The Arizona House of Representatives killed, then resuscitated, one of Speaker David Gowan’s key bills, giving him a comeback win in a Thursday evening vote.
House Bill 2568, which gives developers the authority to levy property taxes on homeowners, is now headed to Gov. Doug Ducey’s desk.
The bill had divided the homebuilder community and drew heavy opposition from cities and towns, which argued it is not in the public’s interest to give unelected boards dominated by developer interests the power to tax people who buy homes in the subdivisions they develop.
But Gowan, with support from a coalition of developers and investors, argued the bill would boost economic development, especially in southern Arizona, which he represents. The bill would allow developers to move faster by changing the way community-facilities districts are structured.
The bill died after nearly an hour of voting, despite Gowan’s pleas for a few members to change their minds.
“I would ask two of you, from an old speaker going out, to vote ‘aye,’ ” Gowan said in a bid to save the bill. Passage required 31 votes.
Community facilities districts have been allowed by law for nearly 30 years, but have had limited use. They allow developers and cities to work collaboratively to pay for infrastructure, such as water and sewer lines, that would serve new developments. Cities must approve a developer’s application to create a community-facilities district.
He didn’t get the votes then, but two hours later, he did. Republicans Rusty Bowers, Phil Lovas and Warren Petersen changed their “no” votes to a “yes,” joined by Rep. Jonathan Larkin, D-Glendale. The 31-28 vote gave Gowan the victory he had been seeking.
Gowan’s bill would give any developer who controls 600 acres or more the authority to establish such a district without city approval. Community-facilities district boards typically issue tax-exempt bonds to cover infrastructure costs, then levy a tax on properties within the district to pay off the debt.
Because HB 2568 also would create a governing board that would favor developers, critics such as local governments and a divided homebuilder community argued the bill gives taxing power to unelected officials.
“Ultimately, it’s shifting the ability to tax residents to developers,” said Brent Mattingly, chief financial officer for the city of Peoria.
Loss of local control
The loss of local-government control over the financial aspects of a district was the heart of the controversy over the bill, which was withheld from a final vote all week amid intense lobbying.
“The developer is not going to put in the same kind of protections as a city would,” Mattingly said. “They want to pass the cost of these improvements on to the residents … and they don’t have the same concerns as a city council would.”
Mattingly said cities, with their elected representatives, are sensitive to tax rates, something he doesn’t believe a developer-driven board would reflect.
His concerns echoed those of the League of Arizona Cities and Towns and the Home Builders Association of Central Arizona. They argued the bill lacked accountability because the district board would be dominated by developer interests, with three of the five seats influenced by developer choices.
The shift to a developer-driven board levying taxes would usher in “an unprecedented experiment in public finance,” the homebuilders’ group wrote in a memo to lawmakers. It could take up to 30 years or more to retire the bond debt, they said, “in most cases long after the developers have exited these projects.”
Although central Arizona homebuilders opposed the bill, southern Arizona homebuilders were neutral on the measure.
Developers with deep pockets
There also was widespread concern that Gowan, R-Sierra Vista, was pushing the bill to benefit deep-pocketed developers who might aid his congressional race. Gowan is seeking the GOP nomination in Congressional District 1.
For example, Tucson developer Don Diamond, whose firm Diamond Ventures is lobbying for the bill, has contributed $2,700 to Gowan’s congressional campaign, according to Gowan’s Federal Elections Commission report. Joan Diamond, his wife, gave another $2,700. Diamond Ventures owns large tracts of land in northern Peoria.
Michael Ingram, founder and president of El Dorado Holdings Inc., contributed $1,000, the FEC report showed. El Dorado is working on a 12,000-acre development outside Benson in southeastern Arizona, which is in Gowan’s legislative district.
The legislation is a way to streamline a process that’s already in law and to speed up the pace of getting large developments underway, said Susie Stevens, a spokeswoman for Land Owners for Arizona’s Economic Development. That’s the coalition of developers and investors behind HB 2568.
The attention on campaign donations was a diversion from the merits of the bill, its proponents said.
The bill would change only the way a district oversees how infrastructure projects are financed, she said. Other local-government controls, such as zoning and land-use planning, would remain.
The coalition disputed that the legislation would lead to higher taxes for people who buy homes in a community-facilities district. Developers are sensitive to price because they have to market their projects to homebuilders, who in turn sell the houses they build, Stevens said. Allowing high tax rates would crater those efforts, she said.
Concerns about tax levy
But critics countered that the bill, although establishing a cap on tax rates, would not cap the tax levy, which could be higher in order to cover debt payments on the bonds.
Despite the opposition, the bill won lopsided favorable votes until Thursday. It got unanimous approval in the House in February, where Gowan determines whose bills get a hearing and whose don’t.
It fared nearly as well in the Senate, passing on a 21-8 vote after it was amended earlier this week, with bipartisan backing. Because of the amendment, the bill needed a final vote in the House, where developer interests, as well as local-government lobbyists, pushed to make their arguments to individual members.
Sen. Steve Farley, D-Tucson, urged support, saying it was a good way to get infrastructure built when public resources are lacking.
And Senate President Andy Biggs, R-Gilbert, said the bill raises the question of who best should control private property in Arizona. In his view, better to let that control rest with the private sector, not government.
Reach the reporter at maryjo.pitzl@arizonarepublic.com and follow her on Twitter @maryjpitzl. Republic reporter Rebekah Sanders contributed to this article.
Our politicians will stop at nothing to sell us out!
Letting private developers tax people WTF?
This is beyond any rationale, its a sell out pure and simple!
Wasn’t the American Revolution fought over tax abuse?
small part yes but the main reason was England declaring we had to use their money from a central bank which near bankrupted the colonies.
Considering home/property owners in HOAs/POAs are already taxed (maintenance fees/dues/assessments/whateveryouwannacallit), this truly is an outrage! It’s as nefarious as taxing Social Security income after recipients have already been taxed for Social Security before they get to hopefully collect it! (I said hopefully…my mother paid into SS all her life and got to collect 4 months worth before she died of cancer at age 65. And because everyone here knows the criminal psychopathic elites are doing everything in their power to kill as many of us “useless eaters” as they can before we can even hope to collect SS).
“The bill died after nearly an hour of voting,…”
Too bad the author didn’t.