The map of public money: how a mid-size city finances what it needs.

There is no single source, there is a combination

The first question every municipal government asks when receiving an urban diagnosis is the same one. With what money?

The honest answer is that there is no single source.

There is a combination.

A combination that has to be designed case by case, with the right instrument for each work. Those who master this map understand that financing is not the foundation of planning, it is the consequence of it. The map below organizes what exists today, drawing on verified primary sources.

Current revenue, ICMS and royalties

The starting point is the municipality's own budget.

The NCR (Net Current Revenue) of the municipality, plus constitutional transfers. For Petrópolis, this includes a share of the state ICMS (State VAT on Goods and Services). And it includes, for municipalities in the state of Rio de Janeiro, the transfer of petroleum royalties. According to Tribuna de Petrópolis, the municipality received roughly R$ 43 million in royalties in 2025, a transfer now under discussion at the Supreme Federal Court, which returned in May 2026 to ruling on the distribution model for these revenues.

The municipality's own budget pays for maintenance, payroll, small works, and counterpart contributions.

The rest comes from four other source families.

FINISA, Saneamento para Todos, BNDES

The first family is federal credit, operated by Caixa and BNDES (Brazilian Development Bank).

FINISA (Caixa infrastructure financing line) is a credit line for the public sector aimed at urban infrastructure and environmental sanitation projects. Caixa itself describes the product as financing with a simplified contracting process, without any required municipal counterpart, with repayment terms of up to 120 months and a grace period of up to 12 months, the financial cost tied to the CDI rate. It covers mobility, public lighting, health, education, water supply, sanitary sewage, solid waste and drainage.

For long-term sanitation, the classic line is Saneamento para Todos, an FGTS (Severance Guarantee Fund) program operated by Caixa, with amortization terms of up to 20 years for water supply, sanitary sewage, integrated sanitation, stormwater management and solid waste. In 2024, BNDES signed a partnership with Caixa to also operate FGTS resources within the line. Avançar Cidades, run by the Ministry of Cities, is the continuous public selection process for these credit operations with financial agents.

At BNDES, direct financing of urban works happens through the BNDES Finem Urban Mobility line and through energy efficiency lines that have been used, for years, to modernize public lighting via PPP (Public-Private Partnership). According to BNDES itself, there is a current portfolio of ten public lighting projects structured by the bank, six of which have already gone to auction.

All these lines require demonstrated fiscal capacity and a mature technical project.

IDB, World Bank, CAF and the Cofiex path

The second family is external credit, with a guarantee from the federal government.

IDB (Inter-American Development Bank), World Bank, CAF, EIB (European Investment Bank), OPEC Fund and Fonplata lend to Brazilian states and municipalities provided that the operation is approved by COFIEX (External Financing Commission) and follows the procedural steps at the National Treasury and the Federal Senate. Rates tend to be lower than those of domestic credit, terms are long, and the bank also enters as a technical co-participant in structuring.

In its first meeting of 2025, on March 27, COFIEX approved 20 programs and projects with external financing totaling roughly US$ 3.5 billion in investment. Of the 20, 15 are by subnational entities, states, municipalities and their companies, agencies and foundations. The other 5 are by federal public companies. Sectors range from education to environmental sustainability, renewable energy, urban development, water management and debt restructuring.

Access to this path requires a payment capacity rating, the CAPAG (Payment Capacity rating), at the appropriate level. The National Treasury evaluates indebtedness, current savings and the liquidity index to define who can receive a federal guarantee.

Transferegov, parliamentary amendments and agreements

The third family is the federal voluntary transfer, brokered through the Transferegov.br platform.

Successor to Siconv and the +Brasil platform, Transferegov.br is the official tool that operates agreements, transfer contracts, collaboration terms and promotion terms among the Union, states, the Federal District, municipalities and private non-profit entities. It is the channel for parliamentary amendments and agreements. Each ministry publishes programs. The municipality registers, submits a work plan, and competes for the resource.

The system is integrated, with open data, and centralizes information about each instrument throughout the cycle, from proposal to accounting.

OODC and Fundurb

The fourth family is capture through instruments proper to urban policy, created by the City Statute, Law 10.257 of 2001.

The Charge for Additional Building Rights (OODC) is in articles 28 to 31 of the Law. The Master Plan defines areas where building is permitted above a basic floor area ratio, subject to a counterpart provided by the beneficiary. The difference between the basic and maximum coefficients is sold. The funds collected, under article 31, are applied to the purposes set out in sections I to IX of article 26: land regularization, social interest housing programs, the establishment of a land reserve, the ordering of urban expansion, the implementation of urban and community facilities, the creation of public leisure spaces and green areas, the creation of conservation units and the protection of historical, cultural and landscape heritage.

