Montgomery County Councilmembers Friedson and Riemer Introduce Green Building Tax Credit Legislation to Meet Climate Targets

Montgomery County Councilmembers Friedson and Riemer Introduce Green Building Tax Credit Legislation to Meet Climate Targets

Councilmembers Friedson and Riemer will introduce legislation Tuesday to accelerate the construction of new energy efficient buildings and to promote the green retrofitting of existing buildings. Bill 10-20 dramatically improves an existing County green building property tax credit by prioritizing energy reduction in new and existing commercial buildings and ensuring incentives are given only for buildings that surpass requirements of the County’s building code.

“Combating the climate crisis requires the public and private sectors working together to achieve our ambitious emissions targets,” Councilmember Andrew Friedson said. “We have stakeholder consensus from environmental advocates and businesses, subject matter experts, and policymakers. We need to turn climate rhetoric into real results.”

Responding to the unfolding climate crisis, the County has committed to reducing emissions by 80 percent by 2027 and 100 percent by 2035. Energy consumption in commercial buildings accounts for 26 percent of greenhouse gas emissions in our County, according to the most recent greenhouse gas inventory. Significantly reducing energy usage and emissions requires retrofitting existing buildings and incentivizing new construction to achieve greater efficiency standards.

“We need to reduce the energy consumption of our buildings if we are to ever have a chance of meeting our climate goals,” said Councilmember Hans Riemer. “Reducing energy use is expensive and complicated work, and it will take time. The changes to the green building tax credit proposed in this legislation, however, will incentivize our private-sector partners to go further than ever before in designing energy-efficient buildings.”

Councilmembers Friedson and Riemer based the legislation on the recommendations of a work group made up of key stakeholders from the County government, climate groups, and the local commercial real estate sector. Over the course of a year, the work group carefully scrutinized the current green building tax credit, identifying its limitations and proposing significant improvements.

Under current law, the tax credit is tied to the Leadership in Energy and Environmental Design (LEED) Green Building rating system or its equivalent. The County caps the overall tax expenditure for this credit at $5 million annually. Since its inception, the County has awarded $33.4 million in credits, across 62 buildings.

However, the credit has been regularly oversubscribed in the past few years. The County also adopted a version of the International Green Building Code (IgCC) in 2017, which makes many of the elements of LEED certification compulsory.

To make the credit more effective and better align with the County’s greenhouse gas reduction effort, Bill 10-20 follows the work group recommendations by making the following changes to the green building tax credit:

Creates a new two-tier structure to the credit.

The first tier ties the amount of the credit to the energy reduction level, relative to the existing building code. The higher the energy reduction level, the higher the credit.

The second tier assigns a bonus credit if the buildings also meet the highest levels of LEED certification.

Removes the annual cap on the credit for new buildings, and maintains a $5 million cap/annually for existing buildings.

Sets a four-year limit on the credit for new buildings and a two-year limit for existing buildings.

The public hearing on Bill 10-20 will be on March 31.