Policymaking at the State Level

March 1, 2006

While 2006 has already been dubbed the year of distraction by many as the U.S. Congress focuses on elections, the war in Iraq, and ethics reform, state policymakers may have an even busier year. Here is a look at some of the state and local issues facing the commercial real estate industry this year.

Eminent Domain. In Kelo v. New London, the U.S. Supreme Court found that the Fifth Amendment allows a locality to condemn property for economic development. It also left the door open for states to pass more restrictive laws and to define public use for themselves. To date, Alabama, Delaware, Ohio, and Texas have passed legislation. The Ohio Supreme Court has also taken up the issue in Norwood v. Horney, the first eminent-domain case since the Kelo decision. Legislation has already been introduced in Pennsylvania and New Mexico, and momentum will undoubtedly continue to make this an important issue in the coming years.

Intl. Codes. Forty-five states, the District of Columbia, and more than 1,093 local jurisdictions have adopted the Intl. Codes (I-Codes). As other states and localities wrestle with the issue, local BOMA associations have become an integral part of the codes adoption process through their successful advocacy efforts. Late last year, BOMA New York was successful in pushing the I-Codes through the City Council. Texas also adopted the Intl. Building Code statewide, with significant help from local BOMA associations. BOMA California is currently working to adopt substantial portions of the codes.

Emergency Preparedness. State and local governments across the country are re-examining their disaster preparedness plans as last year's hurricane season exposed serious flaws in disaster response. Policymakers will focus on upgrading infrastructure and improving the role of communication at all levels of government to ensure that first responders can act quickly in times of crisis. With the possibility of a pandemic flu outbreak, public health measures will also weigh heavily in policy discussions. In an address to the National Press Club in October 2005, U.S. Secretary of Health and Human Services Michael Leavitt called on every state and local government to develop a plan for a possible pandemic flu outbreak. BOMA Intl. encourages its members to develop comprehensive emergency preparedness plans for each building they own or manage and to update those plans on a regular basis. To assist them, the organization has developed two guides for property managers: Are Your Tenants Safe? BOMA's Guide to Security and Emergency Planning and The Property Professional Guide to Emergency Preparedness.

Energy. Last year hurricane season had an immediate effect on energy and heating costs. States reacted quickly to aid consumers. Georgia and Michigan temporarily eliminated gas taxes, while Louisiana banned price gouging. Pennsylvania has designed workshops to help cities conserve energy resources. Seventeen states expect to consider or make supplemental appropriations in FY 2006 to address higher fuel and heating costs. Ten states have adopted renewable energy portfolio standards in recent years, and more are expected to consider these programs in 2006. Such standards require energy retailers to derive a percentage of their fuel from renewable sources.

The commercial office building industry spends approximately $24 billion annually on energy costs. Energy represents the single largest controllable operating expense for office buildings, typically one-third of variable expenses. The BOMA Intl. Foundation, in partnership with the U.S. Environmental Protection Agencys ENERGY STAR® program, has developed a new operational excellence program, called the BOMA Energy Efficiency Program (BEEP), to educate the commercial real estate industry about the opportunity to reduce energy use and expenses with no- and low-cost solutions.

Telecommunications. In 2005, the telecommunications industry mounted a campaign to force competitive access on commercial real estate developments. Local BOMA associations were able to defeat proposals in Arizona, Florida, and New Mexico. However, legislation passed in South Carolina banning preferred-provider contracts and property-owner incentives. Already in 2006, there has been some action in Indiana, and more activity is expected. In an effort to head off another forced-access attempt, BOMA Arizona introduced legislation which explains that the state ... shall not require the owner of a commercial building to accept or maintain facilities or services from one or more providers of telecommunications services. The bill has the support of legislators as Arizona is largely a property rights state. In January, the North Carolina Utilities Commission issued its final order in its Competitive Access to Commercial and Residential Developments case, which was initiated last year. Even though the order does not mandate access to private property in favor of telecommunications providers, it could still negatively impact the ability of commercial real estate owners and managers to recover fees from carriers accessing their property, ban exclusive contracts, and subject preferred-provider contracts to Commission oversight.

For more information on the issues discussed in this column, visit (www.boma.org) or call BOMA Intl. at (202) 408-2662.

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