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

I am wrapping up my discussion of the Destiny USA project this week with one final post.  You can select the Destiny USA tag to review all of the previously published posts on this topic.  I will also be publishing a compendium of posts on the topic -- plus bonus coverage -- later this week.  Thank you for reading. 

I am wrapping up the Destiny USA Debacle discussion with a truly bizarre story. 

When I first read Rick Moriarty’s story on the Destiny USA project, I was shocked to learn that the U.S. Green Building Council invested in the Green Bonds issued for the project.  Additional research turned up a USGBC press release from 2007 touting the purchase of the Green Bonds.  

Why did the USGBC’s involvement shock me?  

In order to qualify for $238 million in tax-exempt Green Bonds, the developer had to provide written assurances to the federal government, including written statements from the USGBC, that the project would achieve LEED certification.  Investors in the Green Bonds received tax-exempt returns based in part on the promises made by the Destiny USA developer to achieve LEED certification.  

By investing in Green Bonds, the USGBC would have been investing in bonds that received tax-free status that was dependent on the USGBC’s decisions and written assurances related to LEED certification.  That could be perceived as a conflict of interest.  

I contacted the USGBC to confirm the purchase of the Green Bonds.  

Here’s where the story becomes bizarre. According to the Judith Webb, Senior Vice President of Marketing & Communication, the USGBC did not purchase the Green Bonds:

“Unfortunately Rick Moriarity was mistaken — USGBC actually didn’t purchase the bond.  (In hindsight, when we didn’t make the purchase we should have taken the press release down, but that was before my time).”

What are your final thoughts on the Destiny USA Debacle?

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The Green Building Certification Institute's (GBCI) use of third-party certification bodies did not last long.  

"LEED certification became so popular that the USGBC had to begin allowing certification through independent certification bodies. . . . The USGBC responded to the backlog by delegating certification to the Green Building Certification Institute (GBCI), which will then be responsible for ten additional "certification bodies."  The ten independent companies will interpret LEED credits and apply them to projects seeking certification."

One of my primary concerns with the use of independent certification bodies was inconsistent application of the LEED rating system.  If you have two people from the same organization review construction documents, the two may come to different conclusions.  If you have two people from different organizations reviewing construction documents, the likelihood that the individuals will come to different conclusions increases.  

"GBCI is bringing the technical review of project documentation in house over the next two years rather than continuing to manage the process exclusively through other certification bodies. This move will allow us to have closer technical oversight of reviews and more direct communication with our customers to ensure consistency and clarity throughout the process. This doesn't change anything project teams are doing now."
 

I immediately focused on the phrase "to ensure consistency and clarity throughout the process."   

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You may remember that in previous posts, GBLU warned that September was going to be a big month for green building regulations in Washington D.C. It was anticipated that the D.C. City Council would vote on new green building codes on September 16 but the codes were tabled to allow for more feedback from affected parties. But there was still significant green building regulations voted on yesterday in D.C.

Late Monday night, H.R. 6899, the Comprehensive American Energy Security and Consumer Protection Act, was passed by the House of Representatives by a vote of 236-189. The big story will be that an energy bill was passed that permits more oil drilling off U.S. Coasts. But as expected, the legislation also included green building mandates. 

Among these mandates is Title IV – Greater Energy Efficiency in Building Codes. This section requires the Secretary to update the national model building energy codes and standards at least every three years to achieve specific overall energy savings, compared to the 2006 IECC for residential building and ASHRAE Standard 90.1-2004. From prior discussions, you may remember ASHRAE 90.1-2004 is the energy standard used by the USGBC’s LEED rating system. 

