The Right Equation for Responsible Development: Spotlight on Aura

In multi-part series, exclusive to the Maine Maine Real Estate Insider, we’ll provide an up-close look at the most notable commercial development projects of the past year that are helping to fuel Maine’s economy in terms of investment and job creation.  MEREDA is proud to recognize responsible development based upon criteria including environmental sustainability, economic impact, energy efficiency, difficulty of the development, uniqueness, social impact and job creation.

Please join with us in celebrating Aura.

 

MEREDA:  Describe the building and project.

Aura:  I would describe Aura as a labor of love. The building is the transformation of a successful but tired venue called Asylum. Aura is our new expanded and rebranded 24,500 SF event and performance center, located in downtown Portland. It was designed by WBRC Architects Engineers, built by Consigli, and completed in April 2017. I was recently told by a booking agent that they believe Aura is one of the top three venues in the U.S. for its size!

MEREDA:  What was the impetus for this project?

Aura:  We (Aura owners Krista Newman, Valerie Levy, and Laurie Willey) were coming up on 20th year in business and needed a change. We had grown, had children, and we wanted our space to better reflect us. We had researched what the local scene needed and saw an opportunity for a larger venue.

The name Asylum has also become a problem. We were hosting more national acts and some of them did not care for that name. It’s also not easy to sell a lunchtime corporate event to a group of professionals at a place called Asylum. We needed something more upscale, a place where we could reach out to a broader audience and host more community events.

MEREDA:  How long were you in the planning stages before construction started?

Aura:  I don’t really recall the timeline – it was a whirlwind, I must say. We’d come up with the idea to renovate, and met with Rob Frank at WBRC, and he introduced us our architect, Jocelyn Boothe. We really clicked; I can’t say enough good things about her. She went back and forth with us for weeks, getting to know each other, refining ideas.

Our planning took a major turn when we decided to add a balcony. We hadn’t had one in the original design or budget. Then we took a trip to visit Gracie Theatre in Bangor and saw their balcony. We decided we wanted to add one, but it required going back to the drawing board, and the planning board.

The balcony was probably the best idea of the whole project; it’s amazing to think that it was an afterthought.

MEREDA:  Tell us about the most challenging aspect of getting this project completed.

Aura:  The timeframe was the biggest challenge. We have a great staff; many have been here over 10 years. They are like family, and we didn’t want to have to lay people off during renovations or lose anyone to the construction process. Fortunately, we were able to keep the sports bar open during most of construction. It only closed for about a month, in August.

The building construction had to be completed in nine months to start our performance season in April, and we were freaking out near the end. But somehow the Consigli team pulled it off.

MEREDA:  Something unexpected you learned along the way was. . .

Aura:  I learned to rely on the professional knowledge base of the people around us. It was hard sometimes to not to control everything. We had trust that the architect, engineers, interior designer and acoustics people knew what they were talking about. Luckily for us, they did.

Our architect Jocelyn’s attention to detail is amazing and alleviated a lot of stress from of us. While we were still Asylum, she came to a couple of sold-out shows and watched the flow of people. She decided we needed two sets of double doors at the entrance so people could exit quicker. Then she said, “The restrooms aren’t quite big enough, it’s too long of a wait. Why don’t we lose that closet and add an extra restroom?” I don’t know a lot of architects would come to two or three shows to really research the little items that are big items for us.

MEREDA:  Now that it’s complete, what feature of the project do you think makes it the most notable? 

Aura:  It’s such an intimate space now. The balcony and the sightlines are amazing. No matter where you are, you feel like you’re right next to the people who are performing or the person who’s speaking.

The spaces at Aura are really special and unique. There’s a feeling of relaxation here. I love the airiness of it. Right before we opened, a friend came in and said, “This is going to sound strange, but when I walk in here, it feels peaceful, almost churchlike.” I’ve heard other people make similar comments. It has a really good aura, which seems funny to say. We worked with a local branding company called Blaze to come up with the new name, and it was hard to choose one before the space was built. I’m glad we chose Aura. It’s perfect.

