Author: Trey Jackson

ENERGY POLICY – LEGISLATION

Posted on by Trey Jackson

A bipartisan bill reintroduced July 17 by Sens. Rob Portman (R-OH) and Jeanne Shaheen (D-NH) includes provisions to advance energy efficiency standards for U.S. real estate by fostering market incentives, data-driven research, and open government procedures.  

Roundtable President and CEO Jeffrey D. DeBoer, left, with Sens. Rob Portman (R-OH) and Susan Collins (R-ME) at a press conference to support the Energy Savings and Industrial Competitiveness (ESIC) Act.
  (  Video of DeBoer’s statement and  the entire press event)

– enlarge photo above  –  
  • Roundtable President and CEO Jeffrey D. DeBoer joined other industry and environmental group leaders at a press conference Wednesday in the Senate to support the Energy Savings and Industrial Competitiveness (ESIC) Act.  (Video of DeBoer’s statement and entire press event)
  • The ESIC Act is a revived version of comprehensive energy efficiency legislation introduced in prior sessions of Congress. (Bill summaryand  text.)  
  • The Real Estate Roundtable has long endorsed the ESIC Act.  The bill contains no mandatory federal building or climate-related regulations.  It aims to improve energy efficiency across U.S. buildings by:  
    • Importing new economic, cost, and small business impact considerations into the process by which the U.S. Department of Energy (“DOE”) proposes revisions to “model” building energy codes, that state and local bodies may ultimately adopt;  
    • Providing stakeholders with opportunities to comment on code revisions suggested by DOE – to correct the currently closed process by which federal code proposals are developed without industry input;  
    • Clarifying standards for real estate appraisers and banks to consider energy efficiency capital investments when determining an asset’s market value; and
    • Creating a voluntary program that can lead to lower interest rates and greater qualifications for buyers seeking mortgages on new energy efficient homes.

      The Portman-Shaheen bill also includes new Section 103,  strongly supported by The Roundtable.  

            

  • The Portman-Shaheen bill also includes new Section 103 , strongly supported by The Roundtable.  This provision would require coordination by federal agencies to gather and report higher quality data on energy consumed by U.S. buildings, through the nationwide Commercial Building Energy Consumption Survey (CBECS).   Data from CBECS provides the underpinning for EPA’s ENERGY STAR scores.  (See Roundtable Weekly  energy policy story above)
  • In a July 18 Senate news release , 15 business and energy efficiency sector leaders expressed support for the latest Portman-Shaheen bill – including DeBoer and Henry H. Chamberlain, President and CEO, Building Owners and Managers Association (BOMA) International.
  • DeBoer stated in the Senate news release, “The [ESIC Act] is exactly the kind of smart, forward-looking policy that will help building owners respond to our modern, evolving economy.  The needs of business tenants have changed dramatically since the turn of the century to power the data centers, IT, and communications systems upon which our workforce depends.  Building owners are meeting their tenants’ 24/7 energy demands while constructing and managing their assets more efficiently – and reducing their carbon footprints.”
  • During the July 17 news conference, Sen. Portman added that the bill would save consumers $13 billion a year – the equivalent in emissions savings of taking 11 million cars off the road within 15 years. (Video of press event, July 17)

In a positive sign, a swath of energy efficiency bills are moving through both the Senate and House, indicating that energy policy could pass in a divided Congress.  ( The Washington Examiner , July 18) 

 

Republican Senators Urge Treasury to Index Capital Gains to Inflation

Posted on by Trey Jackson

Twenty-one Senate Republicans led by Ted Cruz  (R-TX) this week urged Treasury Secretary Steven Mnuchin to use his regulatory authority to eliminate inflationary gains from the calculation of capital gains tax liability.  (Letter to Secretary Mnuchin , July 29)

