Financing Sustainable Building in Cleveland

Photo Credit: The Cleveand Kid

Photo Credit: The Cleveland Kid

The City of Cleveland offers tax abatement to owners that develop or re-develop residential properties. The program encompasses new construction and renovation in two categories: substantial and moderate rehab. Single-family, multi-family low, mid, high-rise, and mixed-use projects are eligible. Abatement is given for 100% of the increased property value for 15 years on new construction, 10 years for projects of $2,500 or less per unit or 12 years for projects with a minimum of $15,000 per unit. All qualifying projects must demonstrate compliance with the City of Cleveland Green Building Standard, which establishes minimum high performance green building requirements.

CITY OF CLEVELAND GREEN BUILDING STANDARD

The Green Building Standard is designed to provide a framework for owners and project teams that results in high performance green buildings: buildings that use less energy, water, materials and resources in their design, construction and operations. Compliance with the Green Building Standard requires projects to demonstrate they meet the requirements of a third-party rating system. The Green Building specifies out which ratings systems are applicable based upon the project type. These options include:

• Enterprise Green Communities (EGC)
• LEED Homes Silver Level Certification
• LEED New Construction BD+C Silver Level Certification
• National Green Building Standard Silver Level Certification
• Passive House+ 2015
• WELL Building Certification

The City’s Green Building Standard also outlines which rating system applies based upon project scope. Key definitions for purposes of identifying which pathway include:

• Market Rate
• New Construction
• Renovation – Substantial
• Renovation – Moderate
• Affordable Housing
• Building Height – low-rise, mid-rise and high-rise

Each rating system defines substation and moderate rehab differently, and there are differences between rating systems regarding building height (low-mid-high rise).

Building Category*New ConstructionSubstantial RehabModerate Rehab
Single Family and Multifamily Low-Rise (Affordable)A. EGC certified through Enterprise
C. LEED Silver
D. NGBS Silver
A. EGC certified through Enterprise
B. LEED Silver
D. NGBS Silver
A. EGC certified through Enterprise
D. NGBS Silver
Single Family and Multifamily Low-Rise (Market Rate)**B. EGC compliant and energy requirements
C. LEED Silver
D. NGBS Silver
B. EGC compliant and energy requirements
C. LEED Silver
D. NGBS Silver
B. EGC compliant and energy requirements
D. NGBS Silver
Multifamily Mid/High Rise (Affordable)
A. EGC certified through Enterprise
C. LEED Silver
D. NGBS Silver
A. EGC certified through Enterprise
C. LEED Silver
D. NGBS Silver
A. EGC certified through Enterprise
D. NGBS Silver
Multifamily Mid/High Rise (Marketrate)**B. EGC compliant and energy requirements
C. LEED Silver
D. NGBS Silver
B. EGC compliant and energy requirements
C. LEED Silver
D. NGBS Silver
B. EGC compliant and energy requirements
D. NGBS Silver
NOTE: In the above chart, “Enterprise Green Communities Compliant & Energy Requirements” indicates that some projects are able to verify requirements with assistance of a City-Approved Verifier (Emerald Built Environments is a City-Approved Verifier). The City-Approved Verifier is a third-party verification entity confirming that a project meets the Enterprise Green Communities v2015 Standard and will qualify for tax abatement without official Enterprise Green Communities certification. A City-Approved Verifier is necessary in these instances because Enterprise Green Communities is a rating system designed for low-income and affordable housing only and is not applicable to market rate projects.

 

INTEGRATED DESIGN

Typically, projects face many challenges when making first cost decisions. First cost decisions can have significant impact on operational costs. High performance green buildings significantly increase durability and lower operations and maintenance costs as a result of design that are energy, water, and waste efficient. Embedded within each compliance path is the concept of integrated design. A major component of integrated design is face-to-face collaboration that engages stakeholders, investors, building users and occupants, operations and maintenance personnel with the design and construction team during the project’s design phase. Through integrated design, project teams are encouraged to think outside the box and look for innovative solutions that achieve multiple benefit – including operational cost savings.

