Certificates of Potential Additional Construction (CEPACs) are a method of leveraging private dollars to finance public investment in neighborhood revitalization through a process of rezoning and construction permit auctions. Through rezoning and the sale of CEPACs, the city raises the funds for upfront construction costs, long-term maintenance, and other priorities, such as historic or cultural preservation. These revenues are captured in a fund separate from the general treasury and are dedicated to the particular neighborhood or urban operation. In Rio de Janeiro, the wholesale auction of the CEPACs to a single third-party vendor, Caixa Economica Federal (CEF), covered the costs for all public infrastructure improvement and future service costs in the Porto Maravilha district for 20 years, without requiring any further public outlay. CEF then placed the CEPACs on the open market, where they are traded publicly and purchased by investors or developers.
Through specific regulation requiring different values of CEPACs for residential, commercial, and retail construction, the city can provide incentives on the development of mixed-use neighborhoods or other specific types of development. Incentives and mandatory holdbacks of CEPAC revenue can also be used for historic preservation, green building techniques, and socially inclusive hiring practices, among other goals.
How to Apply this Program
After the approval of CEPACs as a financing instrument by the Brazilian Federal government in 2001, using them at a local level requires legislation that defines an urban operation area where zoning and potential construction changes. This legislation can vary in function and sector depending on revitalization goals.
In the case of Porto Maravilha in Rio de Janeiro, the rights for this additional construction will be sold to one wholesale investor, who will manage the public auction. By requiring that some portion of raised funds go to historic preservation, or that city projects employ local workers, for example, the municipality can further leverage its investment toward public goals. By varying the number of CEPACs required for different types of construction (and thereby changing the cost to develop for different uses), and in different areas, the municipality can stimulate increased residential density and mixed use development.
Companhia de Desenvolvimento Urbano da Região do Porto do Rio de Janeiro (CDURP) Phone: +55 (21) 2976-6640 Email: email@example.com Website: www.portomaravilha.com.br/web/direito/faleConosco.html
CEPACs were developed as early as 1995 for the redevelopment of the Faria Lima area of São Paulo, Brazil, and have also been used in the Água Espraiada redevelopment project in the same city.