AG intervenes: Will defend 2014 act at heart of $18 fee suit

Tuesday, October 8, 2019

By Scott Loftis

The Arkansas Attorney General’s Office is intervening in a class-action lawsuit challenging the assessment of an $18 annual fee billed to property owners in Carroll County in connection with a failed landfill.

Olan W. Reeves, a deputy attorney general, filed an entry of appearance Thursday in Carroll County Circuit Court in the class-action suit filed by Fayetteville attorneys Matt Bishop and Wendy Howerton on behalf of plaintiff Paul Summers of Berryville.

Defendants in the lawsuit are the Ozark Mountain Solid Waste District and Carroll County collector Kay Phillips.

Reeve’s entry of appearance is filed “for the sole purpose of defending the constitutionality of acts alleged in the Plaintiff’s complain to be unconstitutional,” the document says.

One of the arguments made by Bishop and Howerton is that special language included in the 2014 Arkansas Department of Environmental Quality appropriations bill — which they argue created the mechanism that ultimately resulted in the imposition of the $18 fee — violates the state Constitution. The same special language has been included in each ADEQ funding approved by the state Legislature since 2014.

The $18 assessment, which is being charged to property owners in the six counties included in the Ozark Mountain Solid Waste District, is intended to repay bondholders who purchased $12,340,000 in bonds issued by the solid waste district in October 2005 to finance the purchase of the North Arkansas Board of Regional Sanitation (NABORS) Landfill in Baxter County. The assessment, which could continue for 30 years or more, also is intended to repay the Arkansas Department of Environmental Quality (ADEQ) for up to $16.5 million in costs related to closing and cleaning up the landfill.

Since filing the original Carroll County complaint on Summers’ behalf in May 2018, Bishop and Howerton have filed similar lawsuits in the other five counties — Baxter, Boone, Marion, Newton and Searcy — where the assessments are being levied. The lawsuits seek to have the assessments halted and for property owners who have already paid the assessment to be reimbursed.

Bishop and Howerton filed an amended complaint in Carroll County Circuit Court in July 2019. Like the original complaint, the amended version cites the 2014 ADEQ appropriations bill, Act 274, as an impetus for the creation of the $18 assessment.

The amended complaint notes that “while the bondholders were secured by certain assets, ADEQ had no basis for recovery from OMSWD at that time.”

That changed with the Act 274. That legislation “bestowed a gift upon ADEQ and the bondholders,” the amended complaint says, in the form of special language added by then-state Sen. Johnny Key of Mountain Home and then state-Sen. Jeremy Hutchinson of Pulaski County. Key is now director of the Arkansas Department of Education. Hutchinson, a nephew of Gov. Asa Hutchinson, resigned from his Senate seat after being indicted on federal charges of wire fraud and filing false tax returns. He pleaded guilty in federal courts in Arkansas and Missouri earlier this year to accepting multiple bribes and committing tax fraud.

The special language included in Act 274 created a mechanism for ADEQ to sue other governmental entities to recover funds expended from the Landfill Post-Closure Trust Fund — “In effect authorizing ADEQ to replace taxpayer money with taxpayer money,” the amended complaint says.

The amended complaint goes on to say that the amendment including the special language “delivered exactly the bailout the bondholders and ADEQ had been seeking for years.” It adds that the provision has been renewed as part of the ADEQ appropriations bill every year since 2014, “despite the express outrage and promised legislative fixes made by various members of the General Assembly whose districts overlap with OMSWD.”

The entry of appearance by the Attorney General’s Office is just the latest legal maneuver in the ongoing case. Carroll County Circuit Judge Scott Jackson has not yet ruled on a motion by Little Rock attorney Geoffrey Treece, the court-appointed receiver for the waste district, seeking the dismissal of the suit. That motion was the topic of a Sept. 13 court hearing in Berryville.

Attorneys on both sides have filed motions seeking summary judgment — essentially asking Jackson to rule in their favor on the basis of already-established facts — and both Bank OZK (formerly Bank of the Ozarks) and Crews & Associates have filed motions seeking to squash subpoenas issued by the plaintiffs. Bank of the Ozarks served as trustee for the bondholders. Crews & Associates, which served as underwriter for the bonds, Crews is the investment banking arm of First Security Bancorp, a privately held company that is headquartered in Searcy and operates 75 First Security Bank locations across Arkansas.

The identity of the bondholders has never been revealed. Bishop and Howerton served Crews & Associates with a subpoena in August 2018 seeking documents that would identify the individuals or entities who purchased the bonds.

The next court hearing in the case is scheduled for Nov. 26, when Jackson will consider the plaintiffs’ motion for summary judgment.

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