rate of return for road, underground drainage and water supply investments. Indirect Conducted Impact Evaluation Methodologies Data Collection Needs Impacts for KMRP? • Indirect and 1. Input-Output Modeling Not conducted for - Detailed industry multipliers at the city level induced jobs Economic analysis calculating the flow of money in an economy KMRP - Operational spending on road & sewerage among industries. Analyzes the direct, indirect, and induced Consider for future investments • Indirect and effects on jobs, earnings, and economic output. projects - Household spending induced GDP 2. Cost-Benefit Analysis Yes, conducted by - BWSSB revenue growth • Real estate values Comparison of the costs of sewerage investments and road KUIDFC - Household savings rehabilitation to a variety of benefits, which could include an - Residential and commercial property value • Real estate increase in property values, savings in sanitation expenditures, before and after project implementation activity and and time savings (GIS) investment 3. Hedonic Price Modeling Not conducted for - Residential and commercial property sale • Quality of life Estimates economic benefits from increased land values KMRP data before and after project (GIS) associated with proximity to road rehabilitation and/or Consider for future implementation sewerage investments projects - Neighborhood/city statistics and amenities 4. Health Benefits Assessment Partially conducted - Community health data Assesses the impacts of a water and sanitation investment on for KMRP - Hospital/medical care data reduction in water-borne diseases and other illnesses; avoided - Socioeconomic data Source: World Bank, Vivid Economics, HR&A Advisors costs to health sector and households; improved wellbeing - Neighborhood/city statistics and amenities HR&A Advisors, Inc. Mobilizing Private Investment | 65 Evaluating Impacts | KMRP data collection allowed for cost-benefit analyses, and additional data in future projects would increase options for further economic analysis of indirect impacts. Measurement Approach The World Bank ICR and KUIDFC cost benefit and cost effectiveness analyses collected some of the data needed for impact evaluation methodologies, but additional data collection in future projects would allow for a more robust analysis of indirect impacts. Impact Evaluation Data Collected in Bangalore Additional Data In an ideal scenario, the following data is critical to accurately Methodologies Informing indirect impact assessment assessing indirect project impacts. 1. Input-Output Modeling - One-time sewerage and road rehabilitation costs (project construction spending) - Detailed industry multipliers at the city level Ex ante or ex post - Household time savings - Ongoing operational spending on sewerage & road projects Not conducted for KMRP - Additional public and private investment in urban regeneration in Bangalore 2. Cost-Benefit Analysis - One-time sewerage and road rehabilitation costs - Additional public and private investment in urban Ex ante or ex post - BWSSB revenue growth regeneration in Bangalore Conducted by KUIDFC, outlined in - Savings in monthly sanitation expenditures for households newly connected to UGD ICRR - Household time savings - Increase in property values for UGD component 3. Hedonic Price Modeling - Increase in property values for UGD component - Neighborhood/city statistics and amenities Ex ante or ex post - Relative change in commercial and residential property Not conducted for KMRP values compared to elsewhere in Karnataka 4. Health Benefit Assessment - Qualitative assessment of health outcomes (focus groups and interviews) - More detailed health data from surveys, local hospitals, etc. Ex post Partially conducted for KMRP, outlined in ICRR Source: World Bank, Vivid Economics, HR&A Analysis HR&A Advisors, Inc. Mobilizing Private Investment | 66 Applying to Program Design| There are opportunities to align the World Bank’s existing processes with specific strategies to harness the mobilization of private investment. Program Design HR&A reviewed the World Bank’s internal and external program design processes to align findings and recommendations from our analysis to the specific processes that the Bank follows in project scoping. In the context of the Karnataka Municipal Reform Project, our team reviewed both the World Bank’s internal Project Cycle and external Urban Regeneration Framework to identify steps in each process that can align with strategies to mobilize private investment. Internal External The World Bank Project Cycle is used as a The World Bank Urban Regeneration framework to design, prepare, implement, and Framework was designed to guide the process supervise projects in partnership with low and for sustainable regeneration of underutilized middle-income countries to support development. urban land. The World Bank may consider the evaluation of The World Bank may consider tying private Project Cycle Urban Regeneration Framework indirect impacts specifically in the (2) Preparation, partner identification, and impact assessment (3) Appraisal, and (6) Completion and Evaluation data needs, which are tied to specific direct stages of this process to inform program design. and indirect impacts, to the (1) Scoping and (2) 1. ID Stage During the Preparation and Appraisal stages, the 1. Scoping Planning phases of the Urban Regeneration Bank assesses the capacity to collect certain framework when advancing urban infrastructure 2. Preparation Stage impact data points before the project starts and program design. 