Hawaii Green Building Law

Green buildings are not immune to foreclosure. Recently foreclosure proceedings were commenced against developers of the EcoCentre, a South Florida commercial development seeking LEED Gold certification.

The developers allegedly failed to pay their $6.9 million construction mortgage. However, according to the developer, “the fact that the building is a green building is not why the building financially is in trouble… it has to do with a failure to properly and adequately financially plan the building in the beginning…”

Foreclosures involving green buildings create unique issues. Foreclosure proceedings often take several months. Inadequate or deferred maintenance of green building systems during the foreclosure process could effect the efficiency of the building. For instance, improper maintenance of a HVAC system could lead to degradation of efficiency, equipment life, air quality and comfort.

Further, if a project is certified under the United States Green Building Council’s (”USGBC”) LEED certification or other green building certification program, the project must must keep up to date with the requirements of its certification. For instance, as previously discussed, LEED projects must comply with minimum performance requirements, including submitting operational performance data on a recurring basis to the USGBC, or face possible decertification. The USGBC has not provided any exception to its requirements for projects that are in foreclosure.

There could be further issues if the project involves tenants who entered green leases. The landlord could potentially be in violation of a green lease if the green building systems are not operating correctly, if the project is decertified or if any construction or maintenance is done that would jeopardize the green features of the building.

Special attention must be paid to foreclosures involving green projects.

Classic battles–McDonalds versus Burger King…Coke versus Pepsi…Yankees versus Red Sox. Should we add LEED versus Green Globes to the list?

LEED

The best known green building certification program is Leadership in Energy and Environmental Design (LEED). Developed by the U.S. Green Building Council in 2000, LEED (at least currently) is recognized as the market leader and has been incorporated as the standard in many local building codes and state statutes. There are four levels of certification–certified, silver, gold and platinum. A building must satisfy several prerequisites before it can earn points. Points are generated within the following six categories:

Sustainable sites
Water efficiency
Energy and atmosphere
Materials and resources
Indoor environmental quality
Innovation and Design

LEED certification is a paperwork-intensive process. Each point that is sought requires submissions, and while the process itself is conducted online for the most part, the accumulation of data and supporting material is extensive and often extends past final completion.

In comparison to other rating programs, LEED is expensive. It has been estimated that the LEED process costs between 1 and 9 percent of the overall project cost. In addition, current estimates to document, manage, and report project compliance through the USGBC certification process range from approximately $10,000 to $60,000 per project. These estimates will vary on a project-by-project basis and will depend on the complexity of the building type, the green measures targeted, the LEED Rating pursued (how many credits to document) and the level of green building experience of the stakeholders.

Green Globes

Green Globes was developed by the Green Building Initiative and positions itself as a more economical, practical and convenient alternative to LEED. In order to avoid antitrust issues, several local codes and state statutes, including Hawaii’s statute, incorporate the Green Globes rating system in addition to LEED. Green Globes uses a 1000-point system, although the applicant may confirm that certain points are inapplicable for the project. The Green Building Initiative issues one to four globes based on the percentage of applicable points achieved.

Unlike LEED, Green Globes does not have prerequisites. All actions implemented into the building count toward certification points. Points are accumulated in the following categories:

Site
Water
Energy
Resources
Indoor environment
Emissions, effluents and other impacts
Project management

One of the criticisms of Green Globes is its lack of prerequisites, allowing developers to ignore certain sustainability categories. In contrast, LEED takes a whole building approach to sustainability.

The Green Globes focus clearly is on energy use. While the number of points is relatively balanced among the six point categories in LEED, more than 35% of the points awarded under Green Globes fall under the energy category.

The total registration and verification cost for Green Globes, not including facility improvements, is typically between $5,000 and $7,000. In comparison, LEED registration and certification costs are approximately $13,000 for a 500,000-square-foot project. In contrast to LEED, Green Globes provides a Web-based self-assessment tool that can be completed by any team member with general knowledge of the building’s parameters. Green Globes, however requires an on-site inspection by a verified certifier; LEED does not.

The green building certification debate rages on. Certification can be a significant additional project expense; however, certification costs should not be viewed as the cost of “going green.” LEED is a more rigorous process but it currently is the market leader.

A lot has been written about the USGBC’s decision to de-certify projects that fail to meet the USGBC’s minimum program requirements. I predict that if the USGBC ever wields its de-certification powers, government projects will be among the first to face de-certification.

Several governmental entities have mandated that government buildings be LEED certified. Hawaii law requires all major state renovation or construction projects be designed and built to meet LEED silver or Green Globes standards. Several new state building projects have achieved LEED certification, including the Waipahu Intermediate School cafeteria and University of Hawaii’s John A. Burns School of Medicine.

While state projects are now required to be built green, budget concerns often leave government buildings without adequate funding to cover the construction of LEED buildings. Once built, the state often does not have adequate money or resources to cover necessary maintenance.