Posted in Business, People | Leave a comment

MEREDA’s Morning Menu – Fair Winds and Following Seas: A Conversation with MDOT Commissioner, David Bernhardt and Eimskip’s Larus Isfeld

Eimskip, the Icelandic steamship company began calling on Portland, Maine in March of 2013, after more than $45 million in public and private dollars of investment by the Maine Port Authority (MPA) and Maine Department of Transportation (MaineDOT) revitalized the once derelict International Marine Terminal (IMT) property. The MPA has seen growth at the port at 20% year over year since Eimskip’s arrival, with vessel calls steadily increasing.
Investments at the (IMT) have reinvigorated commercial shipping to the Port of Portland, providing Maine businesses with opportunities to lower logistical costs and reach markets across the world.
Eimskip announced last year that they will increase port calls to weekly service. The result is a 45% increase in ship calls, from 36 to 52 ships per year at the IMT. This is the first time in the company’s 100-year history that they have offered weekly service to the United States.  The huge increase in ship calls to the IMT will provide Maine businesses with better access to foreign markets and increase the global competitiveness of our State.
In 2016, the MPA and MaineDOT announced the award of a federal FASTLANE grant to further improve IMT infrastructure and operations. As part of that grant, the state will be strengthening and enlarging the pier, building a new maintenance and training facility, further improving rail connections at the port, and most recently, expedited a purchase of a new mobile harbor crane. The new crane allows ships to be loaded and offloaded more efficiently and provide for necessary redundancy in crane operations to support the additional traffic.
Mark your calendar to join MEREDA for breakfast on September 6 from 7:30 AM – 9:00 AM at the Holiday Inn By the Bay for a statewide perspective by MaineDOT Commissioner Bernhardt including development opportunities at other key ports along Maine’s coastline, and an in depth look at the Eimskip story with its Managing Director and Executive Vice President, Larus Isfeld.
 
About the Event:
September 6, 2018 – 7:30AM to 9:00AM

Holiday Inn By the Bay
88 Spring Street
Portland, ME
Breakfast: 7:30 AM
Program: 8:00 – 9:00 AM
About the Panel:
David B. Bernhardt joined MaineDOT in 1984 serving in several top positions and was appointed Commissioner of the Maine Department of Transportation (MaineDOT) by Governor Paul R. LePage in February, 2011. He is an active participant on several national and state transportation associations including: The American Association of State Highway and Transportation Officials (AASHTO) Board of Directors and Executive and Strategic Management Committee; NCHRP 20-24; I-95 Corridor Coalition and is an honorary member of Maine’s Women in Transportation Chapter.   Commissioner Bernhardt served as AASHTO’s Vice President in 2016 and President in 2017. While serving as president, he helped lead the implementation of a comprehensive committee restructure. In 2017, Bernhardt worked closely with President Trump’s administration and various infrastructure stakeholders to develop plans for a major infrastructure investment proposal.
Larus Isfeld has been the Managing Director and Executive Vice President of Eimskip USA since February 2009. Before taking on the position of Managing Director of Eimskip USA. Larus was President and owner of Icexpress a NY based Freight Forwarding Company at JFK airport from 2003 until the company merged with Eimskip in 2009. From 2000-2003 Larus was the CEO of Viska hf., an Icelandic Investment fund with focus on M&A of food production companies in Iceland.He started his career for the largest Icelandic retailer Baugur Group, now Hagar, in 1981 working through various positions until becoming a Director of Private Label during the last few years with the company.Larus was one of the moving forces behind the relocation of Eimskip USA from Norfolk VA to Portland ME. He is a proven business leader and entrepreneur with extensive experience in management, retail, and international relations and logistics. 
Registering for this Event:
 
MEREDA Member: $45 each  | Non – Member: $55 each
Register After August 30:  Member: $55 each  |  Non-Member $65 each
Your RSVP is requested by August 30, 2018. Payment is expected at the time of registration. No refunds will be granted to anyone who registers, but fails to attend or who cancels after August 30, 2018.
This MEREDA Morning Menu Breakfast Event is Sponsored by Norway Savings Bank. 
 
Visit www.mereda.org for more information and to register.
Posted in Events, People | Leave a comment

So Do We Have a Deal? Maybe Not

By: Asha Echeverria, Shareholder, LEED AP, Bernstein Shur

A written contract signed by both parties is always best. So what happens when negotiations take months and only one side signs the contract? Is there a contract? Was there a meeting of the minds? According to the court in Ellis Construction, Inc. v. Town of Farmingdale (Kennebec Sup. CV-16-009), whether the parties are still negotiating a contract or entering into a contract is purely a question of intent, which is a question of fact. The mutual assent of both parties has to be shown and is an essential component to the formation of the contract.