3. Appraisal Stage throughout its implementation. 2. Planning 4. Negotiations/ Board Approval 3. Financing 5. Implementation & Support 6. Completion & 4. Implementation Evaluation HR&A Advisors, Inc. Mobilizing Private Investment | 67 Applying to Program Design| The World Bank can incorporate further economic analysis of indirect real estate benefits when designing urban infrastructure projects. Program Design The World Bank can incorporate further economic analysis of indirect benefits into its internal and external processes when approaching urban regeneration projects. Anticipating impacts of urban infrastructure can help the World Bank mobilize more public and private sector investment. Internal External Impact Identification - In the case of sewerage and road infrastructure investments, like that seen in the KMRP, indirect real estate, household time savings, and health impacts were measured as meaningful. - In the case of indirect real estate impacts, this presents an opportunity to identify key real estate owners/operators and developers/investors earlier in the Preparation (Internal) and Scoping (External) stages of Program Design as potential partners in World Bank Urban Regeneration project implementation. At minimum, these groups will remain priority stakeholders Project Cycle Project Phases throughout the process. 1. ID Stage 1. Scoping Measurement Approach 2. Preparation Stage - Implement input-output modeling and hedonic price modeling (ex ante + ex post) measurement approaches to narrow in on the impacts associated with real estate and 2. Planning 3. Appraisal State household time savings to both inform Program Design and the methods to collect 4. Negotiations/ necessary data. Board Approval - In prioritizing these ex ante and ex post indirect impact measurement approaches, it 3. Financing 5. Implementation & requires that data collection efforts are enhanced and better informed, leading to Support more robust collection efforts and project assessment. 6. Completion & 4. Implementation Evaluation - Identify counterfactual options at project start to allow for robust data collection, as well as evaluation that isolates project impacts. HR&A Advisors, Inc. Mobilizing Private Investment | 68 Applying to Program Design | Land value capture tools can be considered in Program Design for urban service projects to leverage real estate value appreciation in support of funding infrastructure capital investment or ongoing operations and maintenance. Investment in large scale infrastructure tied to transit, a form of urban regeneration, can accelerate the pace of real estate development and increase real estate premiums on surrounding properties. This real estate value can be captured to fund future infrastructure investments. Tools & Strategies: Land Value Capture Reviewed in more detail on the following pages Real Estate Value Capture Examples 1 Value capture mechanism established and employed NoMa Transit Station Tax- Union Station Bond and Claremont Bypass Road Based Financing Tax-Based Financing Tax-Based Financing Washington, DC Denver, CO Cape Town, South Africa 2 Funding set aside to operate infrastructure project 21% residential rent 6% rent premium over $310M real estate increase since 2010, surrounding value increase from faster than city downtown multifamily 2008-2018 3 Creation of value by infrastructure project Source: HR&A Advisors. All values are not adjusted for inflation. Note HR&A uses residential and commercial rents as a proxy for value increases, depending on data availability. HR&A Advisors, Inc. Mobilizing Private Investment | 69 NoMa Metro, Washington, DC| Following transit investment, over $3 billion of follow-on investment occurred and rents have continued to increase faster than the rest of the city. A special assessment against landowners was used to fund investment in a new transit station to connect adjacent Ex Post Impact Estimate: communities and spur development. Landowners adjacent to the planned station funded construction through a special assessment over 30 years, with any cost overruns above initial budgets, absorbed by the City. Since construction of the station began, the economic development of the area Project Background has been robust. Many media and Given the large amount of underutilized land in the area as well as its proximity to downtown, Washington DC planners communications companies chose to identified NoMa as a prime area of redevelopment. The building of a Metrorail station was crucial for the locate around the station. From the redevelopment