municipalities; counties; development fees

HB2946 - 572R - S Ver

Senate Engrossed
House Bill

municipalities;
counties; development fees

State of Arizona

House of Representatives

Fifty-seventh Legislature

Second Regular Session

2026

HOUSE BILL 2946

AN
ACT

amending sections 9-463.05, 9-499.15
and 9-511.01, arizona revised statutes; relating to development fees.

(TEXT OF BILL BEGINS ON NEXT PAG

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

Section 1. Section 9-463.05, Arizona Revised
Statutes, is amended to read:

START_STATUTE
9-463.05.

Development fees; imposition by cities and towns; infrastructure
improvements plan; annual report; advisory committee; limitation on actions;
definitions

A. A municipality may assess development fees to
offset costs to the municipality associated with providing necessary public
services to a development, including the costs of infrastructure, improvements,
real property, engineering and architectural services, financing and
professional services required for the preparation or revision of a development
fee pursuant to this section, including the relevant portion of the
infrastructure improvements plan.

B. Development fees assessed by a municipality under
this section are subject to the following requirements:

1. Development fees shall result in a beneficial use
to the development.

2. The municipality shall calculate the development
fee based on the infrastructure improvements plan adopted pursuant to this
section.

3. The development fee shall not exceed a
proportionate share of the cost of necessary public services, based on service
units, needed to provide necessary public services to the development.

4. Costs for necessary public services made
necessary by new development shall be based on the same level of service
provided to existing development in the service area.

5. Development fees may not be used for any of the
following:

(a) Construction, acquisition or expansion of public
facilities or assets other than necessary public services or facility
expansions identified in the infrastructure improvements plan.

(b) Repair, operation or maintenance of existing or
new necessary public services or facility expansions.

(c) Upgrading, updating, expanding, correcting or
replacing existing necessary public services to serve existing development in
order to meet stricter safety, efficiency, environmental or regulatory
standards.

(d) Upgrading, updating, expanding, correcting or
replacing existing necessary public services to provide a higher level of
service to existing development.

(e) Administrative, maintenance or operating costs
of the municipality.

6. Any development for which a development fee has
been paid is entitled to the use and benefit of the services for which the fee
was imposed and is entitled to receive immediate service from any existing
facility with available capacity to serve the new service units if the
available capacity has not been reserved or pledged in connection with the
construction or financing of the facility.

7. Development fees may be collected if any of the
following occurs:

(a) The collection is made to pay for a necessary
public service or facility expansion that is identified in the infrastructure
improvements plan and the municipality plans to complete construction and to
have the service available within the time period established in the
infrastructure
improvement

improvements
plan,
but in no event longer than the time period provided in subsection
H
I
, paragraph 3 of this section.

(b) The municipality reserves in the infrastructure
improvements plan adopted pursuant to this section or otherwise agrees to
reserve capacity to serve future development.

(c) The municipality requires or agrees to allow the
owner of a development to construct or finance the necessary public service or
facility expansion and any of the following
apply

applies
:

(i) The costs incurred or money advanced are
credited against or reimbursed from the development fees otherwise due from a
development.

(ii) The municipality reimburses the owner for those
costs from the development fees paid from all developments that will use those
necessary public services or facility expansions.

(iii) For those costs incurred the municipality
allows the owner to assign the credits or reimbursement rights from the
development fees otherwise due from a development to other developments for the
same category of necessary public services in the same service area.

8. Projected interest charges and other finance
costs may be included in determining the amount of development fees only if the
monies are used for the payment of principal and interest on the portion of the
bonds, notes or other obligations issued to finance construction of necessary
public services or facility expansions identified in the infrastructure
improvements plan.

9. Monies received from development fees assessed
pursuant to this section shall be placed in a separate fund and accounted for
separately and may only be used for the purposes authorized by this
section. Monies received from a development fee identified in an
infrastructure improvements plan adopted or updated pursuant to subsection D of
this section shall be used to provide the same category of necessary public
services or facility expansions for which the development fee was assessed and
for the benefit of the same service area, as defined in the infrastructure
improvements plan, in which the development fee was
assessed. Interest earned on monies in the separate fund shall be
credited to the fund.

