county water augmentation authorities; bond

Chapter 0042 - 572R - H Ver of HB2098

House Engrossed

county water
augmentation authorities; bond

State of Arizona

House of Representatives

Fifty-seventh Legislature

Second Regular Session

2026

CHAPTER 42

HOUSE BILL 2098

AN
ACT

amending sections 45-1901, 45-1973
and 45-1976, Arizona Revised Statutes; repealing section 45-1991,
Arizona Revised Statutes; amending title 45, chapter 11, article 5, Arizona
Revised Statutes, by adding a new section 45-1991; amending sections 45-1993,
45-1994 and 45-1996, Arizona Revised Statutes; repealing section 45-1997,
Arizona Revised Statutes; amending title 45, chapter 11, article 5, Arizona
Revised Statutes, by adding a new section 45-1997; amending title 45,
chapter 11, article 5, Arizona Revised Statutes, by adding section 45-2000;
relating to the county water AUGMENTATION authority.

(TEXT OF BILL BEGINS ON NEXT PAGE)

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 45-1901, Arizona Revised
Statutes, is amended to read:

START_STATUTE
45-1901.

Definitions

In this chapter, unless the context otherwise requires:

1. "Active management area" means an
active management area established under chapter 2 of this title.

2. "Authority" means a county water
augmentation authority established under this chapter.

3. "Board" means the board of directors of
the authority.

4. "County" means the county containing
over fifty
per cent
percent
of the
area of the authority.

5. "Operating unit" means a county, city,
town, water company or political subdivision, this state, the United States, an
Indian tribe or any other public or private entity with which an authority has
a contractual relationship for the acquisition, delivery, exchange, treatment,
storage or recharge of water.

6. "Project" means
a
any of the following:

(
a
) any
facility
necessary or convenient to obtain, divert, withdraw, transport, exchange,
deliver, treat
, conserve, store
or recharge water,
including rights-of-way,
canals, pipelines, pumping stations,
storage projects, recovery wells, DELIVERY and RETENTION FACILITIES, water and
wastewater treatment plants,
real and personal property, interests in
property and improvements to property that are necessary or appropriate to
maintain and operate the facilities.

(
b
) the
ACQUISITION of water and rights to water.

(
c
) a loan of
bond proceeds from an AUTHORITY to An operating unit to ACQUIRE or construct
any facility prescribed in SUBDIVISION (
a
) of this
PARAGRAPH.

7. "Water company" means either a private
water company as defined in section 45-402 or an irrigation district that
primarily serves municipal water.
END_STATUTE

Sec. 2. Section 45-1973, Arizona Revised
Statutes, is amended to read:

START_STATUTE
45-1973.

Water supply fees

The authority may assess fees, including extraction fees,
development impact fees, connection fees, user fees, replenishment fees and
administrative fees, against any operating unit or other person with which the
authority has a contractual responsibility to provide any
service. The amount of the fee and the method of payment shall be
determined pursuant to the agreement between the authority and the operating
unit or person, based on the cost of the service the authority provides,
including the cost of developing an equivalent water supply for an operating
unit that has exchanged with the authority a water right or right to receive
water for a water supply contract with the authority. Any fee
assessed under this section is not a rate or charge of the operating unit and
is not subject to regulation by the
Arizona
corporation
commission. The secretary-treasurer of the authority shall deposit
all monies received under this section in
either of the
following:

1.
The general fund of the
authority.

2. if the monies are collected
PURSUANT to the contracting and bonding powers of the AUTHORITY, the bond fund
of the authority.
END_STATUTE

Sec. 3. Section 45-1976, Arizona Revised
Statutes, is amended to read:

START_STATUTE
45-1976.

Payment of interest; investment of bond fund monies

The secretary-treasurer of the authority shall:

1. Pay
matured

principal and
interest
coupons from

due
on
bonds of the authority from the bond fund.

2. Invest monies in the bond fund, under
the
direction of the board,
in bonds of the
United States or this state that shall be kept in the bond fund and that may be
used to redeem bonds of the authority, on the request of the holders, either by
exchanging them for bonds of the authority or by converting them into cash
as provided in title 35, CHAPTER 2
.
END_STATUTE

Sec. 4.
Repeal

Section 45-1991, Arizona Revised
Statutes, is repealed.

Sec. 5. Title 45, chapter 11, article 5,
Arizona Revised Statutes, is amended by adding a new section 45-1991, to read:

START_STATUTE
45-1991.

