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Going Green by Building Green

By Robert S. Goldsmith, Esq. and Joanne Vos, Esq.

 

Green building is a popular topic in the current construction and real estate markets, but what exactly does it mean to build green? And why is green building an important concept?

 

One need not watch the Al Gore movie, “An Inconvenient Truth,” to know that buildings have had a profound effect upon the environment at large. While global warming and greenhouse gas emissions are terms that are generally associated with industry and transportation, the buildings where we work, shop, and even live significantly compromise the integrity of our natural resources by the effects of daily heating, cooling, ventilation, and hot water use, all of which require the burning of fossil fuels such as oil, natural gas, and coal. According to the federal Environmental Protection Agency (EPA), buildings in the United States account for 39% of total energy use, 12% of total water consumption, 68% of total electricity consumption, and 38% of all carbon dioxide emissions. Certainly, these issues cannot be resolved overnight but building green is a good start.

 

The EPA has described a green building, also known as a sustainable building, as “a structure that is designed, built, renovated, operated, or reused in an ecological and resource-efficient manner.” The EPA has further identified the environmental objectives of green building as protecting occupant health, improving employee productivity, using energy, water, and other resources more efficiently, and to reduce the overall impact on the environment. The practice of green building also incorporates the use of recycled building materials, which reduces the amount of waste sent to landfills. Such a reduction results in a decrease in the amount of released methane (a harmful gas), which is caused by landfill decomposition. The environmental benefits of green building are obviously plentiful but there are other reasons to go green that should not be overlooked.

 

The overall benefits of green building are generally measured by a life-cycle assessment, or “LCA.” From a financial perspective, the primary, and most obvious goal of green building is the reduction of operating costs over a building’s life cycle. Studies have shown that green buildings result in an energy savings of 30%, a water use savings of 35% to 50%, and a water cost savings of 50% to 90%. These financial benefits are tangible but there are other less tangible, although equally lucrative, benefits to building green. A Herman-Miller study showed an increase in worker productivity of up to 7% upon the greening of a particular facility. Another national study, conducted by the Lawrence Berkeley National Laboratory, revealed that businesses could save $58 billion in lost employee sick time plus an additional $200 billion in increased worker productivity if improvements were made to indoor air quality alone. Green building plans often incorporate natural ventilation and enhanced natural light, both of which have been shown to improve indoor air quality.

 

While the goals of green building undoubtedly sound laudable, they often sound expensive. Yet, most people substantially overestimate what has been referred to as the “green premium.” Although there is an added cost to building green, on the average it is a minimal 2% to 5%, which generally amounts to $3 to $5 per square foot. The added cost should be viewed as an investment since greening can not only pay for itself over time but also result in an increased real estate value. A report submitted to the California Environmental Protection Agency referenced a life cycle cost benefit analysis as an example. The initial upfront investment for certain green features was $100,000 on a $5 million project. That $100,000 investment had a return of over $1 million, a benefit of $900,000, over the life of the building, which was estimated, conservatively, to be 20 years. Clearly, green building has a significant potential pay off.

 

Additionally, there may be tax benefits for certain green buildings. Some tax professionals have counseled their clients to apply for a federal tax deduction for expenses incurred for making a commercial building more energy-efficient pursuant to the Energy Policy Act of 2005. The deduction is subject to a cap and the project must be certified as “part of a plan designed to reduce the total annual energy and power costs of interior lighting systems, heating, cooling, ventilation, and hot water systems of the building by 50% or more…”. Partial deductions may also be permitted under certain circumstances.

 

State tax benefits may also be a consideration for the future. The Green Building Tax Credit Act was recently introduced to the New Jersey Senate and Assembly. Under the proposed Act, an incentive package of tax credits would be offered to businesses that build green. Additional tax credits of up to 6% of allowable costs could also be awarded if the project is LEED certified (Leadership in Energy and Environmental Design) by the U.S. Green Building Council as silver, gold or platinum. Although LEED is not the only standard against which a green project may be measured, it is certainly the prevailing standard in the industry.

 

Greenbaum, Rowe, Smith & Davis LLP is proud to have recently formed a Green Building Practice Group in response to our clients’ expanding needs and interest in the topic. A recent green project that the firm has guided is the Epstein’s redevelopment project in Morristown, New Jersey. Our firm has served as legal counsel to the Morristown Parking Authority since 1983. The Parking Authority’s elements of the Epstein’s redevelopment project included construction of a parking garage and office building that will be LEED certified, likely gold or platinum, for environmentally sustainable and energy renewable design.

 

The office building has the benefit of having the Geraldine R. Dodge Foundation as a major tenant, occupying two of four floors within the structure. The Dodge Foundation, consistent with one of its primary missions, provided support through grants to achieve the gold or platinum LEED certification. Notable green features of the office building include a photovoltaic array on the parking garage, geothermal wells as the main heating and cooling source, light shelves to better and more broadly disperse daylight throughout the building, raised floor HVAC distribution, which is more efficient and improves the quality of ambient air, a high performance energyefficient building envelope, and a green roof to improve water quality flowing from the roof.

 

A parking structure, as opposed to surface parking, is in itself a sustainable element of design and construction. A multi-floor parking deck compared to paved surface parking dramatically reduces the impervious surface needed to provide equivalent amounts of parking. In addition, by concentrating the parking in a single structure and having appropriate filtering devices for storm ater runoff, water quality can also be improved.

 

Our firm’s involvement in this project began in June 2004 with a design charrette focusing on creative, sustainable design possibilities. We participated in the resolution of design issues, design meetings, and lease negotiations that involved LEED and cost-saving considerations. The parking facility commenced operations in September of 2008 and the office building will be ready for tenant occupancy in the fall of 2008.

 

It has been apparent that green building certification is affordable and Silver LEED certification can be achieved with a modest 5% cost premium. While gold or platinum LEED certification can involve a higher premium in the range of 20% of costs, the value of building green is in the reduced operating costs, especially in light of the consistently increasing cost of energy. Paybacks on energy efficient elements can now be seen in approximately 4 to 6 years as opposed to 9 to 11 years.

 

There are numerous rewards and incentives to building green, including financial. If you are interested in designing a green project, please do not hesitate to contact our office. The members of the Green Building Practice Group, a cross functional team composed of lawyers from real estate, redevelopment, environmental and construction practices, are prepared to assist you. Partner Kenneth T. Bills chairs the Group and his contact information is: kbills@greenbaumlaw.com, (732) 476-2640.