municipal corporations; water supply; rates

Plain English Breakdown

The official summary does not provide details about specific rate agreements or the handling of pre-existing surcharges.

Water Rates for Out-of-Boundary Residents

HB2328 restricts certain cities from charging higher water rates to residents outside their borders compared to those inside.

What This Bill Does

• Restricts municipal corporations in counties with a population between one million and four million people from charging higher water rates to out-of-boundary residents than they charge to in-boundary residents.

Who It Names or Affects

• Residents living outside the boundaries of cities that provide them with water services.
• Cities and municipalities providing water to areas or other municipalities beyond their own borders, specifically those in counties with a population between one million and four million people.

Terms To Know

Municipal Corporation

A city or town that has been legally recognized as a corporation by the state, allowing it to manage its affairs independently.

Surcharge

An additional charge on top of the regular rate for water services provided by a municipality.

Limits and Unknowns

• The bill does not specify what happens if a city charges rates outside its boundaries that are higher than allowed.
• It is unclear how this law will be enforced or monitored to ensure compliance with new rate restrictions.
• The exact population criteria for affected counties are specified as between one million and four million people.

Official Summary Text

HB2328 - 572R - House Bill Summary

ARIZONA HOUSE OF REPRESENTATIVES

57th
Legislature, 2nd Regular Session

Majority Research Staff

House:
NREW

DP

6-4-0-0

HB
2328
: municipal corporations; water supply; rates

Sponsor:
Representative Marshall, LD 7

Caucus
& COW

Overview

Restricts
certain municipal corporations from charging residents who live outside the
boundaries of a municipality from being charged a higher rate for water than
residents living within the boundaries of the municipality.

History

Current law allows municipal ownership of public utilities to
engage in any business or enterprise which may be engaged in by persons by
virtue of a franchise from the municipal corporation, and may construct,
purchase, acquire, own and maintain, within or without its corporate limits,
any such business or enterprise. This includes engaging in a domestic water or
wastewater business (
A.R.S. � 9-511
).

�Municipalities are prohibited from increasing rates, fees or
service charges without:

a)

preparing
a written report or supplying data supporting the increased rate or rate
component, fee or service charge;

b)

adopting
a notice of intention by motion at a regular council meeting to increase water
or wastewater rates or rate components, fees or service charges;

c)

set a date for a public hearing on the proposed increase that
shall be held at least sixty days after adoption of the notice of intention;
and

d)

publishing
a copy of the notice of intention showing the date, time and place of the
hearing one time in a newspaper of general circulation within the boundaries of
the municipality not less than twenty days before the public hearing date (
A.R.S. �
9-511.01
).

Provisions

1.

Prohibits a
municipal corporation, in a county that meets specific population criteria,
that provides water to residents who live outside the boundaries of the
municipality that the municipal corporation serves from charging a rate for
water to residents that live outside the boundaries of the municipality greater
than the rate for water service within the boundaries of the municipality.

2.

3.

4.

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5.

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2328

6.

1/28/2026� Page 0 Caucus
& COW

7.

8.

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Current Bill Text

HB2328 - 572R - H Ver

House Engrossed

municipal
corporations; water supply; rates

State of Arizona

House of Representatives

Fifty-seventh Legislature

Second Regular Session

2026

HOUSE BILL 2328

AN
ACT

amending section 9-511, arizona revised
statutes; relating to municipal utilities.

(TEXT OF BILL BEGINS ON NEXT PAGE)

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

Section 1. Section 9-511, Arizona Revised
Statutes, is amended to read:

START_STATUTE
9-511.

Power to engage in business of public nature; outside water
rates; right of eminent domain

A. A municipal corporation may engage in any
business or enterprise
which
that

may be engaged in by persons by virtue of a franchise from the municipal
corporation, and may construct, purchase, acquire, own and maintain within or
without its corporate limits any such business or enterprise. A
municipal corporation may also purchase, acquire and own real property for
sites and rights-of-way for public utility and public park
purposes, and for the location thereon of waterworks, electric and gas plants,
municipal quarantine stations, garbage reduction plants, electric lines for the
transmission of electricity
,

and
pipelines
for the transportation of oil, gas, water and sewage, and for plants for the
manufacture of any material for public improvement purposes or public
buildings. If a municipality provides water to another municipality,
the rates it charges for the water to the public in the other municipality
shall be one of the following:

1. The same or less than the rates it charges its
own residents for water.

2. The same or less than the rates the other
municipality charges its residents for water.

3. If the other municipality does not provide water,
the average rates charged for water to the residents in the other municipality
by private water companies.

4. Rates determined by a contract
which
that
is approved by both municipalities and in which such
rates are justified by a cost of service study or by any other method agreed to
by both municipalities.

B.
Nothing in
This section
shall
does not
affect a surcharge on water
provided to another municipality adopted
prior to
before
July 1, 1986
provided that
if
the surcharge did not exceed thirty
per cent
percent
of the rates the municipality providing the water
charges

charged
its own residents and
except that any increase in the percentage of such surcharge proposed after
August 13, 1986 shall be subject to the requirements of this section.

C. The municipality may exercise the right of
eminent domain either within or without its corporate limits for the purposes
as stated in subsection A, and may establish, lay and operate a plant, electric
line or pipeline
upon
on
any land or
right-of-way taken thereunder, and may manufacture material for
public improvement purposes and barter or exchange it for other material to be
used in public improvements in the municipal corporation, or sell it to other
municipal corporations for like purposes, and for any and all such purposes.

d. NOtwithstanding any other law, A
municipal corporation that is in a county with a population of more than one
million persons and less than four million persons and that provides water to
residents who live outside of the boundaries of the municipality that the
municipal corporation serves may not charge a rate for water to the residents
who live outside of the boundaries of the municipality that the municipal
corporation serves that is greater than the rate for water that the municipal
corporation charges the residents who live inside the boundaries of the
municipality that the municipal corporation serves.
END_STATUTE