How a city sells square meters on the financial market. The most ambitious instrument of the City Statute (Brazil, Lei 10.257/2001), explained from the drafting table to the prospectus.
Certificate of Additional Construction Potential. A security issued by the municipal government, registered with the CVM, sold at a public stock-exchange auction, and convertible into building rights only inside the perimeter of the operation that originated it.
The legal basis sits in three paragraphs of art. 34 of Lei 10.257 of 2001, the City Statute. It is short. Reading art. 34 is reading the instrument.
The engineering of CEPAC breaks down into four points, from plan to building permit. Each one corresponds to a distinct agent, with its own logic. The municipal government creates the asset. The CVM ensures the asset is reliable enough to circulate. The stock exchange allows the asset to find a buyer. The city government, in the end, validates that the buyer can use the asset in a project.
By specific enabling law, defines the quantity, lot size, minimum price, equivalence formula in square meters, and the inventory per sub-sector.
Approves the prospectus and supplement, supervises the public offering, and requires transparency on the use of funds and the construction schedule.
Operates the primary auction, custody, book-entry registration, and the secondary market among holders of the security.
Receives the CEPAC as payment for built area that exceeds the general zoning parameters, within the limits of art. 34, § 2º.
The specific enabling law of each operation carries the equivalence formula. As a rule, a CEPAC does not correspond to a single fixed square meter. It is worth a variable number, according to two axes: the sub-sector of the operation and the purpose of the additional potential.
The same certificate may equal two square meters in a peripheral residential sub-sector, or one square meter in a central mixed-use sub-sector. The difference is public policy design. The municipality calibrates the rate to steer investment.
When the project is filed for approval, the developer presents the quantity of CEPACs equivalent to the area exceeding the general parameters. The municipality writes down the inventory, takes the certificates, and issues the building permit. At this moment, the CEPAC ceases to exist as a financial security. It has been absorbed into the permit.
Any Brazilian city with a master plan may charge for additional building rights (OODC). Few use CEPAC. What separates one instrument from the other is not the purpose. It is the degree of financialization.
| Axis | Standard charge (OODC) | CEPAC |
|---|---|---|
| Legal basis | City Statute, arts. 28 to 31 | City Statute, arts. 32 to 34, plus municipal law of the OUC |
| Where it applies | In any zone with a coefficient above the basic one | Only inside the perimeter of an OUC established by specific enabling law |
| How it is paid | Directly to the municipality, at the project approval stage | With certificates acquired on the primary or secondary market |
| Regulation | Municipality, according to the master plan | Municipality issues, CVM registers and supervises |
| Tradability | No security, no secondary market | Book-entry security, freely traded, active secondary market |
| Earmarking | FUNDURB or equivalent, broad urban policy | Exclusively in the operation itself, by force of art. 33, § 1º |
| Usual scale | Project by project, mid-size funds | Large-scale operation, hundreds of millions to billions of reais |
CEPAC is an exceptional instrument. It fits when the municipality wants to concentrate capital on a structural intervention and has the technical capacity to design, market and supervise the operation. For other cases, the standard charge for additional building rights does the job.
In Brazil, virtually all historical CEPAC issuance has happened in São Paulo and Rio de Janeiro. Mid-size cities have not yet used the instrument, even when they would have the scale to do so.
The specialized press tends to treat CEPAC as a synonym for modernization. The more careful literature, partly produced in schools of architecture and urban law, is more reserved. Three specific risks deserve an honest reading.
From masterplan design to the prospectus modeling. When the territory becomes an asset, the project has to be legible on both sides of the table. The urbanistic side and the financial side.
Urbanistic feasibility assessment, OUC modeling, drafting of the specific enabling law, CEPAC prospectus.
