New York: Landmark Legislation Designed to make New York City Greener
This article appears in and is reproduced with the permission of the Journal of Multistate Taxation and Incentives, Vol. 20, No. 8, November/December 2010. Published by Warren, Gorham & Lamont, an imprint of Thomson Reuters. Copyright © 2010 Thomson Reuters/WG&L. All rights reserved.
New York City is reaping praise for recently enacted landmark legislation designed to significantly reduce greenhouse gas emissions generated by existing government, commercial, and residential buildings in New York City. Not only will this legislation help the City achieve its goal of reducing such emissions by 30% by 2030, it also aims to create nearly 18,000 jobs and save consumers $700 million annually in energy costs.
Presented as a six-point "Greener, Greater Buildings Plan," enacted as part of "PlaNYC" (a group of more than 120 initiatives to reduce the City's greenhouse gas emissions), the legislation comprises four bills, along with two PlaNYC programs that will (1) train workers for the new construction-related jobs that will be created and (2) facilitate financing for energy-saving improvements using $16 million in federal stimulus funding.
Commenting on the enactment of this legislation, New York City Mayor Michael Bloomberg noted: "By requiring buildings to conduct energy audits and improve their energy efficiency, the Greener, Greater Buildings Plan will reduce the city's total greenhouse gas emissions while creating thousands of jobs and dramatically reducing annual energy costs."1 According to an official from the Leadership in Energy and Environmental Design (LEED) program established by the U.S. Green Building Council (USGBC), buildings are responsible for 40% of all global emissions of greenhouse gases.2 The Mayor's Office observed that energy use by New York City's buildings accounts for about 80% of city's carbon footprint. Further, 85% of the buildings that exist today still will be functioning in 2030. Thus, increasing efficiency in existing buildings is critical to meeting the city's goal of a 30% reduction in greenhouse gas emissions by 2030. The current legislation will reduce citywide greenhouse gas emissions by 4.75%, the largest reduction achieved by a single program.3
The energy legislation. The four legislative components of the New York City initiative are:
(1) City Energy Code (Int. No. 564-A, 12/28/09; Local Law 85).
(2) Benchmarking (Int. No. 476-A, 12/28/09; Local Law 84).
(3) Lighting Upgrades and Sub-Metering (Int. No. 973-A, 12/28/09; Local Law 88).
(4) Energy Audits and Retro-Commissioning (Int. No. 967-A, 12/28/09; Local Law 87).
The energy code. Int. No. 564-A amends the New York State Energy Conservation Construction Code to create a "New York City Energy Conservation Code" (N.Y.C. Admin. Code §28-101.1 et seq.). As enacted by Int. No. 564-A, N.Y.C. Admin. Code §28-101.4.4 states, in part: "Additions, alterations, renovations and repairs to an existing building, building system or portion thereof shall conform to the provisions of this code as such provisions relate to new construction without requiring the unaltered portion(s) of the existing building or building system to comply with this code."
This language effectively closes a long-standing loophole that allowed buildings to remain noncompliant with provisions governing new construction if the renovations are performed on less than 50% of a given building system. The new legislation, effective 7/1/10, requires that the renovation of any portion of a building system must be compliant with building code provisions for new construction.
Building owners should note that, with regard to certain renovations or repairs (e.g., installing storm windows or glass-only replacements in existing frames; existing insulated ceiling, wall, or floor cavities exposed during construction; or construction where the existing roof, wall, or floor cavity is not exposed), compliance is not required if the energy use of the building is not increased.
Under new N.Y.C. Admin. Code §28-101.5.1, any required compliance must be documented with a statement from a registered design professional or lead energy professional attesting to that compliance. Also, an energy analysis is required to demonstrate how the plans and project designs comply with the code.
Notwithstanding the above, buildings and structures designated as landmarks or certified historic properties are exempt from compliance with the new energy code (N.Y.C. Admin. Code §28-101.4.3, as amended).
Benchmarking. Int. No. 476-A (which added new N.Y.C. Admin. Code §28-309.1 et seq.) requires an energy and water efficiency benchmarking standard for (1) "city buildings," which generally are buildings larger than 10,000 square feet that are owned by the city or for which the city pays at least part of the annual energy bills, and (2) "covered buildings," which generally means privately owned (a) buildings larger than 50,000 square feet, (b) two or more buildings on the same tax lot that, together, exceed 100,000 square feet, or (c) two or more buildings owned in condominium form that are governed by the same board of managers and that, together, exceed 100,000 square feet. Benchmarking allows building owners to gauge the efficiency of their buildings and improves the ability of prospective buyers and tenants to value a property.
