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BOARD DOCUMENT BD 2013-29

CERTIFICATION AND FINANCING PROPOSAL

STREET PAVING AND REHABILITATION PROJECT SAN LUIS RIO COLORADO, SONORA

Revised: August 2, 2013

BOARD DOCUMENT BD 2013-29 CERTIFICATION & FINANCING PROPOSAL SAN LUIS RIO COLORADO, SON.

AUGUST 2, 2013 1



INDEX

EXECUTIVE SUMMARY 2

1. ELIGIBILITY 4

2. CERTIFICATION CRITERIA

2.1 Technical Criteria

2.1.1. Project Description 4

2.1.2. Technical Feasibility 10

2.1.3. Land Acquisition and Right‐of‐way Requirements 13

2.1.4. Management and Operations 14

2.2 Environmental Criteria

2.2.1. Compliance with Applicable Environmental Laws and Regulations 15

2.2.2. Environmental Effects/Impacts 16

2.3 Financial Criteria 19

3. PUBLIC ACCESS TO INFORMATION

3.1 Public Consultation 20

3.2 Outreach Efforts 20

BOARD DOCUMENT BD 2013-29 CERTIFICATION & FINANCING PROPOSAL

SAN LUIS RIO COLORADO, SON.

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EXECUTIVE SUMMARY


Project: The proposed project consists of the construction of new paving and roadway infrastructure, as well as rehabilitation of existing paving, in San Luis Rio Colorado, Sonora (the “Project”).

Project Objective: The purpose of the Project is to improve air quality by increasing street paving coverage and enhancing roadway and traffic infrastructure to promote efficient urban mobility.

Expected Project Outcomes:

The Project is expected to generate environmental and human health benefits related to a reduction in harmful emissions, including 185.6 metric tons/year of PM10.

1

Population Benefitted: 178,380 residents of San Luis Rio Colorado, Sonora.

Sponsor: Municipality of San Luis Rio Colorado, Sonora.

Borrower: Municipality of San Luis Rio Colorado, Sonora.

Project Cost: $179.1 million pesos (US$14.7 million).2

Loan Amount: Up to $112.5 million pesos (US$9.2 million).

Uses & Sources of Funds: (Millions of pesos)

Uses Amount %

Construction* $179.1 100.0

TOTAL $179.1 100.0

Sources Amount %

NADB Loan $112.5 62.8

Federal, state and municipal funds 66.6 37.2

TOTAL $179.1 100.0

* Includes costs related to design, construction, supervision, contingencies and taxes.

Repayment Period: Up to two hundred forty (240) months, including a grace period on principal payments.

1 See section 2.2 for calculation factors. 2 Unless otherwise noted, all U.S. dollar figures are quoted at an average exchange rate of $12.2068 pesos per dollar for the month of April 2013, according to Bloomberg.com.

BOARD DOCUMENT BD 2013-29 CERTIFICATION & FINANCING PROPOSAL SAN LUIS RIO COLORADO, SON.

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Grace Period: Up to twenty‐four (24) months on principal payments, computed as of the first disbursement.

Interest Rate: A fixed or variable market‐rate loan in Mexican pesos.

Repayment Sources: Federal tax revenues (“participaciones”) pledged into an irrevocable trust.

Debt Service Coverage Ratio (DSCR):

A DSCR equal to or greater than 1.0 for each fiscal year must be maintained in the trust.



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1. ELIGIBILITY Project Type

The Project falls within the eligible sector of air quality. Project Location

The Project is located in the city of San Luis Rio Colorado (SLRC), Sonora, immediately adjacent to the U.S.‐Mexico border, and directly south of the city of San Luis, Arizona. Project Sponsor and Legal Authority

The public‐sector Project sponsor is the Municipality of San Luis Rio Colorado, Sonora (the “Municipality” or “Sponsor”), a public entity legally constituted under the Mexican Constitution, the Constitution of the State of Sonora and the Municipal Code of San Luis Rio Colorado. The Project Sponsor has been granted authorization by the Sonora State Congress to contract a loan for this Project under its Municipal Revenue Law for fiscal year 2013, issued in the official gazette of the State of Sonora on December 31, 2012.

