Arkansas Legislative Update: SB 516 and the “Property Assessed Clean Energy Act”

If the current trend holds, the primary contribution of the 88th General Assembly of the Arkansas Legislature to the sustainasphere will be summed up in two words: improvement district.  We already have HB 1118, which would establish the “Arkansas Central Business Improvement and Development Investment Tax Credit Act,” and the newly amended HB 1027, which would establish the “Property Assessed Energy-Efficient Home Improvement District Act.”

Last week saw an important addition to this slate of sustainalaws: SB 516, which would establish the “Property Assessed Clean Energy Act” (which folds up into the convenient acronym PACE).  PACE is the product of years of behind the scenes work by the dedicated denizens of the Arkansas sustainasphere.

SB 516 is a piece of enabling legislation: if passed, it would enable counties to create “property assessed energy improvement districts.”  These districts, in turn, are tasked with establishing “a property assessed clean energy program” to provide financing for energy efficiency improvements and clean renewable energy projects.  The loans would run with the improved property, and would be secured by a lien against the property.  The districts would be bond-financed, and the bonds would be tax-free and fully transferable on the open market.

Unlike HB 1027, which is limited to residential projects, SB 516 grants energy improvement districts the discretion to provide PACE financing to the full range of projects, whether residential, commercial, industrial, or mixed use.

Another advantage of SB 516 is that it provides for districts comprised of several counties.  Given the number of small, rural, sparsely populated counties in Arkansas, this is significant.  These are the very places most in need of sustainable innovation and development, and, if PACE becomes law, these counties will be able to band together and issue bonds that are fiscally sound and financially attractive to investors.

Indeed, if used to their fullest potential, PACE districts will add a powerful arrow to the quiver that Arkansas counties have for attracting business investment, particularly when it comes to attracting international venture capitalists looking to invest in renewable energy and resource projects.

SB 516 is headed for the Senate Committee on Insurance & Commerce, where it is on the regular agenda for the March 1, 2011, meeting.

Stay tuned! 

Is Little Rock a Sustainable City of the Future?

Does Little Rock have what it takes to be considered a “Sustainable City”?


Here, I think, are some broad principles that weigh on the answer:

• A sustainable city has energy, water, transport, and waste infrastructure that is efficient and accessible, and that can be managed with minimal ecological impact.
• A sustainable city is a city conceived, designed, and managed so that its resources are efficiently accessible to all.
• A sustainable city uses research and outreach to make the use of sustainable practices and technologies a part of its mainstream culture.
• A sustainable city uses incentives, particularly tax and land use incentives, to direct investment in sustainable development and technologies and to provide stakeholders and citizens with motivation to change their behavior.
• A sustainable city has a municipal government that embraces and advocates for sustainability, and that is willing to invest monetary and political capital in people, programs, and technology in the move toward sustainability.
• A sustainable city has a population wants to be sustainable, and that wants to make the changes needed to be sustainable.

 

I don’t propose any answers the question (although I think my previous posts make it clear that I think the city and that state are on the right track). But as we continue our journey through the law of the sustainasphere, it is prudent and necessary to keep this bigger picture in mind. The goal, after all, is not just a law or system of laws that embraces, furthers, or protects sustainability. The goal is to take monentary, technological, legal, and political capital and turn it into sustainable social capital. Or, more directly put, the goal is a sustainable city in a sustainable state.

 

(Department of Credit Where Credit is Due: this blawg post was inspired, in part, by “Sustainable Cities of the Future: The Behavior Change Driver,” an article by Peter Newman that appeared in the Fall 2010 issue of Sustainable Development Law & Policy, published by the Washington College of Law at American University.)

 

The Case for HB 1118

Last week, the Main Street Revitalization Committee of the Little Rock Downtown Partnership voted to endorse HB 1118, which, if passed, would establish an investment tax credit for the rehabilitation and development of central business districts.


I’ve discussed the key elements of HB 1118 in previous posts. In short, HB 1118 would create an investment tax credit equal to 20% of the first $1,000,000 of qualified rehabilitation or development expenditures incurred for a qualified project. Any unused tax credits could be carried over for seven consecutive taxable years, and the credit can be transferred, sold, or assigned one time.

 

A “white paper” distributed to the Main Street Revitalization Committee highlighted the benefits of HB 1118:

 

• The return ratio on the HB 1118 tax credit is 1 to 5. In other words, $1,000,000 in tax credits generates $5,000,000 of development or rehabilitation expenditures.
• Every $1.00 of income tax credits returns between $2.19 and $2.22 in income to Arkansans.
• The tax credit should spur economic development not only in central business improvement districts, but in the areas adjacent to the districts.
• Downtown revitalization is a key part of the push for higher paying jobs and a higher quality of life in Arkansas.
• By stimulating the rehabilitation of existing structures, the tax credit will help return non-productive downtown areas to income producing and tax generating areas. This, in turn, will stimulate the tax base through new sales and payroll taxes, as well as by increasing the tax base.
• The tax credit will help attract new businesses to their downtown business areas by creating a significant marketing and economic incentive for municipalities to include in their development packages.

 

As I’ve previously observed, HB 1118 could also be improved. For example, the provision that the tax credit can only be sold, transferred, or assigned limits the utility of the credit as an investment tool and effectively prevents the establishment of a secondary market.

