What do Hurricanes, Earthquakes and LEED Bonds Have in Common?


Several weeks ago, Washington DC was hit by both an earthquake and a hurricane. But this was not the most shocking development during the week — at least for me.

Here’s what shocked me the most: I learned there is a chance that LEED bonds could be available in our nation’s capital.

On Wednesday, August 24, I attended a meeting of the DC Green Building Codes working group. The topic to be discussed was the DC Green Building Act’s LEED bond requirement. For the uninitiated, the DC Green Building Act requires that all new construction in D.C. greater than 50,000 square feet be LEED certified starting January 1, 2012. Project developers have to post a bond guaranteeing the certification. The bonds range from 1 to 3 percent of a project’s total cost, and can be as much as $3 million.

I have been writing about the LEED bond requirement since the first week of this blog. I once compared LEED bonds to unicorns because they only existed in a fantasy world.

LEED bonds do now exist and have been underwritten to support projects applying for the Arlington County, Virginia bonus density program. But it is unlikely that LEED bonds were going to be underwritten in Washington DC due to problems with the Green Building Act. At the working group meeting, the SFAA and NASBP issued a white paper (PDF) summarizing the Act’s many problem, including:

* “The regulations should state the developer must furnish the bond”

* “The regulations should provide for claims less than the full bond amount.”

* “Consider the relationship between the bond amount and the financial thresholds required by the surety. . . . We suggest that the regulation should set the maximum amount at a lower level that is sufficient to provide the necessary financial protection to the District.”

* “The regulations should set forth the appeals process by which a developer can appeal a USGBC determination. Notice of appeal should be provided to surety.”

The last issue is of most interest to me. The D.C. Department of the Environment (DDOE) has indicated that a party other than the US Green Building Council could determine compliance with LEED certification. Whether these third-parties would be in the form of a government agency or a for-profit company remains to be seen. But it would certainly be interesting to have another entity looking over the shoulder of the US Green Building Council.

The DC government has less than four months to revise the Green Building Act to reflect the suggested changes in the SFAA and NASBP white paper.

Will DC make the necessary changes to the Green Building Act by January 1, 2012?

Article by Chris Cheatham, appearing courtesy Green Building Law Update.

Green Building Law Update is published to inform the construction and design industries about green building risks and legal developments. Launched in 2008, the website has served as a forum to discuss green building litigation, regulations, policy and trends.

About Author

Walter’s contributions to CleanTechies over the past 4 years have been instrumental in growing the publications social media channels via his ongoing editorial and data driven strategies. He is the founder and managing director of Sunflower Tax, a renewable energy tax and finance consultancy based in San Diego, California. Active in the San Diego clean technology community, participating in events sponsored by CleanTech San Diego, EcoTopics, and Cleantech Open San Diego, Walter has also been a presenter at numerous California Center for Sustainability (CCSE) programs. He currently serves as an adjunct professor at the University of San Diego School of Law where he teaches a course on energy taxation and policy.

1 Comment

  1. Does the writer understand the bond developers are required to post are not bonds for financing the project? These bonds are a financial guarantee, similar to a completion bond.