The Treasury Department may have the legal authority to adopt inflation indexing through regulatory guidance.  The term “cost” in the tax code’s capital gains provisions arguably is ambiguous and not plainly limited to historical cost,   i.e ., the price originally paid for a capital asset.  
  • Capital gains tax is generally based on the difference between the sale price of a capital asset and its original cost, adjusted for certain factors such as depreciation.  Capital gain liability includes an amount that reflects general price inflation, in addition to the true economic gain.  Especially for long-held assets such as real estate, capital gain thus overstates a taxpayer’s economic income.  
  • The Republican Senators’ letter suggests that indexing capital gains for inflation “would unlock capital for investment, increase wages, create new jobs, and grow the economy.”  
  • The Treasury Department may have the legal authority to adopt inflation indexing through regulatory guidance.  The term “cost” in the tax code’s capital gains provisions arguably is ambiguous and not plainly limited to historical cost, i.e., the price originally paid for a capital asset.  
  • Supporters of the proposed plan include President Trump’s National Economic Council Director Larry Kudlow, who is leading a White House task force examining the proposal. (Wall Street Journal, March 20, 2018) 
  • Stephen Moore, former advisor to President Trump’s 2016 campaign, also recently wrote that President Trump wants to move forward with capital gains indexing.  (Washington Times, July 14, 2019) 
  • However, a 1992 memorandum written by President George H.W. Bush’s administration determined that Treasury did not have the power to index capital gains by regulation. (Justice Dept. Opinion – Sept. 1, 1992).  In contrast, more recent legal analysis has found support in subsequent case law. (Harv. J. Law & Pub. Policy, 2012).  
  • Conservatives such as Americans for Tax Reform President Grover Norquist cite a 2002 Supreme Court decision in a case between Verizon Communications and the Federal Communications Commission to show Treasury can act unilaterally on the issue.  (Americans for Tax Reform – June 26, 2019) 
  • Congressional Democrats have come out strongly against the proposal.  A recent letter to Secretary Mnuchin from 15 Democratic Senators stated, “We urge you to reject reported plans to use questionable authority to – yet again – lavish tax cuts upon our country’s wealthiest, while middle class families and working people continue to see costs rise and wages stagnate.”  (Senate Democratic letter, July 12).  House Ways and Means Committee Chairman Richard Neal (D-MA) on Wednesday stated, “If the Trump Administration unilaterally changes the capital gains tax structure, it wouldn’t just be bad policy, it would be executive overreach.”  (Ways and Means news release, July 31)   

Senate Finance Committee Ranking Member Ron Wyden (D-OR) this week also responded to the proposal, stating, “The Office of Legal Counsel has plainly stated that the Treasury secretary does not have the authority to index capital gains tax rates.”  (Senate Finance news release, July 30).  Wyden added such an action would “absolutely” end up in court.  “We will oppose this strongly, because this is another backdoor effort to flout responsible tax policy,” he told reporters. (TaxNotes, July 31 and New York Times, July 30) 

Senate Committee Advances Five-Year Transportation Bill

Posted on by Trey Jackson

The Senate Environment and Public Works Committee (EPW) unanimously approved a bill on Tuesday to authorize $287 billion over five years to repair and maintain the nation’s surface transportation.  The bipartisan measure also aims to expedite the
infrastructure permitting process, help address climate change, and grow the economy.  ( EPW Committee news release ,
July 30)  

  The Roundtable on April 29 submitted  infrastructure policy recommendations  to
House Committee on Transportation and Infrastructure Chairman Peter DeFazio (D-OR) and Ranking Member Sam Graves (R-MO 
).    
  • America’s Transportation Infrastructure Act of 2019 (ATIA, S. 2302) is not the comprehensive infrastructure overhaul that Republicans and Democrats
    have long sought. (Roundtable Weekly,May 3, 2019.)  However, it makes
    progress toward shoring-up the Highway Trust Fund (HTF) – the nation’s largest financing source for roads, bridges, tunnels, and mass transit.  Congress must reauthorize and capitalize the HTF before it runs out of money by the
    end of September 2020, at the height of the presidential election season. (ATIA summary and
    section-by-section analysis)  

  • The ATIA would also codify Trump Administration measures to cut lengthy
    project permitting times.  EPW Chairman John Barrasso (R-WY) and Ranking Member Tom Carper (D-DE) stated their bill “will speed up project delivery by codifying key elements of the President’s ‘One Federal Decision’ policy,
    without forgoing important environmental protections. Cutting red tape will allow important highway infrastructure projects to be built quicker and smarter.”  (July 29 CNN joint op-ed)

  • President Trump tweeted his support of S. 2302 on
    July 30, praising the EPW Committee’s 21-0 vote as a bipartisan achievement. 