 

HB 1118 is on the deferred agenda for the February 15, 2011, House Revenue and Taxation Committee meeting. I will be tracking the bill. Stay tuned.

 

LEEDigation Update: Amended Complaint in Gifford v. USGBC

Back in October 2010, New York energy use consultant Henry Gifford filed a class-action complaint against the U.S. Green Building Council. Gifford broadly challenged the USGBC’s LEED-certification system as a house of cards built on “lies and omissions” regarding the efficacy of LEED-certification, that lacked a scientific basis, deceived consumers, and undermined competition, and that was designed to monopolize the “market for energy-efficient building design.” In a particularly sensational twist, Gifford alleged that the USGBC had “engaged in a pattern of racketeering activity” in violation of the RICO statute.
 
Strong and serious stuff, and the sustainablogasphere lit up with commentary on the merits and weaknesses of Gifford complaint. Many, including this sustainablawger, opined that the legal theories in the Gifford complaint suffered from some serious and likely fatal deficiencies.
 
I had been tracking progress on the case, and it was clear to me that the lawyers for both sides had been talking, because the only real activity in the case was an order indicating that the parties had agreed that Gifford could amend his complaint.
 
Gifford filed that amended complaint yesterday. It is a substantially different animal than what he first filed.  Here’s the short list of the material changes.

• The case is no longer a class action. Instead, three energy-efficiency professionals have been added as plaintiffs.
• The case no longer alleges antitrust violations of monopolization through fraud.
• The case no longer alleges racketeering or a violation of the RICO statute.

Instead, what Gifford has done is hone his case down to focus on allegations of unfair competition through false advertising. The meat of the coconut, as one of the legends of the Arkansas bench, the Honorable Henry Woods, used to say is summed up in paragraph 50 of the Amended Complaint:

Consumers are being deceived into believing that the LEED-certification will be verified by a third-party to reduce their energy costs. Not only will these consumers suffer in many cases by actually using more energy, rather than less, but they will have to spend thousands of dollars on LEED certification they believed would help them use less energy.

Setting the merits of the new case to the side, Gifford has made some wise decisions. The antitrust allegation was fatally flawed and likely would have been dismissed without any discovery or proof, as Gifford had failed to make any of the required market allegations. The RICO allegation was likewise probably fatally flawed because it was not grounded in a credibly alleged criminal predicate offense. And alleging the case as a class action not only made it unwieldy, but presented real issues as to whether Gifford was an appropriate class representative.

So the case is now leaner and meaner. The USGBC has until April 6, 2011, to respond. I anticipate that they will move to dismiss some or all of the amended complaint. It will likely be several more months before we really know where this is heading. That gives us plenty of time to blawg about it. Stay tuned!

Arkansas Legislative Update: SB 164 and The Arkansas Deceptive Trade Practices Act

My last post was based on the legal theory that greenwashing is an illegal deceptive trade practice in Arkansas. One hole in this theory is the problem of “standing.” “Standing” is lawyer-speak for the condition of being able to sue. For example, one consequence of being injured in a car accident is that your injury gives you the right to sue the person who caused the injury. If you merely read about the accident in the newspaper, you have no right – or “standing” – to sue the responsible party on behalf of your friend.


The Arkansas Deceptive Trade Practices Act expressly grants standing to the Arkansas Attorney General and to private citizens (sometimes called “private attorneys general”). The Arkansas Attorney General always has standing to sue, and can seek injunctive relief as well as the recovery of damages and civil fines. Private attorneys general, however, can sue only if they suffer “actual damage or injury” as a result of a deceptive trade practice. (Department of Legal Citation: this provision can be found at Ark. Code Ann. § 4-88-113(f)). In other words, the mere fact that you discover an act of greenwashing does not mean that you can sue to stop the practice.

It turns out some members of the Arkansas Legislature are attempting to tinker with this aspect of the ADTPA. SB 164 proposes to add the following language to the ADTPA:

Proof of reliance upon a deceptive or unconscionable trade practice is not required to obtain the relief authorized by this chapter.

At first blush, SB 164’s proposed amendment would appear to strengthen the ADTPA as a weapon for combating greenwashing. After all, if one does not need to “rely” on the greenwashing (i.e., to actually fall for the deception) to have the right to sue, prosecuting alleged greenwashers just got easier, right?

Wrong. Here’s why:

We know from a recent decision of the Arkansas Supreme Court, Baptist Health v. Murphy, that private citizens do not have the right to seek injunctive relief under the ADTPA. This means that private citizens can only recover money damages under the ADTPA. And, of course, you must suffer money damages before you can recover them.

SB 164 does nothing to change the requirement that private attorneys general – the very folks most likely to pursue greenwashers – must have suffered “actual damage or injury” before they can sue under the ADTPA. Consider: will a person who has not “relied” on the deceptive trade practice be able claim that they have been actually damaged or injured by the practice? It seems unlikely.

I suspect that SB 164 is a response to a ruling by a judge that the ADTPA required reliance. I leave the question of whether or not that is necessary and appropriate to the collective wisdom of our legislature and our Governor, who just happens to be a lawyer. But if the Arkansas Legislature wants to make the ADTPA a more useful arrow in the quiver of consumer protection, then it should consider giving private attorneys general the right to seek injunctive relief.