Mr. Coleman writes that he is “deeply concerned with what would happen if this legislation became New Jersey law. Construction costs for schools would unnecessarily increase, with absolutely no benefit to the students and teachers who use these buildings or the taxpayers footing the bill. Such legislation would also set a dangerous precedent that could lead to all new public buildings in New Jersey having to use lumber certified through the U.S. Green Building Council. Such legislation would quickly waste millions of dollars in taxpayer money.” Mr. Coleman’s specific concerns with respect to increased costs derive from the types of wood products his organization’s constituents would need to stock in the event S239 passes:

Under LEED, the lumber can only be handled through the strict chain of custody by those who are certified in the program. If this lumber is put in the hands of a yard that is unaffiliated, it is actually deemed corrupted and cannot be sold as certified. If my company were to become LEED certified – in which we would be permitted to sell this ‘certified’ lumber – it would cost us thousands of dollars to follow the regulations of the program. We’d also have to stock certified and uncertified lumber in all the dimensions, doubling our inventory, and making sure the products were clearly separated. This would double my costs for such expenses as financing, space allocation, administration, insurance and other related expenses.

First, just as a quick housekeeping matter, USGBC does not certify lumber or any other individual type of product that may qualify for LEED points. As we noted here at GRELJ earlier this year in the context of LEED Version 3.0′s MR Credit 7: Certified Wood, this is because of the high level of scrutiny which private environmental standard-setting organizations such as USGBC receive under controlling antitrust law. It is also important to note that USGBC does not certify individual companies, either. While Mr. Coleman’s constituents may choose to stock more FSC-certified or reclaimed wood products, there is no requirement that those constituents become “LEED-certified” in order to do so.

However, I was particularly interested in Mr. Coleman’s concerns about chain of custody and the requirements for individual New Jersey lumber yards to apply FSC trademarks. According to its website, FSC requires that

[a]ny operation making, changing, trading, re-labeling or repackaging FSC certified products needs to be chain of custody certified in order to use the FSC trademarks and to enable its customers to make an FSC claim about these products. Retailers were traditionally seen as the end of the supply chain; today brokers or agents, who neither take physical nor legal possession of the products, and retailers, who sell FSC products to end consumers that do not want to make an FSC claim, usually do not need to become certified.

According to FSC, there are 133 companies in New Jersey that already hold FSC chain-of-custody certificates, which at quick glance seem to be a relatively even split between lumber and graphics concerns. The actual cost to obtain certification is unclear; on its website FSC states that the “costs and timescale for [chain-of-custody] certification vary depending on the size and complexity of the operation. It also depends on the range of products and processes.”

Nevertheless, although Mr. Coleman’s general points here about increased costs that would ultimately be passed along to taxpayers are duly noted, the more critical issue to consider generally is the scrutiny under which I believe LEED-driven legislation will continue to come in 2010. As Mr. Coleman notes, “[w]ith New Jersey teetering on bankruptcy and local school districts facing major cuts in state aid, this legislation is impractical, unnecessary and does nothing to solve the paramount issues plaguing the state.” Whether or not you are convinced of the technical merits and purported benefits of the LEED program, it is indisputable that state and local governments across the country – including those right here in our own backyard – are facing severe budget problems. Legislators will need to demonstrate bottom-line benefits to taxpayers for policy decisions similar to New Jersey’s S239, particularly if voices like Mr. Coleman’s grow louder and more uniform.

In addition to the points that Mr. Coleman raises, it’s also worth noting that S239 does not explicitly require formal LEED certification, nor does it provide any guidance with respect to what “incorporate the guidelines” might mean. I think that this is another good example of the type of ambiguous language that continues to appear in third-party-driven green building legislation. I would suggest that such language is indicative of a more general lack of understanding about USGBC, LEED, and the various iterations of the LEED system; consider Mr. Coleman’s own remarks, for example, where he refers to companies as actually being LEED-certified! These distinctions do mean something, in the context of both legislation (where taxpayer dollars are at stake) and, of course, construction contract documents.

The reductions are staggered between 2010 and 2013 and beyond (10 percent through 25 percent, though the benchmark against which those reductions are measured is not set forth in the pending bill); Energy Star ratings would increase from 55 in 2010 to 75 in 2013 and beyond. An independent consultant would determine whether the required energy reduction is met; if not, the contractor (or, interestingly, another entity warranting the energy use) will be responsible for reimbursing the city for the cost of the excess energy use. The amendment is BL2009-503; a vote is slated for later this month. “This would allow an alternative that focuses on the performance of the building, not on the process of how you got to that performance,” Dominy told the Tennessean.

