Monday, May 14, 2012

City's LEED-CRA ordinance makes development 'attractive', but could use tweaks

Cincinnati's new Economic Development Director Odis Jones recommends continuing the City's LEED-CRA (Community Reinvestment Area) tax abatement program – with slight modifications.

Jones' analysis was contained in a report filed in response to a February motion by councilmembers Laure Quinlivan, Chris Seelbach, Wendell Young, and Vice Mayor Roxanne Qualls asking for a review of the City's experience with the six-year-old LEED-CRA ordinance.

The City's LEED-CRA program, authorized under the Ohio Revised Code, provides a 100 percent property tax abatement on the improved value of residential, commercial, and industrial projects that achieve LEED certification through the U.S. Green Building Council (USGBC). For commercial, industrial, mixed-use, and residential projects of four units or more, 25 percent of the abatement goes to Cincinnati Public Schools.

According to Jones, the City's LEED-CRA program is viewed in the marketplace as "stable", being codified in an ordinance and utilizing property taxes as the incentive.

"Compared to other cities, the Cap Rate is very high, making it very attractive for development," Jones said. "A sampling of LEED policies from other cities reflect a variety of approaches to incentives including: rebates on permits, rebates on certification fees paid by property owner, promotional dollars, expedited permitting and reduced permit fees, and increased build-out space. These are typically in lieu of the real estate tax exemption that is the basis of the City's program."

Between 2007 and May 2012, more than $198 million was invested in projects awarded the LEED-CRA exemption – investments that may have never been made without the program.


  • Residential one-, two-, and three-unit projects represented an investment of $29.78 million, with an annual tax abatement savings of just over two million.
  • Multi-unit projects represented an investment of $109.67 million, with an annual tax abatement savings of $2.3 million.
  • Commercial/industrial projects represented an investment of $58.59 million, with an annual tax abatement savings of $1.23 million.
What the development community seeks, Jones said, is not only the cost savings of the abatement, but also leasing or owning a higher-performing building, a boost to its corporate image, and developing a property that can secure higher lease rates and resale value.

"The Great American Tower, United Way building, Cincinnati Zoo, and the University of Cincinnati are examples of these types of commercial projects," he said. "The primary issues for not moving forward with LEED certification are the administrative costs associated with filing projects and obtaining the final certification for both residential and commercial projects."

Bar being raised

February's Council motion hinted that perhaps LEED certification might be too easy to achieve. And it expressed concerns that all levels of certification – from basic LEED certification to LEED Platinum – receive the same tax exemption.

Jones said that, effective November 2012, each level of LEED certification will be much harder to achieve, further pushing toward net-zero carbon footprints for all buildings.

"In so doing, the bar is continually being raised for achievement of certification levels in line with the market drivers," he said. "If possible, ascertaining how a sampling of completed projects would have been rated under the new system will provide valuable information."

Jones has recommended no changes to the commercial/industrial requirements until revisions are made to the USGBC's LEED-ND (LEED for Neighborhood Development) guidelines, perhaps later this year.

For residential new construction, he recommends a tiered approach, ranging from a 12-year tax abatement for basic certification to 15-years for LEED Platinum. Abatement value caps would be set at $562,792 for all levels except for LEED Platinum, which would have no cap. There would be no changes for residential renovation.

The City's LEED-CRA ordinance is set to expire in 2017 and can be amended subject to review by the state.

Previous reading on BC:
Council approves CRA LEED tax exemptions in OTR, University Heights (5/11/12)
Incentives keep company in Cincinnati (8/10/10)
Empowerment Zone, CRA agreements promise 87 jobs, new medical offices (6/28/10)
LEED status in doubt, Fay developers get new CRA agreement (5/24/10)
CRA tax exemption approved for new Medpace HQ (12/2/09)