Baltimore County, Maryland has become one of the first jurisdictions in the nation to enact a property tax credit for Green Building.

This voluntary incentive offered by a local government is on the cutting edge of addressing climate change while leading environmentalism out of the anti-business, anti-consumer wilderness. Bill 85-06 authorizes a 100% tax credit on property taxes for ten years for commercial Green Building that achieves at least a Silver Rating in accordance with the LEED-NC rating system.

Green Building is a philosophy of design and construction that integrates natural resources more effectively, preserves and restores the natural and human resource base while creating healthier, more efficient “high performance” structures, homes and communities.

For more information, generally, on Green Building, see the article, Green Buildings Make Dollars and Sense on our firm website www.stuartkaplow.com.

The U.S. Green Building Council established the Leadership in Energy and Environmental Design (LEED) Green Building rating system as a nongovernmental national standard for measuring Green Building. LEED recognizes water and energy savings, materials selection, indoor environmental quality, and environmental protection. Points are given for green practices and based upon a building’s total number of points, it will receive one of the four LEED levels of certification: Certified, Silver, Gold or Platinum.

Of note there are currently no building certified Silver or above in Baltimore County and only two in the State of Maryland. Of the six LEED certified buildings with less than a Silver rating in Maryland, three are in Baltimore County and two of those federally owned.

Beyond that certification, LEED also recognizes distinct rating systems for different types of construction projects, including: LEED-NC is applicable to new commercial construction and major renovations. LEED-EB is a benchmark rating system for measuring efficiency upgrades, maintenance programs, and systems upgrades to existing buildings. LEED-H is a pilot project for residential construction (but, there are no registered home builders in Maryland). And LEED-CS is a pilot project for new “core and shell” commercial construction.

New Baltimore County Code, Section 11-2-111 mandates that a commercial building achieve at least a Silver rating in the LEED-NC Green Building rating system to be eligible for the ten year 100% property tax credit.

In order to achieve at least a Silver rating, a new commercial construction or major renovation must earn a minimum of 33 points on the LEED-NC checklist in the following areas: water efficiency, materials and resources, indoor air quality, sustainable sites (including encouraging alternate transportation, Brownfield redevelopment, pollution reduction, local habitat protection, and open space maximization), innovation, and design process.

There is a $5 Million cap on the cumulative amount of tax credits to be granted in Baltimore County. Applications are accepted annually, in advance of June 1st, in a streamlined process administered by the Director of Budget and Finance.

The amount of the tax credit can be significant and is estimated to be $20,677 in property tax savings, per building, per year for each of ten years. This estimate in the emerging field of Green Building is somewhat speculative, and may be significantly larger for big buildings, in that it assumes the average County commercial building value of $1,854,457, a 6% annual growth in value, a tax rate of $1.115 per $100 of assessed value. (The somewhat modest average building value is a calculation using all the existing 4,632 improved commercial and industrial properties in the County and new construction will generally result in higher building values.)

Of note, the State of Maryland also has a Green Building income tax credit program; however, that program is capped at $25 Million and has already fully allocated the money authorized. Legislation failed in the 2006 Maryland General Assembly session to increase that allocation to $50 Million.

Federal tax credits (reducing tax dollar for dollar) exist for constructing energy-efficient buildings and for improving the energy efficiency of commercial buildings, a well as for buying hybrid vehicles (as described in the Energy Policy Act of 2005).

While the amount of the tax credit can be significant, there are real additional upfront costs associated with Green Buildings. Thus it is not likely this tax credit program will trigger a sudden explosive growth of Green Buildings in Baltimore County.

And despite the fact that Going Green is a significant trend today, as of December 2005, there were only 118 Silver, 103 Gold, and 17 Platinum LEED certified buildings nationwide. Only two buildings in Maryland, one in Anne Arundel County and the other in Montgomery County, have been Silver certified or above.

The voluntary incentives offered by government, whether as tax breaks (like the new Baltimore County enactment), direct grants or loans for Green Buildings are a non-prescriptive non-regulatory approach to environmental protection that responds to the overwhelming public sentiment that government has not done enough to protect the environment while not burdening owners and operators of the land with another mandate. The Green Building philosophy is an industry-friendly, results oriented environmental policy that may portend a future for broader environmental policy.

For those constructing a building in Baltimore County, serious consideration should now be given to Going Green, if not because of concern over climate change, but because it is going to generate serious Greenbacks.