SYNDICATED URBAN OPERATION (PUBLIC PRIVATE PARTNERSHIP)

                                                              

SYNDICATED URBAN OPERATION (PUBLIC PRIVATE PARTNERSHIP)

Fiabci Brasil
Secovi-SP
Solution proposed by: 
MUNICIPALITY OF SAO PAULO
In a Nutshell: 
A public intervention instrument regulated by a local Master Plan and approved by a municipal law that establishes a specific urbanistic regulation and related incentives aiming to the implementation of improvements in a predetermined perimeter as urban development, like construction of Affordable Housing, urban infrastructure, promotion of economic development to generate jobs, etc
Where and When: 
This instrument has been implemented in Sao Paulo City, Brazil, since 1995, when the municipality launched the first operation – Operação Urbana Faria Lima - a totally innovative initiative. The Federal law named Estatuto da Cidade (2001) finally adopted the syndicated urban operations as a tool for all the urban projects in the Brazilian territory.
Challenges: 
The Syndicated Urban Intervention is a legal instrument that provides the local governments with resources to undertake urban interventions for city improvements, in association with the private sector under a Public Private Partnership in which the Public Sector may be free from using public resources. Partnerships between public and private sectors in city management as a way of overcoming the economic difficulties the municipality faces are very welcome for the benefit of the city and its population.
Innovation: 
The strategy of PPPs encourages the civil society to get involved with the syndicated urban operations, in which the later takes a prominent role, since it holds a volume of capital that will help a poorly functioning state from a financial point of view. In its turn, the public sector, keeper of the regulatory power, will work with incentives to make direct participation in urban improvements - through the payment of consideration - attractive to the private sector.
Concept: 
The Syndicated Urban Operation is grounded in (a) publicly traded securities (known by the acronym CEPAC), which are the “currency” of acquisition of Constructive Potential, and (b) in the flexibility of urban parameters. The proceeds obtained by the municipality from the trade of the CEPACs have to be invested in the perimeter of the Urban Operation. This is a compulsory guidance for the fulfillment of the Operation's objectives. Indeed, the funds raised with the sale of the CEPACs goes for public investments. The concept of the Syndicated Urban Operation in Sao Paulo involves parameters that are only ours, namely, involvement in the process of the Brazilian SEC (CVM – Comissão de Valores Mobiliários), issue of the CEPAC, and its sale in the stock exchange. This system has been working well since 1995. It innovated and improved examples from abroad, such as Canada. This type of urban intervention is so convincingly viable that the Federal law enacted in 2001 (Estatuto da Cidade) included it among the urban intervention tools.
Description: 
Firstly, the municipality formulates a renowned urban intervention. Then, forward a bill to legislative approval, aiming to implement the development plan. At the same time, it calculates the cost of implementation to gauge the amount of CEPACs to be issued. Further, seeks the approval of CVM (the Brazilian SEC) for public issue of CEPACs. The CEPACs are sold only at public auction. In addition, the municipality can use the CEPACs it issued for payment of works of urban operation alternatively to pay in cash. By the methodology above, the Government can set a buildable stock in the area of the operation, launching early in the financial market securities equal to the total value of this stock. Of course, the great advantage of this system for the local Government is the possibility of anticipation of the collection, which shall be made regardless of the pace of progress of the operation. To take advantage of the additional duty of construction in the area, the developer would have to acquire CEPACs in the market and return them to the City Hall to take advantage of the benefit of soil-created.
Impacts: 
Planning should shorten the implementation time improvements in the object of urban operation region. In the City of São Paulo, the Syndicated Urban Operations accomplished twenty years. Therefore, the local authorities have accumulated a lot of experience in all this length of time. One cannot say that mistakes and imperfections have not occurred so far with the implementation of the Syndicated Urban Operations. However, all the experience accumulated in the past years must serve as cases for system improvement, whereas the concept that this instrument of urban intervention is undeniably beneficial for the population and cities, in the sense that it contributes to the streamlined improvements in urban implementation and may free the spending of public sector funds with the development. Moreover, it would be ideal if this urban intervention focused on the inclusion of the low-income population, i.e., it should avoid the divide in what low-income population is concerned. The low-income population cannot be expelled from the perimeter to be reached by the urban operation by reason of high rates of incentive resulting speculation caused by the plan.

Photo Gallery

Avenida Chucri Zaidan, Region of the Urban Operation Agua Espraiada, Sao Paulo, Brazil  – Photo by Calão Jorge