SB1352 - 512R - S-McComish flr amend (ref Bill) adopted-Adopted

Page 1, between lines 1 and 2, insert:

“Section 1. Section 42-6203, Arizona Revised Statutes, is amended to read:

START_STATUTE42-6203. Rates of tax

A. Except as otherwise provided in this section, if a lease of a government property improvement was entered into before June 1, 2010, or if a development agreement, ordinance or resolution was approved by the governing body of the government lessor before June 1, 2010 that authorized a lease on the occurrence of specified conditions and the lease was entered into within ten years after the date the development agreement was entered into or the ordinance or resolution was approved by the governing body:

1. The tax authorized by this article shall be levied and collected at the following rates:

(a) One dollar per square foot of gross building space for office buildings with one floor above ground.

(b) One dollar twenty‑five cents per square foot of gross building space for office buildings with more than one but fewer than eight floors above ground.

(c) One dollar seventy‑five cents per square foot of gross building space for office buildings with eight floors or more above ground.

(d) One dollar fifty cents per square foot of retail building space, including space that is devoted to the sale of tangible personal property, restaurants, health clubs, hair salons, dry cleaners, travel agencies and other retail services.

(e) One dollar fifty cents per square foot of hotel or motel building space.

(f) Seventy‑five cents per square foot of warehouse or industrial building space.

(g) Fifty cents per square foot of residential rental building space.

(h) One hundred dollars per parking space located in a parking garage or deck.

(i) One dollar per square foot of all other government property improvements not included in subdivisions (a) through (h) of this paragraph.

2. The tax rate for government property improvements for which the original certificate of occupancy was issued:

(a) At least ten years but less than twenty years before the date the tax is due is eighty per cent of the rate provided in paragraph 1 of this subsection.

(b) At least twenty years but less than thirty years before the date the tax is due is sixty per cent of the rate provided in paragraph 1 of this subsection.

(c) At least thirty but less than forty years before the date the tax is due is forty per cent of the rate provided in paragraph 1 of this subsection.

(d) At least forty but less than fifty years before the date the tax is due is twenty per cent of the rate provided in paragraph 1 of this subsection.

(e) Fifty or more years before the date the tax is due is zero.

3. If no certificate of occupancy can be located, dated aerial photographs or other evidence of substantial completion may be used to determine the age of the building for purposes of paragraph 2 of this subsection.

4. A lease or development agreement, originally subject to this subsection, that is subsequently amended remains subject to this subsection if the amended lease or development agreement meets all of the following requirements:

(a) The government lessor determines that the amendment furthers the original purpose of the lease or development agreement.

(b) Any land added under the amendment is contiguous to the land under the original lease or development agreement and does not increase the land area under the original lease or development agreement by more than fifty per cent.

(c) Any government property improvement added under the amendment does not increase the area of gross building space of government property improvements under the original lease or development agreement by more than one hundred per cent.

B. Except as otherwise provided in this section, if a lease of a government property improvement does not meet the conditions for applying subsection A of this section:

1. Subject to paragraphs 2 and 3 of this subsection, the tax authorized by this article shall be levied and collected at the following base rates, which apply through December 31, 2011:

(a) Two dollars per square foot of gross building space for office buildings with one floor above ground.

(b) Two dollars thirty cents per square foot of gross building space for office buildings with more than one but fewer than eight floors above ground.

(c) Three dollars ten cents per square foot of gross building space for office buildings with eight floors or more above ground.

(d) Two dollars fifty-one cents per square foot of retail building space, including space that is devoted to the sale of tangible personal property, restaurants, health clubs, hair salons, dry cleaners, travel agencies and other retail services.

(e) Two dollars per square foot of hotel or motel building space.

(f) One dollar thirty-five cents per square foot of warehouse or industrial building space.

(g) Seventy-six cents per square foot of residential rental building space.

(h) Two hundred dollars per parking space located in a parking garage or deck.

