Mr. Mangini discusses how the introduction of green building principles and the heightened interest in energy efficiency and cost savings has begun to influence the negotiation and operation of commercial leases and the build-out of tenant improvements. The article presents a summary and analysis of the issues that landlords and tenants should be aware of and what they need to build into their due diligence when dealing with a high-performance building.

You can read the full article online here. (PDF)

The construction of energy efficient buildings, the practice of conserving natural resources and recycling and the development and use of alternative fuels have all become prevalent concerns in our culture.  Not surprisingly, these concepts have thoroughly permeated the contemporary legal landscape providing both benefits and burdens to individuals and businesses alike.  The purpose of this article is to provide a summary of a few of the laws and incentives that impact the building and real estate industry.

Water Reuse Program
In light of the increasing demand placed on water supplies and the desire to reduce the impact of drought conditions, interest has grown in water reclamation and reuse, which entails the conversion of wastewater into reclaimed water through the application of specialized treatment for beneficial uses, such as landscape and agricultural irrigation, fire protection, dust control and street cleaning.
 

• The term “reclaimed water for beneficial reuse" (RWBR) is defined in the New Jersey Administrative Code to mean “[w]ater that meets restricted access or public access reuse requirements specified in a NJPDES permit that authorizes that water to be directly reused for non-potable applications in place of potable water, diverted surface water, or diverted groundwater.” N.J.A.C. 7:14A-1.2. 
• Under current State policy, as manifested through the New Jersey Department of Environmental Protection’s technical manual entitled “Reclaimed Water for Beneficial Reuse," dated January 2005 (“Guidelines”), the preparation of a water reuse feasibility study may be required for New Jersey Pollutant Discharge Elimination System (NJPDES) permits involving all wastewater treatment and disposal facilities with a design flow of at least 100,000 gallons per day and for water supply allocation permits involving the use of water for non-potable and consumptive uses. See also N.J.A.C. 7:19-2.2(g) (requiring applicant for water supply allocation permit to consider lower quality water for non-potable purposes).  Indeed, in issuing water allocation permits the DEP may require users to consent to the use of reclaimed water should such lower quality water become available, potentially creating a host of additional issues and challenges for builders.
• Any person, who actually produces or is seeking to produce RWBR is required under current State regulations to utilize the Guidelines and to obtain a NJPDES permit. N.J.A.C. 7:14A-2.15.
• A building project that makes use of recycled wastewater for landscape irrigation or sewage conveyance (i.e. toilet flushing) may earn water efficiency credits that can be applied towards certification under the Leadership in Energy and Environmental Design Green Building Rating System for New Construction (LEED-NC) formulated by the United States Green Building Council.

In order to be eligible for the Pay for Performance Program, (1) an applicant must be a customer of a regulated electric utility and/or gas utility in New Jersey, including Atlantic City Electric, Jersey Central Power & Light, Rockland Electric Company, New Jersey Natural Gas, Elizabethtown Gas, PSE&G and South Jersey Gas, and (2) the project for which an application is made must consist of one or more commercial, industrial, institutional or multi-family residential structures having over 200 kW average annual peak demand electrical usage (if the buildings are preexisting) or having at least 50,000 square feet or more of planned conditioned space (if the project calls for new construction).  Individual buildings, as well as multiple buildings in complexes owned by a single person or entity, may qualify for benefits under the program provided that they meet the above criteria.  Condominium associations may also be eligible to receive incentives for energy-efficient measures relating to common elements under this program.

In addition to the provision of loans for energy audits and qualified energy efficiency services, the Green Jobs-Green New York Program requires the Authority to award grants for certain purposes and to promote employment and training services.  In the way of funding, the New York State Legislature has appropriated $112,000,000 to finance the aforesaid loan program and the Authority’s other activities.  The Authority is not expected to begin implementing the Green Jobs-Green New York Program until the spring of 2010.

 
The seminar will be presented from 8:00 AM – 12:30 PM September 9, 2009 and September 10, 2009. The September 9th event will be held at The Villa in Mountain Lakes, New Jersey, and the September 10th event will be held at the Sheraton in Eatontown, New Jersey.

 

The seminar will provide actionable recommendations to cut energy costs immediately, while providing the insight to prepare for upcoming regulations and impending laws and current initiatives, like New Jersey’s Energy Master Plan. The material shared at the event will benefit New Jersey-based building owners, business owners, CFOs, energy managers and facilities managers - anyone who makes decisions about energy for buildings of 20K square feet or more.
Topics to be discussed include:

• Quick and no-cost building upgrades to reduce energy consumption
• Reducing peak demand
• Emerging technologies and incentive opportunities
• State Renewable Energy Tax Exemption
• Grants and loans for energy efficient projects
• Energy audits
• NJ Smart Start Buildings Pay-for-Performance Programs
• And other related topics.

