That Used to Be Us_ How America Fell Behind in thted and How We Can Come Back - Friedman, Thomas L. & Mandelbaum, Michael [48]
“We are in business to help other businesses,” explained Lesk, an expert in putting together real estate transactions involving tax credits to generate financing for community-oriented developments, such as low-income housing. “And what we are finding is that the core of American business is changing—the repeat deals, involving similar structures, are fewer and farther between. There is more competition, barriers to entry are lower, our clients are reaching out to us for new ideas now much more frequently.” His law firm therefore has to be more creative and nimble in every way.
For instance, says Lesk, his firm was a pioneer in putting together low-income housing credits with solar-energy credits in order to finance affordable housing for low-income people that would also come with solar-powered energy.
“A few experienced practitioners in the industry were looking at the base product that we had used for years—the Low-Income Housing Tax Credit—and at the same time we were learning about renewable-energy tax credits,” explained Lesk. “We wondered what would happen if we combined the two. So together with some clients and colleagues we put these financing tools side by side, looking at the rules and requirements and conflicts between these two complex government programs, and then we thought about how to overcome those conflicts.” Then they did some financial modeling, made some assumptions on pricing, and came up with a model that showed “we could build an affordable housing project with solar panels that would utilize tax credits for both of these important programs—and at a minimal or negligible cost,” said Lesk. “So you end up with people having affordable housing with lower energy bills, financed by private investors who can use those tax credits. We were among the first to work through all the issues and come up with a product that could meet governmental requirements, attract private capital, and, most important, scale.”
But no sooner did Nixon Peabody help to open that path than competing law firms and accounting firms followed suit, turning it into a commodity. As a result, said Lesk, “we constantly have to find ways to improve and adapt our products. Now we’re putting together affordable housing with geothermal energy and drafting projects utilizing fuel cells. How about a community wind project? You have to look for original combinations and approaches to stay one step ahead of the competition.”
Lesk continued: “Necessity is the mother of invention and we are in the age of great necessity because little that was given in the past is given today—whether it is fees, types of projects, the structure of deals, or availability of financing. I have worked with tax credits and affordable housing for twenty-five years. It was a specialized field and for a long time it had a reasonably limited number of players. Today it changes frequently and the barriers to entry are so low that we have all kinds of new competitors, and not only law firms.”
His firm’s new chief innovation officer will lead a program to recruit, coach, and inspire lawyers so that they will not only do today’s standard legal work but also invent tomorrow’s. Those qualifications are already being taken into consideration when the firm determines annual pay and bonuses for its lawyers.
“For this year’s partner reviews,” said Lesk, who also heads the firm’s tax-credit finance practice group, “I asked each partner in my group specifically what was his or her best innovative idea for the past year and what does he or she have on the drawing board to invent this year … We are a partnership and we have to share the profits in a way that recognizes past contributions and predicts future performance, and in a way that fairly compensates each partner.” The best predictor of the future is not necessarily just how someone has performed in the past, he said. It’s also how much the person has adapted, created, and innovated. “If I have to make tough compensation choices between lawyers, a significant factor now for me is their ability to invent,” said