Economic Analysis of

New Mexico’s

Sustainable Building

Tax Credit

December 2014

Bureau of Business &

Economic Research

Acknowledgements

The University of New Mexico Bureau of Business and Economic Research (BBER) would like tothank the Foundation for Living for the opportunity to work on this important project. We are gratefulto Jim Folkman, Mike Cecchini, John Garcia, and Steve Hale for the invaluable information andsupport they provided to our staff throughout the execution and completion of this project. Wesincerely hope that the information provided herein provides new insights to the impacts New Mexico’sSustainable Building Tax Credit has had on New Mexico’s economy, households, and environment.

This project could not have been completed without the help of numerous BBER employees. Mysincerest thanks to Jeffrey Mitchell for serving as a constructive sounding board, and for his guidanceand help in determining the scope and content of the project and this report. Doleswar Bhandariprovided invaluable expertise, and also executed the IMPLAN analysis of the tax credit’s economicimpacts. Many thanks to Deborah Anyaibe for her assistance with estimating the environmentalimpacts of energy efficient housing, and for the many hours spent searching for, sifting through, andsummarizing crucial information and data.

Gwendolyn A. Aldrich

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Contents

List of Figures iv

List of Tables iv

1 Introduction 1

2 Analysis of New Mexico’s Sustainable Building Tax Credit 22.1 Sustainable Building Tax Credit Certificates of Eligibility, 2007-2016 . . . . . . . . . . . 32.2 Economic and Fiscal Impacts of the Sustainable Building Tax Credit . . . . . . . . . . . 72.3 Environmental Impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

2.3.1 Water Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112.3.2 Energy Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

2.4 Impact on Household Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

3 Summary 20

References 23

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List of Figures

2.1 Annual SBTC single-family home approvals and associated tax credits . . . . . . . . . . 42.2 HERS Index Scores of SBTC single-family homes . . . . . . . . . . . . . . . . . . . . . 72.3 Estimated annual energy savings (MBtu) from SBTC single-family homes . . . . . . . . 142.4 Cumulative energy savings (MBtu) from SBTC-approved single-family homes . . . . . . 152.5 Cumulative decrease in household energy expenditures (2013 $) . . . . . . . . . . . . . 18

List of Tables

2.1 Sustainable Building Tax Credits by building type . . . . . . . . . . . . . . . . . . . . . 32.2 Annual single-family home SBTC approvals and associated tax credits . . . . . . . . . . 42.3 Single-family home SBTC approvals by city (TYs 2007-2016) . . . . . . . . . . . . . . 52.4 Single-family home SBTC approvals by certification level . . . . . . . . . . . . . . . . . 62.5 Economic impacts of TY2013 SBTC-approved single-family homes (assuming SBTC

stimulates additional construction) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.6 Fiscal impacts of TY2013 SBTC-approved single-family homes (assuming SBTC stimulates

additional construction) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.7 Distribution of TY2013 single-family homes across New Mexico’s counties . . . . . . . . 102.8 Economic impacts of TY2013 SBTC-approved single-family homes (assuming change in

type of construction only) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.9 Fiscal impacts of TY2013 SBTC-approved single-family homes (assuming change in type

of construction only) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.10 Net economic impacts of TY2013 SBTC-approved single-family homes (2013 $) . . . . . 112.11 Estimated annual and cumulative water savings (gallons) from SBTC-approved single-family

homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132.12 Estimated energy savings (MBtu) from SBTC-approved single-family homes . . . . . . . 152.13 Annual reductions in CO2 emissions and passenger vehicle equivalents . . . . . . . . . . 162.14 Decrease in household energy expenditures (2013 $) . . . . . . . . . . . . . . . . . . . . 172.15 Annual economic & fiscal impacts (2013 $) of decreased household energy expenditures

for TY2013 SBTC-approved single-family homes . . . . . . . . . . . . . . . . . . . . . . 19

3.1 Summary of TY2013 Sustainable Building Tax Credit impacts (2013 $) . . . . . . . . . 21

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1 Introduction

Buildings use the majority of energy consumed in the U.S., and are thus responsible for a large portionof U.S. emissions of carbon dioxide and greenhouse gases (GHG). Each year the U.S. Department ofEnergy’s Office of Energy Efficiency and Renewable Energy publishes a Buildings Energy Data Bookthat provides information and statistics regarding U.S. energy consumption. As detailed in the 2011Buildings Energy Data Book (the most recently available edition),1 during 2010 the building sectorwas responsible for a full 74% of total US electricity consumption (industry was responsible for theremaining 26%).2 With respect to primary energy, the 2010 U.S. building sector was responsible for41% of U.S. energy consumption,3 whereas industry and transportation were responsible for 30% and29%, respectively (Kelso, 2011). Single- and multi-family homes accounted for 54% of the primaryenergy consumed by the U.S. building sector, while commercial buildings accounted for the remaining46%.

Buildings contribute to emissions of various greenhouse gases – carbon dioxide, methane, and nitrousoxide. By far the most common GHG is carbon dioxide.4 In 2009 U.S. buildings were responsible for40% of total U.S. carbon dioxide emissions (Kelso, 2011). Constructing more energy efficient (green)buildings and renovating existing buildings such that they are more energy efficient are clearlyimportant components of achieving reductions in overall U.S. energy consumption and greenhouse gasemissions. To this end several state and local governments have implented tax credits and otherincentives to encourage green building. In addition to the numerous incentive programs offered byvarious cities across the country (such as Portland, OR; Austin, Texas; Arlington, VA; and manyothers), New York and Maryland both have green building tax credits available.5 At least in part as aresult of incentive programs, green building is becoming more common. According to a 2014 reportregarding the development of an energy efficient U.S. residential sector, nearly 150,000 homes hadattained LEED certification as of early March 2014. The three states with the greatest number ofLEED certified homes are California (9,186 homes), Texas (8,476 homes), and New York (2,629homes). As of March 2014 New Mexico had 1,698 LEED-certified homes and ranked tenth in thenation (U.S. Green Building Council, 2014).

The New Mexico Sustainable Building Tax Credit (SBTC) is designed to encourage both theconstruction of green/energy efficient buildings and the renovation of existing residential andcommercial buildings into green buildings. To qualify for the SBTC commercial projects must be 60%more energy efficient than the national average for similar buildings,6 and must be certified under thenonprofit U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED)

1The 2011 and prior editions of the Buildings Energy Data Book can be found online:http://buildingsdatabook.eren.doe.gov/DataBooks.aspx.

2The U.S. building sector includes single- and multi-family homes as well as commercial buildings.3Primary energy is the energy consumed to generate and supply electric energy to consumers. Due to losses incurred

during production, transmission, and distribution, delivered energy is notably less than primary energy consumption. Forexample, 49% of primary energy used by the residential building sector is lost during transmission and distribution (Kelso,2011).