10. The schedule for payment of fees shall be
provided by the municipality. Based on the cost identified in the
infrastructure improvements plan, the municipality shall provide a credit
toward the payment of a development fee for the required or agreed to
dedication of public sites, improvements and other necessary public services or
facility expansions included in the infrastructure improvements plan and for
which a development fee is assessed, to the extent the public sites, improvements
and necessary public services or facility expansions are provided by the
developer. The developer of residential dwelling units shall be
required to pay development fees when construction permits for the dwelling
units are issued, or at a later time if specified in a development agreement
pursuant to section 9-500.05. If a development agreement
provides for fees to be paid at a time later than the issuance of construction
permits, the deferred fees shall be paid no later than fifteen days after the
issuance of a certificate of occupancy. The development agreement
shall provide for the value of any deferred fees to be supported by appropriate
security, including a surety bond, letter of credit or cash bond.

11. If a municipality requires as a condition of
development approval the construction or improvement of, contributions to or
dedication of any facilities that were not included in a previously adopted
infrastructure improvements plan, the municipality shall cause the
infrastructure improvements plan to be amended to include the facilities and
shall provide a credit toward the payment of a development fee for the
construction, improvement, contribution or dedication of the facilities to the
extent that the facilities will substitute for or otherwise reduce the need for
other similar facilities in the infrastructure improvements plan for which
development fees were assessed.

12. The municipality shall forecast the contribution
to be made in the future in cash or by taxes, fees, assessments or other
sources of revenue derived from the property owner towards the capital costs of
the necessary public service covered by the development fee and shall include
these contributions in determining the extent of the burden imposed by the
development.
Beginning August 1, 2014,
For
purposes of calculating the required offset to development fees pursuant to
this subsection, if a municipality imposes a construction contracting or
similar excise tax rate in excess of the percentage amount of the transaction
privilege tax rate imposed on the majority of other transaction privilege tax
classifications, the entire excess portion of the construction contracting or
similar excise tax shall be treated as a contribution to the capital costs of
necessary public services provided to development for which development fees
are assessed, unless the excess portion was already taken into account for such
purpose pursuant to this subsection.

13. If development fees are assessed by a
municipality, the fees shall be assessed against commercial, residential and
industrial development
.
, except that

The municipality may distinguish between different categories of residential,
commercial and industrial development in assessing the costs to the
municipality of providing necessary public services to new development and in
determining the amount of the development fee applicable to the category of
development
, except that the municipality may not distinguish
between
single-family residential developments on
the basis of the size of the residential dwelling unit or number of bedrooms
UNLESS THE MUNICIPALITY ADOPTED such DEVELOPMENT FEES BEFORE the effective date
of this amendment to this section. iF A MUNICIPALITY ADOPTED DEVELOPMENT FEES
THAT ARE BASED ON THE SIZE OF THE RESIDENTIAL DWELLING UNIT OR THE NUMBER OF
BEDROOMS BEFORE THE EFFECTIVE DATE OF THIS AMENDMENT TO THIS SECTION, THE
MUNICIPALITY MAY CONTINUE TO MAKE THIS DISTINCTION IN SUBSEQUENT UPDATES TO THE
DEVELOPMENT FEES THAT ARE ASSESSED BY THE MUNICIPALITY
. If a
municipality agrees to waive any of the development fees assessed on a
development, the municipality shall reimburse the appropriate development fee
accounts for the amount that was waived. The municipality shall
provide notice of any such waiver to the advisory committee established
pursuant to subsection
G
H
of
this section within thirty days.

14. In determining and assessing a development fee
applying to land in a community facilities district established under title 48,
chapter 4, article 6, the municipality shall take into account all public
infrastructure provided by the district and capital costs paid by the district
for necessary public services and shall not assess a portion of the development
fee based on the infrastructure or costs.

C. A municipality shall give at least thirty days'
advance notice of intention to assess a development fee and shall release to
the public and post on its website or the website of an association of cities
and towns if a municipality does not have a website a written report of the
land use assumptions and infrastructure improvements plan adopted pursuant to
subsection D of this section. The municipality shall conduct a
public hearing on the proposed development fee at any time after the expiration
of the thirty day notice of intention to assess a development fee and at least
thirty days before the scheduled date of adoption of the fee by the governing
body. Within sixty days after the date of the public hearing on the
proposed development fee, a municipality shall approve or disapprove the
imposition of the development fee. A municipality shall not adopt an
ordinance, order or resolution approving a development fee as an emergency
measure. A development fee assessed pursuant to this section shall
not be effective until seventy-five days after its formal adoption by the
governing body of the municipality. Nothing in this subsection shall
affect any development fee adopted before July 24, 1982.

