Bill Morris in Bricks & Bucks on April 27, 2022
A group of co-op board members have gone public with how they feel about the looming cost of the retrofits that will be required to bring their buildings into compliance with the Climate Mobilization Act (Local Law 97). They are, in a word, terrified.
They vented their fears at a recent City Council hearing designed to develop a roadmap to help building owners avoid fines that will, beginning in 2024, hit buildings that fail to reduce their carbon emissions to specified levels. In addition to co-op board members, speakers included city officials, lenders, affordable-housing advocates, environmental groups, commercial building owners, the Urban Green Council and the Real Estate Board of New York.
The question on everyone’s mind was: How will building owners, including co-op and condo boards, pay for the retrofits that will reduce their carbon emissions enough to exempt them from fines? Here are highlights from the testimony at the hearing:
Warren Schreiber, board president at Bay Terrace Gardens Co-op Section 1 and co-president of the Presidents Co-op & Condo Council (PCCC). “Converting to (electric) heat pumps will cost $2.5 to $3 million, which does not include finance charges. This expense will result in a 25-30% monthly maintenance increase. Shareholders who have lived here for 20, 30, 40 and 50 years will have to leave Bay Terrace Gardens to find more affordable housing.”
Schreiber then offered three suggestions: “LL 97 should have a carveout for garden apartment properties that sit on sizeable green campuses and are more energy-efficient than one- and two-family homes, which are exempt (from the law). A tax abatement similar to the J-51 program but with a seven-year payout should be available to assist co-ops and condos to pay for energy upgrades. In place of draconian penalties, LL 97 should include common-sense incentives to encourage properties to reduce greenhouse emissions.”
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Martha Sickles, the Association for Energy Affordability. “The (city) administration must create funding and financing mechanisms that will support the necessary retrofits in both market rate and affordable buildings. Tax incentives and collaboration with the state and the Green Bank to develop strategies to attract private capital, supplemented by government funding, will afford greater flexibility and certainty to building owners, managers and energy professionals... Achieving LL97 goals of carbon reduction…through comprehensive retrofits avoids compliance by penalties that provide no benefit.”
Michael De Valera, treasurer at Dorie Miller Co-op and executive board member of the PCCC. “I am currently in the unenviable position of refinancing our co-op mortgage and looking to replace our 43-year-old #2 heating oil boilers. My choices are stark. I can replace the outdated oil heaters with updated oil-fueled boilers for $ 2 million, update to gas-fired boilers for more than $2 million, or go all electric with heat pumps for approximately $10-$15 million. With our current carrying charges, we cannot support a loan to go for the heat-pump scenario. The other two options leave us in the world of penalties and don’t contribute toward helping lower fossil fuel emissions. There should be an increase in the J-51 program, a tax abatement or offset for current taxes paid, and grants.”
Bob Friedrich, president of the Glen Oaks Village co-op board and co-president of the PCCC. “For us to be compliant with the law we will need to spend $17- $20 million, money we don’t have on boilers we don’t need. If we do not spend the $20 million now, between 2024 and 2030 we will be assessed annual fines that will rise to $1,096,200 every year. These are real numbers that will bankrupt our co-op and our families.”
Rohit Aggarwala, Chief Climate Officer and commissioner of the city’s Department of Environmental Protection. Aggarwala testified that the DEP is pursuing "enforcement flexibility," noting that "There is no benefit to the environment if we levy a fine on a building that is acting in good faith to come into compliance." He said additional rule making will be necessary, adding, “We are not pursuing a cap-and-trade alternative.” He was referring to a practice, also known as carbon trading, under which buildings that fail to meet their carbon-reduction goals can purchase credits from buildings that have exceeded their goals, thus avoiding fines. The demise of carbon trading means there’s one less road to compliance for co-op and condo boards. The rule making continues as the clock continues to tick toward 2024.
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