(i) Two dollars per square foot of all other government property improvements not included in subdivisions (a) through (h) of this paragraph.

2. If, in the tax year in which the lease of the government property improvement is entered into, the aggregate of all ad valorem property tax rates of all taxing jurisdictions in which the government property improvement is located is at least ninety per cent of the countywide average combined property tax rates, the rate of tax prescribed by paragraph 1 of this subsection, as currently adjusted pursuant to paragraph 3 of this subsection, applies with respect to that government property improvement. If, in the tax year in which the lease of the government property improvement is entered into, the aggregate of all ad valorem property tax rates of all taxing jurisdictions in which the government property improvement is located is less than ninety per cent of the countywide average combined property tax rates, the rate of tax prescribed by paragraph 1 of this subsection, as currently adjusted pursuant to paragraph 3 of this subsection, shall be reduced by ten per cent.

3. On or before December 1, 2011 and December 1 of each year thereafter, for all government property leases that are subject to this subsection the department of revenue shall adjust the tax rates that apply under paragraphs 1 and 2 of this subsection in the following calendar year for each property use according to the average annual positive or negative percentage change for the two most recent fiscal years in the producer price index for new construction or its successor index published by the United States bureau of labor statistics. On or before December 15 of each year, the department shall post the adjusted rates for the following calendar year on its official website and transmit the adjusted rates to each county treasurer.

C. The tax rate for a government property improvement that was constructed pursuant to a lease or development agreement entered into from and after June 30, 1996 and that is located outside a slum or blighted area established pursuant to title 36, chapter 12, article 3 is one and one‑half times the rate established by subsections A and B of this section.

D. Within the first twenty years after the issuance of the original certificate of occupancy, the tax rate on the use or occupancy of a government property improvement is twenty per cent of the rate established in subsections A and B of this section for any of the following:

1. Government property improvements that are subject to leases or agreements that were entered into before April 1, 1985, and options and rights contained in the leases or agreements.

2. Government property improvements that are subject to leases entered into based on a redevelopment contract, as defined in section 36‑1471, entered into before April 1, 1985.

3. Government property improvements that are subject to leases entered into based on an agreement for a redevelopment project for which federal grant monies have been received and that was entered into before April 1, 1985.

4. Government property improvements that are located at an airport that was owned on or before January 1, 1988 by a county having a population of four hundred thousand persons or less or by a city or town that is located in a county having a population of four hundred thousand persons or less if the property is used primarily for manufacturing, retail, distribution, research or commercial purposes. For the purposes of this paragraph, "commercial" includes facilities for office, recreational, hotel, motel and service uses.

E. Within the first ten years after the issuance of the certificate of occupancy, the tax rate on the use or occupancy of a government property improvement that is located in a slum or blighted area established pursuant to title 36, chapter 12, article 3, that resulted or will result in an increase in property value of at least one hundred per cent and that is not eligible for abatement pursuant to section 42‑6209 is eighty per cent of the rate established in subsections A and B of this section.

F. The tax rate to be applied under subsection A or B of this section shall be determined by the predominant use to which the government property improvement is devoted, except that in all cases the tax rate prescribed by subsection A, paragraph 1, subdivision (h) or subsection B, paragraph 1, subdivision (h) of this section shall be applied to any parking garage or deck. If there is no single predominant use, the tax shall be determined by applying the appropriate tax rate to the building space devoted to each use identified in that subsection. For the purposes of this subsection, in applying the tax rates under subsection A of this section the functional area of a government property improvement does not include subsidiary, auxiliary or servient areas such as lobbies, stairwells, mechanical rooms and meeting and banquet rooms. For the purposes of this subsection, "predominant use" means the use to which eighty‑five per cent or more of the functional area of a government property improvement is devoted.

