Update from Beacon Hill

Formal sessions for the 2015-2016 legislature will end on Sunday, July 31. Since many legislators attended the Republican National Convention last week or the Democratic National Convention this week, a lot of action and major votes are expected this weekend as formal sessions will be held on Saturday and Sunday. NAIOP has been actively lobbying on a number of important bills and will continue to do so through the final moments of the session on Sunday night.

Much of NAIOP’s advocacy has been devoted to fighting bills that would do harm to the industry and discourage economic development. Among those bills are the zoning and wage theft bills, which were both passed by the Senate. NAIOP has been working to educate members of the House on the serious consequences these bills would have on economic development if passed.

This weekend the Legislature is expected to pass a number of bills that are now in conference committee and are priorities for both the House and Senate including: the ride-hailing industry bill; a municipal government reform bill; the non-compete legislation; an omnibus energy bill; and an economic development bill.  NAIOP has weighed in on the energy bill by supporting the positions of organizations like AIM on the procurement issues, while also supporting PACE language, and opposing the climate adaptation management plan (CAMP) language, as well as mandatory energy scoring and energy audit requirements. A letter to conference committee members was sent last week highlighting our concerns with the most problematic sections of the bill.

NAIOP is also advocating for the inclusion of language in the economic development bill that was included in the House version. Specifically, NAIOP supports important changes to I-cubed, increased funding for MassWorks and the creation of a new starter home program.

In short, there is one thing that is certain about the final hours of the legislative session – absolutely nothing is certain. Stay tuned for future updates from Beacon Hill.

Senate Energy Bill to Require Home Energy Audits & Labeling

Tomorrow the Senate will be voting on its version of an energy bill that passed the House in early June. The bill includes a new requirement that single family homes, multifamily properties with less than 5 units, and condominiums must undergo an energy audit prior to the property being listed for sale. The results of the audit would need to be disclosed when the property is listed. The bill also requires the Department of Energy Resources (DOER) to establish a home energy rating and labeling system, which would be based on, but not limited to, a property’s energy consumption, energy costs, and greenhouse gas emissions. The property’s energy rating and label would also need to be disclosed. In addition, DOER would track and publicly report the number of home energy audits conducted and energy ratings and labels issued.

NAIOP has serious concerns with the impact this could have on the housing market, particularly in low-income communities where homeowners may not have the means to make upgrades and properties would be potentially devalued with a low score/label. NAIOP supports the Mass Save program and believes that incentives, not penalties, will do more to address energy efficiency in the Commonwealth.

A number of concerning amendments to the bill have also been filed. Amendment #8 is the climate change legislation that was passed by the Senate earlier this year. NAIOP is strongly opposed to this language due to the confusing and vague language it contains and the substantial adverse impact it would have on development. It would require all “commonwealth certificates, licenses, permits, authorizations, grants, financial obligations, projects, plans, actions, and approvals for any proposed projects, uses, or activities in and by the commonwealth” to be consistent “to the maximum extent practicable “with a yet to be developed climate plan. Clearly, this language could delay and potentially halt countless public and private projects.

Amendment #68 would mandate electric vehicle charging stations. NAIOP does not believe the building code is the right place to advance the growth of specific technologies or sectors of the economy.

Following the Senate’s vote, the bill will go to conference committee where members will have to agree to compromise language. That version of the bill would then need to go back to the House and Senate for a vote before the end of the session on July 31.

NAIOP Supports Privatization of MBTA Services

Yesterday, NAIOP testified at the MBTA Fiscal and Management Control Board meeting to urge the Board to support the proposed privatization of MBTA services allowed under Chapter 46 of the Acts of 2015. As one of the organizers of the Coalition for a World-Class Public Transit System, NAIOP supported the passage of this important legislation in response to the MBTA’s complete shutdown last winter.

Many of the T’s operational impediments have originated from the inability to efficiently manage many of the non-core services. By looking at the privatized options for some of these services, the MBTA can focus on those operations of greatest value throughout the organization.  Utilizing all the tools that are available to the Board at this time is critical to balancing the operating budget and achieving necessary efficiencies.

At the hearing, NAIOP urged the Board to stay on course. There has been, and will continue to be, considerable pushback. However, getting the T back on sound financial footing and increasing the system’s reliability, should be the top priorities.

NAIOP thanks the members of the Board for all the good work they have done and their tireless commitment, focus, expertise and long-term vision to fix the T once and for all.

ViewPoint: A new stretch energy code is not justified

This OpEd appeared in the Boston Business Journal on June 3, 2016.

