Business owners considering the construction of a new building or the substantial renovation of an existing structure should consider using green-building practices to capitalize on the economic incentives available. While these incentive programs are not always well known or publicized, they can lead to substantial savings, both initially and throughout the life of the building. […]
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Business owners considering the construction of a new building or the substantial renovation of an existing structure should consider using green-building practices to capitalize on the economic incentives available.
While these incentive programs are not always well known or publicized, they can lead to substantial savings, both initially and throughout the life of the building.
These hard and fast savings, when combined with the other benefits of green building — energy savings, increased foot traffic, higher rents, positive public relations, increased employee morale, productivity, and reduced sick days, among others — make the use of green-building practices beneficial.
Federal green-building incentives
On the federal level, Internal Revenue Code Section 179D provides a deduction based on new energy-efficient construction or improvements in lighting, HVAC, and the building envelope.
Each of the three areas can qualify for a minimum deduction of $0.30 per square foot and a maximum of $0.60 per square foot, for an overall combined maximum deduction of $1.80 per square foot. Partial deductions are also allowed and the deduction can be transferred if desired to certain third parties, such as architects or engineering firms.
In order to receive any deduction, a consultant is needed to measure the energy-efficiency savings as compared to the baseline requirement in ASHRAE Standard 90.1-2001.
The federal deduction is only available until Dec. 31, 2013. However, according to President Obama’s latest budget proposal as part of his Better Buildings Initiative, this deduction would be converted into a credit and be more widely available.
Incentives available through NYSERDA
The New York State Energy Research and Development Authority (NYSERDA) has myriad programs available to assist commercial-building owners and developers. Through a power-bill surcharge, known as the system-benefits charge, NYSERDA has a substantial amount of money available for owners to increase the energy efficiency of their buildings, build new energy-efficient structures, and implement renewable-energy sources — notably solar and wind, among others.
NYSERDA’s “New Construction Program” is the most conducive for green-building projects. NYSERDA is currently accepting applications for this program through the end of 2015 or until funding is depleted. The new construction program is available for the renovation of an existing building or the construction of a new facility without building-size minimums or maximums.
A building owner, or lessee with more than five years on a lease and the right to make improvements, is eligible for the program if he/she is or will be an electric or gas distribution customer of a participating utility, and currently pay or will pay into the system-benefits charge.
Through the new construction program, NYSERDA provides outreach-project consultants and offers financial and professional assistance regarding capital-cost incentives, green-building incentives, design incentives, and building-commissioning incentives.
In certain instances, NYSERDA can provide financial assistance to cover up to one-half of the program participant’s energy-audit expenses and costs of any third-party green-building consultant, up to certain maximums.
New York’s green-building tax credit
In 2009, New York State was one of the first states to pass a green-building tax credit and set aside $25 million in funds for such credits. Those funds were quickly depleted that year, and were meant to be replenished each subsequent year.
Unfortunately, due to the ongoing recession, the legislature has yet to reallocate any additional funding for the pool. If it does so in the future, the credits would be available for owners of buildings that meet the state’s green-building regulations (which differ from LEED), as certified by an architect.
Other state financial benefits
There are various other state financial benefits available for building owners seeking to make energy-efficient upgrades, including “on bill” financing and unsecured loans through the Power NY Act of 2011 and the Green Jobs/Green New York Act.
A number of proposed legislative bills would also benefit green building, including a proposal to allow municipalities to grant tax exemptions for real property meeting LEED standards on a sliding scale, based on the level of certification achieved.
Local-government opportunities
On the county level, the Onondaga County Industrial Development Agency (OCIDA) has a green pilot program available for new construction. It works similar to a regular PILOT program, where a building owner deeds its property to OCIDA, a tax-exempt entity, and the owner thereafter makes payments in lieu of taxes to OCIDA. The Green PILOT program grants an enhanced PILOT schedule based on the level of LEED certification obtained.
While green-building accreditation may appear to be a complicated and expensive proposition at first, the many benefits, including the financial incentives, make it worthwhile in the majority of cases.
Michael T. Stanczyk is a construction, real estate and business attorney at Mackenzie Hughes LLP, and a LEED green associate, accredited by the Green Building Certification Institute of the U.S. Green Building Council. Contact Stanczyk at (315) 233-8262 or email: mstanczyk@mackenziehughes.com
