EX POST EVALUATION OF INVESTMENT PROJECTS CO-FINANCED BY THE EUROPEAN REGIONAL DEVELOPMENT FUND (ERDF) OR COHESION FUND (CF) IN THE PERIOD 1994-1999 WATER SUPPLY IN PALERMO PREPARED BY: CSIL, CENTRE FOR INDUSTRIAL STUDIES, MILAN PREPARED FOR: EUROPEAN COMMISSION DIRECTORATE-GENERAL REGIONAL POLICY POLICY DEVELOPMENT EVALUATION MILAN, SEPTEMBER 5, 2012 This study is carried out by a team selected by the Evaluation Unit, DG Regional Policy, European Commission, through a call for tenders by open procedure no 2010.CE.16.B.AT.036. The consortium selected comprises CSIL – Centre for Industrial Studies (lead partner – Milan) and DKM Economic Consultants (Dublin). The Core Team comprises: - Scientific Director: Massimo Florio, CSIL and University of Milan; - Project Coordinators: Silvia Vignetti and Julie Pellegrin, CSIL; - External experts: Ginés de Rus (University of Las Palmas, Spain), Per-Olov Johansson (Stockholm School of Economics, Sweden) and Eduardo Ley (World Bank, Washington, D.C.); - Senior experts: Ugo Finzi, Mario Genco, Annette Hughes and Marcello Martinez; - Task managers: John Lawlor, Julie Pellegrin and Davide Sartori; - Project analysts: Emanuela Sirtori, Gelsomina Catalano and Rory Mc Monagle. A network of country experts provides the geographical coverage for the field analysis: Roland Blomeyer, Fernando Santos (Blomeyer and Sanz – Guadalajara), Andrea Moroni (CSIL – Milano), Antonis Moussios, Panos Liveris (Eurotec - Thessaloniki), Marta Sánchez-Borràs, Mateu Turró (CENIT – Barcelona), Ernestine Woelger (DKM – Dublin). The authors of this report are Gelsomina Catalano, Mario Genco and Silvia Vignetti of CSIL. The authors are grateful for the very helpful comments from the EC staff and particularly to Veronica Gaffey, Anna Burylo and Kai Stryczynski. They also express their gratitude to all stakeholders who agreed to respond to the team’s questions and contributed to the realisation of the case study. The authors are responsible for any remaining errors or omissions. Quotation is authorised as long as the source is acknowledged. Cover: Fontana Pretoria, picture by Bernhard J. Scheuvens (April, 2007). TABLE OF CONTENTS EXECUTIVE SUMMARY ....................................................................................................................... 1 1 PROJECT DESCRIPTION............................................................................................................... 9 1.1 CONTEXT........................................................................................................................................9 1.2 ITALIAN LEGAL FRAMEWORK IN THE FIELD OF WATER SUPPLY...................................................................11 1.3 STRUCTURAL FEATURES AND SERVICE DELIVERED ..................................................................................14 1.4 CURRENT PERFORMANCE.................................................................................................................18 2 ORIGIN AND HISTORY ...............................................................................................................23 2.1 BACKGROUND ...............................................................................................................................23 2.2 FINANCING DECISION ......................................................................................................................25 2.3 PROJECT IMPLEMENTATION AND ADDITIONAL INVESTMENT NEEDS ...........................................................30 3 LONG-TERM DEVELOPMENT EFFECTS ........................................................................................33 3.1 KEY FINDINGS................................................................................................................................33 3.2 DIRECT WELFARE AND ECONOMIC GROWTH.........................................................................................36 3.3 ENDOGENOUS DYNAMICS ................................................................................................................38 3.4 INSTITUTIONAL QUALITY ..................................................................................................................40 3.5 ENVIRONMENTAL EFFECTS ...............................................................................................................40 3.6 TERRITORIAL AND SOCIAL COHESION ..................................................................................................42 3.7 SOCIAL HAPPINESS..........................................................................................................................42 4 DETERMINANTS OF PROJECT OUTCOMES..................................................................................45 4.1 KEY