Legislating LEED: Developers worry about new city law

Today I am posting an article from the Maryland Daily Record about LEED mandates. More and more LEED certification is becoming the law. Developers and construction professionals need LEED-AP's on their team.


Legislating LEED: Developers worry about new city law
ROBBIE WHELAN
Daily Record Business Writer
July 23, 2009 5:25 PM
Starting this month, everything’s got to be green. A new law in Baltimore City requiring builders to adhere to strict green building regulations on new construction projects and major renovations took effect July 1, and with the city still drafting the specific regulations that accompany the bill, some developers are worried that the bill may have unintended negative consequences. Council Bill 07-0602, which was signed into law by the mayor more than two years ago, was sponsored and shepherded through the lawmaking process by Councilman James Kraft, whose district includes several neighborhoods in the southeastern part of the city. Kraft has taken the lead on the most recent sustainability and environmental policies in city government. Any new construction, including both free-standing structures and additions to existing buildings, must adhere to the LEED-Silver standard, a benchmark set by the U.S. Green Building Council, a Washington-based nonprofit group. LEED, which stands for Leadership in Energy and Environmental Design, is based on a point system in which builders collect points for adding “green” amenities such as energy-efficient materials, power-saving heating systems and clean stormwater management systems. Baltimore’s new law effectively makes LEED part of the city’s building code. If you don’t commit to building green, you will no longer be approved for a building permit in the city. If your building or renovation does not comply with LEED, you will not be issued an occupancy permit. “I think that in our efforts to build a sustainable city, this is a good bill, because if you follow these guidelines, the buildings are cheaper to operate in terms of efficiency,” Kraft said. “People who work in these buildings have fewer sick days, better attitudes. There are all these benefits to green buildings.” But those benefits, Kraft acknowledges, come at a cost. A range of reports have shown that building to LEED standards — there are four: basic certification, silver, gold and platinum — can add up to 12 percent to the construction of a building. All points aren’t equal The reason is that some points are easier — and cheaper — to obtain than others: For example, if a building is located near major public transit lines and the workers who come to it use a bus rather than a car, that’s a point toward LEED certification. But others, such as the use of low-emissive glass and wood in buildings, can be quite expensive. “The objections we’re getting are people who by and large just don’t want to do it,” Kraft said. “There are two avenues of argument. One is that there really isn’t any money right now, it’s hard enough to get development money for anything, why make us jump through this hoop? The other avenue is, it really costs more to build green buildings. That avenue, I think, is a dead end. I think it’s been shown that a building can be built green for the same price or even less in some cases.” Stuart Kaplow, a local real estate lawyer who is well-versed in the rules and regulations associated with sustainable development, said that the real pain will be felt by developers who want to renovate their properties, but are required to do so according to LEED standards. “Baltimore City is quickly going to become one of the greenest cities in America,” he said. “The drag on the business community will be major renovations … Let’s say you need to totally refit out for a national retailer. You have to renovate one whole floor, new HVAC, and you have to do that entire renovation to a LEED-Silver standard. It requires more sophistication, and potentially costs more. Some of these buildings you’re renovating in Baltimore City could be 100 years old with granite footers and stone walls.” Especially vulnerable are developers doing historic rehabs. Projects seeking state and federal historic tax credits, which often provide 20 percent of the cost of a renovation in tax incentives, sometimes preclude builders from using the types of materials and building schemes that LEED requires. Windows of opportunity Joshua Neimann, whose company, Hybrid Development, is working with developers David Holmes and Daniel Winner to renovate five buildings in Fells Point as part of a $60 million mixed-use development, raised concerns that the historic elements of his project, especially the windows, might clash with the green elements. About $10 million of his project will be put into one building on South Broadway, the northern portion of the 19th-century Broadway Market. The developers are seeking millions in historic tax credits to rebuild the structure as it was in the late 1800s, with arched, steel-sash, single-pane windows, an architecturally significant detail that is about as far from “green” as you can get. “I support the mayor’s goals of a cleaner, greener Baltimore. What concerns me is that there’s a potential conflict between the goals of LEED and the goals of historic renovation,” Neimann said. Uptown, another developer, RWN Development Group LLC, is halfway done with a historic renovation of the Brexton Hotel, a triangular, 19th-century brick structure that was the childhood home of famous Baltimore socialite Wallis Warfield. John Ginnever, an executive vice president with RWN, said all the permitting on the Brexton was done before the green building law took effect, but said that the project would be very difficult to pull off with a LEED requirement. However, another project in the pipeline for RWN, the conversion of a historic downtown grain warehouse into an apartment building called the Flour House, will have to comply with the new green standards. “Flour House will need to be LEED-Silver, and one of the biggest issues we’re going to have is meeting LEED-Silver on the windows,” Ginnever said. Michael Goodwin, a principal with Baltimore architecture firm Design Collective Inc., had a similar experience with another project: the American Can Company on Boston Street in Canton. There, a local developer renovated the historic factory building as a mixed-use space. Goodwin said that 1,300 feet of a west-facing wall with lots of glass needed to be preserved for historical reasons, but also needed to be energy-efficient. “How green are you going to be able to be on that project if you’re replacing uninsulated single-pane glass and then increasing your [heating and cooling] capacity to deal with that extra heat gain? It’s just an enormous chasm as far as energy is concerned,” he said. “The reality is that right now, there is still an unknown premium to doing something green … The premium, which is 4 or 8-to-12 percent on a green project, you can justify it if it’s a build-and-hold type of company, and in the boom we’ve been experiencing in the last four or six years, there haven’t been a lot of those.” Where’s the incentive? Financing for American Can, he said, only became feasible when a tax credit law providing major incentives for the redevelopment of brownfields areas went into effect. And many Baltimore developers say that a green building requirement needs the same sort of thing: an incentive package to make it affordable. “The incentive needs to be bigger than immediate upfront costs for [green] certification,” Goodwin said. In the past two years, Kraft has also introduced three different packages of tax breaks for green buildings, which have been criticized in committee by the city’s finance department because it would forfeit too much property tax revenue. Kraft said in an interview this week that he expects the tax credit bills to come before City Council again before the end of the year. Baltimore’s surrounding counties already have tax credit programs for new green buildings. In Howard County, for example, a comprehensive green building package took effect a year ago, requiring new commercial buildings of 50,000 square feet or larger to be LEED certified at the system’s lowest level. Any building of 10,000 square feet or more that receives at least 30 percent funding from the county must be LEED Silver. In early 2008, the county approved five-year tax credits for buildings that use LEED — 25 percent breaks for LEED Silver, 75 percent for LEED Platinum, the system’s highest rating. By contrast, Baltimore County offers only tax credits for green building. Two bills, enacted in 2005 and 2007, deal with commercial buildings and houses, respectively, and offer up to 80 percent and 100 percent tax breaks over five years for building at LEED-Platinum standards.