4http://www.epa.gov/climatechange/ghgemissions/usinventoryreport.html.5Information regarding incentive programs can be found online at http://www.epa.gov/greenbuilding/tools/

funding.htm and http://www.dsireusa.org/.6Initially the SBTC required commercial projects be only 50% more energy efficient; in 2011 the requirement became

more stringent and increased to 60%.

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rating system.7 Single- and multi-family homes must have at least a silver certification under eitherthe LEED or Build Green NM (BGNM) rating system,8 and must also have a Home Energy RatingSystem (HERS) Index Score of no more than 60 (the HERS Index provides a measure of a home’senergy efficiency). A home constructed according the 2004-2006 International Energy ConservationCode (IECC) has a HERS Index Score of 100. A home with a HERS Index Score less than 100 is moreenergy efficient than a home built to the 2004-2006 IECC, while a home with a HERS Index Scoregreater than 100 is less energy efficient. For example, a home with a HERS Index Score of 60 is 40%more energy efficient than a home with a HERS Index Score of 100. Manufactured homes may alsoqualify for the credit under the ENERGY STAR system. The SBTC amount for which a buildingqualifies depends upon the building type, the rating system and level at which the building is certified,and the number of qualified occupied square feet. The tax credit is available for either personalincome tax (PIT) or corporate income tax (CIT), is non-refundable, includes a seven-year carry forwardprovision, and is transferable.

The SBTC was enacted in and became effective in 2007, and was originally scheduled to expire inDecember 2013, but during the 2013 legislative session the SBTC was extended through 2016.Whereas the original (2007) bill provided for $10 million in tax credits annually ($5 million each forresidential and commercial), the 2013 extension allowed for $5 million annually ($4 million forresidential and $1 million for commercial). The 2014-2016 residential tax credits were exhausted byMarch 2014. As of May 23, 2014 all of the 2014 and a portion of the 2015 commercial tax creditswere also exhausted, although approximately $1.8 million in 2015 and 2016 commercial tax credits arestill available.9 The rapid depletion of the 2014-2016 tax credits, in particular the residential taxcredits, indicates substantial demand for green buildings and the SBTC.

The Foundation for Living asked UNM BBER to provide an analysis of the SBTC and its impacts onthe NM economy, household expenditures, and the environment. Due to the short timeline for theproject, we have focused our efforts on estimating the program’s economic and fiscal impacts, changesin household energy expenditures, and impacts on energy consumption, water consumption, andcarbon dioxide emissions.

2 Analysis of New Mexico’s Sustainable Building Tax Credit

Our analysis of NM’s SBTC is based upon data provided to BBER by New Mexico’s Energy, Mineralsand Natural Resources Department (EMNRD). The data includes information regarding approvedrequests for the Sustainable Building Tax Credit – building type, square footage, energy design andsavings, location, energy efficiency certification level, the first tax year in which the approved tax creditmay be claimed, etc. The analysis below encompasses all years in which the tax credit has been madeavailable – 2007 through 2016. Throughout our analysis we use tax year (TY) to refer to the tax yearin which an SBTC-approved building may first claim the credit.

7The LEED certification program has four certification levels offered for new construction (in order from least to moststringent and energy efficient): certified, silver, gold, and platinum.

8The BGNM program offers silver, gold, and emerald certifications.9Per the NM Energy, Minerals, and Natural Resources Department website ( http://www.emnrd.state.nm.us/ECMD/

CleanEnergyTaxIncentives/SBTC.html), accessed October 20, 2014.

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2.1 Sustainable Building Tax Credit Certificates of Eligibility, 2007-2016

The SBTC first became available in 2007 – during the Great Recession and when the housing bubblehad burst. The US economy had officially entered the recession in December 2007, and major joblosses occurred in New Mexico between November 2007 and November 2008. The constructionindustry was one of the hardest-hit, with 1,300 jobs lost during this period. SBTC claims weretherefore limited at first; no certifications were granted in TY2007, and in TY2008 and approximately100 certifications were granted, for a total of roughly $1 million in tax credits. Between TY2008 andTY2013 applications and approvals became more numerous. More than 900 SBTCs were approved forTY2013 for a total of approximately $9 million in tax credits. Due to the decrease in SBTC fundingfor TYs 2014 through 2016, certifications decreased to approximately 400 annually. As detailed inTable 2.1, the majority of SBTC certifications and tax credits have been claimed for single-familyconstruction projects; of the 3,482 SBTC-approved projects, 2,981 (86%) are single-family homes andhave claimed $29.9 (84%) of the $35.8 million in tax credits awarded under the SBTC program.Multi-family projects are the second-most common, and represent 11% of all projects granted a SBTC.Nearly all of the 396 multi-family projects occurred in TY2013. Manufactured homes and commercialprojects have accounted for only 2% and 1% of projects, respectively. Because the vast majority ofcertifications have been for single-family homes, they are the focus of the remainder of this report.

Table 2.1: Sustainable Building Tax Credits by building type

Approvals Tax Credits

Building Type Count % of Total $ % of Total

Single Family 2,981 86 29,878,649 84MultiFamily 396 11 3,521,349 10Manufactured 87 2 421,815 1Commercial 18 1 1,943,786 5Total 3,482 100 35,765,599 100

Source: NM Energy, Minerals, and Natural Resources Department. Includes all2008-2016 commercial and residential projects.

As with the SBTC program in general, use of the program for single-family homes was initially limiteddue to the Great Recession. No projects were awarded a SBTC certifiation in TY2007, and only 103single-family homes were deemed eligible in TY2008, for a total of approximately $1 million in taxcredits. Use of the SBTC program was more common in TYs 2009-2011, although still somewhatlimited (see Table 2.2 and Figure 2.1). However, by 2012 the SBTC was being heavily used;applications for 504 single-family homes totalling $4.9 million were approved. Not surprisingly themajority of green-certified homes have been built in Albuquerque (53%), Rio Rancho (11%), andSanta Teresa and Santa Fe (8% each); in total these four areas account for 80% of all SBTCsingle-family homes. Although the preponderance of certified single-family homes are located in theseareas, the remainder are scattered across the state (Table 2.3).

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Table 2.2: Annual single-family home SBTC approvals and associated tax credits

CreditsTY Approvals ($M)

2007 0 02008 103 1.02009 223 2.12010 227 2.32011 280 3.02012 504 4.92013 477 4.82014 393 3.92015 384 3.92016 390 4.0Total 2,981 29.9

Source: NM Energy, Minerals, and NaturalResources Department.

