Thanks, Eileen

By Jim Jordan

Jim Jordan is director of construction services for Weaver and Tidwell LLP. With offices in Dallas, Fort Worth and Houston (weaverandtidwell.com).

This month Jordan discusses the financial incentives for going green.

For contractors seeking new revenue centers, green construction deserves a long look. In fact, it deserves a rather urgent look, and here is why: Although Texas is a leader in some aspects of the greening of America, particularly residential retrofit as exemplified by the city of Austin, the state has done little to reduce air pollution. Four of the state’s metropolitan areas -- Dallas-Fort Worth, Beaumont-Port Arthur, El Paso and Houston-Galveston- Brazoria -- for decades have been out of compliance with federal air-quality rules. Meanwhile San Antonio, Tyler-Longview, Corpus Christi and Victoria have violated ozone standards and have the potential to fall out of compliance as well.

With ozone increasing and political winds shifting, it’s unlikely the feds will grant further deadline extensions. After all, we’re the nation’s No. 1 polluting state. If our cities don’t reach compliance in the next few years, they will be penalized in numerous ways, including the loss of federal road and bridge construction money. That could prove disastrous given that we’re already strapped for money to maintain our far-flung transportation network.

The good news, however, is the opportunity this offers Texas contractors. Clearly there is a tremendous need for the construction of sustainable commercial and industrial buildings. Project owners certainly are interested because in addition to improving air quality, green-construction provides tax savings and lowers overall operating costs. In addition, studies have shown that green buildings have higher asset values and occupancy rates.

It’s not as if this is new in Texas. Green construction has been going on here for several years and has produced some of the nation’s most impressive green buildings, including the Texas Instruments wafer plant in Dallas and RadioShack’s corporate headquarters in Fort Worth. The problem, however, is that because the state has so many heavy polluters, green construction has to occur on a large scale.

For forward thinking contractors, green construction offers two opportunities: The first being the chance to build themselves an environmentally friendly headquarters that is eligible for tax credits and uses less energy than a facility of comparable size. In recent years several contractors have done this and demonstrated their LEED expertise.

The other, potentially more lucrative, opportunity is the chance to introduce green construction methods to project owners who aren’t aware of all the bottom-line benefits of environmentally conscious construction. Contractors who have expertise in green construction methods are able to offer it as value engineering, which can lead to long-term relationships with clients. Project owners are always impressed when a contractor is able to suggest ways to save money either immediately or over time. That’s what green construction is all about – conserving resources while also saving money over the long haul.

America’s built environment gulps energy at an astonishing rate. In fact, buildings are responsible for 39% of America’s primary energy use, 70% of its electricity use and 12% of all potable water use, according to the U.S. Green Building Council (www.usgbc.org). Sustainable design, however, can make a huge difference. A green building, in addition to receiving federal and state tax incentives, can produce a 30% savings on energy expenditures, 30 to 50% savings in water use, and waste cost savings of 50% to 90%, according to council studies.

Tax incentives for green construction vary widely. At the federal level, the Energy Policy Act of 2005 allows owners or operators of commercial buildings to claim a deduction of up to $1.80 per sq ft for energy efficient building expenditures. Partial deductions are also allowed for improvements in interior lighting, HVAC and hot water systems and building envelope systems. The Green Building Council has a standardized rating system for commercial buildings that measures their "greenness’’ and assigns a Leadership in Energy and Environmental Design rating based on a number of verifiable measures.

In Texas, tax breaks, rebates, low-interest loans and other green-building incentives are available in many but not all communities. The state does not have a carbon tax, but does offer certain incentives through the state franchise tax and property taxes. In addition, several communities offer low-interest loans for sustainable construction. Some local utilities offer rebates to residents who take steps to lower energy usage.

Sustainable construction is not merely a fad: It is here to stay. In fact, LEED-certified construction is now mandated for certain types of municipal buildings in Austin, Dallas and Houston. State legislation is one of the driving forces. Texas Senate Bill 5, the Texas Emissions Reduction Act, requires that all municipal facilities reduce energy consumption 5% a year for five years.

For these reasons and others, contractors can find ample opportunities in the green arena. For those who have no experience, construction trade associations offer information and seminars. In addition, there are many state agencies available to help, including the three U.S. Green Building Council chapters in Texas, Houston Renewable Energy Group, Build San Antonio Green, El Paso Solar Energy Association, City of Austin Green Builder’s Program and Texas State Energy Conservation Office.

Green construction is attractive for all the right reasons: It helps create a more sustainable society while also reducing energy usage and costs. Contractors who can bring this expertise to the table are just what project owners are seeking. With the advent of Senate Bill 5, growing economic incentives and the spreading influence of LEED certification, project owners need to develop green projects but often don’t know how to do so. Contractors can help educate and lead them into the 21st Century world of sustainable construction.

Contractors do not receive tax breaks or other government incentives for supervising green construction. But as their reputation for environmental construction grows, so will their workload and financial bottom line.