Committee on Rural Economic Development Report of Regular Meeting and Agenda Packet

Summary

The report of the regular meeting of the Arizona House of Representatives Committee on Rural Economic Development, Fifty-seventh Legislature, Second Regular Session, held Thursday, March 26, 2026, with its agenda packet and attachments. The report lists presentations on Legislative District 6 and the Tribal Community and records committee action on two bills: SB1016 DPA/SE with a vote of 5-0-1-1 and SB1401 DPA/SE with a vote of 5-1-0-1. Attachments include the original agenda, a Request to Speak report, the committee attendance record, and a Majority Research Staff summary of the strike-everything amendment to SB 1016 on municipal improvement district petitions. The packet also contains the proposed House amendments to S.B. 1016 and to SB 1401, whose short title is the Workforce Housing Incentive Act, and a roll call vote sheet signed by Chairman Teresa Martinez.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

ARIZONA HOUSE OF REPRESENTATIVES
Fifty-seventh Legislature - Second Regular Session

COMMITTEE ON RURAL ECONOMIC DEVELOPMENT

Convened 9:04 A.M.
Recessed 9:29 A.M.
Reconyened 9:32 A.M.
Adjourned 10:06 A.M.

Members Present
Representative Blackman
Representative Bliss
Representative Peshlakai
Representative Volk

Report of Regular Meeting
Thursday, March 26, 2026
House Hearing Room 4 -- 9:00 A.M.

RECEIVED
CHIEF CLERKS OFFICE

MAR 30 2026

Members Not Present

Representative Hernandez

Representative Lopez, Vice-Chairman
Representative Martinez, Chairman

Agenda

Original Agenda — Attachment 1

Request to Speak
Report — Attachment 2

Committee Attendance
Report — Attachment 3

Presentations
Name
Legislative District 6

Tribal Community

Committee Action

Bill Action
SB1016 DPA/SE
SB1401 DPA/SE

Organization

Attachments (Handouts)

Representative Peshlakai 0
Representatives Martinez, Tsosie & 0
Garcia
Vote Attachments
5-0-1-1 4,5,6
5-1-0-1 7,8,9

Veronica Graham, Committee Secretary

March 27, 2026

(Original attachments on file in the Office of the Chief Clerk; video archives available at http:/Avww.azleg.gov)

COMMITTEE ON RURAL ECONOMIC DEVELOPMENT

March 26, 2026
REVISED - 3/25/26 REVISED - 3/25/26 REVISED - 3/25/26

Convened 9:04
ARIZONA HOUSE OF REPRESENTATIVES ; .
Fifty-seventh Legislature - Second Regular Session Adjourn ed | 0. ¢) PD)

REGULAR MEETING AGENDA

COMMITTEE ON RURAL ECONOMIC DEVELOPMENT

DATE Thursday, March 26, 2026 ROOM HHR4 TIME 9:00 A.M.

Members of the public may access a livestream of the meeting here:
https://Awww.azleg.gov/videoplayer/?clientID=6361 162879&eventID=202603 1138

Members:
Representative Biasiueei Representative Hernandez C Representative Lopez, Vice-Chairman
Representative Blackman Representative Peshlakai Representative Martinez, Chairman
Representative Bliss Representative Volk

e Presentations:
o Legislative District 6 - Representative Peshlakai
o Tribal Community - Representatives Martinez, Tsosie & Garcia

Bills Short Title Strike Everything Title

SB1016 5 employers; medical products; religious exemption S/E: municipal improvement districts;

S- 0- l- | COM w/d, RED, RULES

SB1401 special plate; golf tournament charity S/E: housing; contractors; bonds; taxes
se DPAISE
(Payne)
S-}-0-| TI w/d, RED, RULES

ORDER OF BILLS TO BE SET BY THE CHAIRMAN

VE
RA
034492026
03/20/2026
03/25/2026

People with disabilities may request reasonable accommodations such as interpreters, alternative formats, or
assistance with physical accessibility. If you require accommodations, please contact the Chief Clerk's Office at
(602) 926-3032 or through Arizona Relay Service 7-1-1.

Page 1 of 1
9 Attachment__|
Information Registered on the Request to Speak System

House Rural Economic Development (3/26/2026)

$B1016, employers; medical products; religious exemption
Support:

Mayor Robyn Prud'homme-Bauer, Clarkdale, representing self; Camp Verde Mayor Marie Moore, representing
self; Susan Bolt, representing self; Marshall Pimentel, LEAGUE OF ARIZONA CITIES & TOWNS; Zach Sakas,
representing self

Oppose:

Shirley Dye, representing self; Judith Simons, representing self; Shirley Lamonna, representing self; Dianne Post, AZ
NATIONAL ORGANIZATION FOR WOMEN (NOW}, Self; Carol Maas, representing self; Dee Romesburg, representing
self; Anna Arnoid, representing self; Stephen Harris, representing self; Michiko Price, representing self; Rhiannon
Ford, representing self; Buffalo Rick Galeener, representing self; Roger Blain, representing self; James McFadzean,
representing self; Julian Donahue, representing self; Charlyce Knight, representing self; J Holmes, representing
self; Chery! McCutcheon, representing self; Rivko Knox, representing self; Ruth Carter, representing self; Ryan
Larson, representing self; Michelle Carter, representing self; Valerie Starr, representing self; Adam Bloomer,
representing seif; Jeri McDaniel, representing self

All Comments:

Marshall Pimentel, LEAGUE OF ARIZONA CITIES & TOWNS: Supporting the striker.; Zach Sakas, Seif: | am a bond
lawyer and can speak if necessary on municipal improvement districts and the proposed statutory amendments.;
Shirley Dye, Self: Since this really isn't a bill about medical mandates. but a special taxing districts which [am
against anyway, NO; Judith Simons, Self: Rules that impact public heaith must be based on sound scientific
evidence. Personal religious beliefs must not be allowed to jeopardize the health & safety of the broader
population. It’s too great a riskl; Stephen Harris, Self: Strike Everything Amendment: This bill has a proposed
amendment dealing with Special Taxing Districts, which has absolutely nothing to do with employers, medical
products, or religion.; J Holmes, Self: No special taxing districts please.; Cheryl McCutcheon, Self: Expanding
religious exemptions pits religious dogma against proven, effective science. Don't put my heaith at risk!

$B1401, special plate: golf tournament charity

Support:
Steve Kaiser, HABITAT FOR HUMANITY OF CENTRAL ARIZONA; Dominic Rodgers, representing seif; Dianne
McCallister, Dominium

All Comments:
Dianne McCallister, Dominium: Support the strike everything amendment

Attachment_A_
PLEASE, COMPLETE THIS FORM: OR: THE- PUBLIC RECORD

HOUSE OF REPRESENTATIVES

Ts Please PRINT Clearly
Committee on RE D. Bill Number S B | O | le
Date 2 | 4) \y / 4) 0 tySupport -Q Oppose Q Neutral .
Name /%, t¢ ovsor Need to Speak? Yes ONo

Representing ls bseu Loan her Are you a registered lobbyist? Uo_

Complete Address 3412 € CAsadene AW |
WA

E-mail Address 07) Chiaed PO ’Smr@rdoseu- Phone Number Got S 6% G2Sé

Comments:

«+ FT VE-MINUTE SPEAKING LIMIT***

PLEASE, COMPLETE THIS FORM: FOR: THE- ‘PUBLIC RECORD

HOUSE OF REPRESENTATIVES

Please PRINT. Clearly
Committee on (Ce (> Bill Number [ 4 6 }
Date- ; 3 | Ltr [ ZG. CX Support -O Oppose O Neutral
Name 7) rs keg Pe (ous Need to Speak? OYes LINo
Representing ple bot (et fe Marx Are you a registered lobbyist? 47)
Comiplete Address
E-mail Address Phone Number
Comments:

#% FT VE-MINUTE SPEAKING LIMIT***

ARIZONA STATE LEGISLATURE

Fifty-seventh Legislature - Second Regular Session

COMMITTEE ATTENDANCE RECORD

COMMITTEE ON RURAL ECONOMIC DEVELOPMENT
CHAIRMAN: Teresa Martinez VICE-CHAIRMAN: — Chris Lopez
DATE 03/26/26
CONVENED 9.04
RECESSED q: 29
RECONVENED ee
ADJOURNED lo: 0b
MEMBERS PRESENT NOT PRESENT
Blackman ws
Bliss ne
Hernandez C ar
Peshlakai i
Volk oe
Lopez, Vice-Chairman a
Martinez, Chairman gn
TOTAL lo

Attachment 4
ARIZONA HOUSE OF REPRESENTATIVES

57th Legislature, 2nd Regular Session
Majority Research Staff
Senate: HHS DP 4-3-0-0 | Third Read 17-9-4-0

SB1016: employers; medical products; religious exemption
S/E: municipal improvement districts; petitions
Sponsor: Senator Shamp, LD 29
Committee on Rural Economic Development

Summary of the Strike-Everything Amendment to SB 1016

Overview
Outlines requirements and procedures for a municipality to pass an ordinance for an
improvement district.

History
Before ordering an authorized improvement, the governing body ofa municipality must adopt

a resolution or ordinance of intention that briefly describes the improvement. The resolution
or ordinance may provide for one or more improvements on one or more streets as a single
improvement under one or more contracts, may be combined with certain actions relating to
public streets or off-street parking areas, and must exempt a lot from assessment to the
extent the proposed work has already been completed.

If the governing body determines to form an improvement district after the final resolution
of protests, it must submit, within 120 days, a petition signed by owners of more than one-
half of the taxable property units and more than one-half of the assessed valuation within
the proposed district. Property that is tax-exempt is excluded from the valuation calculation,
owners of nontaxable property may not sign the petition, and on verification of the petition
signatures, the governing body may form the district and order the improvement as provided
by law.

When the proposed improvement, in the opinion of the governing body, is of more than local
or ordinary public benefit, it may order the expense of the improvement chargeable upon
another district. The governing body of a municipality is prohibited from assessing the costs
of an improvement for general public benefit against land in a district. If a portion of the
expense of an improvement is for general public benefit, the city or town must assess the
district only for the portion of the expense that benefits the property in the district (A.R.S. §

48-576).

