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This article, in slightly different form, originally appeared in the New York Law Journal, published by ALM, Real Estate Media’s parent organization.

Thinking green has become thenorm in real estate development. However,owners and developers—and even tenantsremodeling large spaces—do not have to goit alone. The government has implementeda number of programs to provide everythingfrom design assistance and tax benefits to anincrease in the number of ecologically viablealternatives in construction.

But what exactly does it mean to be agreen building? Green building is thedesign and construction of structuresand interiors giving careful considerationto three main elements: healthy indoorenvironment, maximum energy efficiency,and conservative, thoughtful use of naturalresources. Green buildings minimizenegative environmental consequencesby lessening changes to the local naturalenvironment, utilizing recycled or recyclablematerials, incorporating renewable andenergy-efficient power generation systems,using water resources more efficiently andproducing less waste. Green buildings alsoprovide employees with a healthier indoorwork environment by effectively controllingoutdoor air ventilation systems while simultaneouslyusing alternative paints, finishes,adhesives, furniture and fabrics that do notnegatively affect air quality.

In addition to the public relations benefitsof building green, there can be significantlong-term cost-savings opportunities. Aone-time investment premium of less than1% of first costs can increase energyefficiency over standard building code practicesby 20 to 30% (according to “Cost of Green Revisited: Reexamining the Feasibility and Cost Impact of Sustainable Design in theLight of Increased Market Adoption,” by Lisa FayeMatthiessen and Peter Morris, July 2007.Click on Cost of Green.)

A 2004 national study by Davis Langdon, a global constructionmanagement consultant, recentlyupdated through 2006, concluded that”there is no significant difference in averagecosts for green buildings as comparedto non-green buildings. Many project teamsare building green buildings with little or noadded cost, and with budgets well withinthe cost of non-green buildings with similarprograms.” The New York chapter ofthe US Green Building Council has also commissioned Davis Langdon toanalyze the cost of building green in NewYork City. That study is due by the springof 2008.

Terminology like being LEED-certifiedhas crept into everybody’s vocabulary,yet the requirements for such certificationoften seem daunting. While architectsand engineers generally lead the charge inthe design of green buildings, an owner mustbe educated to reap the greatest financialbenefits from its efforts. One source of technicaland financial assistance is the NewYork State Energy Research and DevelopmentAuthority (NY Serda), a public benefitcorporation originally created in 1975. Yetover the past 10 years, NY Serda’s focus haschanged.

Working collaboratively with businesses,academia, the federal government, theenvironmental community, public interestgroups, and energy market participants,NY Serda is striving to facilitate the widespreaddevelopment and use of innovativetechnologies to improve the state’s energy,economic, and environmental well-being.While it also administers programs for consumers(through its New York Energy $martProgram), NY Serda offers businessesenergy-efficient construction advice, services and funding for newconstruction and rehabilitation improvements.

NY Serda also offers a variety of green-building services to owners and tenantsunder its new construction program, ProgramOpportunity Notice (PON) 1155.8NY Serda provides cost-shared technicalassistance and financial incentivesto those building owners who institutemeasures that exceed standard practices.Such services include computer modeling;Assistance in obtaining LEED certification and NewYork State Green Buildings Tax Credits;and commissioning and life-cycle costinganalysis. Also available is assistance withcommissioning of existing buildings, referredto as “retro-commissioning.”

Financial incentives under the program are energy performance-based. Therefore, while some greenmeasures may not qualify for incentives,any level of green design is recognized andsupported by NY Serda. Various “shadesof green” are still considered and encouragedwhen applicants seek technical andgreen design assistance for new buildingor major renovation projects. Such assistanceis still available to analyze energy savings, indoor air qualityeffects, appropriateness of the technologyfor LEED certification, life cycle costsand other impacts.

In a continuing effort to promote greenbuilding, on May 12, 2000, the Green BuildingTax Credit program was signedinto law to provide tax credits to ownersas well as tenants of eligible buildings andinterior spaces that meet certain green standards.Initially, $25 million in tax credit componentcertificates were available during”Period One” from 2000 to 2004. During thattime, Credit Component Certificates wereissued to applicants on a first-come, first-servedbasis. Seven buildings received thosecertificates, completely exhausting the $25million allocation.