D. Before the adoption or amendment of a development
fee, the governing body of the municipality shall adopt or update the land use
assumptions and infrastructure improvements plan for the designated service
area. The municipality shall conduct a public hearing on the land
use assumptions and infrastructure improvements plan at least thirty days
before the adoption or update of the plan. The municipality shall
release the plan to the public, post the plan on its website or the website of
an association of cities and towns if the municipality does not have a website,
including in the posting its land use assumptions, the time period of the
projections, a description of the necessary public services included in the
infrastructure improvements plan and a map of the service area to which the
land use assumptions apply, make available to the public the documents used to
prepare the assumptions and plan and provide public notice at least sixty days
before the public hearing, subject to the following:

1. The land use assumptions and infrastructure
improvements plan shall be approved or disapproved within sixty days after the
public hearing on the land use assumptions and infrastructure improvements plan
and at least thirty days before the public hearing on the report required by
subsection C of this section. A municipality shall not adopt an
ordinance, order or resolution approving the land use assumptions or
infrastructure improvements plan as an emergency measure.

2. An infrastructure improvements plan shall be
developed by qualified professionals using generally accepted engineering and
planning practices pursuant to subsection E of this section.

3. A municipality shall update the land use
assumptions and infrastructure improvements plan at least every five
years. The initial five year period begins on the day the
infrastructure improvements plan is adopted. The municipality shall
review and evaluate its current land use assumptions and shall cause an update
of the infrastructure improvements plan to be prepared pursuant to this
section.

4. Within sixty days after completion of the updated
land use assumptions and infrastructure improvements plan, the municipality
shall schedule and provide notice of a public hearing to discuss and review the
update and shall determine whether to amend the assumptions and plan.

5. A municipality shall hold a public hearing to
discuss the proposed amendments to the land use assumptions, the infrastructure
improvements plan or the development fee. The land use assumptions
and the infrastructure improvements plan, including the amount of any proposed
changes to the development fee per service unit, shall be made available to the
public on or before the date of the first publication of the notice of the
hearing on the amendments.

6. The notice and hearing procedures prescribed in
paragraph 1 of this subsection apply to a hearing on the amendment of land use
assumptions, an infrastructure improvements plan or a development fee. Within
sixty days after the date of the public hearing on the amendments, a
municipality shall approve or disapprove the amendments to the land use
assumptions, infrastructure improvements plan or development fee. A
municipality shall not adopt an ordinance, order or resolution approving the
amended land use assumptions, infrastructure improvements plan or development
fee as an emergency measure.

7. The advisory committee established under
subsection
G
H
of this section
shall file its written comments on any proposed or updated land use
assumptions, infrastructure improvements plan and development fees before the
fifth business day before the date of the public hearing on the proposed or
updated assumptions, plan and fees.

8. If, at the time an update as prescribed in
paragraph 3 of this subsection is required, the municipality determines that no
changes to the land use assumptions, infrastructure improvements plan or
development fees are needed, the municipality may as an alternative to the
updating requirements of this subsection publish notice of its determination on
its website and include the following:

(a) A statement that the municipality has determined
that no change to the land use assumptions, infrastructure improvements plan or
development fee is necessary.

(b) A description and map of the service area in
which an update has been determined to be unnecessary.

(c) A statement that by a specified date, which
shall be at least sixty days after the date of publication of the first notice,
a person may make a written request to the municipality requesting that the
land use assumptions, infrastructure improvements plan or development fee be
updated.

(d) A statement identifying the person or entity to
whom the written request for an update should be sent.

9. If, by the date specified pursuant to paragraph 8
of this subsection, a person requests in writing that the land use assumptions,
infrastructure improvements plan or development fee be updated, the
municipality shall cause, accept or reject an update of the assumptions and
plan to be prepared pursuant to this subsection.

10. Notwithstanding the notice and hearing
requirements for adoption of an infrastructure improvements plan, a
municipality may amend an infrastructure improvements plan adopted pursuant to
this section without a public hearing if the amendment addresses only elements
of necessary public services in the existing infrastructure improvements plan
and the changes to the plan will not, individually or cumulatively with other
amendments adopted pursuant to this subsection, increase the level of service
in the service area or cause a development fee increase of greater than five
per cent

percent
when a new or modified
development fee is assessed pursuant to this section. The
municipality shall provide notice of any such amendment at least thirty days
before adoption, shall post the amendment on its website or on the website of
an association of cities and towns if the municipality does not have a website
and shall provide notice to the advisory committee established pursuant to
subsection
G
H
of this
section that the amendment complies with this subsection.

E. For each necessary public service that is the
subject of a development fee, the infrastructure improvements plan shall
include:

1. A description of the existing necessary public
services in the service area and the costs to upgrade, update, improve, expand,
correct or replace those necessary public services to meet existing needs and
usage and stricter safety, efficiency, environmental or regulatory standards,
which shall be prepared by qualified professionals licensed in this state, as
applicable.