Provisions
1. Requires, when passing a resolution or ordinance for an improvement district, a
municipal governing body to:
a. provide an estimate of the assessment, except that the assessment cannot exceed the
amount prescribed in the petition; and

O Prop 105 (45 votes) (2) Prop 108 (40 votes) 0 Emergency (40 votes) O Fiscal Note

Initials SB 1016
3/24/2026 Page 1 Rural Economic Development

Attachment_44__
b. receive a petition prior to passing the resolution or ordinance. (Sec. 4, 5)

2. Instructs the municipal governing body, before passing a resolution or ordinance, to
receive a petition filed with the clerk and signed by the owners of real property in the
proposed improvement district. (Sec. 4)

3. Requires the petition for improvement districts, that will levy and collect ad valorem
taxes, to be signed by:
a. a majority of the individuals owning taxable property within the proposed area; and
b. the owners of 51% or more of the assessed valuation of the property within the
proposed district. (Sec. 4)

4. Maintains that petitions for improvement districts, other than tax levying improvement
districts, must be signed by:
a. a majority of the individuals owning real property within the proposed district; and
b. the owners of 51% or more of the real property, determined by acreage, within the
proposed district. (Sec. 4)

5. Allows a municipal governing body and other individuals to rely on the taxable property
units determined by the county assessor to determine a majority of the individuals owning
real or taxable property within the proposed improvement districts, (Sec. 4)

6. Restricts property that is exempt from property taxes from being included in the
determination for an improvement district that will levy and collect ad valorem taxes.
(Sec. 4)

7. Requires property that is exempt from property taxes to be included in the determination
of a majority of the individuals owning real property, except the owners of public property
or rights-of-way owned by public property owners. (Sec. 4)

8. Stipulates that, in determining acreage within the area of a proposed district, public
property and rights-of-way must be excluded, with the exception of the municipal
governing body declaring in the resolution or ordinance of the intention to do so. (Sec. 4)

9, Exempts a community facilities district issuing special assessment bonds from real or
taxable property determination requirements. (Sec. 4)

10. Permits the municipality and specified owners to enter into a written agreement waiving
any or all posting requirements and protest and objections if the outlined requirements
are met. (Sec. 4)

11. Allows a municipal governing body, on receipt of a petition signed by real property
owners, to adopt a resolution or ordinance of intention to order an improvement district,
have immediate jurisdiction to adopt the resolution and combine two or more
improvement projects into the resolution. (Sec. 4)

12. Requires the petition to include all of the following:

a, the name of the proposed improvement district;

b. the necessity for the proposed improvement district;

c. that the public convenience, necessity or welfare will be promoted by establishing the
improvement district and that the property to be included in the improvement district
will be benefited;

d. a legal description of the boundaries and a map that shows generally the location of
the proposed improvement district;

e. a maximum amount of the assessment;

Initials SB 1016
3/24/2026 Page 2 Rural Economic Development
f. that the petitioners consent to the assessment with the municipal governing body's
compliance with specified requirements;

g. the county assessor's parcel number for each lot;

h. each petition signer indicates that the applicable county assessor's parcel number
corresponds to their lot; and

i, any other matters required by statute. (Sec. 4)

13. Allows a municipality's governing body to adopt a resolution to include adjacent territory
in an improvement district without requiring a petition. (Sec. 2, 3)

14. Prohibits a municipality's governing body from forming improvement districts for areas
that will provide outlined public services until the governing body receives the prescribed
petition. (Sec. 3)

15, Removes the provision requiring the governing body of the municipality, before ordering
an improvement, to submit a specified petition to the city or town clerk. (Sec. 4)

16. Expands the definition of street to include on-street parking. (Sec. 1)
17. Makes technical changes. (Sec. 1-4)

Initials SB 1016
3/24/2026 Page 3 Rural Economic Development
Fifty-seventh Legislature Rural Economic Development
Second Regular Session S.B. 1016

PROPOSED
HOUSE OF REPRESENTATIVES AMENDMENTS TO S.B. 1016
(Reference to Senate engrossed bill)

1 Strike everything after the enacting clause and insert:

2 "Section 1. Section 48-571, Arizona Revised Statutes, is amended to
3 read:

4 48-571. Definitions: appointment of officer

5 A. In this article and article 1 of this chapter, unless the
6 context otherwise requires:

7 1. "Assessment" or “assessment roll" means a special assessment
8 made under the provisions of this article.

9 2. “Block” means any parcel of ground, whether regular’ or

10 irregular, wirct THAT is bounded by streets, or by one or more streets and
11 by one or more boundary lines of the city or town.

12 3. "Clerk" includes any person or official who performs the duties
13 of clerk of the city or town.

14 4. "Contractor" includes the contractor's personal representative
15 or assignee.

16 5. "Council" or "governing body" tmetrtes—ardt means the body or

17 board wich THAT by law is constituted the legislative department of an
18 incorporated city or town.

19 6. "Delinquency" means delinquency in the payment of an assessment
20 made under the provisions of this article.
21 7. “Designated area" means an area of the municipality which THAT

22 is either designated pursuant to section 36-1479 as a slum or blighted
23 area or designated as a pocket of poverty or a neighborhood strategy area
24 by the United States department of housing and urban development, pursuant
25 to title I of the housing and community development act of 1977, as
26 amended (P.L. 95-128; 42 United States Code sections 5301 through 5320)
27 and the department of housing and urban development act (P.L. 89-174; 42
28 United States Code section 3535(d)).

29 8. "Engineer" includes any person who, under whatever official
30 name, is the civil engineer or surveyor of the city or town, and where
31 there is no elected or appointed official, then the engineer is the person
32 who may be appointed or employed by the council to perform the duties
33 required of an engineer under the provisions of this article.

34 9. “Improvement bond" means a bond issue under the provisions of
35 this article.
36 10. “Lighting plants" includes electric light plants, electric power

37 plants, gas plants, distribution systems, poles, parts, pipes, conduits,
38 wires, tanks, reservoirs, generators for gas or electricity, transmission
39 lines, towers, lamps, transformers of every character, machinery,

Attachment_5__

# of Verbals

Withdraw!

Analysts Initials

House Amendments to S.B. 1016

AmNMOATNHPWNH FE

apparatus, equipment and all appliances and structures necessary or
incidental to the construction, installation or operation of a complete
municipal electric light, power and gas plant and distribution system,
placed on the streets improved, though extended beyond.

11. “Lot" includes any portion, piece, parcel or subdivision of
land, and includes property owned or controlled by any person as a
railroad right-of-way.

12. "Mayor" includes the chairman or president of the governing
body.

13. "Municipality" or "city" includes incorporated cities and towns.

14. "Owner" means the person in whom, on the day the action or
proceeding is commenced, appears the legal title to the lot by deed
recorded in the recorder's office, or the person in possession of the lot
under claim of title, or exercising acts of ownership over the lot for the
person, or as the personal representative of the owner.

15. "Railroad" includes street railroad and interurban railroad.

16. "Sewers" includes tunnels, excavations, ditches, drains,
conduits, channels, outlets, outfalls, cesspools, manholes, catch basins,
flush tanks, septic tanks, connecting sewers of every character,
machinery, apparatus, equipment and all appliances and_ structures
necessary or incidental to the construction, installation or operation of
a complete sewer system, for either sanitary or drainage purposes.

17. "Street" includes avenues, alleys, highways, lanes, crossings,
intersections, courts, places and grounds now open or dedicated or
hereafter opened or dedicated to public use, INCLUDING ON-STREET PARKING,
and public ways.

18. "Street superintendent" or "superintendent" includes any person
who, under whatever official name, is charged with the care or supervision
of the streets of the city or town.

19. "Time of delinquency" means the time fixed when assessments
become delinquent.

20. “Treasurer" includes any person who, under whatever official
name, is the custodian of the funds of the city or town.

21. "Waterworks" includes pipes, hydrants, reservoirs, wells, pumps,
pumping plants, conduits, settling basins, filtering plants of every
character, machinery, apparatus, equipment and all appliances and
structures necessary or incidental to the construction, installation or
operation of a complete municipal waterworks system, for fire protection,
or for domestic irrigation, mechanical or power purposes, placed on the
streets improved, though extended beyond.

22. “Work" or “improvement" includes any or all of the improvements
mentioned and authorized to be made in this ARTICLE and article 1 of this
chapter and the construction, reconstruction and repair of all or any
portion of the improvements, and all labor, services, incidental expenses
and material necessary or incidental to the construction, reconstruction
or repair.

B. In any city or town having no officer in this article
designated, or performing like duties, the governing body may appoint a
suitable person to discharge the duties.

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House Amendments to S.B. 1016

OnNOOHP WD FP

Sec. 2. Section 48-574, Arizona Revised Statutes, is amended to
read:

48-574. Improvement districts for operation, maintenance,
repair and improvement of pedestrian malls,
off-street parking facilities, retention and
detention basins and parkings and parkways

A. In addition to the purposes for which an improvement district
may be formed under tte—provistors—of section 48-572, an improvement
district may be formed for the sole purpose of the operation, maintenance,
repair and improvements of pedestrian malls, off-street parking
facilities, retention and detention basins and parkings and parkways.

B. Subject to the powers granted and the limitations contained in
this section, the powers and duties of the governing body of the
municipality and the procedure to be followed shall be as provided in this
article for other types of special improvement districts.

C. If a petition for the formation of an improvement district under
the—provistoms—of this section is presented to the governing body
purporting to be signed by all of the real property owners in the proposed
district, exclusive of mortgagees and other lienholders, the governing
body, after verifying the property ownership and making a finding of that
fact, shall adopt a resolution of intention to order the improvement
pursuant to the—provistoms—of section 48-576 and shall have immediate
jurisdiction to adopt the resolution ordering the improvement pursuant to
the-provisturs—vuf section 48-581, without the necessity of the publication
and posting of the resolution of intention provided for in section 48-578.

D. The governing body shall make annual statements and estimates of
the expenses of the district, which shall be provided for either:

1. By the levy and collection of ad valorem taxes wponm ON the
assessed value of all the real and personal property in the district.

2. By assessment of the total sum wupor ON the several lots, each
respectively in proportion to the benefits to be received by each lot.

E. If the expenses of the district are provided for by ad valorem
taxes, the governing body shall publish notice, have hearings and adopt
the taxes at the times and in the manners provided for incorporated cities
and towns by the applicable portions of title 42, chapter 17,
article 3. The governing body, on or before the third Monday in August of
each year, shall fix, levy and assess the amount to be raised by ad
valorem taxes wpor ON all of the property of the district. If the
expenses of the district are assessed wpom ON the several lots in
proportion to the benefits received by each lot, the governing body shall
follow the procedures established in section 48-575 for the assessment and
collection of the assessments. All statutes providing for the levy and
collection of general county taxes, including the collection of delinquent
taxes and sale of property for nonpayment of taxes, shall be applicable to
the district taxes provided for under this section.

F. An improvement district formed under tte—provtstoms—of this
section shall not be authorized to issue improvement bonds.

G. No improvement district formed under tte—provistorms—of this

section shall be authorized to engage in any activity other than as
-3-

House Amendments to S.B. 1016

OnNOTOHRWNM FE

provided in subsection A of this section. If the municipality is willing
to participate in the cost of the district, the governing body may, by
resolution, MAY summarily order such participation.

H. The formation of an improvement district under tthe-provrstTors—of
this section shall not prevent the subsequent establishment of improvement
districts for any other purpose authorized by law.

I. If, in the opinion of the governing body, any portion of the
territory of a district formed under this section is no longer benefited
by being a part of the district, the governing body may, by resolution,
MAY summarily delete from the district formed under this section any area
and may form a new district from the balance of the original district
formed under this section.

J. If, in the opinion of the governing body, territory adjacent to
a district formed under this section would benefit from being a part of
the district, the governing body, by resolution, may include the territory
in the district formed under this section if the following conditions are
met:

1. Improvements that meet the standards and_ specifications
established by the governing body have been constructed in the territory
and will be used for the purposes of the district.

2. Any required public dedications of property have been made or
will be made before the inclusion of the territory in the district.

3. Including the territory in the district will not adversely
affect the district.

4. Notice of the proposed inclusion of the territory in the
district has been published in five consecutive issues of a daily
newspaper or two consecutive issues of a weekly or semiweekly newspaper of
general circulation published in the municipality and a public hearing has
been held to consider the inclusion of the territory in the district.

5. Notice has been sent by first class mail at least ten days prvor
to BEFORE the hearing specified in paragraph 4 of this subsection with an
accurate map of the territory proposed for inclusion in the district to
each owner of real and personal property within the district and in the
proposed area of inclusion as shown on the statement furnished pursuant to
subsection K of this section that is now or would be subject to taxation
by the district in the event of inclusion of the proposed area.