Figure 2.1: Annual SBTC single-family home approvals and associated tax credits

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Table 2.3: Single-family home SBTC approvals by city (TYs 2007-2016)

City Approvals % of Total

Abiquiu 1 0.0Alamogordo 6 0.2Albuquerque 1,582 53.1Anthony 2 0.1Arroyo Seco 2 0.1Artesia 21 0.7Aztec 21 0.7Belen 1 0.0Bernalillo 17 0.6Blanco 1 0.0Bloomfield 12 0.4Cedar Crest 4 0.1Clovis 7 0.2Corrales 4 0.1Dixon 4 0.1Elephant Butte 10 0.3Farmington 91 3.1Flora Vista 6 0.2Fruitland 1 0.0Gallup 11 0.4Glorieta 1 0.0Grants 1 0.0Hillsboro 1 0.0Hobbs 122 4.1Jamestown 2 0.1Jemez Springs 1 0.0Kirtland 1 0.0La Plata 2 0.1Lamy 2 0.1Las Cruces 85 2.9Los Lunas 30 1.0Los Ranchos 1 0.0Lovington 1 0.0Moriarty 1 0.0Placitas 14 0.5Rehoboth 6 0.2Rio Rancho 330 11.1Roswell 36 1.2Sandia Park 17 0.6Santa Fe 237 8.0Santa Teresa 268 9.0Silver City 2 0.1Taos 1 0.0

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Table 2.3: Single-family home SBTC approvals by city (TYs 2007-2016) (continued)

City Approvals % of Total

Taos Ski Valley 1 0.0Tesuque 1 0.0Tijeras 5 0.2Tularosa 6 0.2Valdez 1 0.0Waterflow 1 0.0

Source: NM Energy, Minerals, and NaturalResources Department. Includes all TY2007-TY2016SBTC-approved single-family homes.

As noted in the previous section, single-family homes may be certified at various certification levels –silver (LEED or BGNM), gold (LEED or BGNM), or platinum (LEED)/emerald (BGNM), whereplatinum/emerald are the most stringent, are associated with the greatest energy efficiency gains, andprovide the largest per-occupied-square-foot tax credit amount. Table 2.4 details the number ofcertifications granted to single-family homes under each certification level, as well as the total andaverage tax credit amount for each level. Silver has been the most frequently used (accounting fornearly three-quarters of all certified single-family homes), while platinum/emerald have been the leastfrequently used (accounting for only 1 percent of certifications). The average silver and gold tax creditamounts are fairly similar – $9.6 and $10.9 million, respectively. At $17.6 million, the averageplatinum/emerald tax credit is notably higher. In addition to the certification level achieved, a home’sHERS Index rating provides another measure of its energy efficiency. Figure 2.2 depicts the HERSIndex Scores of the SBTC-approved single-family homes. The majority of certified homes have aHERS Index Score between 50 and 60; only 290 homes (10%) have achieved a HERS Index Score ofless than 50.

Table 2.4: Single-family home SBTC approvals by certification level

Approvals Tax Credits Average Credit

Certification Level Count % of total $M % of total ($)

Silver 2,199 74 21.0 70 9,561Gold 738 25 8.1 27 10,950Platinum/Emerald 44 1 0.8 3 17,561Total 2,981 100 29.9 100 10,023

Source: NM Energy, Minerals, and Natural Resources Department.

The SBTC has been well-received and utilized, and has helped stimulate the construction of green andenergy efficient buildings. In the remainder of this report we estimate the impacts of the SBTC onNew Mexico’s economy, the environment, and household energy expenditures.

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Figure 2.2: HERS Index Scores of SBTC single-family homes

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2.2 Economic and Fiscal Impacts of the Sustainable Building Tax Credit

The economic and fiscal impacts of the construction of energy efficient single-family homes stimulatedby the SBTC are assessed using a widely-used and generally-accepted model for estimating theeconomic impacts of projects on regional economies – the IMPLAN model. IMPLAN is a regionaleconomic modeling and impact analysis tool that works in conjunction with IMPLAN’s proprietaryinput-output databases, which include multipliers for New Mexico and its counties.1 The model can beused to estimate how much of an expenditure remains within a region and traces the expenditure’seconomic impact on the region’s industries. To assess the impacts of the SBTC we use an”export-base” method, wherein impacts supported by revenues from within the region (e.g. from NMtax dollars) are offset by the impacts had the revenues been used for other economic activities.

IMPLAN estimates impacts on output, employment, and labor income. Output refers to local receipts,which for a construction contract are the contractor’s receipts. Employment refers to the averagenumber of individuals employed locally during a year (including both self-employed and wage & salary

1BBER owns IMPLAN Version 3 and the 2012 IMPLAN databases.

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workers). Labor income refers to total earnings (i.e., wages, salaries, employer-paid-benefits, andproprietor income). IMPLAN estimates the direct, indirect, and induced impacts on output,employment, and labor income. Direct impacts occur as a result of construction companies’ spending.Indirect impacts occur as a result of expenditures by businesses and organizations that support theconstruction companies’ activities. These expenditures create demand for the goods and services ofother companies, which then must purchase goods and services and hire employees to produce theirproducts. Indirect impacts are the sum of these iterative purchases and employment increases.Induced impacts are the result of construction companies’ employees spending their wages and salarieson local goods and services. This spending creates further demand for goods and services, which firmsmust again purchase supplies and hire employees to produce. The sum of these iterative expendituresand employment increases are the induced impacts.

Our analysis continues to focus on single-family homes; we estimate the economic impacts of theconstruction of TY2013 SBTC-approved single-family homes.2 The analysis is intended to provide anestimate of the SBTC’s impact on the New Mexico economy under the tax credit’s original form (priorto the 2014-2016 extension) and during a year in which the effects of the Great Recession havediminished and the program was essentially fully utilized. We therefore model the impacts of the 477single-family homes approved for the SBTC for TY2013, and impose the assumption that all projectsapproved to claim the credit in TY2013 were fully constructed during 2013. Data used in the analysisincludes the square footage of SBTC-approved homes (provided by EMNRD) and estimates of averageper-square-foot construction costs obtained through conversations with some of the constructioncompanies that have built many of New Mexico’s green-certified single-family homes. Cost estimateswere obtained for both standard (non-green-certified) homes and LEED/BGNM-certified homes (atvarious certification levels). Cost estimates included actual construction costs only; overhead costs,impact fees, etc. were not included in the estimates. For this reason the economic and fiscal impactsdetailed herein are conservative estimates of the impacts of the SBTC’s impacts on the New Mexicoeconomy. Our analysis assumes construction contractors’ receipts remain within the New Mexicoeconomy; i.e., we assume contractors keep any and all profits earned and are not required to submit aportion of profits to headquarters located outside NM.