FINDINGS................................................................................................................................45 4.2 PROJECT DESIGN AND FORECASTING CAPACITY .....................................................................................46 4.3 PROJECT GOVERNANCE....................................................................................................................48 5 CONCLUSIONS...........................................................................................................................57 ANNEX I. METHODOLOGY OF EVALUATION..................................................................................59 ANNEX II. COST-BENEFIT ANALYSIS ...............................................................................................65 ANNEX III. MAP OF STAKEHOLDERS ...............................................................................................95 ANNEX IV. LIST OF INTERVIEWEES..................................................................................................97 ANNEX V. REFERENCES .................................................................................................................99 LIST OF ABBREVIATIONS AMAP Azienda Municipalizzata Acquedotto Palermo (Municipal Company Palermo Aqueduct) ANCI Associazione Nazionale Comuni Italiani (National Association of Italian Municipalities) AOTA Authority of Optimal Territorial Ambit APS Acque Potabili Siciliane s.p.a. (administrator of IWS in the remainder of OTA 1 in Palermo) CBA Cost-Benefit Analysis CF Cohesion Fund CIPE Comitato Interministeriale per la Programmazione Economica (Inter-Ministerial Committee for Economic Planning) CSF Community Strategic Framework DG Regio Directorate General for Regional Policy EC European Commission ECU European Current Unit EIB European Investment Bank ERDF European Regional Development Fund ESF European Social Fund EU European Union GDP Gross Domestic Product HDPE High Density Polyethylene IMF International Monetary Fund IWS Integrated Water Service NUTS Nomenclature of Territorial Statistical Units OTA Optimal Territorial Ambit PPP Public-Private Partnership PRGA Piano Regolatore Generale degli Acquedotti (Aqueduct General Plan) R.A.C.T. Regional Administrative Technical Committee SCF Standard Conversion Factor TOP Three-year operational plan WTA Willingness to accept WTP Willingness to pay EXECUTIVE SUMMARY The present case study appraises an infrastructure project aimed at renovating the water distribution network in the city of Palermo, in the Italian region of Sicily. After almost ten years of project implementation the aim of the present ex-post evaluation is to establish the extent to which this infrastructure project has affected the lives of the inhabitants of Palermo and what long-term effects it has produced. The analysis draws from an ex-post Cost-Benefit Analysis - CBA1 and from a set of qualitative evidence, both secondary (technical reports, official reports, press articles, books and research papers) and primary evidence (15 interviews with key stakeholders and experts were carried out in the period September-October 20112). The overall approach and methodology followed in the project is briefly recounted in the underneath Box and, more extensively, in Annex I. OVERALL APPROACH AND METHODOLOGY The Conceptual Framework developed in the First Intermediate Report has been developed starting from the evaluation questions included in the ToRs3, and further specified and organised as per the team’s understanding. In particular, the Team identified three relevant dimensions of analysis: a. The object of the evaluation (the ‘WHAT’): this relates to the typologies of long-term contributions which can be observed. Starting with the typologies identified in the ToR (socio-economic development and quality of life) the Team developed the following classification of long-term effects: ‘Economic development’ (including effects on GDP growth and endogenous dynamics) and ‘Quality of life’, synonymous with additional social wellbeing, i.e. including effects that are not captured by the economic variables. ‘Quality of life’, in turn, has been divided into: social cohesion, territorial cohesion, institutional learning, environmental effects and social happiness. b. The timing of the long-term effects (the ‘WHEN’): this dimension relates to the points in the project’s lifetime at which the effects materialise for the first time (short-term dimension) and stabilise (long-term dimension). The proper timing of an evaluation and the role it can have in relation to the project’s implementation is also discussed here. c. The determinants of the project’s performance (the ‘HOW’): the assumption here is that five aspects of the project’s implementation and their interplay are crucial