LIFECYCLE COST ANALYSIS

According to the Athena Institute, a building’s total embodied costs are roughly break down into 15% first costs, 75% operational costs, and 10% for renovation. With a historical emphasis in the construction industry for minimizing first costs, buildings have historically used more resources – and therefore cost more – to operate. Integrated design, inclusive of the energy model allows projects to fully vet design options in consideration of first cost and ongoing project budgets through a concept of lifecycle cost analysis. In its simplest form, lifecycle cost analysis is a framework that demonstrates how a design decision will result in lower ongoing costs by taking into consideration operational cost savings and demonstrates payback. A robust lifecycle cost analysis takes into consideration many more elements of a first cost.

ENERGY MODEL

Every compliance path listed above requires a certified energy professional to develop an energy model for the project. An energy model demonstrates how the project’s design performs better than a baseline building, thus projecting energy savings. Each rating system requires the model to demonstrate a specific level of improvement over the baseline and defines within its criteria the baseline. In simple terms, the baseline is better in many cases than building code, which means the final project design is required to demonstrate energy performance above and beyond code. In all instances, the rating systems reward projects for going above and beyond the minimum requirements with optional points. The energy model is a vital tool for teams designing high performance, green buildings and is extremely valuable to owners seeking to make informed decisions about what energy-using systems (e.g. HVAC, ventilation, domestic hot water, lighting, controls and renewables) to select for their building. The project’s Licensed Professional Engineer can perform an energy model in some cases and in others an outside credentialed third party is required (Emerald Built Environments has energy modelers on staff that serve all project types).

ENERGY TESTING AND VERIFICATION

Each of the third-party rating systems identified in the Cleveland Green Building Standard has a testing and verification component intended to ensure the project is well constructed, air-tight for maximum efficiency, properly ventilated for indoor air quality, and water-tight for durability and reduced mold. Testing and verification protocols differ by project scope and Green Building Standard compliance pathway. In general terms, the protocols can include third-party review of drawings, visual inspection of insulation and air-barrier sealing, performance testing on mechanical, ventilation, lighting and plumbing systems and envelope. Projects complying with the City of Cleveland Green Building standard need to engage a testing and verification professional, who is someone with the appropriate credentials based upon the project scope and compliance pathway (Emerald Built Environments has on-staff individuals able to perform T&V in all cases).

ENERGY STAR CERTIFICATION

The City’s Green Building Standard requires new construction projects the Enterprise Green Communities Certification or Compliance pathways to achieve Energy Star certification in addition to all other requirements listed in the rating system. LEED Homes for low-rise and midrise have optional compliance pathways to also achieve Energy Star Certification. Achieving Energy Star Certification provides higher standards for energy performance and more rigorous testing and verification. The accreditation presents the project with a brand-name certification upon completion, which is proven to have added market value upon resale.

ROLE OF THE SUSTAINABILITY CONSULTANT

A sustainability consultant is a critical part of any project team seeking to achieve a high performance green building. This person works side-by-side with the design and construction team, as a representative of the owner to facilitate the team in achieving high performance green building in an efficient and budget-conscious method. Often, this individual also is responsible for developing the energy model and managing the certification process. Best practice has the owner directly contracting for the sustainability consultant (including energy model and testing and verification), yet it is not uncommon for the architect to design build-firm to engage this consultant.

Specific to the City of Cleveland’s Green Building Standard, the sustainability consultant will lead the team through careful review of each applicable rating system to first identify the applicable compliance pathways, such as comparing LEED to Enterprise Green Communities. Further analysis of design elements in consideration with project scope, budget and financing stack is needed to identify the right compliance pathway. The sustainability consultant should be engaged early in the process to facilitate integrated design and to conduct the necessary analysis of system designs using the energy model and lifecycle cost assessment.

