HB2737 - 472R

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

Section 1. Section 9-500.11, Arizona Revised Statutes, as amended by Laws 2005, chapter 200, section 1, is amended to read:

START_STATUTE9-500.11. Economic development incentives; requirements; limitations; conditions; definitions

A. In addition to any other powers granted to a city or town, the governing body of a city or town may appropriate and spend public monies for and in connection with economic development activities.

B. To fund economic development activities under this section, a city or town subject to the requirements of section 9‑500.06 shall not impose a new fee or tax on a single specific industry or type of business.

C. Notwithstanding section 19‑142, subsection B, a decision by the governing body involving an expenditure pursuant to this section shall not be enacted as an emergency measure and that decision is not effective for at least thirty days after final approval of the expenditure.

D. The governing body of a city or town may enter into a retail development tax incentive agreement as an inducement or in exchange for retail development activities or locating or relocating a retail business in the city or town, subject to the requirements of this section, if the proposed tax incentive will produce more revenue than the amount of the incentive during the term of the agreement.

E. The governing body of a city or town that offers a retail development tax incentive must maintain a public register of each offer made to a retailer or retail developer as an incentive for locating or relocating a retail business in the city or town. The register must include the date of the offer and any counter offers by the retailer or retail developer and the name of the retailer or retail developer. For thirty days after a bona fide offer is first listed on the register, and for thirty days after a bona fide counter offer is listed, no other city or town located within five miles may offer a retail development tax incentive to the same retailer or retail developer. The listing of the offer on the register must continue until the time limits prescribed by this subsection expire, until the offer is withdrawn by the city or town or until the city or town enters into a retail development tax incentive agreement with the retailer or retail developer, whichever occurs first.

D. F. Except as provided by subsection G of this section, before entering into a retail development tax incentive agreement, a city or town shall at a public hearing make a finding by a simple majority vote of the governing body without the use of consent calendar after a public hearing that includes both of the following:

1. That the proposed tax incentive is anticipated to raise produce more revenue than the amount of the incentive within the duration of the agreement. The finding under this paragraph must be verified by an independent third party before the city or town enters into the agreement. The developer or retail business receiving the incentives under the agreement shall not finance the independent third party or have input into the selection of the independent third party.

2. That in the absence of a tax incentive, the retail business facility or similar retail business facility would not locate in the city or town in the same time, place or manner.

E. G. A city or town located in or within twenty‑five miles of the exterior boundary of a metropolitan statistical area having a population of more than two million persons shall make a finding pursuant to subsection D F of this section, by a two-thirds vote of the governing body.

F. A city or town shall not enter into a retail tax incentive agreement if the proposed tax incentive raises less revenue than the amount of the incentive.

G. A city or town shall present a status report of the revenues and expenses associated with the tax incentive every two years for the duration of the agreement in a public meeting.

H. The finding made pursuant to subsection D, paragraph 1 of this section shall be verified by an independent third party before the city or town enters into the retail development incentive agreement.

H. Any retail development tax incentive agreement entered into after December 31, 2006 by a city or town located in or within twenty-five miles of the exterior boundary of a metropolitan statistical area having a population of more than five hundred thousand persons must be structured as follows:

1. The agreement must provide that the expenditures for the incentive may be derived only from the first one-half of one per cent of the revenues generated at the site over the term of the agreement that are subject to the city's or town's sales, use or transaction privilege tax.

2. The agreement must state a maximum cumulative dollar amount of the tax expenditure considering market analyses conducted by the developer, the retailer or the city or town beyond which no further incentive is allowed regardless of whether the full term of the agreement under paragraph 3 of this subsection has expired.

3. The agreement must include a termination date, not more than sixty months after the first retail unit is open for business, after which no further incentive is allowed to be earned or paid regardless of whether the maximum amount of the expenditure under paragraph 2 of this subsection has been delivered.

I. If a city or town that is not subject to subsection H of this section adopts an ordinance relating to retail development tax incentive agreements, the ordinance must be equal to or more stringent than the provisions of this section.

J. The requirements of subsection H of this section apply regardless of whether the primary inducement is offered for retail development activities or for locating or relocating a retail business in the city or town. If a retail development tax incentive agreement is for:

1. Retail development activities, the developer must agree to:

(a) Cooperate and provide for the compilation and submission to the city or town and to the auditor general of any data that are necessary to administer and determine compliance with the agreement.

(b) Waive confidentiality under state and federal law regarding tax information furnished by the developer solely for the purpose of the administration of the agreement by the city or town and the determination of compliance with the agreement by the auditor general.

(c) Include in any leases and subleases respecting the property and require of lessees and sublessees the same data gathering obligation and limited waiver of confidentiality of tax information furnished by the lessee or sublessee for the purposes of administering and determining compliance with the agreement.

2. Locating or relocating a retail business, the business must agree to:

(a) Cooperate and provide for the compilation and submission to the city or town and to the auditor general of any data that are necessary to administer and determine compliance with the terms of the agreement.