In March 2015, Governor Charlie Baker signed Executive Order 562, initiating a comprehensive review process for all regulations. Only those regulations which are mandated by law or essential to the health, safety, environment, or welfare of the Commonwealth’s residents would be retained or modified, making Massachusetts a more efficient and competitive place to live and work.

Agencies must demonstrate, in their review, that there is a clearly identified need for governmental intervention; the costs do not exceed the benefits; a regulation does not exceed federal requirements; less restrictive and intrusive alternatives have been considered and found less desirable; and the regulation does not unduly and adversely affect the competitive environment in Massachusetts.

Based on these specific criteria, the business community is concerned that the Board of Building Regulations and Standards (BBRS) is currently considering a new Stretch Energy Code as it develops the 9th edition of the statewide building code. Besides the fact that this Stretch Code undermines the statutory requirement that there be a uniform State Building/Energy Code, there is no good reason for it. This proposed energy code is unnecessary and fails the regulatory review standards, and the Baker Administration and the BBRS should not advance it.

The Stretch Energy Code was originally adopted in May 2009, despite strong opposition from the business community.  The code required commercial and residential construction in those communities that voted to adopt it to be approximately 20% more energy efficient than the statewide code. The new stretch energy code would require a 15% increase in energy efficiency over the current code. The Stretch Code has caused confusion among local building inspectors and developers.  Due to this and several other reasons, a new version of the Stretch Energy Code has never been adopted, even when the statewide code changed.  In fact, at the close of the Patrick Administration, the BBRS voted not to advance a new draft of the Stretch Energy Code.  However, in April 2015, this decision was reversed.

Massachusetts is already the most energy efficient state in the nation, with the most aggressive energy efficiency targets.  Furthermore, Massachusetts will be one of only a handful of states in the nation to adopt the 2015 International Energy Conservation Code (IECC) statewide.  Since the Green Communities Act requires the adoption of the latest IECC (every three years), the Commonwealth’s position as a national leader in energy efficiency will be ensured even without a Stretch Code.  Anything beyond that is overly burdensome and creates a significant competitive disadvantage for Massachusetts.

It is important to note that there is no statutory requirement to adopt or update a Stretch Energy Code.  There is no mention of it in any statute, and it is only the Department of Energy Resources’ (DOER) policy that encourages the creation of this code.

According to DOER, the changes to the Stretch Code would take effect automatically in stretch code communities without any local vote.  Many municipalities had no idea they would be subject to an automatic upgrade.

The business community continues to support a uniform statewide building and energy code.  We believe a new Stretch Energy Code is unnecessary, will hinder economic development, and would impose an unfair and difficult burden on local building officials and the construction industry.  We urge the Baker Administration and the BBRS to eliminate the Stretch Energy Code, once and for all, and acknowledge the latest version of the IECC as the only energy code in Massachusetts.

David Begelfer is the CEO of NAIOP Massachusetts, the Commercial Real Estate Development Association.

Federal “Tenant Star” Report Promotes Energy Efficiency in “Next Gen” Commercial Leased Spaces

The U.S. Department of Energy (DOE) just published its Energy Efficiency in Tenant Leased Spaces feasibility study that highlights both opportunities and barriers to implementing energy efficient technologies in multi-tenant commercial spaces.

The study was required by Congress as a part of the Energy Efficiency “Tenant Star” legislation that was passed into law last April. The hope is that this voluntary program will encourage higher energy performance in leased spaces in commercial buildings. Market driven branding incentives have worked well with building owners through the voluntary Energy Star program. Now, this program will attempt to motivate building tenants to increase their energy efficiencies and reduce their energy consumption.

The DOE study finds that “American businesses can occupy more energy-efficient spaces that help improve their bottom line, attract and retain the best workers, and increase their competitiveness.” About half of commercial real estate is occupied by tenants, who could directly benefit from greater energy efficiency. The study further finds that tenant space can be built to save 10-40% energy compared to a typical space.

The study also examined the persistent problem of a lack of energy data. It was determined that a significant increase in sub-metering of tenant spaces would help overcome this barrier. Another persistent problem is the “split-incentive” issue between owners and tenants, with owners paying for the improvements and the tenants benefitting. Accelerated 15-year depreciation of leasehold improvements, can potentially provide real estate owners with greater certainty to undertake property improvements over the typical lease term and economic life of those assets (7-10 years).

Furthermore, the DOE report also encouraged the creation of a federal tenant space recognition system, similar to Energy Star.