One of the most notable assumptions we impose, and one that has significant implications for theanalysis, is whether (a) the SBTC has induced the construction of homes that in the absence of theSBTC would not have been built at all, or (b) the SBTC has only changed what kind of homes havebuilt (green-certified rather than standard), or (c) some combination thereof. Because it is notpossible to know the answer to this question, and because the answer has large implications for theimpact of the SBTC on New Mexico’s economy, we provide two estimates. The first estimate assumesthat in the absence of the SBTC, none of the houses certified under the SBTC would have been built;i.e., we assume the SBTC has stimulated the housing market and increased home construction levels.The second estimate assumes that in the absence of the SBTC the homes granted certification underthe SBTC would still have been built, but would not have been constructed as green homes.

Tables 2.5 and 2.6 summarize the economic and fiscal impacts derived under the assumption that theSBTC stimulates construction activity and that the single-family homes approved for the TY2013SBTC would not have been constructed at all were it not for the SBTC. Construction expendituresassociated with these homes supported $82.9 million in additional output during 2013. A total of 528full- and part-time jobs were supported by the construction of these homes; 266 of those jobs weredirectly supported through home construction, while the remaining 262 jobs were induced or supported

2Although the SBTC may be claimed for remodels as well as new construction, all TY2013 single-family projects werenew construction; none were remodels.

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indirectly.3 Labor income associated with the 528 jobs equated to $24.2 million. Fiscal impacts of the2013 construction activity include approximately $1.6 million in state and local gross receipts taxrevenues. Although much of the local gross receipts tax revenues were concentrated in counties wherethe majority of the construction occurred (such as Bernalillo County), the projects (and thus localgross receipts tax revenues) were distributed across the State’s counties (Table 2.7). In addition togross receipts tax, the construction activity also generated more than $600,000 in property taxrevenues and nearly $300,000 in personal income tax revenues.

Table 2.5: Economic impacts of TY2013 SBTC-approved single-family homes (assumingSBTC stimulates additional construction)

Impact Labor Income OutputType Employment (2013 $) (2013 $)

Direct 266 13,707,724 53,283,371Indirect 153 6,399,837 17,207,471Induced 109 4,094,791 12,373,858Total 528 24,202,352 82,864,700

Estimate assumes the SBTC stimulated construction of homes thatotherwise would not have been built at all.

Table 2.6: Fiscal impacts of TY2013 SBTC-approved single-family homes (assuming SBTCstimulates additional construction)

RevenuesTax (2013 $)

Gross receipts tax 1,563,171Property tax 608,489Personal income tax 295,364Total 2,467,024

Estimate assumes the SBTC stimulatedconstruction of homes that otherwise wouldnot have been built at all.

Tables 2.8 and 2.9 summarize the economic and fiscal impacts associated with the SBTC under theassumption that the SBTC does not stimulate additional construction, but rather creates an incentivefor the construction of green-certified homes rather than standard homes built to code. Resultsindicate that during 2013 the SBTC stimulated $6.8 million in additional output, and directlysupported 22 full- and part-time jobs. An additional 21 jobs were induced or indirectly supported as aresult of the SBTC. Labor income associated with the 43 jobs equated to $2.0 million. State and localgross receipts tax revenues increased by $127,000, while property tax and personal income taxrevenues increase by $50,000 and $24,000, respectively.

To complete our assessment of the economic and fiscal impacts of the SBTC on the NM economy, wemust consider the alternate use of the funds had they not been used to support the SBTC, andthereby consider the net impact of the tax credit. For this purpose we assume that had the $5 million

3As with the other economic and fiscal impacts, job impacts are one-time impacts that occurred in 2013 only; jobs donot remain in the economy after the end of 2013.

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Table 2.7: Distribution of TY2013 single-family homes across New Mexico’s counties

County Number of Homes

Bernalillo 273Chaves 4Dona Ana 48Eddy 2Grant 1Lea 12McKinley 2Otero 2San Juan 13Sandoval 66Santa Fe 51Sierra 2Taos 1Total 477

Table 2.8: Economic impacts of TY2013 SBTC-approved single-family homes (assumingchange in type of construction only)

Impact Labor Income OutputType Employment (2013 $) (2013 $)

Direct 22 $1,116,868 $4,341,383Indirect 12 $521,441 $1,402,018Induced 9 $333,632 $1,008,188Total 43 $1,971,941 $6,751,589

Estimate assumes the SBTC stimulated construction of energy efficienthomes in place of standard-built homes.

Table 2.9: Fiscal impacts of TY2013 SBTC-approved single-family homes (assuming changein type of construction only)

RevenuesTax (2013 $)

Gross receipts tax 127,363Property tax 49,578Personal income tax 24,065Total 201,006

Estimate assumes the SBTC stimulatedconstruction of energy efficient homes in placeof standard-built homes.

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not been used to support single-family residential SBTCs, it would instead have been placed in NewMexico’s General Fund and invested. Per discussions with personnel at the New Mexico StateTreasury, 0.05% is an appropriate one-year rate of return on investment for the General Fund in 2013.Applying this rate of return to the $5 million yields a return on investment of $30,083. Theconstruction of the TY2013 SBTC-approved single-family homes created between 43 and 528 jobs andhad a net economic impact on the NM economy of the between $8.9 and $109.5 million (Table 2.10).As noted previously, impacts of the SBTC depend heavily upon the assumption regarding whether theSBTC merely changes what type of construction occurs (standard or energy-efficient) or whether theSBTC stimulates additional construction, or some combination thereof.

Table 2.10: Net economic impacts of TY2013 SBTC-approved single-family homes (2013 $)

SBTC’s Impact on Construction

Stimulated Changed TypeConstruction of Construction

Sustainable Building Tax CreditOutput $82,864,700 $6,751,589Labor Income $24,202,352 $1,971,941Gross Receipts Tax $1,563,171 $127,363Personal Income Tax $295,364 $24,065Property Tax $608,489 $49,578Employment 528 43

Alternative InvestmentGeneral Fund $30,083 $30,083

Net Economic ImpactDollars $109,503,993 $8,894,453Jobs 528 43

2.3 Environmental Impacts

Green-building certification can consider the building’s performance in various areas, including nontoxicpest control, use of environmentally preferable products and appropriate HVAC refrigerants, waterefficiency, taking advantage of existing infrastructure, energy efficiency, encouraging walking/physicalactivity/time outdoors, and others. Thus although energy efficiency is a primary component of LEEDand BGNM certification, but is certainly not the only component. In the sections below we addresstwo primary environmental concerns for green buildings – water and energy consumption.