2. CERTIFICATION CRITERIA

2.1 TECHNICAL CRITERIA 2.1.1. Project Description Geographic Location

San Luis Rio Colorado is located in the northwest corner of the state of Sonora where three states converge: Arizona, Baja California and Sonora. The city shares a border with San Luis, AZ and is 23 miles southwest of Yuma, AZ and 42 miles east of Mexicali, Baja California. Figure 1 shows the geographical location of the City.



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Figure 1 PROJECT VICINITY MAP

General Community Profile

According to the 2010 Mexican census, the municipality of SLRC has a population of 178,380 residents, which represents 6.7% of the state’s population. By population, SLRC is the 4th largest municipality in the State, just behind Hermosillo, Obregon and Nogales.3 Between 2000 and 2010, San Luis Rio Colorado experienced an average annual growth rate of 2.78%.4 According to the latest economic census, manufacturing constitutes the most important sector in San Luis Rio Colorado, generating 46.3% of the municipality’s gross domestic product (GDP) and employing 23.6% of its working population. Commerce represents the second largest sector, generating 24.8% of the municipality’s GDP and employing 33.6% of its work force. Temporary lodging, food and beverage services represent 6.7% of its economy and contribute with 9.1% of total employment. Overall, San Luis Rio Colorado’s economy constitutes 2.2% of the state’s GDP.5 The status of public services in San Luis Rio Colorado is described in the following table.

3 Source: Mexican national statistics institute, Instituto Nacional de Estadística, Geografía e Informática (INEGI), 2010 general population and housing census. 4 Source: Mexican Population Council, Consejo Nacional de Población (CONAPO). 5 Source: INEGI, 2009 economic census.

DRAFT BOARD DOCUMENT BD 2013-## CERTIFICATION & FINANCING PROPOSAL

MUNICIPAL PAVING, SAN LUIS RÍO COLORADO, SON

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Table 1 BASIC PUBLIC SERVICES AND INFRASTRUCTURE IN SAN LUIS RIO COLORADO

Water System a

Coverage 96.0%

Supply source 17 deep wells

Residential connections 55,794

Wastewater Collection a

Coverage 61.0%

Residential connections 36,032

Wastewater Treatment a

Coverage 100% of collected wastewater

San Luis Waste Water Treatment Plant

Type Capacity

Stabilization ponds 600 lps (13.70 MGD)

Solid Waste b

Collection coverage 100%

Final disposal Landfill (anticipated to begin operation in 2013)

Street Paving c

Coverage 23.68%

a Source: Sonora State Water Commission, Comisión Estatal de Agua (CEA), 2012 annual performance comparison survey of the local water utility, Organismo Operador Municipal de Agua Potable, Alcantarillado y Saneamiento (OOMAPAS). BECC and NADB are working on wastewater projects for this community under the BEIF program. b Source: SLRC Department of Public Works and Municipal Utilities, Dirección de Obras y Servicios Públicas Municipales (DOSPM). c Source: Paving Needs Assessment by satellite imaging for San Luis Rio Colorado, BECC and State of Sonora, 2011.

In 2011, the Border Environment Cooperation Commission (BECC), in coordination with the Sonora State Ministry of Infrastructure and Urban Development, developed a paving needs assessment by satellite imaging for San Luis Rio Colorado, Sonora, in order to obtain information about the city’s paving needs and establish long‐term strategies to cover the backlog. According to the study results, San Luis Rio Colorado has approximately 5 million square meters (m2) of paved streets, which represents 23.7% of the urban area. The need for paving is also included in the Municipality’s Urban Development Program (UDP), a state initiative developed in coordination with local authorities, local non‐governmental organizations, and representatives of “ejidos” and city residents. The latest update to the UDP was conducted in 2013. One of its main objectives is the consolidation of local infrastructure through a comprehensive paving program that considers the specific characteristics of existing infrastructure, local commercial activities and the need for an efficient roadway system to support the movement of residents and economic opportunities. Chapter 3 of the UDP describes the implementation of paving programs as one of the priority development activities