The instrument was consolidated in São Paulo following the Strategic Master Plan approved in 2002. The OODC funds feed the Fundurb, the municipal Urban Development Fund, managed by a Council with 25 members, 16 representing the Executive and 9 from civil society. It is the most mature Brazilian case of urban financing through a dedicated instrument.

Ecological ICMS as earmarked revenue

Above all this, there is a more subtle instrument, and one that is particularly relevant for Petrópolis.

The Ecological ICMS.

In the state of Rio de Janeiro, it was created by State Law 5.100, of October 4, 2007, which adds environmental criteria to the parameters for the transfer of the municipal share of ICMS. According to the official CEPERJ (Statistics and Research Foundation, RJ) page, 2.5% of the municipal share of ICMS is distributed according to the Final Environmental Conservation Index, the IFCA. The calculation is performed by the CEPERJ Foundation in technical cooperation with SEAS (State Secretariat for Environment and Sustainability) and INEA (Rio de Janeiro State Environmental Institute). It considers conservation units, water resource quality and solid waste management.

A city that protects the environment receives more.

A city that provides sanitation receives more.

A city that has a federal, state or municipal conservation unit receives more.

Petrópolis, with its serrano environmental mosaic, is a structural candidate to improve in that index.

FEP Caixa funds the thinking

For the study phase, before the project becomes a work, there is a dedicated instrument.

The Fund for Supporting the Structuring of Concession and Public-Private Partnership Projects, FEP Caixa, created by Law 13.529, of December 4, 2017, and administered by Caixa Econômica Federal (Federal Savings Bank). FEP funds the studies needed to structure PPP and concession projects, generally with a counterpart from the benefiting public entity defined in the call for proposals. Since 2017, according to materials from the PPI (Investment Partnership Program, federal), FEP has accumulated more than 70 projects in its portfolio in areas such as public lighting, sanitation, solid waste and social housing.

This fund removes the biggest barrier to PPP entry in small and mid-size municipalities: the initial cost of modeling.

Every city has a possible arrangement

The synthesis of the map is as follows.

The municipality's own budget sustains operations.

Federal and external credit finances the big work.

Voluntary transfers complement it.

OODC, Ecological ICMS and royalties generate earmarked, qualified revenue.

FEP Caixa funds the thinking.

Every city has a possible arrangement. And each arrangement has to be designed by someone who understands, at the same time, what the city needs and what the system allows.

That is the work.

It is not a spreadsheet.

It is a project.

Sources consulted

All sources below were accessed on May 16, 2026.

• Law 10.257/2001, City Statute, Planalto. OODC in articles 28 to 31; allocation of resources referred to article 26.
• Law 13.529/2017, on the participation of the Union in a fund to support the structuring and development of concession and public-private partnership projects, Planalto. Legal basis of FEP.
• FINISA, Infrastructure and Sanitation Financing, official page, Caixa Econômica Federal.
• Saneamento para Todos, official page, Caixa Econômica Federal.
• Saneamento para Todos, terms and amortization periods, FGTS.
• Avançar Cidades, Sanitation, Ministry of Cities.
• BNDES Finem, Urban Mobility, product page, BNDES.
• Avançar Saneamento, BNDES (partnership with Caixa to operate FGTS resources).
• BNDES Project Hub, Public Lighting sector.
• FEP Caixa, official page, Caixa Econômica Federal.
• Booklet Conheça o FEP, PPI (Investment Partnership Program), February 2025.
• Transferegov.br, official portal for federal voluntary transfers.
• Payment Capacity (CAPAG), Tesouro Transparente, National Treasury.
• COFIEX approves US$ 3.5 billion across 20 projects from states, municipalities and the Union, Ministry of Planning and Budget, March 27, 2025.
• Planning approves US$ 3.5 bn in projects with external financing, Agência Brasil, March 2025.
• Ecological ICMS of Rio de Janeiro, official page, CEPERJ Foundation. Confirms State Law 5.100/2007, the 2.5% share of the municipal portion, and the IFCA calculation with SEAS and Inea.
• Charge for Additional Building Rights, São Paulo City Hall, Municipal Secretariat for Urbanism and Licensing.
• Urban Development Fund (Fundurb), São Paulo City Hall.
• Decision on royalties is set to affect Petrópolis, which received R$ 43 million in 2025, Tribuna de Petrópolis.
• STF begins to rule on the petroleum royalties distribution model, May 2026.

Updated on May 16, 2026. This is the second version of the article. The first was taken down for containing factual claims not verified against primary sources; each item in this version was checked against the official portal of the corresponding institution.