  • The bill now moves to the Finance Committee, chaired by Sen. Chuck Grassley (R-IA), to figure out how to pay for it through tax revenues and other means.  Additionally, the Senate Banking Committee, chaired by Mike Crapo (R-ID), must also mark-up
    sections dealing with mass transit programs.  The Senate’s No. 2 Republican, John Thune (R-SD), said funding the bill will be a “heavy lift” and that any broader infrastructure package is “really unlikely.”  (POLITICO Morning Transportation, Aug. 2)

  • One financing source reportedly off-the-table is an increase to the “pay-at-the-pump” gas user fee that capitalizes the HTF.  Congress has not raised the so-called “gas tax” since 1993, and its buying power has been significantly diminished since
    then by inflation and gains in fuel efficiency.  Grassley said the Finance Committee will not consider how to pay for the ATIA until Senate Majority Leader Mitch McConnell (R-KY) “says he’s willing to let a gas tax increase on the floor.” 
    (BGov Tax, July 31)

  • The Real Estate Roundtable’s infrastructure policy agenda recommends a responsible increase to the gas user fee to sustain the Highway Trust Fund for the long term;
    streamlined permitting goals; and support for infrastructure innovations (such as driverless and electric vehicles) that respond to the nation’s changing demographics and accommodate increased demands for transit-oriented development.

Roundtable President and CEO Jeffrey D. DeBoer discussed the role of public-private partnerships to develop infrastructure projects on  CNBC’s Squawk Box  in June 2017 .  ( Roundtable Weekly , June 9, 2017)  Congressional committees have also received statements from The Roundtable outlining our infrastructure priorities. ( Roundtable Weekly,   
May 3, 2019  and March 22, 2019 ).  

 

Senate Committee Considers Protections for Banks Dealing With Legal Cannabis-Related Businesses; Bill Would Allow CRBs to Buy Property Insurance

Posted on by Trey Jackson

A Senate Banking Committee hearing on July 23 focused on a bipartisan bill that would protect lenders from federal liability when they provide accounts and other financial services to cannabis-related businesses (CRBs) deemed legal under state laws.  The bill would also protect certain real estate transactions involving legitimate CRBs. (Senate Banking Committee, ” Challenges for Cannabis and Banking: Outside Perspectives “)

Senate Banking Chairman Mike Crapo (R-ID)  said at the hearing that “the case was made pretty strongly” that lawmakers needed to address confusion about whether banks and credit unions can provide accounts to marijuana businesses, as well as those ancillary businesses that service the growing industry.
  • The hearing featured testimony by Sens. Cory Gardner (R-CO) and Jeff Merkley (D-OR), co-sponsors of the Secure And Fair Enforcement (SAFE) Banking Act.  Their bill (S. 1200) would provide a safe harbor to financial institutions serving CRBs, protecting them from federal money laundering laws. 
  • Senate Banking Chairman Mike Crapo (R-ID) said at the hearing that “the case was made pretty strongly” that lawmakers needed to address confusion about whether banks and credit unions can provide accounts to marijuana businesses, as well as those ancillary businesses that service the growing industry. (BGov, July 23)  Chairman Crapo reportedly “stopped short of endorsing a legal fix for banks that want to serve cannabis businesses, warning that major concerns he has about financial crimes and access to the drug still need to be addressed.” (Politico Morning Money, July 24) 
  • For real estate: the SAFE Banking Act would protect sellers and lessors of real estate, and other “service providers,” by clarifying that proceeds from transactions with legitimate CRBs do not derive from unlawful activity – and thus do not provide a predicate for federal criminal money laundering. 
  • The Real Estate Roundtable on April 30 urged the Senate Banking Committee leadership to hold hearings on the SAFE Act.  Roundtable President and CEO Jeffrey DeBoer stated in the letter, “Without a bank account, dispensaries and other legal CRBs must operate on a cash basis.  Risks of crime thus increase and tax revenues to pay for infrastructure and other government services are potentially lost.  S. 1200 can significantly address these problems by providing protections for banks, real estate firms and their employees from punishment simply because they aim to serve businesses within … states that have legalized marijuana to varying degrees.”  (Roundtable Policy Letter, April 30) 
  • Companion legislation in the House (H.R. 1595) was approved by the Financial Services Committee on March 27 by a 45-15 vote. A full House vote on the bill may occur after the upcoming summer recess. (Roundtable Weekly, April 26 and Forbes, July 23) 
  • At the July 23 Senate hearing, Banking Committee member Bob Menendez (D-NJ) discussed bipartisan legislation he introduced the day before – to ensure legal CRBs have access to comprehensive and affordable insurance coverage.    The Clarifying Law Around Insurance of Marijuana (CLAIM) Act would prohibit the federal government from taking any adverse action on an insurance policy held by an owner or operator of a CRB, or against real estate or equipment leased to a CRB, solely because the policy covers cannabis operations that a state deems legal. (Menendez news release, July 23) 

