This article was written by shareholders Guido Hartray, AIA, Architect, Partner, Marvel and Maria Ibanez, RA, Architect, Principal, IDSR Architecture.
Much has been made of the connection between the lobby renovation project and Local Law 97. There is a connection, but it’s not what you might think. The proposed improvements will have a negligible impact on reducing our energy consumption and bringing us into compliance with the law, but the money we spend on discretionary projects now will compromise our ability to make mandated performance improvements without increasing maintenance in the future.
We’re going to cover a lot in this article, including…
What Local Law 97 is and how the city is enforcing it
How much progress Seward Park Co-op has made toward compliance with the law so far
Seward Park Co-op’s lack of an established plan for compliance
Why the proposed lobby renovations will only make a small dent in terms of compliance
How much compliance might actually cost over the next two decades (spoiler: it’s likely to require tens of millions of dollars in capital improvements)
How improvements like building electrification, new windows, or new heating/cooling systems could help us comply with the law and actually improve our quality of life
Some quick definitions before we get started:
Greenhouse gases (GHGs): heat-trapping gases that contribute to climate change when released into the atmosphere. The gases include carbon dioxide and methane, among others.
Net zero: a site that does not contribute more GHGs to the atmosphere than it removes.
What is Local Law 97 and how is the city enforcing it?
Local Law 97 (LL97) is a New York City ordinance passed in 2019 and intended to reduce greenhouse gas emissions from NYC buildings. The NYC legislation dovetails with a global initiative, which established the global goal of net zero by 2050—meaning this is not simply local politics, and while the timeline may shift a bit, we will eventually have to comply. For the purposes of the legislation, each type of energy source is given an equivalent value in cubic tons of carbon based on the GHGs released through its production or use. For our buildings, energy is consumed in the form of natural gas and electricity.
The law requires compliance for individual buildings over 25,000 square feet, and for groups of buildings under a single ownership with an area over 50,000 square feet (like our co-op). It establishes a cap for GHG emissions for different uses (in our case, housing, retail, office, and parking) and targets reductions of 40% by 2030 and net zero carbon emissions by 2050. It also establishes a penalty of $268 for each ton of carbon emissions over the limit. (This doesn’t sound like much per ton, but we’ll explain later how that can really add up!)
One thing to note: Gas and electricity are treated differently in the calculations to measure compliance. For natural gas, total carbon emissions are based on the carbon released when the gas is burned. For electricity, the value accounts for the share of electricity that comes from carbon vs non-carbon sources (natural gas, oil, and coal vs. solar, wind, hydroelectric, or nuclear).
In New York City, we currently get very little of our electricity from renewables (~10%), so electricity is currently calculated as emitting more carbon than gas. But the expectation is that NYC’s grid will get cleaner—something that is already happening upstate, where electricity is closer to 90% renewable. The law assumes those future improvements will happen over the next 10 years, and that we’ll have a carbon neutral energy grid by 2040.
Where SPC currently stands
Based on data reported on the NYC LL97 Carbon Emissions Calculator (see screen captures below), we know that Buildings 1 and 2 are responsible for 3,977 tons of carbon emissions per year and Buildings 3 and 4 are responsible for emissions of 5,734 tons. (Many of us have noticed that Buildings 1 and 2 have a B energy performance grade and 3 and 4 have a D.) This may have more to do with how usage is reported than any actual differences between the buildings. The co-op is working to understand and address these inconsistencies and the city will be taking a closer look at them as the penalties start to kick in. Ultimately, compliance will depend on how we perform on an overall basis, so we will look at the numbers overall.
In the diagram below, the orange line indicates the greenhouse emissions threshold, which is being lowered incrementally until 2050, when net zero will be the requirement.
Given that our current combined total is 9,711 tons—less than the current threshold of 13,951—we are currently in compliance. This is good! But the threshold goes down to 6,576 in 2030, so we need to keep improving.
We’re currently projected to be at 8,335 tons in 2030 (thanks to expected reductions in the carbon footprint of electricity, not because of any changes we’re making), but that would still put us over the limit. If no further improvements are made, we can expect to owe about $470,000 per year in penalties starting in 2030. The compliance thresholds get lower every five years, so by 2035 we will be paying over $825,000 in fines every year, and more than $2 million yearly by 2050. Apparently the co-op is working with a company to more precisely document the uses and areas that could result in adjustments to these numbers, but even if the values are reduced, the penalties remain substantial.
What is SPC’s plan for achieving compliance and avoiding fines?
We have asked the Board about this repeatedly and have gotten mixed replies. Two Board members told shareholders during a lobby session that the Board is not planning to pursue compliance because it would be too expensive; instead, they plan to pay the fines because they believe it will be cheaper than complying with the law. Flouting the law and paying the fines is a risky and expensive proposition.
Since we started asking more about this issue, we have been told that paying the fines and waiting out the politics is not the Board’s official position and that they have been studying potential carbon reduction options. More recently, the Board has begun to develop an overall plan for compliance. This is a positive development. The path to compliance will include some difficult decisions and, at minimum, it’s something that shareholders should be informed of directly so that there’s knowledge of the strategy and informed consent.
According to a report put out by Urban Land Institute, achieving compliance over the next 25 years won’t be easy or cheap for the city’s large, old co-ops, but there are a number of ways to tackle the problem. Burying our heads in the sand and pretending this isn’t happening is not one of them.
Aren’t the lobby renovations going to help us achieve LL97 compliance?
While not having a comprehensive plan for LL97 compliance seems unwise, suggesting that the proposed lobby project is a significant step toward compliance, as some Board members have done, is deceptive.
