February 22, 2011
LEEDigation – LEED lawsuit
*(Reposted from www.greenbuildinglawupdate.com)
Unprecedented Green Building Dispute Could Cost Developer Millions
Up until yesterday, the biggest green building dispute I had come across was Shaw Development v. Southern Builders. That case involved $635,000 in damages because a project did not obtain the LEED certification necessary to qualify for state tax credits.
That is chump change compared to the Destiny USA green building dispute that is simmering. Because the mega project allegedly failed to incorporate green building components it had promised the the federal government — including LEED certification — the developer may be penalized $2.3 million by the IRS.
I am going to be writing about this example of LEEDigation for some time. This post will cover just the basics but I will be diving into the messy details throughout the week.
In 2004, federal legislation was passed to create a Green Bond program. Under the program, a few developers received tax-free financing for the construction of green building projects. One of those projects was Destiny USA, which is a proposed 4.5 million square foot retail and entertainment complex in Syracuse, New York. The Destiny USA project received $228 million in tax-free Green Bonds. According to Syracuse.com, the tax-exempt status of the financing saved the developer $120 million. In exchange, the developer of the project, Robert Congel made promises about green building features and LEED certification that would be incorporated into the project.
But what happens if the developer does not satisfy his green building promises? We will likely find out within the next year.
According to an incredible article written by Rick Moriarty of the Syracuse Post-Standard, the project will not include many of the promised green building building components:
There is no 45-megawatt electricity generating plant running on “biofuel” made from soybean oil and recycled cooking grease. If there were, it would be the largest such plant in the nation and consume more than one-third of the total U.S. biodiesel supply.
Nor are there 290,000 square feet of solar panels on the mall’s roofs and other surfaces, enough to blanket six football fields.
The fuel cells that were to make 7 megawatts of electricity, five times more than the nation’s largest existing commercial fuel-cell installation? Nowhere to be seen.
Additionally, there is confusion as to whether the project has received its LEED certification, which was also promised.
The Destiny USA developers are facing a month-end deadline to certify to the IRS that the green building promises were met. If the IRS determines the developer did not meet its promises, the project could lose its tax-exempt status — which reportedly saved the developers $120 million — and be slapped with a $2.3 million penalty.
There is so much more to this story. If you are interested, I would advise you to check back over the coming days as new posts will be frequent. I will also be publishing a white paper describing all of the sordid details.