Legislative auditor: Minnesota’s sustainable building (B3) program lacks clear oversight, data to show results

The Capital Investment Committee heard on Jan. 23 from the Office of the Legislative Auditor that Minnesota’s sustainable building guidelines — commonly called B3 and including the Sustainable Building 2030 energy standard — are required for projects funded with general obligation bond proceeds but operate with unclear oversight and incomplete data.

“For example, there’s little oversight of this program. There’s no state agency that ensures all building projects comply with the guidelines and there are no consequences if building projects do not comply with the guidelines,” said Caitlin Badger, manager of the Legislative Auditor’s evaluation. Badger described recommendations sent to the Legislature when the office released its evaluation in 2023.

The nut of the report, Badger told the committee, is that statutes assign the Departments of Administration and Commerce responsibility to develop the guidelines but do not assign any agency responsibility for administering, monitoring or enforcing compliance after the guidelines are adopted. The audit found project-level confusion over roles, weak or missing data on compliance, and obsolete statutory language — including a reference to rules repealed in 2009.

Badger said the audit reviewed projects included in the 2020 bonding bill and found data gaps that prevent an answer to how often projects comply. “Of the more than 100 projects that we determined could be subject to the guidelines, nearly 60 of those 100 projects had not begun tracking their compliance,” she said. She also cited a 2022 Center for Sustainable Building Research finding that 67% of projects had not submitted up-to-date data in design or construction phases.

The auditor’s office recommended that the Legislature: (1) designate a single state agency to administer and oversee the guidelines; (2) define that agency’s responsibilities in statute (including whether it may require and collect compliance data); and (3) require measurable program goals so performance can be evaluated.

Richard Graves, director of the University of Minnesota’s Center for Sustainable Building Research (the center), told the committee the center is contracted by Administration and Commerce to develop and maintain the B3 guidelines and to provide technical assistance. Graves said the center maintains a database of projects that engage with it and has tracked more than 520 projects and, for those projects, estimates roughly $17 million in annual energy savings. He agreed with many audit recommendations but said the center lacks statutory authority to compel projects to submit data.

Graves and Badger described practical next steps discussed in the audit and the center’s response: clarify applicability rules so project teams know whether a given project must comply; require an agency to track and collect compliance data; create a waiver process for site- or project-specific reasons to exempt particular requirements; and establish measurable goals that reflect the breadth of the guidelines beyond the energy-focused SB 2030 component.

On a procedural note, the committee approved the minutes from its Jan. 16 meeting at the start of the hearing.

The committee’s exchanges included discussion of how long energy measures must pay back. Graves said the program historically used a 12-year payback threshold for capital measures; updated SB 2030 guidance issued Jan. 1 set payback expectations tied to equipment life, with payback windows in the range of roughly six to about 20 years depending on the item.

Lawmakers on the committee asked about existing funding. Badger said Administration and Commerce together have been allocating roughly $1 million for the center’s contract; Graves said the center has subcontractors — including nonprofit and for‑profit firms — that provide energy review, database management and cost analysis support.

The Legislative Auditor’s recommendations were framed as matters for the Legislature to resolve: identify which agency should have oversight authority, amend statutes to allow collection of compliance data, and require measurable program goals so the state can evaluate costs and outcomes.

The committee did not adopt policy changes during the hearing; members said they expected follow-up work and additional testimony in future meetings.