Authority to issue bonds

The authority, acting through the board, may
issue revenue bonds in a principal amount that the authority determines is
necessary to provide sufficient monies to acquire or construct PROJECTS
pursuant to this chapter.� the authority may issue revenue bonds in conjunction
with any other optional or alternative plans provided in this chapter.
END_STATUTE

Sec. 6. Section 45-1993, Arizona Revised
Statutes, is amended to read:

START_STATUTE
45-1993.

Scope of resolution

A. Resolutions for a bond issue or issues shall
state the amount of the proposed issue or issues, the proposed interest rate
and types and terms of bonds
, that all other methods of necessary
financing by the authority have been found impractical, inadvisable or
inadequate
and that the issuance of the bonds is necessary and advisable
as proposed.

B. The authority
chairman
chairperson
and secretary-treasurer shall sign the
resolutions. In support of the resolution the authority shall enter
into its record pertinent engineering, economic and financial data, appropriate
maps, drawings, plans, outlines, calculations, summaries and related agreements
and any other essential information constituting a record appropriate to the
resolution.

C. The resolution may
approve a bond issue to finance an entire plan or system or any single or joint
project, section or other facility of a related system or plan proposed for
ultimate integration and completion.
END_STATUTE

Sec. 7. Section 45-1994, Arizona Revised
Statutes, is amended to read:

START_STATUTE
45-1994.

Hearing; findings

A. The
chairman

chairperson
of the board,

at the
earliest practical date,

the EXECUTIVE director of the
board or the chairperson's or executive director's designee
shall fix a
time and place for a hearing
at least twenty but not more than
thirty days after

before
adopting the resolution.�
The authority shall
publish
provide
notice
of the time and place fixed for the hearing
twice
at least twenty days in ADVANCE of the hearing
in a newspaper
of general circulation in the county in which the authority is established.

B. All pertinent records and documents shall be
filed
with the board
at least ten days before the date
set for the hearing. Prehearings respecting any particular document,
feature or incidental matter or any separable part or portion of any resolution
may be held by the board on ten days' previous written notice if the board
deems that holding a prehearing is conducive to expediting a
final

hearing
PURSUANT to subsection A of this section
, and a
decision as to the issues presented may thereupon be rendered.

C. At the time and place fixed for the hearing, the
board shall examine and determine the matters and questions
involved. Hearings may be recessed, adjourned or continued as the
board orders.

D. Any person who holds an original
agreement or proposal made with the authority relating to or concerning the
handling, sale, control or disposition of a proposed issue of bonds or who has
previously made an offer or bid in good faith to purchase the bonds pursuant to
a published invitation for bids by the authority, and any operating unit
holding contracts with the authority at least ten days before the date fixed
for the hearing, may qualify to be heard.

E.

d. at
the CONCLUSION of the HEARING,
if the board finds that all precedent
requirements and conditions have been fulfilled,
it
the board
shall approve the bond issue in whole or in part or
shall otherwise disapprove the bond issue as a whole or as to such features or
proposals as do not meet the essential requirements. When the board
has made and entered its findings,
it
the
board
shall enter a decision accordingly.

F.

e.
The
decision of the board based on findings of fact that are supported by a
preponderance of the evidence and that are not arbitrary or unreasonable is
final and conclusive.
END_STATUTE

Sec. 8. Section 45-1996, Arizona Revised Statutes, is amended to read:

START_STATUTE
45-1996.

Provisions of bonds; sale

A. The bonds
shall provide that:

1. The bond is purchased and taken
after a complete disclosure and with a full knowledge of all of the surrounding
relevant facts and circumstances and not on the representation, faith or credit
of the authority, this state or any of its political subdivisions.

2. The holder in order to obtain
payment may not compel this state or any of its political subdivisions to
exercise its appropriation or taxing power.

3. The bond does not constitute a debt
of this state, any political subdivision of this state or any operating unit
and is payable only from revenues of the authority.

B. The gross or net revenue derived
from any project or any part of a project may be pledged to secure the payment
of any series of bonds.

A. to secure any bonds PURSUANT to
this article, the board, by RESOLUTION, may:

1. Provide that bonds issued pursuant
to this chapter may be secured by a first lien on all or part of the monies
paid into the appropriate account or subaccount administered by the authority.

2. PLEDGE or assign to or in trust
for the benefit of The holder any part or APPROPRIATE account or SUBACCOUNT of
the monies in the funds as is necessary to pay the PRINCIPAL and interest of
the bonds as they come due.

