You Win Some, You Lose Some: HB 1118 Passes; SB 516 Fails

The 88th Session of the Arkansas General Legislature is through the short rows, and at this point the fate of the slate of proposed sustainalaws seems clear.

 

HB 1118 – The Arkansas Central Business Improvement District Rehabilitation and Development Investment Tax Credit Act. PASSED, and sent to Governor Beebe for signature. This Act is designed to encourage economic development within the central business districts of Arkansas cities by providing tax incentives for the rehabilitation and development of structures in those districts.

 

Unfortunately, the HB 1118 that passed is not the same HB 1118 that this sustainablawger wrote about back in February. As originally conceived, HB 1118 provided for a tax credit equivalent to 20% of the first $1 million in qualified expenditures on a project. The tax credit program would have existed for 5 years, and there was no cap on the total amount of credits that could be issued. The tax credits could also be bought and sold one time – a problematic limitation.

 

The pertinent differences between HB 1118 as proposed and HB 1118 as passed are:

• The value of the available tax credits is limited to $1 million per fiscal year, and the credits are issued on a “first come, first serve” basis.
• The value of the individual credits has been reduced to 25% of either the first $500,000 of qualified expenditures for income-producing property or the first $200,000 of qualified expenditures for non-income producing property.
• Once effective, the program will last for two years, not five.
• The tax credits can still be bought and sold, but still only one time.

Assuming Governor Beebe signs HB 1118 into law, and the expectation is that he will, an additional – and significant – hurdle remains. One of the last minute amendments to the bill requires the Chief Fiscal Officer of Arkansas to certify that there sufficient funding for the tax credits are available in the General Improvement Fund. When that will happen is anyone’s guess.

 

I had previously questioned whether a credit of 20% of $1 million would be sufficient incentive to foster the type of development and investment required to make real changes to the downtowns of Arkansas, and to do so using sustainable business practices. Evidently, it was too much to pass legislative muster. Regardless, some incentive is better than no incentive, and certainly some central business districts – Little Rock immediately comes to mind – are poised to benefit from HB 1118 once it becomes effective.

 

SB 516 – The Property Assessed Clean Energy Act. DID NOT PASS. SB 516 would have enabled counties to create “Property Assessed Clean Energy” (or PACE) districts. PACE districts would have been able provide bond-financed loans to property owners to make energy efficiency improvements, and for other clean renewable energy projects. This bill was two years in the making and did not pass by a close vote of 48-44. The jury is still out on why SB 516 failed, but the initial indications are that a misperception that SB 516 required the creation of PACE districts and the issuance of bonds led to its downfall.

 

Here are the thoughts of one of the primary proponents of SB 516, Mark Robertson:

 

I am encouraged through all your efforts we were able to make a dramatic change in the position of SB516 in less than 24 hours. Yesterday this bill had a rough day and we were solidly in a minority position after the vote due to a lack of understanding the bill. Through great leadership from many legislators and through your efforts the bill was brought back to the floor today in the waning hours of the session and won a close and bi-partisan majority vote of 48-44. However, we were 3 votes shy of the 51 needed to help make a real difference in the many communities of Arkansas. We came very close and further than I think many thought possible in such a short time. Good policy should not fail for lack of effort and I know we gave it every effort and used every option available to try and have a successful income.

 

You all should be commended and pat yourself and your network of friends on the back for such a valiant effort. This shows me when we unite we can make a significant difference in our State and our communities. It does not matter if it is energy, environment, social justice, economic development, poverty, education, health or just the well being of our communities, we can collectively continue to move Arkansas forward to becoming the community we all envision when we act together.

Worthy sentiments. Assuming that sustainability is a result, it is a result that can only be accomplished by giving the stakeholders in the Arkansas sustainasphere the wherewithal to adopt sustainable building practices and to take a chance with renewable, clean energy projects. SB 516 would have enabled counties to move toward providing private, small-scale financing for these projects, and would have filled an important gap between legislation such as HB 1118, which is clearly focused on large scale urban investment and development, and the private stakeholder. Let’s hope the substance of SB 516 finds new life in the 89th General Assembly.

 

Legislative Update: Is the Property Assessed Clean Energy Act Doomed?

The Arkansas Legislature has a self-imposed deadline of today to finish business. One of the most promising pieces of proposed sustainalegislation, SB 516, is in serious jeopardy. SB 516 would enable – not require – counties to establish Property Assessed Clean Energy Districts. These districts would be a significant tool for local economies to use to encourage investment in sustainable homes and practices.


