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City’s Green Building Initiative to Place New Mandates on Building Owners

Client Advisory

April 24, 2009

On April 22, 2009, Earth Day, Mayor Michael Bloomberg and City Council Speaker Christine Quinn announced an ambitious plan to require the retrofitting of existing buildings and to reduce both the City’s energy demand and its emissions of greenhouse gases. The plan, called the “Greener, Greater Buildings Plan for New York City,” is billed as a “far-reaching” “complex plan,” a “game-changer” and “first-of-its-kind legislation.” Many of the plan’s new mandates would fall on owners of buildings of 50,000 square feet or more.[1]

While the rationale for the plan is indisputable -- 80 percent of the City’s carbon emissions come from buildings -- the impacts that this new legislation will have on building owners is not yet clear. The plan would be implemented through four legislative proposals to be considered by the New York City Council, two of which were formally introduced shortly after the City’s announcement. 

The outline of the legislation provided by City leaders contemplates a series of new mandates on building owners, along with opportunities to manage compliance costs. Owners of buildings of 50,000 square feet or more would be required to undertake “an annual benchmark analysis of energy consumption.” The purpose of the analysis is to “empower” building owners to take steps towards minimizing energy use and maximizing the economic benefits of energy conservation.” The plan would also require these owners to conduct an energy audit every ten years. The results of the audit would then dictate what improvements the Owners must undertake in terms of “retro-commissioning, and retrofitting their building.” The legislation defines “retro-commissioning” broadly to include “non-capital work such as…changes to controls or operational improvements.”[2]

The plan would require spending by building owners to undertake only the retro-fits and retro-commissioning “that will pay for themselves in less than 5 years through energy-related cost-savings.”[3] However, the bill text indicates a payback period of 7 years[4] and is not clear on how the payback would be calculated or whether building owners would receive credit for undertaking energy efficiency improvements in the past.

The plan would also create a New York City Energy Code that would apply to any renovation that takes place in any one of New York City’s 1 million buildings. Owners of commercial buildings of 50,000 square feet or more would be required to upgrade their lighting to more energy-efficient systems “whenever there is a renovation project of any kind within a tenant space…regardless of whether such renovation project would otherwise involve electrical work.”[5] Some limited exceptions would apply, including where the cost of the renovation is less than $50,000.[6] 

The City intends to establish a financing program to assist qualifying building owners in meeting some of the legislation’s upfront retrofitting costs. Financing would be provided through a revolving loan fund using federal money from the American Recovery and Reinvestment Act.

Making New York’s buildings greener is unquestionably “the right thing to do.” While City leaders deserve credit for their efforts to implement Mayor Bloomberg’s PlanNYC, this legislation may need to be refined to account for the significant investments that have already been made by responsible building owners and to ensure that any energy efficiency measures are implemented in an equitable, cost-effective manner.


Questions regarding this advisory should be addressed to Victor J. Gallo at (212-238-8771, gallo@clm.com), Clifford P. Case at (212-238-8798, case@clm.com) or Macculloch M. Irving (212-238-8714, irving@clm.com).


 

Endnotes

[1] The information in this Client Advisory is based, in part, on the City’s press release of April 22, 2009, PR-180-09, that is accessible at www.nyc.gov.

[2] Int. No. 967, § 1. 

[3] See PR-180-09.

[4] Int. No. 967, § 1.

[5] Int. No. 973, §2.

[6] Id.



Carter Ledyard & Milburn LLP uses Client Advisories to inform clients and other interested parties of noteworthy issues, decisions and legislation which may affect them or their businesses. A Client Advisory does not constitute legal advice or an opinion. This document was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. © 2017 Carter Ledyard & Milburn LLP.
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