of NoMa to occur, as the existing street network was already congested. A feasibility study concluded that beginning of station construction at the end of 2000 through early 2006, 2.1 a station was possible with project costs expected to be around $75 million. million feet of office space were built in NoMa. The area continues to see real Public Private Partnership estate growth. New multifamily rents The new Metro station was built with funds from private landowners, the District of Columbia, and the federal government. have increased by 21.2% in NoMa In 1998, each party originally agreed to pay $25 million. The landowners funded their portion through a special since 2010, compared to a 16.5% assessment over the period of 30 years, as an additional charge on top of usual property taxes, with the understanding increase citywide. that the new station would increase the value of their land over time. The District of Columbia issued bonds to bring in the capital for the station and repays the bond using the funds collected through the special assessment. The station opened in Following development of the new 2004. station over $3 billion of follow-on investment occurred. From station In 2006, the DC Office of Planning produced the NoMa Vision Plan and Development Strategy to guide the land use mix, opening in 2004 through 2021, the open space, building design, and other development considerations. The Small Area Plan recognizes the large area has added over 5,000 residential development opportunity around the station and recommends implementing a Mixed-Use Creative Industries District, units and 6.5 million square feet of increasing use of floor-area bonuses, developing Retail Overlay Zoning, and encouraging a diversity of housing products. office development. Source: HR&A Advisors completed project, CoStar. All values are not adjusted for inflation. HR&A Advisors, Inc. Mobilizing Private Investment | 70 Denver Union Station, Denver, CO| Completed and future development includes 3,000 residential units, 4.6 million square feet of office, 550 hotel rooms, and 15 acres of parks and plazas. A combination of federal grants, loans, and value capture strategies paid for the Union Station and surrounding Ex Post Impact Estimate: area infrastructure projects. In 2004, Denver metropolitan area voters approved a .4 percent sales tax increase for the FasTracks transit expansion. The FasTracks sales tax, TIF revenue, RTD contributions, and a lodger's tax covered the debt The construction of Denver Union Station service for two major federal loan programs. The total project cost $488 million and was completed in 2014. has had a significant impact on surrounding real estate. Completed and Project Background future development includes 3,000 Union Station is the gateway to downtown Denver. Redevelopment of the Station was a large-scale transit investment for residential units, 4.6 million square feet Denver that has anchored larger redevelopment efforts. The 127-acre Union Station district consists of three areas that of office, 550 hotel rooms, and 15 acres of parks and plazas. are a mix of public and private ownership: Union Station Redevelopment (43-acre transit district that includes Union Station); the Commons (58-acre planned unit development); and Commons Park (26-acre open space amenity). Multifamily rents in the half mile Public Private Partnership around the station have grown by Denver Union Station is a public-private partnership with a jointly funded Intergovernmental Agreement among the 15% since completion in 2014 and hold a 6% premium over rents in the Regional Transportation District (RTD), the City and County of Denver, the Colorado Department of Transportation and the surrounding downtown submarkets. Denver Regional Council of Governments. RTD acquired the station facility and adjoining 20 acres and rezoned it for mixed-use development. RTD then joined with several other entities from local, regional, and state levels to form the Denver Union Station Project Authority (DUSPA) to oversee project execution. DUSPA selected Union Station Neighborhood Company (USNC), a joint venture, as the master developer. USNC in turn assembled a design-build team to facilitate decision-making and ensure project delivery. In 2008, Denver City Council approved a 3-year TIF district comprised of the entire Union Station and surrounding 20 acres. The City of Denver also approved a rezoning of the site to Transit Mixed-Use 30 zoning to encourage denser, mixed-use development around the planned transit station. Source: HR&A Advisors completed project, CoStar. All values are not adjusted for inflation. HR&A Advisors, Inc. Mobilizing Private Investment | 71 Claremont SRA, Cape Town, South Africa| Since the public investment, the total value (in ZAR2018) of property within the SRA rose from R2.3 billion ($160 million USD) in 2008 to over R7 billion ($470 million USD) in 2018. The Claremont Improvement District Company (CIDC) in Cape Town arranged to finance the construction of a bypass Ex Post Impact Estimate: road