Mr. Mangini will present the seminar with Joseph Carlamere of New Jersey SmartStart Buildings. Mr. Carlamere is involved in environmental consulting, company TRC’s design and development of the sector initiative of New Jersey’s Clean Energy Program as part of the team developing programmatic strategies that resonate to the following sectors: industrial, institutional, multi-family, higher education and hospitality. He also manages the Local Government Energy Audit Program for the NJOCE and the BPU.
 

Additional information and details on how to register for the events is available online here.
 

Mr. Mangini states, "Green building is defined in a number of ways, depending on the context. The Environmental Protection Agency defines it as “creating structures and using processes that are environmentally responsible and resource-efficient throughout a building’s life cycle, from siting to design, construction, operation, maintenance, renovation, and deconstruction.”

You can read the full roundtable discussion online here. (PDF)

Imagine the situation where a conscientious property owner decides to install solar panels in an effort to reduce his or her energy costs and help the environment.  Then, imagine further, that once the work is completed, the local tax assessor increases the property’s tax assessment arguing that solar panels are an improvement to the property, which causes the property’s fair market value to appreciate.  The resulting taxes from this higher assessment could end up off-setting all or most of the energy savings generated by the solar panels, thereby discouraging property owners from making investment in green building technologies and processes.  Clearly, this is not an acceptable outcome for the property owner or the general public and, apparently, our state government agrees.  In June, 2008, the New Jersey State Legislature overwhelmingly passed a bill, which Governor Jon Corzine recently signed into law on October 1, 2008 (P.L. 2008, ch. 90; codified at N.J.S.A. 54:4-3-113a, et seq.), that provides a tax exemption for the increase in value to real property attributable to the installation of renewable energy systems - and the new law does not just benefit homeowners.
   

Under the new law, a “renewable energy system” is “[a]ny equipment that is part of, or added to, a residential, commercial, industrial, or mixed use building as an accessory use, and that produces renewable energy onsite to provide all or a portion of the electrical, heating, cooling, or general energy needs of that building.”  The term “renewable energy” is defined broadly to include, among other things, “(1) electric energy produced from solar technologies, photovoltaic technologies, wind energy, fuel cells, geothermal technologies, wave or tidal action, . . .; and (2) energy produced from solar thermal or geothermal technologies.”
   

In order to obtain a renewable energy systems exemption, a property owner must make a written application for certification to the local enforcing agency (i.e. building inspector) under oath and once the application is received, the local enforcing agency must review it for compliance with all legal requirements.  If a property owner is denied the certification and wants to appeal, an appeal may be filed with the local construction board of appeals.  In the event a property owner’s work is certified, but the local tax assessor imposes an unreasonable tax assessment on the property, the aggrieved property owner may file an appeal with the county tax board or State Tax Court in accordance with the court rules.
   

It also be noted that the exemption from taxation for the renewable energy system shall not become effective until the tax year following the year in which certification has been granted.
   

In conclusion, the aforesaid enactment is a good law.  It will prevent property owners, who “go green,” from being penalized by local taxing authorities with higher real property taxes.  However, property owners seeking to take advantage of this new benefit should familiarize themselves with the entirety of the new law and all applicable forms and regulations, as may be adopted by state agencies. The procedures to obtaining the certification must be followed in order to take advantage of the exemption.

 
Another recent green building initiative, introduced as Assembly bill A3062 on June 23, 2008, is designed to improve “energy efficiency and renewable energy” - the third “broad area” of green building - and would also amend the MLUL  adding to the statute a definition of “inherently beneficial use.”  The proposed definition, if enacted, would specifically designate certain uses as being inherently beneficial, such as “a wind, solar or photovoltaic energy facility.”  The Legislature is also proposing, among other things, a host of low interest loans and tax incentives for green building.  One such proposal was introduced in the Assembly on February 7th as A2065, which requires the New Jersey Economic Development Authority (“EDA”) in consultation with the Commissioner of the Department of Community Affairs (“DCA”) to “[e]stablish and administer a program that makes low-interest loans available to a developer or redeveloper, who constructs a new building or renovates an existing building that, when completed, qualifies as a high performance green building.”   A “high performance green building” is defined as “[a] building having at least 15,000 square feet in total floor area that is designed and constructed in a manner that achieves at least a silver rating according to the Leadership in Energy and Environmental Design Green Building Rating System as adopted by the United States Green Building Council.”

