Green Building Law Update : Green Building & Construction LEED AP, Lawyer & Attorney Chris Cheatham : Washington DC, Virginia, New York City

Three weeks ago, Washington DC was hit by both an earthquake and a hurricane. But this was not the most shocking development during the week -- at least for me.  

Here's what shocked me the most: I learned there is a chance that LEED bonds could be available in our nation's capital.

On Wednesday, August 24, I attended a meeting of the DC Green Building Codes working group. The topic to be discussed was the DC Green Building Act's LEED bond requirement. For the uninitiated, the DC Green Building Act requires that all new construction in D.C. greater than 50,000 square feet be LEED certified starting January 1, 2012. Project developers have to post a bond guaranteeing the certification. The bonds range from 1 to 3 percent of a project's total cost, and can be as much as $3 million. 

I have been writing about the LEED bond requirement since the first week of this blog. I once compared LEED bonds to unicorns because they only existed in a fantasy world. 

LEED bonds do now exist and have been underwritten to support projects applying for the Arlington County, Virginia bonus density program. But it is unlikely that LEED bonds were going to be underwritten in Washington DC due to problems with the Green Building Act.  At the working group meeting, the SFAA and NASBP issued a white paper (PDF) summarizing the Act's many problem, including:

• "The regulations should state the developer must furnish the bond"
• "The regulations should provide for claims less than the full bond amount." 
• "Consider the relationship between the bond amount and the financial thresholds required by the surety. . . . We suggest that the regulation should set the maximum amount at a lower level that is sufficient to provide the necessary financial protection to the District." 
• "The regulations should set forth the appeals process by which a developer can appeal a USGBC determination.  Notice of appeal should be provided to surety." 

The last issue is of most interest to me.  The D.C. Department of the Environment (DDOE) has indicated that a party other than the US Green Building Council could determine compliance with LEED certification.  Whether these third-parties would be in the form of a government agency or a for-profit company remains to be seen.  But it would certainly be interesting to have another entity looking over the shoulder of the US Green Building Council. 

The DC government has less than four months to revise the Green Building Act to reflect the suggested changes in the SFAA and NASBP white paper.

Will DC make the necessary changes to the Green Building Act by January 1, 2012?

Photo credit: Cape Town Craig

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If the International Green Construction Code (IGCC) is successful, green buildings will soon become the rule instead of the exception.  By codifying green building standards, the IGCC has the potential to make major strides to advance green building practices on a scale that has been unattainable through LEED and other similar voluntary green building standards.

We are currently in the period for public commentary on the proposed International Green Construction Code (IGCC), we at Green Building Law Update have decided to do a series highlighting some of the proposed IGCC provisions.  Most of you do not have time to read the entire 243 page proposed code but that is what interns are for.  

If your city decides to adopt the IGCC, Green Building Law Update wants you to be prepared and know what it means for you and your business.  Each Wednesday we will post a proposed code section and a short analysis.  Please feel free to discuss the pros and cons of the proposed code in the comments.  Please also note that if you are especially passionate about a certain provision of the IGCC that the public commentary period runs until August 12, 2011.  The IGCC is expected to be finalized by January 2012.

Photo Credit: International Code Council

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I have been amazed at the immediate interest generated by the International Green Construction Code (IGCC).  

Despite the fact that the IGCC is still in its infancy, there are a number of states and municipalities closely studying it for adoption.  We have already discussed Rhode Island’s adoption of IGCC for public buildings.  More significantly, legislation was introduced in Maryland just a few days ago to allow statewide adoption of the IGCC.  

Based on the interest in IGCC, I have teamed up with BasicGov and Bob Kobet to present a free webinar related to green building code adoption:

“The Reality of Implementing Green Building Programs in Your City”

The webinar is FREE and will take place on February 23 at 2 pm eastern.  During the webinar we will cover the following topics:

• The basics of IGCC
• Best practices for implementation of green building codes
• Problems that have arisen in jurisdictions that have adopted green building codes

I hope you can join us.  And please pass on the webinar information to your favorite city official or planner.  

Disclaimer:  I am being paid to speak at this webinar. 

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Every year, as the calendar turns over, a host of new regulations take effect.  In California, January 1, 2011 marked the introduction of CALGreen, the California green building code.  The California government has produced a guide to CalGreen, which I found informative:

“The 2010 California Green Building Standards Code is a code with mandatory requirements for new residential and nonresidential buildings (including buildings for retail, office, public schools and hospitals) throughout California beginning on January 1, 2011. The code is Part 11 of the California Building Standards Code in Title 24 of the California Code of Regulations and is also known as the CALGreen Code.”

If you are interested in a more thorough review of CALGreen, I would recommend Imad Naffa’s post on the subject.  Here are some quick thoughts I have on CALGreen:

• Whenever I read about new building codes, I always wonder whether code officials will be prepared to enforce them.  This question is specifically addressed in the guide: “Chapter 7 of the CALGreen Code provides a guideline for minimum inspector qualification criteria.”

• I noted that CALGreen requires commissioning of new buildings.  Commissioning involves calibrating the building’s systems to make sure they are running as designed.  Commissioning is often cited as one of the more expensive aspects of a green building; but it can also ensure a green building works properly.  It will be interesting to see how the California real estate industry responds to mandatory commissioning. 

• California is often a bell-weather state for new green building trends.  Will statewide building codes become more common? 

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I continue to ponder the importance of the release of the International Green Construction Code public version 2.0 (IGCC).  I recently asked Bob Kobet, LEED Faculty member, to provide his thoughts on IGCC.  It's good to see that I am not the only one who thinks the new code is a big step for green building.  

For the last 31 years my professional life as an architect and educator has been linked to codes. Through it all my core beliefs about codes, why we have them and how they get developed and enforced have been reinforced. They include:

1) Architecture is complex, no matter now simple the project may seem. It is very difficult to write codes that apply with equal rationale to a variety of building types in different geographic locals and climate zones.

2) Codes do not lead the technology parade. They follow it.

3) Code officials are generally not known for taking risks or being overly creative in their role as authorities who essentially interpret and enforce the law. Most “go by the book” for a reason, so what is in the book is critically important to the advancement of building performance and environmental stewardship.

From this perspective the International Green Construction Code (IGCC) provides a much needed alternative for advancing environmentally responsible architecture combined with the ability for municipalities to adopt what they believe is most appropriate and important to them.

The IGCC was developed to be consistent and coordinated with the ICC family of Codes & Standards. These are the I-Codes, which include ASHARE 189.1. ASHRAE Standard 189.1, Standard for High-Performance Green Buildings Except Low-Rise Residential Buildings, is an American National Standards Institute (ANSI) standard developed by the American Society of Heating, Refrigeration and Air-Conditioning Engineers (ASHRAE) in association with the Illuminating Engineering Society (IES) and the U.S. Green Building Council (USGBC). The IGCC allows jurisdictions to choose ASHRAE Standard 189.1 as an alternative compliance path. The IGCC is applicable to commercial buildings, including existing buildings undergoing alterations and additions. Traditional and innovative construction practices are addressed.

The IGCC does not replace existing codes or force municipalities to make wholesale administrative changes. Instead it allows jurisdictions to use their administrative powers to exercise the flexibility inherent in the IGCC. This is possible because the IGCC contains a new regulatory framework that allows choice and adaptation to local or regional conditions. Through the use of Baseline requirements, Projective Electives and Jurisdictional Requirements, the IGCC has achieved a balance between traditional safety issues and sustainability. The balance is a result of collaboration between the International Code Council, ASHRAE, ASTM, The AIA, and the US Green Building Council.

Overall I favor the approach the IGC and its partners have taken with the IGCC. I am hopeful it will meet the expectations of those who have worked so hard to make it available. Finally, there is a code emerging that supports renewable energy systems, rainwater harvesting, grey water reclamation, nontoxic design and straw bale construction. There will be those who view the IGCC as just another code to confront. I embrace it is a significant step in the right direction.

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Back in October 2010, Doug Reiser and I co-presented on the topic of substituting LEED for traditional building codes.  As we were finishing our presentation, I reiterated our primary theme that LEED standards should not be used as a building code.  One of the audience members raised her hand and asked why weren’t we discussing the International Green Construction Code (IGCC).  

That audience member was right--states are beginning to consider the adoption of IGCC as a state-wide green buiding code in lieu of LEED certification requirements.  

The IGCC is available for a free download.  I suggest you take a look at it.  At the front of the code is a “Roadmap to the International Green Constructon Code” that I found to be helpful:

“Chapter 3 is the core of the (IGCC).  It is formatted to: facilitate the customization of this code to address local issues; provide options for construction which exceed the minimum requirements of this code; and provide for the implementation of best practice. . . .

All of the provisions of this code, other than those selected by the jurisdiction in Table 302.1 and those designated as project electives, are mandatory as applicable.”  

Rhode Island was one of the first states to adopt the IGCC.  Interestingly, Rhode Island adopted the code as an “‘equivalent standard’ to meet requirements that all new major facility projects by state agencies be constructed as green buildings.”  

Do you see other states adopting IGCC as an “equivalent standard” to other green building rating systems? 

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This is as confusing and sordid as any green building dispute I have seen.  Consider yourself warned. 

Over the holidays, Michael Anschel informed me that the the Builders Association of the Twin Cities (BATC) had sued Minnesota GreenStar and filed a restraining order against using a green building standard. 

Despite that simple statement, there is a lot more to this story.  Here is the best summary I can come up with after reviewing the lawsuit filed by the BATC and a blog post by Anschel on the subject. 

The BATC worked with other associations to create a green building standard, called the Green Homebuilding Guidelines.  BATC and the other entities then created a new entity, Minnesota GreenStar, to run the green building standard (much like the Green Building Certification Institute runs LEED).  At some point, BATC became disenchanted with either Minnesota GreenStar and/or the Green Homebuilding Guidelines, and decided to file a lawsuit to essentially take over administration of the Guidelines.  If you believe the complaint, the reason for BATC's disenchantment was Minnesota GreenStar's failure to repay a loan and GreenStar's intent to license the green building standard to other states.  If you believe Anschel's post, BATC's reasons are more sinister and have to do with weakening the Green Homebuilding Guidelines.

Lets start with the lawsuit itself. 

On December 9, 2010, the BATC filed a restraining order and lawsuit against Minnesota GreenStar.  BATC claims that in 2006, it developed the Green Homebuilding Guidelines and further asserts it owns the intellectual property rights to the Guidelines.  BATC also points out it that it contributed $50,000 to develop the Guidelines. 

In 2007, BATC, along with two other entities, formed Minnesota GreenStar, which began using the Green Homebuilding Guidelines.  At some point in 2008, GreenStar filed registered copyrights for the Green Homebuilding Guidelines, which would give GreenStar intellectual property rights to the Guidelines. 

This is where events get a bit confusing.  BATC alleges that in 2010, it provided an additional loan to GreenStar.  Despite this additional loan, BATC claims that GreenStar ran into financial trouble:

"On September 15, 2010, GreenStar conducted a meeting of its Board of Directors and disseminated its Business Plan . . . in which GreenStar relied on continued sponsorships, a one-year deferment on its Promissory Note obligations to BATC, and significant additional funding from BATC. . . . GreenStar also indicated its intent to license the Green Homebuilding Guidelines developed and owned by BATC to other states to raise revenue for GreenStar."

BATC goes on to ask the Court for four things: 

1.  Judgment of $50,000 for an alleged breach of the loan;
2.  Judgment declaring that BATC owns the intellectual property rights to GreenStar and GreenStar is restricted from using or licensing the Guidelines;
3.  Temporary and permanent injunction against GreenStar from using the Guidelines; and
4.  Attorneys fees. 

Taken at its face, the complaint suggests that BATC is concerned about the prospect of licensing the Green Homebuilding Guidelines to other states.  But why would a builders association be concerned about this? 

According to Anschel, BATC's motives are more complicated.  In a blog post at Construction Law Musings, Anschel explains that BATC actually intends to develop a new green building certification program that allows for self certification.  Anschel believes BATC's move is a step backwards for green building in Minnesota.  If BATC intends to create a new green building standard in Minnesota, then it certainly makes sense why it would want to take over and limit Minnesota GreenStar and the existing Green Homebuilding Guidelines. 

What do you think?

Photo credit: Jvstin

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Many months ago, I promised a two-part series on public-private partnerships.  Part one was previously published and today I wrap up the series with post two.  As we head in to 2011, public-private partnerships will play a vital role in replacing the non-existent state funds for necessary public works projects.  Here is part two on public-private partnerships: 

We have already revealed Secret No. 1 about public-private partnerships: there is bi-partisan support for PPPs.  I promised to reveal Secret No. 2 about PPPs.  In hindsight, I should have probably not labeled this a secret as it is more an observation verging on opinion.  Some of you that do not support public-private partnerships will not agree with this observation. 

Secret No. 2:  There appears to be no viable alternative to public-private partnerships. 

If you work in the construction industry, you probably know that the U.S. infrastructure is in dire need of renovation and repair.  According the American Society of Civil Engineers (ASCE), the U.S. infrastructure is in absolute disrepair based on its 2009 U.S. infrastructure grade card:

2009 Grades
Aviation D
Bridges C
Dams D
Drinking Water D-
Energy D+
Hazardous Waste D
Inland Waterways D-
Levees D-
Public Parks and Recreation C-
Rail C-
Roads D-
Schools D
Solid Waste C+
Transit D
Wastewater D-

America's Infrastructure GPA: D

Further, the ASCE has concluded that an investment of $2.2 trillion would be required over the next five years to improve our infrastructure.  Assuming the ASCE is correct, repairs to our infrastructure will require substantial investments by the states charged with infrastructure upkeep. 