But GBI’s Green Globes rating system also found its way into the legislation. Under Title VI – Green Resources for Energy Efficient Neighborhoods, the legislation described requirements for both residential and non-residential projects seeking HUD assistance. Among these requirements, to qualify for HUD assistance projects can comply with one of numerous green building standards:

1)      The national Green Communities criteria checklist

2)      The gold certification level for the LEED for New Construction rating system, the LEED for Homes rating system, or the LEED for Core and Shell rating system

3)      GBI’s Green Globes assessment and rating system; or

4)      The National Green Building Standard

It seems peculiar that this legislation would require LEED gold certification but not include a similar requirement for Green Globes. Like the LEED rating system, Green Globes awards “globes” for each level of certification. The equivalent of LEED gold certification would be achieving three globes through Green Globes. 

Word on Capitol Hill is that the Senate is likely to adopt a different version of energy legislation so it is unclear whether green building mandates will be included in the Senate’s version.   

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In a previous post, GBLU referenced problems with a green building performance bond requirement in Washington D.C.’s Green Building Act.  So what are the apparent problems with this green performance bond? 

On August 13, 2007,  the Surety and Fidelity Association of America and the National Association of Surety Bond Producers detailed the problems with the bond requirement, pointing out that the Act “includes bond requirements that, if not clarified significantly, may make sureties reticent to issue such bonds.”  The SFAA and NASBP outlined several perceived problems with the Green Building Act’s performance bond requirement, including:

•    The Act incorrectly uses the term “performance bond” as the bond described in the Act “seems to function more in the manner of a license or compliance bond, which typically guarantees compliance with a law or code.” A performance bond typically assures one party that another party will perform the contract in accordance with its terms and conditions.

•    The Act does not designate which party is to furnish the performance bond.  The letter argues that “the building owner or developer, as the originator of the building project that retains the design professional and contractor, hold the ultimate responsibility for whether the building achieves compliance with the Act’s requirements.” 

The SFAA and NASBP’s primary concern with the Act is that contractors and performance bonds are improperly suited for guaranteeing green building compliance.  The Government of D.C. so far has continued to incorporate the green performance bond in building codes and rules used to enforce the Green Building Act.  September 2008 is going to be a big month in D.C. for green building codes and the green performance bond.  GBLU will continue to keep you apprised.

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As part of GBLU’s monitoring of green building regulations and codes, GBLU will provide timely information regarding government green building programs that may be of interest to you.  Below is information about a Green Roof subsidy being offered by the Government of the District of Columbia, District Department of the Environment.  Please note, applications are due September 9th. 
   
D.C. plans to make major changes to the stormwater regulations in the near future that will encourage incorporation of green roof technology.  Subsidies such as this one are a good step to promote green roofs in advance of these stormwater regulation changes, which we will discuss in a later post.  Thanks to Scott Kowalski and Brian Cashmere for providing information regarding this subsidy. 
…

Green Roof Subsidy Grant Program 2008
Contact Info: Office 202-518-6195
email: nora@dcgreenworks.org

DDOE District Department of the Environment

The Green Roof Grant Program applies to:
• Extensive or intensive green roofs
• New roofs and roof retrofit
• Innovated green roof design
• Educational value of demonstration
• All Properties within the Combined
  Sewer Overflow Zone (CSO) are eligible
• Geographic and building use diversity
• Size of Projects with priority given to
  spaces larger then 3500 square feet
• Retrofits

The Green Roof Subsidy Program (the Program) is funded wholly, or in part by the Government of the District of Columbia, District Department of the Environment, Watershed Protection Division with the purpose of subsidizing and encouraging green roof projects in the District of Columbia within the Combined Sewer Overflow Zone.

The purpose of the project is to demonstrate greenroof technology, encourage its use and illustrate the feasibility of greenroofs to help manage storm water – to reduce excessive runoff and to improve water quality. The grants are intended to partially defray the additional costs of a greenroof. The subsidy will be in amounts that approximate up to $3.00 a square foot of the greenroof cost for each qualified building with a cap of $12,000 per property.

Applications are due September 9th.