In this case, a contractor attempted to claim that a renewal sewer maintenance contract had been formed in June 2015 when they emailed the secretary of the Sewer committee to confirm receipt of the draft contract and that they were “agreeable to the changes.” The court disagreed because it was obvious from reviewing the Sewer Committee and Select Board meetings that the parties were still in negotiations as to whether the Town would agree to the renewal. The evidence did not establish that the Town had the intent to enter a contract just yet.

The fact that negotiations were still ongoing was made clearer as further modifications were made to the contract in August/September 2015 and these terms became a point of contention between the parties.

The contractor’s final attempt to establish a contract was based on the Town’s ultimatum “that if the Sewer Maintenance Contract is not signed tomorrow night, that the contract will be put out to bid” and its quick response by signing the contract. The court did not interpret the Town’s action as being an intent or assent to be bound if the contractor signed, but rather, the court interpreted it to mean that the Town wanted to know the contractor’s position by the next day but had not decided if it would countersign the agreement. And then, just days later, the Town officially declined to renew the contract. Because no contract was ever formed, the contractor was not entitled to contract damages.

The court declined to find an implied contract but did determine that the contractor had completed some work after the expiration of the prior contract. Therefore, the contractor was entitled to unjust enrichment damages of $1,100.

Finally, the court did confirm that Maine’s Prompt Payment Act (10 M.R.S.A. § 1111 et seq.) applies to both express and implied contracts (quantum meruit claims) although it was not applicable in this instance since the contractor was only able to collect under Unjust Enrichment. This means that if a contractor is forced to sue to recover amounts owed by an owner, which includes a municipality, the contractor can recover penalties and attorney’s fees even if the contract was only implied from the actions of the parties.

The final takeaway from this case is to try and always have a written contract signed by both parties—then at least you know you have a deal.

Original Publication: The Construction Advantage, June 1, 2018

Posted in Business, Member Articles | Leave a comment

MEREDA Board of Directors votes to join the No on 1 campaign organized to defeat the referendum

This fall, Maine voters will face yet another ill-conceived citizen-initiated referendum that would establish a new tax to fund a home health care initiative.   The proposed referendum would: 

* Impose a massive tax increase in the form of a payroll tax on Maine families and Maine businesses. 

* Increase taxes collected in Maine by over $300 million annually. 

* Undermine existing programs for home care services. The services will be made available to anyone, even millionaires. The benefit will go to the well-off who may more easily navigate the system, threatening to leave behind those truly in need. 

* Create a privatized board to spend these additional public resources with no public accountability. 

* Allow for turning over names of individuals receiving care to organizations that represent individuals who provide care, such as labor unions, for advocacy and Board election campaign purposes, in violation of federal privacy laws.

Citing the proposed referendum as very poorly designed policy, at its June meeting the MEREDA Board of Directors voted to join the No on 1 campaign organized to defeat the referendum. The No on 1 campaign, whose slogan is “Stop the Scam,” is working with dozens of businesses, trade associations and non-profit organizations, including the trade association that represents home care workers, to defeat this referendum. You can read the legislation to be voted upon here.

Facebook: Stop The Scam Maine

Twitter: @stopthescammaine

Instagram: @stopthescammaine

Website: https://stopthescammaine.com

Posted in Advocacy, Business, MEREDA Resources | Leave a comment

Maine Real Estate & Development Association Announces Public Policy Committee Chair

Michael Lane of Richmond, a partner at Preti Flaherty, is the Maine Real Estate & Development Association’s (MEREDA’s) new Public Policy Committee Chair. Mike succeeds recently elected MEREDA President, Gary Vogel of Drummond Woodsum, who has chaired the committee for the last 14 years.

MEREDA’s active Public Policy Committee meets regularly during each legislative session reviewing pending bills and regulations, identifying those of interest to the membership, and works to ensure the real estate industry’s concerns are considered. The committee works to influence and shape the final form of proposed laws and regulations, and initiates new ones when circumstances warrant.

“I look forward to working with, and advocating on behalf of, MEREDA’s members during the upcoming session on the legislative and regulatory issues of interest to our membership,” said Lane.