2.3.1 Water Efficiency

Water efficiency is a common component of green-certified homes; according to the U.S. GreenBuilding Council (2014), 94% of LEED-certified homes have very high water-efficiency fixtures andfittings installed. Build Green NM (responsible for the majority of all NM’s green-buildingcertifications and 84% of NM’s single-family home green-building certifications) has some of thecountry’s most stringent water conservation requirements (Martinez, 2011). A recent study conducted

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for The Salt Lake City Corporation and the US Environmental Protection Agency (EPA) usedinformation obtained from nine of the country’s water utilities to assess various aspects of waterconsumption in single-family homes (DeOreo, 2011).4 The study compared indoor water use inhigh-efficiency homes (built to meet or exceed the EPA’s WaterSense New Home specifications) withthat in standard-built new homes, and found that indoor water use in high-efficiency homes was 21%lower than that in standard-built homes.5 This 21% reduction is quite similar to the estimated 20%reduction in indoor water use reported by Build Green NM.6

Data obtained from the Albuquerque Bernalillo County Water Authority (ABCWA) is used toconstruct rough estimates of the water savings that might result from the construction ofgreen-certified single-family homes.7 The ABCWA provided BBER with the number of single-familyhomes added to the ABCWA service area each year between 2009 and 2013, as well as the averagewater consumption associated with these homes. Using this information we estimate that single-familyhomes added to the ABCWA service area between 2009 and 2013 on average use 57,350 gallons ofwater each year, and assume this reflects water consumption for a standard-built new home.8

According to ABCWA, approximately 60% of this consumption (34,410 gallons/year) is for indoor use.Assuming green-certified single-family homes use 20% less water for indoor purposes thereby yields anaverage water savings of 6,882 gallons per year per green-certified home. This value is subsequentlyused to estimate annual water savings associated with single-family homes granted SBTC approval ineach year of the SBTC program, as well as cumulative water savings (Table 2.11). Because homesmay not be occupied (and therefore would not yield water savings) during the year in whichconstruction is completed (particularly when construction is completed during the latter part of ayear), we assume a home’s water savings do not commence until the year following that in which theSBTC may be claimed for that home. For example, we assume the 103 homes granted a SBTC forTY2008 do not begin generating annual water savings until calendar year 2009.

These estimates indicate that by the end of 2014 New Mexico’s green-certified single-family homes willreduce residential water consumption by more than 34 million gallons. Over the next 30 yearssingle-family SBTC-approved homes are expected to yield water savings of approximately 700 milliongallons. These values may understate water savings for two reasons – (1) our assumption that allhomes added to the ABCWA service area between 2009 and 2013 were standard-built homes and (2)our calculations do not include reductions in outdoor water use.

4Participating utilities were: City of Aurora, CO; Denver Water, CO; Eugene Water and Electric Board, OR; SouthernNevada Water Authority, NV; City of Phoenix, AZ; City of Roseville, CA; Salt Lake City Corporation, UT; St. John RiverWater management District, FL; and Tampa Bay Water, FL.

5Although the EPA’s WaterSense program and its requirements different from the LEED program’s water efficiencyguidelines, there is overlap and similarity between the two.

6Personal communication with Steve Hale, Build Green NM Program Director.7In doing so we impose the assumption that water consumption habits are similar across the state. Even if this

assumption is invalid, the fact that a large portion of New Mexico’s certified single-family homes have been constructed inAlbuquerque (53%) reduces the implications of any variance in water consumption habits.

8Because not all homes added to the ABCWA service area during this time were standard-built homes (informationobtained from EMNRD indicates that approximately 35% were green-certified), our assumption that the average wateruse of 57,350 gallons per year reflects the water use in a standard-built home results in a conservative estimate of watersavings.

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Table 2.11: Estimated annual and cumulative water savings (gallons) from SBTC-approvedsingle-family homes

Tax Water Savings

Year Certifications Annual Cumulative

2007 0 0 02008 103 708,851 02009 223 1,534,696 708,8512010 227 1,562,224 2,952,3972011 280 1,926,972 6,758,1682012 504 3,468,550 12,490,9112013 477 3,282,735 21,692,2052014 393 2,704,644 34,176,2332015 384 2,642,705 49,364,9062016 390 2,683,997 67,196,283Total 2,981 20,515,375 67,196,283

2.3.2 Energy Efficiency

Natural gas and electricity are the major sources of energy used by the residential sector. Burningnatural gas results in carbon dioxide, methane, and nitrous oxide emissions. The electricity sectoremits these same GHGs when fossil fuels are combusted to produce electricity. Of these GHGs, carbondioxide is the most common (82% of total GHG emissions), while methane and nitrous oxide arenotably less common (contributing 9% and 6%, respectively, to total metric tons of GHG emissions).Flourinated gases comprise the remaining 3%. Because CO2 is the most common GHG associatedwith residential energy consumption, we assess the impacts of the TY2013 SBTC-approvedsingle-family homes on CO2 emissions. This is accomplished using information obtained through theLEED/BGNM certification process and subsequently provided to EMNRD as part of the SBTCapplication. Specifically, each home’s estimated total energy savings is included in the SBTC datamaintained by EMNRD. For each tax year the SBTC has been available, Figure 2.3 depicts theestimated annual energy savings (in million Btus (MBtu))9 associated with the single-family homesgranted SBTCs in that year. Energy savings are relative to comparable homes built to code.

9Btu denotes a British thermal unit, which is a unit of energy. Specifically, a Btu is the amount of energy needed tocool or heat one pound of water by one degree Fahrenheit.

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Figure 2.3: Estimated annual energy savings (MBtu) from SBTC single-family homes

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Ene

rgy

savi

ngs

Tax Year

Because homes may not be occupied (and therefore would not yield energy savings) during the sameyear in which construction is completed, we assume each home’s energy savings do not commenceuntil the year following that for which the home is SBTC-approved. For example, we assume the 477homes granted a SBTC for TY2013 do not begin generating annual energy savings until calendar year2014. We also impose the conservative assumption that each home will yield energy savings for only30 years. Thus we assume the annual energy savings of 17,858 MBtu associated with the 477 homesapproved for TY2013 do not commence until 2014, and continue through 2043. Similarly, the 103homes approved for TY2008 are assumed to yield annual energy savings of 4,286 MBtu beginning in2009 and continuing through 2038. Cumulative energy savings has increased exponentially as the totalnumber of certified homes has increased (Figure 2.4). By the end of 2014 energy savings are expectedto reach nearly 200,000 MBtus. Even without the construction of additional certified green homes,energy savings continue and increase exponentially far into the future. As depicted in Figure 2.4 andTable 2.12, between now and 2046, when energy savings from homes approved for TY2016 areassumed to end, the cumulative energy savings resulting from all (TY2007-TY2016) SBTC-approvedsingle-family homes is 3.5 trillion Btus.