to ease traffic around an office node’s main artery in (total cost $46 million). The CIDC used a Special Rating Area (SRA) public-private partnership to take out a loan with the municipal lender and collect levies from residents and Since the construction of the bypass, businesses over the 15-year span of the loan. “Special Rating Areas” (SRAs, used interchangeably with “City Improvement the total value (in ZAR2018) of District” or CID) are a legal mechanism designed to levy additional property rates within a defined area, to finance property within the SRA rose from R2.3 additional municipal services that enhance the physical and social environment. billion ($160 million USD) in 2008 to over R7 billion ($470 million USD) in 2018, with 6 new developments As a first of its kind, this Public Private Partnership strategy required a number of financial and institutional innovations. scheduled for completion as of 2018. The CIDC approached South Africa’s largest municipal lender, the DBSA, for a loan to fund the project. The DBSA had never before lent to a private entity. To overcome legal and risk challenges: Property value increases are attributed to higher office and residential rentals, • The Claremont Road Bypass Company (‘Roadco’) was established as a Special Purpose Vehicle sharing a board and lower neighborhood risk, and new staff with the CIDC to collect levies in addition to municipal rates and the SRA levy. private sector developments. • Whereas SRAs are only guaranteed for 5 years, the City agreed to allow Roadco’s lifespan to be equal to the tenor of the loan (i.e., 15 years). • Cape Town undertook to pay the CIDC the rates collected from ratepayers, who in turn paid Roadco the portion allocated to repayment of the $22 million DBSA loan. • The DBSA required a cessation agreement in terms of which the CIDC relinquishes all rights and title to the infrastructure levy, and Cape Town required bank guarantees from Roadco to ensure it bears all construction risks. Cape Town also played an important role in conducting two planning studies around urban upgrade projects in the Claremont CBD. Changing citywide land use regulations helped stimulate further development in the SRA. Source: HR&A Advisors. All values are not adjusted for inflation. HR&A Advisors, Inc. Mobilizing Private Investment | 72 APPENDIX Introduction Case Study Selection HR&A reviewed 12 World Bank and 11 Non-World Bank case studies and narrowed them down to Lebanon and Karnataka based on the following criteria. Case Studies Reviewed Evaluation Criteria Selection World Bank Non-World Bank • Understanding the Wider Economic • Conservation of Architectural Heritage in Benefits of Comprehensive Neighborhood Upgrading in Tanzania Quito, Ecuador • Cultural Heritage Investment in Santa Aligned with World • Dar es Salaam, Tanzania Coast Sea Domingo Bank Priorities Lebanon Wall • Greater Mejong Subregion Tourism • Master Plan for Urban Flooding in Ho Development Project Cultural Heritage & Chi Minh City • Leveraging the Economic Potential of Data available Urban Development • Vietnam Urban Upgrading Seawalls for Resilient Waterfront • Mekong Delta Region Urban Upgrading (Re)development in Manila, Philippines Project • Strengthening the Economic Benefit World Bank and/or • Punjab Municipal Services Improvement Project Potential of Flood Risk Management in Dakar, Senegal local contacts available Karnataka Municipal • Lessons Learned from Strengthening • IDB Curacao Project Reform Project Urban Economies through Cultural Heritage Preservation in the Middle East • IDB Maboneng Precinct Project • IDB Quartier des Spectacles Project Isolated impacts North Africa (MENA) Region • Liverpool Waterfront • Land Value Capture and Urban • Pozzuoli Masterplan Relevant direct and Development in Two South Indian States • Cotonou Drainage Project • Metropolitan Buenos Aires Urban indirect impacts Transformation Project (MBAUT) Impacts • Djibouti Integrated Slum Upgrading Project (ISUP) • Cap-Haitian Urban Development Project (CHUD) • Decentralization and Productive Intermediate Cities Support (DPIC) HR&A Advisors, Inc. Mobilizing Private Investment | 74 Data Availability Data availability in Lebanon and Karnataka, India is limited. HR&A reviewed the following data resources for each case study. Bangalore, Karnataka, India Lebanon (Byblos focus) Years: Up to 2019 Years: Only 2018/2019 Geography: State-level Geography: County-level; Point in time City-level Employment Variables: Worker population ratio (2017 - 2019, State-level); Employment Variables: Standard labor force data; labor force participation, employmenet (Quarterly, State-level) to population ratio (city-level, 2018/2019) Years: Up to 2019 Years: Only 2018/2019 Geography: State- and city-level Geography: City-level Housing Variables: Number of dwellings approved (State-level, 2008-2019), Housing Variables: Stats on housing conditions (number of rooms, persons per room, characterstics in housing census (State/city-level, most recent year 2011) costs, connectivity, home appliances) Years: Up to