The genesis for the amendment is a 16-classroom addition to Antioch’s middle school, which uses an HVAC and building envelope system that does not qualify for credits under LEED (though it’s unclear exactly why this is the case). The contractor which designed and installed the system- Energy Systems, Inc. of Cookeville, Tennessee- is owned by Bob Southerlan, a former aerospace engineer who is “worried about being knocked out of the Metro construction market.”

I think that this is a critical battle to watch as it may suggest that local governments are coming to view LEED as something less than the mark of building performance; Mr. Dominy’s thoughts about process versus performance are particularly noteworthy in this context. It also echoes some of the remarks in the comments to Pat Murphy’s recent article as presented here at GRELJ (i.e., Mr. Murphy himself noted that “[t]here is a crying need for accurate, verificable and reliable energy rating systems. If LEED doesn’t fill the bill, other options will come forward.”) In addition, if it is true that Southerlan’s system is somehow excluded from the purview of LEED, there may be other, more serious problems with Nashville’s legislation from an antitrust perspective, which we’ll get into in a subsequent article.

• Nashville’s Green Building Code Under Review (Tennessean)

The legislation does not require formal LEED certification, but owners must submit a checklist for the appropriate LEED rating system as part of the plans submittal for a new building permit. Checklists must set forth specific credits the project will pursue, briefly describe how each credit will be achieved, and (interesting to note from a legal perspective) the parties responsible for each credit. The checklist must also be signed by a LEED AP who is not an employee of the building owner at the time of submittal. Again, although certification is not required, in order to obtain a building occupancy permit from the city, at the time of occupancy permit application, project teams must submit a completed checklist indicating which credits the project met successfully, signed by a non-employee LEED AP. As we’ve discussed frequently here at GRELJ, all of these requirements could raise interesting- and novel- liability issues in the event that a project fails to receive a building permit or certificate of occupancy as originally contemplated. However, the city’s development community is calling for Baltimore’s City Council to reconsider the legislation based on perceived additional green building first costs and asking it to propose an incentive-based structure in its place.

According to Don Fry, President and CEO of the Greater Baltimore Committee, the new legislation “inadvertently contradicts the state’s ‘smart growth’ policy by making the counties more economically attractive to new growth and development and by impeding the city’s own efforts to grow and expand its tax base.” Specifically, Mr. Fry pointed to legislation in surrounding Baltimore, Howard, and Carroll counties that offer tax incentives for green projects rather than mandates. “This puts the city, which already has the highest property tax rate in the region, at a further competitive disadvantage,” Fry wrote in a recent op/ed piece. You may recall a similar situation unfolding in King County, Washington and Seattle a couple of years ago.

In addition, developers, many of whom have in recent years have been renovating historical structures in Baltimore’s urban core, are worried that the legislation will make such adaptive reuse projects cost-prohibitive. According to Michael Goodwin of Baltimore-based architects Design Collaborative, Inc., “[t]he reality is that right now, there is still an unknown premium to doing something green. . . . The premium, which is 4 or 8 to 12 percent on a green project, you can justify it if it’s a build and hold type of company, and in the boom we’ve been experiencing in the last four or six years, there haven’t been a lot of those.” From an engineering perspective, developers are also worried about the feasibility of simultaneously preserving historic building walls which contain glazing that will need to be upgraded in order to address LEED’s energy and atmosphere credits.

One other thought from Mr. Fry also rings salient in the context of green building policymaking: “[f]or any new policy such as this to succeed, two key things must happen. First the policy must be well-designed to achieve its intended outcome. Second, it must be well communicated to those impacted by it. Neither appears to be the case with Baltimore city’s new ‘green building’ measure.” Here, Mr. Fry is referring to the fact that the Baltimore-specific Green Building Standards that will serve as the “equivalent” to LEED have yet to be fully developed, and will not be released until the end of this year. Moreover, I would also note that, as drafted, Council Bill 07-0602 fails to include language providing for project teams to appeal a decision of the building department not to award a certificate of occupancy or building permit based on the required LEED checklists, nor does it include any sunset provision that allows the city to review the legislation’s impact and effect after a certain period of time.

It’s been a while since we’ve heard industry voice opposition to LEED-driven legislation, and the Baltimore mandate may suggest- particularly as stimulus dollars continue to flow to state and local governments to craft similar pieces of legislation, and economic conditions improve and boost construction starts- similar concerns could be raised once again in other parts of the country as well.

• Baltimore’s Green Building Standards Well-Intentioned But Flawed (GBC)
• Developers Worry About City’s New Law (TDR)
• Council Bill 07-062
• San Francisco Ordinance is “LEED on Acid” (GRELJ)