Thanks to our Sponsor

FEDERAL FOCUS    -   STATELINE    -   CANADA UPDATE    -   FOR YOUR INFORMATION

May 19, 2009

House Moves Closer to Passing Cap and Trade Legislation - Building Energy Efficiency Included The House Energy and Commerce Chairman, Henry Waxman (D-Calif.), recently announced an agreement with members of his own party that will allow him to move forward with a climate change bill titled the American Clean Energy and Security Act of 2009. Compromises in the bill, such as renewable electricity standards for utilities and carbon allowance distributions, may increase overall support, but other provisions including building energy efficiency mandates still worry many business interests. The legislation would ultimately cap greenhouse gas emissions at 17 percent below 2005 levels by 2020 and 83 percent by 2050. A draft copy of the legislation released last Friday imposes significant mandates for real estate developers. The bill requires states to adopt strict energy efficiency targets for building codes and imposes federal civil penalties on developers that are not in compliance. The national energy efficiency targets for commercial buildings are increased 30 percent immediately following the bill’s enactment, 50 percent by 2015 with an additional increase of five percent every three years until 2030, when it will reach 75 percent. The baseline for the efficiencies is ASHRAE 90.1 (2004). To reach the energy efficiency targets, the proposal would create a new national building code that will be issued within a year of the bill’s enactment and one year after each additional code target date. The states will then be required to adopt either the national code or a state equivalent. If a state does not have an energy code that meets the federal requirements within one year after the release of the national code, the national building code shall become the applicable energy code for that state and local jurisdictions. Additionally, states that are not in compliance with the law could forfeit federal funding and emission allowances under the cap and trade bill as a consequence. The Department of Energy will have the authority to establish federal enforcement capabilities and impose new inspection fees to cover the costs of inspections required for enforcement. When a state fails to enforce the new building code, the Department of Energy will assess civil penalties for violators. In the event a building constructed is out of compliance with the applicable code and has been conveyed by a knowing builder or knowing seller to an unknowing purchaser, the builder or seller shall be considered a violator. Each day of unlawful occupancy will be considered a separate violation. Markup of the bill was set to begin at 1 p.m. on Monday, May 18, with a vote for final passage out of the Committee expected before the end of the week. Republicans on the committee have vowed to offer numerous amendments to the bill during the mark-up and may request a reading of the 932-page bill as a stall tactic, though none are expected to vote for the bill’s final passage. Meanwhile, the Senate Energy and Natural Resources Committee is planning on moving several energy related measures including building efficiency this week. No time frame has been set in the Senate for debate on a larger cap and trade bill, or how the Senate would conference its version of the legislation with the House’s broader bill. NAIOP continues to work with members of Congress to amend or remove the building code provisions in Title 2 of the American Clean Energy and Security Act of 2009. The provisions as written would create significant financial barriers to the construction of new buildings. We will continue to work with both chambers on the energy efficiency provisions as the measures move forward to negotiate a more reasonable approach to increasing energy efficiency for buildings. For more information, contact John Bryant at (703) 904-7100, ext. 162. Thanks to our Sponsor