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for the municipality, with a focus on improving connectivity throughout the community by completing new roads and providing new transportation route options. Project Scope and Design

The Project consists of first‐time road paving and rehabilitation of existing roadways, and includes the following components:

‐ 235,200 m2 (2.53 million ft2) or approximately 17.1 km (10.6 miles) of new paving;

‐ 124,800 m2 (1.34 million ft2) or approximately 7.6 km (4.7 miles) of paving rehabilitation in the downtown area; and

‐ Construction of two bridges to complete new road infrastructure across irrigation canals.

The streets targeted for new paving have existing water and wastewater infrastructure, except in the case of Oaxaca Avenue and Tlaxcala Avenue, where this basic service infrastructure will be installed by the local water utility (OOMAPAS) in coordination with the paving activities. The Project will include the purchase of the water and wastewater infrastructure materials necessary to provide these service connections and/or make repairs during construction. Additionally, storm water infrastructure improvements needed in the downtown area of SLRC will be developed by OOMAPAS prior to carrying out paving works. On May 31, 2013, OOMAPAS made a formal commitment to complete the installation of the necessary water and storm water infrastructure improvements in the Project area.6 Table 2 provides the streets that are expected to be addressed by the Project.

6 Source: OOMAPAS, Letter No. 408./DOOAS/2013, dated May 31, 2013, signed by the General Manager.



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Table 2 PROJECT COMPONENTS

STREETS Est. Length (km)

Est. Length (miles)

New Paved Roadways

34th Street 1.93 1.20

Benjamin Flores 1.19 0.74

Jalisco Avenue 2.08 1.29

Oaxaca Avenue 2.93 1.82

Tlaxcala Avenue 2.44 1.52

26th Street* 1.75 1.09

Carlos G. Calles* 2.33 1.45

Jazmin Avenue* 2.44 1.52

Paving Rehabilitation

Downtown area (streets between Internacional Ave. and Kino Ave. and between Morelos and 7th Street)

7.59 4.72

BRIDGES

Bridge 1 on Jalisco Ave. over the 48th Street canal

Bridge 2 on Benjamin Flores over the Argentina Ave. canal

* Project complements under construction that are being funded by the Project Sponsor.

Figure 2 shows the general location of the Project components throughout the city of San Luis Rio Colorado, supporting a benefit to the entire population of the city.



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Figure 2 LOCATION OF PROJECT

The Municipality has made continuous investments to address paving deficiencies throughout the city supported by multiple funding sources, including the federal, state, and local governments. With planned paving investments for 2013, the Municipality expects to cover a total surface area of almost 775,000 m2 (8.33 million ft.2), of which approximately 360,000 m2 (3.87 million ft.2) are included in the proposed Project for certification and NADB financing. Based on this information and excluding the rehabilitation component, Project implementation is expected to increase paving coverage by just over 1%; however, the total 2013 paving efforts will increase paving coverage by just over 3%. The proposed Project will address unpaved areas, along with the rehabilitation of roads in the downtown area that have deteriorated due to heavy traffic and age. The Project will also help improve urban mobility for residents by increasing paving coverage of primary roadways within the urban area, as well as roadway connectivity throughout the city. In particular, neighborhoods on the southeast side of the city will enjoy better traffic flows, while the interconnection of several main thoroughfares will provide easier access to the University and



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other education centers, and agricultural products from the San Luis Valley (southwest of the city) will have direct routes to the downtown area, the university (on the east side), and to the commercial port‐of‐entry (on the northeast side). Other direct benefits for the community include facilitating easier and more rapid access for emergency, security and other public service personnel; fostering economic development; and increasing the value of properties located adjacent to the newly paved streets. Table 3 presents the key development tasks related to the implementation of paving activities. The tasks currently listed as “in process” are expected to be completed in the third quarter of 2013.

