A bill that would give developers more power to issue municipal bonds and levy taxes to pay for public infrastructure in communities they are building has been approved by the Arizona Senate.
The proposal would allow developers and land owners to automatically set up what’s known as a special taxing district. The units are run by boards with authority similar to governments, including the use of eminent domain.
Under current law, setting up a special taxing district can only be done by working with municipal or county government. But House Speaker David Gowan’s plan would allow developments to form the districts if they are more than 600 acres, in unincorporated areas and if all the landowners agree, among other conditions.
Some of the state’s largest developers are backing the bill to help ensure they are at least partially reimbursed for money they spend on things like public roads and water and sewer systems, despite critics who say it turns over public financing privileges to boards that could be stacked by the developers.
If approved, it could have a significant impact on the growth of master planned communities across Arizona as developers are more likely to take advantage of the public financing available through the special taxing districts. That would include an area in Gowan’s southeast Arizona legislative district where El Dorado Holdings Inc. is developing a 28,000-home community featuring an 18-hole golf course and a park.
Gowan’s bill also change the makeup of the governing board behind these districts to include two members chosen by the landowners, two members selected by the closest municipality and one member chosen by the municipality from a short list provided by landowners.
To date, about 75 of these districts have been established in Arizona.
The Senate passed House bill 2568 on a 21-8 vote Monday where it received bi-partisan support. It now heads back to the House to review the changes before going to the governor’s desk.
The League of Arizona Cities and Towns decries the legislation as a power grab by developers that takes decision-making authority from elected officials.
“That goal I believe is to completely control the formation, decision making and taxation of these districts without interference from the local jurisdiction,” Patrice Kraus, who lobbies for the League of Arizona Cities and Towns, said during a committee hearing.
Allowing districts to form automatically skews board decisions in the developer’s favor, Kraus said.
Developers contend that the board is still primarily chosen by government officials and would help prevent unnecessary spending. They say the legislation is necessary to modernize laws to provide more confidence for private investment in public infrastructure.
“It provides a level of certainty that there will be the ability to recover reimbursements of public infrastructure costs that are sunk into a community,” said Jim Kenny, president of El Dorado Holdings Inc.
The Landowners For Arizona’s Economic Development Coalition is the primary group backing the legislation. They say they represent about 200,000 acres of land set aside for master planned communities, though it would likely take decades to develop it. The coalition includes at least 11 developers such as El Dorado Holdings Inc. and Diamond Ventures Inc.
The House speaker has received nearly $5,000 from developers El Dorado Holdings Inc. and Diamond Ventures Inc. to fund his congressional campaign and was seen sitting with Diamondbacks co-owner Mike Ingram, who founded El Dorado Holdings, for the team’s opening day.
Stephanie Grisham, Gowan’s spokeswoman, said the House speaker and Ingram only met briefly and did not know each other at the time the bill was crafted.
Gowan said he is pushing the legislation to improve financing for large developments to spur job growth in the state, particularly in his district.
“This is a pretty major bill when it comes to putting people back to work,” Gowan said to a Senate Government panel. “Each homeowner would pay for their own infrastructure.”