2. An analysis of the total capacity, the level of
current usage and commitments for usage of capacity of the existing necessary
public services, which shall be prepared by qualified professionals licensed in
this state, as applicable.

3. A description of all or the parts of the
necessary public services or facility expansions and their costs necessitated
by and attributable to development in the service area based on the approved
land use assumptions, including a forecast of the costs of infrastructure,
improvements, real property, financing, engineering and architectural services,
which shall be prepared by qualified professionals licensed in this state, as
applicable.

4. A table establishing the specific level or
quantity of use, consumption, generation or discharge of a service unit for
each category of necessary public services or facility expansions and an
equivalency or conversion table establishing the ratio of a service unit to
various types of land uses, including residential, commercial and industrial.

5. The total number of projected service units
necessitated by and attributable to new development in the service area based
on the approved land use assumptions and calculated pursuant to generally
accepted engineering and planning criteria.

6. The projected demand for necessary public
services or facility expansions required by new service units for a period not
to exceed ten years.

7. A forecast of revenues generated by new service
units other than development fees, which shall include estimated state-shared
revenue, highway
users

user
revenue,
federal revenue, ad valorem property taxes, construction contracting or similar
excise taxes and the capital recovery portion of utility fees attributable to
development based on the approved land use assumptions, and a plan to include
these contributions in determining the extent of the burden imposed by the
development as required in subsection B, paragraph 12 of this section.

F. A municipality's development fee ordinance shall
provide that a new development fee or an increased portion of a modified
development fee
shall
not be assessed against
a development for twenty-four months after the date that the
municipality issues the final approval for a commercial, industrial or
multifamily development or the date that the first building permit is issued
for a residential development pursuant to an approved site plan or subdivision
plat, provided that no subsequent changes are made to the approved site plan or
subdivision plat that would increase the number of service units.

A residential, commercial, industrial or multifamily development for
twenty-four months after the effective date of the DEVELOPMENT fee ordinance
that imposes a new or increased development fee if no subsequent changes are
made to the approved site plan
or final subdivision plat that

INCREASE the number of service units
. If
the number of service units increases, the new or increased portion of a
modified development fee shall be limited to the amount attributable to the
additional service units. The twenty-four month period shall not be
extended by a renewal or amendment of the site plan or the final subdivision
plat that was the subject of the final approval.

G.
The municipality shall
issue, on request, a written statement of the development fee schedule
applicable to the development. If, after the date of the
municipality's final approval of a development, the municipality reduces the
development fee assessed on development, the reduced fee shall apply to the
development.

G.
H.
A
municipality shall do one of the following:

1. Before the adoption of proposed or updated land
use assumptions, infrastructure improvements plan and development fees as
prescribed in subsection D of this section, the municipality shall appoint an
infrastructure improvements advisory committee, subject to the following
requirements:

(a) The advisory committee shall be composed of at
least five members who are appointed by the governing body of the
municipality. At least fifty
per cent

percent
of the members of the advisory committee must be
representatives of the real estate, development or building industries, of
which at least one member of the committee must be from the home building
industry. Members shall not be employees or officials of the
municipality.

(b) The advisory committee shall serve in an
advisory capacity and shall:

(i) Advise the municipality in adopting land use
assumptions and in determining whether the assumptions are in conformance with
the general plan of the municipality.

(ii) Review the infrastructure improvements plan and
file written comments.

(iii) Monitor and evaluate implementation of the
infrastructure improvements plan.

(iv) Every year file reports with respect to the
progress of the infrastructure improvements plan and the collection and
expenditures of development fees and report to the municipality any perceived
inequities in implementing the plan or imposing the development fee.

(v) Advise the municipality of the need to update or
revise the land use assumptions, infrastructure improvements plan and
development fee.

(c) The municipality shall make available to the
advisory committee any professional reports with respect to developing and
implementing the infrastructure improvements plan.

(d) The municipality shall adopt procedural rules
for the advisory committee to follow in carrying out the committee's duties.

2. In lieu of creating an advisory committee
pursuant to paragraph 1 of this subsection, provide for a biennial certified
audit of the municipality's land use assumptions, infrastructure improvements
plan and development fees. An audit pursuant to this paragraph shall
be conducted by one or more qualified professionals who are not employees or
officials of the municipality and who did not prepare the infrastructure
improvements plan. The audit shall review the progress of the
infrastructure improvements plan, including the collection and expenditures of
development fees for each project in the plan, and evaluate any inequities in
implementing the plan or imposing the development fee. The
municipality shall post the findings of the audit on the municipality's website
or the website of an association of cities and towns if the municipality does
not have a website and shall conduct a public hearing on the audit within sixty
days of the release of the audit to the public.