Mike chairs Preti Flaherty’s Real Estate Group and has represented clients in all aspects of real estate and land use law, including: acquisitions; dispositions; obtaining federal, state and local regulatory approvals, commercial and public financing, and title and conveyancing matters. Mike has built a strong timberlands practice representing mills, land management companies and industrial land owners in complex timberlands transactions, including acquisitions, sales, operating agreements, wood supply agreements, underwriting timberland titles, Land Use Planning Commission (LUPC) development compliance and permitting. He routinely appears before municipal planning boards, the LUPC and the Department of Environmental Protection to permit residential, commercial and industrial projects.

For further information, please contact MEREDA’s Vice President of Operations, Shelly R. Clark at 207-874-0801

Posted in Business, Networking, People | Leave a comment

Maine Real Estate & Development Association (MEREDA) Announces Appointments to Board of Directors

Dan Brennan, Director of MaineHousing, and resident of Winslow, and Shawn McKenna of Scarborough, Vice President, Commercial Banking, at Bangor Savings Bank, have been elected to the board of directors of the Maine Real Estate & Development Association (MEREDA), a statewide organization of commercial real estate owners, developers and related service providers.

In April, the Maine Senate unanimously confirmed the nomination of Dan Brennan, a member of MaineHousing’s leadership team, as Director of the $1.7 billion financial institution that serves more than 90,000 people statewide annually.  The Senate vote followed a unanimous vote by the Maine Legislature’s Labor, Commerce, Research, and Economic Development Committee on Tuesday, April 3. He was nominated by Governor Paul LePage on March 19.  Brennan has been serving as Senior Director of Programs, overseeing departments responsible for creating single and multifamily housing, addressing homelessness, managing Section 8 Housing Choice Vouchers, and administering the federal Home Energy Assistance Program (HEAP) as well as the Department of Energy Weatherization Program. Brennan received his bachelor’s degree from the University of Maine in Orono and his Master’s in Business Administration from Thomas College in Waterville. He is currently participating in the Maine Development Foundation’s Leadership Maine program.

MaineHousing is a $1.7 billion financial institution that bridges public and private housing finance, combining them to benefit Maine’s low and moderate-income people. MaineHousing brings millions of new private and federal housing funds to invest in Maine to create safe, affordable, warm housing.

In his role as a vice president and commercial real estate lender, Shawn is a creative individual that is eager to thoroughly understand any idea, product, or concept.   Over the last two decades with Bangor Savings Bank, he has held roles as a commercial underwriter, real estate appraisal review specialist, and commercial portfolio manager.  Shawn’s interest in solving problems, conceiving new concepts, and understanding a borrower’s needs comes in handy when working with a multitude of commercial banking clients.

Outside of the office, Shawn is an avid automobile and outdoor enthusiast that enjoys spending time with his wife Traci and their two French bulldogs, Boston and Una.  Shawn currently serves on MEREDA’s Membership & Marketing Committee.

“Both MaineHousing and Bangor Savings Bank have been great supporters of MEREDA over the years and we are pleased that Dan and Shawn have accepted our invitation to sit on the board.  We look forward to their active participation in furthering MEREDA’s mission of promoting responsible real estate development throughout Maine,”  says Shelly R. Clark, Vice President of Operations for MEREDA.

For further information, please contact MEREDA’s Vice President of Operations, Shelly R. Clark at 207-874-0801 or visit www.mereda.org.

Posted in Business, People | Leave a comment

The Right Equation for Responsible Development: Spotlight on Bayside Anchor

In multi-part series, exclusive to the Maine Maine Real Estate Insider, we’ll provide an up-close look at the most notable commercial development projects of the past year that are helping to fuel Maine’s economy in terms of investment and job creation.  MEREDA is proud to recognize responsible development based upon criteria including environmental sustainability, economic impact, energy efficiency, difficulty of the development, uniqueness, social impact and job creation.

Please join with us in celebrating Bayside Anchor.

 

MEREDA:  Describe the building and project.

Bayside Anchor:  Portland Housing Authority (PHA) and Avesta Housing were co-developers on this 45-unit, mixed-income, mixed-use Passive House building located in the heart of the East Bayside neighborhood in Portland. The building has nine market-rate units and 36 affordable units targeted for individuals and families making between approximately $23,000 and $49,000 annually. Bayside Anchor is a service hub for low-income residents in East Bayside, giving the project its name as a stabilizing ‘anchor’ for the community. The street level is home to a Head Start preschool program and Community Policing and PHA offices. Bayside Anchor is PHA’s first new development in 45 years, and a first step in revitalizing their properties in this neighborhood. These homes, along with the community services Bayside Anchor offers, will further enrich this already vibrant neighborhood.

