Ensuring Sensible Policies in the Areas of Sustainabilty, Immigration, Infrastructure & Land Use Policies
Policy Issues Snapshot: More background on various Energy, Environment, Land Use and Infrastructure policy issues can be found in recent issues of Roundtable Weekly — our weekly policy eNewsletter that can searched by key word or phrase.
News on various sustainability issues can be found in recent issues of Roundtable Weekly — our weekly policy eNewsletter archive that can searched by key word or phrase.
• "Tenant Star"
• EB-5 Investment Program
• Land Use Near Airports – FAA “One Engine Inoperative” Policy
• Federal Building Energy Codes
• 179D Tax Deduction for Energy Efficient Buildings
• Commercial Building Energy Consumption Survey (CBECS)
• EPA's ENERGY STAR Program
• Sustainability Accounting Standards Board (SASB)
• Federal Environmental Regulations – Climate, Waters of the U.S., Lead-Paint
• Joint Employer Policy
Policy Issues SnapShot:
> "Tenant Star"
- "Tenant Star" legislation directs the federal EPA and Energy Department to implement a voluntary, market-based branding program to recognize commercial landlord and tenants that design, construct, and operate within high-performance and energy efficient leased spaces. It has been a top priority of The Roundtable’s Sustainability Policy Advisory Committee (SPAC).
- Capping years of advocacy efforts by The Roundtable, real estate industry partners, energy efficiency and other stakeholders, President Obama on April 30, 2015 signed into law the Energy Efficiency Improvement Act of 2015 (S. 535), whose “Tenant Star” component is expected to encourage optimum energy efficiency in leased commercial spaces and increased investment and job creation, while also helping the environment.
- The overall bill signed by the president also addresses the regulation of certain grid-enabled energy-efficient water heaters; requires that the federal government collect and disclose energy usage data for federally leased buildings; and authorizes the Department of Energy (DOE) to study benchmarking methodologies, best practices, programs, and policies that increase building energy efficiency. The U.S. Environmental Protection Agency (EPA), in consultation with DOE, will start developing standards for the Tenant Star designation within 180 days, according to Portman’s office and the bill’s language.
- On Sept. 30, 2015 The Roundtable submitted agency comments explaining best practices for design and construction of high performance tenant fit-outs – with emphasis on the financial metrics that make such projects economically feasible. DOE will assess RER’s and other comments and is expected to provide a study to Congress on these matters in April 2016, as the next step to implement the “Tenant Star” law.
- On May 3, the U.S. Department of Energy (DOE) released a congressionally-mandated study exploring “best practices” and market challenges for improved energy efficiency in the nation’s stock of tenant-leased spaces. As envisioned by the Tenant Star law, DOE’s new study sets in motion further exploration of a potential recognition program for optimal tenant energy performance. While such programs exist for whole-buildings, there is currently no federal sustainability program geared to leased spaces. (Roundtable Weekly, May 6)
> EB-5 Investment Program
- EB-5 attracts foreign capital by currently allowing $500K investments in Targeted Employment Areas (or $1 million elsewhere) for job-creating development projects in the U.S. Immigrant investors obtain lawful “green card” status if they meet the program’s stringent criteria.
Aletter sent to Capitol Hill by a 70-plus-member coalition on November 19, 2015 specifically backed EB-5 “integrity” reforms advocated by Senate Judiciary Committee Chairman Charles Grassley (R-IA), Senate Foreign Relations Chairman Bob Corker (R-TN), and Senate Homeland Security Committee Chair Ron Johnson (R-WI) to improve regional center accountability.
- During and since the financial crisis, EB-5 has been used across the U.S. to finance many projects including real estate, infrastructure, agribusiness, energy, hospitality, entertainment, and recreation.
- Regional centers would have expired last Dec. 11. With the Coalition and Chamber, The Roundtable was involved in intense negotitions to reform the program last year. Ultimately, Congress passed a “clean” EB-5 extension tied to the omnibus federal appropriations bill that authorizes federal spending through Sept 30. 2016.
