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.

 

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!