These are pleasant words, bringing to mind energy conservation and preservation of the environment – good things in and of themselves, most people will agree. From a real estate construction and development perspective, an analysis of cost effectiveness must also come into play.
Among the multiple reasons for building green are reduced operating and maintenance costs and the potential for increased employee productivity and health. There can also be grant funding or tax incentives available for some green building projects, which are discussed in more detail below. On the negative side, currently constructing a LEED certified building may cost more, although as green building practices increase and materials become available, these costs should reduce.
LEED (Leadership in Energy and Environmental Design) stands for a rating system developed in 2001 by the U.S. Green Building Council, a non-profit organization which was initially funded in 1993 through the U.S. Department of Energy. In 2006, the U.S. Congress recognized LEED as the most credible US green building rating system. Consequently, federal, state and local governments among other entities, use the LEED system to rank or qualify projects for benefits or compliance purposes. Though LEED was originally developed to evaluate commercial construction, it is expanding its system, including the evaluation of residences, neighborhoods, schools and property portfolios. The LEED system has also been criticized as to its effectiveness – the Pittsburgh Business Journal noted complaints that a developer could receive as many credits for promoting bicycling to work and use of a limited amount of non-toxic paint, as for reducing water use by 20%. 
If you are contemplating a green building project, it is advisable to select a rating system for the project in advance for consistency, and in the event that there are grant, funding or tax credit considerations, the rating system should comply with the applicable finance requirements. The LEED system generally rates building performance in 5 areas: 1) sustainable site development, 2) water savings, 3) energy efficiency, 4) materials and resources, and 5) indoor environmental quality. Each of these categories has a minimum standard for receiving LEED certification – and there are three additional levels, silver, gold and platinum, that can be achieved. LEED also has a category for innovation.
LEED Certification is used by governments as both a requirement and an incentive. For example, the City of Pittsburgh has a bonus system in place, granting certain LEED certified buildings additional floor area and height benefits under the zoning code. In addition the City Council has recently re-introduced legislation to adopt an ordinance that would require that most city-owned building projects and any project receiving TIF financing achieve a minimum silver LEED certification. The Commonwealth of Pennsylvania passed legislation in 2005 providing a financial incentive to school districts whose buildings received a LEED silver certification. Various tax credits or incentives may be available for improving the energy efficiency of a building. The Tax Relief and Health Care Act of 2006 (expiring December 31, 2007 unless Congress takes action) provided tax credits for renewable energy and energy efficiency projects, including commercial buildings and home improvements. The American Jobs Creation Act of 2004 authorized issuance of tax exempt private activity bonds for green building and sustainable design projects (LEED certification is required). In addition, a proposal for a LEED certified building may pass through planning approval processes more quickly and with greater ease. The Green Building Alliance website at www.gbapgh.org lists numerous sources for funding or grants toward green building projects.
Construction costs for a LEED certified building include a registration fee of $450.00 and project certification fees of approximately $0.03 per square foot. Reports show that using LEED certification on a project can add 1.5-2% total additional costs (including professional fees, materials and systems). Energy savings are intended to quickly offset this additional cost.
Currently, developers involved in public building projects or projects financed through a state or local government should check on green building and sustainable design requirements for the project. To date, it seems any other participation is voluntary, although there may be tax incentives and possible grants available to developers or property owners to inspire participation.
The Real Estate Law Group of Maiello, Brungo & Maiello, LLP, can further educate you on this key issue and advise you as to if and how it affects your business now, or in the future. If you are contemplating a project let us help you investigate this option. You’re welcome to contact Attorney Kathleen McConnell at 412.242.4400 or firstname.lastname@example.org, or any other member of the MB&M Real Estate Law team.
 Friday, July 6, 2007, “Eight Years after Green Start, Industry Awaits LEED’s Successor”, Pittsburgh Business Times – by Tim Schooley
 Pittsburgh Code, Title Nine, Zoning, Section 915.04.
 Pittsburgh City Council Legislative File 2008-0027, Proposed Ordinance 915.06.
 See IRS forms 5695, 8908