But states have no money. 

Check out the grim outlook for state budget shortfalls from the Center on Budget and Policy Priorities:

The worst recession since the 1930s has caused the steepest decline in state tax receipts on record. State tax revenues were 8.4 percent lower in the 2009 fiscal year than in 2008, and an additional 3.1 percent lower in 2010, while the need for state-funded services did not decline. As a result, even after making very deep spending cuts over the last two years, states continue to face large budget gaps. At least 46 states struggled to close shortfalls when adopting budgets for the current fiscal year (FY 2011, which began July 1 in most states). These came on top of the large shortfalls that 48 states faced in fiscal years 2009 and 2010. States will continue to struggle to find the revenue needed to support critical public services for a number of years, threatening hundreds of thousands of jobs.

From my vantage point, I see an extreme need for infrastructure upgrades and I see public bodies that do not have the financial ability to fund the upgrades. 

If the public sector cannot fund infrastructure improvement, isn't the only other solution private sector investment through public-private partnerships? 

Photo credit:  Barbour

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I just finished up a presentation to the Construction User's Roundtable (i.e. users of construction services) regarding public private partnerships (P3s). P3s are defined by the National Council of Public Private Partnerships as:

"a contractual agreement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility."

In the course of preparing for my speech, I learned two very important secrets about public private partnerships that I want to share with you.

Secret No. 1. P3s have bipartisan support.

One of the first areas I researched for my presentation was the effect the recently-completed election would have on P3s. You may have noticed that the House of Representatives will now be controlled by Republicans, many of which ran on a platform of fiscal austerity. As a result, the new Congress is likely to be less supportive of expensive public works projects. At the same time, our infrastructure - including old buildings - needs significant upgrades. For example, take a look at the abysmal grades given to the U.S. infrastructure in 2009 by the American Society of Civil Engineers (ASCE).

My research uncovered secret number one: support for public private partnerships is bi-partisan. Many politicians on both sides of the aisle have indicated their support for P3s as a means to fix our infrastructure problem. Here are some quotes I used during my presentation:

“That means maintaining strong support for public-private partnerships like NREL. . . . ”

- Rep. John Boehner, presumptive House Majority Leader

“Innovative public-private partnerships are appearing around the country, bringing much-needed capital to the table. It is important to ensure that the public interest is well-served in public-private partnerships, since they are here to stay and likely grow in importance.”

- Rep. Nancy Pelosi, Speaker of the House

And probably most important, Rep. John Mica, the presumptive Chairman of the House Transportation & Infrastructure Committee recently indicated he supports P3s, at least in one instance. In response to questions about the future of an American Recovery and Reinvestment Act high-speed rail project in Florida, Rep. Mica suggested that a public-private partnership should be used to get the project done:

"I want private dollars involved in this," Mica said. "If someone in the private sector puts up $500 million and that's $100 million short – I'm in an excellent position to assist. But I don't want the private sector to see this as a gravy train.”

Along with the Congress, President Barack Obama is strongly supportive of P3s and is pushing a National Infrastructure Bank to support P3 development.

While bi-partisan issues are few and far between these days, public private partnerships appear to have support of both Republicans and Democrats. With growing infrastructure needs and bi-partisan support, P3s may gain in popularity over the next few years.

I will reveal secret number two on Monday.

Photo credit:  Photo Phiend

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Across the country, government officials are scrambling to award and spend American Recovery and Reinvestment Act (ARRA) funding before upcoming deadlines.  If you are a contractor or subcontractor lucky enough to work on one of these projects, congratulations! 

Now comes the tough part. 

Working on a federal or state-funded project brings a myriad of regulatory issues that must be resolved.  One of those issues is Davis-Bacon compliance.  As you sort out compliance issues, here are some questions to think about: 

• Is the project a federal project subject to federal labor laws? 
• Is the project a state project subject to state labor laws?
• Is the project both a federal and state project subject to both federal and state labor laws?

Is your head spinning yet?  In some circumstances, depending on the government agencies involved and the source of funding, you may actually be subject to both federal and state labor laws.  I have assisted clients with these confusing issues, so please contact me if you have questions (chris@cheathamconsulting.com). 

Photo Credit:  NIOSH

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For this Halloween edition of Green Building Law Update, I thought I would try to scare your socks off by describing circumstances that may lead to the green building legal apocalypse.  Be warned, this blog post is going to give you nightmares! 

Last week, Doug Reiser and I presented at the Green Legal Matters conference on the following topic:

"The Green Building Legal Apocalypse: Why Cities Should Stop Mandating LEED" 

I have received a number of inquiries about the presentation so I published the slideshow.  I am big on not using a lot of words or bullet points on slides so I am not sure how helpful the slideshow will be, but I am happy to answer any questions you may have about it in the comments section. 

There is one central theme of our presentation:  municipal governments should stop mandating LEED certification for private construction.  I could run through all of the reasons - there is no proper enforcement mechanism, there will be increased LEEDigation - but in my mind, the creator of the LEED rating system, the US Green Building Council, makes the most powerful argument for not mandating private-construction LEED certification: 



This picture is taken from the USGBC white paper, "Greening the Codes" (pdf).  The hyphenated vertical line represents the current market.  The updwards sloping, blue area at the bottom represents building codes.  The dashed line above the blue area represents green building codes.  Above the green building codes are LEED Platinum, Gold, Silver and Certified certification levels. 

What does it mean? 

If you need evidence that LEED certification was never meant to be a building code, and should not be a building code, use this picture.  Building codes are the minimum.  By mandating LEED certification for all private construction, a government essentially makes LEED certification a building code, a minimum.  LEED certification is supposed to represent buildings that have gone beyond the building code.  With this picture, the US Green Building Council is telling us not to use LEED certification for private-construction mandates. 

LEED certification is a high bar, and if certification is mandated, not everyone will comply.  Non-compliance means penalties, disputes and litigation.  This is why I say governments that are requiring LEED certification for  private construction are setting the stage for the green building legal apocalypse. 

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The likelihood that some American Recovery and Reinvestment Act (ARRA) green building projects would fail should not come as a surprise to Green Building Law Update readers.  Back in February 2009, I wrote about the the difficulties of administering the stimulus funds at state, county and municipal levels.  In January 2010, I highlighted initial problems with the Illinois weatherization program, which was being funded by Department of Energy ARRA funds. 

But the rampant problems with the Illinois weatherization program have not improved. 

The Department of Energy Office of Inspector General recently published a follow up report on the Illinois weatherization program.  The report focuses on 15 homes that were audited.  The conclusions of the report speak for themselves:

Poor Workmanship: At 12 of the homes, CEDA inspectors found substandard work that could have, in some cases, resulted in significant property damage or injury to the homeowners. In one home, 11 of the 14 items that the contractor should have installed or repaired to improve energy efficiency failed inspection. In another instance, while accompanying inspectors, we found that a contractor had not corrected, as required by the home's work order, improperly installed kitchen exhaust ductwork, a potential fire hazard. Although CEDA and certain State officials disagreed that the ductwork problem posed a fire hazard, State building code officials we consulted confirmed the concern. Further, we observed a furnace intake vent pipe that had been improperly installed and found that five of the six tune-ups to heating systems had not been properly performed, allowing the heating systems to either improperly fire or emit carbon monoxide at higher than acceptable levels. Further, CEDA's own inspectors cited contractors for improper insulation of attics, band joists, and walls. In all, 8 of the 10 contractors that had weatherized homes included in our evaluation were cited for poor workmanship.
...

Inadequate Initial Assessments: At eight of the homes, CEDA inspectors found that assessors from within its organization had either called for inappropriate measures or had overlooked key weatherization measures needed to make the homes more energy efficient. In one home, for example, an inspection report noted that an assessor had inappropriately called for attic insulation when sizeable leaks in the roof would have reduced the effectiveness of the insulation. In addition, we found homes where inspectors cited assessors for failing to identify an open sump pump, leaking water lines, and a skylight that had not been properly insulated. CEDA acknowledged that, due to hiring nearly 60 new field personnel who were needed for the increased level of weatherization work funded by the Recovery Act, it had experienced "an inevitable level of inadequate assessments that were not corrected or were incompletely reviewed before the jobs were assigned to contractors."
...

Erroneous Billing: At 10 of the 15 homes we visited, CEDA inspectors found that contractors had billed a total of about $3,300 for labor and materials that had not been installed. For example, a contractor had installed a 125,000 BTU boiler, but had billed CEDA for a 200,000 BTU boiler costing an estimated $1,000 more. Additionally, a contractor had installed one carbon monoxide detector, but had billed CEDA for 3; another contractor had installed 12 light bulbs, but had billed CEDA for 20; and, yet another had failed to install a gas shut-off valve, but had billed for the work. In addition, a contractor had billed for almost four times the amount of drywall actually installed. Billing issues appeared to be pervasive, since 7 of the 10 contractors in our sample were cited by CEDA for erroneous invoicing.

Keep in mind that the DOE and Illinois were already on notice that the program was suffering from severe deficiencies back in January 2010. 

I have absolutely no doubt that this report will be picked up in the press and by politicians in order to cite a failure of the stimulus program.  I have no doubt that Illinois is not the only state that is failing to properly administer the DOE weatherization program.  I have no doubt that other green building stimulus programs are also facing similar issues. 

But as I look at this from a legal standpoint, I see an enormous wave of green building litigation.  I see homeowners filing lawsuits against contractors, engineers, and architects.  And I am advising my clients to be very careful as they proceed with ARRA projects. 

This could get very messy. 

Photo:  BostonBill

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It's an understatement to say environmentalists were disheartened by Senator Reid's announcement last week that a comprehensive cap-and-trade bill would be tabled for the year.  But, fear not, environmentalists - and, be fearful, unprepared federal contractors - because the federal government will be regulating greenhouse gas emissions in other ways.  

Back in October 2009, we talked about the groundbreaking Executive Order 13514, which set advanced sustainability requirements for the federal government.  One of the most important parts of the Order is Section 13, which asks the General Services Administration to look into the feasibility of requiring  vendors and contractors to report greenhouse gas emissions. 

The GSA recently released its report, which concludes that it is feasible to implement a "phased approach, for the Federal Government to track and reduce its scope 3 supply chain emissions through coordination with suppliers and other stakeholders."  In short, a greenhouse gas emissions reporting requirement will be phased in, and eventually mandated for federal contracts.

For federal contractors - and eventually state and local contractors - tracking, reporting, and reducing emissions will become an important strategy for winning government contracts. 

While much of the focus of Green Building Law Update has been on green building certification, I plan to shift gears in the coming months and focus more on greenhouse gas emissions reporting requirements for federal contractors.  Why?  

My concern is that construction contractors are not prepared to report greenhouse gas emissions.  

Are you prepared to report your greenhouse gas emissions?    

Photo credit: melancholic optimist

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"A Public-Private Partnership (PPP) is a contractual agreement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility."

But P3 practices are also being used for green building projects.  For example, the General Services Administration recently entered into a P3 lease agreement for a new campus to house the National Nuclear Security Administration's Kansas City manufacturing operations, which are seeking LEED Gold certification:

"The Heartland Region of the General Services Administration on Monday signed the final lease agreement with CenterPoint Zimmer LLC for a new campus to house the National Nuclear Security Administration’s Kansas City manufacturing operations. . . .

CenterPoint Zimmer, a subsidiary of CenterPoint Property Trust of Oak Brook, Ill., will receive annual rent of $61.5 million through the 20-year lease for a total contract amount of $1.23 billion.  Stephen Stanberry, the GSA contracting officer who worked on the lease, said it is a “net of utilities” leasing, meaning the NNSA will pay its own utility costs.

In return for the NNSA lease payments, CenterPoint Zimmer will develop the new campus. . . ."

My friends at J.E. Dunn will be constructing the project.

If you have questions about P3s, please let me know and I will do my best to address them in future posts.

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Despite my previous suggestion that the USGBC's Greening the Codes could have done without the history of building codes, I do think it offers an interesting history lesson.  This paragraph caught my attention:   

The energy crisis of the 1970s brought yet another topic to the national stage. The soaring costs of energy and a growing concern about pollution and natural resource conservation caused Congress to pass the Energy Policy and Conservation Act that in 1978 would require states receiving federal funds to initiate energy conservation standards for new buildings. That same year, the State of California led the nation by adopting the California Energy Code, recognizing that energy consumption gone unchecked yields societal costs to consumers, to the economy, to the environment and ultimately to public health. It would take a number of compounding factors in the 1990s to revive this interest in building energy efficiency that ended up otherwise largely lost to other priorities in the 1980s.

The more recent surge in support for green building looks eerily similar to the 1970s.  
I have always thought that the most recent green building trend really took hold in 2008, just as gas prices skyrocketed.

Congress then included billions of dollars for the green building and renewable energy industries in the American Recovery and Reinvestment Act that passed in February 2009.  In order to receive some of the stimulus funds, Governors had to make promises to improve state building codes.  At the state level, California became the first state to adopt a mandatory, state-wide green building code in January 2010.

History teaches us that this combination - the federal government and then California push green building codes forward - tends to repeat itself. 

If history repeats itself, what lessons can we learn from the last cycle of green building support?  The 1970s saw a wave of sick building syndrome cases.  After building envelopes were tightened -- but ventilation remained the same -- the occupants grew ill from the indoor environment.  Concerns are already starting to emerge about indoor air quality in this cycle's green buildings.  

Any other lessons I missed?

