Dozens of Lower Manhattan commercial buildings receive benefits through the Lower Manhattan Energy Program (LMEP). By signing a lease or sublease in one of these eligible buildings businesses will be eligible for up to 12 years of reduced electricity costs, amounting to $1 per square foot or more of savings per year. To see a map of participating buildings click here.

Section 11 of the bill adds a new Article 2-1, entitled “Rebates of Charges or Energy in Revitalization Areas in Cities Having a Population of One Million or More”, to the General City Law. It establishes a program to reduce electricity costs for eligible occupants of commercial space in renovated or newly constructed buildings located in a defined area in lower Manhattan.

Eligibility for the energy benefit depends on several factors, the primary of which are: investment in the building occupancy of premises in the building by eligible users of electricity, and compliance with certain submetering and notice requirements. In general,the law would require the “private utility”, defined to include Con Edison (§ 25-aa(k)[1]), to make a “special rebate” (§ 25-aa(o)) based on “eligible charges” (§ 25-aa(b)) for electricity made to “an eligible redistributor of energy” (§ 25-aa(c)), who would generally be the landlord of an “eligible building” (§ 25-aa(a)). The private utility makes the rebate by reducing the energy bill of the eligible redistributor of energy. The landlord is required to pass along the benefit, which is generally payable over a twelve-year period, to tenants who are “eligible revitalization are energy users”. § 25-aa(e). The utility that makes a “special rebate” as part of this program may claim a credit against its gross receipts tax otherwise payable to the City of New York. The program would be administered by the Department of Business Services.

Investment in the Building

An eligible building must be located within the area of lower Manhattan defined as the “eligible revitalization area”. § 25-aa(d). The owner of the building must make one of four specified investments in the building. These options may be generally described as follows:

1. The owner may construct a new building or invest a minimum of 20% of an existing building’s assessed valuation in renovation so as to qualify for real property tax benefits under the Industrial and Commercial Incentive Program (“ICIP”). Title 2-D of Article 4 of the Real Property Tax Law. Application for ICIP benefits must be made to the Department of Finance after June 30, 1995, and before April 1, 2004. § 25-aa(a)(1). Applications for ICIP benefits must be filed on or before the date of issuance of a building permit.

2. The owner may obtain financing for renovation or construction from New York City’s Industrial Development Agency (“IDA”) and invest at least 20% of assess valuation in such renovation or construction. Approval of such financing must be obtained from the IDA after June 30, 1995, and before June 30, 2005. § 25-aa(a)(2).

3. The owner may lease property owned by the City or the New York State Urban Development Corporation and improve such property by an investment of at least 20% of assessed valuation. Approval of such lease must be obtained after June 30, 1995, and before April 1, 2004. § 25-aa(a)(3).

4. The owner may invest at least 20% of assessed value of an existing building to convert it to a mixed-use building which is eligible for tax exemption under proposed amendments to the Real Property Tax Law for construction work on mixed-use property (Title 2-E of Article 4 of the Real Property Tax Law, which would be added by section 15 of the bill). Application for such benefits must be to the Department of Finance after June 30, 1995, and before June 30, 2005. § 25-aa(a)(4).

Eligible Occupants

Although the special rebate is initially paid to the landlord or owner of the building, the amount of the rebate, described in further detail below, depends upon the presence of eligible revitalization area energy users. § 25-aa(e). This latter term is defined to exclude residents, retail stores, manufacturers, hospitals and hotels. Thus, by process of elimination, eligible revitalization energy users are, essentially, commercial tenants. In addition, special provisions in the definition of an eligible revitalization area energy user treat a landlord as such a user with respect to (1) vacant premises which have been renovated or constructed for occupancy by eligible revitalization area energy users other than the landlord, and (2) common areas, systems and facilities of the building, such as elevators and lobbies, which are to be used by tenants who are eligible revitalization area energy users. § 25-aa(e)

Metering Requirements

The bill conditions the rebate on certain requirements relating to metering so that electrical usage by the occupants of an eligible building can be measured or, in the case of smaller tenants, estimated. If the premises of the user equal or exceed the lesser of 10,000 square feet or the entire floor of a building, they must be metered by the utility or submetered by the landlord. §§ 25-aa(e); 25-bb(c)(3). If the premises are neither metered nor submetered and do not exceed the space limitations, charges for electrical use attributable to such premises will be determined by the Department of Business Services in accordance with rules to be promulgated by the Department. 25-bb(c)(2)(ii). Under a special provision in the bill, the owner of a building which has been renovated to qualify for benefits under the mixed-use provisions of the bill would be eligible for the special rebates under Article 2-1 only if the portions of the building used commercial purposes are separately and directly metered by a private utility or public utility service. 25-aa(e). If the landlord seeks to be treated as an eligible revitalization area energy user with respect to vacant premises which have been renovated or constructed by the landlord for occupancy by an eligible revitalization area energy user other than the landlord, such premises must be separately metered or submetered in accordance with rules of the Department of Business Services. 25-aa(e).

