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SB1293 - 572R - S Ver
Senate Engrossed
GPLET; abatement;
limitation
State of Arizona
Senate
Fifty-seventh Legislature
Second Regular Session
2026
SENATE BILL 1293
AN
ACT
amending section 42-6209, Arizona
Revised Statutes; relating to government property lease excise tax.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it
enacted by the Legislature of the State of Arizona:
Section
1.
1. Section
42-6209, Arizona Revised Statutes, is amended to read:
START_STATUTE
42-6209.
Abatement of tax for government property improvements in single
central business district; definition
A. A city or town may abate the tax provided for
under this article for a limited period beginning when the certificate of
occupancy is issued and ending eight years after the certificate of occupancy
is issued on a government property improvement that is constructed either
before or after July 20, 1996 and that meets the following requirements:
1. The
government property
improvement
is located in a single central business district in the city or town and is
subject to a lease or development agreement entered into on or after April 1,
1985.� For the purposes of this section:
(a) A city or town shall not designate more than one
central business district within its corporate boundaries.
(b) A city or town shall not approve or enter into a
development agreement or lease for a government property improvement within one
year after the designation of the central business district in which the
government property
improvement is located.
(c) "Central business district" means a
single and contiguous geographical area that is designated by resolution of the
governing body of the city or town and that is geographically compact and not
larger than the greatest of the existing total land area of the central
business district of the city or town as of January 1, 2018, two and one-half
percent of the total land area within the exterior boundaries of the city or
town or nine hundred sixty acres. For the purposes of this
subdivision, any central business district formed before January 1, 2018
is considered to be geographically compact. For the expanded areas
of an existing central business district only and the new designation of a
central business district formed on or after January 1, 2018 and for the
purposes of this subdivision, "geographically compact" means a form
or shape that has a length that is not more than twice its width as measured
from at least four points on the exterior boundary of the expanded areas of an
existing central business district or a central business district formed on or
after January 1, 2018.
2. The
government property
improvement
is located entirely within a slum or blighted area that is designated pursuant
to title 36, chapter 12, article 3.
3. The government property improvement resulted or
will result in an increase in property value of at least one hundred percent.
B. The prime lessee
shall notify the county treasurer and the government lessor and apply for the
abatement before the taxes under this article are due and payable in the first
year after the certificate of occupancy is issued.
C. Except as provided by subsection D of this
section, each lease between a prime lessee and a government lessor for which
the tax is abated under this section that is entered into from and after May
31, 2010
,
and that does not meet the conditions
provided in section 42-6203, subsection A must be approved by a simple
majority vote of the governing body without using a consent calendar and shall
not be approved unless:
1. The government lessor notifies the governing
bodies of the county and any city, town and school district in which the
government property improvement is located at least sixty days before the
approval.� The notice must include the name and address of the intended prime
lessee, the location and proposed use of the government property improvement
and the proposed term of the lease or development agreement.
2. The government lessor determines that, within the
term of the lease or development agreement, the economic and fiscal benefit to
this state and the county, city or town in which the government property
improvement is located will exceed the benefits received by the prime lessee as
a result of the development agreement or lease on the basis of an estimate of
those benefits prepared by an independent third party in a manner and method
acceptable to the governing body of the government lessor.� The estimate must
be provided to the government lessor and the governing bodies of the county and
any city, town and school district in which the government property improvement
is located at least thirty days before the vote of the governing
body. A lease or development agreement between a prime lessee and a
government lessor involving residential rental housing is exempt from the
economic estimate analysis requirements of this paragraph.
3. The lease or development agreement provides that
the government lessor may not approve an amendment to change the use of the
government property improvement during the period of abatement unless:
(a) The government lessor notifies the governing
bodies of the county and any city, town and school district in which the
government property improvement is located at least sixty days before the
approval.� The notice must include the name and address of the prime lessee,
the location and proposed use of the government property improvement and the
remaining term of the lease or development agreement.
(b) The government lessor determines that, within
the remaining term of the lease or development agreement, the economic and
fiscal benefit to this state and the county, city or town in which the
government property improvement is located will exceed the benefits received by
the prime lessee as a result of the change in the lease or development
agreement on the basis of an estimate of those benefits prepared by an
independent third party in a manner and method acceptable to the governing body
of the government lessor. The estimate must be provided to the
government lessor and the governing bodies of the county and any city, town and
school district in which the government property improvement is located at
least thirty days before the vote of the governing body. A change in
use under a lease or development agreement between a prime lessee and a
government lessor to residential rental housing is exempt from the economic
estimate analysis requirements of this subdivision.