present Years: Current, see below Geography: City-level Geography: Points/City-level Variables: Mortality Rate (2013-2017, City-level); Life expectancy (1990- Variables: List of private and public hospitals & pharmacie, list of primary care Health present, State-level); Birth/death rates (2014-2018, State-level); Other health health centers; Access to health insurance (2018/2019, City-level) indicators such as disease (2017, 2019, state-level); Environment stats (Date varies up to 2018, not always time series, State-level) Years: Up to 2019 Years: Only 2019/2018 Education Geography: State-level Geography: City-level Variables: Gender parity indicies (2015-2019, State-level) Variables: Entrollment ratios and residents by level of education Years: Up to 2019 Years: Up to 2020, but limited Geography: City-level Geography: Country-level and District-level Property Values Variables: Construction cost index Bangalore (2007-2019) Variables: Value of real estate transactions, 2011 - 2020; Real estate taxes and real estate taxes by foreginers (2011-2016; District Level); Value of real estate sales and number of real estate sales (2011-2016; District Level) HR&A Advisors, Inc. Mobilizing Private Investment | 75 Data Availability Data availability in Lebanon and Karnataka, India is limited. HR&A reviewed the following data resources for each case study. Bangalore, Karnataka, India Lebanon (Byblos focus) Years: Census years 1991, 2001, 2011 -- Demographic Geography: Village/town level Variables: Standard census Business Formation Years: 2004 -- Geography: City-level /Establishments Variables: Census of buildings by use Years: Up to 2012 Years: 2011-2020 Geography: State-level Geography: City-level Income/Wealth Variables: Key indicators of slums (1993, 2002, 2009, 2012); Economic survey Variables: Byblos banks data - cash and balances with central banks, financial reports (1990-2019, State-level) assets, etc (2011 - 2020); Household income, self classification of wealth (2018/2019) -- Years: Varies Other Opportunity Geography: City-level Access Variables: Access to services (% of pop in Jbeil vs Lebanon, includes grocery, public transport, bakery, pharmacy, private clinic, etc) -- Years: Varies Tourism Geography: Country-level Variables: Tourism factbook (spending, number of hotels, etc) Years: Current -- Geography: Local GIS Variables: Health GIS, Education GIS, Emergency Services GIS, Employment Offices, etc HR&A Advisors, Inc. Mobilizing Private Investment | 76 Brooklyn Bridge Park, New York City, NY | Value capture from real estate rent and PILOT payments fund most of the park’s ongoing operations and maintenance budget. Brooklyn Bridge Park achieves self-sufficient park operation and maintenance through the entitlement Brooklyn Bridge Park Operations Funding by Source, 2015 and disposition of a portion of the project’s land for residential, retail, hotel, and parking uses – value capture from the land and municipal tax proceeds generate an endowment fund to support the 85-acre project’s operations and maintenance requirement in perpetuity. Public Private Partnership Brooklyn Bridge Park is a moderately-programmed 75-acre waterfront park built on a former industrial site. The potential to revitalize underutilized industrial waterfront attracted public commitment, but the park is almost entirely supported by real estate capture. The park is governed by a private, community- led nonprofit in partnership with the Brooklyn Bridge Park Corporation (quasi-public non-profit management entity) and the Brooklyn Bridge Park Development Corporation, a subsidiary of New York State. Ex Post Impact In a 2015 analysis, 73% of Brooklyn Bridge Park operations were funded by lease revenues from 1 Brooklyn Bridge Park. The park is expected to earn approximately $16M per year from ground leases on 5 adjacent development parcels. Brooklyn Bridge Park continues to generate a substantial real estate premium. In 2021, the median one- bedroom condo at 1 Brooklyn Bridge Park has rented for about $4,500. In comparison, the median one- bedroom rental rate in the surrounding Brooklyn Heights neighborhood is $3,500, a 29% premium. Source: HR&A Advisors completed project, StreetEasy HR&A Advisors, Inc. Mobilizing Private Investment | 77 High Line, New York City, NY| The High Line has generated a substantial 130-214% premium for surrounding real estate and will contribute $1 billion in tax revenues by 2027, which exceeds the City’s investment by 800 percent. When Friends of the High Line sought to convert the High Line, an abandoned railway on Manhattan’s west side, into a public park, HR&A prepared an economic and fiscal impact study to demonstrate that the economic and social benefits of converting the rail line would far outweigh the necessary capital costs of development. The City invested about $200M in the High Line, 90% of total capital costs. Friends of the High Line raised the rest of the funding. Ex Post Impacts High Line Rents, 2011-2017 The High Line has generated significant net new economic activity for the City and will