As indicated below, in general, a building would not be rendered ineligible for the program by reason of the presence of non-commercial tenants. Instead, only the portion of the bill for electricity that is attributable to the eligible tenants would be eligible for the special rebate. §§ 25-aa(b); 25-aa(o). However, the landlord is required to submeter all premises within the building if they equal or exceed the specified amount of space (10,000 square feet or a full floor). § 25-bb(c)(3). If the landlord fails to meet this requirement at any time in the first five years of the benefit period, the Department of Business Services is required to terminate the landlord’s eligibility. § 25-bb(h).

Redistributor’s Obligation to Pass Benefits Through

An “eligible redistributor of energy” is defined to include the landlord who purchases electricity from a private utility and either resells it to an eligible revitalization area energy user or consumes the electricity himself or herself and qualifies as an eligible revitalization area energy user. § 25-aa(c). The owner of a building which has been improved or built to qualify for reduced energy costs is required to reduce the electricity rebate among them according to their use of the electricity. § 25-b(c)(2). Use is to be determined first according to submeter readings, and if there is no submeter, according to rules of the Department of Business Services. § 25-bb(c)(2)(i) and (ii). As indicated above, the landlord may benefit directly from reduced energy costs to the extent the landlord meets the definition of an eligible revitalization area energy user. The landlord is, by special provisions of the definition, an eligible revitalization area energy user with respect to vacant premises constructed or renovated for eligible tenants and common areas, systems and facilities used by eligible tenants. § 25-aa(e). With respect to common areas, systems and facilities, however, the landlord is obligated to reduce charges made to tenants separately from rent for the costs of operating the building by that portion of the special rebate which is attributable to such costs. § 25-bb(c)(2)(iii).

To qualify as an eligible redistributor of energy, the landlord must comply with certain additional requirements. The landlord may mark up charges for electricity where there is a submeter, but only to the extent of 12%. § 25-bb(c)(4). The landlord must also state in each bill to a tenant for electricity that a reduction in energy charges is available through the program authorized by the bill. § 25-b(c)(5). The bill rendered for rent to “rent inclusion” tenants, who do not receive a separate bill for electricity, must contain the same statement. § 25-aa(f).

Amount of the Special Rebate

The special rebate payable to an eligible redistributor of energy is equal to 30% of eligible charges for the first eight years of the benefit period, 24% for the ninth year; 18% for the tenth year; 12% for the eleventh and 6% for the twelfth and last year. § 25-bb(a)(1). If the eligible building is a designated landmark, the landlord is entitled to an extra year at the 30% rate. § 25-bb(a)(1). As indicated above, charges for electricity sold by a landlord to tenants who are excluded from the definition of eligible revitalization energy users would not be included in the “eligible charges” against which the applicable percentage would be applied in arriving at the amount of the special rebate. § 25-aa(b).

Deeper benefits may be available in buildings that receive electricity from the New York City Public Utility Service. § 25-bb(a)(2). In addition, owners who have improved their buildings by twice the level of investment in their property as that required for the basic special rebate (i.e., 40% instead of 20% of assessed valuation) are entitled to an enhanced benefit. § 25-bb(a)(3).

Applications

Applications to the Department of Business Services for benefits must be made after June 30, 1995 and before June 30, 2005, and before a building permit for the construction or renovation is issued. § 25-bb(f). After the required level of investment in the premises has been made, the applicant must submit to the Department of Business Services a proposed method of calculating the amount of the special rebate and the allocation of the reductions in charge for electricity that the applicant will make for eligible tenants. § 25-bb(f). Once a landlord is certified by the Department of Business Services as an eligible redistributor of energy, the landlord is entitled to the special rebate for the period beginning with the first day of the first billing cycle which commences after the certification is issued. § 25-bb(h)

***Refer To The Legislation For Full Details/Requirements***

For questions regarding these incentives, call the Grants and Incentives Hotline at the Alliance for Downtown New York (212) 566-6700 or reach us by e-mail at  incentives@DowntownNY.com. To better answer your questions please include your company name, address and number of employees.