For more information and to download an application go to www.DCGREENWORKS.org or http://web.mac.com/trees14/Site/About__Green_Roofs.html

MAIL APPLICATIONS TO DC GREENWORKS 3030 12TH STREET N.E. WASHINGTON, DC 20017
 

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As green building becomes more popular, new green building regulations continue to pop up in U.S. cities.  The Aspen Daily News recently highlighted proposed changes to the Aspen Commercial Building Codes that will incorporate very progressive green building strategies.  Among the green building strategies, the proposed codes will “require either a photovoltaic solar panel system [solar panels] or payment into a renewable energy fund to offset exterior features such as snowmelt systems and heated pools.”  The City Council’s proposed enforcement mechanism for the green building codes is particularly of interest.

In the article, Aspen’s chief building official describes the proposed building codes as “all carrot and no stick,” meaning that the codes will rely on incentives instead of penalties for enforcement.  For example, commercial projects will receive from the city “triple the credit for energy generated by the solar panels rather than through payments into the [renewable energy fund].”  Essentially, commercial projects can either invest in solar energy or pay three times as much into the solar energy fund.  Quite the incentive to invest in solar energy. 

The Aspen City Council made a major change to the proposed code by eliminating “a requirement that buildings larger than 25,000 square feet submit to an energy audit every five years, and that the results of that audit be used to apply credit or debit to a particular building’s energy target.”  Good decision, Aspen City Council.  Could you imagine trying to enforce this provision? 

Aspen’s chief building official stated that the city “can find no examples of other municipalities that have implemented a program that requires owners to pay if they do not meet efficiency targets.” I can think of one…

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On August 7, I had the pleasure of attending the USGBC National Captial Region's annual event, a Midsummer Night's Green.  This year, the event was held in the stunning World Bank Atrium.  Tyler Coffey of Sigal Construction did a great job choosing the venue and organizing the event. 

Bisnow on Business has a good summary of the award winners from the event:

Winners assembled on stage: Nationals Park won for best large project; PN Hoffman's Alta condo for best medium project; a yoga studio in Clark County, Va., for best small project; Tower Companies for member firm of the year in the client category (ie, the ones who decide about green goals) and SmithGroup in the consultant category (the ones who implement); the Pentagon library renovation for best federal project; the Chesapeake Bay Foundation headquarters in Annapolis for best legacy; and consultant Paul Tseng for individual member of the year.

Whenever I attend events like these, I am reminded just how long some people have been involved with green building.  It was quite an impressive crew. 
 
 

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    When people ask me about green building lawsuits and legal issues, I usually start with Washington D.C.'s Green Building Act of 2006. 
  
    The Green Building Act is a very progressive Act that requires both that private and public projects comply with specific green measures.  I have written more extensively about the Act in the article "What's Your Green Construction Strategy" available here. 

    The biggest problem with the Green Building Act is the green performance bond requirement.  When I read this performance bond requirement I literally gasped so I am going to post portions of it word-for-word.  Please note that "section 4" details green building requirements for privately-owned construction projects: 

    (b)  On or before January 1, 2012, all applicants for construction governed by section 4
shall provide a performance bond, which shall be due and payable prior to receipt of a certificate
of occupancy.

    (g)  All or part of the performance bond shall be forfeited to the District and deposited in
the Green Building Fund if the building fails to meet the verification requirements described in
sections 3 and 4.

Did you gasp?  If not, make sure you catch my later posts detailing the potential problems with this green performance bond.
 

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    During a recent Green Building Institute Webinar, I had the pleasure of hearing Dan Murphy, Senior Vice President of Environmental Systems Design, speak about potential liability resulting from green building projects.  Dan poignantly stated what I have been thinking for awhile:

"There has been no significant green building litigation, yet.  I emphasize the word yet."  

    Dan is right.  So far, the green building world has avoided major litigation.  Some green building claims have arisen but were subsequently settled.  Major litigation has been avoided because those undertaking green building did so for non-financial reasons (e.g. the environment or goodwill).  Two factors will result in the beginning of significant green building litigation:

•    Parties undertaking green building projects for purely financial reasons will expect to make a profit
•    Cities and states will require (unwilling) parties to build green

Cities and states can require green building?  How can they do that?  More later…
 

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