The legislation requires owners to assess and monitor their buildings' annual energy and water consumption using a free online "Portfolio Manager" tool provided by the U.S. Environmental Protection Agency (EPA).4 Commencing in 2010 for city buildings and in 2011 for covered buildings, by February 15 of every year owners are required to obtain any tenant's separately metered energy usage for the prior calendar year. More specifically, if a building contains a tenant-occupied non-dwelling unit or space that is separately metered by a utility company, in January the building owner must request the energy-use information from the tenant, who then has until February 15 to provide that information to the owner.
In addition, no later than 5/1/10 for city buildings and 5/1/11 for covered buildings, and by every May 1st thereafter, city agencies and building owners, respectively, are required to input their buildings' energy usage (and if the building is equipped with appropriate automatic meter-reading equipment, water usage) directly into the EPA's online benchmarking tool.
Lighting upgrades and sub-metering. Noting the vast improvements in lighting technology that have facilitated dramatic reductions in energy use, Int. No. 973-A (adding new N.Y.C. Admin. Code §§28-310.1 et seq. and 28-311.1 et seq., effective immediately) targets lighting, which, in New York City, accounts for approximately 20% of the energy used in a building and approximately 20% of a building's carbon emissions.5 Under this legislation, the lighting systems of "covered buildings" (generally defined as in the benchmarking legislation, but it does not appear to exclude what that legislation termed "city buildings") must be upgraded by 1/1/25 to meet the requirements of the City's Energy Conservation Code.
In addition, noting that most large buildings have one master meter that measures electricity usage building-wide, the legislation requires (also by 1/1/25) that covered buildings install sub-meters to separately measure electricity usage in certain large, non-dwelling-unit tenant spaces. Furthermore, building owners must provide those tenants with a monthly statement showing electric consumption and the amount charged for that electricity.
Audits and retro-commissioning. Int. No. 967-A, adding new N.Y.C. Admin. Code §28-308.1 et seq., effective upon enactment, requires "covered buildings" (defined as discussed above, but expressly including, with certain exceptions, covered buildings owned by the city and for which the city pays at least part of the annual energy bills) to conduct energy audits and undertake retro-commissioning measures at least once every ten years. Exemptions are provided, however, for buildings that face severe financial hardship.
Retro-commissioning is a process for optimizing the energy efficiency of existing base building systems by identifying and correcting deficiencies (e.g., properly calibrating heating and cooling systems, cleaning and repairing ventilation systems, and modifying operational practices). Base building systems include heating, ventilating, and air conditioning systems; conveying systems; domestic hot water systems; and electrical and lighting systems.
The audit process focuses on the base building systems and should identify, at minimum, five areas:
(1) All reasonable measures, including capital improvements, that, if implemented, would reduce energy use and/or the cost of operating the building.
(2) For each of these measures, the associated annual energy savings, the cost to implement, and the simple payback, calculated by a method determined by the City's Department of Buildings. (Simple payback is the time it will take to recover an investment with the energy savings produced by that investment, without taking into account the time value of money.)
(3) The building's benchmarking output consistent with the U.S. EPA's online Portfolio Manager tool (discussed above) or as otherwise established by the City's Department of Buildings.
(4) A calculation of energy use by system and estimated energy savings by system, after implementation of the proposed measures.
(5) An overall assessment, based on a sample of spaces, of the impact of major energy consuming equipment and systems used within tenant spaces on the energy consumption of the base building systems.
Beginning with calendar year 2013, an energy efficiency report, which includes both an energy audit report and a retro-commissioning report, must be filed in the calendar year with a final digit that is the same as the last digit of the building's tax block number (e.g., tax block number ending with 7, first report due in 2017). The energy audit generally must be completed no earlier than four years prior to the date on which the energy efficiency report is filed.
Incentives. Two significant programs accompany the legislative components of the Greener, Greater Buildings Plan. As mentioned above, around 18,000 jobs are expected to be created under the plan, increasing the demand for energy auditors, construction workers, contractors, and other construction and energy-related positions.
Worker training programs. New York City has created the Working Group for Green Building Workforce Development to ensure that worker qualifications are up to par for those obtaining these jobs stemming from the legislation. Among its effort, the Working Group will identify workforce needs and opportunities, identify training needs, and advise on certification requirements for energy auditors and retro-commissioners.
Relevant courses are widely available at the City University of New York (CUNY). Course topics cover a wide range of areas connected to environmentally conscious building and development. For example, Bronx Community College, a part of CUNY, offers "building analyst training." The course teaches how a residential building operates as a system, and topics include energy consumption analysis. Advanced courses cover a variety of additional issues such as building envelope diagnostics. Significantly, the costs of these courses are generally reimbursed by the New York State Energy Research and Development Authority (NYSERDA).6
Financing the changes. The second program—Green Building Financing—provides building owners with financing in the form of direct loans to help mitigate the costs of retrofits and improvements necessitated by the new legislation discussed above. The financing will be available through a revolving loan fund established by New York City, which will fund the program using $16 million in federal stimulus funding allocated to the City as part of the Energy Efficiency and Conservation Block Grant program.
