NYC may relax controversial Local Law 97 fines structure
New York City
New York City may be on the verge of creating additional flexibility for buildings unable to comply with Local Law 97 requirements by the 2024 deadline.
Testifying before members of the New York City Council, New York City Department of Environmental Protection Commissioner Rohit Aggarwala said the city was considering ‘fine flexibility’ for buildings. which do not comply with the time limits of the law.
Buildings 25K SF and larger must reduce their greenhouse gas emissions starting in 2024 under Local Law 97, which was passed as part of the city’s 2019 Climate Mobilization Act. Under current legislation, any building that fails to comply will be subject to fines of $286 for each tonne of carbon dioxide emitted above the buildings cap.
Buildings remain the biggest source of greenhouse gas emissions in the city, and how Mayor Eric Adams implements Local Law 97 will be a test of his commitment to environmental issues. But the Adams administration hinted it could relax the law’s regulatory approach as early as January this year, when a spokesperson for the mayor told Bloomberg Law the city needed to cut renovation costs and avoid “overly punitive fines”.
Although the law already provides options for buildings able to demonstrate their compliance efforts, Aggarwala said it could be amended to allow more flexibility on penalties and compliance mechanisms.
“Buildings acting in good faith may have their annual building emissions limits adjusted based on their penalties for non-compliance,” he said. “The concept of an alternative compliance mechanism and the idea of flexibility in terms of fines are things that I think are really important.”
Aggarwala said the advisory committees have not yet fleshed out details of what sanctions flexibility or alternative compliance mechanisms might look like, but said the committee is exploring options. A spokesperson for the Adams administration declined to provide further details on plans for alternative compliance mechanisms or flexibility on fines.
Many players in the real estate industry have been very critical of the law, including the chairman of the Durst organization, Douglas Durst, who told a bisnow webinar last year that the law punishes landlords who have already designed their buildings with sustainability in mind, pointing out that One Bryant Park is a property that exceeds most green building standards, but would face steep fines if the law is as written.
“Local Law 97 punishes people like us who have spent years making our buildings efficient by insisting we pay fines if we don’t make them more efficient, and every year we spend money to make them as efficient. effective as possible,” said Durst. “The idea that those of us who have made our buildings efficient can make them even more efficient is beyond me.”
YuhTyng Patka, partner and co-chair of Duval & Stachenfeld LLP’s Climate Mobilization Law Task Force, hailed the city’s move toward flexibility to reward building owners who are trying hard but are unable to meet the 2024 deadline.
Many building owners have struggled during the pandemic to collect enough rent to cover expenses and continue to face inflation-related challenges in the post-vaccine era, Patka said. bisnowleaving many people unsure of how to pay the bill for the required renovations.
“Currently, Local Law 97 provides no flexibility or middle ground approach. Either you comply, which means you are under your cap by January 2024, or you are not and you must pay a penalty,” Patka said. “It’s very black and white.”
New York City Buildings
Aggarwala also said the city plans to use fines collected from non-compliant buildings beginning in 2024 to fund renovation efforts to bring New York’s affordable housing stock into compliance.
“Emerging ideas are being discussed about how the city could create an alternative mechanism to traditional civil penalties that would also help modernize affordable housing,” Aggarwala said. “We are excited about this concept, but have not yet determined whether, and if so how, we would achieve this under current law.”
The proposal has the support of the entire city government. Louise Yeung, climate manager at the New York Comptroller’s Office, said fines collected should be earmarked for affordable housing renovations, but should ultimately serve as an incentive to get buildings to meet climate goals.
“The goal is 100% compliance, not fines for failure,” Yeung said in testimony before the city council.
Although affordable housing providers won’t have to comply with emissions caps until 2030, the added flexibility will likely provide much-needed relief, Patka said.
“I think it’s a good thing the city is looking for a way to accommodate the unique financial situation that affordable housing owners find themselves in,” she said. “Affordable housing is likely to have difficulty complying with Local Law 97, regarding the ability to pay for renovations or fines that result from not being able to pay for renovations.”
But even with the flexibility in place, the city could find itself collecting more fines than it hopes. Speaking during a bisnow event last month, Michael Lefkowitz, managing member of Rosenberg & Estis, said some buildings might choose to pay fines rather than complete upgrades, based on the cost of the renovations.
Aggarwala also said the advisory committee “is not pursuing a cap-and-trade system at this time,” following a feasibility study released in November by the Guarini Center on Environmental, Energy and Land Use. Law from New York University School of Law. While the study found that a carefully designed carbon trading program could help the city achieve its goals, the study also described the program as complicated.
Members of the Bronx and Brooklyn City Council, who represent residents of communities that have fought long battles for environmental justice, praised the city for avoiding a cap-and-trade system.
“I’m very, very pleased to hear that the administration is not pursuing a cap and trade mechanism,” board member Pierina Ana Sanchez, who represents District 14 in the Bronx, told the hearing. “We have seen time and time again, research shows that cap and trade mechanisms create hotspots that exacerbate damage to environmental justice communities.”