MYTHS BUSTED + OUR OPINION

Although the City of Cleveland’s Green Building Standard has been around for several years, the recent update clarifies compliance pathways and sets forth more stringent standards. In the Cleveland community, a perception that the “Enterprise Compliance” pathway for market-rate projects is cheaper than achieving LEED certification. We could not disagree more with that broad-sweeping statement. First, no two projects are alike and in addition to the myriad of scope differences in projects, financing stacks also have an impact on which Green Building Standard compliance pathway works best. This is most true for high-rise residential development and redevelopment. The chart below illustrates the differences between EGC and LEED as it applies to a mixed-use high-rise substantial renovation project. Stopping short at providing budget estimates, which can only be done on a project-by-project basis, it shows more stringent baseline requirements for Enterprise. For market-rate projects, there is no certification given to a project that results from this compliance pathway. If a project is going to achieve high performance green building, an actual third-party certification such as LEED or WELL Building has value in the marketplace and national REIT’s pay more for certified buildings. Financing stacks that include PACE, 179-D or Cost Segregation require whole-building energy models whereas “Enterprise Compliance” requires only a model on the residential portion. To maximize return on investment, projects must closely at the long-term cost benefit of a tax abatement strategy.

Mandatory Comparison Enterprise Green Communities & LEED BD+C v3
Prepared for Mixed-Use Highrise Substantial Rehab scope

MANDATORY ITEMSEGCLEEDNOTES
Integrated Design Processx1
Sensitive Site Selectionx1
Proximity to Services x6
Environmental Remediation / Level 2x1
Water Conserving Fixturesxx
1.28gpf toilets, .5gpf urinals,
2.0 shower & kitchen, 1.5 Lav
Baseline figures are 1.6gpf
toilets, 1gpf urinals, 2.2
kitchen and lav, 2.5 shower
EGC prescriptive meets LEED 20% requirement
Energy Efficiency MimimumEGC calculations on BTU, LEED calculates on cost
savings
Meet ASHRAE 90.1-2010xEUI Baseline 58
Beat ASHRAE 90.1-2007 by 14%4EUI Baseline 72
Energy Star lightingxNo requirements in LEED
Residential Unit Submetering xNo requirements in LEED
Low VOC paints, coatings, adhesives and
sealants
x2
Construction Waste Management
Minimum 50% or two of the following at
100%: {concrete brick and asphalt},
metal, wood, drywall, cardboard
xNo requirements in LEED
50%1
Ventilation RequirementsASHRAE 62.1-2010ASHRAE 62.1-2007
Ventilation RequirementsMechanical Ventilation of
hallways & corridors to
ASHREA 62.1-2010
No specific additional
ventilation requirements
beyond ASHRAE
Ventilation RequirementsIndividual toilet room fans
MUST be energy star labeled
and on a control; Mechanical
ventilation of kitchen fans
No specific additional
ventilation requirements
beyond ASHRAE
Ventilation RequirementsECM motors with VFD
required for common
ventilation systems
No specific additional
ventilation requirements
beyond ASHRAE
CO monitors (if combustion)xNo requirements in LEED
Integrated Pest ManagementxEBOM innovation point
Resident ManualxNo requirements in LEED
Resident Training xNo requirements in LEED
100% Owner and 15% tenant reported
data
x1ESPM; no tenant data reporting required
Building O&M Manualx2Part of Enhanced Cx service
Total Optional Points020

NOTE: The chart above summarizes mandatory items in EGC that are not found in LEED and that have impact on design or construction. Both rating systems have additional mandatory items (prerequisites in LEED) not included in this chart because they are either similar in requirement or they do not impact design and construction costs. To the extent there is an equivalent requirement in LEED, it is reflected above. To the extent LEED rewards the requirement with points, they are reflected above. There are no requirements in LEED that are not otherwise included in EGC for this type of building.

 

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