Honolulu may soon consider passing a bill that provides incremental real property tax breaks to LEED-NC certified projects based on the level of LEED certification achieved. Because the bill has so many flaws, it is the perfect starting point for discussing what should be considered before LEED, or any other green building rating system, is written into law. Here are 10 critical points to consider before introducing any such legislation:
1) Mandate vs. incentive
It seems that industry-wide and maybe in life in general, people flock to incentives and cringe at mandates. However, using LEED, Green Globes, Energy Star, and ASHRAE 90.1, etc as resources to develop building code amendments (as Boston has done) keeps the power within your government and raises the bar uniformly for building projects without having to use tax dollars as incentives. Incentives will likely cost taxpayers money – it is important to articulate exactly what taxpayers are getting in return for the expense. Hopefully the value will be clear not controversial.
The certification process for LEED and Green Globes is run solely by the USGBC and GBI, respectively. Providing incentives for obtaining certification through a private corporation empowers these organizations to decide who gets an incentive and who doesn’t without any government oversight. Establishing an in-house city/state run green building certification system is one way to maintain local control. Any certification fees could be used to operate the program or maintain city/state buildings.
3) New vs existing buildings
There will always be more existing buildings than new construction projects. Is it appropriate then to focus incentives on new construction? New construction is a blank slate with unlimited potential to be truly ‘green’, but retrofitting existing buildings with new, more efficient equipment and ensuring proper maintenance can result in ‘greener’ buildings as well.
4) Tax dollars – how big of a hit and who gets the money?
In Hawaii, LEED-NC projects typically consist of large-scale luxury developments. Several such high-rises were recently built with units selling from $500k to well over $1M each. Any uncapped real property tax break is potentially a substantial amount of money, which incidentally will likely end up in the hands of affluent foreign investors that can afford to make such a purchase. If you must provide tax incentives for LEED certified buildings, consider that LEED Silver is fairly easily achievable. Require Gold (or three Globes) or higher to get more bang for the taxpayer buck. Or, consider capping the amount of tax forgiven so the sky isn’t the limit.
5) Incentives without independent rating systems/tax breaks
Cities all over the country are coming up with creative ways to encourage ‘green building’ while taking the burden off taxpayers and/or leaving LEED out of it:
Huntington, Long Island: Taxes developers $1 per square foot and returns 80% of total upon gaining LEED certification. Max fee is capped at $200k.
New York City Green Building Tax Incentive: Total amount of money given is capped over nine years, ‘green building’ definition is adapted from LEED, program is prescriptive, clearly specifying what is required to qualify for the tax break instead of providing prerequisites and a variety of options for certification as LEED does.
Portland, OR Grants: $425k total was awarded from a 5-year $2.5M fund, as part of a competitive program to encourage innovative building projects, to 7 building projects. This program is scalable – scale down to provide small $5000 grants to individual community members or non-profits to complete ‘green’ community projects, scale up to encourage the implementation of larger and more innovative ‘green building’ technologies.
CA state building code: California now requires a 15% reduction in energy use (baseline is former standard), aims for a 50% reduction in landscape water use, and plans to update the code in 2010.
Also consider adopting a program that provides incentives for ‘certifiable’ projects as opposed to certified projects like Boston and Dallas have. This eliminates the question of what happens if a project expects certification but is denied, but also creates a new issue of how to define ‘certifiable’.
Someone recently mentioned that the energy consumption of a LEED project in Washington state was found to be 60% higher than design. While this was not readily verifiable, it raises a good point – where is the data to support the claims LEED and other rating systems make? How much energy or water are you actually saving, how much better is the indoor air quality…What exactly are you getting by investing in LEED (or Green Globe) certification? For example, maybe low-flow fixtures were installed, but do people flush ten times more than the design assumption thus consuming significantly more water than expected? Do you actually have a recycling program in operation, or just an empty space on your property designated for recycling? There is no ongoing monitoring of performance – once you are certified you are free to operate the building however you want even if it contradicts the system you got the certification from. Cost savings (if any) are not being tracked or documented here. Before creating incentives for such a program, perhaps create a government program that enables the building industry to report itemized costs for certified buildings and enables building owners to monitor and report operating conditions then use this data to determine the true value of certification. If LEED incentives are a must, consider adding a ‘sunset clause’ to the legislation to provide an opportunity to re-evaluate the effectiveness of the program.
7) Local factor
Environmental concerns vary from place to place. In Hawaii, most places have enough water but are starved for land and open space, yet LEED places the same credit value on water efficiency and development density. Also, some credits may be irrelevant to a tropical climate since they were written with the four-season U.S. mainland in mind. To effectively build ‘green’, a rating system or any legislation must have the ability to adapt to an area’s specific needs. Green Globes does this by allowing a project to opt out of certain credits that are not applicable.
9) Legal issues
The possibility of antitrust suits (as a result of specifically naming just one rating system in law) has been mentioned, and while one could make a case it is unlikely we’ll be seeing this headline any time soon due to the complexity of proving it.
Specifications have not evolved as quickly as these rating systems have. As a result, we may see an increasing number of disputes arising when a contractor does not fully understand what an architect and/or engineer requires of him in order to achieve LEED/GG certification. There was a project where specs stated that the contractor was required to provide the LEED required 14,000 cfm building flush out but because the specs did not specifically outline how this should be done, the contractor did not account for associated costs in his budget. In Maryland, a contractor was sued when a 23-story condo project did not receive its expected $635k green building tax credit.
Design professionals also take on greater risk when agreeing to provide innovative design features. Insurance companies may determine such projects fall beyond the standard of care and decide to not provide any coverage.
If legislation provides incentives specifically for LEED certified projects, manufacturers could potentially claim they have been excluded from the market if they sell a product certified by one organization but not certified by the organization that LEED specifically awards credits for. This has not happened yet.
A suit was recently filed by industry giants against the city of Albuquerque arguing more stringent local energy codes are preempted by federal regulations.
10) Which version?
If you are compelled to pen LEED or any other rating system into law, you must consider which version you want to adopt. These rating systems are speedily evolving. What will be written into the next version of LEED is anyone’s guess. You don’t want to be forced to provide incentives for something that no longer promotes your green building goals.