Photo Credit: Stuck In Customs

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The United States Green Building Council (USGBC) recently published a white paper entitled "Greening the Codes" that is simultaneously very helpful and somewhat frustrating.  The most important information is buried on page seven after an unnecessary review of the history of building codes.  But if you can get through the first six pages, you will find that the USGBC has made an important statement, although one that could have been made more boldly:  

"Raising the Floor: While green building rating systems such as LEED have been designed to benchmark above-code leadership for buildings that intend to go beyond the minimum, it is equally important to complement this leadership with stronger, more comprehensive building codes. Safer, healthier, and more environmentally responsible codes are at the heart of sustainability planning for raising the floor for the entire community. These codes are a viable new baseline off which incentives for exemplary leadership and commitments for public buildings to pave the way can naturally be built.

For commercial buildings: Consider adopting the International Green Construction Code and its technically rigorous 189.1 compliance path.

For residential buildings: In addition to adopting and implementing the 2009 International Energy Conservation Code, consider a well-established local green homebuilding program in your area. In the absence of such a program, the ICC-700 compliance path of the International Green Construction Code should be considered as a means for jurisdictional oversight for residential buildings."

I wish the white paper had stated in big bold letters on page one "STOP USING THE LEED RATING SYSTEM FOR BUILDING CODES."  But the statement in the white paper is a good start. 

Based on this white paper, I would suggest that it is time to revisit the D.C. Green Building Act before it's too late.  As you may recall, starting in 2012, all private construction greater than 50,000 square feet will be required to achieve LEED certification in Washington, D.C.  The USGBC's white paper all but states that the LEED rating system should not be used as a de facto building code for commercial buildings.  

And there still remains the issue of the unavailable "bonds" required to enforce the Act, but I won't get started on that.  At least for now.  

What are your thoughts on "Greening the Codes"? 

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I recently co-authored a chapter with Shari Shapiro of a soon-to-be-published book about green building law.  I am a regular reader Shari's Green Building Law Blog and she is one of the authors who helped me launch my own blog.

However, I am going to respectfully disagree with one of her recent posts regarding green building legislation. Shari juxtaposed two "green" regulatory measures - one that passed in Europe and one that was vetoed by the Governor of Wisconsin.  Shari concluded the Wisconsin Governor was in the wrong: 

"On the one hand, Europe has determined that it is not only feasible, but necessary to build its entire building stock to a near carbon neutral level, and Wisconsin has determined that it cannot even make 15% of its public buildings green.  What will the competitiveness of Wisconsin--indeed, the entire United States--be if it is saddled with a portfolio of underperforming building stock contributing to greenhouse gas emissions."

The Wisconsin Governor did not actually veto legislation making public buildings green.  The Governor properly vetoed spending state funds to certify public buildings as green:

"The measure had directed all state building funds to be used for certifying at least 15% of total gross square footage of working space in state-owned and leased buildings to meet green building requirements.  Doyle said he remained committed to green building efforts but that he could not support the bill."

For long-time Green Building Law Update readers, this veto should not be a surprise.  Back in October 2008, I pointed out that states may balk at green building regulations if revenues drop:

"[W]hat will happen to all of those states that passed regulations requiring public projects achieve LEED certification?  As you probably know, during economic downturns, less taxes are collected, which affects state budgets. . . . One area where state agencies may seek budget cuts is through green building programs."

"The latest biannual NGA-NASBO 'Fiscal Survey of the States,' released on June 3, says that, for fiscal 2010, which ends for 46 states on June 30, state general-fund expenditures will fall an estimated 6.8%, to $612.9 billion."

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I recently had the pleasure of sitting down with Chris Birk of Surety Bonds Insider to discuss surety issues and the green building industry, particularly related to the D.C. Green Building Act.  

As a quick reset, the D.C. Green Building Act of 2006 requires owners put up "performance bonds" that guarantee LEED certification for certain projects.  The surety industry has raised concerns that these types of bonds do not exist.  My favorite question was when Chris asked me about the implications of the D.C. Green Building Act "performance bond" issue for the broader green building industry:

Chris Birk:  "What sort of long term, beyond the District implications are there in this?"

Chris Cheatham:  "This same issue will pop up wherever there is a green building regulation being proposed or pushed forward.  Whenever you are mandating some type of certification, some type of green building certification, you have to have an enforcement mechanism.  Because if you don't then people won't comply and its pointless to have the regulation.  You have to have some type of penalty." 

Related Links: 

Surety Bonds Sit-Down: The Future of Green Building with Chris Cheatham (Surety Bonds Insider)

A Green Building Performance Bond (GBLU)

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If you are working on a construction project funded by the American Recovery and Reinvestment Act (or you have any hint that you are), you need to be aware of your responsibility to pay Davis-Bacon wages.

"Notwithstanding any other provision of law and in a manner consistent with other provisions in this Act, all laborers and mechanics employed by contractors and sub contractors on projects funded directly by or assisted in whole or in part by and through the Federal Government pursuant to this Act shall be paid wages at rates not less than those prevailing on projects of a character similar in the locality as determined by the Secretary of Labor in accordance with subchapter IV of chapter 31 of title 40, United States Code."

"Section 1606 of ARRA plainly indicates that the Davis-Bacon prevailing wage requirement broadly applies to ARRA-appropriated construction projects. . . . [The ARRA] also extends the prevailing wage requirements to projects 'assisted in whole or in part by and through the Federal Government pursuant to this Act' thus encompassing any assistance provided for ARRA projects through grants, loans, guarantees, and insurance."

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Back in January 2010, I said this:  "Government officials and citizens are going to expect results form the significant investments in the green movement (particularly in an election year). In 2010, the nation will begin to decide if investments in the green building and renewable energy industries were worth it."

Not one month later, it appears that media critiques of American Recovery and Reinvestment Act(ARRA) green building programs have begun.  Last Thursday, the Los Angeles Times ran the following headline:  

"Obama's federal government can weatherize your home for only $57,362 each"

How did the Los Angeles Times come up with this number?  The Times did some very simple math to calculate how much money had been spent per home so far. 

"The Energy folks did tell ABC they've so far spent 522-million Recovery Act dollars on the program. So, let's see, about 9,100 homes divided into that chunk of stimulation change to believe in is -- gee! -- about $57,362 worth of very expensive weatherstripping for each home fixed up so far."

Of course there is more to the Times' blog post.  The Energy Department had to resolve Davis-Bacon wage determinations prior to starting the weatherization program.  At the end of the Los Angeles Times post, the Energy Department's response was included:  

"The GAO report cites figures from September 2009 -- almost five months out of date. Since then, we have resolved Davis-Bacon wage issues in all 50 states, clarified how states should handle historic preservation and worked with states to resolve any remaining barriers. As a result, by the end of 2009, our programs had weatherized about 124,000 homes in total, and we are on track to weatherize more than 250,000 this year. In fact, since September 2009, we have tripled the pace of Recovery Act funded home weatherization. The report also erroneously implies that our goal was to weatherize 593,000 homes in 2009. That is wrong. The goal has been to weatherize that number by March 2012, and we are on track to meet that goal."

The Los Angeles Times article suggests the media is going to comprehensively cover the progress and accounting of ARRA green building projects in 2010.  While this Los Angeles Times article may have relied on stale statistics, you can bet that the Department of Energy's weatherization program, and the contractors taking part in it, will be under additional scrutiny. 

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I often get the same question about the American Recovery and Reinvestment Act: where are the green jobs and projects?  A recent Wall Street Journal article sheds light on that question:

"The Obama administration's economic-stimulus program has delivered about a third of its total $787 billion budget during its first year, much of that to maintain social services and government jobs and to provide tax cuts for workers. Now, the pace and direction of stimulus spending are about to change.

Infrastructure spending is set to step up in the second year of the stimulus program, which should mean more money flowing to private-sector employers."

Infrastructure spending includes the green building projects that will be administered by the General Services Administration, the Department of Defense and the Department of Energy.  A large portion of the $180 billion set aside for infrastructure projects has not been spent: 

"During year one of the stimulus, only about $20 billion of money was handed out for infrastructure projects.

'I think we'll see a lot more stimulus money get into actual contracts and actual hiring in 2010 than we did in 2009,' said Kenneth Simonson, chief economist of the Associated General Contractors of America."  

If you are looking for ARRA green building projects, 2010 appears to be the year.  

Photo:  vividbreeze

Related Links:

Bulk of Stimulus Spending Still to Come (WSJ)

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In Ohio, there is LEEDigation brewing.  But it's not the LEEDigaiton that I anticipated.  

The Ohio School Facilities Commission (OSFC) requires that new OSFC-funded schools achieve LEED Silver certification.  The Washington-Nile school district is balking at the additional costs incurred as a result of the LEED certification requirement.  

When a school project is pursuing LEED certification, OSFC provides three percent more funding than the estimated project costs in order to pay for the incremental costs of certification.  According to Washington-Nile Superintedent Patricia Ciraso, 3 percent is insufficient to cover the costs of LEED certification in her school district (red dot in the picture on the left):  

"'It might cover it in Columbus, or Cleveland, where you have people that deal with LEED constantly. These contractors down here, this is new to them and they’re going to have to deal with it. They’re probably going to have to bring in some people, or at least have some people trained,' she said.

To help prove the need for greater LEED funding at smaller, isolated districts, the school has retained an attorney in Columbus, with experience in school projects, to research the equity of LEED funding for schools in Ohio. Ciraso said the outcome of this battle could have local impact on LEED funding for school projects at New Boston and Clay also.

'If you are co-funding these projects and you have said silver is the appropriate LEED certification, why would you not want to fund to that level?' she asked."

I had always assumed LEEDigation would involve post-construction disputes when a project failed to achieve its green building certification.  A pre-construction dispute involving public funding for certification is a new issue, and one that could impact other state green building programs.  

Did you see this coming? 

Related Links: 

LEED Funding for Green School Causes Construction Delay (GBLU)

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Last Thursday, during a webinar on green building legal issues, I stated the following:

"I really believe schools will be a hotbed for green defect claims, in terms of energy efficiency, and other green building components.  Schools rely on tight budgets. . . .  Be careful what you are promising on these green school projects."

On Friday, I read an article titled "Construction Delayed at West School," which led with the following paragraph:

"Construction is at a stand-still at Washington-Nile School, where issues surrounding state-mandated LEED (Leadership in Energy and Environment Design) elements have placed the new middle school building project over-budget. Now attorneys working for the school are researching the equity of LEED funding for schools in Ohio; the outcome of which could also affect building projects at New Boston and Clay."

I was close.  

In Ohio, the Ohio School Facilities Commission (OSFC), administers the state’s Kindergarten through 12th Grade public school construction program and helps school districts fund, plan, design, and build or renovate schools.  In a previous post, we highlighted the OSFC's green buiding requirement for Ohio schools:

"OSFC Resolution 07-124 . . . mandates that all newly constructed or substantially renovated school buildings that are state funded achieve a minimum of Silver certification in the US Green Building Council's LEED-Schools (Leadership in Energy and Environmental Design) rating system with emphasis in energy conservation."

As highlighted in the article, the OSFC accepted the Washington-Nile School (tiny red dot in the photo to the left) as a special-needs project.  Because of the district’s low wealth base, the OSFC agreed to provide 98 percent of the funding for a new $16 million middle school. The remaining 2 percent (about $320,000) was paid from the school’s General Fund.

By accepting the OSFC funds, the school district is required to build the new Washington-Nile School to LEED Silver certification.  But the bids for the school were over-budget despite numerous changes made to the design:  

"'We knew a little about LEED. We didn’t know much, so they (the OSFC) educated us and they did a very good job. We bought into that and we designed accordingly. We made sure we had some educational LEED credits,' Washington-Nile Superintendent Patricia Ciraso said. She explained that while striving to meet these LEED requirements, the school had to give up other features they had hoped to add. By choosing to cut-back on windows, the school had change its lighting system, which means redesigning the entire electrical system — and what they ended up with still was estimated at least $1.2 million over-budget."

On Friday, we will look at allegations by the Washington-Nile school district that the OSFC is not properly funding the necessary LEED-certification costs.  You will want to check back, as these allegations include a creative legal challenge to the state's funding of green schools, which could have broad implications for other state green building programs. 

Related Links: 

Sensible Interview:  OSFC (GBLU)

Live Webinar (GBLU)

Construction Delayed at West School (Portsmouth Daily Times)

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In December 2009, an Amendment to the D.C. Green Building Act of 2006 was introduced by the D.C. Council.  Labeled the "Green Building Technical Corrections, Clarification, and Revision Amendment Act of 2009," this Amendment includes many revisions to the original Green Building Act.  One of those revisions involves the "performance bond" requirement:

"'Sec. 6. Bond requirements.'.

(2) Section 6 is amended by striking the phrase 'performance bond' wherever it appears and inserting the word "bond" in its place."

That's it.  This feels anti-climatic.  We have been discussing this same issue since the dawn of Green Building Law Update.  Back on August 15, 2008, one of my very first posts pointed out the performance bond issue.  So what does this fix? 

1.  Replacing "performance bond" with "bond" will eliminate the confusion that was certain to ensue in the construction and surety industry.  Performance bonds guarantee a contractor will building according to the plans and specifications.  Here, a developer has to guarantee that a project will achieve green building certification. 

2.  I still have concerns about the bigger issue of whether these "bonds" will be available.  Bond instruments guaranteeing green building certification simply do not exist in the market.  Maybe a surety will develop these bonds, maybe they will not. 

In the end, I applaud the D.C. City Council for addressing the "performance bond" issue. 

What do you think about this revision?  Disaster averted? 

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These are strange times for the green building industry.  Last week, California prepared to vote on new green building codes that would improve energy efficiency, water use and waste reduction in the construction industry.  Normally you would anticipate that environmental groups and green builders would applaud these measures, right?

