The dollars and cents of green construction: being environmentally friendly brings financial as well as social benefits.EXECUTIVE SUMMARY * WHEN PLANNING CONSTRUCTION PROJECTS, consider the tax implications, rebate rebate, partial refund of the total price paid for goods or services. In the United States, rebates were historically given by railroads to favored shippers as a return on transportation charges. offers and soft benefits associated with environmentally friendly Environmentally friendly, also referred to as nature friendly, is a term used to refer to goods and services considered to inflict minimal harm on the environment.[1] construction. Construction companies may not be eligible for these on buildings they construct for others, but building owners and any subcontractors used on the projects are. * IT'S MOST COST-EFFECTIVE TO CONSIDER green elements before beginning construction, but some elements such as solar panels can be added to existing buildings. * FIRMS AND COMPANIES CAN BE environmentally friendly and also save or earn money in seven ways: Tax rebates tax rebate n → devolución f de impuestos; reembolso fiscal tax rebate n → ristourne f d'impôt tax rebate ; LEED incentives; recycling recycling, the process of recovering and reusing waste products—from household use, manufacturing, agriculture, and business—and thereby reducing their burden on the environment. the core and shell of existing buildings; using energy-efficient devices; maximizing natural energy sources; building on HAZMAT and Superfund sites; and calculating the intangible benefits of green construction. * WHILE CPAs MAY FIND IT DIFFICULT to quantify the soft benefits, studies show that environmentally friendly buildings raise employee retention and productivity rates, improve the retail customer experience and generate higher average revenues, and bring apartment building owners higher-wealth clients willing to pay more in rent. My company has gone green--and as its controller, I've helped its management and customers recognize that the tax benefits, rebates and lower utility costs of being environmentally friendly add up to a real bottom-line reward for doing the right thing. We've used many "green" elements in building three Stop & Shop supermarkets, and come to understand that green construction can be a smart business decision as well as a socially conscious one. In addition to the hard cost savings, studies show that natural light and fresh air improve employee productivity and retention, allow apartment-building owners to charge higher rents, and increase retail revenues by encouraging customers to stay in stores longer and spend more. In this article I'll share what I've learned to help my fellow CPAs suggest incorporating green concepts when their firms undertake construction projects or clients plan to build commercial or residential properties. This year is a particularly good time for small and midsize firms and companies to consider construction projects, to take advantage of a two-year extension and upgrade to the U.S. Small Business Administration's 504 loan program. Loans can be used for the purchase of equipment, construction, renovation or acquisition of land by small businesses, and carry low fixed interest rates. For 2005 and 2006, the maximum for loans to general businesses has been raised to $1.5 million; minority- and women-owned businesses can borrow up to $2 million and manufacturers can borrow up to $4 million. GOING GREEN FOR STOP & SHOP Like many good ideas, the environmental approach we took actually was suggested by our client; Stop & Shop management already had the design in mind when it hired us to manage its construction project. Its vision was to earn tax incentives and rebates--as well as to improve the customer experience and maximize sales--by recycling the concrete from the demolition portion of the construction project and using high-efficiency heating, ventilation and air-conditioning (HVAC (Heating Ventilation Air Conditioning) In the home or small office with a handful of computers, HVAC is more for human comfort than the machines. In large datacenters, a humidity-free room with a steady, cool temperature is essential for the trouble-free ), energy management and hot water reclamation Reclamation A claim for the right to return or the right to demand the return of a security that has been previously accepted as a result of bad delivery or other irregularities in the delivery and settlement process. . That translated into lots of skylights that allowed natural light into the stores, and a system that automatically dims or brightens the overhead fixtures depending on the amount of sunlight. Stop & Shop also installed a hot water reclamation system that draws off the heat being generated by the refrigeration refrigeration, process for drawing heat from substances to lower their temperature, often for purposes of preservation. Refrigeration in its modern, portable form also depends on insulating materials that are thin yet effective. units in the stores and uses it to preheat pre·heat tr.v. pre·heat·ed, pre·heat·ing, pre·heats To heat (an oven, for example) beforehand. pre·heat  er n. the water that runs into the hot water heaters.