Building owners should see immediate economic benefits under the program, as the loans generally will be structured so that loan repayments will be less than the projected energy savings. Of course, after the loans are paid back, building owners should continue to reap the benefits of energy savings for years to come. Moreover, loan repayments under the program will replenish the loan fund's coffers, enabling additional building owners to take out loans and, thus, further extend the benefits of the $16 million funding.
Conclusion. The combination of laws and programs discussed above clearly demonstrates New York City's commitment to improving the local environment and being at the forefront of the environmental movement. By providing generous incentives for funding and worker training, these initiatives appropriately target buildings that are environmentally inefficient. As an added bonus, these efforts will create jobs for thousands of New Yorkers.7
Practice Note: Keep in Mind the Six Points
New York City's "Greener, Greater Buildings Plan," created as part of "PlaNYC" (a compilation of more than 120 initiatives to reduce the City's greenhouse gas emissions), consists of the following six components (discussed more fully in the accompanying article):
(1) New York City Energy Code: Eliminates a critical loophole for relatively smaller renovations: inefficient equipment cannot replace inefficient equipment; rather, the renovation of any portion of a building system must be compliant with building code provisions for new construction.
(2) Benchmarking: Annual analysis of energy usage now mandated for larger buildings.
(3) Lighting Upgrades and Sub-Metering: Large buildings require upgrades; separate measurement of electricity usage in certain large, non-dwelling-unit tenant spaces.
(4) Audits and Retro-Commissioning: Energy audit (and related energy-system fixes) required for large buildings every ten years.
(5) Green Workforce Development Training: Some 18,000 jobs will be created; training will be provided to ensure the needed supply of skilled workers.
(6) Green Building Financing: Beneficial financing is available to building owners to help mitigate the costs of retrofits and improvements.
2. Id. As described on its website, the U.S. Green Building Council is a Washington, D.C.-based IRC §501(c)(3) nonprofit organization "committed to a prosperous and sustainable future for our nation through cost-efficient and energy-saving green buildings. USGBC works toward its mission of market transformation through its LEED green building certification program, robust educational offerings, a nationwide network of chapters and affiliates, the annual Greenbuild International Conference & Expo, and advocacy in support of public policy that encourages and enables green buildings and communities." Further, the LEED green building certification program "is a voluntary, consensus-based national rating system for buildings designed, constructed and operated for improved environmental and human health performance. LEED addresses all building types and emphasizes state-of-the-art strategies in five areas: sustainable site development, water savings, energy efficiency, materials and resources selection, and indoor environmental quality." For more information, on these green initiatives, see the USGBC website at www.usgbc.org.
3. PR-532-09, supra note 1.
4. The tool is available via the Energy Star website, at www.energystar.gov (click on "Buildings & Plants" and "Portfolio Manager"). Portfolio Manager is EPA's system for tracking and helping to improve energy efficiency across an entire portfolio of buildings. Energy Star is a joint program of the U.S. Environmental Protection Agency (EPA) and the Department of Energy, designed to save money and protect the environment through energy-efficient products and practices.
5. PR-532-09, supra note 1.
6. The New York State Energy Research and Development Authority (NYSERDA) is a public benefit corporation created in 1975 under Article 8, Title 9 of the State Public Authorities Law. NYSERDA's earliest efforts focused solely on research and development with the goal of reducing the state's petroleum consumption. Today, NYSERDA's aim is to help New York meet its energy goals: reducing energy consumption, promoting the use of renewable energy sources, and protecting the environment. NYSERDA's programs and services provide a vehicle for the state to work collaboratively with businesses, academia, industry, the federal government, environmental community, public interest groups, and energy market participants. Through these collaborations, NYSERDA seeks to develop a diversified energy supply portfolio, improve market mechanisms, and facilitate the introduction and adoption of advanced technologies that will help New Yorkers plan for and respond to uncertainties in the energy markets. For more information, see the group's website at www.nyserda.org.
7. To read about some New York State actions in this area, see McLaughlin and Williams, "Governor Approves Two Green Building Laws for Residential and State Structures," 19 J. Multistate Tax’n 42 (June 2009). For more on "green" and "energy" incentives generally, see, e.g., Bowman, "Going ‘Green’: How States Are Using Tax Incentives to Protect the Environment," 18 J. Multistate Tax’n 16 (Nov/Dec 2008); Berry and Feller, "Tax-Credit Bonds Finance Energy Production and Energy Conservation Projects," 19 J. Multistate Tax’n 34 (January 2010).