MEREDA:  What was the impetus for this project? 

Bayside Anchor:  Bayside is the most impoverished Census tract in Portland. The unemployment rate is double that of Maine and the U.S.; the poverty rate is triple the Maine poverty rate; the median income is half that of Mainers overall; and the number of households on food stamps is triple the rate of Mainers and Americans overall.

Additionally, Portland is in the midst of a serious housing crisis. The demand for housing is outpacing supply and development, leading to tremendous affordability issues.

Nestled in the middle of a Portland Housing neighborhood with 176 units and 600+ residents, Bayside Anchor is PHA’s first new building in 45 years. It is a symbol of Portland Housing Authority, Avesta Housing, and Portland’s commitment to supporting low-income residents in the face of rapid gentrification. Bayside Anchor was designed to be a social hub for the neighborhood – with large indoor/outdoor community spaces, a Head Start preschool program, community policing offices, and a satellite office for PHA. Of the 45 units, 36 are affordable to households making 40%-60% area median income. There are also nine units with a homeless preference and nine with project-based vouchers.

MEREDA:  That sounds like quite a process.  How long were you in the planning stages before construction started? 

Bayside Anchor:  We started planning for this project in late 2012, when we began work on an ultimately successful application for the national “Lowering the Cost” competition sponsored by Enterprise Community Partners and Deutsche Bank. Avesta and PHA applied to MaineHousing in 2014 for Low Income Housing Tax Credits, but was unsuccessful that year. Applying again in late 2014, Bayside Anchor secured the LIHTC and designed the project for 6 months in 2015. There were challenging requirements from HUD as part of the disposition of the land to the Partnership, so construction did not start on the site until January of 2016. The construction was relatively quick at 10 months; Bayside Anchor welcomed its first residents in December 2016.

MEREDA:  Tell us about the most challenging aspect of getting this project completed

Bayside Anchor:  This project had its share of unique challenges. It required a rezone of the site. We also had to navigate and negotiate the parking requirements with the City of Portland, eventually relying on a campus-wide approach with Portland Housing Authority’s other properties. Additionally, we needed to merge uses that were not naturally compatible, such as early childhood education, office space, and private residences. Meanwhile, we were developing one building while considering a potential, but not definite, second phase.

With an eye toward Passive House certification, we were trying to introduce some of the most advanced energy concepts with very strict cost cap requirements. In order to overcome these challenges, the Bayside Anchor development team’s integrated construction management approach reduced professional fees, shortened construction time frames, and minimized change orders. The project team realized savings through compression of construction time and better labor efficiency.

MEREDA:  Something unexpected you learned along the way was…

Bayside Anchor:  Multi-family buildings on Portland’s peninsula really can be built without any parking lot, and still be successful! Well, we did assign parking to the under-utilized PHA lots in the neighborhood, but we only had 19 parking sticker requests for 45 apartments!

MEREDA:  Now that it’s complete, what feature of the project do you think makes it the most notable? 

Bayside Anchor:  While passersby may point to the bright green exterior of Bayside Anchor, the most notable feature is in fact its advanced energy design. Bayside Anchor is the Portland multi-family building designed to the Passive-House standard. We expect certification shortly!

Posted in Business, People | Leave a comment

Maine Real Estate & Development Association Names New President and Announces 2018-2019 Officers

Gary Vogel, attorney at Drummond Woodsum, is the new president of the Maine Real Estate & Development Association (MEREDA), a statewide organization of commercial real estate owners, developers and related service providers. Founded in 1985, MEREDA promotes responsible development and ownership of real estate in Maine through legislative advocacy, educational programs and professional networking opportunities.

Gary succeeds Paul Peck of Drummond & Drummond who led the Association the last two years. Since joining the Board of Directors in 2004, Gary chaired the Public Policy Committee for 13 years and continues to serve on MEREDA’s Executive Committee.

“I am excited about the opportunity to step up and lead MEREDA.  MEREDA is one of the most impactful statewide trade organizations and exerts a huge positive benefit for the entire state of Maine,” Vogel stated.