Yesterday, SB 516 received a “do not pass” vote from the Legislature. It appears that the vote was driven by the misperception that the SB 516 would require the establishment of PACE Districts, and would have a negative impact on the state’s finances. Neither view is accurate. SB 516 is merely enabling legislation, and it is revenue neutral.

Below are some talking points on SB 516.

1. SB516 is only enabling legislation. It simply gives permission but does NOT create districts.

2. PACE = Property Assessed Clean Energy Bonds.

3. PACE = Economic Development and job creation in the hard hit construction industry. It creates new job opportunity STATEWIDE.

4. PACE enabling legislation has been adopted in 25+ States and has existed since 2007. It has a successful track record across the country and within the region.

5. SB516 is the result of a year long study of the Legislative Task Force on Sustainable Buildings and included countless hours of testimony from experts within and outside of Arkansas and include numerous reports and evaluations from other programs. This bill is the only recommendation from the 2009-10 Task Force and is based on extensive study and discussion. Members of this Task Force include Legislators, Industry Professionals, and State Agency representation.

6. PACE is VOLUNTARY for the State, County, municipality and the homeowner. Any City, County, or homeowner that chooses not to participate in PACE will NOT be affected by PACE legislation. It is an Opt-In and not an opt-out program.

7. PACE is NOT a tax.

8. Property owners voluntarily borrow money for investments in energy conservation improvements or to install clean renewable energy options to power property.

9. PACE is a LOAN and is repaid over time as an additional amount collected with the property tax of the applicant who chooses to participate. PACE is voluntary

10. REVENUE NEUTRAL – this will not impact the general revenue fund.

11. County Assessors simply enter a code to the county records identifying those properties that have VOLUNTARILY enrolled in the PACE loan program. It is treated similarly to several existing programs that require simple coding in the office.

12. NO additional property assessment is required by the County Assessor. Value is determined by the amount of the LOAN the applicant qualifies for and receives NOT by additional time spent by Assessor analyzing the property.

13. PACE is funded by private capital.

14. PACE provides consumer choice in the marketplace and is an alternative to traditional lending mechanisms and should be at a lower cost (interest rate). Especially beneficial to low to moderate-income property owners. Those who choose other options may do so and neither effect the PACE program or be limited to utilizing different options of their choosing.

15. The benefits to homeowners. 3 things – access to 100% financing, repayment terms, and transferability.

16. February 2011 report by independent Pike Research indicates over 42% of the respondents want this type of option to be available and would choose to participate if available. (http://www.pikeresearch.com/newsroom/42-of-homeowners-would-be-interested-in-a-residential-clean-energy-financing-program) the 58% of homeowners that may choose not to utilize PACE financing would NOT be affected by its availability to others.

17. PACE districts administered by local boards.

18. PACE is Supported by National Association of Regulatory Utility Commissioners (including AR PSC Chair); National League of Cities and National Association of Counties (http://pacenow.org).

19. SB516 is supported by AR Municipal League and has not opposed by the Association of AR Counties, AR Assessors Association, AR Bankers Association or Mortgage Bankers of AR Association.

Proponents of SB 516 are organizing a last ditch attempt to save bill, and hopefully it’s not too late to save this significant piece of proposed law. Give your representative a call, text, email, or smoke signal.

In the meanwhile, I’ll continue tracking progress. Stay tuned.

Arkansas Legislative Update: February Recap

Those charting the march of sustainability through Arkansas Legislature noted two significant developments in February: the introduction of SB 516, which would enable the creation of property assessed energy improvement districts, and the radical amendment of HB 1027 which has been transformed from the "Sustainable Energy-Efficient Home Program" to the "Property Assessed Energy-Efficient Home Improvement District Act."  

Otherwise, unfortunately, not much happened at all.  Here's a summary of the inaction: 

HB1027 was revamped from the "Sustainable Energy-Efficient Home Program" to the "Property Assessed Energy-Efficient Home Improvement District Act," but still awaiting action from the Joint Committee on Energy, as is HB1050, The Energy Efficiency and Conservation Financing Act.

HB 1036 and 1037, which provide for tax credits and exemptions for the purchase of renewable resource equipment, and HB 1118, the Arkansas Central Business Improvement District Rehabilitation and Development Investment Tax Credit Act, are still awaiting action from the House Committee on Revenue and Taxation.

HB 1043, the Reusable Shopping Bag Act, is - you guessed it - still awaiting action from the House Committee on Public Health, Welfare, and Labor.

SB 516, the Property Assessed Clean Energy Act, is the newest addition to the bunch.  It is headed on to Senate Committee on Insurance and Commerce but it's on the deferred agenda.

The Arkansas SustainaBlawg will continue to track the progress of these bills. Stay tuned!

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!