- The EB-5 “regional center” program is scheduled to expire on Sept. 30, 2016. The Roundtable is working with the “EB-5 Investment Coalition” (www.eb5coalition.org), the U.S. Chamber of Commerce, and other stakeholders to support multi-year reauthorization as long as key reforms are included. As Roundtable President and CEO Jeffrey D. DeBoer remarked in a statement, “[t]he ten month EB-5 extension … provides The Roundtable and other stakeholders with another platform to help policy makers reach our mutual end goal of long-term, comprehensive, and necessary regional center reforms.”
- The Roundtable has long supported steps to fortify the regional center program with necessary “integrity measures” that have garnered bipartisan approval in Congress. These reforms are the centerpiece of bipartisan bills introduced by Senators Grassley (R-IA), Leahy (D-VT), Flake (R-AZ), Cornyn (R-TX), and Schumer (R-NY), among others.
- The Roundtable joined a November 19, 2015 letter with myriad real estate, business, and regional center stakeholders – including the U.S. Chamber of Commerce and the EB-5 Investment Coalition – urging Senate and House leadership to reauthorize EB-5 with provisions to maximize protections for homeland security and deter evolving risks of investor fraud. [Roundtable Weekly, Nov. 20, 2015]
Legislative EB-5 reforms, aligned with recommendations from a Government Accountability Report released last August, continued to be proposed with the introduction in December of the “EB-5 Integrity Act of 2015” (S. 2415). Sponsored by Judiciary Committee Senators Jeff Flake (R-AZ), John Cornyn (R-TX) and Charles Schumer (D-NY), S. 2415 would, among other things, provide authorities for the Department of Homeland Security to:
- Conduct criminal background checks and obtain biometric information from individuals involved in the regional center program
- Debar individuals and suspend or terminate regional centers based on program non-compliance and other factors
- Deny or revoke immigrant investor petitions for reasons including fraud, misrepresentation, or national security concerns
- Establish an “EB-5 Integrity Fund” with fees on applicants to pay for federal site visits that will further rigorous program oversight
- Require thorough annual reporting and accounting requirements for regional center operators
- Collect evidence for assurances that an investor’s funds are derived from legitimate and lawful sources
- Engage in a proper and non-preferential way with industry stakeholders to avoid favoritism in processing applications
Other key issues focus on the balance to ensure fair access to EB-5 financning for rural, urban and suburban areas alike in the context of Targeted Employment Area (“TEA”) designations; and how to “grandfather” existing investors and projects with new rules Congress may require. Resolution on these matters will be critical to procure any long-term EB-5 reauthorization. This year, both the Senate and House Judiciary Committees have held hearings regarding TEA reform.
- These and many other topics are expected to be central to EB-5 reform negotiations in 2016. The Roundtable is working with the “EB-5 Investment Coalition” (www.eb5coalition.org) urging Congress to pass responsible, multi-year reauthorization before expiration.
> Land Use Near Airports – FAA “One Engine Inoperative” Policy
- In 2014, the Federal Aviation Administration (FAA) announced a change in its longstanding One Engine Inoperative (“OEI”) policies to determine hazards to “navigable airspace.” This “about face” could have serious implications on the height of buildings, transferrable air rights, and land development near airports across the nation – and the ability to obtain lending and insurance coverage for these buildings and projects.
- Before the FAA can change these policies, The Roundtable and coalition members maintain the agency must go through a full rulemaking process. to prevent an agency from changing regulations by the “stroke of a pen.” We also believe the White House Office of Management and Budget must study and report on the economic, safety, and land use implications of the proposed agency policy change.
- The Roundtable and a coalition of real estate groups submitted a technical comment letter to FAA on July 25, 2014 asking for a full rulemaking with a cost-benefit analysis. While the agency has taken no further steps to finalize its policy change, to date it has also not responded to our request.
- Long-term FAA reauthorization is considered one of this year’s “must do” items, as Congress must reauthorize the agency this summer. The Roundtable and our partners are working to incorporate favorable OEI language in any such FAA reauthorization bill. To this end, the House added our recommended “rulemaking” and “cost benefit” language in its bill passed in February. Efforts are currently underway to urge the Senate to add identical language.