Not quite.  

"[P]arts of the state's new code, which would take effect in January 2011, would amount to 'a setback for California's leadership on green building,' according to a Dec. 22 letter from six groups. They included the Sierra Club, the Natural Resources Defense Council and Global Green, along with two nonprofit certification groups, the Green Building Council and Berkeley-based Build It Green. 

The groups largely applaud the code's mandatory rules as a baseline minimum standard.  But they take issue with its two-tier labeling system for stricter voluntary measures, CalGreen, saying it would be open to conflicting interpretations and be unenforceable by local building inspectors.

'The tiers cause confusion in the marketplace and the potential for builders to label their buildings green without substantiating their claims,' said Elizabeth Echols, director of the Green Building Council's Northern California chapter. Many local officials who would be responsible for verifying builder claims do not have the technical expertise that LEED and other third-party verifiers provide, she added."

I am puzzled by these groups attempts to thwart passage of the California green building code.  Pushing for the LEED rating system, or any other third party green building rating system, to be codified for an entire state is not a viable option.  Next post I will give you three reasons to consider. 

What do you think about the environmental groups' attempts to block the California green building code?  

Photo:  mars discovery district

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A coalition of forest product companies ("the Coalition") has filed a complaint with the Federal Trade Commission (FTC) regarding, in part, the United States Green Building Council’s preference for Federal Stewardship Council-certified (FSC) wood products. The Coalition has asked the FTC Bureau of Competition to provide guidance to the USGBC and other rating systems regarding the endorsement of product certifications.

If the FTC decides to provide such guidance, the USGBC’s LEED rating system will obviously be affected.  I am particularly interested in the implications of FTC action for green building regulations that have incorporated the LEED rating system.

In its complaint, the Coalition takes a shot across the bow aimed at federal agencies that have adopted the LEED rating system:

“The favoritism shown FSC-certified products by USGBC is inconsistent with the American National Standards Institutes's (“ANSI”) due process requirements and OMB Circular No. A-119, which establishes the principles that voluntary, private sector standards must meet if federal agencies wish to use them, including openness, balance, due process, an appeals process, and consensus.”

In short, the Coalition is arguing that federal agencies are improperly requiring LEED certification for the design and construction of federal buildings. This allegation is not a new one.  Most green building regulations that require LEED certification also permit “an equivalent” certification in order to avoid antitrust issues like the ones raised by the Coalition’s complaint.

But many federal agencies exclusively require LEED certification for federal projects. The most obvious example is the General Services Administration, which builds and maintains a large percentage of federal buildings.  The GSA's website describes its LEED mandate:

“As a means of evaluating and measuring our green building achievements, all GSA new construction projects and substantial renovations must achieve Silver certification through the Leadership in Energy and Environmental Design (LEED®) Green Building Rating System of the U.S. Green Building Council.”

If the FTC were to find that the USGBC’s preference for FSC-certified wood products constitutes anti-competitive behavior, hundreds of green building regulations across the country and in Washington D.C. will have to be re-written.

The implications of the FTC action on the complaint are staggering.

What other implications do you see?

Related Links:

• USGBC Accused of Anti-competitive Practices (GBLU)
• FSC, USGBC Accused of Deception, Anti-Competitive Practices (Green Source)
• Letter:  Forest Certification and Law and Standards (Complaint)(pdf)
• GSA - Sustainable Design Program (GSA)

Photo:  Eighty734

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We may be settling into 2010, but one unresolved legal development in 2009 could have a broad impact on the future of the green building industry. On October 20, 2009, the Coalition for Fair Forest Certification ("the Coalition") filed a complaint with the Federal Trade Commission (pdf), alleging anti-competitive behavior by the Forest Stewardship Council (FSC) and the United States Green Building Council (USGBC):

"[T]he Coalition asks that the FTC investigate through the Bureau of Consumer Protection the deceptive and unfair trade practices arising out of FSC’s forest certification standards; investigate through the Bureau of Competition concerns about anticompetitive activities and monopolization arising out of USGBC’s LEED rating system and preference for FSC-certified products; and provide guidance to standard-setting organizations concerning behavioral standards for compliance with antitrust law."

My law firm represents many of the forest product companies involved in this complaint (another law firm submitted the letter), so I will not be discussing the allegations made against the FSC. Nor will I debate the merits of one wood certification versus another. But I will continue to keep you updated on the status of this complaint and I will be discussing allegations made against the USGBC and the potential impact of these allegations on green building regulations.

First, some background on the connection between USGBC, LEED and FSC:

"Under the LEED system, points can be awarded in five categories: sustainable sites, water efficiency, energy & atmosphere, materials & resources, indoor environmental quality, and innovation & design process. Credit 7 under the materials & resources category addresses the issue of certified wood, with the intent of encouraging environmentally responsible forest management. The requirements for the credit are:

'Use a minimum of 50% (based on cost) of wood-based materials and products, certified in accordance with the Forest Stewardship Council’s Principles and Criteria, for wood building components including, but not limited to, structural framing and general dimensional framing, flooring, finishes, furnishings, and non-rented temporary construction applications such as bracing, concrete form work and pedestrian barriers.'"

According to the Coalition’s complaint, forest product companies that do not supply FSC-certified wood can not contribute to LEED materials & resources Credit 7: "[T]he three standards most widely adopted by forest owners in the U.S. and Canada - SFI, the Canadian Standards Association ("CSA") Sustainable Forest Management Standard, and the American Tree Farm System - receive no points under LEED, creating a substantial disadvantage for American-sourced wood products."

Among other actions, the Coalition has asked the FTC's Bureau of Competition to investigate the USGBC’s preference for FSC-certified wood:

"The Coalition also believes that the exclusionary actions of USGBC and its exclusive endorsement of FSC-certified products . . . warrants investigation by the Bureau of Competition concerning issues of possible monopolization, attempt to monopolize and conspiracy to monopolize the fast-growing certification marketplace. In examining the issue, the Coalition invites the FTC to use USGBC as a case in point to provide specific guidance to USGBC and other standard setting organizations."

It’s this last sentence that has really caught my attention.  

How do you think the FTC should respond to the Coalition's complaint?

Related Links:

• FSC, USGBC Accused of Deception, Anti-Competitive Practices (Green Source)
• Letter:  Forest Certification and Law and Standards (SJ)(pdf)

Photo:  Travelin' Librarian

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The Energy Star program, responsible for certifying energy efficient products, is about to undergo some major changes. Recently, the program, run by the Environmental Protection Agency (EPA) and the Department of Energy (DOE), has come under fire from a number of groups:

"Various stakeholder groups, such as manufacturers, utilities and even Consumer Reports , the monthly magazine published by the Consumers Union, have complained in recent years that Energy Star . . . is too inclusive. An internal audit of the program by the Department of Energy found that there is inadequate tracking of whether the appliances have actually met the required specifications for energy efficiency."

The New York Times article lists three primary complaints with the Energy Star program:

1. Too many products are achieving the Energy Star rating, casting doubt on whether evaluations have been properly performed.
2. The program has been slow to keep up with technical advancements.
3. The program has been hamstrung by jurisdictional disputes between EPA and DOE.

The complaint that the Energy Star Program has failed to keep up with technical advancements was of particular interest to me, as it may foreshadow problems with green building regulations that incorporate rating systems. Like green products and appliances, the green building industry and building rating systems are constantly evolving through technical advancements. For example, with the launch of LEED 2009 (which replaces LEED 2.2), the United States Green Building Council's LEED rating system will now be revised every two years.

Here's my concern: as I have written about numerous times, many green building regulations require LEED or other green building certification. Many jurisdictions have created green building regulations that incorporate the previous version of the USGBC's LEED rating system, LEED 2.2.

How will these jurisdictions keep up with advancements in green building rating system?

Related Links:

Congress and Agencies Debate an Overhaul to the Federal Energy Star Program (New York Times)

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Photo:  serdir

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If you are a contractor lucky enough to have won a stimulus project, one of the pesky requirements attached to the project is reporting the number of new jobs created by the project.  Many builders and contractors have been wondering how exactly to do that.  Finally, at long last, the White House has provided clarity: 

Wait, that didn't answer all the questions out there.  If someone was already working for you, do they count?  What about subcontractors?  If you receive multiple stimulus contracts and employ the same person for both jobs, is that one job or two?  Maybe there is further clarification:  

Oh, now I get it!

The reporting of ARRA jobs is going to be an extremely confusing and important issue for all parties. Back on June 22, I wrote:  "As we draw closer to the 2010 election cycle, you can bet that politicians who supported the ARRA will be looking to tout green jobs that were created." 

Turns out, the federal government isn't the only one hoping to tout good job creation numbers:

As funds for green building projects start flowing from the General Services Administration and the Department of Energy, everyone will be paying attention to the number of green jobs created by these agency projects.  If you have to report green jobs, be extra careful that you follow the reporting requirements, whatever those requirements may be.

Photo:  talkradionews

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You may be relieved to learn that I am temporarily done discussing LEED de-certification.  The USGBC will be releasing an addenda to the Minimum Project Requirements, at which time we will discuss this issue anew.  Until then, lets move on...to another LEED legal discussion. 

One green building legal development that I, and others, have been concerned about is the inclusion of LEED into government regulations, particularly when applied to private projects.  Is it constitutional to require private parties to comply with a third party rating system, namely the USGBC's LEED rating system?  What other legal issues arise from LEED mandates? 

Brad N. Mondschein's green energy blog raised an interesting case study regarding Connecticut's recently passed LEED mandate.  Under the regulation, the State Building Inspector is required to revise the State Building Code to incorporate LEED standards. 

Turns out, the State Building Inspector is very concerned about revising the State Building Code to incorporate LEED:

The state Department of Public Safety is still trying to write building-code language that reflects the new requirements for commercial projects.

“We don’t have the framework in place to implement it properly,” said Lisa R. Humble, the state building inspector.

After the law was passed, the State Building Inspector asked for an opinion from the Attorney General regarding the legality of the mandate.   

Andrew Falk did a great job finding a copy of the Attorney General's informal opinion letter (PDF) to the State Building Inspector.  From Janet Ainsworth from the Connecticut Department of Public Safety: 

The attached is the informal advice (PDF) received from the Office of the Attorney General. The AG opinion does not address the constitutionality of the legislation.  Rather, it discusses whether the statutory provisions may be enforced in the absence of applicable language in the State Building Code.  The Department of Public Safety is engaged in the development of the applicable language to be added to the State Building Code.  At this time, I am unable to estimate when the amendment to the State Building Code to address the green building requirements of the Connecticut General Statutes will be enacted.

Check out the letter (PDF) as we will be discussing it in future posts.  What's your take on the letter?

*Turns out, the Attorney General letter does not address constitutionality of LEED mandates, as originally thought.  We will save this issue for another day. 

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Dear Feebate,

I'm sorry to be writing this.  First, I have to say, it's not you, it's me. You have done nothing wrong.

I remember when we met back at Greenbuild '08. The Portland officials were very eager to show you off and I fell for you hard. You were everything I dreamed of in a green building regulation. You weren't quite a mandate, but you strongly encouraged green building certification. Projects that did not achieve LEED certification were penalized; projects that achieved LEED Gold or Platinum certification received a reward.

It has been a long distance relationship and my eye has wandered. I have become increasingly focused on retrofits to existing buildings. How are we going to improve the energy efficiency of existing building stock?  You always refused to answer this question when I asked.

Then, she appeared.  PACE.

PACE bonds - Property Assessed Clean Energy bonds. PACE bonds are just so beautiful to me. What is a PACE bond you ask?

PACE is a bond where the proceeds are lent to commercial and residential property owners to finance energy retrofits (efficiency measures and small renewable energy systems).  OWNERS then repay their loans over 20 years via an annual assessment on their property tax bill. PACE bonds can be issued by municipal financing districts or finance companies and the proceeds can be used to retrofit both commercial and residential properties.

My dear Feebate, PACE bonds are everything you are not.  PACE bonds focus strictly on creating a market for energy efficiency retrofits or renewable energy. PACE bonds are not mandates; instead, individuals must willingly agree to opt in. PACE bonds can be set up by private companies or government entities. The best part, though, is that a PACE bond can turn into a revolving fund that creates even more retrofits.

So Feebate, thanks for everything. It's been a nice ride and I wish you luck.

Best Wishes,

Green Building Law Update

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On Monday we highlighted "headaches" that may arise from climate-related stimulus funding.  Cities and towns are struggling to come up with worthy programs for the funds.  Furthermore, the Department of Energy has warned officials that funding should go towards the long-term establishment of programs: 

"Don't use the entire amount of this money to set up a single capital fund that when that fund is done, your program is done," Bailey told local officials. "Because you will have potentially, I think, wasted an opportunity to set in motion a program that could last five, 10, 15, 20 years."

Virginia should heed this advice.  The state recently announced plans to use stimulus funding from the DOE to create a long-awaited financial incentive program for renewable energy development:

After years of zero financial incentives for alternative-energy enthusiasts, Virginia is bursting out of the starting gate with tens of millions of stimulus dollars just for renewable-energy aid.

The state plans to set aside $39 million from its $70 million share of the federal stimulus package to help residents, businesses, nonprofits, schools and government agencies summon electricity and heat from the sun and wind.

Funding is expected to start flowing for the program, if approved, in July.  The incentive program will be a great short-term solution for renewable energy development in Virginia.  Turns out, though, the long term prospects for a state funding to continue the incentive program are unclear:

That money runs out in September 2010, and Jurman, a self-described eternal optimist, acknowledges that he could still have trouble getting legislative backing then. . . .

