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ConstructionPro Week, Volume: Construction Advisor Today - Issue: 157 - 05/03/2012

Most Appealing Green Building Incentives Outlined in New Report

By Steve Rizer

 

Tax incentives, density/floor area ratio bonuses, and expedited permitting are the most attractive incentives for spurring green construction in the private sector, according to a report that the National Association of Counties (NACo) and American Institute of Architects (AIA) recently released. The report, entitled “Local Leaders in Sustainability: Green Building Incentive Trends,” is intended to serve as a guidebook to assist local government leaders in developing incentive programs and increase the number of green buildings in their communities. Overall, NACo and AIA believe that green building incentive programs thus far have achieved “varying levels of success.”

 

One of the three most enticing methods for incentivizing green construction in the private sector is reducing taxes for implementing specific green measures and certifications, the report states. Also considered one of the most appealing incentives is a density/floor area ratio bonus, which entails the provision of height bonuses, floor/area ratio bonuses, reductions in landscaping requirements, and counting green roof space as landscaping/open space in return for achieving a certain green building rating. The third incentive deemed the most attractive is expedited permitting, the streamlining of the permitting process for building, planning, and site permits on projects that achieve specific green measures and certifications.

 

Other types of incentives include net metering, feed-in tariffs, grants (including fee subsidization, loans, insurance, technical assistance/design assistance, permit/zone fee reductions, rebates and discounts on environmental products such as Energy Star, and leasing assistance. State and local government green building incentives can range from options that are virtually cost-free to those that involve direct local government investment.

 

Local governments also have found that the most effective way to extend the life of incentive programs is to leverage private money through loan programs, according to the report. These programs often consist of either a revolving loan program, where smaller low-interest loans are granted for green projects and financed through a large loan pool, or a loan loss reserve fund, which may increase available incentive dollars by spreading risk to various interested parties.

 

“When it comes to determining which incentives will best meet their needs, local governments have a range of attractive options,” the report stated. “[S]electing appropriate incentives depends primarily on a local government’s financial situation and its desired impact on the building industry. Green incentives work best when they are based on a sound methodology combined with robust advocacy efforts and strong support from the public. When either developing or implementing green building incentives, local governments should weigh the potential effectiveness of the incentive against the following key criteria: financial costs; oversight structure; local political and cultural environment; limits to power; and industry engagement.

 

“The significance of each of these criteria … will differ widely for each local government. Incentive programs should therefore begin with an internal research and discussion phase that incorporates stakeholders from all relevant agencies and departments within the government. Continued engagement with relevant industry stakeholders should follow.… Regardless of which incentive is pursued, it is vital that any policy be as simple as possible to implement. When applied to public incentive programs, simplicity generally means the incentive can be easily explained in an elevator pitch (i.e. one minute or less), addresses a common practice or development, and is not encumbered with difficult paperwork and application processes that may deter interest.”

 

As the market for green building continues to evolve, stronger regulatory policies will continue to take hold, NACo and AIA predicted. “Rather than providing incentives, several of the local governments interviewed for this report indicated that they are reviewing the possibility of adopting green building codes, or mini¬mum green building features and efficiencies. These regulations will make sustainable building construction mandatory and eliminate the need for separate green permits or incentives….

 

“While the economic downturn has had a devastating impact on local government resources, the economy will grow again, and development activity will increase. If local governments act now, our nation’s communities can be well-positioned to build green in the near future.”

 

The report, which analyzes specific initiatives and provides best practice examples, includes case studies from communities across the country, including the following:

  • Bernalillo County, N.M., on impact fee reduction.
     
  • Cincinnati, on community reinvestment area property tax abatement.
     
  • King County, Wash., on green building grants.
     
  • Santa Barbara County, Calif., on innovative building review and financing.
     
  • Arlington County, Va., on density bonus.
     
  • Chicago, on expedited permitting.
     
  • San Diego County, Calif., on fee discounts and expedited review.
     
  • Alameda County, Calif., on critical design assistance.
     
  • Sarasota County, Fla., on broad green building promotion.

AIA Official Provides GBI Additional Information

 

In an email interview, AIA Public Policy Director Brooks Rainwater provided Green Building Insider (GBI) the following additional details about the report:

 

GBI: Who is receiving and reading the report? Local government officials? What evidence, if any, is there that previous NACo/AIA reports on this topic have been used to form new local policies?