 
As for tax incentives, the proposed Green Building Tax Credit Act introduced in the Assembly as A2070  provides a “taxpayer” with “[a] credit for allowable costs paid or incurred by the taxpayer in connection with a green building[]” computed in accordance with the provisions of the act.   Under this proposal, a taxpayer may be eligible to receive as much as 4% of allowable costs plus “[0.]5%, 1.0%, 1.5% or 2.0% of allowable costs, attributable to buildings but not to other site improvements, qualifying as Certified, Silver, Gold, or Platinum status, respectively, under the LEED Green Building Rating System or the LEED Residential Green Building Rating System.”   The term “allowable costs” is generously defined under this legislative proposal and includes such expenses as “legal, architectural, engineering and other professional fees allocable to construction or rehabilitation, site costs, such as temporary electrical wiring, scaffolding, demolition costs and fencing and security facilities . . . not to exceed $280 per square foot of interior space, for both commercial and residential space.”   A taxpayer may apply up to 20% of the total amount allowed under the credit in any one tax year and shall have the right to carry forward unused portions to succeeding tax years.   Furthermore, in the event a taxpayer conveys the property to which a credit relates, the taxpayer may retain the unused portion of the credit or transfer it to the grantee.

  
A peculiarity about the proposed Green Building Tax Credit Act, which may serve as an obstacle for builders, is an overly complex and potentially contradictory definition of “green building,”  - one that is dissimilar to the definition of green building in the UCC.  Indeed, the proposed statute allows a taxpayer to become eligible for the credit upon a showing “[t]hat the building with respect to which the credit is applied meet[s] either (a) the green building standards . . . or (b) the criteria required for Certified, Silver, Gold or Platinum status under LEED Green Building Rating System or LEED Residential Green Building Rating System[]”  - even though the act defines “green building” only as “[a] building meeting the standards prescribed and adopted [by the DCA].”   It remains to be seen whether the Legislature will revisit the “green building” concepts presently embedded in the text of this proposed legislation to make them less cumbersome and reconcile any inconsistencies.
  

The foregoing demonstrates how interested the Legislature and our State has become in promoting energy efficiency in the design and construction of buildings.  This enthusiasm will likely produce even more legislative initiatives in the near future.  While the fate of the above-cited proposals not already enacted into law is yet uncertain, one thing at least is clear.  The push to become ever so green will present many legislative (and other) challenges and will undoubtedly soon transform the legal landscape.

The seminar will focus on topics including:

• Moving from dependency on fossil fuels to alternative technologies
• Rebates and promotions for energy-efficient structures
• Federal tax incentives
• State initiatives, proposals and newly enacted legislation, such as the newly enacted amendment to the Municipal Land Use Law authorizing localities to include green buildings and environmental sustainability plan elements in their master plans
• Current protocols for green building, such as the U.S Green Building Council's Leadership in Energy and Environmental Design (LEED) Green Building Rating System
• Green building contracts

You can access additional information and registration form here.

In this regard, this legislative proposal seeks to amend Section 9 of P.L. 1977, c.146, codified as N.J.S.A. 52:27F-11, to augment the powers and responsibilities of the Board of Public Utilities and give the BPU a considerable amount of influence over the promulgation of State energy-efficient building standards.

Assembly bill A1629 and Senate bill S702 would also require the Board of Public Utilities to offer qualified buyers of new homes meeting the enhanced energy subcode requirements down payment assistance through its residential facilities energy conservation program in consultation with the Department of Community Affairs and the New Jersey Housing and Mortgage Finance Agency. This down payment assistance shall be limited to either “the additional cost of construction required in order to make a building, which otherwise would conform to the current edition of the International Energy Code, also conform to the enhanced energy conservation construction requirements [to be] established by the Commissioner of Community Affairs” or “the additional down payment required in order to qualify the purchaser or purchasers for mortgage financing without the requirement of private mortgage insurance[,]” whichever is less.

Although Assembly bill A1629 and Senate bill S702 are working their way through the legislative process, their future is yet uncertain. Should this piece of proposed legislation become law it could have a profound impact upon the state of energy-efficient building in New Jersey depending, of course, on the comprehensiveness of the energy subcode that might ultimately be adopted by the DCA.