Local Governments Use Both Carrots and Sticks to Encourage Green Buildings

Local governments are turning to a variety of tools – both carrots and sticks – to reduce greenhouse gas (GHG) emissions from commercial and residential buildings. Early efforts saw municipalities using their buying power to achieve lower GHG emissions – for example, by insisting on LEED certification for new public buildings. In the past several months, however, cities have increasingly begun using their regulatory and taxing authority to compel private developers and businesses to reduce emissions from commercial and residential buildings.

In addition, as previously reported in this newsletter[1] some cities and counties are requiring developers to account for, and mitigate, their GHG emissions as part of the environmental review process for new construction. On December 3, 2007, for example, the City of Seattle adopted an ordinance that will take effect on March 31, 2008, which will require developers to quantify GHG emissions for all projects subject to the City’s environmental review and permitting process under Washington’s State Environmental Policy Act.[2]

The potential reductions in GHG emissions that these local government initiatives can achieve are significant, because construction is the nation’s biggest manufacturing industry and buildings account for 39% of U.S. energy use, 70% of electricity consumption, and 12% of potable water use.[3]

What is Green Building?

“Green building” is a collection of design and construction strategies that reduce or eliminate the adverse environmental impacts of a building, while providing healthy indoor space for occupants. Reduced energy and water use is a frequent goal of green building programs. The increased costs of initial construction are generally recouped through reduced operational costs over the life of the building.[4]

The U.S. Green Building Council (USGBC) has developed a green rating system called LEED (Leadership in Energy and Environmental Design) that many cities have integrated into their building ordinances or green building programs. LEED encourages an integrated design process and establishes performance goals in the form of credits or “points” for achievements in the areas of (1) sustainable site development; (2) water efficiency; (3) energy and atmosphere; (4) materials and resources; (5) indoor air quality; and (6) innovation and design.[5] To obtain LEED certification, a developer must document the specific credits that the building will achieve and submit the documentation to the USGBC for certification. There are four progressive levels of certification: Certified (26-32 points); Silver (33-38 points); Gold (39-51 points); and Platinum (52-69 points). As of August 2007, USGBC has certified over 1000 commercial buildings and over 7,300 more have registered, which is the first step toward certification. The third-party certification process has made the LEED system an attractive mechanism for state and local governments to measure the energy and environmental performance of new buildings.

Building Green Public Buildings

More than 25 American cities of all sizes have started green building initiatives by setting mandatory or aspirational goals for all new public buildings to meet some level of LEED standards. For example, Atlanta, Georgia requires all city-funded projects over 5,000 square feet or costing $2 million to meet the LEED Silver award. Publicly funded new and renovated projects over 5,000 square feet in Bellingham, Washington, must also achieve LEED Silver standards. In Los Angeles, since 2002, 48 public buildings were designed to meet LEED standards. Houston adopted a resolution in 2004 stating that all city-owned buildings over 10,000 square feet shall use LEED to the greatest extent practical and reasonable, with a target of LEED Silver certification. Boston is the first city to require all public and private development projects over 50,000 square feet to meet the LEED for New Construction standard.[6] USGBC estimates that 46% of LEED projects are owned by federal, state and local governments.

In February 2000, Seattle adopted a sustainable building policy using LEED certification as a design and measurement tool. All newly constructed or renovated public facilities and buildings over 5,000 gross square feet of occupied space must meet a minimum LEED Silver rating.[7] As of October 2005, Seattle had 38 completed or planned projects targeted for LEED certification, including Seattle City Hall (Gold), the Seattle Public Library Central Library (Silver), and the Seattle Justice Center (Silver).[8]

In 2004, Chicago adopted a set of standards known as “the Chicago Standard” for public buildings derived from the LEED system. The Chicago Standard focuses on site considerations, water conservation, energy efficiency, smart materials (including recycled materials) and high indoor air quality.[9] Chicago also has a program that promotes the use of rooftop gardens on top of private and public buildings to reduce energy consumption.[10] The city recently announced a program to replace alley paving with environmentally sustainable porous materials designed to filter surface water before it reaches groundwater.[11] A 50% green roof and LEED certification are required for all public projects in Chicago, except community centers and schools. Community centers and schools must either have a 25% green roof or LEED certification plus a 10% green roof, and must also focus on indoor air quality and daylighting.

Local governments have also dedicated staff to providing information, education and planning resources to private developers. Some cities, such as Seattle, have award programs to recognize and encourage environmentally sensitive private projects.

Higher Density and Fee Incentive Programs

Many local governments have stopped short of requiring private projects to achieve green building standards, but instead have instituted incentive programs with the aim of encouraging private developers to adopt green standards. These incentives include waiving or refunding permit fees, waiving property taxes, or modifying land use codes to allow greater density or size for green buildings.