H.
I.
On
written request, an owner of real property for which a development fee has been
paid after July 31, 2014 is entitled to a refund of a development fee or any
part of a development fee if:

1. Pursuant to subsection B, paragraph 6 of this
section, existing facilities are available and service is not provided.

2. The municipality has, after collecting the fee to
construct a facility when service is not available, failed to complete
construction within the time period identified in the infrastructure
improvements plan, but in no event later than the time period specified in
paragraph 3 of this subsection.

3. For a development fee other than a development
fee for water or wastewater facilities, any part of the development fee is not
spent as authorized by this section within ten years after the fee has been
paid or, for a development fee for water or wastewater facilities, any part of
the development fee is not spent as authorized by this section within fifteen
years after the fee has been paid.

I.
J.
If
the development fee was collected for the construction of all or a portion of a
specific item of infrastructure, and on completion of the infrastructure the
municipality determines that the actual cost of construction was less than the
forecasted cost of construction on which the development fee was based and the
difference between the actual and estimated cost is greater than ten
per cent
percent
, the current owner may
receive a refund of the portion of the development fee equal to the difference
between the development fee paid and the development fee that would have been
due if the development fee had been calculated at the actual construction cost.

J.
K.
A
refund shall include any interest earned by the municipality from the date of
collection to the date of refund on the amount of the refunded
fee. All refunds shall be made to the record owner of the property
at the time the refund is paid. If the development fee is paid by a
governmental entity, the refund shall be paid to the governmental entity.

K.
L.
A
development fee that was adopted before January 1, 2012 may continue to be
assessed only to the extent that it will be used to provide a necessary public
service for which development fees can be assessed pursuant to this section and
shall be replaced by a development fee imposed under this section on or before
August 1, 2014. Any municipality having a development fee that has
not been replaced under this section on or before August 1, 2014 shall not
collect development fees until the development fee has been replaced with a fee
that complies with this section. Any development fee monies
collected before January 1, 2012 remaining in a development fee account:

1. Shall be used towards the same category of
necessary public services as authorized by this section.

2. If development fees were collected for a purpose
not authorized by this section, shall be used for the purpose for which they
were collected on or before January 1, 2020, and after which, if not spent,
shall be distributed equally among the categories of necessary public services
authorized by this section.

L.
M.
A
moratorium shall not be placed on development for the sole purpose of awaiting
completion of all or any part of the process necessary to develop, adopt or
update development fees.

M.
N.
In
any judicial action interpreting this section, all powers conferred on
municipal governments in this section shall be narrowly construed to ensure
that development fees are not used to impose on new residents a burden all
taxpayers of a municipality should bear equally.

N.
O.
Each
municipality that assesses development fees shall submit an annual report
accounting for the collection and use of the fees for each service
area. The annual report shall include the following:

1. The amount assessed by the municipality for each
type of development fee.

2. The balance of each fund maintained for each type
of development fee assessed as of the beginning and end of the fiscal year.

3. The amount of interest or other earnings on the
monies in each fund as of the end of the fiscal year.

4. The amount of
development fee monies used to repay:

(a) Bonds issued by
the municipality to pay the cost of a capital improvement project that is the
subject of a development fee assessment, including the amount needed to repay
the debt service obligations on each facility for which development fees have
been identified as the source of funding and the time frames in which the debt
service will be repaid.

(b) Monies advanced by the municipality from funds
other than the funds established for development fees in order to pay the cost
of a capital improvement project that is the subject of a development fee
assessment, the total amount advanced by the municipality for each facility,
the source of the monies advanced and the terms under which the monies will be
repaid to the municipality.

5. The amount of development fee monies spent on
each capital improvement project that is the subject of a development fee
assessment and the physical location of each capital improvement project.

6. The amount of development fee monies spent for
each purpose other than a capital improvement project that is the subject of a
development fee assessment.

O.
P.
Within
ninety days following the end of each fiscal year, each municipality shall
submit a copy of the annual report to the city clerk and post the report on the
municipality's website or the website of an association of cities and towns if
the municipality does not have a website. Copies shall be made
available to the public on request. The annual report may contain
financial information that has not been audited.

P.
Q.
A
municipality that fails to file the report and post the report on the
municipality's website or the website of an association of cities and towns if
the municipality does not have a website as required by this section shall not
collect development fees until the report is filed and posted.