Table 3 PROJECT MILESTONES

KEY MILESTONES STATUS

Final designs – New paving Completed

Final designs – Rehabilitation work In process

Environmental authorization – Municipality Completed

Environmental consultation – SEMARNAT Completed

Construction permits – CONAGUA In process

Procurement Third quarter of 2013

Construction activities were initiated in 2013 by the Municipality with its own funds, as part of its contribution towards the Project components indicated in Table 2, and are currently in progress. All paving works are scheduled to be completed by the end of 2014. 2.1.2. Technical Feasibility Selected Technology

During the project development process, the various paving options available in the region were considered. Final selection of the paving method and material was based on cost, availability, compatibility with existing infrastructure, and ease of maintenance. Under those criteria, asphalt was determined to be the best alternative for the purposes of the Project. The final design for paving was developed in accordance with the design criteria of the Engineering Institute of the Universidad Nacional Autónoma de México (UNAM). The design considers local characteristics, such as climate, geological conditions, topography, stratigraphy and soil tests. It also took into consideration existing and projected traffic volumes and flows, as well as type of traffic. All new road works include terrain plotting and leveling, excavation or cutting, hauling of materials, formation and compaction of earth‐fill, treatment of the subgrade layer and development of the hydraulic base layer. The pavement includes hydraulic base prime coating for the asphalt layer, followed by the installation of the asphalt concrete layer. The Project also



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includes construction of curbs, gutters and sidewalks. Curbs will be constructed using hydraulic concrete placed over the compacted base before the asphalt layer is applied. Although there is minimal precipitation in this area, the geometric design of the roadways does incorporate the installation of a minimum 2% transverse slope (crown) from the center of the street to move runoff to the shoulders that will help to convey any storm water flows to areas suitable for absorption. Additionally, any manholes will be built or modified to prevent water from infiltrating the sewer system. Storm water in the downtown area currently flows into an existing drainage system, and no changes to this pattern are anticipated. Improvements to this system have been identified and will be managed by OOMAPAS, in coordination with the Municipality, prior to the planned rehabilitation of these roads. The Municipality’s project engineers will verify that the paving works comply with the applicable specifications. Several design details and sections are shown in the figure provided below.

Figure 3 PAVING DETAILS

The two bridges included in this Project were developed in accordance with the federal design standards issued by the Mexican Ministry of Communications and Transportation (SCT), as well



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as with the design specifications of the American Association of State Highway and Transportation Officials (AASHTO).7 The designs for the two bridges are illustrated in the following figures.

Figure 4 DRAWING DETAILS FOR JALISCO BRIDGE

7 Source: SCT Standard No. N‐PRY‐CAR‐06‐01‐005/01.



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Figure 5 DRAWING DETAILS FOR BENJAMIN FLORES BRIDGE

Technical documents reviewed in the evaluation of the Project scope, design and selected technology include, but are not limited to, the following:

- Final design and calculations for the streets to be paved, prepared by the engineering firm OI&A;

- Final designsand calculations for the bridges to be built prepared by the engineering firm, OI&A; y

- Soil mechanics and pavement studies of the streets to be paved, prepared by the company, Estudios Profesionales de Geotecnia y Concretos (EPGC).

2.1.3. Land Acquisition and Right-of-way Requirements The proposed Project is being developed within SLRC’s urban area and primarily within existing rights‐of‐way. The Project Sponsor has indicated that property ownership and appropriate access to rights‐of‐way for all works within the city have been secured, except for a segment of approximately 130 meters (420 ft.) on Tlaxcala Avenue between 29th Street and 30th Street. This segment is owned by a private entity (Club Campestre) and is needed to complete the