K. The county assessor and the department of revenue, respectively,
shall. furnish to the district within thirty days after a request a
statement in writing showing the name and the address of each owner of
real and personal property within the district and in the proposed area of
inclusion that is now or that would be subject to taxation by the district
in the event of inclusion of the proposed area.

L. Within ten days after the governing body adopts a resolution
pursuant to subsection J of this section, the municipality shall record
the resolution in the office of the county recorder in the county in which
the district is located to give notice of the inclusion of the territory
in the district to all property owners in the district. If, before the
governing body adopts the resolution pursuant to subsection J of this
section, a majority of the property owners, by area, of either the

-4-
House Amendments to S.B. 1016

ONO WHY FE

original district formed under this section or the territory proposed to
be included in the district files with the governing board written
objections to the proposed inclusion of the territory, the territory shall
not be included in the district. THE GOVERNING BODY MAY ADOPT A
RESOLUTION PURSUANT TO SUBSECTION J OF THIS SECTION WITHOUT REQUIRING A
PETITION TO BE FILED PURSUANT TO SECTION 48-576, SUBSECTION A.

M. Within ten days after adoption of the resolution of intention to
order the improvement pursuant to section 48-576, the municipality shall
record the resolution in the office of the county recorder in the county
in which the district is located to give notice of formation of the
district to all property owners within the district.

N. For the purposes of this subsection, a property owner is an
owner of real property, exclusive of mortgagees and other lienholders,
that is within an improvement district that was formed as prescribed by
this section. A property owner may petition the governing body to dissolve
the district pursuant to the following procedures:

1. A property owner shall file with the clerk of the governing body
in which the district is located a written notice of the property owner's
intent to circulate a petition to dissolve the district. The notice shall
include the name, address and telephone number of at least one property
owner living within the district who intends to circulate the petition,
the name, location and general purpose of the district whycth THAT is to be
dissolved and a true and concise statement of two hundred words or less
explaining the advantages of dissolving the district. A petition shall
not be circulated for thirty days after the property owner files with the
governing body the notice of intent to circulate a dissolution petition.

2. The governing body may provide a form of petition to be used to
dissolve the district. Any petition shall include the statement provided
in the notice of intent to circulate a petition regarding the advantages
of dissolving the district.

3. The governing body may provide a true and concise written
statement of two hundred words or less regarding the petition or
dissolution of the district. If so provided, the property owner must
circulate this statement affixed to the petition.

4. Property owners shall submit to the clerk of the governing body
a petition for the dissolution of an improvement district formed under
this section that purports to be signed by more than fifty per—cent
PERCENT of the property owners in the district.

5. Within twenty days of AFTER receipt of the signed petition, the
governing body shall verify that the petition is signed by more than fifty
per—cert PERCENT of the property owners as set forth in paragraph 4 of
this subsection.

6. If the governing body finds the petition contains valid
signatures of more than fifty per—cemt PERCENT of the property owners, the
governing body shall set the date for dissolution of the district within
ninety days. The district may continue to operate after dissolution only
as needed to collect money and make payments on any outstanding district
obligations.
House Amendments to S.B. 1016

OnNanfPWDM FE

7. Each property in the district with outstanding assessments or
liens attached shall remain subject to those assessments or liens for
payment of the existing obligations of the district, notwithstanding
dissolution of the district.

8. If a district formed under this section subsequently dissolves
as prescribed in this subsection, the governing body may not attempt to
form any district for the same purpose for at least two years after the
date the district is dissolved if the proposed district includes lands
formerly located within the dissolved district.

0. Districts that are located in slum or blighted areas as defined
in section 36-1471 are exempt from subsection N of this section.

Sec. 3. Section 48-575, Arizona Revised Statutes, is amended to
read:

48-575. Improvement districts for enhanced municipal services

A. In addition to the purposes for which an improvement district
may be formed under tte—provistors—of section 48-572, an improvement
district may be formed within a designated area to provide public service
within the district at a higher level or greater degree than provided in
the remainder of the community, including such services as public safety,
fire protection, refuse collection, street or sidewalk cleaning or
landscape maintenance in public areas, planning, promotion, transportation
and public parking.

B. The powers and duties of the governing body of the municipality
and the procedure to be followed shall be as provided in this article for
other types of special improvement districts.

C. If a petition for the formation of an improvement district under
the—provistors—vof this section is presented to the governing body
purporting to be signed by all of the real property owners in the proposed
district, exclusive of mortgagees and other lienholders, the governing
body, after verifying such ownership and making a finding of such fact,
shall adopt a resolution of intention to order the improvement pursuant to
the—provistors—of section 48-576 and shall have immediate jurisdiction to
adopt the resolution ordering the improvement pursuant to tte—provirs7ors
uf section 48-581, without the necessity of the publication and posting of
the resolution of intention provided for in section 48-578. FOR
IMPROVEMENT DISTRICTS FORMED PURSUANT TO THIS SECTION AFTER THE EFFECTIVE
DATE OF THIS AMENDMENT TO THIS SECTION, THE GOVERNING BODY MAY NOT ORDER
THE IMPROVEMENTS PRESCRIBED BY SUBSECTION A OF THIS SECTION UNTIL AFTER
THE GOVERNING BODY HAS RECEIVED A PETITION PRESCRIBED BY SECTION 48-576,
SUBSECTION A.

D. The engineer shall make duplicate diagrams of the _ property
contained within the improvement district. The diagram shall show each
separate lot numbered consecutively, the area in square feet of each lot,
and the area in square feet of any building or buildings located on each
lot. Prior—to BEFORE making any assessment wpor ON the district, the
diagram shall be approved by the governing body.

E. The governing body shall make annual statements and estimates of
the expenses of the district, and shall assess the total sum wporr ON the
several lots, each respectively in proportion to the benefits to be

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House Amendments to S.B. 1016

ONO WN FE

received by each lot. When the assessments have been completed, the
governing body shall fix a time when it will hear and pass wupom ON the
assessments and the prior proceedings relating thereto, which shall not be
less than twenty days from AFTER the date of the notice. Notice of
hearing shall be given in the manner provided by section 48-590,
subsection E. Any person owning real property affected by the assessment
who has any objection to the legality of the assessment, or to any of the
previous proceedings connected therewith, may—prvor—to BEFORE the time
fixed for the hearing MAY file a written notice briefly specifying the
grounds of the objection. At the time fixed for the hearing or at any
time not later than ten days thereafter to which the hearing may be
postponed, the governing body shall hear and pass wupomr ON the
objections. The decision of the governing body shall be final and
conclusive wpor ON all persons entitled to object as to all errors,
informalities and irregularities witch THAT the governing body might have
remedied or avoided any time during the progress of the proceedings.

F. The assessments for the annual expenses shall be collectible in
the manner and by the officers provided by law for the collection and
enforcement of general taxes the municipality is authorized to levy. All
statutes providing for the levy and collection of county and city taxes,
including the collection of delinquent taxes and sale of property for
nonpayment of taxes, shall be applicable to the district assessments
provided for under this section.

G. An improvement district formed under the—provitstorms—of this
section shall not be authorized to issue improvement bonds.

H. No improvement district formed under tte—provitsjurns—of this
section shall be authorized to engage in any activity other than as
provided in subsection A of this section. If the municipality is willing
to participate in the cost of the district, the governing body may, by
resolution, MAY summarily order such participation.

I. The formation of an improvement district under tte—provirs7vors—of
this section shall not prevent the subsequent establishment of improvement
districts for any other purpose authorized by law.

J. If, in the opinion of the governing body, any territory of a
district formed under this section is not benefited by being a part of the
district, the governing body may, by resolution, MAY exempt such territory
from assessment under this chapter, or if any portion of the territory of
a district formed under this section is no longer benefited by being a
part of the district, the governing body may, by resolution, MAY summarily
delete from the district formed under this section any such area and may
form a new district from the balance of the original district formed under
this section.

K. Any real property that is within the boundaries of the district,
that is wtitizvet USED for residential purposes and that is not
specifically benefited by the public services at a higher level or greater
degree shall be exempt from assessment pursuant to this section for that
year. Existing improved real property wtitizec USED for residential
purposes with four units or less per building at the time of formation of

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House Amendments to S.B. 1016

the district is presumed to not be specifically benefited by a public
service at a higher level or greater degree.

L. Within ten days after adoption of the resolution of intention to
order the improvement, the municipality shall record the resolution in the
office of the county recorder in the county in which the district is
located in such a way as to give notice of formation of the district to
all property owners within the district.

M. If, in the opinion of the governing body of the municipality,
territory adjacent to a district formed under this section would benefit
from being a part of the district, the governing body, by resolution, may
include the territory in the district formed under this section if all of
the following conditions are met:

1. Including the territory in the district will not adversely
affect the district.

2. Notice of the proposed inclusion of the territory in the
district has been published in five consecutive issues of a daily
newspaper or two consecutive issues of a weekly or semiweekly newspaper of
general circulation published in the municipality and a public hearing has
been held to consider the inclusion of the territory in the district.

3. Notice, including an accurate map of the territory proposed for
inclusion in the district, has been sent by first class mail at least ten
days before the hearing prescribed in paragraph 2 to each owner of
property listed on the tax roll within the district and in territory that
is now or would be subject to taxation by the district in the event of
inclusion of the territory.

N. Within ten days after the governing body of the municipality
adopts a resolution pursuant to subsection M of this section, the
municipality shall record the resolution in the office of the county
recorder in the county in which the district is located to give notice of
the inclusion of the territory in the district to all property owners in
the district. If, before the governing body of the municipality adopts
the resolution pursuant to subsection M of this section, a majority of the
property owners, by area, of either the original district formed under
this section or the territory proposed to be included in the district
files with the governing body of the municipality written objections to
the proposed inclusion of the territory, the territory shall not be
included in the district. THE GOVERNING BODY MAY ADOPT A RESOLUTION
PURSUANT TO SUBSECTION M OF THIS SECTION WITHOUT REQUIRING A PETITION TO
BE FILED PURSUANT TO SECTION 48-576, SUBSECTION A.

0. An improvement district to provide enhanced municipal services
may continue to exist in an area that is no longer in a designated area as
defined in section 48-571, if at the time of district formation all of the
following apply:

1. The area contained in the improvement district has been in a
designated area for five or more years.

2. Not more than ten percent PERCENT of the frontage of the
property fronting on the proposed improvement, or if the cost of the
improvement is to be made chargeable on a district, not more than ten per

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House Amendments to S.B. 1016

ANAT HR WN FE

cert PERCENT of the frontage of the property contained within the limits
of the improvement district, is owned by the same person.

3. Not more than one-third of the property owners by frontage of
the area contained in the improvement district files with the governing
body of the municipality written objections to the improvement district.

4. The municipality otherwise complies with the-provrstorms—of this
article for the process of forming the improvement district.

