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AG: Local governments can't repay efficiency bonds with energy savings Wednesday, Jul 2, 2008 By John Lyon Arkansas News Bureau LITTLE ROCK - A 2005 state law permitting local governments to issue revenue bonds to finance energy-saving projects may conflict with the state constitution, according to state Attorney General Dustin McDaniel. The state senator who sponsored the legislation said Tuesday she still believes the law makes good sense. In an opinion requested by Washington County Prosecutor John Threet and state Rep. Michael Lamoureux, R-Russellville, McDaniel said Act 1980 of 2005 is "constitutionally suspect" to the extent the act can be construed as authorizing the use of tax dollars to repay bonds issued for efficiency projects. The act added "performance-based efficiency projects" to the list of projects that counties and cities can finance with revenue bonds. Under the act, a county or city could issue bonds to hire an engineering company to develop and help implement cost-saving measures such as energy-efficient lighting fixtures and heating and cooling systems. Savings resulting from such a project would not be new revenue, McDaniel said in the opinion released Monday. Assuming a local government pays its energy bills with funds that include tax revenue, then using that money to repay bonds would violate Amendment 65, which prohibits the use of tax dollars for the repayment of revenue bonds, the attorney general said. "The act never expressly states that the 'efficiency savings' may be used to repay the bonds. That appears to be the clear implication" in the wording of the act, however, McDaniel said in the opinion. If a revenue source other than tax dollars were used to repay the bonds, there would be no conflict with Amendment 65, McDaniel noted. Washington County Attorney George Butler said he asked Threet to seek an attorney general's opinion about Act 1980 because the county has been considering issuing bonds for an efficiency project. "I was concerned from the very beginning that it (the law) appeared to be authorizing general tax revenue to retire those bonds, and if so, that's unconstitutional," Butler said. Lamoureux did not immediately return a call seeking comment Tuesday. State Sen. Mary Anne Salmon, D-North Little Rock, sponsored the legislation that became Act 1980. Salmon said Tuesday that using energy savings to pay for efficiency projects seems like a good idea to her. "There are companies that will guarantee a savings or they will pay if you don't save," she said. "You're going to save money because you've built an environmentally friendly building that is supposed to save on energy. And if you save, then it makes sense that that's a good way to pay the bond off." The Pulaski County Quorum Court voted in February to approve borrowing $6.1 million for an efficiency project, but the county halted the plan after bond lawyers questioned whether savings could be used to pay off the debt. Pulaski County Judge Buddy Villines said Tuesday more than 30 states have laws similar to Act 1980, but "we have a very literal-reading Supreme Court, meaning that if it doesn't specifically say that you can, then you can't." Efficiency projects could not have been envisioned by the authors of Arkansas' 1874 constitution, "who didn't even envision electricity, probably," Villines said. |
