Attorney general dubious of savings-backed bonds
Posted on Wednesday, July 2, 2008
A 2005 law allowing cities and counties to repay certain bonds with money saved from cheaper energy bills is “constitutionally suspect,” according to the attorney general’s office.
Attorney General Dustin Mc-Daniel released two opinions regarding the constitutionality of Act 1980 of 2005 by state Sen. Mary Anne Salmon, D-North Little Rock.
The law aims to encourage cities and counties to make their buildings more energy efficient by allowing them pay for the upgrades with bonds that can be serviced with the resulting savings from utility bills. The law allows the bonds to be issued without a vote of the people.
But one opinion, prepared by assistant attorney general Elana Wills, says the law is questionable because the money that would have gone toward paying for energy generally would be tax dollars.
The opinion, issued Monday in Little Rock, points to state constitutional Amendment 62, which allows tax-backed bonds to be issued only after a vote of the people, and Amendment 65, which allows bonds without a vote of the people only if they are backed by non-tax revenues.
“Amendment 65 is violated if... the city or county merely uses the tax dollars that it would have otherwise used to pay its higher energy bills to pay the principal and interest on bonds,” the opinion stated.
The attorney general said it’s possible cities and counties could issue the bonds if the money used for energy bills is non-tax dollars.
The law was passed without opposition: 34-0 in the Senate and 92-0 in the House.
Salmon contends the money that would pay off the bonds shouldn’t be considered tax dollars.
“It’s the savings you get from having the energy efficient building,” Salmon said. “It’s not tax dollars, it’s savings. That’s a really good way to pay off bonds. You don’t have to delve into other tax dollars. The savings wouldn’t be there if not doing the energy program.”
Salmon said she knew of no city or county that has issued bonds under the 2005 law.
Don Zimmerman, director of the Arkansas Municipal League, said he didn’t think any city or county had used the law but noted that earlier this year Pulaski County contemplated it. Pulaski County decided not to do so after its lawyers questioned whether it could be done legally.
Zimmerman said neither his group nor the Association of Arkansas Counties pushed for the law.
“We thought it was questionable,” he said.
Salmon said neither city nor county officials objected to the bill during debate in 2005.
Rep. Michael Lamoureux, R-Russellville, and Washington County Prosecuting Attorney John Threet asked for the attorney general’s opinions, which are nonbinding but are widely viewed in state government as providing legal guidance.
Lamoureux said he did so at the request of former Rep. Jeremy Hutchinson, R-Little Rock.
Hutchinson, a lawyer, said he was working with bonding company officials who didn’t want to issue the bonds for a possible energy project unless they were sure it was legal. He declined to identify the city or the county interested in the projects.
Threet referred questions to the Washington County attorney, George Butler, but he couldn’t be reached for comment Tuesday.
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