On September 12, 2023, Mayor Adams introduced “Getting 97 Done”, including proposed rules and guidelines to address New York City’s ongoing efforts to reduce harmful carbon emissions from the City’s buildings. The proposed rules are focused on four key areas:
- Identifying and targeting city, state, federal and utility-based financing for building upgrades;
- Improving awareness by providing technical support for compliance through NYC Accelerator;
- Implementing enforcement mechanisms through the NYC Department of Buildings; and
- Partnering with New York State to decarbonize central systems.
We have reviewed the proposed rules and guidelines and are providing this update to share our initial insights and summary concerning the implementation of the rules, the potential resources available, and initial guidance about the implementation (and mitigation) of fines and penalties.
The City’s administration has identified several financial resources available to eligible owners to make their buildings more energy efficient:
- $5 billion in proposed programs available across the State from 2025-2030;
- $40 billion in proposed federal grants for buildings struggling to access market-rate loans; and
- $625 million in tax credits and subsidies through the Federal Inflation Reduction Act.
Potential Tax Credits
The City also offers various tax incentives to cover LL 97 improvement costs. The attorneys at BBG can assist in the application process for these tax incentive programs, and provide more information to help you comply with the various statues and regulations:
- For low and moderate income multifamily buildings, including co-ops and condos, the New York State legislature recently passed a new J-51 tax abatement program. If this program is signed by the Governor and approved by the New York City Council, it will result in increased financial support and tax breaks to recover a portion of LL 97 compliance costs; and
- For substantial commercial or industrial developments, the Industrial & Commercial Abatement Program (ICAP) property tax abatement provides tax abatements in most areas of the City for periods up to twenty-five years. Applications will be accepted through March 1, 2025, and the initial application must be filed prior to the issuance of any permit related to the project.
Implementation of Fines and Mitigation
As stated above, enforcement is an essential aspect of LL 97’s implementation, and DOB has published a comprehensive framework for building emissions reductions. Under the proposed rules, building owners may be able to mitigate their exposure to fines and associated penalties during the 2024-2029 compliance period so long as they are able to demonstrate they have made “good faith efforts” towards compliance. For a building owner to establish that they have made “good faith efforts” that owner must pass the following two-prong test:
First Prong: Proof of Compliance with Existing Guidelines
- Submitting the annual building emissions report and maintaining compliance with any adjustment DOB has granted;
- Complying with the Energy Benchmarking guidelines under LL 84 of 2009;
- Complying with the Lighting Upgrades and Sub-meter Installation guidelines under LL 88 of 2009; and by demonstrating any of the following:
Second Prong: Proof of Efforts to Comply or Proof of Exemption
- That your building is undergoing work by having a fully approved application and permit issued; or
- That your building is undergoing electrification readiness work by securing an approved alteration application and a letter from a utility company attesting to the work; or
- That your building was previously under the emissions limit for the previous reporting year; or
- That your building is a critical facility (e.g., a hospital) whose services would be significantly impacted by having to pay the full penalty; or
- That your building has applied for or has been granted an adjustment to the applicable buildings emissions limits under NYC Admin Code § 28-320.7; or
- By submitting an appropriate decarbonization plan by no later than May 1, 2025.
Under the proposed rules, eligible owners who are able to evidence compliance with both of the prongs are likely able to establish that they are making “good faith efforts” as contemplated by the proposed rules and, therefore, would be entitled to the postponement of any fines or penalties.
Although the City’s analysis of LL 97 indicates that only eleven percent of properties covered by LL 97 are not in compliance with their 2024-2029 emissions limits, a great amount of work is still needed to reach these emissions reduction targets, with limited time to do so. It is therefore crucial that all building owners explore the various financial and legal resources available to them in order to take the necessary steps to either comply with LL 97 or establish that satisfactory efforts are underway to be able to mitigate the City’s harsh fines and penalties for noncompliance.
We will continue to provide you with information and insights on these new rules and regulations on a regular basis, including updates after the City’s public hearing on the proposed rules currently scheduled for October 24, 2023.
If you have questions relating to this new guidance, contact your BBG attorney of record or click here to submit a question.