1. Where a market for coverage exists, products emerge. He gave the example of auto insurance as an instance where insurers met a need for a product.
2. Other environmental regulations, such as RCRA, require the use of financial assurance products. These funds must be sufficient to provide for satisfaction of the relevant statute.
3. The financial instrument is not financially burdensome because the District (and other entities) frequently require various payments, deposits, or guarantees to be made at the start of construction and those fees have not (in this telling) imperiled or impeded development.
4. Although the DDOE will receive any forfeited funds, this does not create a conflict of interest because such a funding mechanism for regulatory agencies is fairly common.
In order of reverse importance, Mr. Hawkins misstates the objections to the performance bond and through an imprecise comparison obscures the larger abdication of a significant public policy goal.
Defense 4 (Conflict of interest): Per testimony to the Council of the District of Columbia, DDOE required a one-time supplemental appropriation of $725,000
for developing, training, and implementing the GBA. States Hawkins, "We expect that the increased funding will
be used primarily to provide technical and engineering support, via contract, so we can achieve the following key objectives: leveraging resources and knowledge across the government to ensure full GBA implementation for public and publicly-financed buildings; finalizing and implementing the revised “green” building code; training and educating agency and private sector partners to implement LEED and other green requirements; and developing detailed green building design specifications that promote application of innovative methods and practices.
Going somewhat further afield, "DDOE also seeks to become a primary green building resource for the development community, residents and non-profits, so as to encourage the widespread adoption of green building principles and standards. Related, but separate from this enhancement, is also the Mayor’s proposed funding for a climate change program. This proposal, which complements the benefits generated by the Green Building Act’s requirements, designates one FTE to work specifically on the District’s response to the issue of global warming."
Alone, this is not a significant worry, however DDOE's FY 2009 Gap Closing Plan
(page 48) mentions "Stormwater Administration: Reduce FY2009 enhancement funding for Low-Impact Design to $375,000 from total of $750,000. DDOE successfully completed the process to increase revenue from stormwater fees, and, therefore, has significantly more funds to implement Low-Impact Design projects. DDOE seeks to keep a portion of the enhancement, because this enhancement will
specifically target the older portion of the city within the combined sewer area."
Assurances that this will not become a revenue source in the future are not wholly credible, but given the impact fees and proffers typically required by suburban jurisdictions, some conflict of interest is not wholly objectionable.
Defense 3 (Reasonable cost): The assertion that the performance bond does not create an undue burden is offered with no serious evidence of fact. Mr. Hawkins' testimony ignores the cumulative effect of fees, bonds, and other charges, and fails to acknowledge that the imposition of up to $3m (or 4% of total building cost) in the form of a bond or letter of credit presents a true and verifiable cost to a developer. His assertion that the District's Condominium Law, which requires 10% of the construction cost to be secured by escrow or letter of credit, had no negative effect on condominium development in the District is specious. It ignores the ability of a developer to build a non-residential project or to withdraw a condominium filing and convert the project to rental apartments or alternate uses. The policy goals in both cases may be admirable but to suggest "fears of business disruption from this new assurance requirement are unwarranted" is woefully unsupported by testimony.
Defense 1 (Availability of financial products): Mr. Hawkins acknowledges appropriate instruments "do not currently exist in the financial assurance world," and continues with the <em>non sequitur</em> "Before there were automobiles, there was no such thing as car insurance."
More directly, auto insurance is an extension of tort law, and vehicle insurance exists to compensate a party for its loss, whether personal or property. These loses are either known (cost of repair or treatment) or negotiated. In the case of the DC GBA, the compensated party (District's Green Building Fund) is not the party of loss. Regarding forfeiture, the legislation states "All or part of the performance bond
shall be forfeited to the District and deposited in the Green Building Fund if the building fails to meet the verification requirements." There is no method in the legislation to negotiate (or dispute) the severity of loss or even identify the loss. Certification of LEED projects is made by the US Green Building Council (USGBC), a non-governmental entity, and includes a mix of objective and subjective requirements
. Because a failure to achieve the desired certification could be the result of subjective failures, a surety bond
is an inappropriate method to ensure compliance.
Defense 2 (Existing environmental regulation): Most alarming is Hawkins citation of the Resource Conservation and Recovery Act (RCRA) as the model for implementation and enforcement of the DC GBA. The legislative history of RCRA began with the 1965 Solid Waste Disposal Act with multiple amendments in the intervening 40 years. These environmental laws governing the disposal of solid and hazardous waste
were approved by Congress and are implemented by the EPA. The policy and compliance mechanisms of RCRA are known
and the regulations can be modified
through petition, legislation, or judicial appeal. Like most regulations, RCRA has a defined period for an agency to accept, review, and opine upon submissions. Most importantly, it offers multiple methods of providing financial assurance for clean up obligations (RCRA Financial Assurance Training Module
, pg 9).
By contrast, LEED is administered by the non-governmental USGBC
, certified by the Green Building Certification Institute
and modified through a non-public process with limited avenues of appeal. DC has simultaneously endorsed the goals of LEED/USGBC and abdicated any oversight of this policy to the USGBC without modification. By leaving review and certification to USGBC and its review processes
, neither the developer nor the District have a method of decision making, scheduling, or directly participating in the revision of the LEED guidelines.
The expressed desire of the DC GBA to create "an integrated, whole-building approach to the planning, design, construction, operation, and maintenance of buildings and their surrounding landscapes that help mitigate the environmental, economic, and social impacts of buildings, so that they are energy efficient, sustainable, safe, cost-effective, accessible, healthy, and productive" is noble and fulfills a public good. The legislation is poorly served by the misleading and inaccurate testimony of its supporters and its misuse of LEED-certification without an appropriate and identifiable method of modification and appeal needlessly antagonizes a natural constituency.