The real estate community is supportive of these voluntary, market driven programs that have already shown tremendous results across the country.

Water: It’s Time for MassDEP to Take Control

Now is the time for the Massachusetts Department of Environmental Protection (MassDEP) to be given delegated authority by EPA over National Pollutant Discharge Elimination System (NPDES) programs, along with the funding needed to adequately administer the program.

A NPDES permit is required for any discharges of pollutants from a point source into navigable waters of the US. As required by law, EPA or the state must set limits on the amount of pollutants that facilities may discharge into a waterbody.

To date, 46 states have been authorized to administer the federal NPDES permit program. Massachusetts is just one of four states in the nation (along with Idaho, New Hampshire, and New Mexico) where the federal government is in charge of the permit issuance, compliance and enforcement (with 2,990 NPDES permit holders in Massachusetts).

However, MassDEP is better equipped than EPA to concentrate on Massachusetts specific issues and develop permits with a more complete understanding of local conditions.

Currently, MassDEP jointly issues NPDES permits with EPA. Having MassDEP as the sole permitting authority, with EPA limited to an oversight role, would result in a more efficient permitting process. In addition, as the NPDES program continues to evolve in response to increased concerns over issues like nutrient loading and stormwater impacts, MassDEP would have greater control over policy decisions. These could be more effective with a program redesign, the heightened use of science, and coordination on managing all pollution sources in a watershed.

For this delegation to succeed, appropriate resources would be needed (estimated at under $10 million per year) to ensure a carefully coordinated approach to watershed management.

Massachusetts has an excellent national reputation as a leader in environmental protection, permitting, compliance and enforcement. MassDEP has implemented many successful environmental regulatory programs, with some being the models used by other states.  After years of discussion, Massachusetts needs to assume the responsibility for wastewater permitting by taking NPDES authorization over from EPA.

As Boston Proposes CPA, Issues to Consider

The Boston City Council’s Committee on Government Operations scheduled a public hearing for Tuesday, March 29 to discuss the city’s adoption of the Massachusetts Community Preservation Act (CPA). If approved by the City Council to move forward, the question would be put to the voters of Boston on this November’s ballot. This would result in a 1% property tax surcharge on commercial and residential properties starting in fiscal year 2018 (with the first $100,000 in value exempt as well as a 100% exemption for those who qualify for low-income housing or low or moderate income senior housing). Communities that adopt the CPA can decide on the distribution of funds across the three areas covered under the CPA, as long as each area – open space, historic preservation and affordable housing – receives at least 10 percent of the total available.

The Mayor has released a comprehensive housing plan for Boston, including objectives to produce 53,000 new units of housing. The report, Housing a Changing City – Boston 2030, estimates the CPA would generate $20 million annually, including state matching funds, of which 50% or $10 million would be dedicated to new housing funds. There is no question that Mayor Walsh and his team are very committed to providing affordable and middle income housing, as confirmed by the various initiatives the Administration has advanced in recent months.

The business community is also concerned about the lack of workforce housing.  Without housing that can be affordable to working individuals, couples and families, the region will not be able to maintain the exceptional economic growth it is currently experiencing. However, as City Council considers putting this on the ballot, a few questions should be asked and answered:

  • How much of these funds will end up supporting middle income housing? With a statutory requirement that housing produced under the CPA be for persons and families whose income is less than 100% of the AMI, it is unclear how middle income housing would be created. Furthermore, the independent CPA committee that will oversee the use of CPA funds is free to spend these funds in any of the three prescribed uses (beyond the 10% statutory requirement).
  • There is no requirement for the City to detail exactly how the CPA funds will be used to attain its goals. One would think that the days of throwing money at a problem and hoping for a good outcome are in the past. The MBTA operated like that for years, and we are seeing the results very clearly. What exactly is the plan to produce more affordable and workforce housing with this additional revenue?
  • How much of an impact will the CPA make? Preliminary estimates show that if half of the CPA funds ($10 million) were used for traditional affordable housing, there would only be 40-50 units built in a year. That is helpful, but is it worth it to impose new taxes on residential and commercial properties? The last time the CPA was proposed in Boston, it was estimated that the business community would be paying 81% of the total, as a consequence of real estate tax classification and the residential exemption. In addition, the City has also increased the requirements for new developments under the Inclusionary Development Policy and higher linkage payments for new commercial development are coming.

As a result of the recent building boom, the city’s revenue from real estate taxes is the largest in history. While having more money from the CPA for the City sounds great, the costs and benefits must be weighed before making this decision.