Converting energy savings (Btus) to reductions in CO2 emissions requires assumptions regarding the

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Figure 2.4: Cumulative energy savings (MBtu) from SBTC-approved single-family homes

0

100

200

300

400

500

600

0

500,000

1,000,000

1,500,000

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3,500,000

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SBTC

ap

pro

vals

Ene

rgy

savi

ngs

(M

Btu

)

Tax Year

cumulative energy savings single-family SBTC approvals

Table 2.12: Estimated energy savings (MBtu) from SBTC-approved single-family homes

SBTC Energy Savings

Tax Year Approvals Annual Over 30 Years

2007 0 0 02008 103 4,287 128,5972009 223 9,325 279,7362010 227 9,275 278,2642011 280 12,332 369,9552012 504 17,373 521,1902013 477 17,858 535,7332014 393 14,712 441,3552015 384 15,179 455,3762016 390 15,546 466,374Total 2,981 115,886 3,476,581

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portion of energy savings derived from natural gas and the portion derived from electricity. Informationobtained from EMNRD indicates that in a typical New Mexico home approximately 52% of the energysavings would be derived from natural gas savings, while the remaining 48% would be derived fromelectricity savings. Imposing this assumption yields the reductions in carbon dioxide emissions listed inTable 2.13, calculated using various online conversion tools.10 When the energy savings from all SBTChomes are realized the annual reduction in CO2 emissions resulting from the SBTC program will be14,433 metric tons, equivalent to the annual emissions of 3,038 passenger vehicles. Over a 30-yearperiod CO2 emissions will be reduced by approximately 433,000 metric tons (the equivalent to theannual emissions of 91,158 passenger vehicles).

Table 2.13: Annual reductions in CO2 emissions and passenger vehicle equivalents

Annual CO2 Savings Passenger VehicleTY (Metric tons) Equivalent

2008 534 1122009 1,161 2442010 1,156 2432011 1,536 3242012 2,164 4562013 2,224 4692014 1,832 3852015 1,890 3982016 1,936 407Total 14,433 3,038

Calculations use information obtained from EMNRD, as well asonline conversion calculators: http://www.rapidtables.com/

convert/energy/BTU_to_kWh.htm, http://www.unitconversion.

org/energy/therms-to-btus-th-conversion.html, and http:

//www.epa.gov/cleanenergy/energy-resources/calculator.html.

2.4 Impact on Household Expenditures

The SBTC is designed to offset at least a portion of the additional cost of constructing agreen-certified home (as opposed to standard home built to code). We impose the simplifyingassumption that the SBTC fully offsets the additional cost of construction. Discussions with some ofthe companies that have built New Mexico’s green-certified homes regarding the costs of constructionindicate this assumption may be valid. However, although additional per-square-foot constructioncosts may fall within the per-square-foot tax credit amount, the ability of companies to use the creditto fully offset additional costs may be limited by the companies’ tax liabilities. This is an issue forwhich UNM BBER does not have access to the information required to provide a detailed assessment.We therefore impose the simplifying assumption that companies are able to fully offset their additional

10Btus derived from electricity are converted to kWh using the conversion calculator found here: http:

//www.rapidtables.com/convert/energy/BTU_to_kWh.htm. Btus derived from natural gas are convertedfrom Btus to therms using the conversion calculator found here: http://www.unitconversion.org/energy/

therms-to-btus-th-conversion.html. Finally, conversions from kWhs and Therms to CO2 emissions, and from metrictons of CO2 emissions to passenger vehicle equivalents are accomplished using the conversion calculator provided by theEPA: http://www.epa.gov/cleanenergy/energy-resources/calculator.html.

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construction costs through use of the SBTC, and thus charge home buyers the same price for anenergy-efficient home as they would for a comparable home built to code. As a result of theseassumptions, there is no impact on down payments or monthly mortgage payments. As such, the onlyimpacts on household expenditures stem from lower utility payments associated with the reductions inenergy and water consumption that result from a more energy efficient home. However, due to a lackof water price forecast data we limit our assessment to household expenditure impacts stemming fromreductions in energy consumption.

We apply residential energy price forecasts for natural gas and electricity to the reductions in naturalgas and electricity consumption discussed in Section 2.3.11 As detailed in Table 2.14, results indicatethat a family living in an SBTC-approved home can expect to spend $994 less each year on energythan if they were living in a comparable home built to code. Over a 30-year period this equates to asavings of nearly $30,000. Considering only those homes certified through TY2013, and thus thosehomes already occupied and producing energy savings, the SBTC is currently saving New Mexicofamilies $1.8 million in energy expenses each year. By 2017 (when all SBTC-approved homes areassumed to be occupied) the annual savings in household energy expenditures will increase to $2.9million. In total we estimate that SBTC-approved energy efficient single-family homes will save NewMexico families $87.6 million in energy expenditures (Table 2.14 and Figure 2.5).

Table 2.14: Decrease in household energy expenditures (2013 $)

Average per-householdSBTC Decrease in Energy Expenditures Total

TY Approvals Annual Over 30 Years Decrease

2008 103 1,016 30,478 3,139,2592009 223 1,027 30,806 6,869,7912010 227 1,010 30,311 6,880,5472011 280 1,096 32,878 9,205,8992012 504 864 25,910 13,058,8492013 477 945 28,353 13,524,4992014 393 951 28,543 11,217,3932015 384 1,011 30,340 11,650,5052016 390 1,027 30,802 12,012,701Average 994 29,825 87,559,443

Sources: NM Energy, Minerals, and Natural Resources Department: home energysavings. U.S. Energy Information Administration: natural gas and electricity price dataand forecast.

As household energy expenditures decrease, utility revenues will decline by an equivalent amount.Reductions in gas and electric utility revenues will be greatest in those areas where the majority ofcertified green homes have been built – Albuquerque, Rio Rancho, Santa Fe, and Santa Teresa.However, decreased energy expenditures also equate to money available to households for eithersavings or consumption of other goods. As a counterpart to the economic and fiscal impacts detailed

11Historical natural gas and electricity price data, as well as forecasts through 2040, are available from the U.S. EnergyInformation Administration (EIA). For our purposes we require price forecasts through 2046. To project prices through2046 we calculate the average rates of change in the forecasted natural gas and electricity prices, and assume natural gasand electricity prices will rise at that rate between 2040 and 2046. The EIA energy price forecasts are in 2012 dollars. Weinflate to 2013 dollars using the CPI for All Urban Consumers: Household Energy.