D. Subsection C of this section does not apply if:
1. The tax is not abated under this section.
2. The government lessor is acting as a commercial
landlord without a development agreement in a lease for a use ancillary to a
government property improvement used for a public purpose.
E. The designation of a slum or blighted area that
is originally designated from and after September 30, 2018 and in which a
central business district is located automatically terminates on the tenth
anniversary after the designation unless the city or town formally renews or
modifies all or part of the slum or blighted area designation. The
termination of a slum or blighted area designation under this subsection does
not affect any existing project described in section 35-701, paragraph 7,
subdivision (a), item� (ix) that is within the designated
area. Before the tenth anniversary of its designation, the city or
town shall review the area and, pursuant to the review, shall either renew,
modify or terminate the designation. If the city or town renews or
modifies the original designation, the slum or blighted area designation is
subject to subsequent reviews on a ten-year cycle. If the city
or town fails to renew or modify the designation, the slum or blighted area
designation automatically terminates five years after the
review. This subsection does not apply to leases or development
agreements to lease government property if either of the following conditions
is met with respect to any such excluded area:
1. The lease of the government property improvement
was entered into before the termination or modification of the slum or blighted
area designation.
2. A development agreement, ordinance or resolution
was approved by the governing body of the government lessor before the
termination or modification of the slum or blighted area designation that
authorized a lease on the occurrence of specified conditions and the lease was
entered into within five years after the date the development agreement was
entered into or the ordinance or resolution was approved by the governing body.
F. Before October 1, 2020, each city or town shall
review the designation of each slum or blighted area that was originally
designated before September 30, 2018 and in which a central business district
is located. All such slum or blighted areas in which a central
business district is located are considered to be valid. Pursuant to
the review, the city or town shall either renew, modify or terminate the
designation.� If the city or town renews or modifies the original designation,
the slum or blighted area designation is subject to subsequent reviews on a ten-year
cycle. If the city or town fails to renew or modify the designation,
the slum or blighted area designation automatically terminates from and after
September 30, 2025
,
or five years after any
subsequent review. The termination of a slum or blighted area
designation under this subsection does not affect:
1. Any existing project described in section 35-701,
paragraph 7, subdivision (a), item (ix) that is within the designated area.
2. Any lease or development agreement to lease
government property if either of the following conditions is met with respect
to the slum or blighted area:
(a) The lease of the government property improvement
was entered into before the termination or modification of the slum or blighted
area designation.
(b) A development agreement, ordinance or resolution
was approved by the governing body of the government lessor before the
termination or modification of the slum or blighted area designation that
authorized a lease on the occurrence of specified conditions and the lease was
entered into within five years after the date the development agreement was
entered into or the ordinance or resolution was approved by the governing body.
G. Notwithstanding section 42-6206, subsection
C, beginning with development agreements, ordinances or resolutions to lease
government property improvements approved by the governing body of the
government lessor from and after December 31, 2016, the lease period for a
property for which the tax is abated under this section may not exceed eight
years, including any abatement period, regardless of whether the lease is
transferred or conveyed to subsequent prime lessees during that
period. As soon as reasonably practicable but within twelve months
after the expiration date of the lease, the government lessor must convey to
the current prime lessee title to the government property improvement and the
underlying land. Property conveyed to the prime lessee under this
subsection does not qualify for classification as class six property or for any
other discounted assessment regardless of the location or condition of the
property. This subsection does not apply to leases or development agreements
to lease government property if either of the following occurred before January
1, 2017:
1. A corresponding resolution or ordinance for the
lease or intent to lease such property subject to this section was approved by
the governing body of the government lessor.
2. A proposal was submitted to the government lessor
in response to a request for proposals.
H. Notwithstanding
subsection A of this section, for development agreements for the lease of
government property improvements approved by a governing body from and after
the effective date of this amendment to this section, the abatement of tax
under this article is limited to the amounts otherwise designated for counties,
cities, towns and community college districts pursuant to section 42-6205,
subsection B, paragraphs 1, 2 and 3. The proportional amount of
government property lease excise tax revenue for school districts pursuant to
section 42-6205, subsection B, paragraph 4 may not be abated.
END_STATUTE