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Proposals before City Council would offer big tax breaks to 'green' buildings

ROBBIE WHELAN

Daily Record Business Writer

March 4, 2008 6:58 PM

Two bills before the Baltimore City Council would provide hefty tax credits to home and business owners who go green.

Introduced by Councilman Jim Kraft at the City Council meeting on Monday night, both pieces of legislation propose changes in the city tax code.

The first bill, which deals with owners of commercial properties, would provide incentives, in the form of a 10-year, 100 percent credit on city property taxes, for builders who comply with the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) Silver standards.

The second bill, geared more toward homeowners, would provide incentives of up to one-third of the installation costs, with a $25,000 cap, for single-family home owners who install alternative energy devices such as solar panels or geothermal heating. For multifamily and commercial properties, the credit would be capped at $125,000.

"I think that it's important that we try to create a sustainable city," said Kraft, a Democrat who represents Southeast Baltimore. "Using the LEED certification tools allows us to move in that direction, so creating incentives like these would help more people participate in the program."

Kraft added that he expects the first bill, referred to as the High-Performance Buildings bill, to be amended to shorten the duration for the tax credits to five years, and for the LEED expectation to be raised from LEED-Silver to LEED-Gold, when discussed in committee meetings. This is, he said, because many builders are building green on their own, without city incentives.

"We're finding this is something we don't have to push for," he said. "When people come in to talk about their programs, they say, ‘Naturally, this is going to be certified.' ... The market has created the demand for green buildings."

Baltimore's Green Building Task Force was created in 2006, and last year the city passed an ordinance requiring all commercial and institutional buildings constructed starting in July 2009 to comply with LEED-Silver or equivalent standards.

The LEED system is the most widely used national rating structure in the country, and is judged on a scale of 69 total possible points, which are earned by incorporating sustainable elements, such as storm water management facilities, solar panels or air quality systems, into the design of a building. LEED-Silver buildings have earned a minimum of 33 points.

Brad Rogers, a broker at Baltimore's City Life Realty, which specializes in selling green properties, said he was thrilled that Baltimore was joining the ranks of at least 40 American cities that have mandated green building and energy efficiency standards.

Many homeowners cannot afford the price tag that comes with a residential solar panel system, he said, which in Baltimore can range between $12,000 and $75,000, depending on the size of the house's roof, the age of the house and a variety of other factors.

"Certainly I would see this as being a pro-business and pro-real estate business direction that legislation is going in," he said. "But it is only adding to what I see as a sea change in the Baltimore and Maryland economy. This is the future to which real estate, construction, and development is going. ... It is exactly the type of thing that successful regions do when they're trying to respond proactively to environmental problems. "

In addition, Rogers said his company has seen an increase in the number of home buyers who consider building practices an important part of their purchasing decision.

"In a city where property taxes continue to be much higher than the surrounding jurisdictions, and where home buyers consider property taxes a legit factor in paying their monthly payments, anything that brings those taxes down, improves the salability of real estate in the area, and if you can combine that with green measures, it's a two-punch, win-win situation," he said.

Both of the pending City Council bills will be discussed next in committee, and Kraft expects a vote on them in late April. If approved by the council, Kraft said, he does not expect the mayor to veto the bills, but does expect resistance from the city's finance department, which collects property taxes.

Baltimore City assesses a tax of $2.268 per $100 of assessed value on residential properties, and an additional 5.67 cents for commercial property, which combined amount to more than half the city's annual tax revenue.

"Generally, [Kraft's bills] appear to be for a good cause, but my concern is for the financial impact, said Edward Gallagher, the city's Director of Finance. "I'm certainly concerned about the loss of revenue."