At this point, a project can be de-certified if it fails to provide ongoing monitoring data. The USGBC has not yet stated what will happen if a building’s energy and/or water usage is higher than projected, which could occur if a building is not properly maintained. Nevertheless, even if a project achieves LEED certification, funding issues could prohibit the state from keeping up with the USGBC’s minimum program requirements.

As previously discussed, potential de-certification could set off a wave of litigation between the developer and each stakeholder involved in the design, construction or occupancy of the project. Addressing risk and potential liability issues early on in the planning process is now a necessity.

China and the United States recently announced two partnerships that may lead to the development of greener buildings.

First, the countries announced plans to develop a U.S.-China Clean Energy Research Center. The Center would facilitate joint research and development on clean energy by teams of scientists and engineers from the U.S. and China, as well as serve as a clearinghouse to help researchers in each country. The U.S. and China together pledged $15 million to support initial activities.

Second, the countries announced a partnership to increase research and development for energy-efficient buildings and communities. The agreement allows for the exchange of experts and technicians as well as joint research on more efficient buildings that may lead to the two countries partnering in building a demonstrative energy-efficient project in China.

Experts are expected to look at high-performance HVAC, insulation, lighting, cold storage, geothermal heat pumps, building-integrated photovoltaics and solar thermal systems, and other means of improving performance of buildings.

The U.S. and China also will collaborate on development of standards for the Ministry of Urban-Rural Development’s eco-cities initiative — a plan to build sustainably designed cities in China with green features that include renewable power and efficient, modern transportation systems.

The partnership could allow construction of buildings in China with at least 30% lower greenhouse gas emissions at no additional cost. The partnership could also be a boon for energy-efficient building construction worldwide as current and future research is utilized and tested on the rapidly growing construction taking place in China. On the other hand, the rapid pace of construction, the lack of uniform standards, and the differences in legal and building standards could prove a barrier to the free exchange of technology and ideas back to the United States.

The Hawaii Legislature has overridden Governor Lingle’s veto of SB50. The bill requires the Board of Land and Natural Resources to conduct at least two public hearings before leasing any public land to an entity seeking to develop a renewable energy project.

Proponents of the bill seek to create greater transparency and community participation in the leasing of public lands. Governor Lingle believes however that renewable energy projects already go through an approval process through various state and county agencies. Requiring hearings specifically for renewable energy producers increases costs and delays. The bill also requires renewable energy projects to publicly disclose business sensitive information, such as its financing plan.

It remains to be seen how these new lease requirements will effect Hawaii’s renewable energy industry. Both sides are correct, the legislation will create more transparency, however the additional red tape will add to the costs and time frame for developing renewable energy projects. Developers of proposed renewable energy projects may be driven to lease more private property rather than dealing with the increasing governmental regulations that accompany public land leases.

The San Francisco 49ers unveiled plans to build a new stadium in Santa Clara, California. The proposal is for a $937 Million, 68,000-seat stadium that would incorporate a vegetated roof and solar panels. Reportedly, the stadium would be equipped with a lighting system designed to conserve energy. The 49ers’ intent is for the stadium to achieve LEED certification.

The Niners’ proposed stadium would not be the first LEED stadium. That distinction goes to Medlar Field at Lubrano Park, a $30 million, 5,400-seat baseball stadium on the Penn State campus. Highlights include water-efficient landscaping, a 76 percent construction waste recycling rate and power provided in part by a wind turbine system.

Stadiums are ideal for the implementation of sustainability concepts–they are massive projects, large energy users and often tied into public transportation routes. But stadiums are not immune to potential legal disputes. The Washington Nationals built the first major league ballpark to achieve LEED certification. After the Nationals moved into their stadium, they stopped paying rent alleging that the stadium was not “substantially complete.” The Nationals cited problems with the ballpark, including the high-definition LED lighting on the scoreboard. The Nationals subsequently settled their dispute.

Likewise, as discussed in a prior post, the home of the NBA’s Minnesota Timberwolves, the Target Center, is the subject of a labor dispute submitted by roofers to the National Labor Relations Board.

I think there are several reasons that make stadiums particularly prone to disputes. As with all green building projects, expectations are high. This is particularly true with stadiums which the public often expects to be fitted with state-of-the art technologies. Meanwhile, most stadium projects are at least in part taxpayer funded. Also, although the USGBC has considered a rating system specifically tailored to LEED stadiums, no such rating system exists to date.

High expectations + innovative but unproven technologies + budgetary and political issues + unestablished guidelines = potential problems.

According to the United States Green Building Council (”USGBC”), as of July 14, 2009 there are 146 projects registered for LEED certification. Registering a LEED project is the first step toward earning LEED certification.