Sec. 4. Section 48-576, Arizona Revised Statutes, is amended to
read:

48-576. Resolution or ordinance of intention to order

improvement; petition

A. Before ordering an improvement authorized by this article, the
governing body of the municipality shall comply with both of the
following:

1. Pass a resolution or ordinance of intention so to cdo MAKE AN
IMPROVEMENT, briefly describing the improvement AND PROVIDING AN ESTIMATE
OF THE ASSESSMENT, EXCEPT THAT THE ASSESSMENT ESTIMATE MAY NOT EXCEED THE
MAXIMUM ASSESSMENT AMOUNT THAT IS INCLUDED IN THE PETITION AS PRESCRIBED
BY THIS SECTION. By the resolution or ordinance and the proceedings
subsequent thereto, one or more improvements may be made on one or more
streets and shall constitute one improvement and be constructed under one
or more contracts. The resolution or ordinance of intention may be
combined in a single resolution or ordinance of intention to open, extend,
widen, straighten or close public streets or off-street parking areas
pursuant to section 48-505. If the work proposed is already done for a
lot, the lot shall be excepted from the assessment therefor to the extent
of the work done.

2. BEGINNING ON THE EFFECTIVE DATE OF THIS AMENDMENT TO THIS
SECTION, BEFORE PASSING A RESOLUTION OR ORDINANCE OF INTENTION PRESCRIBED
IN PARAGRAPH 1 OF THIS SUBSECTION, THE GOVERNING BODY MUST RECEIVE A
PETITION THAT IS FILED WITH THE CLERK AND SIGNED BY THE OWNERS OF REAL
PROPERTY IN THE PROPOSED IMPROVEMENT DISTRICT AS FOLLOWS:

(a) FOR IMPROVEMENT DISTRICTS THAT ARE FORMED UNDER SECTION 48-574
THAT WILL LEVY AND COLLECT AD VALOREM TAXES, THE PETITION SHALL BE SIGNED
BY BOTH OF THE FOLLOWING:

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House Amendments to S.B. 1016

ONO wnre

(i) A MAJORITY OF THE PERSONS OWNING TAXABLE PROPERTY WITHIN THE
AREA OF THE PROPOSED IMPROVEMENT DISTRICT.

(ii) THE OWNERS OF FIFTY-ONE PERCENT OR MORE OF THE ASSESSED
VALUATION OF THE PROPERTY WITHIN THE AREA OF THE PROPOSED IMPROVEMENT
DISTRICT. PROPERTY THAT IS EXEMPT PURSUANT TO TITLE 42, CHAPTER 11,
ARTICLE 3 IS NOT CONSIDERED IN DETERMINING THE TOTAL ASSESSED VALUATION OF
THE PROPOSED IMPROVEMENT DISTRICT AND OWNERS OF PROPERTY THAT IS NOT
SUBJECT TO TAXATION ARE NOT ELIGIBLE TO SIGN THE PETITION REQUIRED BY THIS
SUBDIVISION.

(b) FOR IMPROVEMENT DISTRICTS THAT ARE AUTHORIZED UNDER THIS
CHAPTER OTHER THAN TAX LEVYING IMPROVEMENT DISTRICTS FORMED UNDER SECTION
48-574, THE PETITION SHALL BE SIGNED BY BOTH OF THE FOLLOWING:

(i) A MAJORITY OF THE PERSONS OWNING REAL PROPERTY WITHIN THE AREA
OF THE PROPOSED IMPROVEMENT DISTRICT.

(ii) THE OWNERS OF FIFTY-ONE PERCENT OR MORE OF THE REAL PROPERTY,
DETERMINED BY ACREAGE, WITHIN THE AREA OF THE PROPOSED IMPROVEMENT
DISTRICT.

(c) FOR THE PURPOSES OF THIS PARAGRAPH:

(i) TO DETERMINE A MAJORITY OF THE PERSONS OWNING TAXABLE PROPERTY
WITHIN THE AREA OF THE PROPOSED IMPROVEMENT DISTRICT PURSUANT TO
SUBDIVISION (a), ITEM (i), OF THIS PARAGRAPH, THE GOVERNING BODY AND OTHER
PERSONS MAY RELY ON THE TAXABLE PROPERTY UNITS AS DETERMINED BY THE COUNTY
ASSESSOR AS OF THE DATE OF THE PETITION. THIS DETERMINATION OF A MAJORITY
OF THE PERSONS OWNING TAXABLE PROPERTY MAY NOT INCLUDE PROPERTY THAT IS
EXEMPT PURSUANT TO TITLE 42, CHAPTER 11, ARTICLE 3.

(ii) TO DETERMINE A MAJORITY OF THE PERSONS OWNING REAL PROPERTY
WITHIN THE AREA OF THE PROPOSED IMPROVEMENT DISTRICT PURSUANT TO
SUBDIVISION (b), ITEM (i), OF THIS PARAGRAPH, THE GOVERNING BODY AND OTHER
PERSONS MAY RELY ON THE TAXABLE PROPERTY UNITS AS DETERMINED BY THE COUNTY
ASSESSOR AS OF THE DATE OF THE PETITION. THIS DETERMINATION OF A MAJORITY
OF THE PERSONS OWNING REAL PROPERTY SHALL INCLUDE REAL PROPERTY THAT IS
EXEMPT PURSUANT TO TITLE 42, CHAPTER 11, ARTICLE 3, BUT MAY NOT INCLUDE
THE OWNERS OF PUBLIC PROPERTY PRESCRIBED BY SECTION 48-582 OR
RIGHTS-OF-WAY OWNED BY THOSE OWNERS OF PUBLIC PROPERTY.

(d) FOR PURPOSES OF SUBDIVISION (b), ITEM (ii) OF THIS PARAGRAPH,
TO DETERMINE THE ACREAGE WITHIN THE AREA OF THE PROPOSED DISTRICT, PUBLIC
PROPERTY AND RIGHTS-OF-WAY SHALL BE EXCLUDED. PUBLIC PROPERTY MAY BE
INCLUDED WITHIN THE PROPOSED IMPROVEMENT DISTRICT SUBJECT TO THE
DECLARATION OF THE GOVERNING BODY IN THE RESOLUTION OR ORDINANCE OF
INTENTION PURSUANT TO THIS SECTION.

(e) THIS PARAGRAPH DOES NOT APPLY TO A COMMUNITY FACILITIES
DISTRICT ISSUING SPECIAL ASSESSMENT BONDS PURSUANT TO SECTION 48-721.

B. When the proposed improvement, in the opinion of the governing
body, is of more than local or ordinary public benefit, it may order the
expense of the improvement chargeable upon ON a district, and _ shall
describe the extent of the district in general terms in its resolution or
ordinance of intention, either by reference to street lines or block
numbers, or by designating its exterior boundaries by their courses and
distances from the street or streets the improvement of which is

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House Amendments to S.B. 1016

OANA TNF WNHEHE

contemplated, and may refer for a more particular description thereof to a
map on file with the city or town engineer, showing the exterior boundary
lines of the district, and delineating block and lot numbers or containing
such details as will show the location of the lines. A city or town shall
not assess the costs of an improvement which THAT is for the general
public benefit against land in an assessment district. If a portion of
the expense of an improvement is for general public benefit, the city or
town shall assess the district only that portion of the expense which THAT
benefits the property within the district.

C. The governing body, in the resolution or ordinance of intention,
may provide that the improvement described therein may be made according
to any of several alternative plans and specifications, or methods,
classes or kinds of construction, or classes and kinds of material to be
thereafter determined by the legislative body.

D. NOTWITHSTANDING ANY OTHER PROVISION OF THIS SECTION, IF THE
PETITION PRESCRIBED BY SUBSECTION A, PARAGRAPH 2 OF THIS SECTION IS SIGNED
BY THE OWNERS OF ALL OF THE REAL PROPERTY WITHIN THE PROPOSED IMPROVEMENT
DISTRICT, OTHER THAN PUBLIC PROPERTY AS PRESCRIBED BY SECTION 48-582, AND
IS APPROVED BY THE GOVERNING BODY, THE MUNICIPALITY AND THOSE OWNERS MAY
ENTER INTO A WRITTEN AGREEMENT WAIVING ANY OR ALL REQUIREMENTS RELATING TO
POSTING, PUBLICATION, MAILING, NOTICE, FRONTAGE OWNER WRITTEN REQUIREMENTS
AND DIRECTIONS, AND PROTEST AND OBJECTION, INCLUDING THE PROVISIONS OF
SECTIONS 48-578, 48-579 AND 48-580. ON RECEIPT OF A PETITION SIGNED BY
THE OWNERS OF ALL THE REAL PROPERTY WITHIN THE PROPOSED IMPROVEMENT
DISTRICT, THE GOVERNING BODY MAY ADOPT A RESOLUTION OR ORDINANCE OF
INTENTION TO ORDER THE IMPROVEMENT PURSUANT TO SUBSECTION A, PARAGRAPH 1
OF THIS SECTION, SHALL HAVE IMMEDIATE JURISDICTION TO ADOPT THE RESOLUTION
ORDERING THE IMPROVEMENT PURSUANT TO SECTION 48-581, AND MAY COMBINE THOSE
RESOLUTIONS INTO ONE RESOLUTION.

E. THE PETITION REQUIRED BY SUBSECTION A, PARAGRAPH 2 OF THIS
SECTION SHALL SET FORTH ALL OF THE FOLLOWING:

1. THE NAME OF THE PROPOSED IMPROVEMENT DISTRICT.

2. THE NECESSITY FOR THE PROPOSED IMPROVEMENT DISTRICT.

3. THAT THE PUBLIC CONVENIENCE, NECESSITY OR WELFARE WILL BE
PROMOTED BY ESTABLISHING THE IMPROVEMENT DISTRICT AND THAT THE PROPERTY TO
BE INCLUDED IN THE IMPROVEMENT DISTRICT WILL BE BENEFITED.

4. A LEGAL DESCRIPTION OF THE BOUNDARIES OF THE PROPOSED
IMPROVEMENT DISTRICT AND A MAP THAT SHOWS GENERALLY THE LOCATION OF THE
PROPOSED IMPROVEMENT DISTRICT.

5. A GENERAL DESCRIPTION OF THE PROPOSED IMPROVEMENT.

6. A MAXIMUM AMOUNT OF THE ASSESSMENT.

7. THAT THE PETITIONERS CONSENT TO THE ASSESSMENT, EXCEPT THAT AN
ASSESSMENT WILL NOT BE LEVIED WITHOUT THE GOVERNING BODY'S COMPLIANCE WITH
SECTIONS 48-577, 48-578, 48-579, 48-580, 48-581, 48-582, 48-583, 48-584,
48-585, 48-586, 48-587, 48-588, 48-589, 48-590, 48-591, 48-592, 48-593 AND
48-594.

8. THE ASSESSOR'S PARCEL NUMBER FOR EACH LOT TO BE INCLUDED IN THE
PROPOSED IMPROVEMENT DISTRICT. EACH PETITION SIGNER SHALL INDICATE THE

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ANA TNHR WN FE

House Amendments to S.B. 1016

APPLICABLE ASSESSOR'S PARCEL NUMBER THAT CORRESPONDS TO THE LOT OWNED BY
THE SIGNER.

9. ANY OTHER MATTERS REQUIRED BY THIS ARTICLE.

Sec. 5. Section 48-577, Arizona Revised Statutes, is amended to
read:

48-577. Plans; estimate of cost: limitation on assessment

Before passing the resolution of intention, preliminary plans that
show the location and the type and character of the proposed improvements
and estimates of the cost and expenses of the proposed improvements shal]
be prepared and filed with the clerk. The ASSESSMENT SHALL NOT EXCEED THE
MAXIMUM AMOUNT OF THE ASSESSMENT INCLUDED IN THE PETITION REQUIRED BY
SECTION 48-576, AND THE assessment for any lot shall not exceed its
proportion of the estimate.”
Amend title to conform

TERESA MARTINEZ

1016MARTINEZ SE.docx
03/20/2026

11:44 AM

H:
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PB/1s

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ARIZONA HOUSE OF REPRESENTATIVES
Fifty-seventh Legislature - Second Regular Session

ROLL CALL VOTE

COMMITTEE ON Rural Economic Development BILLNO. SB 1016

DATE March 26, 2026 MOTION: DPA, > FE.

