Summer 2012Portland's commercial construction market has embraced green building to the point that it almost goes without saying that any new office building in the central city will probably meet some prestigious sustainable development standard. Provision of green amenities as a new baseline for bringing competitive space to market in Portland is not likely to go away soon as green technologies advance and building owners and tenants continue to recognize return on investment in green technologies through energy efficiency and productivity gains compared to nongreen office space.
Because of limited new office construction in the city center over recent years, insufficient new, green space has come to market to represent a viable alternative for most tenants of office space developed before green was even conceived of, let alone the norm. As we start to experience some optimism inspiring shifts in the economy including the commercial lending markets, more new, green projects should be coming on line, such as the TMT Development's Park West building which is scheduled to resume construction in 2013 and be ready in 2015.
It stands to reason that existing office space will be faced with growing competition from newer, greener alternatives. This competitive disparity appears only to be exacerbated by the growing preference of sustainability, and green amenities among existing and potential tenants continue to increase. But, there is some help for owners of office space that are looking to compete in the new green market place. The Oregon Energy Trust, as well as the state and federal governments, have joined in subsidizing green retrofits, providing resources to fund the green improvements that attract tenants who otherwise head for greener pastures. Each of the following could provide assistance to a building owner wishing to compete with green space coming to market or simply to reduce energy related expenditures.
Updated Business Energy Tax Credit ("BETC")
The traditional BETC program, which had been in effect since 1979, expired in 2010 with the passage of HB 3672. The Oregon Department of Energy will only offer business energy tax credits to qualified applicants who invest in one of three types of projects:
- Energy conservation
- Recycling, renewable energy resources
- Less-polluting transportation fuels
Oregon Department of Energy
Renewable Energy Systems Exemption. The value of newly installed qualifying renewable energy systems such as solar, wind, geothermal, and biomass are not included in the assessment of property value for tax purposes.
Small-Scale Energy Loan Program. This program provides low-interest loans for commercial projects that save energy, produce renewable energy, use recycled materials to create products, use alternative fuels, and reduce energy use during construction. There is no specified maximum loan amount.
Small Premium Projects (SPP). Up to $1.7 million in tax credits is available through the SPP program. Tax credits for approved SPPs are allocated on a first-come, first-served basis between January 13, 2012 and December 31, 2012 until the funds are exhausted. Taxpayers who receive the credit may claim the entire value of the credit in the first tax year.
Oregon Energy Trust
Custom Renewable Energy Projects. These provide cash grants and development assistance for installation of on-site renewable energy projects of up to 20 megawatts.
Kick-Start Bonus Incentives. Commercial and industrial customers of PGE, Pacific Power, NW Natural and Cascade Natural Gas may receive up to a 20 percent kick-start bonus incentive for qualified lighting upgrades and custom capital energy-efficiency improvements.
GreenStreet Lending Program. Collaboration between Umpqua Bank and the Oregon Energy Trust provides low interest loans of up to $500,000 for installation of solar and wind energy systems as well as efficiency upgrades.
The federal government provides numerous tax incentives and loans for green commercial retrofits. Tax incentives include depreciation deduction through the modified accelerated cost-recovery system, as well as energy-efficient commercial tax deductions, business energy investment tax credits, and renewable electricity production tax credit. Multiple loan and grant programs are available to the building owner wishing to finance a green retrofit as well.
These programs are all intended to reduce the amount of initial investment in green retrofits and actively shorten the time frame over which such investments are returned through savings in energy expenditures. Strategic use of multiple incentives should be maximized, because the potential benefits might be the factor that allows an opportunistic owner to make the business case for a green retrofit that is profitable from an operations standpoint and that levels the competitive playing field with some of the new, cutting-edge sustainable properties that are on the market.
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