On Saturday, I spoke at the truly excellent seminar on green building law and policy "It's Not Easy Building Green" put on by the William & Mary Environmental Law and Policy Review Symposium. Notes on my presentation and others are available here.
Among the topics discussed was the outcome of the Las Vegas tax credit for green buildings which I first posted on in July 2007.
In short, Las Vegas passed a tax incentive for green buildings in 2005 -- worth up to 50 percent of the property value for up to 10 years -- to projects that qualify under the Leadership in Energy and Environmental Design standards. Projects meeting the silver level of certification were eligible for a 35 percent property tax break.
According to Darren Prum, one of the presenters at the ELPR Symposium, developers soon realized that they would receive up to $3 back for every $1 they spent building green, and applied the tax breaks to construction equipment and other ancillary purchases. Soon, the green incentive was slated to cost the state $940 million in revenue over the next decade, and threatened the budget of the state of Nevada.
To escape the budget crisis, a new bill was passsed which lowered the property tax reductions, and limited the abatement to 10 years. School taxes were also exempted from the abatement, and sticrt anti-smoking provisions were incorporated. Six projects were grandfathered in. According to Prum, the reduced price tag of the revised abatement was $493 million.
Like the famous architecture book which inspired the title of this post, there is much that we can learn from the unique character of Las Vegas, especially as Obama tries to put together green incentives as part of the stimulus package. Here are some teachings from Las Vegas' initial failed attempt at encouraging green building:
1. Proportionaility is key: Ideally, an incentive should be only $1 over the price which makes the project economically desireable. If a project is already economically desireable, a financial incentive is not the right tool.
2. Green should be green: Although we should not let the great be the enemy of the good, a green project should have to meet the basic components of energy efficiency, water conservation, sustainable site, indoor air quality, and renewable materials and resources.
3. Regulatory experimentation will not be without failure: Counties with green regulatory schemes have increased 400% since 2003. With such a great increase in regulation, there will be failures like Las Vegas, and litigation. This is part of new regulatory regimes, and is to be expected.