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Napa Valley Hotel Demonstrates Dangers to Developers Posed by LEED Creep

In the wake of the D.C. Council passing significant LEED legislation last week, there’s been substantial commentary about how positive the bill is for green building at large. While I agree that the legislation is certainly a step in the right direction, a recent post I wrote about the D.C. mandate describes what the BD+C White Paper calls “LEED creep.” The effects of LEED creep may eventually plague private developers across the District, and its potential problems are well-illustrated by a recently completed LEED hotel project out in California that I came across earlier today.

The Gaia Napa Valley Hotel in American Canyon, California, is waiting on up to $1 million in hotel occupancy tax revenues from the American Canyon City Council. In 2003, the Council promised developer Wen-I Chang a tax rebate of up to $1 million over the hotel’s first four years of operation. The catch? It had to first receive LEED certification, but it hasn’t- yet- despite opening this past October 31st.

“Until they have the designation, they don’t get the credit,” City Manager Richard Ramirez said. “They will be responsible for collecting the occupancy tax and rebating it to the city.”

Bobbie Freeman, the hotel’s director of sales, confirmed that Gaia Napa Valley does not yet have a LEED rating. “Obtaining a LEED certification is an extremely lengthy and tedious process,” she said. “As of right now, we don’t have a final.”

So, in essence, because it’s taking USGBC so long to sort through Chang’s LEED paperwork, the municipality is withholding his tax rebate. Chang has clearly built an environmentally-friendly structure- green features at the hotel include solar power, recycled water, recycling bins in each room, toilet and facial tissues made from recycled products, and a kiosk in the lobby which displays the hotel’s energy consumption, water use, and carbon emissions in real-time. Why penalize him because USGBC doesn’t have its house in order? Although Chang expects his Silver or Gold rating within the next two months, the fact that American Canyon has tied its tax rebate program to LEED is costing him money right now. As a prospective developer- in American Canyon, D.C., or any other municipality mandating LEED for private projects- this would bother me. I might choose to site my project outside such jurisdictions out of fear that compliance issues outside of my control would end up costing me money, or worse, potentially expose me to liability.

Obviously the objective behind these local green building ordinances is to encourage green building, but it seems to me that LEED creep will ultimately discourage developers from building- green or otherwise- in those locales which continue to insist on only one means of certification as a precondition for whatever incentives the municipality was purporting to offer developers in the first place.

5 Responses to Napa Valley Hotel Demonstrates Dangers to Developers Posed by LEED Creep

  1. Preston December 19, 2006 at 5:07 am #

    I understand the issue here, but I think the hotel and developer should shoulder a little bit of the burden here. For example, when you think about building a green hotel in a jurisdiction that ties the tax rebates to receipt of certification from the USGBC, then you figure out when certification typically comes from USGBC. Then you take that and plug that into the cash flow forecasts and see how the timing will affect the profitability of the project. Unless the USGBC is really off its rocker, I don’t think the blame lies there.

    Point two: green buildings are getting to the point where they can be built at a similar cost to code built buildings, on a first costs analysis. With a hotel, they’re so levered to energy, green is going to hit the bottom line quick. So, the hotel should be making okay money out of the investment without city tax breaks… Just a thought, however.

    I think there are some legitimate issues, but I’m not sure about this scenario.

  2. Stephen December 19, 2006 at 5:45 am #

    You’re right that hotels do present issues that other types of construction do not, so maybe this was a bad example for my thoughts on LEED creep. In other scenarios, though, where a project’s bottom line may depend on whether those tax breaks are granted, would you, the developer, feel comfortable laying your project at the feet of USGBC? Or would you decide that it might not be worth your while and decide to go build somewhere else? I think that’s what BD+C is describing when it talks about LEED creep, and I think there are, as you call them, legitimate issues with respect to the LEED certification process and how it interacts with these local programs.

    However, I am not, by any means, advocating that municipalities stop proposing green legislation that references LEED. I think there are ways to address the problems posed by LEED creep (mainly by streamlining the LEED process itself) which USGBC is pursuing right now. In this respect, 2007 will be extremely interesting, especially once the details surrounding LEED Version 3.0 are announced.

    At the same time, didn’t the quote from the American Canyon City Manager kind of bother you? I understand that bright lines are important, but I think those words capture the essence of LEED creep as described by BD+C in the White Paper.

  3. Preston December 19, 2006 at 6:21 am #

    I did think the City Manager’s comment was a little curt, or abrupt maybe. Another interesting point is the mention of the consultants in the attached article. Who’s consultants were those? It sounded like those were the developer’s consultants that were dragging their feet. I’d be interested in hearing that story.

  4. Nick December 26, 2006 at 12:56 am #

    ha… on a completely tangential note, sounds like the “Gaia Napa Valley” hotel has a pretty ambitious marketing department, considering American Canyon is just the northern part of Vallejo, an ugly Bay Area industroburb. The City of Napa is a good 20 minutes north of American Canyon; the Valley (and Wine Country) a good 20 minutes further from there… just a tad ironic that travelers looking for green accomodations in the beautiful Napa Valley will be tricked into staying off I-80 between Six Flags Marine World and the Chevron refinery…


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