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Figure 2.5: Cumulative decrease in household energy expenditures (2013 $)

0

100

200

300

400

500

600

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

90,000,000

100,000,000

SBTC

ap

pro

vals

Uti

lity

savi

ngs

(2

01

3 $

)

Tax Year

cumulative utility savings single-family SBTC approvals

in Section 2.2, we use IMPLAN to assess the economic and fiscal impacts of the change in thedistribution of monies from utility companies to NM households.12 Specifically, we estimate theeconomic and fiscal impacts stemming from the average annual energy savings realized by the 477single-family homes granted SBTC approval for TY2013 (the same households included in theeconomic and fiscal impact estimated detailed in Section 2.2). Because consumption patterns varywith household income, we assign the 477 household to IMPLAN’s income brackets as follows: weassume half of the 477 households are in the $50,000-$75,000 income bracket and half are in the$75,000-$100,000 income bracket.13

On average each TY2013 household saves an estimated $945 dollars in energy expenditures annually.Thus households in the $50,000-$75,000 income bracket save an estimated $225,383 each year, while

12We assume utility revenues largely flow to corporations and individuals located outside the NM economy, and thusassume utility revenues have no economic or fiscal impact on the New Mexico economy.

13Based on DataTraq information regarding plan check values for Bernalillo County single family permits granted duringthe 4th quarter of 2013, we assume an average total sale price of approximately $260,000 for certified-green single familyhomes (includes house and land value). During 2013 interest rates averaged around 4%, which suggests that householdsfalling in the $50,000-$75,000 income bracket would have had sufficient income to support a 30-year mortgage for agreen-certified home.

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households in the $75,000-$100,000 income bracket also save an estimated $225,3683 each year. Theannual economic impacts (all of which are induced impacts) stemming from households’ decreasedenergy expenditures, and therefore increased “discretionary” income to spend on other goods andservices, are detailed in Table 2.15. The $450,765 in energy savings experienced by the 477 householdsapproved for TY2013 generates an increase in output of nearly $355,000, approximately 3 jobs, andlabor income of roughly $116,000. Fiscal impacts include the generation of approximately $11,400 ingross receipts tax revenues, $4,400 in property tax revenues, and $1,400 in personal income taxrevenues. Although these numbers are rather small, it is important to bear in mind that they reflectthe economic and fiscal impacts stemming from only one year of energy savings associated with the477 homes approved for TY2013, and that energy savings will be derived from these homes each yearfor a period of at least 30 years.

Table 2.15: Annual economic & fiscal impacts (2013 $) of decreased household energyexpenditures for TY2013 SBTC-approved single-family homes

Economic/Fiscal Impact Value Added

Induced Economic ImpactsOutput $354,422Labor Income $116,285Employment 3.1

Fiscal ImpactsGross Receipts Tax $11,418Personal Income Tax $1,409Property Tax $4,445

Sources: Household income has no direct orindirect effects; household income only has inducedeffects. For consistency with the economic andfiscal impacts discussed in Section 2.2, only homesSBTC-approved for TY2013 are included. Dollarsare in 2013 $.

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3 Summary

When the Sustainable Building Tax Credit was first enacted in 2007 it went unused, at least in part asa result of the Great Recession and a struggling housing market. In 2008 roughly 100 constructionprojects were approved for the SBTC. The number of qualifying projects grew over time, such that in2013 more than 900 single-family, multi-family, manufactured residential, and commercial projectswere approved. Because the majority of SBTC approvals (86%) and funds (84%) have been allottedto single-family homes, we focus our analysis on single-family homes. To capture the impacts of theSBTC as it was originally structured (with $5 million in tax credits allotted for residentialconstruction) and in a year when the credit was fully utilized, we assess the impacts of single-familyresidential construction projects funded with money allocated to the 2013 tax year (TY2013).

Nearly 500 single-family homes were approved for the SBTC in TY2013, for a total of approximately$5 million in tax credits. Characteristics of the single-family residential construction projects approvedfor the credit in TY2013 are consistent with the characteristics of the single-family residentialconstruction projects approved for the SBTC in other TYs. Most TY2013 projects (77%) were LEEDor BGNM certified at the silver level, while few (only 2%) were certified at the most stringentplatinum/emerald level. The average TY2013 approved credit amount for single-family residentialconstruction projects was $10,073. As in other years, the majority of TY2013 projects were located inAlbuquerque (57%), Rio Rancho (12%), Santa Fe (10%), and Santa Teresa (9%), with the remaining12% scattered across the state.

An IMPLAN model was used to estimate the 2013 economic and fiscal impacts stemming from theconstruction of the 477 single-family homes approved for TY2013 under two different assumptions –(1) the SBTC stimulated additional construction; i.e., in the absence of the SBTC the 477 homeswould not have been built at all and (2) the SBTC did not create an incentive for additionalconstruction, but rather created an incentive to construct energy-efficient homes rather thanstandard-built homes. Data used in the analysis includes square-footage information for eachSBTC-approved home (obtained from NM’s Energy, Minerals and Natural Resources Department(EMNRD)) and average per-square-foot costs obtained from construction companies. Because theaverage per-square-foot costs include only construction costs (and do not include overhead, impactfees, etc.) the economic and fiscal impacts reported herein are conservative estimates of the SBTC’seconomic and fiscal impacts on the New Mexico economy.

Under the assumption that the TY2013 SBTC stimulated the construction of an additional 477 homesin New Mexico, model results indicate that the SBTC generated $82.9 million in additional output,528 jobs, labor income of $24.2 million, gross receipts tax revenues of $1.6 million, and property andpersonal income tax revenues of approximately $610,000 and $295,000, respectively. (All dollar figuresare in 2013 dollars.) Under the assumption that the SBTC created an incentive to constructenergy-efficient homes in place of standard-built homes, impacts are much reduced – results indicatethe SBTC generated $6.8 million in additional output, 43 jobs, labor income of $2.0 million, $127,363in gross receipts tax revenues, $49,578 in property tax revenues, and $24,065 in personal income taxrevenues. These and other values are summarized in Table 3.1, which details the impacts of the singlefamily homes approved for the SBTC during TY2013.