PASS AYE NAY PRESENT | ABSENT
Blackman Fi os
Bliss
Hernandez C a
Peshlakai F 4
Volk

Lopez, Vice-Chairman

Martinez, Chairman

Mn ass <

| 4
sa Paha

COMMITTEE SECRETARY

AP.

SAMARTINEZ, Chairman
CHRIS LOPEZ, Vice-Chairman

ATTACHMENT. ly

ARIZONA HOUSE OF REPRESENTATIVES

57th Legislature, 2nd Regular Session

Majority Research Staff
Senate: PS 7-0-0-0 [Third Read 23-4-3-0

SB1401: special plate; golf tournament charity
S/E: housing; contractors; bonds; taxes
Sponsor: Senator Payne, LD 27
Committee on Rural Economic Development

Summary of the Strike-Everything Amendment to SB 1401

Overview

Allows municipalities to administer a workforce housing project expedited plan and
permitting process and exempts such projects from the State's portion of the prime
contracting sales tax.

History

Established in 2001 and housed in the Arizona Office of Economic Opportunity, the Arizona
Finance Authority (AFA) serves as the State's bonding authority and supports affordable
housing programs. AFA is governed by a 7-member board of directors, appointed by the
Governor to 7-year terms. AFA's main responsibilities include: 1) administering funds or
property from federal agencies or others; 2) entering into agreements, contracting with, or
acting as a guarantor with any federal, state, or local government agency in connection with
its responsibilities related to housing; and 3) inspecting housing facility financed through its
resources (Arizona State Library).

Furthermore, the AFA must authorize any corporation that seeks to act as an authority in
the issuance of bonds and is responsible for overseeing the greater Arizona development
authority. Bonds are issued mainly by the Arizona Industrial Development Authority (IDA),
with uses for bonds ranging from residential rental to manufacturing and infrastructure
projects (Title 41, Chapter 53; Title 35, Chapter 5, Art. 1 & 2 A.R.S).

Provisions

Workforce Housing Authorization
1. Allows municipalities to establish and maintain a workforce housing project expedited
plan review and permitting process. (Sec. 1)

2. Requires the following information and objectives to be included in a workforce housing
project expedited plan review and permitting process:
a, a dedicated point of contact for affordable housing applicants;
b. initial plan review within twenty business days after the submission of the plan
application; and
c. inspections being given priority scheduling or being scheduled within 72 hours. (Sec.

1)

O Prop 105 (46 votes) [] Prop 108 (40 votes) 0 Emergency (40 votes) O Fiscal Note

Initials SB 1401
3/24/2026 Page 1 Rural Economic Development

Attachment_“}_
3. Defines workforce housing and workforce housing project. (Sec. 1)

IDA Bond Issuance
4. Lowers the minimum population threshold, from 7% to 3% of the total state population,
that a governing body of a county or municipality must have in order to issue bonds to
finance a qualified project. (Sec. 2)

5. Expands one of the types of qualified projects that can receive a bond issuance from an
IDA, to include all residential rental projects instead of solely multifamily residential
rental projects. (Sec. 2)

Tax Exemption
6. Exempts the gross proceeds of sales or gross income attributable to the development of
workforce housing projects from the State's portion of the prime contracting sales tax
regardless of whether services are provided sequential to or concurrent with prime
contracting activities that are subject to tax. (Sec. 3)

Miscellaneous
7. Establishes the effective date of this act to be 12 months after the general effective date.
(Sec. 7)

Cites the act as the Workforce Housing Incentive Act. (Sec. 8)

9. Makes technical and conforming changes. (Sec. 1, 2, 3)

Initials SB 1401
3/24/2026 Page 2 Rural Economic Development
Fifty-seventh Legislature Rural Economic Development
Second Regular Session S.B. 1401

ANAT HPWNHE

PROPOSED
HOUSE OF REPRESENTATIVES AMENDMENTS TO S.B. 1401
(Reference to Senate engrossed bill)

Strike everything after the enacting clause and insert:

"Section 1. Title 9, chapter 4, article 6, Arizona’ Revised
Statutes, is amended by adding section 9-461.21, to read:

9-461.21. Workforce housing projects: residential structures;

lan review and permittin rocess; definiti

A. EACH MUNICIPALITY MAY ESTABLISH AND MAINTAIN A WORKFORCE HOUSING
PROJECT EXPEDITED PLAN REVIEW AND PERMITTING PROCESS. THE WORKFORCE
HOUSING PROJECT EXPEDITED PLAN REVIEW AND PERMITTING PROCESS SHALL INCLUDE
ALL OF THE FOLLOWING:

1. A DEDICATED POINT OF CONTACT FOR AFFORDABLE HOUSING APPLICANTS.

2. INITIAL PLAN REVIEW WITHIN TWENTY BUSINESS DAYS AFTER’ THE
SUBMISSION OF THE PLAN APPLICATION.

3. INSPECTIONS BEING GIVEN PRIORITY SCHEDULING OR BEING SCHEDULED
WITHIN SEVENTY-TWO HOURS.

B. FOR THE PURPOSES OF THIS SECTION:

1. "WORKFORCE HOUSING" MEANS NEW DWELLING UNITS THAT ARE:

(a) FOR SALE OR RENT AT A SALES OR RENTAL PRICE THAT IS AFFORDABLE
TO HOUSEHOLDS EARNING NOT MORE THAN ONE HUNDRED FIFTY PERCENT OF THE AREA
MEDIAN INCOME AS DETERMINED BY THE UNITED STATES DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT.

(b) SUBJECT TO A RECORDED AFFORDABILITY COVENANT OR OTHER BINDING
RESTRICTION THAT ENSURES THAT THE SALES OR RENTAL PRICE OF THE DWELLING
UNIT IS AFFORDABLE AS PRESCRIBED IN SUBDIVISION (a) OF THIS PARAGRAPH FOR
AT LEAST TWENTY YEARS.

2. “WORKFORCE HOUSING PROJECT" MEANS A RESIDENTIAL PROJECT THAT
DOES ALL OF THE FOLLOWING:

(a) CONSTRUCTS NEW DWELLING UNITS FOR SALE OR RENT AT A SALES OR
RENTAL PRICE THAT IS AFFORDABLE TO HOUSEHOLDS EARNING NOT MORE THAN ONE
HUNDRED FIFTY PERCENT OF THE AREA MEDIAN INCOME AS DETERMINED BY THE
UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT.

(b) RECORDS AN AFFORDABILITY COVENANT OR OTHER BINDING RESTRICTION
THAT ENSURES THAT THE SALES OR RENTAL PRICE OF THE DWELLING UNIT IS
AFFORDABLE AS PRESCRIBED IN SUBDIVISION (a) OF THIS PARAGRAPH FOR AT LEAST
TWENTY YEARS FOR WORKFORCE HOUSING RENTAL PROJECTS OR INITIAL SALE PRICE
AFFORDABILITY FOR OWNERSHIP UNITS.

(c) OFFERS ONE HUNDRED PERCENT OF THE NEW DWELLING UNITS IN THE
PROJECT FOR SALE OR RENT AT A SALES OR RENTAL PRICE THAT IS AFFORDABLE TO
HOUSEHOLDS EARNING NOT MORE THAN ONE HUNDRED FIFTY PERCENT OF THE AREA
MEDIAN INCOME AS DETERMINED BY THE UNITED STATES DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT.

Attachment_2 _

House Amendments to S.B. 1401

ONO WNH FP

Sec. 2. Section 35-726, Arizona Revised Statutes, is amended to
read:

35-726. Approval of general plan before issuing bonds; fee;

exceptions: definition

A. Bonds shall not be issued by a corporation for—tte—purpose—of
firarcitrg TO FINANCE single family dwelling units pursuant to section
35-706, subsection A, paragraph 11 or 12 without approval of a general
plan by its governing body. The corporation shall submit TO THE GOVERNING
BODY a general plan for each respective series of bonds to~?ts—goverming
body. The general plan shall briefly describe:

1. The amount of the proposed bonds.

2. The maximum term of the bonds.

3. The maximum interest rate on the bonds.

4. The need for the bond issue.

5, The terms and conditions for originating or purchasing mortgage
loans or making loans to lenders.

6. The area in which the single family dwelling units to be
financed may be located.

7. The proposed fees, charges and expenditures to be paid for
originators, servicers, trustees, custodians, mortgage administrators and
others.

8. All insurance requirements with respect to mortgage loans,
mortgaged property, mortgagors, originators, servicers and trustees.

9. The anticipated date of issuance of the bonds.

B. The governing body shall review general plans submitted by
corporations pursuant to subsection A of this section. In reviewing the
plans the governing body shall consider:

1. Whether the amount of the mortgage monies proposed to be made
available is reasonably related to the demand for the mortgage monies.

2. Whether the terms of the general plan are justifiable in the
context of the transaction and in the context of similar transactions.

3. Whether the fees, costs and expenditures as set forth in the
general plan are reasonably related to the services provided.

4. For projects of owner-occupied single family dwelling units to
be occupied by persons of low and moderate income and financed pursuant to
section 35-706, subsection A, paragraphs 11 and 12, whether the proposed
mortgage monies to be made available will fulfill a public purpose by
providing housing for persons of low and moderate income or by encouraging
single family developments in all participating jurisdictions, including
such jurisdictions’ slum or blighted areas as defined in section 36-1471.

C. The governing body shall approve or disapprove the general plan
not later than thirty days after receipt of the plan. If the governing
body does not act on the general plan within thirty days after the date of
receipt, the general plan shall be deemed approved. If a general plan is
approved, the corporation may issue the series of bonds covered by the
general plan with a total principal amount, maximum term and maximum
interest rate mo NOT greater than that which is set forth in the general
plan. The origination and servicing fees pertaining to mortgage loans to
be financed in accordance with the general plan shall not exceed those
proposed in the general plan. The corporation may vary other items in the

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House Amendments to S.B. 1401

ONO TOHRWDY FE

general plan on a finding that the variation is minor and that the
variations will not impair the security for the bonds or substantially
increase the cost of financing the single family dwelling units and the
findings of the corporation shall be conclusive.

D. The governing body may charge any corporation submitting a
general plan for review a fee of not to~exceed—tern—thousand—tottars MORE
THAN $10,000 together with reimbursement of its actual costs and expenses
incurred in reviewing the general plan.

E. Except for a corporation THAT IS approved by the Arizona finance
authority or a governing body of a county or a municipality having a
population of more than sever THREE percent of the total state population,
a corporation shall not issue bonds, other than refunding bonds the
proceeds of which are used exclusively to refund a prior bond issue, to
finance a muttifamity residential rental project, sanitarium, clinic,
medical hotel, rest home, nursing home, skilled nursing facility or life
care facility as prescribed in section 20-1801, unless the department
approves the project. The department, with or without a hearing, shall
review the project and consider at least the following factors:

1. The demand for and feasibility of the project in the area set
forth in the application to the corporation.

2. The terms and conditions of the proposed bonds.

3. The proposed use of bond proceeds.

4. The benefit to the public if the project provides rental housing
for persons of low and moderate income or encourages rental housing in
slum or blighted areas as defined in section 36-1471.