Of the 146 registered projects in Hawaii, the following 14 Hawaii projects have attained LEED certification:

Case Middle School, Punahou School – Gold
AIA Honolulu Chapter Office – Gold
1779 Palolo Chinese Home – Certified
Group 70 International-Ground Floor – Silver
Imiloa Astronomy Center of Hawai’i - Certified
Hawaii Baptist Academy Middle School – Gold
Waipahu Intermediate Cafeteria – Certified
Dowling Company Office – Certified
Botanical Research Center – Gold
Hawaii Gateway Energy Center at NELHA – Platinum
Frear Hall, University of Hawaii at Manoa – Silver
40 South School Street – Silver
Castle and Cooke New Storage Facility – Certified
Hilton Waikoloa Dolphin Quest Village – Silver

According to the USGBC, LEED “is an internationally recognized green building certification system, providing third-party verification that a building or community was designed and built using strategies aimed at improving performance across all the metrics that matter most: energy savings, water efficiency, CO2 emissions reduction, improved indoor environmental quality, and stewardship of resources and sensitivity to their impacts.” As of April 2009, there were 19,524 LEED registered projects, and 2,476 LEED certified projects worldwide.

The Obama administration announced that Hawaii and five other states and territories will receive more than $141 million in Recovery Act funding to support energy efficiency and renewable energy projects. Hawaii’s share of today’s award is $10,372,000.

The Department of Energy’s State Energy Program (SEP), provides grants to states that have proposed statewide plans that prioritize energy savings, create or retain jobs, increase the use of renewable energy, and reduce greenhouse gas emissions. Activities eligible for SEP funding include energy audits, building retrofits, education and training efforts, transportation programs to increase the use of alternative fuels and hybrid vehicles, and new financing mechanisms to promote energy efficiency and renewable energy investments.

Hawaii will use its Recovery Act funding to improve energy efficiency and expand the deployment of renewable energy technologies, which will help advance mutual state and national goals for creating and maintaining jobs, reducing oil dependence, and reducing greenhouse gas emissions. Hawaii’s energy efficiency strategy will directly fund high performance buildings, government and residential building retrofits, and energy efficiency measures in the state’s hospitality industry. The program will also provide technical assistance and training to building owners, developers, design professionals, and county building code officials to ensure that new and renovated buildings are designed and built with high efficiency measures. Hawaii will target bringing buildings to ENERGY STAR and Leadership in Energy and Environmental Design (LEED) standards.

The Collaborative for High Performance Schools (”CHPS”) calls itself a “leading a national movement to improve student performance and the entire educational experience by building the best possible schools.”

Earlier this year, the Hawaii legislature passed HB 986, which would mandate:

Design and construct[ion of] all public school facilities, including renovation projects under five thousand square feet, to meet the Collaborative for High Performance Schools rating system, except when the guidelines conflict with the use of the facility as an emergency shelter;

HB 986 was among the measures highlighted in last month’s post on Hawaii Green Legislation for 2009. Last Friday, July 10, 2009, the measure was vetoed by Governor Lingle as part of a series of legislative vetoes reportedly made for budgetary reasons. It remains to be seen whether her veto will be overridden, which requires a 2/3 majority vote of both the House and Senate.

Looking at the text of the bill, it is not set forth how a school can “meet the CHPS rating system” as required by the law. Existing CHPS guidlines appear to be state specific, with assessment criteria available for California, Washington, Texas, New York, New Hampshire, Rhode Island, Connecticut, Maine, Vermont, Massachusetts and soon, Colorado (but not Hawaii). According to the CHPS website, independent review of CHPS projects applies only to projects in California, Colorado, Texas and Massachusetts, while a self-certification process has been outlined for projects in California, Texas, New York, Washington and the Northeast (again, Hawaii is not yet on the list).

If the bill becomes law over the governor’s veto, it remains to be seen how the provisions of the law would be implemented. Presumably CHPS criteria for Hawaii would need to be developed. Who would be responsible for developing such criteria? What incentives for compliance with CHPS criteria or penalties for non-compliance would be permissible for architects, designers, contractors and other project members? Should the bill become law, RFPs and design and construction contracts under the mandate would be ripe for misunderstanding and disappointment, and therefore must clearly set forth the expectations and requirements of all involved in such a project.

This is not a movie review but I just watched the film “The Greening of Southie.” The documentary follows a LEED project team developing the Macallen Building, Boston’s first LEED-Gold certified mixed-use residential project.

The movie highlights several of the potential hurdles stakeholders encounter in developing a LEED building. These include assembling the project team, training a green collar workforce, utilizing new technologies and marketing the green development.

One of the problems faced by the Macallen team was the installation of bamboo flooring throughout the development. In order to obtain a LEED credit, the project specifications called for the flooring to be installed using a low-VOC adhesive, which the contractor was not familiar with. The application of the adhesive caused the floors to buckle, forcing the contractor to rip up all of the flooring and order 60,000 square feet of new bamboo flooring from China. The result: wasted materials, lost money and several weeks of delay.

Stakeholders in all construction projects face risk and liability. Green buildings add a new layer of potential risk that must be addressed at an early stage. For instance, the delays associated with the Macallen bamboo flooring could have affected the developer’s ability to take advantage of tax incentives if the incentives required a specific completion date. It is not too long ago that Shaw Development v. Southern Builders presented our first glimpse of green building litigation regarding unattained tax credits allegedly caused by a contractor’s failure to build as promised.

Many of the problems that can arise with green buildings are new. All stakeholders should assess the potential risks and address their possible liability before construction starts.