We assume that had the $5 million not been used to support the SBTC for single-family homes, it

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Table 3.1: Summary of TY2013 Sustainable Building Tax Credit impacts (2013 $)

SBTC’s Impact on Construction

Stimulated Change TypeConstruction of Construction

2013 Economic and Fiscal ImpactsConstruction Activity

Output $82,864,700 $6,751,589Labor Income $24,202,352 $1,971,941Gross Receipts Tax $1,563,171 $127,363Personal Income Tax $295,364 $24,065Property Tax $608,489 $49,578Employment 528 43

Alternative InvestmentGeneral Fund $30,083 $30,083

Net Economic ImpactDollars $109,503,993 $8,894,453Jobs 528 43

2014-2043 Recurring Annual ImpactsChange in Household Discretionary Income*

Output $354,422Labor Income $116,285Gross Receipts Tax $11,418Personal Income Tax $1,409Property Tax $4,445Employment 3

Reduced Water Consumption 3.3 million gallonsReduced Energy Consumption 17,585 MBtusReduced CO2 Emissions 2,224 metric tonsHousehold Discretionary Incomes* $450,765

* Due to changing energy prices, impacts on household discretionary incomes and the associatedeconomic and fiscal impacts will vary from year to year. Values listed here are those estimatedfor 2014.

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would have instead been placed in the General Fund where it would have earned a one-year rate ofreturn on investment of 0.05%. This equates to a return on investment of $30,083. Reducing theimpacts generated by the TY2013 SBTC-approved single-family homes by this amount yields netimpacts between $8.9 and $109.5 million and the creation of between 43 and 528 jobs. Theassumption regarding whether the SBTC stimulates additional construction or merely changes whattype of building is constructed is clearly key to assessing the SBTC’s net economic impacts on theNew Mexico economy.

Homes that qualify for the SBTC are more water efficient than standard-built homes.1 Specifically,relative to standard-built homes, green-certified homes use an estimated 20% less water for indoorpurposes. Applying this 20% reduction to estimates of indoor water use in single-family homesobtained from the Albuquerque Bernalillo County Water Authority indicates that annual indoor usewater savings from a New Mexico green-certified home is on average 6,882 gallons. Thus theestimated annual water savings derived from the 477 homes approved for the TY2013 SBTC is 3.3million gallons (98.5 million gallons over a 30-year period).

Because homes that qualify for the SBTC are also more energy efficient than standard-built homes,they reduce both energy consumption and household energy expenditures.2 Reductions in energyconsumption were calculated using information pertaining to each SBTC home’s anticipated energysavings (provided by EMNRD). The 477 TY2013 single-family residences are expected to reduceenergy consumption by 17,858 million Btus (MBtu). Over a 30-year period this equates to an energyconsumption savings of 535,733 MBtus. As a result of decreased energy consumption, families’ energyexpenditures will decline as well. Using residential energy price forecasts published by the U.S. EnergyInformation Administration, we estimate that each family residing in a TY2013 SBTC-approved homewill on average save $945 each year (for a total of $450,765 in annual energy savings for these 477families). Over a 30-year period this equates to energy expenditure savings of $28,353 per family (fora total savings of $13.5 million for these 477 families over a 30-year period). Carbon dioxide emissionswill be lowered as well – relative to CO2 emissions from comparable standard-built homes, the annualCO2 emissions from these 477 homes will be an estimated 2,224 metric tons lower (equivalent to theannual carbon dioxide emissions of 469 passenger vehicles).

The impacts on water consumption, energy consumption, energy expenditures, and carbon dioxideemissions are notably larger when all SBTC-approved single-family homes (TY2007-TY2016) areconsidered. The estimated water savings associated with these 2,981 homes over a 30-year period isapproximately 700 million gallons. The total reduction in annual energy consumption is an estimated116 billion Btus, or 3.5 trillion Btus over a 30-year period. Total annual household energy expendituresare expected to decline $2.9 million. Over a 30-year period SBTC-approved homes thus will save NewMexico families $87.6 million in energy expenditures and reduce CO2 emissions by 433,000 metric tons(equivalent to the annual carbon dioxide emissions of 91,158 passenger vehicles).

The improved energy efficiency decreases household energy expenditures and thus increases household“discretionary” income. To estimate the impacts of this change, we use an IMPLAN model toestimate the economic and fiscal impacts of the $450,765 in annual energy savings (and equivalentincrease in “discretionary” income) for the 477 households granted SBTC approval for TY2013 (thesame households included in the IMPLAN model used to estimate the economic and fiscal impacts of

1Impacts on water consumption do not vary with the assumption regarding whether the SBTC creates an incentive tobuilt additional homes or whether the SBTC creates an incentive to build a different kind of home.

2Impacts on energy consumption, household energy expenditures, and carbon dioxide emissions do not vary with theassumption regarding whether the SBTC creates an incentive to built additional homes or whether the SBTC creates anincentive to build a different kind of home.

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construction activity). The $450,765 in energy savings generated an output increase of approximately$354,000, 3 jobs, labor income of $116,285, gross receipts tax revenues of $11,400, property taxrevenues of $4,400, and personal income tax revenues of $1,400.

If the SBTC is extended beyond TY2016 and if future market conditions and funding levels are similarto those of TY2013, we can expect the SBTC to yield comparable impacts on New Mexico’s economy,households, and the environment as those detailed herein. The expected magnitudes of the economicand fiscal impacts depend greatly on whether the SBTC stimulates additional construction activity ormerely changes what types of buildings are constructed (energy-efficient rather than standard-built).Assuming future market conditions are similar to those of 2013 and assuming the SBTC stimulatesadditional construction, we estimate that every $5 million in SBTC funding for single-family homes willcreate 531 jobs and generate a net economic impact of $110 million (including approximately $1.6million in gross receipts tax revenues, $0.6 million in property tax revenues, and $0.3 million in personalincome tax revenues). Alternately, assuming future market conditions are similar to those of 2013 andassuming the SBTC changes the type of construction but not the level of construction, we estimatethat every $5 million in SBTC funding for single-family homes will create 46 jobs and generate a neteconomic impact of $9.4 million (including approximately $140,000 in gross receipts tax revenues,$54,000 in property tax receipts, and $25,000 in personal income tax receipts). Regardless of whetherthe SBTC stimulates additional construction or merely changes the type of construction, we estimatethat every $5 million in SBTC funding for single-family homes will reduce annual water consumptionby 3.3 million gallons, annual energy consumption by approximately 18,000 MBtus, annual CO2

emissions by 2,224 metric tons (the equivalent of 469 passenger vehicles), and annual householdenergy expenditures by nearly $451,000. Over a period of 30 years the $5 million SBTC investmentwill reduce water consumption by approximately 100 million gallons, energy consumption by 528 billionBtus, CO2 emissions by 67,000 metric tons, and household energy expenditures by $13.5 million.

References

DeOreo, W. B. (2011). Analysis of water use in new single family homes. By Aquacraft. For Salt LakeCity Corporation and US EPA.

Kelso, J. D., editor (2011). 2011 Buildings Energy Data Book. U.S. Department of Energy.

Martinez, K. C. (2011). Build Green New Mexico. Presented at the UNM School of Law UttonTransboundary Resources Center.

U.S. Green Building Council (2014). Leed in motion: residential.

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