(b) Waive confidentiality under state and federal law regarding tax information furnished by the retailer solely for the purpose of the administration of the agreement by the city or town and the determination of compliance with the agreement by the auditor general.

K. A city or town shall adopt a notice of intent to enter into consider ENTERING into a retail development tax incentive agreement at least fourteen days before approving a retail development tax incentive agreement.

I. L. The adoption of the retail development tax incentive agreement shall, at a public hearing, be approved by a simple majority vote of the governing body, without the use of consent calendar. For except that in a city or town located in or within twenty‑five miles of the exterior boundary of a metropolitan statistical area having a population of more than two million persons, the adoption of a retail development tax incentive agreement shall be approved by an affirmative vote of at least two-thirds of the governing body. without the use of consent calendar.

J. A person or business entity receiving the retail development tax incentive agreement shall not finance the independent third party verification of the findings or have input into the selection of the independent third party verifying the findings.

M. A copy of any retail development tax incentive agreement entered into after December 31, 2006, must be immediately filed with the auditor general.

N. Every two years for the duration of the agreement the city or town shall present in a public meeting a status report of the revenues and expenditures associated with the agreement.

O. The auditor general shall develop and prescribe the form of audit reports respecting each agreement. The audit report is due from the city or town within ninety days after the termination of the agreement. The auditor general shall conduct or cause to be conducted an audit of the expenditures under the agreement and determine compliance with the limitations prescribed by subsection H of this section. If the auditor general declines or fails to begin the audit within one hundred twenty days, no further action is authorized. If, after audit, the auditor general determines that there is a violation of the limitations prescribed by subsection H of this section:

1. The auditor general shall notify the parties to the agreement of the violation by certified mail, return receipt requested.

2. The parties may correct the violation without penalty within ninety days after the date of the notice.

3. If the parties fail to correct the violation, the parties are subject to a civil penalty equal to three times the amount of any expenditures that exceeds the limit, payable by the parties in equal proportions. The penalties shall be paid to the auditor general for credit to the state general fund.

4. The city or town shall reimburse the auditor general for any costs incurred in complying with the requirements of this section.

L. P. Subsection subsections D through N of this section does do not apply with respect to:

1. Municipal services and benefits that are generally afforded by ordinance to all new businesses in the city or town and that have no direct effect on municipal tax revenues.

2. Tax incentives given to a business entity in or locating or relocating into an area that is designated by a city or town as a redevelopment project as defined in section 36-1471.

3. Incentives consisting of public infrastructure features furnished and owned by the city or town, including transportation, water, sewer and other physical facilities and amenities.

4. Incentives that are offered for the purpose of preserving historical buildings and other structures.

5. Incentives that are offered for cleanup or other remediation activities at a Brownfields site under title 49, chapter 2, article 1.1 or the comprehensive environmental response, compensation, and liability act of 1980 (P.L. 96-510; 94 Stat. 2767; 42 United States Code sections 9601 through 9657), commonly known as "superfund".

M. Q. For the purposes of this section:

1. "Economic development activities" means any project, assistance, undertaking, program or study, whether within or outside the boundaries of the city or town, including acquisition, improvement, redevelopment, leasing or conveyance of improved or unimproved real or personal property or other activity, that the governing body of the city or town has found and determined will assist in the creation or retention of jobs or will otherwise improve or enhance the economic welfare of the inhabitants of the city or town.

2. "Expenditure" includes any waiver, exemption, deduction, credit, rebate, discount, deferral or other abatement or reduction of the normal municipal tax liability that otherwise applies to similar existing business entities and properties in that city or town, however denominated, computed or applied, and that is generally understood as an inducement to locate a business facility or other operation in the city or town.

3. "Metropolitan statistical area" means a geographical area consisting of cities, towns and other populated areas defined for federal statistical and census purposes by the United States office of management and budget with technical assistance from the United States bureau of the census.

4. "Retail" means the sale of tangible personal property, except the sale of tangible personal property to a person who is engaged in the business of selling such property.

5. "Retail development activities" means those economic development activities that involve the acquisition, improvement, leasing or conveyance of improved or unimproved real or personal property or other activity to facilitate the sale of goods tangible personal property at retail, including the sale of automobiles, or to facilitate other activities, including theater and restaurant development, that generate revenues that are subject to municipal sales, use or transaction privilege taxation.

6. "Retail development tax incentive agreement" means an agreement between a city or town and a person engaged in or planning to engage in retail development activities or the location or relocation of a retail business within that city or town in which the city or town agrees to pay, refund, credit, rebate or otherwise provide to that person all or a portion of the sales, use or transaction privilege taxes payable to that city or town in connection with the construction, development or operation of the retail development activities or the location or relocation of a retail business in the city or town. END_STATUTE

Sec. 2. Repeal

Section 9-500.11, Arizona Revised Statutes, as amended by Laws 2005, chapter 105, section 2, is repealed.