Q.
R.
Any
action to collect a development fee shall be commenced within two years after
the obligation to pay the fee accrues.

R.
S.
A
municipality may continue to assess a development fee adopted before January 1,
2012 for any facility that was financed before June 1, 2011 if:

1. Development fees were pledged to repay debt
service obligations related to the construction of the facility.

2. After August 1, 2014, any development fees
collected under this subsection are used solely for the payment of principal
and interest on the portion of the bonds, notes or other debt service
obligations issued before June 1, 2011 to finance construction of the facility.

S.
T.
Through
August 1, 2014, a development fee adopted before January 1, 2012 may be used to
finance construction of a facility and may be pledged to repay debt service
obligations if:

1. The facility that is being financed is a facility
that is described under subsection
T

v
, paragraph 7, subdivisions (a) through
(g)

(
e
)
of this section.

2. The facility was included in an infrastructure
improvements plan adopted before June 1, 2011.

3. The development fees are used for the payment of
principal and interest on the portion of the bonds, notes or other debt service
obligations issued to finance construction of the necessary public services or
facility expansions identified in the infrastructure
improvement

improvements
plan.

U. A municipality may assess
development fees on the development of accessory dwelling
units, as follows:

1. FOR WATER AND WASTEWATER, THE
WATER AND WASTEWATER DEVELOPMENT FEES ASSESSED FOR SUCH ACCESSORY DWELLING UNIT
SHALL NOT EXCEED THE INCREMENTAL INCREASE IN DEMAND CAUSED BY THE DEVELOPMENT
OF EACH ACCESSORY DWELLING UNIT WHETHER SERVED BY THE SAME WATER METER AS THE
PRIMARY DWELLING OR BY A SEPARATE WATER METER.

2. FOR DEVELOPMENT FEES ASSESSED ON
THE DEVELOPMENT OF AN ACCESSORY DWELLING UNIT FOR ALL NECESSARY PUBLIC SERVICES
OTHER THAN WATER AND WASTEWATER, THE DEVELOPMENT FEES ASSESSED FOR SUCH
ACCESSORY DWELLING UNIT SHALL NOT EXCEED THE LESSER OF TWENTY-FIVE PERCENT OF
THE TOTAL DEVELOPMENT FEES OR THE PROPORTIONATE SHARE FOR THOSE SAME NECESSARY
PUBLIC SERVICES APPLICABLE TO A SINGLE-FAMILY HOME.

T.
v.
For
the purposes of this section:

1. "Dedication" means the actual
conveyance date or the date an improvement, facility or real or personal
property is placed into service, whichever occurs first.

2. "Development"
means:

(a) The
subdivision of land.

(b) The
construction, reconstruction, conversion, structural alteration, relocation or enlargement
of any structure that adds or increases the number of service units.

(c) Any use or extension of the use of land that
increases the number of service units.

3. "Facility expansion" means the
expansion of the capacity of an existing facility that serves the same function
as an otherwise new necessary public service in order that the existing
facility may serve new development. Facility expansion does not
include the repair, maintenance, modernization or expansion of an existing
facility to better serve existing development.

4. "Final approval" means:

(a) For a nonresidential or multifamily development,
the approval of a site plan or, if no site plan is submitted for the
development, the approval of a final subdivision plat.

(b) For a single family residential development, the
approval of a final subdivision plat.

5. "Infrastructure improvements plan"
means a written plan that identifies each necessary public service or facility
expansion that is proposed to be the subject of a development fee and otherwise
complies with the requirements of this section, and may be the municipality's
capital improvements plan.

6. "Land use assumptions" means
projections of changes in land uses, densities, intensities and population for
a specified service area over a period of at least ten years and pursuant to
the general plan of the municipality.

7. "Necessary public service" means any of
the following facilities that have a life expectancy of three or more years and
that are owned and operated by or on behalf of the municipality:

(a) Water facilities, including the supply,
transportation, treatment, purification and distribution of water, and any
appurtenances for those facilities.

(b) Wastewater facilities, including collection,
interception, transportation, treatment and disposal of wastewater, and any
appurtenances for those facilities.

(c)
Storm water

stormwater
, drainage and flood control facilities, including any
appurtenances for those facilities.

(d) Library facilities of up to ten thousand square
feet that provide a direct benefit to development, not including equipment,
vehicles or appurtenances.

(e) Street facilities located in the service area,
including arterial or collector streets or roads that have been designated on
an officially adopted plan of the municipality, traffic signals and rights-of-way
and improvements thereon.