5. If the project consists of a nursing home, or a life care
facility as prescribed in section 20-1801, the benefit to the public of
the project, including the proposed rent, fees and other charges of the
project in relation to the level of services to be offered.

F. Subsection E of this section does not apply to bonds issued to
finance:

1. A sanitarium, clinic, medical hotel, rest home, nursing home,
skilled nursing facility, or life care facility as prescribed in section
20-1801, if the facility is to be owned and operated by this state or a
political subdivision or agency of this state.

2. A nursing home, rest home, skilled nursing facility, life care
facility or senior residential facility providing on-site medical and
support services if the facility is owned and operated by a nonprofit
organization that is exempt from taxation under section 501(c)(3) of the
United States internal revenue code.

G. Except for a corporation that is exempt under subsection E of
this section, the department with or without a hearing shall approve or
disapprove the project not later than thirty days after receipt of the
request for approval. If the project is approved the corporation may
issue the bonds described in the approval request with the total principal
amount, maximum term and maximum interest rate mo NOT greater than as set
forth in the request. The department shall charge each applicant
submitting a project approval request pursuant to this subsection a fee of
not to—exceet—five—thousamt—tottars MORE THAN $5,000 together with
reimbursement of its actual costs and expenses incurred in reviewing the

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project. The department shall remit the fees to the state treasurer for
deposit in the Arizona department of housing program fund established by
section 41-3957.

H. For the purposes of this section, "department" means the Arizona
department of housing.

Sec. 3. Section 42-5075, Arizona Revised Statutes, is amended to
read:

42-5075. Prime contracting classification; exemptions;

definitions

A. The prime contracting classification is comprised of the
business of prime contracting and the business of manufactured building
dealer. Sales for resale to another manufactured building dealer are not
subject to tax. Sales for resale do not include sales to a lessor of
manufactured buildings. The sale of a used manufactured building is not
taxable under this chapter. The prime contracting classification does not
include any work or operation performed by a person that is not required
to be licensed by the registrar of contractors pursuant to section
3221121,

B. The tax base for the prime contracting classification is
sixty-five percent of the gross proceeds of sales or gross income derived
from the business. The following amounts shall be deducted from the gross
proceeds of sales or gross income before computing the tax base:

1. The sales price of land, which shall not exceed the fair market
value.

2. Sales and installation of groundwater measuring devices required
under section 45-604 and groundwater monitoring wells required by law,
including monitoring wells installed for acquiring information for a
permit required by law.

3. The sales price of furniture, furnishings, fixtures, appliances
and attachments that are not incorporated as component parts of or
attached to a manufactured building or the setup site. The sale of such
items may be subject to the taxes imposed by article 1 of this chapter
separately and distinctly from the sale of the manufactured building.

4. The gross proceeds of sales or gross income received from a
contract entered into for the modification of any building, highway, road,
railroad, excavation, manufactured building or other structure, project,
development or improvement located in a military reuse zone for providing
aviation or aerospace services or for a manufacturer, assembler or
fabricator of aviation or aerospace products within an active military
reuse zone after the zone is initially established or renewed under
section 42-1301. To be eligible to qualify for this deduction, before
beginning work under the contract, the prime contractor must have applied
for a letter of qualification from the department of revenue.

5. The gross proceeds of sales or gross income derived from a
contract to construct a qualified environmental technology manufacturing,
producing or processing facility, as described in section 41-1514.02, and
from subsequent construction and installation contracts that begin within
ten years after the start of initial construction. To qualify for this
deduction, before beginning work under the contract, the prime contractor
must obtain a letter of qualification from the department of revenue.

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This paragraph shall apply for ten full consecutive calendar or fiscal
years after the start of initial construction.

6. The gross proceeds of sales or gross income from a contract to
provide for one or more of the following actions, or a contract for site
preparation, constructing, furnishing or installing machinery, equipment
or other tangible personal property, including structures necessary to
protect exempt incorporated materials or installed machinery or equipment,
and tangible personal property incorporated into the project, to perform
one or more of the following actions in response to a release or suspected
release of a hazardous substance, pollutant or contaminant from a facility
to the environment, unless the release was authorized by a permit issued
by a governmental authority:

(a) Actions to monitor, assess and evaluate such a release or a
suspected release.

(b) Excavation, removal and transportation of contaminated soil and
its treatment or disposal.

(c) Treatment of contaminated soil by vapor extraction, chemical or
physical stabilization, soil washing or biological treatment to reduce the
concentration, toxicity or mobility of a contaminant.

(d) Pumping and treatment or in situ treatment of contaminated
groundwater or surface water to reduce the concentration or toxicity of a
contaminant.

(e) The installation of structures, such as cutoff walls or caps,

to contain contaminants present in groundwater or soil and prevent them
from reaching a location where they could threaten human health or welfare
or the environment.
This paragraph does not include asbestos removal or the construction or
use of ancillary structures such as maintenance sheds, offices or storage
facilities for unattached equipment, pollution control equipment,
facilities or other control items required or to be used by a person to
prevent or control contamination before it reaches the environment.

7. The gross proceeds of sales or gross income that is derived from
a contract for the installation, assembly, repair or maintenance of
machinery, equipment or other tangible personal property that is either
deducted from the tax base of the retail classification under section
42-5061, subsection B or that is exempt from use tax under section
42-5159, subsection B and that has independent functional utility,
pursuant to the following provisions:

(a) The deduction provided in this paragraph includes the gross
proceeds of sales or gross income derived from al] of the following:

(i) Any activity performed on machinery, equipment or other
tangible personal property with independent functional utility.

(ii). Any activity performed on any tangible personal property
relating to machinery, equipment or other tangible personal property with
independent functional utility in furtherance of any of the purposes
provided for under subdivision (d) of this paragraph.

(iii) Any activity that is related to the activities described in
items (i) and (ii) of this subdivision, including inspecting the
installation of or testing the machinery, equipment or other tangible
personal property.

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House Amendments to S.B. 1401

(b) The deduction provided in this paragraph does not include gross
proceeds of sales or gross income from the portion of any contracting
activity that consists of the development of, or modification to, real
property in order to facilitate the installation, assembly, repair,
maintenance or removal of machinery, equipment or other tangible personal
property that is either deducted from the tax base of the retail
classification under section 42-5061, subsection B or exempt from use tax
under section 42-5159, subsection B.

(c) The deduction provided in this paragraph shall be determined
without regard to the size or useful life of the machinery, equipment or
other tangible personal property.

(d) For the purposes of this paragraph, “independent functional
utility” means that the machinery, equipment or other tangible personal
property can independently perform its function without attachment to real
property, other than attachment for any of the following purposes:

(i) Assembling the machinery, equipment or other tangible personal
property.

(ii) Connecting items of machinery, equipment or other tangible
personal property to each other.

(iii) Connecting the machinery, equipment or other tangible
personal property, whether as an individual item or as a system of items,
to water, power, gas, communication or other services.

(iv) Stabilizing or protecting the machinery, equipment or other
tangible personal property during operation by bolting, burying or
performing other similar nonpermanent connections to either real property
or real property improvements.

8. The gross proceeds of sales or gross income attributable to the
purchase of machinery, equipment or other tangible personal property that
is exempt from or deductible from transaction privilege and use tax under:

(a) Section 42-5061, subsection A, paragraph 25, 29 or 58.

(b) Section 42-5061, subsection B.

(c) Section 42-5159, subsection A, paragraph 13, subdivision (a),
(b), (ec), (d), (Ce), (fF), (i), (kK), (m) or (n) or paragraph 55.

(d) Section 42-5159, subsection B.

9. The gross proceeds of sales or gross income received from a
contract for the construction of an environmentally controlled facility
for the raising of poultry for the production of eggs and the sorting,
cooling and packaging of eggs.

10. The gross proceeds of sales or gross income that is derived
from a contract entered into with a person who is engaged in the
commercial production of livestock, livestock products or agricultural,
horticultural, viticultural or floricultural crops or products in this
state for the modification of any building, highway, road, excavation,
manufactured building or other structure, project, development = or
improvement used directly and primarily to prevent, monitor, control or
reduce air, water or land pollution.

11. The gross proceeds of sales or gross income that is derived
from the installation, assembly, repair or maintenance of clean rooms that
are deducted from the tax base of the retail classification pursuant to
section 42-5061, subsection B, paragraph 17.

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12. For taxable periods beginning from and after June 30, 2001, the
gross proceeds of sales or gross income derived from a contract entered
into for the construction of a residential apartment housing facility that
qualifies for a federal housing subsidy for low-income persons over
sixty-two years of age and that is owned by a nonprofit charitable
organization that has qualified under section 501(c)(3) of the internal
revenue code.

13. For taxable periods beginning from and after December 31, 1996
and ending before January 1, 2017, the gross proceeds of sales or gross
income derived from a contract to provide and install a solar energy
device, The contractor shall register with the department as a solar
energy contractor. By registering, the contractor acknowledges that it
will make its books and records relating to sales of solar energy devices
available to the department for examination.

14. The gross proceeds of sales or gross income derived from a
contract entered into for the construction of a launch site, as defined in
14 Code of Federal Regulations section 401.5.

15. The gross proceeds of sales or gross income derived from a
contract entered into for the construction of a domestic violence shelter
that is owned and operated by a nonprofit charitable organization that has
qualified under section 501(c)(3) of the internal revenue code.

16. The gross proceeds of sales or gross income derived from
contracts to perform postconstruction treatment of real property for
termite and general pest control, including wood-destroying organisms.

17. The gross proceeds of sales or gross income received from
contracts entered into before July 1, 2006 for constructing a state
university research infrastructure project if the project has been
reviewed by the joint committee on capital review before the university
enters into the construction contract for the project. For the purposes
of this paragraph, “research infrastructure” has the same meaning
prescribed in section 15-1670.

18. The gross proceeds of sales or gross income received from a
contract for the construction of any building, or other structure,
project, development or improvement owned by a qualified business under
section 41-1516 for harvesting or processing qualifying forest products
removed from qualifying projects as defined in section 41-1516 if actual
construction begins before January 1, 2024. To qualify for this
deduction, the prime contractor must obtain a letter of qualification from
the Arizona commerce authority before beginning work under the contract.

19. Any amount of the gross proceeds of sales or gross income
attributable to development fees that are incurred in relation to a
contract for construction, development or improvement of real property and
that are paid by a prime contractor or subcontractor. For the purposes of
this paragraph:

(a) The attributable amount shall not exceed the value of the
development fees actually imposed.

(b) The attributable amount is equal to the total amount of
development fees paid by the prime contractor or subcontractor, and the
total development fees credited in exchange for the construction of,
contribution to or dedication of real property for providing public

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infrastructure, public safety or other public services necessary to the
development. The real property must be the subject of the development
fees.

(c) “Development fees" means fees imposed to offset capital costs
of providing public infrastructure, public safety or other public services
to a development and authorized pursuant to section 9-463.05, section
11-1102 or title 48 regardiess of the jurisdiction to which the fees are
paid.

