One of Arizona’s greatest economic assets is the availability of land. But access to that land is limited by our lack of infrastructure. Developers have long sought additional tools to provide infrastructure to make that land even more valuable.
One such tool is the Community Facilities District (“CFD”), which allows for a city or town to create a special taxing district to fund new infrastructure which benefits those homeowners paying the tax. As CFDs exist today, the city or town council typically serves as the CFD board to ensure that there are checks on the creation and tax rates of the district.
In the 2016 legislative session, House Bill 2568 was introduced which sought to expand the use of CFDs by ceding control of those districts over to private developers. HB2568 would have given private developers the authority to create CFDs, to issue bonds, to set tax rates, and to levy special assessments, among other governmental powers. Although more infrastructure would benefit the home building industry, we viewed this bill as a bridge too far. Thankfully, Governor Ducey agreed and vetoed the bill.
Based on our research, no other state in the country allows for the private creation of special taxing districts, and for good reason. As Governor Ducey stated in his veto letter, “[t]hese districts, like all of government, need to be accountable, and when the balance of power disproportionately favors any one side, homeowners and businesses are the ones who suffer.”
In addition, HB2568 would have created an uneven playing field for developments and home builders not using this financing mechanism, because the CFDs distort the true cost of a home by not including the taxes imposed by the CFD in the price of the home. Moreover, the CFDs take away any risk for developers for projects that the market does not desire or need.
Arizona has done a good job of creating a business-friendly, pro-growth environment. It does not need to cede taxing authority to an unaccountable board of developers at the expense of taxpayers.
We agree with the proponents of the bill that Arizona does need more infrastructure financing tools and are firmly committed to working with Governor Ducey and the Legislature on this issue. We also agree with Governor Ducey when he said in his veto letter that any such solutions must have an “emphasis on accountability…that ensure[s] protection for both businesses and taxpayers.”
On behalf of the Home Builders Association of Central Arizona, we would like to thank Governor Ducey for his leadership on recognizing the irreparable harm that HB2568 would have caused our state and vetoing the bill.
Connie Wilhelm is president of the Home Builders Association of Central Arizona.