Following the hearing, Chairman Crapo said the Committee is acting on the SAFE Banking Act.  “We’re looking at it to see if there’s a solution to the various issues we’re talking about.”  (BGov, July 23) 

DHS Issues New EB-5 Regulations

Posted on by Trey Jackson

The Department of Homeland Security (DHS) on Wednesday published long-anticipated regulations governing key aspects of the EB-5 investment visa program. 

The  Department of Homeland Security (DHS) on Wednesday published   long-anticipated regulations governing key aspects of the EB-5 investment visa program.   

The new rule is scheduled to take effect on November 21, 2019 – assuming Congress reauthorizes EB-5 regional centers by September 30, and does not enact substantive reforms that supersede those program elements covered by DHS’s action.  For a detailed description of the rule, see “Greenberg Traurig Alert: Final EB-5 Regulations.”   The regulation includes:

  • Increases in Investment Amounts: 
    Investment amounts will increase to $900,000 for economic development projects in Targeted Employment Areas (“TEAs”), and to $1.8 million for non-TEA projects (from current levels of $500,000 and $1 million, respectively, which have not changed since the early 1990s).  The new amounts will adjust for inflation every five years back to 1990 dollars, with the first anticipated adjustment anticipated on October 1, 2024. 
  • TEA Definitions: 
    States no longer have a role in designating TEAs – those geographies that attract EB-5 capital at the lower investment threshold.  The new rules define “High Unemployment Area” TEAs –typically in urban locations – as the census tract where the project is located, plus any “directly adjacent” tracts to the project’s tract.  The weighted average unemployment rate across these tracts must be 150% of the national average unemployment rate. 
    • “Rural Areas” (with one exception) are not limited to high unemployment characteristics for TEA qualification.  As with current law, generally any area outside the boundaries of a U.S. Census Bureau Metropolitan Statistical Area (“MSA”) is a “Rural TEA.”  However, an entire town or city outside an MSA – with a population of 20,000 or more people – qualifies for TEA status only if that municipality has an unemployment rate 150% of the national average.
    • A number of stakeholders urged DHS to consider a “commuting pattern” approach for urban environments to qualify as a TEA.  DHS said it “appreciated” comments providing substantial evidence that workers who live in economically distressed neighborhoods typically commute to downtown job centers where core urban development is located.  In the end, however, DHS dismissed a “commuting pattern” option for TEAs because the agency found it “too operationally burdensome” and “posed challenges” that the agency could not figure out.
    • DHS also considered – and rejected – TEA delineations tied to census tract designations with a track record of success in other analogous economic development programs, like the established New Market Tax Credit (“NMTC”) program.

    • DHS’s new EB-5 rule does not comprehensively reform the program as urged by rural and urban stakeholders. (EB-5 coalition letter and  Roundtable Weekly, May 17, 2019) 

       

      Moreover, DHS failed to address the suggestion of rural and urban stakeholders to consider a recent Trump Administration Executive Order and assess the relationship between EB-5’s economically distressed TEA census tracts and “Opportunity Zone” census tracts, designated by the U.S. Treasury in the spring of 2018. (Roundtable Weekly, March 8, 2019).