(f) Fire and police facilities, including all
appurtenances, equipment and vehicles. Fire and police facilities do
not include a facility or portion of a facility that is used to replace
services that were once provided elsewhere in the municipality, vehicles and
equipment used to provide administrative services, helicopters or airplanes or
a facility that is used for training firefighters or officers from more than
one station or substation.

(g) Neighborhood parks and recreational facilities
on real property up to thirty acres in area, or parks and recreational
facilities larger than thirty acres if the facilities provide a direct benefit
to the development. Park and recreational facilities do not include
vehicles, equipment or that portion of any facility that is used for amusement
parks, aquariums, aquatic centers, auditoriums, arenas, arts and cultural
facilities, bandstand and orchestra facilities, bathhouses, boathouses,
clubhouses, community centers greater than three thousand square feet in floor
area, environmental education centers, equestrian facilities, golf course
facilities, greenhouses, lakes, museums, theme parks, water reclamation or
riparian areas, wetlands, zoo facilities or similar recreational facilities,
but may include swimming pools.

(h) Any facility that was financed and that meets
all of the requirements prescribed in subsection
R
S
of this section.

8. "Qualified professional" means a
professional engineer, surveyor, financial analyst or planner providing
services within the scope of the person's license, education or experience.

9. "Service
area"
:

(
a
)
Means any specified area within the boundaries of
a municipality in which development will be served by necessary public services
or facility expansions and within which a substantial nexus exists between the
necessary public services or facility expansions and the development being
served as prescribed in the infrastructure improvements plan.

(
b
) Includes
the service territory of water or wastewater facilities, whether inside or
outside of the boundaries of the municipality, if the municipality provides
water and wastewater services.

10. "Service unit" means a standardized
measure of consumption, use, generation or discharge attributable to an
individual unit of development calculated pursuant to generally accepted
engineering or planning standards for a particular category of necessary public
services or facility expansions.
END_STATUTE

Sec. 2. Section 9-499.15, Arizona Revised
Statutes, is amended to read:

START_STATUTE
9-499.15.

Proposed new or increased municipal taxes and fees; notification;
exceptions

A. A municipality may not levy or assess any new
taxes or fees or increase existing taxes or fees pursuant to statute on a
business without complying with this section.

B. A municipality that proposes to levy or assess a
tax or fee shall:

1. Prepare a schedule of the proposed new or
increased tax or fee that includes the amount of the tax or fee and a written
report or data that supports the new or increased tax or fee. A copy of the
report or data shall be filed in the office of the clerk of the municipality.

2. If the proposed tax or fee is a new charge,
provide written notice of the proposed charge, the schedule of the proposed new
charge and the written report or data that supports the new charge on the home
page of the municipality's website at least sixty days before the date the
proposed new tax or fee is approved or rejected by the governing body of the
municipality.

3. If the municipality proposes to increase the rate
of an existing tax or fee on a business, provide written notice of the proposed
increase, the schedule of the proposed increased tax or fee and the written
report or data that supports the proposed increased tax or fee on the home page
of the municipality's website at least sixty days before the date the proposed
new rate is approved or rejected by the governing body of the municipality.

4. Prepare a notice of intent to establish or
increase taxes, assessments or fees
,
including
assessments levied pursuant to section 48-572, subsection B, paragraph 2.
The notice of intent shall include the date, time and place of the meeting of
the governing body of the municipality in which the proposed new or increased
tax or fee will be considered and a statement that a schedule of the proposed
new or increased tax or fee that includes the amount of the tax or fee and a
written report or data that supports the new or increased tax or fee is
available on the municipality's website. The notice of intent shall
be posted on the municipality's website at least fifteen days before the date
the proposed new or increased tax or fee will be approved or rejected by the
governing body of the municipality. If the municipality uses social media or
other electronic communication tools, the notice of intent shall be distributed
through the municipality's social media accounts or other electronic communication
tools.

C. At least seventy-five days before the date a
municipality proposes an ordinance to adopt or repeal a model or local option
in the model city tax code, the municipality shall request from the department
of revenue a list of all taxpayers within the municipality in the affected tax classification. At
least sixty days before the date the proposed ordinance is approved or rejected
by the governing body of the municipality, the municipality shall notify by
mail all taxpayers in the affected tax classification of the proposed ordinance.

D. Subsection C of this section does not apply to
ordinances that do either of the following:

1. Impose a use tax or a model or local option to
exempt a city or town from use tax.

2. Impose a two-tiered tax rate structure for
retail sales.

E. All departments, boards or other subdivisions of
a municipality that are authorized to establish or modify taxes or fees shall
follow the notice requirements prescribed in subsection B of this section
before the date of the entity's consideration of the new or increased tax or
fee.