Our interest in green construction began long before Stop & Shop hired us, though. If it's done right, green construction doesn't add cost, and its long-term return on investment (ROI (Return On Investment) The monetary benefits derived from having spent money on developing or revising a system. In the IT world, there are more ways to compute ROI than Carter has liver pills (and for those of you who never heard of that expression, it means a lot). ) is real. It increases the value of the building and reduces operating costs operating costs npl → gastos mpl operacionales every year. And the benefits to the environment and to employee health and retention are priceless price·less adj. 1. Of inestimable worth; invaluable. 2. Highly amusing, absurd, or odd: a priceless remark. . As the construction managers on green projects, we ourselves don't get any tax benefits. But our clients and subcontractors do. And our local utility company, like many across the country, offers rebates to customers who lower their use of electricity and to the contractors who perform the work that makes it possible. SEVEN STEPS TO GREENER BUILDINGS The best approach to green construction is to consider it before you start a new project, so you can build the elements into the project plan up front. Installing high-efficiency windows, for example, doesn't add much cost and can generate a quick ROI if it's done as the structure is being built. It's much more costly if the old windows have to be removed. But some elements--solar panels, for example--can be added at any time. Before we start a construction project, we consider the following seven elements: * Tax rebates. Virtually every state offers tax reductions for environmentally friendly construction (see "States With Tax Incentives for Green Construction," page 50). * Recycling the core and shell. When we are building on a property that has an existing structure, we save on costs by reusing as much of the existing concrete, core and shell as possible. That saves on material costs and also on carting away the rubbish. * LEED incentives through the U.S. Green Building Council (www.usgbc.org). Owners of buildings that use green construction concepts can apply for a Leadership in Energy and Environmental Design The Leadership in Energy and Environmental Design (LEED) Green Building Rating System, developed by the U.S. Green Building Council, provides a suite of standards for environmentally sustainable construction. (LEED) rating that entitles them to certain incentives and tax reductions. There is some up-front time and expense involved; we estimate the process adds about 2% to the cost, though it yields a full ROI. * Energy-efficient devices. Using efficient, modern HVAC devices saves operating costs and also may entitle en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: owners and subcontractors to rebates offered by local energy companies. Since a significant portion of the value of a property is determined by its annual operating costs, decreasing them also increases the overall value of the building when it comes time to sell. * Natural energy sources. Designing facilities that make their own energy through natural ventilation Natural ventilation is the process of supplying and removing air through an indoor space by natural means. There are two types of natural ventilation occurring in buildings: wind driven ventilation and stack ventilation. and daylight also reduces energy requirements and operating costs. Fresh air and light already are hot commodities in the New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of apartment market, drawing health-conscious. high-net-worth customers. The increased demand can result in higher rental income Noun 1. rental income - income received from rental properties income - the financial gain (earned or unearned) accruing over a given period of time and purchase prices. * HAZMAT and Superfund sites. While cleaning up deeply contaminated contaminated, v 1. made radioactive by the addition of small quantities of radioactive material. 2. made contaminated by adding infective or radiographic materials. 3. an infective surface or object. sites is better left to experts in this field, we do consider sites that are slightly contaminated. Companies can buy them at reduced cost, and then use grants and funds from various environmental sources, such as the Environmental Protection Agency Environmental Protection Agency (EPA), independent agency of the U.S. government, with headquarters in Washington, D.C. It was established in 1970 to reduce and control air and water pollution, noise pollution, and radiation and to ensure the safe handling and and HAZMAT Superfunds, to improve the facility in part at the government's expense. One site we're considering, for example, is a gas station where spilled oil has contaminated the soil, but not the water table beneath it. * Intangible benefits. Studies show that employee satisfaction, comfort, productivity and retention all improve when the workplace offers flesh air and natural light. Since more than 50% of the overhead of most nonmanufacturing businesses is employee-related, we know there's real value to them, even if they are hard to quantify. We and our children live in a fragile, interconnected world. When we put the theories of green construction to work in our buildings, we're doing the right thing for Planet Earth as well as for our bottom line and that of our clients.
States With Tax Incentives for
Green Construction
Corporate Property
State Income Tax Tax Tax Sales Tax
Alabama *
Arizona * *
Arkansas *
California *
Colorado * *
Connecticut * *
Florida *
Hawaii * * *
Idaho *
Illinois *
Indiana *
Iowa * *
Kansas * *
Maryland *
Massachusetts * * * *
Minnesota * *
Missouri *
Montana * *
Nevada *
New Hampshire *
New Jersey *
New York * *
North Carolina * * *
North Dakota * *
Ohio * * *
Oregon * * *
Rhode Island * * *
South Dakota *
Texas * *
Utah *
Vermont * *
Virginia *
Washington *
West Virginia *
Wisconsin *
Source: Office of Energy Efficiency and Renewable Energy,
U.S. Department of Energy, www.eere.energy.gov.