     
  • Grandfathering and Transition Rules: 
    As noted above, the rule is scheduled to take effect on November 21, 2019 – assuming Congressional EB-5 reauthorization by September 30 and no legislative reforms on matters within the rule’s purview.
    • Investors who have already filed I-526 petitions, or who file by November 21, are subject to current program investment levels of $500,000 or $1 million.  They will not be required to post more money to meet DHS’s new amounts.  The rule states: “Petitions filed before the effective date will be adjudicated under the regulations in place at the time of filing.”  
    • Projects that do not complete intended EB-5 capital raises by November 21 will subscribe investors at different amounts.  For example, a project that currently qualifies as a TEA can attract investors at $500,000 until November 21.  Thereafter, if that project loses TEA status as per the new rule, it must attract investors at the $1.8 million level.  DHS rejected the concept for “project grandfathering,” stating such an approach “would grant existing projects in affluent urban areas that have been marketed as TEAs an unfair competitive advantage against new projects in such areas, which will need to attract investors at the higher minimum investment amount.”       

DHS’s rule does not achieve comprehensive reform of the “regional center” program – an objective that a broad coalition of rural and urban groups have urged Congress to achieve by the program’s legislative sunset date on September 30, 2019.  For example, the new regulation does not address EB-5 “integrity measures” that stakeholders have long requested to deter instances of fraud and maximize national security safeguards.  (Roundtable Weekly, May 17, 2019.)

House Passes Bipartisan Bill to Suspend Debt Ceiling, Increase Budget Caps 2 Years and End Sequestration; Senate to Vote on Package Next Week

Posted on by Trey Jackson

The U.S. House of Representatives yesterday passed the Bipartisan Budget Act of 2019 (H.R. 3877) that would suspend the national debt ceiling until July 31, 2021; raise federal spending over the next two years; and avoid the threat of automatic, across-the-board “sequestration” budget cuts. The bill now goes to the Senate, which is expected to vote next week.  ( Section-by-Section summary of the bill, Budget Committee)

The U.S. House of Representatives yesterday passed the   Bipartisan Budget Act of 2019  (H.R. 3877) that would suspend the national debt ceiling until July 31, 2021; raise federal spending over the next two years; and avoid the threat of automatic, across-the-board “sequestration” budget cuts.  
  • The measure, which passed 284-149, caps recent negotiations between Democratic congressional leaders and the White House.  Earlier this month, Treasury Secretary Steven Mnuchin wrote to House Speaker Nancy Pelosi (D-CA) warning that if the debt ceiling was not raised, the U.S. could run out of cash to pay its bills in early September, resulting in potential default on the nation’s financial obligations.  (Roundtable Weekly, July 12) 
  • The deal increases discretionary spending limits $324 billion over two years, replacing the prospect of strict sequestration caps imposed under the Budget Control Act of 2011.  The bill passed by the House permanently ends sequestration, which would impose a 10 percent cut on all programs if budget targets are not met.  (CQ, July 25) 
  • The fiscal package passed by the House would increase the budget cap for FY’20 defense programs by three percent, to $738 billion.  Funding for domestic programs would increase four percent, topping off at $632 billion. (Politico, July 25) 
  • The deal also lifts the debt limit through July 2021, meaning policymakers would not have to address the controversial issue during the 2020 election year. 
  • President Trump encouraged GOP lawmakers to endorse the legislation, tweeting yesterday, “House Republicans should support the TWO YEAR BUDGET AGREEMENT which greatly helps our Military and our Vets. I am totally with you!”  
  • Senate Majority Leader Mitch McConnell, (R-KY) this week stated he expects the Senate to pass the House bill next week and send it to President Trump for his signature. (Washington Post, July 25).  He added, “I make no apologies for this two-year caps deal. I think it’s the best we could have done in a time of divided government. The alternatives were much worse.” (Politico, July 23).   
  • When Congress returns from summer recess on September 9, policymakers will face a tight deadline to set federal appropriations for individual agencies and departments for FY’20.  Current FY’19 funding runs out on September 30, as does legislative authority for the National Flood Insurance and EB-5 investment programs.  
  • If Congress and President Trump cannot agree on how to allocate the $1.37 trillion in discretionary money allotted for the new fiscal year beginning October 1, a stopgap funding measure (or “Continuing Resolution”) may be required.  
  • Last December and January, the lack of a government spending deal over security measures on the southern border led to a 35-day partial government shut down. (Roundtable Weekly, Feb. 1) 

The House recessed today for six weeks; the Senate is scheduled to leave August 2.  

