The Green Standard CIP includes a suite of incentives that enable developers and property owners to recoup a portion of the ICC incurred to voluntarily construct new buildings to the higher performance levels under the Green Standard CIP. The mix of incentives offered aim to optimize influence on the development community while balancing affordability to the municipality with consideration to the different stages of development, types of buildings and their ownership over the long-term.
The following list provides a summary of the Green Standard CIP Incentive Programs which is followed by a more detailed description of each incentive. All programs are subject to approval of the requisite budgetary resources at the sole discretion of City Council. Once a program has approved funding, public notification will be provided to indicate incentive applications are being accepted along with any additional conditions or financial limitations.
Pre-construction (Land acquisition, development financing and building design):
- Feasibility study grants
- Intended to support the Integrated Design Process used to determine cost-effective design characteristics required to construct high performance buildings
- Financing (low-interest loan from municipality)
- Only applicable to the ICC involved in constructing to Net Zero energy or Net Zero ready building performance levels (A or B)
- Completion of a feasibility study is required as part of process (grant applicable)
- Applicable to developers intending to own the new building post-construction
Post - construction (upon building verification of performance level equivalency):
- Cash rebate grants
- Intended to be a one-time grant for developers selling the building post-construction
- May be used by faith-based places of worship and charitable organizations who are exempt from paying property taxes (other eligibility limitations apply as indicated in section 5.3)
- Value of incentive will be at a lesser level than the Tax Increment Rebate (see below)
- Incremental Property Tax Rebate (similar to Brownfields CIP program)
- o Based on tax uplift between pre and post construction assessed property value
- o Intended for developers that retain ownership of building post-construction to recoup a larger portion of their ICC
As previously indicated in section 4.0, regardless of the building performance level or incentive program, Green Standard CIP applicants will be required to conduct, and provide to City staff, independent modelling by a qualified professional indicating the target building performance level prior to issuance of the building permit as well as verification upon commissioning of the building. For all incentive programs, the City will maintain a right to peer review any supporting documentation provided and to have all reasonable peer review costs covered by an applicant.
5.1 Feasibility Study Grants
Feasibility Study Grants are intended to support the use of an Integrated Design Process determine cost-effective design characteristics required to construct high performance buildings. These studies are to be conducted at the early design stage, provide for upfront consideration of opportunities to maximize the performance of the building envelope, optimization of efficiency of the mechanical and ventilation systems as well as inclusion of renewable or alternative energy resources where feasible. This will enable building proponents to pro-actively evaluate the impacts of different building design elements on performance levels related to any applicable incentives as well as cost-effectively assess different alternatives to achieve the desired goal.
The outcome of the Feasibility Study must clearly provide a quantitative assessment of different building elements as they impact energy performance related to the Green Standard CIP performance levels (as described in Section 4.0) based on established engineering and building science practices/principles. The assessment should also clearly indicate a preferred bundle of building design elements and energy efficiency measures that will be included as the project advances to the building permit and construction stages of development including the targeted CIP building performance level and third-party building certification level if applicable.
The Feasibility Study Grants will provide up to 50% of the cost of completing the feasibility study up to maximum of $25,000 per development project. Grant applicants must submit the completed feasibility study to the City for review, along with the invoice indicating the cost of the study, as well as the associated energy modelling indicating achievement of at least Level C building performance levels as described in Section 4.0. The Feasibility Study Grants will be awarded to the property owner following the City's confirmation that grant application meets these requirements and upon issuance of the building permit for the project to be constructed to the targeted performance level.
These grants are not applicable to development projects that access other programs such as the Enbridge Gas Savings by Design Program or any other program that reimburses or provides upfront financial assistance for the full cost of a feasibility study or equivalent design charette process. The CIP Feasibility Study Grants are available to eligible development projects that may access related programs which incentivize up to the remaining 50% of the costs associated in conducting an Integrated Design Process subject to the maximum CIP Grant value and the other requirements as outlined above.
A maximum dollar value for all Feasibility Study Grants provided within any one calendar year may be established by City Council at their sole discretion.