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Tlaxcala Avenue in the western part of the city. The Sponsor is currently negotiating the donation of this land with the property owners and will complete this task prior to authorizing construction of this segment. Even though implementation of this segment of the Project is contingent upon securing the land, it will not delay nor jeopardize implementation of the overall Project. As previously described, the Project also includes two bridges that will cross over irrigation channels within the urban area. The corresponding construction permits have been requested as required from the local office of the Mexican National Water Commission (CONAGUA).8 Similar permits have been issued for other crossings already constructed in the urban area; therefore, the Project Sponsor anticipates that the permits will also be obtainable for these new crossing activities. As with other projects, securing these permits will be a condition precedent in the loan agreement for disbursements related to these specific works. 2.1.4. Management and Operations During Project implementation, the Municipality of San Luis Rio Colorado will oversee the execution of the proposed construction activities through its Department of Public Works and Municipal Utilities, Dirección de Obras y Servicios Públicas Municipales (DOSPM), in coordination with the Department of Property Records, Urban Development and Environment, Dirección de Catastro, Desarrollo Urbano y Ecología (DCDUE). According to Article 32 of the Internal Code of Municipal Public Administration,9 the Municipality, through the DOSPM, is responsible for maintaining the roadways within the city limits. The Municipality has an ongoing paving maintenance schedule in place, divided into short‐, medium‐ and long‐term actions. The plan is described in the Urban Development Plan. The DOSPM will be responsible for implementing preventive and corrective maintenance of the roads included in the Project and for absorbing the related costs in its annual operation and maintenance budget. The DOSPM organizational chart includes a director who oversees three offices: Public Works, Public Services and Administration. The Public Works office has an area dedicated to paving and rehabilitation that will be directly involved in operations and maintenance activities. The DOSPM will be responsible for quality control and assurance related to the implementation of the works included in the Project and may be assisted by external supervision.

8 Applications for construction permits were submitted to CONAGUA on June 5, 2013, under CONAGUA file number BCA‐O‐007‐05‐06‐13‐S. 9 These internal regulations are public policy to be followed by authorities, officers, employees and public servants of the city administration and residents. Their purpose is to define the structure and regulate the internal functions of the municipal administration presided over by the City Council of San Luis Rio Colorado, Sonora.



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2.2. ENVIRONMENTAL CRITERIA 2.2.1. Compliance with Applicable Environmental Laws and Regulations Applicable Laws and Regulations

Most of the Project components will be implemented within the jurisdiction of the Municipality of San Luis Rio Colorado in areas that have been previously impacted and are not part of protected natural areas or regions considered a priority due to biodiversity. Based on these characteristics and in accordance with Article 32 of the Internal Code for Municipal Public Administration, streets, bridges and primary accesses must be constructed by DOSPM, in coordination with DCDUE, the entity responsible for issuing environmental authorizations for the Municipality. In the case of the bridge components, the construction will be across water infrastructure under federal jurisdiction. Therefore, letters have been submitted to the Sonora offices of the Mexican Ministry of Environment and Natural Resources (SEMARNAT) to determine if any specific environmental studies or authorizations will be required. The Project will support compliance with the following environmental laws and regulations related to paving works and air quality:

- Urban Development Plan for San Luis Rio Colorado, Regulations Section, Urban Development Standards, Pavements (paragraphs 20‐27), which establishes the requirements for paving works in SLRC.

- Official Mexican Standard NOM‐025‐SSA1‐1993, which establishes the criteria for evaluating ambient air quality and the permissible level for concentrations of total suspended particles (TSP), including particles below 10 microns (PM10), with a permissible limit of 150 µg/m3 in a 24‐hour period, once a year.

Environmental Studies and Compliance Activities

The Sponsor has consulted with the applicable environmental agency regarding the type of environmental authorization required for each Project component. The DCDUE has issued all necessary environmental authorizations and consent for the implementation of the works through Official letters No. 792/DCDUE/2013, No. 793/DCDUE/2013 and No. 793/DCDUE/2013 dated June 18, 2013. On May 29, 2013, the Sponsor sent a letter to the Sonora office of SEMARNAT, to confirm that no other environmental clearances are required for the construction of the bridges.10 SEMARNAT issued a response on July 16, 2013, indicating that no federal environmental clearances are required for the construction of the bridges.