CECL Accounting Standard Implementation Delayed for Certain Lenders

Posted on by Trey Jackson

The Financial Accounting Standards Board (FASB) on Wednesday passed a proposal that would give more time to smaller lending institutions to adopt the Current Expected Credit Losses (CECL) accounting standard, which forces lenders to book losses on bad loans much faster. ( ABA Banking Journal , July 17)

FASB Chairman Russell Golden stated, “Additional time would give the stakeholders more ability to learn from larger lenders, more ability to have resource providers available, and more ability to look at best practices for disclosures and controls.”  
  • The delay would set January 2023 as the new deadline for small public lenders, private lenders and nonprofits (such as credit unions) to implement CECL.  (Credit Union National Association, July 17) 
  • CECL would still take effect for publicly traded U.S. banks beginning in January 2020.  The regulatory change in how banks estimate losses in their allowance for loan and lease losses (ALLL) will require substantial changes in data analytics and financial methodologies. 
  • FASB Chairman Russell Golden stated, “Additional time would give the stakeholders more ability to learn from larger lenders, more ability to have resource providers available, and more ability to look at best practices for disclosures and controls.” (Wall Street Journal, July 17) 
  • FASB is expected to release the proposed accounting standard changes in August, subject to a 30-day comment period.  
  • For real estate, there is concern that banks may reduce lending volumes as they build up additional capital reserves to be in compliance with CECL.   A business coalition that included The Real Estate Roundtable wrote to the U.S. Securities and Exchange Commission (SEC) and FASB in March, urging further study amid concerns that CECL may soon begin to reduce aggregate bank lending.  (Coalition Letter, March 5 and Roundtable Weekly, March 8) 
  • Congressional legislation to delay CECL’s implementation was introduced in the Senate on May 21 by Sen. Thom Tillis (R-N.C.) and in the House on June 10, led by Rep. Vicente Gonzalez (D-TX). (S&P Global Intelligence, June 11) 
  • This week, FASB posted a Q&A document addressing various CECL implementation issues, including how to make a “reasonable and supportable” forecast of expected loan losses.  FASB also plans a series of CECL educational workshops throughout the country.  (FASB Advisory, July 17) 
  • The CECL accounting rule change was issued in June 2016 by FASB as a result of the 2008 financial crisis.  (FASB, Credit Losses)  

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to address the potential impact of the new accounting standard and work with the CECL business coalition on implementation issues. 

 

Senators Portman, Shaheen, Reintroduce Energy Efficiency Bill

Posted on by Trey Jackson

A bipartisan bill reintroduced July 17 by Sens. Rob Portman (R-OH) and Jeanne Shaheen (D-NH) includes provisions to advance energy efficiency standards for U.S. real estate by fostering market incentives, data-driven research, and open government procedures.  

Roundtable President and CEO Jeffrey D. DeBoer, left, with Sens. Rob Portman (R-OH) and Susan Collins (R-ME) at a press conference to support the Energy Savings and Industrial Competitiveness (ESIC) Act.
  (  Video of DeBoer’s statement and  the entire press event)

– enlarge photo above  –  
  • Roundtable President and CEO Jeffrey D. DeBoer joined other industry and environmental group leaders at a press conference Wednesday in the Senate to support the Energy Savings and Industrial Competitiveness (ESIC) Act.  (Video of DeBoer’s statement and entire press event)
  • The ESIC Act is a revived version of comprehensive energy efficiency legislation introduced in prior sessions of Congress. (Bill summaryand  text.)  
  • The Real Estate Roundtable has long endorsed the ESIC Act.  The bill contains no mandatory federal building or climate-related regulations.  It aims to improve energy efficiency across U.S. buildings by:  
    • Importing new economic, cost, and small business impact considerations into the process by which the U.S. Department of Energy (“DOE”) proposes revisions to “model” building energy codes, that state and local bodies may ultimately adopt; 
    • Providing stakeholders with opportunities to comment on code revisions suggested by DOE – to correct the currently closed process by which federal code proposals are developed without industry input;  
    • Clarifying standards for real estate appraisers and banks to consider energy efficiency capital investments when determining an asset’s market value; and
    • Creating a voluntary program that can lead to lower interest rates and greater qualifications for buyers seeking mortgages on new energy efficient homes.

