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Local Improvement Charges

By: Sonja Persram, BSc. MBA, LEED AP - Monday, January 29, 2007
Source: Sustainable Alternatives Consuting, Inc.

Commercial property owners and occupants may not understand the substantial benefits of green building retrofits. They could be enjoying higher building value, lower churn, easier lease-up, higher productivity and lowered operations and maintenance costs. The cost of going green, though, may exceed the benefit to the building owner. Not any more. Implementation of measures that are beyond a short simple-payback horizon have a new lease on life through an arrangement called Local Improvement Charges (LICs). LICs present significant opportunities to municipalities and building owners, given the urgency of retrofitting existing buildings and developing renewables to address global warming and climate change.

LICs have been used by many municipalities to allocate cost segments of infrastructure development for community enhancement to the properties whose owners benefit most from the improvements. Examples of these projects have included purchasing green space, building a park, putting in a new sidewalk, or replacing electrical poles on private property.

What is unusual about LICs is that these costs are associated with an individual property, not with the owner. They attach to the site or building owned, not to the person or entity owning it . Additionally, the municipality may support part of the project and the impacted property owners repay their portion via their municipal tax bills. An example of this system is found on the City of Regina’s website.

The new application of the LIC concept to financing energy efficiency retrofits and renewables, proposed in 2004 by the Pembina Institute, arose from a Canadian, Yukon Territory LIC initiative beginning in 1984, whereby rural residents were able to become grid connected and linked to telephone landlines. LICs were also used to finance renewables.

Federation of Canadian Municipalities has expressed interest in supporting the considerable communications costs for the Ottawa pilot.

Next: LIC number crunching, and tax and policy implications.

Sonja Persram, BSc. MBA, LEED AP is author of Green Buildings: A Strategic Analysis of North American Markets for Frost & Sullivan, addressing Energy, Water and Facilities Management. She participated on the City of Toronto’s Green Development Standards Working Group. Contact: Sustainable Alternatives Consulting Inc:

Peters, Roger; Horne, Matt and Heap, Nicholas, Using Local Improvement Charges to Finance Building Energy Efficiency Improvements: A Concept Report, The Pembina Institute, 2004.

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