G. Prime lessees of government property improvements who become taxable or whose taxable status terminates during the calendar year in which the taxes are due, including prime lessees subject to exemption or abatement under sections 42‑6208 and 42‑6209, shall pay tax for that calendar year on a pro rata basis. END_STATUTE

H. IF A GOVERNMENT PROPERTY IMPROVEMENT THAT WAS CONSTRUCTED PURSUANT TO A LEASE OR DEVELOPMENT AGREEMENT FOR WHICH THE GOVERNMENT LESSOR DETERMINED THAT THE USE OF THE GOVERNMENT PROPERTY IMPROVEMENT INCREASED THE GOVERNMENT LESSOR’S COSTS OF PROVIDING PUBLIC SAFETY SERVICES, THE TAX AUTHORIZED BY THIS ARTICLE SHALL BE LEVIED AND COLLECTED AT A RATE EQUAL TO THE AMOUNT OF THE AD VALOREM PROPERTY TAX THAT WOULD BE PAYABLE PURSUANT TO THIS TITLE IF THE land and GOVERNMENT PROPERTY IMPROVEMENT WERE NOT OWNED BY A GOVERNMENT LESSOR. THE PRIME LESSEE SHALL BE ENTITLED TO THE SAME RIGHTS AS A PROPERTY OWNER PURSUANT TO CHAPTER 16, ARTICLE 5 OF THIS TITLE AND THE CLASSIFICATION SHALL BE DETERMINED AS IF THE land and GOVERNMENT PROPERTY IMPROVEMENT WERE NOT OWNED BY A GOVERNMENT LESSOR.

Sec. 2. Section 42-6205, Arizona Revised Statutes, is amended to read:

START_STATUTE42-6205. Disposition of revenue

A. The county treasurer shall separately account for payments received under this article with respect to each government property improvement.

B. except as provided by subsection c of this section, within thirty days after receiving tax revenues under this article, the county treasurer shall pay to the following taxing jurisdictions in which the government property improvement is located the monies received with respect to the improvement, allocating the revenue among the jurisdictions as follows:

1. The county, for deposit in its general fund, thirteen per cent.

2. The city or town, seven per cent. If the government property improvement is located in an unincorporated area, the revenue that would otherwise be allocated to a city or town shall be allocated to the other jurisdictions identified in this section subsection in the same proportion that the remaining revenues are allocated to them.

3. The community college district, seven per cent. If the government property improvement is not located in a community college district, the revenue that would otherwise be allocated to the district shall be allocated to the other jurisdictions identified in this section subsection in the same proportion that the remaining revenues are allocated to them.

4. The common school district, thirty-six and one-half per cent, the high school district, thirty‑six and one-half per cent, the common school district not within a high school district, seventy-three per cent, or the unified school district, seventy-three per cent. If the government property improvement is not located in any school district, the revenue that would otherwise be allocated under this paragraph shall be allocated to the other jurisdictions identified in this section subsection in the same proportion that the remaining revenues are allocated to them.

C. WITHIN THIRTY DAYS OF RECEIVING TAX REVENUES UNDER THIS ARTICLE WHERE THE TAX RATE IS DETERMINED PURSUANT TO SECTION 42-6203, SUBSECTION H, THE COUNTY TREASURER SHALL PAY TO THE FOLLOWING TAXING JURISDICTIONS IN WHICH THE GOVERNMENT PROPERTY IMPROVEMENT IS LOCATED THE MONIES RECEIVED WITH RESPECT TO THE IMPROVEMENT AS FOLLOWS:

1. ALLOCATING FORTY PER CENT OF THE REVENUE AMONG THE JURISDICTIONS AS FOLLOWS:

(a) THE COUNTY, FOR DEPOSIT IN ITS GENERAL FUND, THIRTEEN PER CENT.

(b) THE CITY OR TOWN, SEVEN PER CENT. IF THE GOVERNMENT PROPERTY IMPROVEMENT IS LOCATED IN AN UNINCORPORATED AREA, THE REVENUE THAT WOULD OTHERWISE BE ALLOCATED TO A CITY OR TOWN SHALL BE ALLOCATED TO THE OTHER JURISDICTIONS IDENTIFIED IN THIS subSECTION IN THE SAME PROPORTION THAT THE REMAINING REVENUES ARE ALLOCATED TO THEM.