Energy advocates worry about the consequences if the incentives disappear after merely a year.

“It looks like we’re going to grow very easily, but it’s not going to shrink easily,” said Peter Lowenthal, executive director of the Maryland-District of Columbia-Virginia Solar Energy Industries Association, which is advising the Virginia agency on the renewable-energy rebate program. “It will be a shot in the arm. People will get some training, so that’s a good thing. But it won’t really meet the goals of the stimulus in order to create permanent job growth.”

Are there better ways to setup renewable energy development incentive programs for Virginia?

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It’s no surprise that there is intense competition for stimulus projects.  Competition can be good and result in more efficient construction.  But competition can also lead to complaints, disputes and even litigation.  

Connecticut is experiencing intense competition for stimulus funding.  

"There's nowhere near the amount of money for individual projects that people thought there was," one senior lobbyist lamented.

Still, advocates and their clients ask whether putting solar panels or a geothermal roof on a planned new building would qualify them for some energy funds (it might); they ask about the permit process (a bill to expedite project approvals has yet to be passed by the legislature); and they want to know how the feds define a stimulus 'job' (still not clear). 

When I read this article, I couldn’t help but notice the complaints about the "green" stimulus projects:  

In her meeting with Fritz, Cheri Quickmire, director of Common Cause of Connecticut, noted that a portion of the stimulus money must go to create "green jobs."

"How does a road-paving project create a green job?" Quickmire said last week, recounting her conversation with Fritz.

Stimulus funding for green building projects will help the industry grow.  Complaints about the administration of green building stimulus funds, though, should be of concern to the industry.  Complaints mean bad press.  Complaints mean bid protests.  Complaints mean litigation. 

Have you heard any rumblings about green stimulus projects?

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In previous posts I have talked about Dillon’s Rule and the impact this rule has on green building regulations in Virginia.  Dillon’s Rule provides that the state retains all powers except those specifically carved out for municipalities and counties.  You can think of this as the reverse of the federal system, where all powers not enumerated in the Constitution to federal authorities are then devolved to the states.  So if a Dillon’s Rule state has a statewide building code, like Virginia, cities are limited in the green building regulations they can enact. 

Arlington County has found a way to implement a green building policy despite Dillon's Rule.  What other options are out there for municipalities located in Dillon's Rule states? 

You may recall that I have highlighted the Portland Feebate system as a common sense green building regulation that others should mimic.   After reading more about the Feebate structure, I recently learned that the Feebate system works particularly well for Dillon’s Rule states:

According to Vinh Mason at the Portland Bureau of Planning and Sustainability, the new policy came about in part because Portland cannot institute a building code that is more stringent than the statewide code.

Lets not stop there, though.  I also came across another option for Dillon’s Rule states looking to implement green building regulations when reading Green Building Law Blog's post regarding a new Massachusetts building code.  According to the Board that passed the new code, implementation would be optional at the city level:

[T]he stretch code would be incorporated into the Massachusetts building code as an optional appendix.  Towns and cities in Massachusetts would then be able to choose between remaining on the base energy code or adopting the stretch energy code as their mandatory energy code requirement.

Which option do you prefer, the Feebate or the stretch code?  Got any better ideas? 

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In addition to clarifying the LEED 25% guideline, Rob Watson also had some interesting points regarding regulations that required LEED certification.* 

First, Watson made a great point about governments requiring municipal projects to achieve LEED certification:  "As far as municipalities requiring their own buildings to go LEED, that's an owner decision and no problem.  Municipally-funded projects are in a similar vein."  I wholly agree with Watson. 

I still remain concerned about private development LEED mandates.  Watson indicated he also has similar concerns:  "It gets a bit dicey when talking about broader mandates because we designed LEED as a market-leading standard and there is concern about the market's ability to respond on a very broad level.  As penetration of green accelerates, I believe this will become less of a problem."

What do you think?  Can LEED mandates for private projects work?

*To be clear, Watson was speaking to me as the CEO of The EcoTech International Group.  He was not speaking on behalf of the USGBC. 

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Thanks to the fine folks at the Green Research Council, I was able to review their publication, "Green Guide to the 2009 Stimulus Package."  This guide is packed with information about the American Recovery and Reinvestment Act.  The Guide starts with a review of the stimulus and where to get information about particular projects being funded.  I have been telling people that due to transparency demands of the Obama Administration, there is a ton of information available about the stimulus projects.  The Guide does a great job bringing all of the information together in one place. 

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On Wednesday, we discussed the LEED 25 percent rule: the LEED rating system was only intended to apply to the top 25 percent of buildings.

It is important to remember this premise when considering what is happening in the green building industry today. Many cities are mandating LEED certification for public and private buildings. For example, in Washington D.C., all new construction of private buildings greater than 50,000 square feet will have to be LEED certified after January 1, 2012.

As cities, states and federal agencies are mandating LEED certification, you simultaneously have the USGBC "raising the bar" for green buildings by bi-annually updating the LEED rating system to include even more stringent requirements for certification. The USGBC's goal is not for every building in the country to be LEED certified. Instead, the USGBC wants "to bring in even greener and greener buildings."

You see the problem there. I know you do. But I will say it anyways.

Mandates require 100 percent compliance.

The USGBC is designing a system that only the leading 25 percent of buildings can comply with, at least in terms of certification.

Those two numbers do not add up.

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The Washington D.C. government has recently began incorporating Social Media 2.0 into its public outreach.  Agencies have Facebook pages, some are on Twitter and officials have even taken to participating in online chats with the public. 

I was very excited to learn that Councilmember Mary Cheh was conducting one of these online chats last Friday.  Cheh is the chairperson of the Committee on Government Operations and the Environment and very interested in the operation of the D.C. Green Building Act of 2006.  You may recall that I spoke at a D.C. Public Hearing on Green Building that was convened by Councilmember Cheh.  During the hearing, Cheh demanded accountability from those responsible for implementing the Act. 

After reading the chat, I am optimistic about the future of green building regulations in the District: 

1:37    [Comment From SG]
How can the DC government incentivize "green roofs" for private citizens to make it extremely cost-effective for average citizens and businesses to install?

1:41    Mary Cheh:  We are moving to do just that. The RiverSmart program, by DDOE, provides grants for mitigation of storm water outflow at residential properties. It could be used for green roofs. Anyone interested should check out the DDOE website at ddoe.dc.gov. Unfortunately, at the moment, for our businesses, we don't have much by way of incentives and we are relying more on a stick approach, which will make it more expensive for businesses if they fail to deal with water runoff. DDOE has a Business Outreach specialist who can offer advice on strategies for green roofs and other environmental initiatives.

Cheh's comment that it is "unfortunate" that there are not more incentives for green roofs has me optimistic that Cheh also supports further incentives for green building development.  The problem Cheh faces, of course, is that Washington, D.C. has very limited funds for incentive programs. 

So here's my proposed plan:  the D.C. Feebate.  Modeled after the Portland Feebate, D.C. could set up a separate green building fund.  If a project fails to achieve LEED certification or equivalent, the project pays a fee into the city fund.  If a project achieves LEED Certified or Silver certification, nothing happens.  Here's the kicker:  if a project achieves LEED Gold or Platinum, the project will get a rebate back from the fund. 

What do you think?
 

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[Sometimes, it's better not to reinvent the wheel.  As I was preparing this week's posts, I came across Lane Burt's analysis of the Department of Energy's (DOE) stimulus funding.  Lane, an NRDC Policy Analyst, agreed to let me use his post today.  Check out Lane's blog - it's a great resource for energy policy analysis.]   

DOE released the funding distribution for the Energy Efficiency and Conservation Block Grants (EECBG) from the recovery act (ARRA) late last week. With this action, we now know as much as we are going to about the destination of the clean energy dollars.

The big ticket items for clean energy were,

• $5 billion for low income weatherization (WAP)
• $3.1 billion for state energy programs (SEP)
• $3.2 billion for the local block grants (EECBG)
• $4.5 billion for greening GSA facilities

I blogged on the funding breakouts here and here,

We aren't going to get more clarity on the destination of the GSA funding. GSA has a list of projects across the country, but details have yet to be released and GSA is not required to do so.  [Ed. The GSA released its project list after this post.]

The money for state energy programs and low income weatherization is distributed according to an existing formula that sends a baseline allocation out and divides the remainder, 1/3 weighted according population, 1/3 by consumption, and 1/3 equally. The text of the law is here,

Now, DOE has released the funding amounts for EECBG and a nifty little interactive map so you can see where all the funding (SEP and WAP included) is headed.  More detailed state by state info here, including city by city breakouts for the local block grants.  A few clicks show me that my home state of North Carolina is getting $266 million dollars and my hometown of Charlotte is getting close to $7 million of that.  New York recieves $693 million, California gets $764 million and Texas gets $755 million.

Decision time

DOE is doing everything they can to get this money out now. How it gets spent (in the case of SEP and EECBG) is now a state or local matter and there is a lot of discretion given to states and localities on how to spend it. The potential impact of this money is incredible if used properly to save energy and create jobs, but the potential for waste is also very high.

Because of the potential for waste, there are two words that should guide every state, county, and local official in spending this money - Prioritize Efficiency. I cannot say this enough. It is faster, cheaper, and cleaner than any alternative and it is the only way we can spend now to save us money in the future. It supports local jobs and keeps dollars in the local economy. No one can find a stimulus proposal better than the one that will leave you with more money than you started with in just a few years.

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While we have all (or at least I have) been focusing on the federal stimulus and its effect on the green building industry, an interesting development occurred in Virginia that may impact the future of a statewide green building regulation.

In past posts, I highlighted Governor Tim Kaine's attempts to pass a statewide green building regulation.  As you may recall, in 2007, Governor Kaine indicated his preference for the LEED rating system and Energy Star in Executive Order 48.  In 2008, the Governor and the General Assembly crossed paths on the proper green building rating system for Virginia:  

The Governor’s original proposed budget in 2008 did not include green building provisions.  As part of the budget process, the Governor’s budget was sent to the General Assembly to undergo legislative amendments and the following provision, which includes Green Globes, was added:  “All new and renovated state owned-facilities . . . that are over 5,000 gross square feet shall be designed and constructed consistent with the . . . U.S. Green Building Council's LEED rating system or the Green Globes rating system.”  Governor Kaine vetoed the inclusion of Green Globes but the General Assembly overrode the veto.  

Based on the Governor Kaine's past work to exclude the Green Globes rating system, I was surprised by a portion of the Governor's State of the Commonwealth Address on January 14, 2009: 

"A few years ago, I issued an executive order requiring that all new state buildings be constructed to high energy-efficiency standards. Later, members of the General Assembly included similar language in the budget bill. That was a smart step in ensuring that the Commonwealth makes good energy decisions, and one that saves us money in the long run.

This year, I will ask you to ratify that approach again, by requiring in the Code of Virginia that all state and local government buildings meet either LEED or Green Globes standards for efficiency."

Did you see that shift in policy?  What do you think of Governor Kaine's new found support for the Green Globes standard? 

Photo:  Ouij

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Last week, I had the pleasure of testifying before the D.C. Council regarding green building policies in the district.  As mentioned in my post last week, the focus of my testimony was the Green Building Act's "performance bond" requirement.  Before my testimony, I had the opportunity to hear George Hawkins, Director of the District Department of the Environment.  During his speech, Mr. Hawkins directly addressed the "performance bond" issue and many of the points I raised in my White Paper last Wednesday.  After you review Mr. Hawkins testimony, I would be very interested in hearing your thoughts. 

---

“Performance Bond” Requirement for Private Projects

I would now like to turn to the issue of performance bonds and criticism of this enforcement tool. Pursuant to the Act, commercial applicants will be required to submit a “performance bond.” If the building fails to meet the LEED certification requirements, “all or part of the performance bond shall be forfeited to the District.” Experts in the area of environmental finance analysis and DDOE’s research on the subject support this approach as an appropriate and sufficient enforcement mechanism to ensure compliance with the Act.

One of the concerns that has been raised is that “performance bonds” do not currently exist in the financial assurance world. There are, however, a number of laws and regulations that have required forms of financial assurance that at the time of the inception did not exist in the market. In each regulatory context, private financial markets have developed to provide the insurance, bonds, and other financial instruments necessary to demonstrate assurance. For example, before there were automobiles, there was no such thing as car insurance. When the law recognized a growing need to insure against harms that may be perpetrated by automobile drivers to others, the market rose to the demand.

The breadth of operations and environmental risks covered by current rules is an additional testament to the market’s ability to conform to and rise to the demand of a new form of financial assurance. For example, the Resource Conservation and Recovery Act (RCRA) requires that financial assurance be provided by the responsible party as proof that adequate funds will be available when needed to undertake the necessary corrective action at a RCRA treatment, storage, and disposal facility. Many states have their own laws requiring financial assurance, including our own DDOE requirement that developers post a bond equal to the cost of stormwater management infrastructure until DDOE verifies proper installation.

A second concern that has been raised is that it may prove difficult and financially burdensome for developers to provide letters of credit, collateral to obtain a bond, or escrow in amounts up to $3,000,000 (the maximum requirement under the Green Building Act). While opposition to new financial assurance rules is common regardless of industry, DDOE believes fears of business disruption from this new assurance requirement are unwarranted. When the District began to require condominium developers to place 10 percent of the cost of construction in an escrow account or provide a letter of credit under the Condominium Act, the same concerns were cited, and yet, this is now common practice.