20. The gross proceeds of sales or gross income derived from a
contract entered into for the construction of a mixed waste processing
facility that is located on a municipal solid waste landfill? and that is
constructed for the purpose of recycling solid waste or producing
renewable energy from landfill waste. For the purposes of this paragraph:

(a) “Mixed waste processing facility" means a solid waste facility
that is owned, operated or used for the treatment, processing or disposal
of solid waste, recyclable solid waste, very small quantity generator
waste or household hazardous waste. For the purposes of this subdivision,
"very small quantity generator waste", “household hazardous waste” and
"solid waste facility" have the same meanings prescribed in section
49-701, except that solid waste facility does include a site that stores,
treats or processes paper, glass, wood, cardboard, household textiles,
scrap metal, plastic, vegetative waste, aluminum, steel or other
recyclable material.

(b) “Municipal solid waste Jandfill" has the same meaning
prescribed in section 49-701.

(c) “Recycling” means collecting, separating, cleansing, treating
and reconstituting recyclable solid waste that would otherwise become
solid waste, but does not include incineration or other similar processes.

(d) “Renewable energy" means usable energy, including electricity,
fuels, gas and heat, produced through the conversion of energy provided by
sunlight, water, wind, geothermal, heat, biomass, biogas, landfill gas or
another nonfossil renewable resource.

21. The gross proceeds of sales or gross income derived from a
contract to install containment structures. For the purposes of this
paragraph, “containment structure" means a structure that prevents,
monitors, controls or reduces noxious or harmful discharge into the
environment.

C. Entitlement to the deduction pursuant to subsection B, paragraph
7 of this section is subject to the following provisions:

1. A prime contractor may establish entitlement to the deduction by
both:

(a) Marking the invoice for the transaction to indicate that the
gross proceeds of sales or gross income derived from the transaction was
deducted from the base.

(b) Obtaining a certificate executed by the purchaser indicating
the name and address of the purchaser, the precise nature of the business
of the purchaser, the purpose for which the purchase was made, the
necessary facts to establish the deductibility of the property under
section 42-5061, subsection B, and a certification that the person
executing the certificate is authorized to do so on behalf of the

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purchaser. The certificate may be disregarded if the prime contractor has
reason to believe that the information contained in the certificate is not
accurate or complete.

2. A person who does not comply with paragraph 1 of this subsection
may establish entitlement to the deduction by presenting facts necessary
to support the entitlement, but the burden of proof is on that person.

3. The department may prescribe a form for the certificate
described in paragraph 1, subdivision (b) of this subsection. The
department may also adopt rules that describe the transactions with
respect to which a person jis not entitled to rely solely on the
information contained in the certificate provided in paragraph 1,
subdivision (b) of this subsection but must instead obtain such additional
information as required in order to be entitled to the deduction.

4. If a prime contractor is entitled to a deduction by complying
with paragraph 1 of this subsection, the department may require the
purchaser who caused the execution of the certificate to establish the
accuracy and completeness of the information required to be contained in
the certificate that would entitle the prime contractor to the deduction.
If the purchaser cannot establish the accuracy and completeness of the
information, the purchaser is liable in an amount equal to any tax,
penalty and interest that the prime contractor would have been required to
pay under article 1 of this chapter if the prime contractor had not
complied with paragraph 1 of this subsection. Payment of the amount under
this paragraph exempts the purchaser from liability for any tax imposed
under article 4 of this chapter. The amount shali be treated as a
transaction privilege tax to the purchaser and as tax revenues collected
from the prime contractor in order to designate the distribution base for
purposes of section 42-5029.

D. Subcontractors or others who perform modification activities are
not subject to tax if they can demonstrate that the job was within the
control of a prime contractor or contractors or a dealership of
manufactured buildings and that the prime contractor or dealership is
liable for the tax on the gross income, gross proceeds of sales or gross
receipts attributable to the job and from which the subcontractors or
others were paid.

E. Amounts received by a contractor for a project are excluded from
the contractor's gross proceeds of sales or gross income derived from the
business if the person who hired the contractor executes and provides a
certificate to the contractor stating that the person providing the
certificate is a prime contractor and is liable for the tax under article
1 of this chapter, The department shall prescribe the form of the
certificate. If the contractor has reason to believe that the information
contained on the certificate is erroneous or incomplete, the department
may disregard the certificate. If the person who provides the certificate
is not liable for the tax as a prime contractor, that person is
nevertheless deemed to be the prime contractor in lieu of the contractor
and is subject to the tax under this section on the gross receipts or
gross proceeds received by the contractor.

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F, Every person engaging or continuing in this state in the
business of prime contracting or dealership of manufactured buildings
shall present to the purchaser of such prime contracting or manufactured
building a written receipt of the gross income or gross proceeds of sales
from such activity and shall separately state the taxes to be paid
pursuant to this section.

G. For the purposes of section 42-5032.01, the department shall
separately account for revenues collected under the prime contracting
classification from any prime contractor engaged in the preparation or
construction of a multipurpose facility, and related infrastructure, that
is owned, operated or leased by the tourism and sports authority pursuant
to title 5, chapter 8.

H. For the purposes of section 42-5032.02, from and after
September 30, 2013, the department shall separately account for revenues
reported and collected under the prime contracting classification from any
prime contractor engaged in the construction of any buildings and
associated improvements that are for the benefit of a manufacturing
facility. For the purposes of this subsection, "associated improvements"
and “manufacturing facility" have the same meanings prescribed in section
42-5032.02.

I. For the purposes of section 42-5032.03 and subject to section
48-4238, beginning October 1, 2025 and each month thereafter through
December 31, 2055, the department shall separately account for revenues
reported and collected under the prime contracting classification from any
prime contractor engaged in the construction of any buildings and
associated improvements that are for the benefit of a major league
baseball facility or an adjacent building that is owned by a _ county
stadium district pursuant to title 48, chapter 26 and operated by the
county stadium district or the _ professional baseball franchise
organization that occupies the major league baseball) facility or adjacent
building. For the purposes of this subsection, “adjacent building" and
"major league baseball facility" have the same meanings prescribed in
section 48-4201.

J. The gross proceeds of sales or gross income derived from a
contract for lawn maintenance services is not subject to tax under this
section if the contract does not include landscaping activities. Lawn
maintenance service is a service pursuant to section 42-5061, subsection
A, paragraph 1, and includes lawn mowing and edging, weeding, repairing
sprinkler heads or drip irrigation heads, seasonal replacement of flowers,
refreshing gravel, lawn dethatching, seeding winter lawns, leaf and debris
collection and removal, tree or shrub pruning or clipping, garden and
gravel raking and applying pesticides, as defined in section 3-361, and
fertilizer materials, as defined in section 3-262.

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K. Except as provided in subsection P of this section, the gross
proceeds of sales or gross income derived from landscaping activities is
subject to tax under this section. Landscaping includes installing lawns,
grading or leveling ground, installing gravel or boulders, planting trees
and other plants, felling trees, removing or mulching tree stumps,
removing other imbedded plants, building irrigation berms, installing
railroad ties and installing underground sprinkler or watering systems.

L. The portion of gross proceeds of sales or gross income
attributable to the actual direct costs of providing architectural or
engineering services that are incorporated in a contract is not subject to
tax under this section. For the purposes of this subsection, “direct
costs” means the portion of the actual costs that are directly expended in
providing architectural or engineering services.

M. Operating a landfill or a solid waste disposal facility is not
subject to taxation under this section, including filling, compacting and
creating vehicle access to and from cell sites within the landfill.
Constructing roads to a landfill or solid waste disposal facility and
constructing cells within a landfill or solid waste disposal facility may
be deemed prime contracting under this section.

N. The following apply in determining the taxable situs of sales of
manufactured buildings:

1. For sales in this state where the manufactured building dealer
contracts to deliver the building to a setup site or to perform the setup
in this state, the taxable situs is the setup site.

2. For sales in this state where the manufactured building dealer
does not contract to deliver the building to a setup site or does not
perform the setup, the taxable situs is the location of the dealership
where the building is delivered to the buyer.

3. For sales in this state where the manufactured building dealer
contracts to deliver the building to a setup site that is outside this
state, the situs is outside this state and the transaction is excluded
from tax.

0. The gross proceeds of sales or gross income attributable to a
written contract for design phase services or professional services,
executed before modification begins and with terms, conditions and pricing
of all of these services separately stated in the contract from those for
construction phase services, is not subject to tax under this section,
regardless of whether the services are provided sequential to or
concurrent with prime contracting activities that are subject to tax under
this section. This subsection does not include the gross proceeds of
sales or gross income attributable to construction phase services. For
the purposes of this subsection:

1. "Construction phase services" means services for the execution
and completion of any modification, including the following:

(a) Administration or supervision of any modification performed on
the project, including team management and coordination, scheduling, cost
controls, submittal process management, field management, safety program,
close-out process and warranty period services.

(b) Administration or supervision of any modification performed
pursuant to a punch list. For the purposes of this subdivision, “punch

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list" means minor items of modification work performed after substantial
completion and before final completion of the project.

(c) Administration or supervision of any modification performed
pursuant to change orders. For the purposes of this subdivision, "change
order" means a written instrument issued after execution of a contract for
modification work, providing for all of the following:

(i) The scope of a change in the modification work, contract for
modification work or other contract documents.

(ii) The amount of an adjustment, if any, to the guaranteed maximum
price as set in the contract for modification work. For the purposes of
this item, "guaranteed maximum price" means the amount guaranteed to be
the maximum amount due to a prime contractor for the performance of al]
modification work for the project.

(iii) The extent of an adjustment, if any, to the contract time of
performance set forth in the contract.

(d) Administration or supervision of any modification performed
pursuant to change directives. For the purposes of this subdivision,
“change directive’ means a written order directing a change in
modification work before agreement on an adjustment of the guaranteed
maximum price or contract time.

(e) Inspection to determine the dates of substantial completion or
final completion.

(f) Preparation of any manuals, warranties, as-built drawings,
spares or other items the prime contractor must furnish pursuant to the
contract for modification work. For the purposes of this subdivision,
“as-built drawing” means a drawing that indicates field changes made to
adapt to field conditions, field changes resulting from change orders or
buried and concealed installation of piping, conduit and utility services.

(g) Preparation of status reports after modification work has begun
detailing the progress of work performed, including preparation of any of
the following:

(i) Master schedule updates.

(ii) Modification work cash flow projection updates.

(iii) Site reports made on a periodic basis.

(iv) Identification of discrepancies, conflicts or ambiguities in
modification work documents that require resolution.

(v) Identification of any health and safety issues that have arisen
in connection with the modification work.

(h) Preparation of daily logs of modification work, including
documentation of personnel, weather conditions and on-site occurrences.

(1) Preparation of any submittals or shop drawings used by the
prime contractor to illustrate details of the modification work performed.

(j) Administration or supervision of any other activities for which
a prime contractor receives a certificate for payment or certificate for
final payment based on the progress of modification work performed on the
project.

2. “Design phase services" means services for developing and
completing a design for a project that are not construction phase
services, including the following:

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(a) Evaluating surveys, reports, test results or any other
information on-site conditions for the project, including physical
characteristics, legal limitations and utility locations for the site.

(b) Evaluating any criteria or programming objectives for the
project to ascertain requirements for the project, such as physical
requirements affecting cost or projected utilization of the project.

(c) Preparing drawings and specifications for architectural program
documents, schematic design documents, design development documents,
modification work documents or documents that identify the scope of or
materials for the project.

(d) Preparing an initial schedule for the project, excluding the
preparation of updates to the master schedule after modification work has
begun.