F. Technological issues that either prevent the
posting of the notice on the municipality's website or distribution of the
notice through social media or other electronic communication tools do not
preclude the governing body of the municipality from approving or rejecting the
new or increased tax or fee at the meeting provided on the notice of intent.

G. A municipality shall demonstrate that the taxes
or fees are imposed pursuant to statute.

H. Subsections A and B of this section do not apply
to:

1. Any fee adopted pursuant to section 9-463.05.

2. Water and wastewater rates
, fees

or rate components
that are adopted pursuant to section 9-511.01
.

3. Fees for registration-based classes, programs or
activities provided by the municipality.

4. Court fees established pursuant to state law.

5. Fees or charges established pursuant to federal
law for public housing or other federally funded programs.

6. Other fees whose amounts are set by state or
federal law.

I. If information is made available relating to the
fees provided in subsection H of this section, that information shall be posted
on the municipality's website and, if the municipality uses social media or
other electronic communication tools, distributed through social media or other
electronic communication tools.

J. In addition to any other limitation that may be
imposed by law, a municipality shall not levy or impose an assessment, fee or
tax on hospital revenues, discharges, beds or services for the purpose of
receiving services or payments pursuant to title 36, chapter 29.
END_STATUTE

Sec. 3. Section 9-511.01, Arizona Revised
Statutes, is amended to read:

START_STATUTE
9-511.01.

Water and wastewater business; rates; procedures; responsibility
for payments

A. A municipality engaging in a domestic water or
wastewater business shall not increase any water or wastewater rate or rate
component, fee or service charge without complying with the following:

1. Prepare a written report or supply data
supporting the increased rate or rate component, fee or service
charge. The report or supporting data shall include cash flow
projections that indicate all anticipated revenues from residential and
nonresidential customers and the overall expenses for providing water or
wastewater service. A copy of the report and cash flow projections
shall be made available to the public by filing a copy in the office of the
clerk of the municipality governing board and posting the report and cash flow
projections on the municipality's website or the website of an association of
cities and towns if the municipality does not have a website at least thirty
days before the public hearing described in paragraph 2 of this subsection.

2. Adopt a notice of intention by motion at a
regular council meeting to increase water or wastewater rates or rate
components, fees or service charges and 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. A copy of the notice of intention showing the
date, time and place of the hearing shall be published one time in a newspaper
of general circulation within the boundaries of the municipality not less than
twenty days before the public hearing date.

3. For
the portion of a water or wastewater fee that is adopted or increased after
december 31, 2026 to fund capital improvements to water or wastewater
facilities that serve new growth, adopt growth-related fees as prescribed
by section 9-463.05.

B. After holding the public hearing, the governing
body may adopt, by ordinance or resolution, the proposed rate or rate
component, fee or service charge increase or any lesser increase.

C. Notwithstanding section 19-142, subsection
B, the increased rate or rate component, fee or service charge shall become
effective thirty days after adoption of the ordinance or resolution.

D. Any proposed water or wastewater rate or rate
component, fee or service charge adjustment or increase shall be just and
reasonable.

E. Rates and charges demanded or received by
municipalities for water and wastewater service shall be just and
reasonable. Every unjust or unreasonable rate or charge demanded or
received by a municipality is prohibited and unlawful.

F. A municipality may not assess or collect a fee on
new water or wastewater service connections at the time of the establishment of
service to those connections for the purpose of recovering the municipality's
costs of acquiring, whether by purchase or by eminent domain, the utility
plant, facilities, system or other property of a public service corporation or
another municipality engaged in the business of providing water or wastewater
service. This subsection does not apply to water or wastewater fees adopted
before January 1, 2016 or to water or wastewater fees included in a notice of
intent to adopt or increase water or wastewater rates and fees adopted before
January 1, 2016.

G. For residential property of four or fewer units,
a municipality shall not require payment of unpaid water and wastewater service
rates and charges by anyone other than the person who the municipality has
contracted with to provide the service, who physically resides or resided at
the property and who receives or received the service. A property
owner, an immediate family member of the person who does not reside at the
property or any other entity, at its sole discretion, may contract for water
and wastewater service with a municipality and shall provide payment.

H. For residential property of four or fewer units,
a municipality shall not refuse service within the municipality's service area
for the unpaid water and wastewater rates and charges to anyone other than the
person who physically resided and received the service at the
property. A property owner, at the owner's sole discretion, may
contract for water and wastewater service with a municipality and shall provide
payment for that service.
END_STATUTE