An additional criticism of the current “performance bond” requirement is that the enforcement mechanism creates an inherent conflict of interest because those that would require forfeiture of the bonds would also directly benefit from the forfeiture. If forfeited, performance bond funds are to be “deposited in the Green Building Fund.” Under the Act, the Green Building Fund is to be used, in part, for “staffing and operating costs to provide technical assistance, plan review, and inspections and monitoring of green buildings.” On the contrary, it is important to note that many legally-required fees, fines, and penalties are used by governments to fund the operation of the program under which they are collected. For example, D.C. Official Code § 7-632 authorizes the establishment of a Regulatory Enforcement Fund to be used by DDOE to finance its regulatory practice. The Council has routinely authorized use of enforcement proceeds to finance future enforcement actions.

In summary, we believe the bond requirement under the Green Building Act is viable and can be implemented. We have already, and will continue to, participate in discussions with our sister agencies and stakeholders as to how this enforcement mechanism should best be implemented.

---

Do you think Mr. Hawkins is right?  Will the financial sector come up with a green building performance bond?

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Well, that wasn't much time to get prepared. 

The Department of Energy has released the first installment of funding for the Weatherization Assistance Program and the State Energy Program. 

"To jump-start job creation and weatherization work, the Department of Energy is releasing the first installment of the funding - about $780 million -- in the next few days.  The Department will release additional funding over time as states demonstrate that they are using the funding effectively and responsibly to create jobs and cut energy use."

The Weatherization Assistance Program seems fairly straightforward.  Through the program, "an average investment of up to $6,500 per home in energy efficiency upgrades and will be available for families making up to 200% of the federal poverty level - or about $44,000 a year for a family of four."  

The administration of the State Energy Program funding is a bit more murky.  According to the DOE, State Energy Program funding "will be available for rebates to consumers for home energy audits or other energy saving improvements; development of renewable energy projects for clean electricity generation and alternative fuels; promotion of Energy Star products; efficiency upgrades for state and local government buildings; and other innovative state efforts to help save families money on their energy bills."

In the coming weeks, Green Building Law Update will monitor stimulus funding at the state level.  How do individuals apply for weatherization funding?  What programs will be funded through the State Energy Program?  I hope to answer these and many more questions. 

Related Links

• DOE to Release First Wave of $8B in Weatherization, Energy Efficiency Funds from Stimulus (GreenerBuildings)
• Obama-Biden Administration Announces More Than $164.1 Million in Weatherization Funding and Energy Efficiency Grants for Virginia (DOE)
• Getting Green From the Stimulus (GBLU)

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I have been working with the D.C. City Council recently on revisions to the D.C. Green Building Act of 2007.  In particular, I have been looking for an enforcement mechanism that can be used to ensure compliance with LEED certification requirements for commercial buildings.  The problem is that the current Green Building Act requires a "performance bond" to guarantee certification.  Green Building Law Update has covered the issued extensively and you can read more about it here. 

Photo:  Martyn and Debz

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As promised, below is the slideshow from last week's "Green in the Stimulus" presentation as part of Rutherfoord's Trends in Green Building seminar.  Unfortunately, I have not figured out how to synchronize audio files with a slideshow - maybe next time.

I had two goals when I created this presentation:

(1) Explain the green building provisions in the stimulus package.
(2) Convey how parties can prepare themselves now to take advanage of resulting green buiding opportunities. 

You can be the judge whether I succeeded.  The slides, by themselves, do not do the presentation justice.  If you are interested in hosting the "Green in the Stimulus" presentation for your company, please contact me at chris@greenbuildinglawupdate.com.  The presentation can be tailored to your specific state or region and industry. 

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[GBLU Note:  Awhile back, I had the pleasure of hearing Darren Prum speak at the William & Mary symposium, "It's Not Easy Building Green."  Darren's presentation regarding Nevada's problematic green building legislation was fascinating.  I asked Darren to write something up for Green Building Law Update on the topic.

Darren's post is very timely.  State and local governments throughout the country are currently drafting new green building regulations to take advantage of incoming stimulus funding.  The "Nevada Green Building Incentive Experience" provides a warning of what can happen when green building regulations are not drafted and implemented carefully.]

By Darren A. Prum, MBA, JD

In 2005, the Nevada Legislature passed a poorly considered green building incentive package in an effort to spur private developers in the state. The hastily written legislation in conjunction with little direction to state agencies and minimal financial analysis forced the next session of the Nevada Legislature in 2007 to rethink and modify the program because it created a financial crisis of epic proportions (developers figured out quickly that they could receive up to $3 for every $1 spent meeting the LEED requirements). 

In brief, the 2005 legislation required the state to construct 2 LEED Silver or higher structures during each 2 year budget cycle while it provided a sales tax reduction down to 2% for all materials and fitting used in construction and a 50% reduction on all property taxes for 10 years to the owners of private constructed buildings. 

While the concept had the best of intentions, the agencies charged with administrating the program drastically altered the legislative intent.  The Nevada Tax Commission was supposed to only authorize projects that broke ground before December 31, 2005; but instead, it allowed those “in existence” prior to the date to qualify.  Then, Nevada Governor Gibbons’ newly appointed Director of the Office of Energy changed the application of the LEED building standard for eligibility to evaluate a project based on an entire development rather than by each individual building.  This modification allowed casinos to permit smoking and still gain the tax break.

As a result of the legislation, LEED projects in Nevada jumped from 14 in 2005 to 97 in 2007.  As the 2007 legislative session approached, budget forecasters projected a minimum loss of $940M to state revenue over the next biennium.  Clark County (Las Vegas area) would lose 10% of its tax base and the Clark County School District would lose $700-900M over the next 10 years (which the state must still fund through other sources).  The biggest winners of the breaks included:  MGM-Mirage’s Project City Center ($80M already and  $900M over its life), Venetian’s Palazzo Tower, and Boyd Gaming’s Echelon Place (currently stalled).

In 2007, a very wild legislative session resolved the financial impact but grandfathered 6 projects under the old system.  The current incentives repealed the sales tax abatement revised the property tax incentives.  The property tax reductions no longer applied to education levies and strictly enforced compliance to the adopted LEED standard.  These changes limited the state’s exposure now to approximately $493M.

In evaluating already existing incentive programs, New York, Oregon, and Maryland preceded Nevada but utilized their state income tax code as the primary tool to further green buildings.  In an effort to avoid similar results to that of Nevada, many other jurisdictions created their own unique programs.  Virginia followed the Nevada model by allowing property tax abatements at a local level, New Mexico used the income tax credit approach, and Hawaii tried a new method by requiring a green building to receive priority processing during governmental reviews for project approvals, which should not impact the state’s revenue stream at all. 

Because Nevada does not impose an income tax, a well-developed incentive program should try to offer nonfinancial incentives first, followed by abatements in taxes that do not create lasting effects to the state’s fragile revenue stream.  Accordingly, the Nevada experience provides an example to other jurisdictions considering a green building program on how incentives may offer too generous a benefit to developers and others and may place a state in financial crisis despite the noble intentions.

Darren A. Prum is a Visiting Lecturer in Business Law and Finance at the University of Nevada, Las Vegas.  A more detailed version of Nevada’s Green Building Incentive Experience is expected to appear in an upcoming issue of William & Mary’s Environmental Law & Policy Review.  Mr. Prum has other green building related articles previously published and forthcoming in the Real Estate Law Journal.

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Update:  For a rundown of green building provisions in the stimulus pacakge, see this post.

Thank you to everyone who attended Rutherfoord's "Trends in Green Building" seminar yesterday and listened to my "Green in the Stimulus" presentation.  It was great to recognize so many faces in the crowd.  If you came up and spoke to me about speaking engagements or green building legal programs offered by my law firm, please follow up with me so we can make it happen.  For those of you who missed the event, I will post the powerpoint I presented to Green Building Law Update (hopefully with a voiceover) on Monday. 

Now for the bad part. 

The stimulus package is going to result in increased levels of green building litigation. I hope I am wrong, but I think it is inevitable. 

In my "Green in the Stimulus" presentation, I highlighted three factors that will contribute to an increase in green building litigation.  The first factor is an influx of inexperienced parties attempting to build green.  There are many state and local governments that, to date, have not been substantially involved in the green building industry.  These entities, with the help of the stimulus funding, are now going to require green building projects through regulation.  Here is an example.  These state and local governments will be required by the timelines of the law to fast track these green building developments.  Do you see the problems that can arise from this scenario?

The second factor will be the requirement that projects attain LEED certification.  The website of the General Services Administration states:

As of 2003, all new GSA building projects must be certified through the Leadership in Energy and Environmental Design (LEED) Green Building Rating System of the U.S. Green Building Council, and Silver LEED rating is encouraged. 

The GSA will not be the only entity requiring LEED certification for projects.  Who will be responsible for achieving the LEED certification?  What happens if the project fails to achieve the LEED certification?

Finally, the third factor that will result in more green building litigaiton is the emphasis on energy efficiency.  The drive to build green primarily centers around the desire to reduce building energy use.  However, it is very difficult to anticipate how a building will actually perform.  Under the LEED rating system, energy efficiency is modeled through ASHRAE.  Buried deep in a ASHRAE appendix (ASHRAE 90.1, Appendix G, Section G1.2, Note 2) is the following disclaimer:

"Neither the proposed building performance, nor the baseline building performance are predictions of actual energy consumption or costs for the proposed design after construction. Actual experience will differ from these calculations due to variations such as occupancy, weather, energy use not covered by this procedure, changes in energy rates between design of the building and occupancy, and the precision of the calculation tool."

Not every government or municipality will see or understand this caveat.  Heck, many of the entities requiring certification don't even understand the acronym for the LEED rating system.  What happens when the new green buildings don't actually reduce energy usage? 

I am not the only one concerned about these issues.  Real Life LEED initially raised factor three.  Are we wrong?  Tell me. 

Related Links:

• LEED Risk Management:  Crossing the Model/Reality Chasm (Real Life LEED)
• "The Stimulus:  Now for the Hard Part" (GBLU)
• The Stimulus:  Green Building Provisions (GBLU)
• The Stimulus:  "LEEDS"ing the Way (GBLU)
• The Stimulus:  FedBizOpps Has Green (GBLU)
• The Stimulus:  States Have Green Too (GBLU)
• The Stimulus:  Build Relationships Now (GBLU)

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Update:  For a rundown of green building provisions in the stimulus pacakge, see this post.

I am wrapping up my "Green in the Stimulus" presentation for tomorrow and wanted to provide more information that may benefit your company as you seek out green stimulus projects. 

As you prepare to bid federal and state projects, relationships will be key.  You will need relationships with general contractors or subcontractors to facilitate your bid.  Relationships with the government officials that are creating or letting the government projects can also be helpful.  I am convinced that in the stimulus bidding process, information is power.  Government officials can provide information about requirements and preferences for green stimulus projects. 

How do you develop relationships with these government officials?  Here is an idea. 

Like Virginia, Maryland has developed a stimulus website .  Unlike the Virginia stimulus website, Maryland does not provide information about proposed stimulus projects.  But other information on the website may prove valuable. 



The Governor's office will be providing "Workshops for Local Leaders" related to the stimulus package.  The event is free.  You do not have to register. 

If you are in Maryland and you want to learn about stimulus projects and talk to the officials in charge of these projects, why would you not go to one of these events? 

Related Links: 

• "The Stimulus:  Now for the Hard Part" (GBLU)
• The Stimulus:  Green Building Provisions (GBLU)
• The Stimulus:  "LEEDS"ing the Way (GBLU)
• The Stimulus:  FedBizOpps Has Green (GBLU)
• The Stimulus:  States Have Green Too (GBLU)

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Update:  For a rundown of green building provisions in the stimulus pacakge, see this post.

Yesterday, while preparing for my "Green in the Stimulus" talk, I came across something both hilarious and frightening. 

StimulusWatch.org has provided an inventory of proposed projects that could benefit from the stimulus.  The list was prepared from a list of shovel-ready projects prepared by the U.S. Conference of Mayors .  While reviewing the list for "LEED" projects, to my great horror, I made the following discovery:



If an entity is seeking "LEEDS" certification, is the project really "shovel-ready"?  And no, that is not a rhetorical question. 

Related Links: 

• "The Stimulus:  Now for the Hard Part" (GBLU)
• The Stimulus:  Green Building Provisions (GBLU)

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• Stimulus: now for the hard part (CNN)
• Earmark-Free Stimulus Bill Lacks Spending Direction (NPR)
• Democrats Among Stimulus Skeptics (Wash. Post)

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Update:  For a rundown of green building provisions in the stimulus pacakge, see this post.

Thomas C. Mawson - U.S. Green Building Council
Executive Director, National Capital Region Chapter
2009 LEED Rating System Changes and their Impact on Property Owners and Developers

Richard M. Silberman - Healthy Buildings International, Inc.
Chief Executive Officer
Earning the Ventilation-Related Credits Within LEED-NC

Eric M. Oliver - EMO Energy Solutions
President
Looking for Energy Savings In All The Right Places

Bobby C. Christian - Tangible Software Solutions, Inc.
President  
Simplifying Energy – Buy. Use. Manage.

Did I forget anything? 

Related Links:

• Highlights of $787 billion stimulus plan (AP)
• Stimulus: Now For the Hard Part (CNN)

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• D.C. Green Building Act
• SFAA and SBP Letter Regarding "Performance Bond" Requirement 
• Related GBLU "Bond" Posts

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Last week, we talked about the William & Mary Environmental Law Review Symposium "It Ain't Easy Building Green."  Today, I am going to try yet another new blog trick and make my slideshow available from the Symposium. 

If you have any questions or would like to discuss any of the slides in detail, just post a comment and I will be sure to respond.  If your company or organization would be interested in hosting this or a similar presentation, please contact me (chris@greenbuildinglawupdate.com). 

