Michigan builders may have a new incentive to be green

The green movement is in full effect across America - and it may soon pack some punch in the Michigan construction industry as well. A package of bills recently introduced in the Michigan Senate would create tax incentives for Michigan builders to focus on green buildings. Specifically, the bills would give tax breaks when Michigan builders make LEED-compliant new construction or retrofit buildings to meet the same compliancy.

LEED stands for the Leadership in Energy and Environmental Design. The U.S. Green Building Council has created the standards to designate buildings as being "green" under a rating system that certifies buildings as one of four levels of LEED compliance. To become compliant, a building has to meet standards relating to energy efficiency, water use and overall impact on the surrounding environment. However, currently in Michigan, being LEED compliant does not give a builder any advantage, other than being able to tout a building as energy efficient and green.

The bills introduced in the Michigan Senate would change that. Local governments in Michigan would have the authority to exclude properties from up to one-half of the mills levied under the state education tax act for up to six years. Building owners would have to apply for the exemption and prove that they met the standards set by LEED.

Across the country, many municipalities have passed laws requiring new municipal buildings to be LEED compliant. While this increases the numbers of LEED-compliant buildings, and will hypothetically reduce energy costs, it doesn't give a financial incentive to builders in the private sector. Cincinnati took a more overreaching measure than what Michigan is considering by offering LEED-compliant building owners a 100-percent property tax exemption. While the law has reduced the city's tax base, it has resulted in the city being known as one of the greenest cities in the Midwest.

Tax incentives and energy savings are nice, but the real benefit may lie in the marketing edge LEED compliance will bring.

"I'd definitely be willing to pay a little more for a place that was more energy efficient based on the money I'd save in utilities," reasoned David Gordon, a soon-to-be attorney in the new condo market. "Also, it seems like the resale potential would be better, too."

If the bills pass and developers start using the advantages of owning a green property as a marketing tool, failing to be LEED compliant may become too large of a risk to take. Owners of non-LEED-compliant homes or condos may have difficulty selling their property when similar properties offer energy savings they cannot compete with.

Some companies are already taking the initiative to be LEED compliant, even without the tax incentive. Recently, Chrysler built a plant in southern Michigan that received LEED compliance. The plant is expected to reduce total energy use by 39 percent, saving the company $1.25 million per year. Needless to say, the incentive to be LEED compliant will be even greater if the tax incentive bills are signed into law.

Sources:
http://www.mlive.com/auto/index.ssf/2010/03/new_chrysler_plant_gets_leed_c.html
http://www.cincinnati-oh.gov/cdap/pages/-3521-/
http://www.legislature.mi.gov/documents/2009-2010/billintroduced/Senate/pdf/2010-SIB-1111.pdf