(e) Preparing preliminary estimates of costs of modification work
before completion of the final design of the project, including an
estimate or schedule of values for any of the following:

(4) Labor, materials, machinery and equipment, tools, water, heat,
utilities, transportation and other facilities and services used in the
execution and completion of modification work, regardless of whether they
are temporary or permanent or whether they are incorporated in the
modifications.

(ii) The cost of labor and materials to be furnished by the owner
of the real property.

(iii) The cost of any equipment of the owner of the real property
to be assigned by the owner to the prime contractor.

(iv) The cost of any labor for installation of equipment separately
provided by the owner of the real property that has been designed,
specified, selected or specifically provided for in any design document
for the project.

(v) Any fee paid by the owner of the real property to the prime
contractor pursuant to the contract for modification work.

(vi) Any bond and insurance premiums.

(vii) Any applicable taxes.

(viii) Any contingency fees for the prime contractor that may be
used before final completion of the project.

(f) Reviewing and evaluating cost estimates and project documents
to prepare recommendations on site use, site improvements, selection of
materials, building systems and equipment, modification feasibility,
availability of materials and labor, local modification activity as
related to schedules and time requirements for modification work.

(g) Preparing the plan and procedures for selection of

subcontractors, including any prequalification of subcontractor
candidates.
3. "Professtonal services" means architect services, engineer

services, geologist services, land surveying services or landscape

architect services that are within the scope of those services as provided

in title 32, chapter 1 and for which gross proceeds of sales or gross

income has not otherwise been deducted under subsection L of this section.

P, The gross proceeds of sales or gross income derived from a

contract with the owner of real property or improvements to real property
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for the maintenance, repair, replacement or alteration of existing
property is not subject to tax under this section if the contract does not
include modification activities, except as specified in this subsection.
The gross proceeds of sales or gross income derived from a de minimis
amount of modification activity does not subject the contract or any part
of the contract to tax under this section. For the purposes of this
subsection:

1. Tangible personal property that is incorporated or fabricated
into a project described in this subsection may be subject to the amount
prescribed in section 42-5008.01.

2. Each contract is independent of any other contract, except that
any change order that directly relates to the scope of work of the
original contract shall be treated the same as the original contract under
this chapter, regardless of the amount of modification activities included
in the change order. If a change order does not directly relate to the
scope of work of the original contract, the change order shall be treated
as a new contract, with the tax treatment of any subsequent change order
to follow the tax treatment of the contract to which the scope of work of
the subsequent change order directly relates.

Q. Notwithstanding subsection P of this section, a contract that
primarily involves surface or subsurface improvements to land and that is
subject to title 28, chapter 19, 20 or 22 or title 34, chapter 2 or 6 is
taxable under this section, even if the contract also includes vertical
improvements. Agencies that are subject to procurement processes under
those provisions shall include in the request for proposals a notice to
bidders when those projects are subject to this section. This subsection
does not apply to contracts with:

1. Community facilities districts, fire districts, county
television improvement districts, community park maintenance districts,
cotton pest control districts, hospital districts, pest abatement
districts, health service districts, agricultural improvement districts,
county free library districts, county jail districts, county stadium
districts, special health care districts, public health’ services
districts, theme park districts or revitalization districts.

2. Any special taxing district not specified in paragraph 1 of this
subsection if the district does not substantially engage in the
modification, maintenance, repair, replacement or alteration of surface or
subsurface improvements to land.

R. THE GROSS PROCEEDS OF SALES OR GROSS INCOME ATTRIBUTABLE TO THE
DEVELOPMENT OF WORKFORCE HOUSING PROJECTS AS DEFINED IN SECTION 9-461.21
IF THE WORKFORCE HOUSING PROJECT IS NOT SUBJECT TO THE STATE'S PORTION OF
THE PRIME CONTRACTING SALES TAX UNDER THIS SECTION, REGARDLESS OF WHETHER
THE SERVICES ARE PROVIDED SEQUENTIAL TO OR CONCURRENT WITH PRIME
CONTRACTING ACTIVITIES THAT ARE SUBJECT TO TAX UNDER THIS SECTION.

R> S. Notwithstanding subsection S- T, paragraph 10 of this
section, a person owning real property who enters into a contract for sale
of the real property, who is responsible to the new owner of the property
for modifications made to the property in the period subsequent to the
transfer of title and who receives a consideration for the modifications
is considered a prime contractor solely for purposes of taxing the gross

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proceeds of sale or gross income received for the modifications made
subsequent to the transfer of title. The original owner's gross proceeds
of sale or gross income received for the modifications shall be determined
according to the following methodology:

1. If any part of the contract for sale of the property specifies
amounts to be paid to the original owner for the modifications to be made
in the period subsequent to the transfer of title, the amounts are
included in the original owner's gross proceeds of sale or gross income
under this section. Proceeds from the sale of the property that are
received after transfer of title and that are unrelated to the
modifications made subsequent to the transfer of title are not considered
gross proceeds of sale or gross income from the modifications.

2. If the original owner enters into an agreement separate from the
contract for sale of the real property providing for amounts to be paid to
the original owner for the modifications to be made in the period
subsequent to the transfer of title to the property, the amounts are
included in the original owner's gross proceeds of sale or gross income
received for the modifications made subsequent to the transfer of title.

3. If the original owner is responsible to the new owner for
modifications made to the property in the period subsequent to the
transfer of title and derives any gross proceeds of sale or gross income
from the project subsequent to the transfer of title other than a delayed
disbursement from escrow unrelated to the modifications, it is presumed
that the amounts are received for the modifications made subsequent to the
transfer of title unless the contrary is established by the owner through
its books, records and papers kept in the regular course of business.

4. The tax base of the original owner is computed in the same
manner as a prime contractor under this section.

S> 7. For the purposes of this section:

1, “Alteration” means an activity or action that causes a direct
physical change to existing property. For the purposes of this paragraph:

(a) For existing property that is properly classified as class two
property under section 42-12002, paragraph 1, subdivision (c) or paragraph
2, subdivision (c) and that is used for residential purposes, class three
property under section 42-12003 or class four property under section
42-12004, this paragraph does not apply if the contract amount is more
than twenty-five percent of the most recent full cash value established
under chapter 13, article 2 of this title as of the date of any bid for
the work or the date of the contract, whichever value is higher.

(b) For all existing property other than existing property
described in subdivision (a) of this paragraph, this paragraph does not
apply if the contract amount is more than $750,000.

(c) Project elements may not be artificially separated from a
contract to cause a project to qualify as an alteration. The department
has the burden of proof that project elements have been artificially
separated from a contract.

(d) If a project for which the owner and the person performing the
work reasonably believed, at the inception of the contract, would be
treated as an alteration under this paragraph and, on completion of the
project, the project exceeded the applicable threshold described in either

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House Amendments to S.B. 1401

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subdivision (a) or (b) of this paragraph by not more than twenty-five
percent of the applicable threshold for any reason, the work performed
under the contract qualifies as an alteration.

(e) A change order that directly relates to the scope of work of
the original contract shall be treated as part of the original contract,
and the contract amount shall include any amount attributable to a change
order that directly relates to the scope of work of the original contract.

(f) Alteration does not include maintenance, repair or replacement.

2. “Contracting" means engaging in business as a contractor.

3. "Contractor" is synonymous with the term “builder” and means any
person or organization that undertakes to or offers to undertake to, or
purports to have the capacity to undertake to, or submits a bid to, or
does personally or by or through others, modify any building, highway,
road, railroad, excavation, manufactured building or other structure,
project, development or improvement, or to do any part of such a project,
including the erection of scaffolding or other structure or works in
connection with such a project, and includes subcontractors and specialty
contractors. For all purposes of taxation or deduction, this definition
shall govern without regard to whether or not such a contractor is acting
in fulfiliment of a contract.

4, "Manufactured building” means a manufactured home, mobile home
or factory-built building, as defined in section 41-4001.

5. “Manufactured building dealer" means a dealer who either:

(a) Is licensed pursuant to title 41, chapter 37, article 4 and who
sells manufactured buildings to the final consumer.

(b) Supervises, performs or coordinates the excavation = and
completion of site improvements or the setup of a manufactured building,
including the contracting, if any, with any subcontractor or specialty
contractor for the completion of the contract.

6. “Modification” means construction, grading and leveling ground,
wreckage or demolition. Modification does not include:

(a) Any project described in subsection P of this section.

(b) Any wreckage or demolition of existing property, or any other
activity that is a necessary component of a project described in
subsection P of this section.

(c) Any mobilization or demobilization related to a_ project
described in subsection P of this section, such as the erection or removal
of temporary facilities to be used by those persons working on the
project.

7. "Modify" means to make a modification or cause a modification to
be made.

8. “Owner” means the person that holds title to the real property
or improvements to real property that is the subject of the work, as well
as an agent of the title holder and any person with the authority to
perform or authorize work on the real property or improvements, including
a tenant and a property manager. For the purposes of subsection P of this
section, a person who is hired by a general contractor that is hired by an
owner, or a subcontractor of a general contractor that is hired by an
owner, is considered to be hired by the owner.

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House Amendments to S.B. 1401

9. “Prime contracting" means engaging in business as a _ prime
contractor.
10. “Prime contractor" means a contractor who supervises, performs

or coordinates the modification of any building, highway, road, railroad,
excavation, manufactured building or other structure, project, development
or improvement, including the contracting, if any, with any subcontractors
or specialty contractors and who is responsible for the completion of the
contract. Except as provided in subsections E and ®&- S of this section, a
9 person who owns real property, who engages one or more contractors to
10 modify that real property and who does not itself modify that real
11 property is not a prime contractor within the meaning of this paragraph
12 regardless of the existence of a contract for sale or the subsequent sale
13 of that real property.

14 11. "Replacement" means the removal from service of one component
15 or system of existing property or tangible personal property installed in
16 existing property, including machinery or equipment, and the installation
17 of a new component or system or new tangible personal property, including
18 machinery or equipment, that provides the same, a similar or an upgraded
19 design or functionality, regardless of the contract amount and regardless
20 of whether the existing component or system or existing tangible personal
21 property is physically removed from the existing property.

ANAT HRWNH FE

22 12. "Sale of a used manufactured building" does not include a lease
23 of a used manufactured building.

24 Sec. 4. Effective date

25 Section 9-461.21, Arizona Revised Statutes, as added by this act,

26 and sections 35-726 and 42-5075, Arizona Revised Statutes, as amended by
27 this act, are effective twelve months from and after the general effective
28 date.

29 Sec. 5. Short title

30 This act may be cited as the "Workforce Housing Incentive Act"."

31 Amend title to conform

TERESA MARTINEZ
1401MARTINEZ. docx
03/19/2026
04:25 PM
H: PB/Is
130JONKMW

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ARIZONA HOUSE OF REPRESENTATIVES
Fifty-seventh Legislature - Second Regular Session

ROLL CALL VOTE
COMMITTEE ON Rural Economic Development BILL NO. SB 1401
DATE March 26, 2026 MOTION: peA | S E
PASS AYE NAY PRESENT | ABSENT

Blackman 2

Bliss af

Hernandez C . uf
Peshlakai a WA

Volk

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Lopez, Vice-Chairman

_

Martinez, Chairman

i

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/anreniza/ by kgm

=) Yi dix COMMITTEE SECRETARY
(TERESA MARTINEZ, Chaikmarr

CHRIS LOPEZ, Vice-Chairman

— YY"

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