So what do you think? 

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[Green Building Law Update is achieving another first:  our first guest post!  Christopher G. Hill is a Virginia construction attorney and recently started a legal blog, Construction Law Musings.  I first met Chris through Twitter and I appreciate his willingness to discuss green building legal issues.]

Aside from the governmental impetus to learn green building techniques, two factors require that Virginia contractors learn to build green.  These two factors are simply 1.  project owners want green buildings and 2.  those contractors that do not keep up with the “greening” of construction are likely to fall behind and struggle to stay afloat in today’s economy.

Project owners want green buildings for many reasons.  Owners want to be seen as environmentally friendly and civic minded.  Additionally, and possibly more importantly, owners save money (both initially and over time) by building green.  As an example, use of integrated green building methods requires less up front costs for irrigation piping and the like and leads to use of less than one quarter of the water that a non-green building uses according to a recent study.  Lower water usage means lower operating costs.  Couple these factors with tax incentives and the like provided by the government and the benefits of green building to owners are obvious.

Because of the environmental benefits and cost savings inherent in a green building approach, contractors versed in green building can sell their services more readily than those that do not.  First of all, a “green” contractor will be among a limited set of contractors to whom an owner seeking green certification for its building will look.  Second of all, if an owner asks you for input, you can sell him or her on the benefits of your services over a comparable non-“green” contractor.  In both of these instances, being knowledgeable in green construction and its benefits will serve your business well.

As always, be sure to consult with a legal professional regarding the contract requirements on such a project before bidding on the job to avoid headaches at the end of the project.  As with any new area of business, you are better off anticipating issues rather than responding to them.   

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Last week, we discussed a law in Virginia that prohibits municipalities from creating green building codes or mandates.  In short, Dillon's Rule only grants to municipalities those powers that are explicitly granted by the state.  The Virginia Code has specifically granted the power to create a building code to the state; municipalities, on the other hand, can create zoning ordinances. 
 
Recently, I had the pleasure of sitting down to speak with Joan Kelsch, Environmental Planner for Arlington County, about the Arlington County green building programs.  Arlington County has taken advantage of the opportunity to create zoning ordinances by promulgating two programs that stimulate the development of green building projects:  (1) a Site Plan Program; and (2) a Bonus Density Program. 

Lets start with the Site Plan Program.  According to Kelsch, in Arlington County "green building policies are technically voluntary but site plan projects do allow Arlington County to ask for specific proffers from developers."

What is a site plan project?  A site plan is a large project that requires a special exception to the zoning ordinance in order to be built.  Because site plans require an exception to the zoning ordinance, Arlington County is able to require specific green building requirements, including:

(a) LEED™ Accredited Professional
(b) LEED™ Scorecard.
(c) LEED™ Tracking.
(d) Construction Waste Management.
(e) Energy Star Appliances.

In addition, Arlington County is also incentivizing green building development through its Bonus Density Program.  Under the Bonus Density Program, projects larger than zoning would normally permit are allowed if the developer promises to achieve a specific LEED certification level. 

We will be looking at Arlington County's Bonus Density Program in more detail, in part, because the enforcement mechanism involves a four-letter word that has created problems in Washington, D.C. (hint: bond).

Related Links: 

• Virginia Green Building Regulations:  Avoid the Building Code (GLBU)
• Green Building Regulations in Virginia:  Zoning In (GBLU)
• Environmental Services (Arlington)
• Green Building Incentive Program (Arlington)

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Last week, I had the pleasure of speaking at the William and Mary Environmental Law & Policy Review symposium "It's Not Easy Building Green."  The students did a fantastic job and the audience was large and engaged. 

In particular, Mark Pike organized an interactive web 2.0 experience for the symposium that was quite impressive.  Many of the symposium participants used Twitter to discuss the event.  Additionally, Mark set up a blog (in less than 12 hours!) and live blogged each of the presentations.  From what I have heard, the event was even taped and should be made publicly available. 

In addition to the technology, there was plenty of substantive discussion about green building law.  Here are five things I learned at the symposium:

1.  Stephen Del Percio correctly pointed out that state legislation may run afoul of antitrust law if it only incorporates one green building rating system, like LEED.

2.  North Carolina's green building regulations focus on two specific green building strategies -- energy efficiency and water usage -- instead of requiring certification through a rating system.  This seems like a good idea to me. 

3.  If I am going to describe techniques to reduce water usage, I should be able to list more than just "low flow urinals."  Furthermore, I should not emphasize the awkwardness by repeating the word "urinal" and then pausing.  Thanks to everyone for pointing this out to me.

4.  Darren Prum described a ridiculous scenario in Nevada surrounding a property tax abatement that went awry.  Essentially, the property tax abatement that was provided to projects achieving LEED certification almost bankrupted the state. 

5.  There is a Property Tax Reduction regulation in Virginia for projects that achieve LEED certification or certification under another energy preferred standard.  You will definitely be hearing more about this at Green Building Law Update. 

Green Building Law Update will be looking at these issues in more depth in future posts.  Thanks to all of the symposium participants for their hard work and important ideas.

Related Links: 

• "It's Not Easy Building Green" homepage (W&M)
• "It's Not Easy Building Green" live blog (W&M)
• "It's Not Easy Building Green" twitter discussion (hashtags.org)

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I hope you survived the dramatic cliffhanger from Monday.  Now, time to answer the question, how do Virginia cities and counties regulate green building if they cannot adopt a building code? 

Such a dramatic pause for such a mundane answer:  zoning ordinances. 

The Virginia code specifically delegates to the municipalities the right to create zoning ordinances:

“The planning commission of each locality may, and at the direction of the governing body shall, prepare a proposed zoning ordinance including . . . a text setting forth the regulations applying in each district.”

Under the Dillon Rule, the state creates the building code at the state level but cities and counties can create zoning ordinances at the local level. 
Local governments have recognized the opportunity to regulate green building through zoning ordinances.  You may remember this great quote from a previous post:

“Arlington County is deliberately pushing the limits of state law to insist on green standards for development. . . . Arlington pioneered green building standards through its planning and zoning . . . process.”

Next week, we will examine Arlington County's green building regulations.  In the meantime, I have something very special for Friday.

Related links: 

• Virginia Code 15.2-2285
• Going Green (Va. Lawyers Weekly) 

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This past weekend, I spent a lot of time preparing a slideshow for the William & Mary Environmental Law & Policy Review Symposium, "It's Not Easy Being Green."  As you may recall, I will be presenting on green building regulations in Virginia.  Guess what we are going to discuss on Green Building Law Update this week?  That's right, green building regulations in Virginia. 

Hold on, stay with me. Virginia is actually a very interesting state for developing green building regulations. 

As you may recall, in the past, a reader asked how a Virginia city or county can regulate green building with the Dillon Rule in place.  The Dillon Rule essentially says this: 

"Municipal corporations have only those powers that are expressly granted . . . ." 

“The Board is hereby directed and empowered to adopt and promulgate a Uniform Statewide Building Code. Such building code shall supersede the building codes and regulations of the counties [and] municipalities . . . .”

• Have a Beer With Green Building Law Update (GBLU)
• Dillon Rule Hampers Green Building Efforts (GBLU)
• The Rules of Statutory Construction (Virginia1774)
• Virginia Code 36-98
• Arlington Green Building

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Last week, Green Building Law Update highlighted Portland's innovative green building regulation that includes a "Feebate" system to encourage green building development.  According to this OregonLive article, City Commissioner Dan Saltzman unveiled a previous version of the green building program nearly one year ago at the USGBC's Greenbuild event in Chicago.  The reception in Portland to the previously proposed policy was not good: 

Upon returning home, however, a firestorm of resistance singed the commissioner and nearly torched the entire policy. Saltzman retreated, forming committees -- adding the Realtors and homebuilders who were left out of initial discussions -- to rework the policy.  

The final Portland green building program removed regulations for owners of existing homes.  Despite the removal of residential requirements, opposition still remains: 

The policy has already laid bare a rift among the larger Portland real estate players, mirroring a division apparent nationwide. The nation's biggest commercial developers have caught onto the green-building trend and often brag about their energy efficiency strides and certification plaques. . . .  

But Earth-friendly standards for homebuilders have been slower to develop. Certification programs are more varied, and the residential industry remains hostile to government requirements -- even if the rules promise rebates for compliance.

Dave Nielsen, chief executive officer of the Home Builders Association of Metropolitan Portland, said Saltzman is rushing to impose new rules without assessing their potential impact. Buyers of new homes might or might not recoup the higher price they pay for energy efficiency measures, Nielsen said.

"They have no clue in terms of what the costs are to do this and what the value will be, to the consumer or the value of the home," Nielsen said. "They're just trying to be first to something, and it's crazy."

Based on Mr. Saltzman's quotes, residential developers are concerned about the additional costs associated with "green" homes.  As suggested by the CoStar Group Study published in early 2008, commercial green building projects result in increased profits and sales.  The residential "green" market has not developed to the extent of the commercial "green" market.  As a result, governments wishing to create a market for "green" residential projects should create incentives for green home developers.  Whether Portland's "Feebate" is the proper incentive structure for such a program remains to be seen. 

Related Links: 

• Saltzman offers scaled-back green building policy (OregonLive.com)
• Portland's Battle To Legislate Green Building (Green Building Law Blog)
• A Tale of Two Cities: Portland's Feebate (GBLU)

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Here at Green Building Law Update, we remain troubled by the disbanding of the proposed ASHRAE 189.1 green building code committee, but we have to point out one bright spot. 

As you may recall, last week we  discussed the merits of the “Proposed Standard 189: Standard for the Design of High-Performance Green Buildings Except Low-Rise Residential Buildings" and the disbanding of a committee that was to create the code, apparently due to pressures from industry groups.   After the committe was dissolved,  the USGBC voiced strong support for the green buiding code: 

Brendan Owens, vice president for LEED Technical Development at USGBC, told EBN that it was “very surprised at this action taken by ASHRAE,” adding that USGBC is trying to learn more about ASHRAE’s reasons.

 

“We want to make sure that this is the best path forward,” Owens said. Acknowledging the uncertainty about Standard 189, Owens noted that a minimum green building standard that can be incorporated into codes is “so fundamental to everything USGBC is about, we are very committed to making sure it happens.”

• Uncertain Future for ASHRAE Standard 189 (BuildingGreen)
• Industries Halt Proposed Green Code (GBLU)

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Last week, Green Building Law Update questioned whether governments should be requiring LEED certification through regulations and mandates.  Assuming governments should get out of the green building certification business, what then should governments do to support green construction strategies?  There are generally two options, one of which we will discuss today:  green building codes. 

Green building codes essentially incorporate green building strategies into construction codes.  By incorporating green building strategies into code, governments can not only mandate the strategies they deem most important but also avoid the costly and time-consuming certification process. 

Apparently, not everyone agrees with me.  Shari Shapiro first brought my attention to the fact that the committee constituting the “Proposed Standard 189: Standard for the Design of High-Performance Green Buildings Except Low-Rise Residential Buildings” recently disbanded.  Proposed Standard 189-P was supposed to serve as a minimum green building code. 

A committee composed of members from ASHRAE, the USGBC and the Illuminating Engineering Society of North America (IES) had been put together in 2006 to work on the standard.  But on October 14, 2008, the committee was suddenly disbanded and the reasons remain unclear:   

Several committee members discussed the move with EBN, all of them speaking off the record, either because they were unauthorized to speak by the organizations they work for, or did not want to jeopardize their chances to rejoin the committee.

Discussing resistance from various industry groups, including steel, gas and utilities, wood, and building owner interests, one committee member said, “We must have been doing a good job.” While those trade associations had specific complaints in some cases, in others they were unsupportive of ASHRAE’s involvement, as a mechanical engineering association, in a broad green building standard.

There are many nuances to creating a green building code, which we will discuss in future posts.  Managing all of the associated parties' interests is one clear impediment to proposed green building codes. 

Related Links: 

• A Week of Epiphanies:  I Don't Mean to Diminish This But . . . (GBLU)
• The Death of ASHRAE 189? (Green Building Law)
• Uncertain Future for ASHRAE Standard 189 (BuildingGreen)

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In continuing our week of epiphanies, here’s another one that struck us here at Green Building Law Update:  should governments consider getting out of the green building certification process? 

Yes, I realize this epiphany is out there and that practically every state has implemented some sort of green building regulation.  Over the past few months, we have profiled green building regulations in D.C., Virginia, Indiana and Maryland, to name a few.  But the more I think about these regulations, the more I become concerned that governments should not mandate certification, particularly of public projects.

Apparently, I am not the only one with these concerns.  For example, this article cites an Evanston, Illinois official that is concerned with certification cost:

At the meeting, Evanston residents spoke about the Green Building Ordinance, which was drafted by the Evanston Environment Board. . . .  Ald. Lionel Jean-Baptiste (2nd) cited the need to look closer at the cost of the ordinance.

"It's difficult in this current economic climate for anyone to build," he said. "We need to look more into the cost, and have greater discussion at the committee level." 

And here is another example, this time a LaCrosse, Wisconsin official voicing concern over the costs for green building certification:

“When I think about all this discussion about certification and not certification, I think we’re going to do all this good stuff so let’s just declare it a green building and go home,” Supervisor John Medinger said during the Law Enforcement Center Construction Committee meeting this week. “We say it’s a green building. Who says it isn’t? I don’t mean to diminish this, but I’m trying to see what we’re going to get with this $161,000.”

With the state facing a $3 billion shortfall, Medinger said the county will take a hit and can’t afford to spend money that brings no return.

