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Building Green Pays Off

July 1, 2003
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Sustainable building offers financial, as well as aesthetic and environmental, advantages BY LESLIE MOLDOW, AIA
Mary's Woods at Maryhurst - Woodland Gardens.

BY LESLIE MOLDOW, AIA, PRINCIPAL, MITHUN ARCHITECTS + PLANNERS + DESIGNERS

PHOTOGRAPHS BY ECKERT & ECKERT PHOTOGRAPHY Not all rewards for protecting the environment are ecological-some are financial "It's not easy being green," laments Kermit the Frog in his plaintive 1970s trademark song. Some 30 years later, being "green" in the design and construction field is not only easy, but it is becoming imperative-and often financially rewarding. Instead of being a financial drain, as some once believed, sustainable building development actually offers financial benefits-provided this approach is incorporated into the earliest planning stages, well before bricks are ordered or ground is broken.

Not only is sustainable building development good for the environment and beneficial to the health of those who will occupy buildings thus developed, as would be expected, but it also offers direct cost savings, such as lower utility costs, and indirect positive effects in the areas of financing, city/municipal planning, and marketing.

Achieving an environmentally appropriate design begins with site selection and planning, and continues throughout the project, with emphasis on:

' increasing efficient water usage,
' maximizing energy savings,
' promoting clean air,
'using materials and resources wisely, and
' paying heed to indoor environmental quality.

This article highlights some of the financial benefits of sustainable building development and will examine some environmentally friendly steps that designers and builders can take to achieve it. Financial Benefits
Direct cost savings. Because most owner/operators of long-term care facilities and senior housing are "in it for the long haul," they have more time over which to spread their initial building costs than developers of "spec" housing, who must sell their projects soon after they are completed in order to realize a profit.

Many strategies for sustainable development can pay for themselves within three to five years. For example, by choosing energy-efficient lighting and appliances, Esperanza Apartments (independent living) and Park Place Assisted Living, part of a low-income housing project sponsored by Retirement Housing Foundation in Seattle, have saved more than $36,000 per year in electrical costs, as well as receiving a $181,688 rebate offered by the local electric company as an incentive for energy efficiency.

In addition to reducing these facilities' annual operational costs, this strategy is expected to pay for their upgrade in fixtures within three to five years. And the direct cost savings resulting from energy conservation aren't limited to lower electric bills and utility company rebates. Some states, such as New York, are attempting to reduce the tax burden for green projects. New York is looking to implement a Green Building Tax Credit, equaling 7% of the capitalized cost of construction, in an effort to encourage the incorporation of a wide range of sustainable strategies into construction projects.

Financing. Bankers are attracted to projects that are designed to control operating costs. In fact, they try to determine whether owners can increase their borrowing capacity, quicken their payback, or lower the cost of capital by showing past annual cost savings, thus making them better candidates for loans for any new projects or renovations.

In addition to rewarding strategies that will reduce operating costs, lenders also respond favorably to being shown a basis for predictable operating costs. Designing with an eye to return-on-investment strategies can help make operational costs more predictable. For example, one California community is studying getting off the electrical grid by providing its own electricity by cogeneration. It is also possible to reduce peak load demands that may cause unpredictable spikes in the cost per kwh. In the past few years, according to Fitch's 2002 median ratio for CCRCs, operational costs have increased at a faster rate than long-term care organizations' ability to generate more income. With the median utility costs for CCRCs-as identified by B.C. Zeigler and Co., for example-hovering at approximately 7 to 10% of all operating expenses, having a predictable cost base for utilities will help streamline yearly budgeting.

The need for this was highlighted by the recent spikes in West Coast energy costs, which forced projects to reallocate money from other budgets to pay the unexpectedly high costs. Having solid expectations of future utility costs not only allows resources to be budgeted for other, more worthwhile, endeavors but also makes a project more appealing to lenders.

City/municipal planning. Some cities require a sustainable approach to site development. For example, a city's zoning may limit site-paving coverage, or its engineering department may require on-site purification of storm water.

Even for those municipalities that do not have such requirements, there may be other specific advantages to being environmentally sensitive with your development. One is that sustainable building development can help shorten the approval process. The city of Portland, Oregon, for example, will expedite permit approvals for LEED (Leadership in Energy and Environmental Design) projects.

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