5.2 Financing
The City may offer eligible development projects low-interest financing for the ICC premium involved in constructing to Net Zero energy or Net Zero ready building performance levels. This refers to the Green Standard CIP building performance levels A and B. Municipalities have financing options that are often at lower interest rates than traditional sources of financing available to the development sector and therefore can help decrease the cost of capital required for constructing a high-performance building.
This financing will only be applicable to developers intending to own the new building post-construction. A charge, equal to the value of the loan, will be registered on title to the property until it is paid in full.
Maximum loan amounts will be determined upon City Council approval of annual budgets for the purposes of administering the Green Standard CIP. Applicable terms and interest rates will be determined at time of the proponent's application to the Green Standard CIP. Completion of a feasibility study will be a pre-requisite to applying for financing through the Green Standard CIP.
If the fully constructed building fails to reach the required building performance levels described above upon commissioning, a financial penalty and/or a shorter term of loan repayment may be enforced at the discretion of the City Treasurer or designate.
5.3 Cash Rebate Grants
Based on independent studies assessing the ICC for constructing high performance green buildings, it is estimated that the building performance levels identified within the Green Standard CIP may involve ICC premiums within the range of approximately 2% to 17% above the related current OBC energy efficiency standards depending on the performance level and benchmark standard referenced as well as the type of building constructed.
Cash Rebate Grants are intended to be a one-time grant, at a maximum of $250,000 for any individual project, to help building proponents recover a portion of the ICC premium associated with reaching Green Standard performance levels A, B, or C, as listed
- Up to 35% of eligible ICC associated with achieving CIP Performance Level A*
- Up to 25% of eligible ICC associated with achieving CIP Performance Level B
- Up to 15% of eligible ICC associated with achieving CIP Performance Level C
*If the applicant uses the Zero Carbon Building (ZCB) standards for third party certification to qualify for this incentive program, Level A requires the ZCB v2 Design Standard certification to meet the TEUI target identified within Kingston's Green Standard CIP regardless of the TEDI option chosen for energy modelling allowed within the ZCB standard.
The Cash Rebate Grants are applicable to developers selling the new building post-construction as well as faith-based places of worship and charitable organizations who exempt from paying property taxes.
The proportion of the ICC, and the associated dollar value of this incentive, will be at a lesser amount than provided within the more long-term oriented Incremental Property Tax Rebate (see Section 5.4) as the property owner will be able to recover some or all the additional proportion of their investment in the sale of their high-performance building.
The property owners indicated above, who are exempt from paying property taxes, and therefore ineligible for the larger Incremental Property Tax Rebate, will be able to further recover a portion of their ICC investment during their ongoing ownership of the building through reduced operating expenses with the expected lower energy consumption and associated utility bills.
Provincial and federal owned properties and properties owned by their agencies ineligible for Cash Rebate Grants.
The total number of Cash Rebate Grants and the maximum cumulative dollar value awarded to all eligible applicants within any one calendar year will be established as part of the municipal budget approved by Kingston City Council on an annual basis.
5.4 Incremental Property Tax Rebate
Property taxes are a primary source of revenue for a municipality. Properties which are vacant, undeveloped, or in need of remediation will yield less (if any) revenue to the municipality than developed and well-maintained properties. Developments that the residential or employment intensity of an area can also enhance property tax values and associated revenue for the municipality while serving a public good such as environmental protection and downtown revitalization as examples.
Offering temporary relief on property tax is a proven tool that the municipality can use to motivate and incentivize property owners to invest in improvements to their properties, thus increasing the value of the property and the associated tax revenue potential for the municipality. Many municipalities have successfully offered short-term relief programs waiving part or all the property tax on eligible properties, particularly the portion of the tax that is new due to actions which increase the value of the property which is sometimes referred to as tax uplift. These relief programs have been called Tax-Increment Grants or rebates because it applies only to the incremental increase in property taxes payable, not to the tax that was assessed prior to the improvement of the property. This helps ensure that the municipality continues to collect tax revenue from the property used for the funding of municipal services such as garbage collection and road maintenance, but also provides a meaningful incentive to the developer.