> Federal Building Energy Codes
- The Roundtable and other real estate organizations have long opposed any efforts to create a mandatory, “one size fits all” federal building energy code administered and enforced by the U.S. DOE. Building codes should are a state and local issue. A federal code would create confusion with state laws already dominating this field.
- Senate bills have endorsed The Roundtable’s approach. The comprehensive Portman-Shaheen energy efficiency bill (S. 720) authorizes voluntary energy efficiency building “targets” developed by DOE with cost considerations and tenant “plug load” uses in mind. Portman-Shaheen would not create new regulations.
- The Portman-Shaheen has been incorporated into a larger Senate energy package, which was stalled due to the Flint, MI drinking water controversy.
- Voluntary energy codes legislation also supported by The Roundtable passed the House (H.R. 8, 1273) last fall, along mostly party-lines. These bills sponsored by Reps. Fred Upton (R-MI), Marsha Blackburn (R-TN) and Kurt Schrader (D-OR) prescribe specific “pay-back” periods to justify the costs for energy efficiency components that DOE must consider in developing code proposals.
- The Senate bill needs to be “conferenced” later this year with the House-passed measure to resolve differences in their respective energy code sections. The prospects for a conference become dimmer as Election Day looms closer.
> 179D Tax Deduction for Energy Efficient Buildings
- The 179D deduction is the U.S. tax code’s key provision to incentivize greater energy efficiency in commercial and larger multifamily building. Section 179D was part of Congress’s package that extended expired tax provisions last December. The extension runs through the end of 2016.
- The December 2015 enactment of the Protecting Americans from Tax Hikes [PATH] Act of 2015 included a two-year extension (and limited reform) of the 179D tax deduction for energy efficiency upgrades in commercial and multi-family buildings — providing an opportunity to press for broader reforms next year that would make the deduction more workable, easier to claim, and more effective at spurring “deep” energy efficiency retrofits.
- For years, The Roundtable and other real estate groups have urged modifications to 179D to better enable its use for private sector “retrofit” projects of existing buildings. We support 179D’s temporary extension – insofar as it is a placeholder to try and achieve more meaningful improvements for retrofits.
- If comprehensive tax code reform discussions ever occur, Congress may consider energy incentives holistically. Programmatic changes to 179D would best be raised in that context (not in extenders). But serious comprehensive tax code negotiations are unlikely before 2017.
> Commercial Building Energy Consumption Survey (CBECS)
- CBECS is a national sample survey that collects information on the stock of U.S. commercial buildings, including their energy-related building characteristics and energy usage data (consumption and expenditures). The Energy Information Administration (EIA), DOE’s information gathering arm, is responsible for the CBECS process.
- Roundtable members were randomly selected to participate in CBECS data gathering when EIA fielded the survey in 2013. The 2013 CBECS data could alter a building’s ENERGY STAR score as determined under US-EPA’s rating program. It continues to “crunch numbers” and release new data on buildings’ nationwide energy use from the 2013 survey. It is gearing up to conduct a new survey in 2017.
- In March-April 2015, CBECS released more detailed data from the 2012 survey effort. A schedule of EIA’s planned release of further CBECS data for the remainder of this year and 2016 is available on its website at: http://www.eia.gov/consumption/commercial/
- The Roundtable has facilitated federal agency discussions to ensure coordinated roll-out of CBECS’s impact on ENERGY STAR ratings. Federal agency staff announced at our Sustainability Policy Advisory Committee (SPAC) last January that ENERGY STAR ratings will be updated in 2018 to reflect data gathered from the 2013 CBECS survey.
> EPA's ENERGY STAR Program
- EPA’s voluntary ENERGY STAR rating program for buildings is a great success. More than 25,000 U.S. buildings have been awarded the ENERGY STAR label, and about 40% of the market tracks and measures energy use through EPA’s “Portfolio Manager” benchmarking tool.
- The Roundtable has been assisting EPA to consider how “Portfolio Manager” – currently available to track water and energy use – may evolve to also include building waste management and tracking. We expect a new waste-tracking feature will be added in 2016.
> Sustainability Accounting Standards Board (SASB) Asset Score
- The stated mission of the non-profit SASB is to improve corporate disclosures of “material information” for investors regarding climate, environmental, social, and governance (ESG) risks.