The Board has suggested the proposed lobby project is directly related to compliance with Local Law 97. The FAQ section of Sewardparkcampus.com cited Local Law 97 as the “regulatory driver” for the project. (Note: This page was recently updated and most of the questions from December and January were removed.) The implication is that we have to make building improvements to satisfy the law and avoid fines, so we might as well make aesthetic upgrades to our spaces at the same time. Board treasurer Chris McCartin had a more realistic projection for the lobby project’s impact, stating in the Jan. 7 webinar that the planned renovations will only make “a small dent” in what is needed for compliance.
The same FAQs said that the replacement of windows in the lobbies will contribute to LL97 compliance. Upgrading windows is a good idea, but the windows in the lobbies and breezeways that are the focus of the proposed work are only 1.5% of the total window area of our buildings, so we can expect a reduction of around 0.15% in energy consumption. A very small dent.
What about the new heating and cooling systems in the lobbies and breezeways? Again, this is not a bad idea. The lobbies currently have no cooling beyond the natural ventilation from the breezeway windows and get minimal heating from the building’s steam system in the winter. New systems that provide cooling in summer and better heating in winter will make these spaces more comfortable, which is particularly important for the staff who spend their days in these spaces.
That said, adding heating and cooling to these spaces might actually increase energy consumption. And even if the new systems are very efficient, they are ultimately only a small portion of the building. They will only have a small impact on the building’s energy usage as a whole and, by extension, Local Law 97 compliance.
This does not mean that replacing the windows in the lobbies and providing improved heating and cooling is not a good idea. But it is an improvement that could be achieved as part of a much less expensive lobby renovation project that keeps the lobbies and entrances in their current location and does not need a deceptive claim of Local Law 97 benefits to justify it.
Using Local Law 97 to justify spending the balance of the money available from our mortgage on an overblown ground floor renovation is not responsible because it uses up the funds we need to take real steps toward compliance.
How can we actually achieve LL97 compliance and avoid the fines?
Although the law imposes fines to pressure building owners (like us) to take action, there are many benefits to be considered:
Reducing our carbon footprint is a goal that many of us take seriously and believe has a value unto itself—because doing nothing to curb climate change puts our future and our children’s future at risk.
There are also financial benefits: Inefficient buildings cost more to operate, and those costs will go up as utility costs increase.
Many of the improvements that make buildings more efficient also make them more comfortable. These improvements could make our apartments less drafty, and allow us to keep more humidity inside in winter and outside in summer.
These improvements can also increase long-term property value (maybe more than lobby finishes), especially among the next generation of buyers, as research has shown that Millennials and Gen Z are particularly concerned about the effects of climate change.
Reducing energy consumption and related carbon emissions can happen in two ways: improving the performance of the envelope of the building (the façade and roof), which keeps heat inside in winter and outside in summer, and/or increasing the efficiency of the mechanical systems we use to heat and cool. We will most likely need to undertake a combination of measures.
Let’s review some known options for reducing energy consumption, and estimate what they might cost based on analysis of similar buildings.
Envelope Improvements
Replacing all of our buildings’ windows with tight-sealing casement windows that have better insulated glass could reduce energy consumption by as much as 10%. Our old windows are very drafty, and even shareholders who replace them with new double-hung windows notice they are not much better. Properly installed casement windows would make apartments more comfortable.
Insulation could be added inside or outside of our brick walls, reducing our energy consumption by as much as 33%. Exterior insulation would be finished in stucco or panels and transform the exterior appearance of our buildings, so it would need to be undertaken with that knowledge. The upside is that it could also save on future local law 11 façade repairs.
Similar performance benefits could be achieved with interior insulation; it would cost less but the construction work would be quite invasive inside individual apartments.
Mechanical Systems Improvements
The most economical improvements involve improving the performance of our current systems. How many of us have windows open in the middle of winter? Better valves could keep our existing steam system from overheating apartments while others are too cool.
By switching our hot water production from gas/steam to electric heat pumps, we could expect energy consumption reductions of more than 11%. A similar reduction could be achieved by installing rooftop solar collectors to heat our water. This would be a minimally intrusive change with a significant benefit.
Installing heat pumps in each room in place of radiators would lead to reductions of more than 40%. This would be fairly invasive—requiring work in each apartment—but it would provide heating and cooling without the need for window air conditioners and would allow each resident to set the temperature to their needs.
COST: The reality is that taking on these improvements across our whole co-op will not be cheap. Going ahead with a few measures like better thermostatic valves and upgrades to domestic hot water could be a $5 to $10 million dollar project. Window replacement might increase the budget to $20 to $30 million. These would likely address the just-over 20% reduction in emissions that we need to comply with the 2030 threshold. Complying with the requirements for 2050 will likely require a switchover to electric heating. A new mechanical system that meets those requirements and provides heating and cooling would be closer to $60 million.
Every dollar spent on the lobbies is a dollar we won’t be able to use on Local Law 97 compliance.
If you read our deep dive on the mortgage that is being used to fund these renovations, you’ll recall that the proposed renovations would use up the remaining funds available from our mortgage and add to the amount we’ll need to refinance (likely at a higher interest rate) when our mortgage is due in 2031.
So, every dollar we spend on the lobbies is a dollar that is not available to spend toward energy performance improvements. We can spend money to renovate our lobbies and improve our landscaping, but we have to do so wisely, with the knowledge that we will need to make other significant capital investments in our buildings over the next 10 to 25 years, and that could lead to higher maintenance fees in the future. Since presenting the lobby project at the start of the year, the Board has taken steps to develop a plan for Local Law 97. Because taking steps toward improving our energy performance may have less immediate visible results than spending on lobbies, it is important that the Board hears from shareholders who think this long term investment in our buildings is a priority.