10 Letters to SEMARNAT were submitted on May 29, 2013, with reference numbers 357/DOSPMM/2012 and 358/DOSPMM/2012, respectively.



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Pending Environmental Tasks and Authorizations

No pending authorization or clearances are required. Compliance Documentation

The following formal environmental authorizations have been obtained for the Project:

- Letter No. 792/DCDUE/2013 for new paving works.

- Letter No. 793/DCDUE/2013 for rehabilitation of paving works.

- Letter No. 794/DCDUE/2013 for the construction of the bridges.

- Letter No. DSSGUGAIA0584‐13 from SEMARNAT, indicating no federal environmental clearance is required for the Jalisco Bridge.

- Letter No. DSSGUGAIA0585‐13 from SEMARNAT, indicating no federal environmental clearance is required for the Benjamin Flores Bridge.

2.2.2. Environmental Effects/Impacts San Luis Rio Colorado has experienced rapid urban growth and development. As a trade corridor for North America, it is critical to maintain infrastructure adequate to meet the demands of heavy traffic volumes. The Project is intended to reduce the backlog of unpaved roads in several zones of the city and to rehabilitate the most heavily trafficked roads in the downtown area, which are in poor condition. Both efforts are anticipated to result in PM10 reduction benefits. Additionally, street paving and connecting several main traffic corridors will improve traffic flows within the city and increase urban mobility. Existing Conditions and Project Impact – Environment

As a result of its arid climate, desert terrain, agricultural activity and strong winds, air quality in the region is naturally affected by airborne particles and pollutants, such as PM10. Additionally, air quality in San Luis Rio Colorado is affected by the dust and PM10 generated by several sources, including unpaved roads which account for 76% of the roadway surface in the city, as well as dust generated by roads in poor conditions. It is also important to recognize that the neighboring U.S. community of Yuma County has been designated as a non‐attainment area for PM10. Although a similar designation does not exist in Mexico and there is no official monitoring in the community, the air quality conditions in SLRC are likely the same. Vehicle traffic on unpaved roads causes the suspension of particles that directly impact public health. In addition to these direct impacts related to a lack of pavement, other deficient road conditions contribute to poor air quality effects. First‐time paving and repaving are considered proven methods to reduce the amount of fugitive dust resulting from vehicle traffic. This Project also contributes to a reduction of the concentration of pollutant emissions by improving traffic flows. Pursuant to the methodology recommended and approved by USEPA AP‐42 for estimating PM10 emissions by vehicles traveling on unpaved roads, paving the roads included in the Project will



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reduce PM10 emissions by an estimated 99.7% in the direct Project area, which equates to 185.6 metric tons/year. The construction of new bridges, interconnecting roads and repaving, is also expected to improve traffic flows, which may help reduce vehicular gas emissions. Mitigation of Risks

During Project implementation, measures are being taken to mitigate the temporary effects of construction by following the preventive actions recommended by the state and federal environmental authorities, such as:

Noise

- All operating vehicles must close their exhaust and operate at low speed around the work areas.

- All vehicles must comply with Mexican standard NOM‐080‐ECOL‐1994, which establishes the maximum permissible levels of noise from motor vehicles, motorcycles, and three‐wheel motor vehicles, as well as noise measuring methods.

Site preparation and construction

- Dust emissions generated by vehicle traffic will be minimized by irrigating the areas where work will be performed.

- With regard to air emissions caused by motor vehicles, all vehicles used in the Project must have emission control systems.

- Wastewater collected in portable containers will be disposed of by an authorized company.

- The use of water should be optimized during construction of the Project. The water required during the construction phase should be obtained from a water tap provided by OOMAPAS or from an alternative source authorized by CONAGUA.

- Excavations will only be performed in areas previously identified by the Project.

- In‐fill activities will be performed, preferably, with the material from the excavations whenever appropriate.

Waste management

- All non‐recyclable solid wastes must be disposed of according to applicable procedures and in facilities designated by the authorities for this purpose.