- SASB has developed voluntary ESG reporting principles, intended for use in SEC Form 10-Ks forms and similar filings, for a number of industries over the past years. In 2015, it started gathering input on ESG principles for real estate owners and service providers.
- RER Throughout 2015, RER’s Sustainability Committee engaged with SASB raising concerns about its initial research about real estate and sustainability initiatives. RER submitted comments on the proposed reporting standard on January 5, 2016.
- SASB released its “provisional” ESG reporting standards, made available on March 31, 2016. These will now be tested in the marketplace for the remainder of this year, and are expected to become final voluntary ESG reporting standards by 2017.
> Federal Environmental Regulations – Climate, Waters of the U.S., Lead-Paint
- US-EPA has ramped up regulatory efforts to get new federal environmental rules in place before President Obama leaves office. Several recent and anticipated rules may have significant impact of the U.S. real estate sector. The Roundtable has submitted lengthy, technical comments to EPA on most of these matters.sector.
- In particular, EPA:
(1) released its “Clean Power Plan” in Aug. 2015 to cut emissions of greenhouse gas (GHG) from existing coal-fired power plants;
(2) released its “waters of the United States” (“WOTUS”) rule in May 2015 regarding ditches and drains regulated under the Clean Water Act (“CWA”); and
(3) proposed a “framework” by which it will determine whether renovation and remodeling activities in public and commercial buildings create lead-based paint hazards to tenants and other occupants.
These rules could affect the real estate sector as follows:
(1) states may seek greater building energy efficiency standards and programs as they strive to comply with the Clean Power Plan;
(2) theWOTUS rule would allow federal protection of drainage ditches and create double regulation of municpally-owned stormwater sewers; and
(3) the lead-paint rules could trigger new testing and renovation best practices whenever a new “fit out” occurs for commercial tenant leases.
(4) the formaldehyde rules are expected to require wood products purchased by building owners (e.g., flooring, furniture) to be labeled as compliant with indoor air quality emission standards.
- On the WOTUS issue, The Roundtable filed coalition comments in Aug. 2014. The comments mainatin that urban storm sewer systems should not be “doubly regulated” as WOTUS. In Oct. 2015, the U.S. Sixth Circuit Court of Appeals issue a “stay” to temporarily block the agencies’ implementation of the WOTUS rule.
- The WOTUS and GHG issues are particularly acrimonious on Capitol Hill. The Republican majorities in both chambers have highlighted these rules as examples of regulatory overreach and have introduced legislation to stop them. But Democrats in the Senate, have blocked GOP efforts to unwind these new environmental rules.
- The WOTUS and GHG rules are also being challenged in the federal courts. Both rules have been subject to a “stay” which blocks EPA from implementing them (at least temporarily), until the federal courts can decide whether in fact they are legal or not.
> Joint Employer Policy
- An Aug. 26 National Labor Relations Board (NLRB) ruling in the Browing-Ferris Industries case could greatly expand its longstanding “joint employer” standard. The ruling could fundamentally upset traditional franchise, contracting, and purchasing relationships.
- The decision effectively holds a company responsible for the wage, benefits, collective bargaining, workplace conditions, and other labor decisions made by independent operators. That is, the “parent” company with “indirect” or “potential” control would become a “joint employer” with their contractors, vendors or franchise operators.
- Bills in the House and Senate have been introduced to legislatively overrule this decision.
- Spearheaded by the International Franchise Association, the “Coalition to Save Local Businesses” (http://savelocalbusinesses.com/) has been formed to address the NLRB decision and keep stakeholders informed on this issue.
For weekly updates on key policy issues affecting commercial real estate, see our eNewsletter Roundtable Weekly.
The Roundtable’s Sustainability Policy Advisory Committee (SPAC) is led by chairman Tony Malkin (Empire State Realty Trust) and Charlotte Matthews (Related Companies) serving as vice chair. For additional information on sustainability, infrastructure, immigration, and land use issues, please contact Duane Desiderio, Senior Vice President and Counsel at The Real Estate Roundtable or call (202) 639-8400.