These officials represent a minority view that government’s should not mandate green building certification due to the associated costs.  But Mr. Medinger drives home the point:  what are governments getting out of certification? 

Green building certification is primarily a marketing tool used to sell a building.  Green building strategies can most definitely be incorporated without obtaining certification and the results can still be confirmed through commissioning.  What benefits are cities and states getting when their public buildings are deemed certified?

Related links: 

• Cost concerns may clash with green ordinance draft (Daily Northwestern)
• Several commissioners object to price tag for LEED certification (LaCrosse Tribune)
  
• Can state budgets support green building? (GBLU)

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Over the weekend, we here at Green Building Law Update had some green building epiphanies.  So let’s start with epiphany number one.  As I was driving into my law firm’s office in Tyson’s Corner on Saturday, I looked out at the construction and thought to myself, why am I not writing about that? 

This isn’t any regular construction I am referring to either.  The construction I see everyday is the beginning stages of the Tyson’s Land Use Task Force Recommendations.  While I have been perusing the Internet for green building stories, there is a green building story happening in my backyard! 

The first time I read about the Tyson’s Corner redevelopment project was in this post  from Kaid Benfield’s NRDC blog.  Kaid describes the current design of Tyson’s Corner:

an absolute mess of a place that would be hard-pressed to function worse environmentally or even as a place to navigate in a car.  You'd have to be suicidal to try it on foot. 

Kaid is right – I have worked in Tyson’s for three years and walked to lunch once.  Thankfully, the Tyson’s Land Use Task Force Recommendations are aiming to fix these problems by focusing on “smart growth.”  Smart growth generally is an urban planning and transportation theory that concentrates growth in the center of a city to avoid urban sprawl.  

Maybe you are wondering, what does this have to do with green building?  Next time we discuss the Tyson’s Corner redevelopment, we will look at the Task Force Recommendations, which include green building regulations.  

Related Links

• Retrofitting suburbia for the 21st century (Kaid Benfield)
• Smart Growth (Wikipedia)

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As part of our review of the economic downturn's effect on green building, on Monday we looked at private projects that have cut LEED certification due to associated costs.  Today, we move from private projects to public projects.  Despite this shift, the theme is the same:  the economic downturn will result in less public projects pursuing LEED certification.  Want proof?  In the same Gazette.Net article cited to on Monday, one Maryland public project has already abandoned LEED certification:

A Frederick County Public School project, the Earth and Space Science Lab at Lincoln Elementary in Frederick, also had registered for LEED certification. Directors withdrew from the process in the spring, realizing it could not meet the standards without incurring additional costs.

Gov. Martin O'Malley directed state agencies yesterday to look for budget cuts of up to 5 percent that could include layoffs or unpaid furloughs for state employees, as he seeks savings in this year's budget and prepares a spending plan for next year.  An economic downturn has cut tax collections, so O'Malley must make cuts for the fiscal year that began in July to keep the $14 billion operating budget in balance, as required by law.

One area where state agencies may seek budget cuts is through green building programs.  For example, the Maryland Green Buildings Tax Credit (you may remember this from the Shaw Development case) has yet to be renewed in 2008 and it seems unlikely to be renewed in the face of the state's huge deficit.  Additionally, Governor Martin O'Malley signed Maryland's High Performance Buidings Act on April 24, 2008, which requires construction or major renovation of public projects to achieve green building certification through LEED, Green Globes or an equivalent green building system unless a waiver is obtained.  If agencies are asked to cut 5 percent from their budgets, it's not a stretch to imagine agencies using  waivers to eliminate green building certification and the associated costs. 

Obviously, Maryland is not the only state with a major deficit that has now been hit by the economic downturn.  It will be interesting to see Maryland and other states manage the green building certification process in face of state deficits. 

Related Links: 

• Developers Cede LEED Label for Savings (Gazette.Net)
  
• State Budget Troubles Worsen (Center on Budget)
• O'Malley Calls for 5% Cuts in State Agencies' Budgets (Baltimore Sun)
• Maryland Green Buildings Tax Credit (Maryland Govt.)
• Maryland's High Performance Buildings Act (Maryland Govt.)

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Last week, Green Building Law Update wrote about the Dillon Rule and how it is thwarting Virginia cities’ green building regulations. Under the Dillon Rule, the Virginia legislature is empowered with passing building codes, thus preempting city building codes or building regulations.

As we detailed, Indiana also follows the Dillon Rule but was successful in passing a green building regulation. The regulation was actually an executive order passed by Governor Mitch Daniels requiring new state buildings to achieve green building certification. You may remember that Governor Tim Kaine passed a similar executive order in 2007 requiring the incorporation of green building strategies in public construction. So how are Virginia cities including green building regulations?

• Alexandria, Virginia has set a goal “to achieve LEED-Silver rating for all new City-owned facilities over 5,000 square feet.”

• Arlington County “encourages private developers to evaluate the environmental impacts of all site plan projects.”

Importantly, notice the language in these green building provisions. Virginia cities have recognized that green building regulations affecting private projects must be passed in the Virginia State Legislature and so they either set “goals” or “encourage” green building. But this doesn’t mean the Virginia cities aren’t testing the limits of the Dillon Rule:
 

Arlington County is deliberately pushing the limits of state law to insist on green standards for development. A decade ago, Arlington pioneered green building standards through its planning and zoning approval process.
 

Arlington County has created one of Green Building Law Update’s favorite green building incentive structures. Stay tuned to read more about it.

Related Articles: 

• Going Green (Virginia Lawyers Weekly) 

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Now that our discussion of Southern Builders v. Shaw Development is over (whew!), Green Building Law Update is going to take the rest of the week to answer some reader questions.  The first question comes from Erica: 

How should a locality located in a "Dillon Rule" state, such as Virginia, go about establishing a mandatory green building program?

Good question Erica.  Lets get everyone on the same page first.  What exactly is the Dillon Rule?  The Dillon Rule is a peculiar rule that basically limits a city’s rulemaking ability so that the city can only make rules when expressly granted by the state: 

“This rule provides that municipal corporations have only those powers that are expressly granted, those necessarily or fairly implied from expressly granted powers, and those that are essential and indispensable. When a local ordinance exceeds the scope of this authority, the ordinance is invalid."

The Dillon Rule is upheld in Virginia, which means that cities are not allowed to create their own building codes.  Virginia Code section 36-98 states “the Board is hereby directed and empowered to adopt and promulgate a Uniform Statewide Building Code. Such building code shall supersede the building codes and regulations of the counties, municipalities and other political subdivisions and state agencies.”

What does this have to do with green building?  We have previously highlighted the Virginia legislature’s disagreement over green building regulation.  While the Virginia legislature continues to disagree as to the proper green building rating system, Virginia cities are watching cities all around them pass green building regulations.  

So how does a Virginia city get around the Dillon Rule so it can enact green building regulations?  My first instinct was building codes, but clearly that is not an option.  What other states use the Dillon Rule.  Indiana?  Indiana!  And Indiana recently imposed green building regulations!  How did that happen?  Stay tuned…

Related Links

• Virginia Debates Green Building (GBLU)
• Governor's Mansion Goes Green (GBLU)
• Going Green (Virginia Lawyers Weekly)

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Today we are wrapping up our discussion of Shaw Development v. Southern Builders, one of the first examples of major green building litigation.   On Monday we discussed the basic facts of the case; on Wednesday we looked at the contractual green building requirements between the two parties; and on Friday we looked at Shaw Development’s stated causes of action. We conclude our discussion today by looking at the damages alleged by Shaw Development. 

Parties that bring claims or lawsuits based on a green building project’s failure to achieve certification must also prove damages. Often, owners seek green building certification to obtain government incentives or comply with regulatory mandates. In Shaw Development’s counter-complaint, damages were based on the owner’s failure to obtain green building tax credits: 

Shaw Development demands judgment in its favor and against Southern Builders for . . . Six Hundred Thirty-Five Thousand Dollars ($635,000.00) in tax credits for failing to construct the Project in conformance with a (LEED) “Silver Certification . . . .”

The tax credits for which Shaw sought damages were part of a State of Maryland green building tax incentive program. Many cities throughout the country have enacted similar tax incentives to entice developers to build green. Failure to achieve anticipated incentives can result in litigation similar to this case. Additionally, many cities, including Washington, D.C., New York, Los Angeles and San Francisco, have adopted mandatory green building laws and codes that will require the incorporation of green building strategies into all construction projects. Failure to comply with green building laws and codes creates additional liability risks for contractors. 

As inexperienced parties undertake green building projects, unmet expectations will result in disputes and lawsuits. Parties must protect themselves from the start by clearly stating all parties’ understanding of the green building certification process and what is to be achieved. Furthermore, parties must fully understand the specific requirements of the green building incentives and mandates that apply in their locality. While Shaw Development v. Southern Builders was apparently settled without a trial, further green building litigation is just around the corner and is unlikely to be as easily settled.   Check back with Green Building Law Update as we continue to discuss how to mitigate your green building risks.   

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Way back on August 13, GBLU’s inaugural post focused on the impending green building litigation and factors that would cause the litigation.  One of the factors that was described focused on parties’ financial expectations:  “Parties undertaking green building projects for purely financial reasons will expect to make a profit.”  In order to make a profit from a green building, the project typically has to be certified.  Thus, it was anticipated that green building litigation would most likely occur when a project failed to achieve certification.  

Not surprisingly, we now have an example of green building litigation arising from this very scenario.  On February 16, 2007, Shaw Development, L.L.C. (Shaw Development) filed a counter-complaint against Southern Builders, Inc. (Southern Builders) in the Circuit Court of Somerset County, Maryland arising from, in part, the projects failure to achieve LEED Silver certification.  While the case never proceeded to trial, Shaw Development’s counter-complaint is instructive as to the future of green building litigation.  Our next three GBLU posts will look at the Shaw Development v. Southern Builders case in detail:  

•    Monday we will review the facts
•    Wednesday we will review the contract
•    Friday we will review the causes of action
•    Next Monday we will review the damages and provide some tips to avoid this type of litigation

The facts are similar to most construction projects.  Prior to the lawsuit, Shaw Development purchased property in Somerset County, Maryland and retained Southern Builders to construct a condominium project on the property.  In the counter-complaint, Shaw Development alleged, among other things, that Southern Builders failed to construct the condominium project in a good and workmanlike fashion and, as a result, the project did not achieve USGBC LEED Silver certification.

The contract between two parties is key to determining liability between two parties undertaking a green building project.  Check back Wednesday when we review the contract between Shaw Development and Southern Builders.  

Related LInks

• The Anatomy of America's First Green Building Litigation (gbNYC)
• The First LEED Lawsuit...Great.... (Real Life LEED)
• Open the Floodgates:  The Era of Green Building Litigation (Greener Buildings)

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Last week, we discussed the Virginia General Assembly’s attempts to pass green building legislation in 2008. Virginia Governor Tim Kaine was also forced to weigh in on his preferred green building rating system in 2008.  Previously, in 2007, Governor Kaine indicated his preference for the LEED rating system in Executive Order 48: 

“All agencies and institutions constructing state-owned facilities over 5,000 gross square feet shall be designed and constructed consistent with the U.S. Green Building Council’s LEED rating system (including the use of Virginia forest products with alternate certifications) or the United States Environmental Protection Agency/Department of Energy’s ‘Energy Star’ rating.”

The Governor’s original proposed budget in 2008 did not include green building provisions.  As part of the budget process, the Governor’s budget was sent to the General Assembly to undergo legislative amendments and the following provision, which includes Green Globes, was added:  “All new and renovated state owned-facilities . . . that are over 5,000 gross square feet shall be designed and constructed consistent with the . . . U.S. Green Building Councils LEED rating system or the Green Globes rating system.”  Governor Kaine vetoed the inclusion of Green Globes but the General Assembly overrode the veto. 

The debate over green building rating systems continues to play out in Virginia and other states across the country.  GBLU looks forward to monitoring the 2009 Virginia legislative session and further green building legislation.  Virginia’s choice of a green building rating system will have a significant impact on the Virginia cities due to a peculiar statewide rule, which we will discuss next week.

Related Articles: 

More Green Building Legislation May Be Imminent for Garden State (gbNYC)

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One of the more interesting debates in the green building industry relates to the LEED and Green Globes rating systems.  When parties or governments decide to regulate green building, they must choose between green building rating systems.  GBLU has discussed Washington, D.C.’s incorporation of the USGBC’s LEED rating system into its Green Building Act.  What rating system does D.C.’s neighbor, Virginia, prefer? 

During the 2008 legislative year, the Virginia General Assembly tried to decide which green building rating system is most appropriate for Virginia.  In the House of Delegates, Senators J. Chapman Peterson and Toddy Puller introduced bill, S.B. 447, the Green Building Act, on January 9, 2008.  As introduced, S.B. 447 required that departments, agencies and institutions “ensure” that construction of “state-owned buildings” 10,000 square feet or less “comply” with the LEED Silver standard.

After being introduced, S.B. 447 was then referred to the Committee on General Laws and Technology, where it emerged in a different form.  The Committee’s amendment to S.B. 447 eliminated the Division’s involvement and instead included an alternative green building rating system: “Green Building Design means . . . the USGBC’s LEED building rating system or the GBI’s Green Globes building rating system.”  The amended S.B. 447 passed in the Senate, 39-0, but died in the House of Delegates’ Committee on General Laws.

But this wasn’t the end of green building regulation in Virginia in 2008.  In a future post, we will discuss how Governor Tim Kaine was ensnared in this green building debate.  A similar debate is occurring in cities and states throughout the country and even at the federal level.  The winner of this important debate will shape the future of green building. 

Photo credit:  Ian Britton
 

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