Industry Insights
November262019
Climate Mobilization Act – A War on Greenhouse Gases and a Challenge for Real Estate

Mitchell Marcus, CPA

11.26.19 | Berdon Industry Insights

The New York City Council (the Council) wants the City to go green in a big way, and has declared war on greenhouse gases. In a package of legislation known as the Climate Mobilization Act, (Act)1 the Council is targeting NYC buildings, which it says contribute nearly three-quarters of the City’s greenhouse gas emissions. These aggressive steps to counter climate change are unique in that they include requirements that impact existing properties. Both owners and developers should be aware that certain measures go into effect by 2024, so plans to comply need to be made soon.

The Goal

The Council is seeking to compel building owners and managers to improve the energy efficiency of building systems and operations as well as invest in cleaner on-site power generation. Going further, the Council is seeking to support the growth of renewable energy via power purchase agreements and other mechanisms to obtain cleaner energy. The Council is also looking to reduce emissions from the City’s power supply by switching to cleaner energy sources and prompting fuel distributors to offer low-carbon fuels. Additionally, the Council wants residents to purchase more efficient light bulbs, and to lower thermostats, unplug chargers and electronics when not needed, and buy more energy-efficient appliances.

The Impact

The Act impacts all buildings over 25,000 square feet in total floor area as well as two or more buildings on the same tax lot that together exceed 50,000 square feet. These include condominiums and cooperatives. Buildings that have alternate requirements include those with one or more rent-regulated units and Housing Development Fund Corporation co-ops. Buildings not impacted by the law include:

  • Houses of worship;
  • New York City Housing Authority buildings;
  • City-owned buildings;
  • Multifamily properties that are three stories or less with no central HVAC systems or hot water heating systems; and
  • Industrial facilities primarily used for the generation of electric power or steam.

Methodology and Key Dates

The Law provides a methodology for calculating carbon emissions limits for the covered buildings and requires an annual report showing the calculated limits as well as their carbon emissions for the previous year.

The carbon limits rule takes effect in 2024 and, beginning in 2025, covered buildings must submit their carbon emissions reports for 2024. Should a building emit carbon over a calculated limit, a fine may be imposed. Significantly lowered permitted emissions caps will also be enacted by 2029, with the goal of getting the City’s buildings to a carbon reduction of 40% by 2030.

Potential Fines

Fines will be calculated by multiplying building emissions overages by $268. The calculation will be the same for 2024 and 2029, but with a different carbon limit. Owners and managers should weigh the cost factors of noncompliance and associated penalties with the investment outlay of making changes to be in compliance. Be aware that failing to file a report may result in a substantial fine with even higher fines for filing a false report.

Taking Action
Initially, owners and managers can examine their benchmarking data submitted each year under Local Law 84/133 2 which includes a carbon emissions calculation, and compare it to the building’s carbon limits for 2024 and 2029. They can then calculate the carbon limit by taking the building’s square footage and multiplying by the relevant occupancy group. Should the building not meet the new standards, action will be necessary. Some suggested measures can include:

  • Adjusting temperature settings for heat and hot water based on occupancy and facility requirements
  • Repairing leaks in heating systems
  • Ensuring that heating systems are clean and operating efficiently
  • Placing timers on exhaust fans
  • Upgrading lighting to meet new standards
  • Examining and/or installing insulation for pipes
  • Insulating steam system condensate tank or water tank
  • Installing individual temperature controls
  • Upgrading windows and ductwork

This is not a comprehensive list as each building will have its own unique strengths and challenges.

Moving Forward

The City has created an office to oversee the energy performance laws, and appointed an advisory board to provide guidance on future decisions regarding emission limits. It is reasonable to assume that new pronouncements will follow, therefore stay tuned for future updated on this topic as we continue to monitor for developments.

Questions: Contact Mitchell Marcus, CPA and Principal, at 212.331.7460 | mmarcus@berdonllp.com

Berdon LLP, Accountants and Advisors

1 https://council.nyc.gov/data/green/

https://www1.nyc.gov/assets/buildings/local_laws/ll84of2009.pdf

https://www1.nyc.gov/assets/buildings/local_laws/ll133of2016.pdf

 

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