6.9 Underwriting Owner’s Utility Cost as Part of Operating Expenses

A. For most existing buildings, utility costs are underwritten as part of expected operating expenses based on three years of operating history. But for applications where savings result from utility conservation measures included in the Repair Escrow, these savings may reduce the estimated operating budget for the relevant utility. (Properties with less than three years of operating history are not eligible for underwriting of reduced utility costs as compared to proven annual utility costs.) While substantial rehabilitation involves existing buildings, the estimation of utility cost as a portion of forecasted operating expense is not based on three prior years of expense history, unless the existing building is fully occupied for the three years prior to application and either will remain occupied during construction, or the majority of existing tenants will resume occupancy after temporary relocation. When an application for a stabilized, operating property proposes green building certification, then 100% of projected savings may offset historic expense, but if no new certification is proposed then only 75% of projected savings may be underwritten. In all other cases of substantial rehabilitation, and in new construction proposals, utility costs included in forecasted operating expense must be derived as follows: a) for green MIP applications, from the modeled or simulated utility consumption calculated for the proposed project; and b) for applications with no green building certification, utility costs may be estimated by comparison to other recently built, non-green-building-certified properties in the same utility pricing market.

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Chapter 6 Energy and Water Conservation 6.9 Underwriting Owner’s Utility Cost as Part of Operating Expenses

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