Assigned to HEALTH & APPROP                                                                                                         AS ENACTED

ARIZONA STATE SENATE

Forty-seventh Legislature, Second Regular Session

FINAL AMENDED

FACT SHEET FOR S.B. 1346

methamphetamine education fund; children; warnings

(NOW:  fleet requirements; tax incentives; biodiesel)

Purpose

            Creates a fleet fuel credit that counts toward the state mandate of alternative and clean burning fuel vehicle use.  Classifies real and personal property and improvements used to produce biodiesel fuel as class 6 property.

Background

Government vehicle fleets in Arizona are required to operate a specific percentage of alternative or clean burning fuel vehicles.  According to statute, alternative fuel includes electricity, solar energy, liquefied petroleum gas, natural gas, hydrogen and alcohol fuels.  Clean burning fuel includes an emulsion of water-phased hydrocarbon fuel, a diesel fuel substitute or other diesel fuel that meets specific standards. 

            Biodiesel is a domestically produced, renewable fuel that can be manufactured from vegetable oils, animal fats or recycled restaurant greases. Blends of 20 percent biodiesel with 80 percent petroleum diesel (B20) can generally be used in unmodified diesel engines. Biodiesel can also be used in its pure form (B100), but it may require engine modifications to avoid maintenance and performance problems and may not be suitable for wintertime use.

            Arizona classifies property for assessment purposes into 9 legal classes, based on the current use of the property by its owner, such as commercial, agricultural or residential. Each legal class has an assessment ratio, which is specified by statute. The assessment ratio, which ranges from 1 percent to 25 percent, is used to calculate the assessed value of a property.  Class 6 properties include noncommercial historic, foreign trade zone, qualifying military reuse zone, qualifying enterprise zone, qualifying environmental technology and qualifying environmental remediation properties.  Properties designated class 6 have a 5 percent assessment ratio.

            A fiscal note was prepared by the Joint Legislative Budget Committee for a similar bill, H.B. 2711, that includes both biodiesel and ethanol fuel production facilities as class 6 property.  According to the fiscal note, H.B. 2711 would not have a fiscal impact relative to the current revenue base as there are no existing biodiesel production facilities in the state. However, should a biodiesel production facility be constructed, the bill would result in future foregone increases in net assessed value (NAV). The foregone increases in NAV would reduce the state’s K-12 education formula cost. 

Provisions

Fleet Fuel Credits

1. Allows federal, state, municipal or school district vehicle fleets in Arizona to earn credits toward the state mandate of alternative and clean burning fuel vehicle use by purchasing biodiesel, diesel substitute or an ethanol or methanol blend.

2. Calculates the fuel credit as one vehicle for every:

a) 450 gallons of neat (pure) biodiesel.

b) 2,250 gallons of diesel substitute.

c) 530 gallons of ethanol (E85).

Biodiesel Fuel Production Property Classification

3. Classifies, effective January 1, 2007, to December 31, 2016, real and personal property and improvements used specifically and solely to produce biodiesel fuel and that are valued at full cash value as class 6, for property tax purposes.

4. Applies the class 6 property valuation for biodiesel production facilities only to the portion of the property used specifically for the production of 100 percent biodiesel fuel,  its by-products or on-site storage facilities that are intrinsically associated with the manufacturing process.

5. Disqualifies the entire biodiesel production property from classification as a class 6 property for any other commercial or industrial use.

Miscellaneous

6. Makes technical and conforming changes.

7. Becomes effective on the general effective date, except as otherwise noted.

Senate Action House Action

HEALTH        2/6/06     DP        5-0-2-0                    APPROP (B)  4/4/06     DPA/SE     13-0-0-2

APPROP         2/14/06   DPA     9-1-1-0                    3^rd Read           5/22/06                   47-11-2-0

3^rd Read           3/6/06                  29-0-1-0

Final Read      6/21/06                20-8-2-0

(on reconsideration)

Signed by the Governor

Chapter 388

Prepared by Senate Research

June 23, 2006

FB/ac