(c) THE COMMUNITY COLLEGE DISTrICT, SEVEN PER CENT. IF THE GOVERNMENT PROPERTY IMPROVEMENT IS NOT LOCATED IN A COMMUNITY COLLEGE DISTRICT, THE REVENUE THAT WOULD OTHERWISE BE ALLOCATED TO THE DISTRICT SHALL BE ALLOCATED TO THE OTHER JURISDICTIONS IDENTIFIED IN THIS subSECTION IN THE SAME PROPORTION THAT THE REMAINING REVENUES ARE ALLOCATED TO THEM.

(d) THE COMMON SCHOOL DISTRICT, THIRTY-SIX AND ONE-HALF PER CENT, THE HIGH SCHOOL DISTRICT, THIRTY-SIX AND ONE-HALF PER CENT, THE COMMON SCHOOL DISTRICT NOT WITHIN A HIGH SCHOOL DISTRICT, SEVENTY-THREE PER CENT, OR THE UNIFIED SCHOOL DISTRICT, SEVENTY-THREE PER CENT. IF THE GOVERNMENT PROPERTY IMPROVEMENT IS NOT LOCATED IN ANY SCHOOL DISTRICT, THE REVENUE THAT WOULD OTHERWISE BE ALLOCATED UNDER THIS PARAGRAPH SHALL BE ALLOCATED TO THE OTHER JURISDICTIONS IDENTIFIED IN THIS subSECTION IN THE SAME PROPORTION THAT THE REMAINING REVENUES ARE ALLOCATED TO THEM.

2. ALLOCATING SIXTY PER CENT OF THE REVENUE TO THE CITY OR TOWN OF WHICH EIGHTY PERCENT MUST BE USED FOR PUBLIC SAFETY services AND TWENTY PER CENT MUST BE USED FOR sponsoring ART PROGRAMS. IF THE GOVERNMENT PROPERTY IMPROVEMENT IS LOCATED IN AN UNINCORPORATED AREA, THE REVENUE THAT WOULD OTHERWISE BE ALLOCATED TO A CITY OR TOWN SHALL BE ALLOCATED TO THE OTHER JURISDICTIONS IDENTIFIED IN THIS subSECTION IN THE SAME PROPORTION THAT THE REMAINING REVENUES ARE ALLOCATED TO THEM.

D. The monies distributed pursuant to sUBSECTION C, PARAGRAPH 2 OF THIS SECTION are in addition to any other appropriation, transfer or other allocation of public or private monies from any other source and shall not supplant, replace or cause a reduction in other funding sources.

C. e. The county treasurer shall distribute all monies collected or received under this article as delinquent or back taxes in the same manner and proportions as required by subsection subsections B and c of this section, except that the county treasurer shall credit to the county general fund any interest and penalties collected under this article with respect to delinquent taxes. END_STATUTE

Sec. 3. Section 42-6209, Arizona Revised Statutes, is amended to read:

START_STATUTE42-6209. Abatement of tax for government property improvements in single central business district

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 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 improvement is located.

(c) "Central business district" means a single and contiguous geographical area designated by resolution of the governing body of the city or town and meeting the following requirements:

(i) The central business district is located entirely within a slum or blighted area that is established pursuant to title 36, chapter 12, article 3.

(ii) The central business district is geographically compact and no larger than the greater of five per cent of the total land area within the exterior boundaries of the city or town or six hundred forty acres.

2. The government property improvement resulted or will result in an increase in property value of at least one hundred per cent.

3. the tax rate is not determined by section 42-6203, subsection h.

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, each lease between a prime lessee and a government lessor for which the tax is abated under this section and 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 the use of 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 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.”

Renumber to conform

Amend title to conform

Fifty-first Legislature McComish

Second Regular Session S.B. 1352