A shareholder (partner) at the law firm of Drummond Woodsum, Gary’s practice is concentrated in real estate real estate development, finance transactions, commercial transactions, mergers and acquisitions and commercial law.  His practice often involves developments utilizing the Federal Low-Income Housing Tax Credit, Federal and State Historic Tax Credits and New Market Tax Credits.  He has been practicing law in Portland for over 30 years and resides in Yarmouth.

MEREDA also announced its 2018 / 2019 slate of officers which include President Gary Vogel of Drummond Woodsum, Vice Presidents Bruce Jones of Creative Office Pavilion and Brian Curley of PDT Architects, Treasurer William Shanahan, of Northern New England Housing Investment Fund and Secretary Shelly R. Clark, who also serves full time as MEREDA’s Vice President of Operations.

                L-R: Gary Vogel, Bruce Jones, Brian Curley, Bill Shanahan, Shelly R. Clark

For further information, please contact MEREDA’s Vice President of Operations, Shelly R. Clark at 207-874-0801.

Posted in Business, People | Leave a comment

Tax Reform has Mostly Good News for the Real Estate Industry

By Andrew Smith, Principal, Baker Newman Noyes

December’s federal Tax Cuts and Jobs Act (the “Act”) contains some of the most significant tax law changes seen in decades.  Many in the real estate industry will come out ahead as a result of the changes, and this article provides a brief overview of the new rules.

Reduced tax rates

Taxable C corporations formerly faced graduated rates topping out at 35%, but the Act permanently reduced it to a flat 21% beginning in 2018.  For flow-through entity owners, the top rate dropped from 39.6% to 37% beginning with 2018 and continuing through 2025.  Self-employment tax and the net investment income tax remain unchanged.

20% deduction of flow-through income

Beginning with 2018, most owners of flow-through entities (“FTE”) may deduct up to 20% of that taxpayer’s share of the entity’s business income.  Rental income appears to qualify, but the law is vague and clarification is expected.  Dividend income, capital gains, an interest income, wages and guaranteed payments do not qualify.

Under complex rules and calculations, filers with taxable incomes that do not exceed $315,000 for married couples, or $157,500 for others, may receive the full deduction; those with higher incomes face potential limitations:

  1. For certain personal service providers, the benefit is partially phased out when taxable income is between $315,000 and $415,000 for married couples, or $157,500 and $207,500 for others. The benefit is fully phased out if taxable income exceeds those ranges.
  2. Taxpayers other than certain personal service providers, but whose income exceeds the $315,000 or $157,500 threshold amounts, do not face the phaseout described above, but other reductions of the benefit will apply that can be overcome only if (1) wages paid by the entity to its employees are high enough, or (2) the cost of fixed assets held by the entity is high enough.

Business interest expense limitation 

Beginning with 2018, business interest deductions are limited to 30% of income.  This limit applies regardless of the entity’s form of business, but exceptions exist for entities with average gross receipts of $25 million or less, banks, and vehicle dealerships.

The 30% limit applies to adjusted taxable income (“ATI”).  ATI is generally taxable income other than interest itself, gains unrelated to a trade or business, net operating losses, and the 20% FTE deduction.  It also excludes depreciation, amortization, and depletion deductions, but only until 2022.

Interest limited by these rules may be carried forward.  Although the limitation is computed at the entity level, special rules allocate disallowed interest (generated in years the limit applies) or excess income (generated in years the limit does not apply) to flow-through entity owners, for their use in a very complex tracking system that preserves the deduction but defers its use.

Bonus depreciation

This deduction was extended through 2026.  The percentage of cost that may be deducted depends on the date placed in service:

9/28/17 – 12/31/22         100%

1/1/23 – 12/31/23           80%

1/1/24 – 12/31/24           60%

1/1/25 – 12/31/25           40%

1/1/26 – 12/31/26           20%

1/1/27 and forward        0% (expired)

“Used” property now qualifies if it is “new” to the taxpayer, and was not previously owned by a related party.

Section 179 

This deduction is expanded by allowing expensing of $1,000,000, with a phaseout that begins at costs exceeding $2,500,000.  Interior nonresidential real property improvements now qualify, as do HVAC, security systems, and fire alarm and protection systems.  Property used to furnish lodging facilities now qualifies.  These increases are permanent and indexed for inflation.

Qualified Opportunity Zones

Three new incentives in the form of gain deferral, gain exclusion, or basis increases are provided for those who invest in certain low-income communities known as Qualified Opportunity Zones through the use of Qualified Opportunity Funds.