The Business Case for Green Green design and construction can save energy and buffer the bottom line in the following ways: * Earn tax breaks and rebates. * Lower construction costs. * Reduce or eliminate the need for heating and air-conditioning equipment and he associated costs of purchase, maintenance and electricity. * Cut energy and water bills by as much as half. * Increase labor productivity, retail customer sales and apartment rental prices. * Protect operating budgets Noun 1. operating budget - a budget for current expenses as distinct from financial transactions or permanent improvements budget items, operating cost, operating expense, overhead - the expense of maintaining property (e.g. from increases in energy prices. Company Profile Company name: Axis Construction Ownership: Private Location: Hauppauge, New York Hauppauge (pronounced /hɔpɔg/) is a hamlet in the Town of Islip and the Town of Smithtown in Suffolk County, New York, United States. Annual sales: $35 million Total number of employees: 30 Accounting/finance staff: 4 How I got my job as controller: Networking through Construction Financial Management Association. Biggest accounting challenge in 2004: Coordinating the 1031 like-kind exchange for sale of old building and purchase of new one. Biggest accounting challenges in 2005: Managing health care and liability insurance costs, lowering mortgage interest rates. Solutions: Modifying medical insurance coverage to increase the deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). and reduce cost, renegotiating banking relationships to decrease interest rate and improve terms and conditions. The Solaire Building If there's a poster child for green construction, it s likely the Solaire Building in New York's Battery Park. Its 27 stories of luxury apartments make use of solar panels, an ozone-free heating and air-conditioning system and fresh-air-enriched ventilation designed to consume 35% less energy, 65% less peak electricity and 50% less potable potable /pot·a·ble/ (po´tah-b'l) fit to drink. po·ta·ble adj. Fit to drink; drinkable. potable fit to drink. water than conventional high-rise buildings high-rise building Multistory building taller than the maximum height people are willing to walk up, thus requiring vertical mechanical transportation. The introduction of safe passenger elevators made practical the erection of buildings more than four or five stories tall. . A thermal envelope around the building maximizes daylight, and occupancy and daylight sensors automatically shut off energy in public spaces when it's not needed. An on-site black water treatment system supplies water for the toilets, and a storm water catchment catch·ment n. 1. A catching or collecting of water, especially rainwater. 2. a. A structure, such as a basin or reservoir, used for collecting or draining water. b. system waters the "green roof" and rooftop gardens. More than 93% of the waste generated by the construction was recycled. Tax credit: $2.8 million over five years. Grant: $100,000, New York State Energy Research Development Authority New Construction Program. RESOURCES AICPA AICPA See American Institute of Certified Public Accountants (AICPA). Resources Book Audit Risk Alert, Construction Contractors Industry Developments--2004/2005 (# 022315JA). Conference AICPA Small Business Practitioners' Tax Forum July 18-19 Marriott Baltimore Waterfront Baltimore, Maryland "Baltimore" redirects here. For the surrounding county, see Baltimore County, Maryland. For other uses, see Baltimore (disambiguation). Baltimore is an independent city located in the state of Maryland in the United States. CPE (Customer Premises Equipment) Communications equipment that resides on the customer's premises. CPE - Customer Premises Equipment Construction Contractors Advanced Issues, a self-study course (# 731990JA). JofA article "Nail a Construction Niche," Mar.03, page 35, www.aicpa.org/pubs/jofa mar2003/phelan.htm. Other Resources * U.S. Small Business Administration, information on construction loans for small businesses, www.sba.gov/financing/ sbaloan/cdc504.html. * U.S. Green Building Council, www.usgbc.org. * Office of Energy Efficiency and Renewable Energy The United States Department of Energy´s Office of Energy Efficiency and Renewable Energy (EERE) mission is to strengthen America's energy security, environmental quality, and economic vitality in public-private partnerships. , U. S. Department of Energy, www.eere.energy.gov. ANDREW MEYERSON, CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. , is controller of Axis Construction, Hauppauge, New York. He also is secretary of the Long Island Chapter of the Institute of Management Accountants The Institute of Management Accountants (IMA) is a professional organization headquartered in Montvale, New Jersey consisting of over 70,000 members worldwide. The IMA is dedicated to advancing the role of the management accountant and financial manager within the business and president of the LI Chapter of the Construction Financial Management Association. He can be reached at ameyerson@theaxisgroup.com. |
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