States Facing Greater Deficits Even with Stimulus Dollars According to The Washington Post, the $135 billion of the federal stimulus package to help states cover budget deficits and limit state layoffs of public employees may not be enough. Many states, such as Maine and Washington, are having to make additional layoffs despite receiving stimulus funds. The layoffs may signify that the initial stimulus funding is falling short in meeting state needs as state revenues continue to decline and deficits increase during the current economic downturn. Supporters of the final $787 billion stimulus package, which included $25 billion less in state aid than the House of Representative’s plan, said that the aid would help states avoid severe job cuts. Ray Scheppach, executive director of the National Governors Association, told a Senate committee last month that states are facing a $200 billion deficit during the next two years. In order to address these deficits, it is argued that states, including California, Georgia and New Jersey, will need to order additional layoffs or forced furloughs of state employees in combating budget shortfalls absent additional federal assistance or a revitalized economy. There are arguments on both sides as to whether the stimulus package was large enough to avoid significant state layoffs. The White House has conceded as indicated in the article that the final package was smaller than it had expected as Chief of Staff Rahm Emmanuel stated, “We clearly thought that economic activity needed [a larger stimulus], but it was more important to get it done than argue about it.” Meanwhile, it is worth noting that some states are grateful for the federal stimulus dollars, citing that the layoff situation may have been exacerbated without the additional stimulus funds. As the economy continues to contract, state leaders will struggle to avoid more layoffs and balance their budgets without making some hard and politically sensitive decisions. However, the passage and implementation of state policies that revitalize and strengthen a weakened economy will increase state revenues and provide some relief for state leaders from making additional budget cuts. For more information contact Toby Burke at (703) 904-7100, ext. 116. Coalition of NAIOP Chapters Visit Pennsylvania State Capital A coalition of leaders from three NAIOP Pennsylvania chapters (NAIOP Central Pennsylvania, NAIOP Greater Philadelphia and NAIOP Pittsburgh) visited the state capital in Harrisburg on May 4-5 to address issues that directly impact the commercial real estate development industry. NAIOP members met with key legislative and committee members to discuss expediting the construction permit process, the state’s mechanics’ lien law, electric cap rates, the state budget and transportation and infrastructure. These topics were discussed in meetings scheduled with the following members and/or their staffs: Senators Jane Orie (R-District 40); John Pippy (R-District 37); Rob Wonderling (R-District 24) Representatives Dan Frankel (D-District 23); Joseph Markosek (D-District 25) Members also met with new Deputy Secretary Joe Powers of the Department of Environmental Protection, which included a visit by Secretary John Hanger, who was sworn into office the previous day. Additional administration meetings were scheduled with Al Biehler, Secretary of Transportation; and Jack Wagner, Auditor General. For more information contact Toby Burke at (703) 904-7100, ext. 116.

Federal Government has Spent Almost Five Percent of its Stimulus Package A recent article in the Financial Post reports that the federal government has already spent nearly $2 billion of the $40 billion fiscal stimulus package that was approved in an effort to provide relief from the effects of the lingering recession. Government documents indicate that the monies allocated have gone towards rebuilding or refurbishing facilities at Canadian colleges and universities. Atomic Energy of Canada Ltd. also received funding in the amount of $222 million to go toward building an advanced CANDU reactor and maintain “safe” operations at its plant in Chalk River, Ontario, that has experienced problems in the past. CANDU is a Canadian nuclear power generation technology using deuterium oxide (heavy water) as the moderator and coolant and natural uranium as fuel. An additional $250 million was allocated to provinces and territories to aid unemployed residents, with a specific focus on skills training. The Treasury Board of Canada, which oversees government spending, released the documentation as part of its supplementary estimates program. This program provides updates on how Ottawa is distributing funds and the reasoning behind specific distributions. These supplementary estimates indicate that $1.8 billion of the $3 billion set aside by the government, has already been spoken for. The Treasury Board reports that the remaining $1.18 billion will most likely be spent by the end of June. Downtown Vancouver Reserves Land for Future Office Development A recent article in the Vancouver Sun reported that the City of Vancouver has agreed to set aside land in the downtown core for future office development, despite economic projections of rising office vacancy rates spurred by the recession. As part of this plan, Metro Vancouver has agreed to buy Metrotown Place III in Burnaby for $14.25 million, in an effort to relieve the space crunch in the regional district. This move comes as the city’s office vacancy rate has climbed to seven percent and sublease rates continue to rise as companies downsize or delay expansion plans. Brent Toderain, Vancouver’s city planning director, noted that the economy was not a factor in the city’s decision and the recent actions are part of a larger 2004 interim city policy developed to protect the expanding business district from “excessive” residential development. He noted that although residential development results in more profitability, ensuring that land is available for future office development will help the city to provide jobs for up to 130,000 people. In addition, Toderain explained that many tenants want to be downtown amidst all the activity and by not reserving land for future development, some of these office tenants may have to relocate to city suburbs. The Metrotown Place III deal, brokered by Michael Gill of Avison Young, was the first sale of a B.C. suburban office building valued at more than $5 million since last fall. Gill said that despite rising vacancy rates, this is a good time for investors as property owners look to sell prime assets to raise capital. Toronto’s Green Roof By-law One Step Closer to Becoming Mandatory Despite backlash from the development community, industry and even churches, Toronto has moved one step closer to making green roofs on new buildings mandatory. The proposed by-law, which would mandate green roofing on new buildings with a floor plate of more than 2,000 square meters, was approved by a committee on May 6 and heads to the city council at the end of this month. The by-law would apply to mid-rise residential buildings consisting of more than eight stories, schools, industrial buildings and non-profit housing. The version of the proposal that was adopted on May 6 is significantly more encompassing than the original version, which initially proposed mandatory green roofing for only tall condo and office towers with a footprint of more than 5,000 meters. The original proposal also exempted low- and mid-rise condos, industrial buildings, schools and social housing. But Toronto’s Deputy Mayor Joe Pantalone requested that a wider-ranging proposal be drafted in an effort to limit greenhouse gases and reduce energy consumption. Patrick Berne, of the Pemeberton Group, is recognized for constructing buildings to the highest environmental standards. However, he feels that the city is being too narrow-minded in pushing green roofs, as opposed to other technologies such as reflective roofs, wind turbines and solar panels. Steve Daniels, who represents both Tridel and the Building Industry and Land Development Association, expressed his views that the by-law is extremely difficult to implement due to its “one-fits-all” approach that doesn’t recognize the complexity of condo towers. He also noted that the by-law has a provision allowing builders unable to create a green roof to pay a penalty, stating “They’re setting up a standard that’s so high that they know we’re not going to be able to meet it and it’s just taking a quick cash grab from us.” Meanwhile, Toronto Councillor Peter Milczyn feels that Toronto is merely catching up to the rest of world in terms of implementing green roofs, sitting 25 years behind Europe and five years behind the United States in this area.