3. Set aside, REGULATE and DISPOSE of
any reserves and sinking funds.

4. Provide that sufficient amounts of
the proceeds from the sale of the bonds may be used to fully or partly fund any
reserves or sinking funds established by the resolution.

5. Prescribe the procedure, if any,
by which the terms of any contract with bondholders may be amended or
abrogated, the amount of bonds that the holders must consent to and the manner
in which that consent may be given.

6. Provide for payment from the
proceeds of the sale of the bonds of all legal and financial expenses incurred
by the board in issuing, selling, delivering and paying the bonds.

7. Do any other matters that may
affect the security and protection of the bonds.

B. The bonds shall be signed by the
chairperson or vice chairperson and the secretary-treasurer of the
authority.� Board members or any person executing the bonds are not personally
liable for the payment of the bonds.� The bonds are valid and binding
obligations unless before the delivery of the bonds any of the persons whose
signatures appear on the bonds ceases to be a member of the board. From and
after the sale and delivery of the bonds, the BOARD may not contest the
validity of a bond.

C. The authority may provide for reimbursement to
the holder
of any bonds
of all expenses of litigation and
attorney fees incurred in collecting the bonds in the event of default and may
provide for and fix the powers and duties of a trustee if necessary to enforce
collection.� Bond resolutions, agreements and bonds may be in such form and may
contain such other conditions and terms as the authority deems appropriate or
necessary to make the bonds fully salable and marketable.

D. The board may use available monies
to purchase bonds that may be canceled at a price not exceeding either of the
following:

1. If the bonds are then redeemable,
the redemption price then applicable plus accrued interest to the next interest
payment date.

2. If the bonds are not then
redeemable, the redemption price applicable on the first date after purchase on
which the bonds become subject to redemption plus accrued interest to that
date.

D.

e.
The
authority may provide that any holder of bonds, or a trustee designated by the
authority at the time of issuing the bonds, on proper showing may secure an
order of the superior court requiring the authority, subject to the contracts
with operating units then in effect, to fix and collect rates and charges that
will produce adequate revenues to permit setting up adequate yearly reserves
with which to meet future payments according to the terms of the bond.

F. Any pledge made PURSUANT to this
article is valid and binding from the time the pledge is made.� The monies
pledged and received to be placed in the appropriate fund are immediately
subject to the lien of the pledge without any future physical delivery or
further act, and any such lien of any pledge is valid or binding against all
parties having claims of any kind against the board regardless of whether the
parties have notice of the lien.� the resolution or trust indenture or any
instrument by which a pledge is created and PLACED in the board's records shall
serve as notice to all concerned of the creation of the pledge.� the board is
not required to record these instruments of creation in any other place.

G. bonds issued PURSUANT to this
article, the transfer of such bonds and the income such bonds produce are
exempt from taxation by this state or any political subdivision of this state.

H. Bonds issued PURSUANT to this
article are obligations of the authority and are payable only according to
their terms and are not obligations general, special or otherwise of this
state, the county in which the authority is established or, other than the
authority, a POLITICAL SUBDIVISION of this state.� Payment of the bonds is not
enforceable out of any monies of this state other than the income and revenue
pledged and assigned to or in trust for the benefit of the holder or holders of
the bonds.

E.

i.
All
bonds issued by the authority and agreements of the authority with respect to
bonds are subject to this chapter, and no bond or agreement may contain any
provision in conflict with this chapter. An amendment of this
chapter does not diminish or impair the remedy and rights of the bondholder.

F. The bonds shall be signed by the
chairman or vice-chairman and the secretary-treasurer of the authority in
office at the date of signing and are valid obligations of the authority
although before delivery or sale the persons whose signatures appear on the
bonds may have ceased to be officers of the authority.

G.

j.
The
validity of the bonds is not dependent on or affected by the legality of any
proceeding relating to the acquisition, construction, improvement or extension
of a project for which the bonds are issued. The bonds shall recite
that they are regularly issued pursuant to this chapter and that recital is
prima facie evidence of their legality and validity.

H.

k.
Bonds
so issued may be sold when the money is needed for the purposes for which they
are issued. Pending the preparation or execution of definite bonds,
interim receipts or certificates or temporary bonds may be delivered to the
purchaser or purchasers of bonds.