Net operating losses

Newly-created net operating losses may no longer be carried backward, but may be carried forward indefinitely.  However, only 80% of a year’s income may be offset by a loss carryforward.

Excess business losses

This new concept limits the amount of business losses (such as flow-through income from S corporations and partnership) that can offset other income (such as wages or investment income) on a filer’s 1040.  The amount useable annually is $500,000 for joint filers and $250,000 for others.  Any losses exceeding those amounts are converted to net operating loss carryforwards. 

The Tax Cuts and Jobs Act is complex, and the information above barely scratches the surface of the depth and breadth of the rules.  However, those involved in many industries, including real estate, should become familiar with the rules and ensure that to the extent possible and reasonable, business is conducted in a way that maximizes the benefit. 

Andrew Smith, CPA, is a principal in the tax department of Baker Newman Noyes.  He specializes in the real estate and construction industry.

Posted in Business, Member Articles, People | Leave a comment

Solar Plus Complementary Technologies Leads to an Economical, Sustainable Grid

By Fred Greenhalgh, Employee-Owner ReVision Energy

MRRA microgrid at Brunswick Landing in Brunswick ME by ReVision Energy

Thanks to over a 75% decline in the cost of solar panels over the last ten years, it’s now economically viable (and environmentally necessary) to fully power our modern society with clean energy. However, solar panels alone don’t get us out of the climate bind – we must also convert loads that have traditionally been met by burning oil or gas to use electricity instead. This concept – converting to a 100% electricity-powered world – is called strategic electrification.

Why Electrify?

Common wisdom has been that certain needs – transportation and home heating, for example – could only be met by burning of fuels. Thanks to modern heat pumps, heat pump water heaters, and electric cars, this is no longer the case.

A few quick facts – a heat pump in a home in Maine will produce heat for the equivalent price of $1/gallon of oil, and it costs the equivalent of around $1/gallon of gas to drive an electric vehicle.

Maine currently spends over $5 billion annually on heating oil and gasoline, at a tremendous cost to our local economy and environment. With strategic electrification, we can keep more of these energy dollars at home and do our part to mitigate carbon pollution.

The Case for Solar Plus

Converting to these all-electric options without also cleaning up the electricity mix misses the mark. The current electric grid is antiquated – it’s too large, too centralized, and too inefficient. Adding massive infrastructure and huge, remote power plants made sense in 1950, but not in 2018.

A future-ready grid takes into account that most people in the near-future will be producer-consumers, making some power and consuming some power. Deployable resources like electric vehicles, batteries, and even water heaters can help balance the intermittency of renewable energy. Furthermore, combining the economics of solar plus these new electric technologies unlocks a much more substantial ROI for the consumer.

Solar photovoltaic is now the least expensive form of electricity on the planet – in most parts of the United States, including the Northeast, a homeowner, business, or organization can buy solar for less per kilowatt-hour than the traditional utility grid.

Smart Electronics Ensure Grid Stability

To the end user, the electric grid looks easy – turn on a light switch and Bam! there’s power. There is a tremendous amount of technical work behind the scenes, however, ensuring stability of service. Critics often cite the intermittency of renewable inputs as a strike against their ability to be taken to scale, however, understanding the possibilities of load balancing and demand response quickly quashes this criticism.

With our current grid, demand response is already in play, but it is generally only used on the large scale. For example, large, industrial customers are often incentivized to lower their usage during peak hours.

Modern electronics make this feature available to everyone. With current, readily available technology, it’s no harder to turn off 1,000 water heaters than it is to turn off a paper mill. This allows grid operators to think more creatively about how to balance grid stability in a fully electrified context.

Consider a heat pump water heater that can be controlled by the grid. Electronics can tell the water heater to run when there is excess solar on the grid, or to stop when grid demand is high. In essence, this works just like a battery, but at roughly 2% of the cost, since all that’s involved is a smart switch that tells the water heater to run or not.

From the consumer’s perspective, the heat pump water heater is a way to reduce nearly 300 gallons of oil use in their home each year. However, from the grid operator’s end, it’s part of an expanding, integrated network of smart-devices that help manage an internet of energy.

The Modernization Imperative

Strategic electrification offers major opportunities for grid operators, end users, and all of society. Converting to a 100% clean energy grid is imperative not only for the sake of the planet, but also for its powerful economic incentives.

Posted in Business, Member Articles, People | Leave a comment