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Tax Incentives Aren't the Only Value to Going Green

Increased awareness about the conservation of resources and global warming is contributing to the increased desire for green buildings.

Oct/Nov 08
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In addition to the financial benefits these and other environmentally conscious strategies accrue, contractors and owners are also learning that green building has public relations value. Any company that is in the public eye, whether nationally or locally, can enhance its standing with an environmentally sound building. Similarly, architects and builders can use green buildings to set themselves apart from the competition.

Green building practices need not be limited to new construction. Expanding or remodeling a building can involve energy-saving practices, too - most notably with lighting. The requirements for an overall federal tax deduction include energy modeling to demonstrate that a building meets energy-efficiency requirements. For the lighting component alone, however, no energy model is necessary.

Regardless of whether a business is contemplating new construction or an expansion or remodeling project, it's important to begin thinking green during the design phase. While it isn't too late to start green construction after site work begins, it's more efficient and cost-effective to incorporate environmentally conscious techniques into the plan during design and preconstruction.

LEED-certified designers and contractors may help identify energy-saving opportunities that would otherwise be overlooked. They also are more likely to be aware of new products and materials to boost the overall "greening" of a project.

Investing With Care
There is one note of caution. Green or not, a building is an investment that deserves the same cost/benefit analysis that any investment would receive. It's important that owners talk with their financial consultants and tax advisers before undertaking any building project.

It is important for owners to weigh tax incentives, energy savings, up-front costs, and a host of other factors in deciding where and how to expand or relocate. Businesses that want to open their operations in more than one state may especially need help in sorting through state and local tax incentives, as well as LEED credits, to determine the best locations and building strategies.

Let's say energy-efficiency measures would add $2 million to the cost of a $10 million building. Owners might be reluctant to pursue LEED certification. If they learned that tax incentives and energy cost savings, however, would offset all but $500,000 of the additional cost, they could decide that complying with LEED standards was advantageous.

Given the results of the Davis Langdon study, it's possible that an owner wouldn't face that dilemma. Energy efficiency may not add to the $10 million price tag at all. In that case, tax and energy savings would appear in effect to offset the cost of a LEED-certified building by $1.5 million compared to a non-green building. Without a complete cost/benefit analysis, done in cooperation with experienced advisers, however, it's impossible to know.

Green construction isn't new, but it's rapidly gaining prominence with politicians, architectural and design firms, contractors, and the public. But acceptance has been slower in the United States than in some areas of Europe and Asia, where sustainable design trends are more prevalent. Slow-starting or not, though, sustainable buildings and designs are here to stay. Even without federal tax incentives, they're demonstrating their value.

1 "LEED® Initiatives in Governments and Schools," U.S. Green Building Council, August 2007.

2 "Cost of Green Revisited: Reexamining the Feasibility and Cost Impact of Sustainable Design in the Light of Increased Market Adoption," Davis Langdon, July 2007, p. 3.

Ridge Miller is an executive with Crowe Horwath LLP in the Indianapolis office. He can be reached at 317-706-2686.

Ed Meyette is an executive with Crowe Horwath LLP in the Grand Rapids, Mich., office. He can be reached at 616-752-4234.

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