            

  • The Portman-Shaheen bill also includes new Section 103 , strongly supported by The Roundtable.  This provision would require coordination by federal agencies to gather and report higher quality data on energy consumed by U.S. buildings, through the nationwide Commercial Building Energy Consumption Survey (CBECS).   Data from CBECS provides the underpinning for EPA’s ENERGY STAR scores.  (See Roundtable Weekly  energy policy story above)
  • In a July 18 Senate news release , 15 business and energy efficiency sector leaders expressed support for the latest Portman-Shaheen bill – including DeBoer and Henry H. Chamberlain, President and CEO, Building Owners and Managers Association (BOMA) International.
  • DeBoer stated in the Senate news release, “The [ESIC Act] is exactly the kind of smart, forward-looking policy that will help building owners respond to our modern, evolving economy.  The needs of business tenants have changed dramatically since the turn of the century to power the data centers, IT, and communications systems upon which our workforce depends.  Building owners are meeting their tenants’ 24/7 energy demands while constructing and managing their assets more efficiently – and reducing their carbon footprints.”
  • During the July 17 news conference, Sen. Portman added that the bill would save consumers $13 billion a year – the equivalent in emissions savings of taking 11 million cars off the road within 15 years. (Video of press event, July 17)

In a positive sign, a swath of energy efficiency bills are moving through both the Senate and House, indicating that energy policy could pass in a divided Congress.  ( The Washington Examiner , July 18) 

#  #  # 

EPA Releases Updated ENERGY STAR Scoring Model for Office, Retail, and Other Properties

Posted on by Trey Jackson

The U.S. Environmental Protection Agency (EPA) on July 15 released highly anticipated updates to its ENERGY STAR scoring model – a key federal label that rates and compares U.S. buildings’ energy performance. The scoring update includes changes advocated by The Real Estate Roundtable and other real estate organizations. 

EPA on July 17 released a 23-page presentation –  Update on the ENERGY STAR Office Model for U.S. Properties .
  • ENERGY STAR is a widely recognized, national label used as a market signal for well-managed property assets with smaller carbon footprints.  The label impacts nearly 35,000 buildings and plants nationwide, representing more than 5 billion square feet of commercial space. ( ENERGY STAR “Facts and Stats “)   
  • In a significant improvement affecting office and other property types, EPA will reintroduce a heating degree day (HDD) adjustment into the scoring process.  Including HDD in ENERGY STAR equations will result in more equitable ratings for properties in all climates.  As a result, some office buildings in colder climates will see score increases – and buildings in warmer locations will not see score decreases.  (Analysis and Key Findings from EPA’s Review of the ENERGY STAR Score Model for Office Properties, July 15) 
  • Last August, EPA announced the first updates to its ENERGY STAR office rating model in over a decade.  Initial analyses by The Roundtable’s Sustainability Policy Advisory Committee (SPAC) indicated that EPA’s equations at that time produced arbitrary scoring results.  In particular, a SPAC working group initially identified and then advocated for the result ultimately announced by EPA this week – to include the HDD scoring adjustment.  
  • Since last September, EPA has suspended certifications for office, warehouse and other property types during a “study period” to assess its scoring models with stakeholder groups.  (Roundtable Weekly, Sept. 14) 
  • The Real Estate Roundtable sent a summary of   recommended changes to EPA on Nov. 26, urging revisions to the scoring model so that buildings of all sizes located in varying climate zones across the country are rated fairly.  (Roundtable Weekly, Nov. 30)