- Backfill and compacting materials should be free of hazardous and non‐hazardous waste, ensuring that such materials are moved to authorized confinement or treatment sites.

- In order to avoid ground contamination generated by vehicle, machinery and equipment maintenance and oil changes, these activities will be carried out in authorized service shops.



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Natural Resource Conservation

The Project does not interfere in any way with the conservation of natural resources in the region. All Project components will be carried out in a predisturbed urban area and within existing roads. No Action Alternative

The no action alternative was dismissed because of the ongoing need for basic services and the deterioration of roadways, which poses risks to local air and water resources, as well as to public health. The Project is necessary to meet the existing and future urban development needs of San Luis Rio Colorado. Affordable project financing is important to support the implementation and ongoing investment in adequate basic infrastructure, such as paving. Without access to affordable financing, the needed works and future investments by the Municipality may be delayed or postponed. Existing Conditions and Project Impact – Health

Although human health statistics for Sonora are limited, Sonora Health Services for Health Jurisdiction Number II and the SLRC Local Health Services have annual incidence rates for acute respiratory diseases in San Luis Rio Colorado over a five‐year period based on a total population of 178,380 (see Table 4 below).

Table 4 INCIDENCE RATES OF RESPIRATORY DISEASES IN

SAN LUIS RIO COLORADO, SONORA

2009 2010 2011 2012 2013*

Total No. of Cases 17,298 15,697 14,399 14,482 4,883

Incidence Rate 105.25 94.75 86.25 86.15 28.85

* Information as of May 11, 2013.

Mexican Standard NOM‐020‐SSA1‐1993 establishes that health risks associated with air pollutants are correlated to the time elapsed between exposure and the onset of adverse effects in exposed individuals and cause changes in pulmonary function that render affected individuals more susceptible to respiratory diseases and infections. Furthermore, with respect to epidemiological surveillance, in Mexican Standard NOM‐017‐SSA2‐1994, potential health impacts from environmental pollution are defined as poisonings and disorders resulting from contact with or handling of toxic substances and environmental factors. Transboundary Effects

The Project is expected to have a positive transboundary impact by improving air quality in the shared airshed of San Luis Rio Colorado and Yuma County, Arizona. Yuma County has been designated as an area of non‐attainment by EPA for particulate emissions (PM10), and the reduction of these particles can be positively influenced by the paving of the streets included in this Project.



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In addition to these benefits, this Project will also improve urban mobility, not only for local traffic, but also for cross‐border traffic that flows through the city to the international crossings, thereby further reducing environmental pollution from vehicle exhausts while improving the quality of life for people on both sides of the border. Finally, the new paving works are not expected to result in increased storm water runoff along the international border. Other Local Project Benefits

Additional direct benefits to the local community include facilitating access to emergency, security and other public services; reducing travel times; and fostering economic development.

2.3. FINANCIAL CRITERIA The Project Sponsor has requested a loan for up to $112.5 million pesos from NADB to complete the financing of the Project, which is estimated to cost a total of $179.1 million pesos. The loan will be used to pay for construction and related costs, such as designs, construction, supervision and management when necessary. The NADB loan will complement federal, state of Sonora and other municipal funds. The Project’s proposed payment mechanism is consistent with financial structures for loans to Mexican municipalities with federal revenues (Participaciones Federales) as the source of payment. The source of repayment will be the Participaciones Federales received by the Municipality of San Luis Rio Colorado, which shall be irrevocably pledged and deposited into a trust to pay for the NADB loan’s debt service in accordance with the applicable laws. NADB performed a financial analysis of the Municipality of San Luis Rio Colorado. The cash flow projections indicate that San Luis Rio Colorado has the capacity to meet all its financial obligations, including those related to this loan, without adversely affecting the operation and maintenance of the Municipality. In line with these conclusions, Fitch Ratings and Moody’s have rated San Luis Rio Colorado BBB (mex) and A2mx, respectively. These ratings had already considered the impact of the requested loan amount. In addition, NADB has verified that San Luis Rio Colorado has the legal authorization to contract this loan and to pledge its Participaciones Federales as the source of payment for its debt service. San Luis Rio Colorado has also the legal and financial capacity to operate and maintain the works constructed under this Project, either directly or through its water utility (OOMAPAS). Considering the Project’s characteristics and based on the financial and risk analyses performed by NADB, the proposed Project is considered to be financially feasible and presents an acceptable level of risk. Therefore, NADB proposes providing a market‐rate loan of up to $112.5 million pesos to the Municipality of San Luis Rio Colorado, Sonora for the construction of the Project described herein that will be repaid in a period of up to 240 months.