Baltimore County, Maryland, for example, gives a county property tax credit to any commercial building that achieves LEED Silver certification for ten consecutive years. Honolulu provides a one-year exemption from real estate taxes for all new commercial, resort, hotel and industrial construction that achieves LEED certification. If a private commercial, office, industrial or multi-family project in Babylon, New York achieves LEED certification, the town will refund the certification fees paid to USGBC by the developer. Local governments such as Miami-Dade County, Florida; Costa Mesa, California; Issaquah, Washington; Chicago; San Francisco and Burbank, California, offer some form of expedited permit processing and reduced permit fees to private projects, depending on the level of rating and sustainability achieved. King County, Washington established a green building grant program that offers from $15,000 to $25,000 in grants to developers who meet a minimum of LEED Silver certification.

Several municipalities, including Seattle; Nashville; Acton, Massachusetts; Bar Harbor, Maine; the Township of Cranford, New Jersey; Portsmouth, New Hampshire; and Arlington County, Virginia, have programs which reward projects that meet LEED standards with density incentives. The programs allow developers to request a larger building than is normally allowed under municipal codes if the project receives official LEED certification from the USGBC.

The extra space allowed under the Arlington County program varies depending on the project and on the LEED award sought.[12] Such projects, knows as “site plan projects,” must include a LEED accredited professional as part of the project team, must submit a LEED scorecard as part of the application, must prepare and implement a construction waste management program, and, if a multi-family residential project, must use appliances and fixtures that meet EPA’s Energy Star standards. All site plan projects that do not receive LEED certification must make a contribution to the county’s fund for green building education and outreach, calculated at a rate of $0.03 per square foot.[13]

Seattle’s LEED incentive, adopted in 2006, applies only to commercial and residential buildings in downtown zoning areas.[14] Seattle allows greater heights and/or greater maximum floor area if a project achieves a LEED Silver rating, along with contributing to affordable housing and other public amenities.[15] The project applicant submits a letter of intent to achieve Silver certification, and permits are issues based on this commitment. If the applicant fails to submit documentation that verifies LEED certification, the city assesses a substantial penalty. Penalties are put into a fund to support market adoption of green building.

Colorado: Green Residential Standards

Local governments in Colorado have taken a different tack by designing programs aimed at achieving higher energy efficiencies in residential projects. For example, in 2006, Eagle County, Colorado implemented the Eagle County Efficient Building Code (ECOBuild) that requires all new single and multi-family homes as well as residential expansions of more than 50% of expansion to comply with point-based prescriptive measures in siting, water conservation, materials, efficiency, renewable energy, and indoor air quality. Projects achieving LEED certification are exempt from the program. Homes that obtain points above the required minimum are eligible for rebates of 25% off their permit fees, up to $5,000, as well as additional 10% rebates depending on the number of points obtained.

Boulder, Colorado is currently considering amendments to its residential construction codes that will establish even more stringent energy efficiency requirements than its existing “Green Points” program for new homes and substantial additions to existing homes. According to city staff analysis of the proposal, “Building codes should evolve to support and balance community sustainability objectives, including energy efficiency, reduction of carbon emissions and waste-reduction, with life-safety requirements.” Building permit applicants would choose from a menu of building components such as lighting, solar energy, planting shade trees, and using recycled materials in order to accumulate enough Green Points for permit issuance. The staff analysis estimates that the proposed mandatory measures would increase hard construction costs to new home builders by approximately one to five percent.

Portland, Oregon: Proposal for Mandatory Carbon Tax

At last month’s annual Greenbuild International Conference & Exposition in Chicago, Portland Commissioner Dan Saltzman announced that he will ask the Portland City Council early next year to establish a carbon tax on new housing that merely meets, rather than exceeds, building code requirements for energy efficiency.[16] Developed by the city’s Office of Sustainable Development, the proposal would provide substantial incentives to construct buildings that are very energy efficient (saving at least 45 percent more energy than the code requires) and meet the highest green building standards. The revenue generated by the carbon fee charged to buildings that only meet existing minimum code requirements for energy efficiency would fund the proposed incentives program. Projects that attain “moderate performance, such as 30 percent less energy use than required by code” will not have to pay the carbon fee.[17] The plan would also require an energy building performance rating for all commercial and residential buildings, either at time of sale or lease, or by a specific future date.[18] Reaction to the proposal from area developers was mixed, with one major developer, Gerding Edlen, endorsing it, while representatives from two other building organizations expressed concerns about a mandatory program.[19]

Portland officials have not yet publicly presented the details of the carbon fee program, but are scheduled to do so before year-end. If passed, the carbon-fee rules would become effective in 2010, allowing the city a two-year period in which to provide more assistance, training and outreach to builders. Based on the reaction to the proposal from local developers, it remains to be seen whether the City Council will go along with the proposal.[20]

Conclusion

As more and more local governments move from imposing green building standards only on public projects toward stimulating green building by the private sector, project proponents need to consider the benefits as well as the restrictions implemented by towns and cities of all sizes. The Portland proposal may serve as an indication of the type of restrictions and penalties that may be imposed by municipalities, if local governments perceive that green building standards are not being embraced quickly enough for private projects.

For more information about green building programs, please contact Linda Larson or any member of Marten Law Group’s Climate Change/Sustainability Practice Group.