The law was amended in 2005, and theGBTC program extended for “Period Two”from 2005 to 2009, with an additional $25 millionin credits authorized. Those obtainingtheir initial certificates in Period Two willhave nine taxable years to claim the credit(2006-2014). The credits are distributed overa five-year period, and any unredeemed portioncan be carried forward indefinitely ortransferred to a new owner. In Period Two,there will be a maximum incentive of $2million per building.

Unfortunately, until the New York StateDepartment of Environmental Conservationpromulgates updated regulations to account for changes in otherstatutes and standards since the law wasenacted, applications for Period Two Credit Component Certificates cannotbe accepted. (Regulations establishing the initial standards toqualify for the credits became effective May 22, 2002.) However, buildings or tenantspaces with a final certificate of occupancyissued on or after Jan. 1, 2005, thatmeet the updated regulations will still beable to apply for a Credit Component Certificateonce the regulations are finalized.

While the statute is extremely technical,there are some general guidelines forthe program to enable owners and tenants todetermine whether their projects qualify. Tax incentives are availableto corporations, utilities, banks, insurancecompanies and individual taxpayers meetingthe statute’s requirements.

Eligible buildings under the GBTC programinclude: certain hotels and officebuildings having at least 20,000 sfof interior space; multifamily buildings with at least 12 units having atleast 20,000 sf; multifamily buildings, withat least two units, part of single or phasedconstruction, with at least 20,000 feet of interiors (provided at least10,000 sf is under constructionor rehabilitation in any single phase; orany combination of the above. Minimum standards require no more than 65%of energy use allowed under the New YorkState Energy Conservation and ConstructionCode for new construction and 75%for rehabilitation; additional criteria are setforth in the associated regulations.

Projects can qualify for credits under sixdifferent GBTC program components.

1. Whole Building Credit (available tothe owner or tenant)—where the basebuilding and all tenant space are green.Credit is available for new constructionor rehabilitation at 7% ofAllowable Costs (1.4% eachyear for five years) or 8% if inan Economic Development Area (1.6% each year for five years), witha cap of $150 per sf for basebuilding and $75 per foot fortenant space.

2. Base Building Credit (available tothe owner), for non-dwelling spaces.Credit is available for new constructionor rehabilitation at 5% of allowable costs (1% per yearfor five years) or 6% if in an EconomicDevelopment Area (1.2% per year for five years), with a cap of$150 per sf.

3. Tenant Space Credit (available toowner or tenant). Credit is available fornew construction or rehabilitation at 5% of allowable costs (1%per year for five years) or 6%if in an Economic Development Area(1.2% per year for five years),with a cap of $75 per sf. If thetenant space is less than 10,000 feet, the base building must be greento qualify.

4. Fuel Cell Credit for systems fueled bya “qualifying alternate energy source.”Credit is 30% of the capitalizedcost of each fuel cell (6% per yearfor five years).

5. Photovoltaic Module Credit: 100%of incremental cost (20% per year for five years) of building-integratedand 25% of the incremental cost (5% per year for five years)of non-building-integrated photovoltaicmodules.

6. Green Refrigerant Credit: 10% ofthe cost of new air conditioning equipmentusing an EPA-approved non-ozonedepleting refrigerant (2% per yearfor five years).

An eligibility certificate from an architector professional engineer licensed to practicein New York state is required in each year ofthe credit and must certify that the buildingor tenant space remains green and thatany fuel cells, photovoltaic modules and airconditioning equipment for which a creditis being claimed also remain qualified.

While only a handful of buildings availedthemselves of the significant tax creditsunder Period One of the GBTC program,hopefully more owners and tenants will applyfor these tax incentives once Period Twoapplications can be accepted. If green buildingsare comparable in cost to construct,realize meaningful energy savings over thelife of the building and qualify for tax incentivesand shared-cost technical support (while simultaneously promoting healthierwork and living environments) it’s hardto imagine why all new construction andbuilding rehabilitation in New York won’tbe going green.

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