 

Rainwater: Local government officials and staff are receiving and reading the report. NACo distributed the report at its recent legislative meeting in Washington, D.C., and we presented on the report to the NACo Green Government Advisory Board. At AIA, we have had great success with our Local Leaders in Sustainability research series (www.aia.org/localleaders). We have published six reports in the series since 2007: ‘A Study of Green Building Programs in Our Nation’s Communities’; ‘Green Counties’; ‘Green Incentives’; ‘Green Building Policy in a Changing Economic Environment’; ‘Special Report from Sundance’; and ‘Green Building Incentive Trends’. These reports have been a collaborative effort with organizations that include the NACo (‘Green Counties’ and ‘Green Building Incentive Trends’) and ‘Special Report from Sundance’ (U.S. Green Building Council, Redford Center, and ICLEI -- Local Governments for Sustainability).

 

Numerous localities and states have referenced the ‘Local Leaders in Sustainability’ reports as a source of best practice information when developing green building policies over the years. Architects, working through our local AIA chapters, have also been heavily involved in helping to develop holistic green building programs in communities nationwide and have used this research as a resource in those efforts.

 

GBI: In announcing the report, NACo and AIA listed the types of incentives that provide the most tangible results. Which incentives were found to have been the least effective for expanding green construction?

 

Rainwater: In examining this subject, we were most focused on finding those incentives that were effective for expanding green construction. While we did not rank those incentives that were the least effective, we generally found that communities that were already quite experienced with green construction needed less in the way of incentives (i.e., lower-cost incentives like green building awards and permit fee reductions), whereas those communities that were just being introduced to green building needed larger incentives to move the process forward. This is something that we have observed throughout the ‘Local Leaders in Sustainability’ study, whereby many communities that started off heavily incentivizing green building were able to gradually reduce the incentives as green building became standard practice within the community.

 

An example of this can be seen in our case study discussion of Alameda County, where when Leadership in Energy and Environmental Design (LEED) was first introduced the county provided a $100,000 grant for LEED certification at any level. The county’s generous grant was intended to help offset the additional design time and training costs associated with project certification. As LEED continued to grow in popularity, the grant amount was lowered to $50,000 and then to $30,000. Since the LEED certification system has become more commonplace, any additional costs are now internalized by developers. As of 2011, most of the grants have been phased out, partly as a result of the program’s success.

 

GBI: The latest report found that communities should select incentives based primarily on desired impact on the construction industry and local governments’ financial situations. For clarification, is the report suggesting that local officials, in forming these incentives, place a higher priority on money than environmental benefits?

 

Rainwater: The report is not making an assumption on what priority level certain communities place on monetary rather than environmental benefits but rather seeking to offer solutions for a wide variety of communities in different financial and political situations.

 

GBI: What statistics, if any, can you provide on the total amount of money that local governments have invested/forfeited through these green incentives, the total amount of pollution prevented through implementation of these policies, etc.?

 

Rainwater: While we have anecdotal evidence from the interviews that took place, we did not create an overall statistical analysis.

 

GBI: When, if at all, will a follow-up report be released?

 

Rainwater: This is a follow-up report on the 2008 white paper that we released within the Local Leaders series, which is titled ‘Green Incentives.’ We do plan to release additional reports in the series, but the next topic area has not yet been finalized.

 

GBI: Besides the report, what else is being done by NACo, AIA, or other organizations to persuade local governments to adopt green building incentives?

 

Rainwater: AIA is working to design a sustainable future in many different ways. We are working with our local AIA chapters to reach out to their local elected officials with resources that are helping them develop green building policies. AIA is working closely with NACo as a founding members of its Green Government Advisory Board. We are working to reach out to mayors and city council members through the U.S. Conference of Mayors and National League of Cities. AIA also supports the development and adoption of the International Green Construction Code, which provides model code language for states and municipalities to establish baseline sustainable design requirements for new and existing buildings, including but not limited to energy and water use efficiency; materials and resource use; indoor environmental quality; building impacts on the environment; site design; and sustainable building owner/facility management education.

 

The report is available in the Solutions Center/Get Information, Training, and Assistance/Green Government Initiative section of the NACo website at http://www.naco.org/.

 

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