Non-Residential Construction Costs Down in Calgary and Across Canada Recently released figures from Statistics Canada indicate that the cost of non-residential construction decreased by 4.6 percent in the Calgary metropolitan area in the first quarter of 2009 from the last quarter of 2008. In a composite price index of seven CMA’s across Canada, the quarterly change was down 4.2 percent nationally. Vancouver saw the biggest decrease at 10.7 percent, while Montreal showed the only increase at 0.4 percent. Statistics Canada reported that the national quarterly decrease was mostly due to the decline in construction material prices and competitive conditions due to a weaker non-residential construction market, particularly in Western Canada. The agency said the non-residential building construction price index provides an indication of the changes in six CMA’s: Calgary, Edmonton, Halifax, Montreal and Vancouver, along with the Ottawa part of the Ottawa-Gatineau CMA. Superior Education through NAIOP's Executive Graduation Certificate in Real Estate NAIOP, in cooperation with the University of Denver, offers members the online Executive Graduate Certificate in Real Estate, including many other exclusive benefits for program participants who apply to the program through NAIOP. The Program is primarily offered online and requires that you attend one three-day course in residence at the University of Denver. You must hold a bachelor's degree from a regionally accredited college or university and have at least five years work experience in real estate to be considered for the program. The advanced curriculum in the Executive Graduate Certificate is designed to enhance an existing foundation in real estate rather than to serve as an introduction to the industry. Course work is rigorous, challenging and rewarding; it builds upon existing knowledge and experience. Apply today! Industrial Property Sector Faring Better Than Most A Mortgage Bankers Association Survey indicates that industrial property loans originations had the lowest decrease of all property sectors during the past year. In addition, compared to the fourth quarter of 2008 where activity was virtually nonexistent, first quarter originations for industrial properties rose 67 percent. In contrast, health care properties saw a 72 percent decrease in originations; a 39 percent decrease for multifamily properties; a nine percent decrease for retail properties; and a four percent decrease for office properties. Hotel properties remained relatively unchanged. View the full report here.

Past Issues NAIOP Legislative News Staff President, Thomas J. Bisacquino (Ext. 104) Vice President for Government Affairs, Aquiles Suarez (Ext. 115) Vice President for Marketing, Kathryn Hamilton (Ext. 165) Legislative News Editor, Leslie Silvey (Ext. 166)

2201 Cooperative Way, Suite 300, Herndon, VA 20171-3034
Tel: (703) 904-7100 | Fax: (703) 904-7942
Sponsor Legislative News - Unsubscribe - Contact Us
Copyright 2009