contribute $1 billion in tax revenues by 2027, which exceeds the City’s $200M investment by 800 percent. As of 2017, it had already seen a return of $300M in incremental tax revenues. The High Line has had a substantial effect on adjacent real estate value and pace of development. By the time the first section opened in 2009, 30+ projects were either planned or under construction. According to a 2016 analysis by StreetEasy, apartments near Section 1 sold for an average of $4.42M, 130% more than the average in East Chelsea. Apartments near Section 2 had a 214% premium over the East Chelsea neighborhood. Source: HR&A Advisors completed project. HR&A Advisors, Inc. Mobilizing Private Investment | 78 Detroit, MI | A Watershed Improvement District (WID), supported by surrounding new development, to fund stormwater infrastructure and sewerage relief improvements in Detroit. From 2015 to 2019 a team led by The Nature Conservancy (TNC) and HR&A Advisors Projected Benefits analyzed the effects of a proposed stormwater ordinance on real estate and the feasibility of a watershed improvement district (WID) in Detroit, Michigan. The City of Detroit had a combined $4.5M real estate value appreciation, 155+ jobs sewerage system that discharged nearly 8 billion gallons of untreated combined sewage into the Impact Conservative Expected Optimistic Great Lakes. The cost of bringing the stormwater system into compliance with the National Pollution Real Estate Value Appreciation for Potential Appreciation of Up to $4.5M Discharge Elimination System Permit was approximately $1.2 billion. Existing Property Increased Value of Future Potential Increases in Pace and Value of New The watershed improvement district concept was advanced as a collective, property-owner led Development Development mechanism to build, own and operate green stormwater infrastructure (GSI). Two revenue streams were considered: Increase in Drainage Charges with +10% Collection Rate +$205k +$255k +$310k - Compliance payments from developers required by the stormwater management ordinance Improvement to fund GSI construction and maintenance for new developments that create or replace .5 acre or more of impervious surface Economic Opportunity from Construction - Drainage charge credits from the Water and Sewerage Department generated from detention & Ongoing Operations* and retention of stormwater by GSI interventions, a portion of which would fund construction Total Worker Compensation $3.8M $8.5M $16.6M and maintenance, as well as WID administration Total Jobs Created 70 155 300 Prior to the WID concept creation, the team first quantified the supportable land value within the Total Potential Stormwater 34M gal 41M gal 49M gal WID for three typologies by constructing multi-year development models calibrated to reflect Management Capacity current market conditions: downtown commercial buildings converted to multifamily residential, newly-constructed multifamily residential buildings, and large box retail development sites. Acreage Activated with GSI, of which a Portion May Be Converted 26 AC 46 AC 80 AC to Greenspace Source: HR&A Advisors HR&A Advisors, Inc. Mobilizing Private Investment | 79 Gentilly District, New Orleans, LA | Ex ante tax increment analysis guided planning and financing for necessary flood infrastructure investments and to support neighborhood revitalization. In 2019, the City of New Orleans was supported by a team including HR&A Advisors to evaluate a funding and governance strategy for the Gentilly Resilience District (GRD), a pilot effort to address chronic Preliminary Property Tax Increment Estimate: flooding with stormwater infrastructure, layered with investment in $400K – $800K total neighborhood improvements. The district has seven Urban Water sites that would store approximately 10 million cubic feet of stormwater for a 1-year Total Built Parcels 5,470 storm event, providing cost savings of up to $170k for the Sewage & Water Board of New Orleans. Total Assessed Value $89.1M Real Growth in Value 20-40% In order to be successful, the GRD needed long-term operating funding. The team estimated revenue potential for four recommended funding tools: Undedicated Increment $185K - $370K • Dedicated value capture from increased tax revenue, • A special assessment, • Shared maintenance agreement, and Newly Developed Parcels 100 – 200 • A drainage fee set-aside. Per-Parcel Assessed Value $20,000 The tax revenue tool focused on dedicating a portion of the City budget to Total Assessed Value $2M - $4M the GRD, based on the project’s value to the city as existing homes become more valuable and as vacant lots are developed. While an unprecedented Undedicated Increment $210K - $415K approach in New Orleans, the study found the GRD property tax increment could be valued at up to $800k. Source: HR&A Advisors HR&A Advisors, Inc. Mobilizing Private Investment | 80 Los Angeles, CA | Infrastructure Financing District to Fund LA River Capital Projects In 2016, the City of Los Angeles Economic and Workforce Development 30-Year Bond Yield from