    The Roundtable’s Sustainability Policy Advisory Committee (SPAC) is led by its Chairman, Anthony E. Malkin (Empire State Realty Trust), left, and Vice Chair Daniel Egan (Vornado Realty Trust)

     – enlarge photo –
  • “The Roundtable’s constructive engagement with the EPA over the last 10 months has resulted in a better outcome on an issue with massive national implications for our industry,” said Anthony E. Malkin, Chairman and CEO of Empire State Realty Trust, and Chairman of The Roundtable’s Sustainability Policy Advisory Committee (SPAC).  “We commend EPA for acting on our feedback and their transparency and candor, which led to an improved set of ENERGY STAR scoring models.  In particular, the agency took the corrective action to account fully for climate variations so that all types of commercial buildings – no matter where they are located, in hot or cold temperature zones – are on a level playing field as owners respond to investor, tenant, and other market demands to attain ENERGY STAR ratings for their assets.”
  • On July 17, EPA released a 23-page presentation –  Update on the ENERGY STAR Office Model for U.S. Properties.     
  • On July 22, updated office property scores will be live in EPA’s Portfolio Manager, an online tool used to measure and track energy and water consumption, as well as greenhouse gas emissions.  EPA advises stakeholders to download their current scores before July 21, as Portfolio Manager will be unavailable that day to allow for the release of the updated score model.  
  • On July 31, EPA will reinstate ENERGY STAR certification for office buildings, after its suspension since last September. (EPA’s ENERGY STAR resources)

Malkin also noted, “The Roundtable’s work with EPA is far from finished. We are in the midst of active engagement to ensure that federal-level building energy data, on which ENERGY STAR is based, is robust and reliable; that EPA continues its recognition programs for tenants to label high-performance leased spaces; and that the EPA provides critically important federal guidance to help synchronize emerging state and local mandates that address buildings and climate change.  The ENERGY STAR whole-building rating program is now back on track, providing The Roundtable with the policy foundation we need to pursue other important objectives on SPAC’s agenda.”  

Commerce Dept. Issues Preliminary Determinations in Fabricated Structural Steel Trade Dispute

Posted on by Trey Jackson

The U.S. Department of Commerce on July 8 found that government subsidies to Canadian exporters of fabricated structural steel (FSS) were not large enough to justify any new countervailing duties.  In contrast, the agency found that unfair subsidies provided by the other two implicated countries warrant new duties in the range of 13% (Mexico) to 36% (China).  ( Commerce Dept. Fact Sheet , July 8) 
 Survey.

Fabrocated structural steel is a key material used in constructing the superstructure of major real estate and infrastructure projects, including high-rise developments, bridges, parking decks and ports.
  • FSS is a key material used in constructing the superstructure of major real estate and infrastructure projects, including high-rise developments, bridges, parking decks and ports. (Roundtable Weekly, March 8) 
  • A countervailable subsidy is financial assistance from a foreign government that benefits the production of goods by foreign companies and is limited to specific enterprises or industries, or is contingent either upon export performance or upon the use of domestic goods over imported goods.  Canada’s FSS subsidies were determined to be at de minimis levels of less than 1 percent and therefore do not warrant tariffs. (GlobeNewsWire, July 9) 
  • As a result of its preliminary decision, Commerce will instruct U.S. Customs and Border Protection to collect cash deposits from importers of fabricated structural steel from China and Mexico.  (The Straits Times, July 9) 
  • In 2018, FSS imports to the United States were valued at $897.5 million from China; $622.4 million from Mexico; and $722.5 million from Canada, according to the Commerce Dept. 
  • The Roundtable wrote to the U.S. International Trade Commission about the FSS issue in March and Commerce Secretary Wilbur Ross in June, urging a cautious approach to the investigation and emphasizing the potential economic harm that new tariffs could cause.  
  • Separately, the quasi-judicial FSS investigation will determine whether exporters in the three countries have engaged in unfair dumping, which could also lead to new duties.  Dumping occurs when an exporter sells a product in the United States at a price that is below “normal value,” such as the price at which the foreign producer sells the merchandise in its own domestic market.    

Preliminary determinations on dumping are expected on September 5, and final determinations on the countervailing subsidies are expected on November 18.