The intent of the Incremental Property Tax Rebate incentive program is to encourage investment in enhanced building performance as described within the Green Standard CIP. This rebate is targeted for developers that retain ownership of building post-construction during its operation to recover a larger portion of the ICC associated with building to CIP performance levels A, B or C. Upon building completion and payment of the first year's property taxes, the rebate would be paid annually to the property owner at the following incremental levels from 25% to 50% of the annual tax uplift on the property for up to 10 years (25% for multi-residential and office, 50% for retail buildings) or until the eligible ICC is partially recovered as indicated below to a maximum of $1,000,000 for any individual development project:
- Up to 75% of eligible ICC associated with achieving CIP Performance Level A*
- Up to 55% of eligible ICC associated with achieving CIP Performance Level B
- Up to 35% of eligible ICC associated with achieving CIP Performance Level C
*If the applicant uses the ZCB standard for third party certification to qualify for this incentive program, Level A requires the ZCB v2 Design Standard certification to be met upon completion of the building and ZCB v2 Performance Standard to be achieved for each year the tax rebate is applicable.
The formula included below will be used to determine the rebate on any given project subject to any maximum limits established.
Total eligible amount for Tax Rebate = % of eligible ICC associated with the Green Standard CIP building performance achieved.
Total amount rebated annually = 25% - 50% of Total municipal portion of incremental property tax payable per year until Total eligible amount of Tax Rebate is recovered by the applicant.
Incremental property tax payable = Property value after construction – Property value before construction x tax rate
The final valuation of the Tax Rebate will be calculated after a site assessment has been conducted following the completion of the development and is incrementally determined based on the level of building performance and any applicable third-party certification has been verified. Property taxes must be paid in full in any year for which the applicant will receive a rebate prior to the rebate being processed. When the cumulative approved incentive amount is reached, the tax rebate will immediately expire.
The following example illustrates how the Incremental Tax Rebate would be calculated. A property owner constructs a new NZe multi-residential building on a vacant property and is independently verified to have met the Green Standard CIP performance Level A. The increased assessment value of that property will be used when calculating the Incremental Property Tax Rebate amount as follows:
- The project will create a $300,000 annual increase in municipal portion of property taxes payable thereby creating a maximum annual rebate of $75,000 (at 25%)
- The property owner incurs $800,000 in additional eligible costs to build to NZe enabling them to recover up to 75% of the eligible ICC back as a rebate (75% x $800,000 = $600,000).
- Upon project completion, and payment of first year's property taxes, the property owner receives $75,000 as a rebate.
- The tax rebate for this project expires after eight years ($600,000 divided by $75,000 = 8).
Property owners who occupy the new building constructed to the Green Standard CIP performance levels, and benefit from their associated lower utility costs, will have post-construction incentives reduced by up to 50% depending on the portion of the utility savings that are passed on to other building tenants. For example, a property owner of a multi-unit residential building who maintains a relatively small management office may have no reduction in the rebate paid to them if their tenants pay their own utility bills. Whereas a property owner occupying a commercial office building where they pay the utilities for the entire building would have the total rebate value reduced by 50%. The percentage of occupied space utilized by the owner, as well as responsibility for utility costs as described above, will be factored into the determination of any reduction accordingly.
The maximum cumulative dollar value for all Incremental Property Tax Rebates awarded within any one calendar year will be established as part of the annual municipal budget approved by Kingston City Council.
For the purposes of this incentive program, the following development projects are not eligible for the Green Standard CIP Incremental Property Tax Rebate program:
- developments that do not increase the property taxes collected by the City;
- developments that will not achieve Green Standard CIP building performance levels A, B or C as outlined in section 4;
- development projects where the incremental tax uplift is already being rebated through another parallel program such as the City's Brownfield CIP; or,
- there are existing property tax arrears on the property.
If the City of Kingston's Brownfield CIP rebate is being utilized as part of a development project, the Cash Rebate Grant may be accessed as an alternative Green Standard incentive at the corresponding percentage recovery of the associated ICC if all other eligible requirements are met as described in section 5.3.
Property owners may utilize both the Green Standard CIP and Rental Housing CIP for a project that meets the requirements of each CIP independently. Where a property owner is eligible to receive a benefit through both CIPs, they will be paid consecutively, with the Incremental Property Tax Rebate program in the Green Standard CIP taking effect only once any Rental Housing CIP benefit has been exhausted.