Property Tax Increment: Department (EWDD) was supported by a team to evaluate the potential $1.895 billion property tax-increment revenue yield and funding capacity of one or more The team conducted sensitivity analyses for the bond yield based on real Enhanced Infrastructure Financing Districts (EIFD) along the LA River. The 51-mile estate value growth and development pace: LA River had primarily been a flood control mechanism, but increasingly is seen as a unique ecological, recreational and cultural asset. Real Estate Value Growth 30-Year Bond (2016 $M) Capital projects, including ecological restoration, new parks and open space, 3.0% $1,380 bridges and streetscape improvements, faced significant funding challenges. The 3.5% $1,615 team considered several boundaries to evaluate the potential revenue yield of an EIFD and found that revenue yield of a 30-year bond backed by a share of 4.0% (a 0% premium over historical averages) $1,895 the property tax increment generated within one mile on each side of the River could total nearly $2B. Development Pace 30-Year Bond (2016 $M) As demonstrated in the tables to the right, the team found that areas near the LA (% on Projection) River have already experienced value growth associated with the proposed 50% $1,760 revitalization and would therefore not experience additional premiums. Because California law caps assessed value growth on existing properties, any River- 75% $1,835 related premium would have minimal impact on revenue yield. The analysis also assumed that new development would occur only on vacant parcels and did not 100% (on par with citywide projections) $1,895 estimate redevelopment of underutilized parcels. Source: HR&A Advisors HR&A Advisors, Inc. Mobilizing Private Investment | 81 Mission Bay, San Francisco, CA| Following coordinated investment, development activity has increased markedly, and vacancy rates are only 2.7% compared with 7.7% for other Class A buildings in San Francisco. Originally a 303-acre rail yard, Mission Bay has used public/private partnerships to transform into an enormous mixed-use neighborhood and biotech hub with over 6,000 residential units and 4M SF of office. Catellus Development Corporation invested $700M in public infrastructure and 8 acres of new parks, in partnership with the Redevelopment Agency, which would reimburse these expenses through increased tax revenue on the property. Ex Post Impact Mission Bay Rents, 2011-2017 Since 2006, Mission Bay has been home to 30% of total Class A construction in San Francisco. Buildings have leased up quickly and vacancy rates are only 2.7% compared with 7.7% for other Class A buildings in San Francisco. Source: HR&A Advisors completed project. HR&A Advisors, Inc. Mobilizing Private Investment | 82 Bayfront Park, Sarasota, FL | Land value appreciation analysis estimated $48 million in incremental property tax revenue tied to redevelopment of Sarasota Bayfront, which informed City approval of Tax Increment Finance (TIF) to fund redevelopment. In 2018, The Bay Sarasota, FL and the Sarasota, FL Bayfront Planning Organization identified potential sources of capital and operational funding for redevelopment of the Sarasota Bayfront. $139M in value capture expected over 30 years Result In October 2020, the Sarasota City Commission approved the creation of a tax increment financing district along the bayfront to allocate approximately $200 million in local tax revenue towards the construction of The Bay Sarasota park, park infrastructure and a waterfront performing arts center. The TIF will capture 95% of any property tax revenue increase above 2019, the baseline year. The TIF is expected to generate $189 million over 30 years. Other funding sources include state and federal contributions, development impact fees, city capital support, tourist development tax, and philanthropy. Impacts Analysis estimates an additional $48 million in property tax revenue from increases in existing property value and an additional $134.7 million from new development along the Bayfront. Source: HR&A Advisors completed project. HR&A Advisors, Inc. Mobilizing Private Investment | 83 This report is a case study evaluation of the indirect impacts of urban infrastructure projects that mobilized private investment. The objective of the work is to inform World Bank program design and an approach to identifying partners for co-investment. Two urban infrastructure case study narrative assessments were conducted to identify how the projects impacted private sector partners and/or economic sectors, to inform potential opportunities for targeting and collaborating with private co-investment, and to enhance the design of future projects. Wichtiger HINWEIS ! Innerhalb der Schutzzone (hellblauer Rahmen) darf kein anderes Element platziert werden! Ebenso darf der Abstand zu Format- resp. Papierrand die Schutzzone nicht verletzen! Hellblauen Rahmen der Schutzzone nie drucken! Siehe auch Handbuch „Corporate Design der Schweizerischen Bundesverwaltung“ Kapitel „Grundlagen“, 1.5 / Schutzzone www. cdbund.admin.ch