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3. PUBLIC ACCESS TO INFORMATION

3.1. PUBLIC CONSULTATION BECC released the Draft Project Certification and Financing Proposal for a 30‐day public comment period beginning July 3, 2013. The following Project documentation was made available for public access:

- DCDUE Authorization Letter No. 792/DCDUE/2013 dated June 18, 2013, for new paving works.

- DCDUE Authorization Letter No. 793/DCDUE/2013 dated June 18, 2013, for rehabilitation of paving works.

- DCDUE Authorization Letter No. 794/DCDUE/2013 dated June 18, 2013, for the construction of the bridges

- Municipality Urban Development Program (UDP)

- Paving Needs Assessment by Satellite Imaging for San Luis Rio Colorado, Sonora, developed by BECC

- OOMAPAS Letter No. 408./DOOAS/2013 dated May 31, 2013.

- Applications for construction of bridges submitted to CONAGUA.

- Confirmation request letters sent to SEMARNAT for the construction of the bridges.

- Letter No. DSSGUGAIA0584‐13 from SEMARNAT, indicating no federal clearances are required for the Jalisco Bridge.

- Letter No. DSSGUGAIA0585‐13 from SEMARNAT, indicating no federal clearances are required for the Benjamin Flores Bridge.

The public comment period ended on August 2, 2013, with no comments received.

3.2. OUTREACH EFFORTS In addition to the public comment period and as is the normal practice in San Luis Rio Colorado, Project information within the context of the general investment activities of the Municipality is made available to community residents through postings on the municipal website, as well as frequent communication with local media. San Luis Rio Colorado currently uses weekly postings on Facebook as part of its communication strategy for municipal works and activities. As an example of this interactive tool, on June 17, 2013, the Municipality posted information



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describing current paving activities related to the Project, but not part of the proposed works, and seven comments from residents were posted in response.11 Additionally, BECC conducted a media search to identify public opinion regarding the Project. References were found in several articles on Internet sites, including online newspapers such as Sonora presente, Expreso más personal, and Diario en tu ciudad. No opposition to the Project was detected in the media search. Examples of these articles can be found at the following links:

- Sonora presente (June 14, 2013).‐ State Governor announces investment of more than 60 million pesos to pave San Luis Rio Colorado (http://sonorapresente.com/2013/06/anuncia‐padres‐inversion‐de‐mas‐de‐60‐mdp‐para‐pavimentar‐san‐luis‐rio‐colorado/)

- Expreso más personal (June 13, 2013).‐ More than 60 million pesos to be invested in paving SLRC. (http://www.expreso.com.mx/index.php?option=com_content&view=article&id=62369:anuncia‐padres‐inversion‐de‐mas‐de‐60‐mdp‐para‐pavimentar‐slrc&catid=943:nogales&Itemid=163)

- Diario en tu ciudad. (February 18, 2013) San Luis Rio Colorado requests loan from NADB for paving (http://www.sinbaches.com/recurre‐san‐luis‐rio‐colorado‐a‐credito‐para‐pavimentacion/)

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STREET PAVING AND REHABILITATION PROJECT SAN LUIS RIO ...server.cocef.org/CertProj/Eng/BD 2013-29 SLRC AQ Paving Project... · STREET PAVING AND REHABILITATION PROJECT SAN LUIS RIO

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