L. Each
operating unit that owns, operates or otherwise benefits from projects that are
financed by bonds issued pursuant to this chapter shall collect from each end
user that benefits from the projects that proportion of the revenue required under
section 45-1992 that is equal to the proportion of the benefits of the
projects allocated to each end user to ensure all necessary fiscal reserves,
operation costs, maintenance and depreciation charges and payment amounts due
to the authority in connection with the authority's payment of principle and
interest of the bonds. this section does not affect the Corporation
Commission's authority to prescribe just and reasonable classifications to be
used and just and reasonable rates and charges to be made and collected by
public service corporations. Notwithstanding this subsection, any
project allocation by an operating unit is subject to restrictions on place of
use under this Title.

END_STATUTE

Sec. 9.
Repeal

Section 45-1997, Arizona Revised
Statutes, is repealed.

Sec. 10. Title 45, chapter 11, article 5,
Arizona Revised Statutes, is amended by adding a new section 45-1997, to read:

START_STATUTE
45-1997.

Attorney general notification

The board shall notify the attorney general of
the AUTHORITY'S intention to issue bonds. The notification shall
adequately describe the project.� the attorney GENERAL shall INFORM the BOARD
within ten days after RECEIving the notice whether the ATTORNEY GENERAL
BELIEVES the PROPOSED project does not comply with THIS CHAPTER.� If the
ATTORNEY general does not issue an OPINION within ten days after receiving the
notice, the board may issue the bonds.� If within ten days after receiving the
notice the ATTORNEY general issues an opinion that the bonds do not comply with
this chapter, the board may not issue the bonds.� a person may not bring an
action CHALLENGING the LEGALITY of any contract, agreement, lease, MORTGAGE,
obligation or PROCEEDING or the issuance of bonds PURSUANT to this chapter from
and after THIRTY calendar days after the board is AUTHORIZed to issue bonds.
END_STATUTE

Sec. 11. Title 45, chapter 11, article 5,
Arizona Revised Statutes, is amended by adding section 45-2000, to read:

START_STATUTE
45-2000.

Wastewater treatment; loan repayment; definitions

A. Notwithstanding any other law, the
authority may construct, acquire or improve a wastewater treatment facility,
drinking water facility or nonpoint source project with monies borrowed from or
financial assistance, including forgivable principal, provided by the water
infrastructure finance authority of Arizona pursuant to title 49,
chapter 8.

B. the authority may enter into a
loan repayment agreement with the water infrastructure finance authority of
Arizona.� A loan repayment agreement is payable from any revenues otherwise
authorized by law to be used to pay long-term obligations.

C. The board shall obtain approval
for the loan repayment agreement in the same manner provided by law for
approving and issuing other bonds or long-term obligations payable from
revenues that are to be used to pay the loan.

D. A loan repayment agreement entered
into pursuant to this section shall contain the covenants and conditions
pertaining to the construction, acquisition or improvement of a wastewater
treatment facility, drinking water facility or nonpoint source project and
repayment of the loan as the water infrastructure finance authority of Arizona
deems proper.

E. Loan agreements may provide for
the payment of interest on the unpaid principal balance of that agreement at
the rates established in the agreement. The agreement may provide
for payment of the authority's proportionate share of the expense of
administering the clean water and drinking water revolving funds established by
sections 49-1221 and 49-1241 and may provide that the authority pay
financing and loan administration fees approved by the water infrastructure
finance authority.� These costs may be included in the assessment amounts
pledged to repay the loan.� An authority is bound by and shall fully perform
the loan repayment agreements, and the agreements are incontestable after the
loan is funded by the water infrastructure finance authority of Arizona.� The
BOard shall agree to pay any costs INCURRED by the water INFRASTRUCTURE FINANCE
AUTHORITY in issuing bonds or otherwise borrowing to fund a loan.

F. A loan repayment agreement under
this section does not create a debt of the authority. The water
INFRASTRUCTURE finance AUTHORITY of arizona may not require the AUTHORITY to
make payment on a loan agreement from any source other than those sources
permitted in subsection B of this section.

g. An authority may employ or
contract for the services of attorneys, accountants, financial consultants and
other experts in their fields as deemed necessary to perform services with
respect to the loan repayment agreement.

h. This section is supplemental and
alternative to any other law under which an authority may borrow money or issue
bonds.� This section provides the exclusive authorization to enter into loan
agreements with the water infrastructure finance authority of arizona.

i. For the purposes of this section:

1. "Drinking water
facility" has the same meaning prescribed in section 49-1201.

2. "Wastewater treatment
facility" has the same meaning prescribed in section 49-1201.

END_STATUTE

APPROVED BY THE GOVERNOR APRIL 13, 2026.

FILED IN THE OFFICE OF THE SECRETARY OF STATE APRIL 13, 2026.