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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
REVISED
county water augmentation authorities; bond
Purpose
Outlines requirements for a county water augmentation authority (authority) to issue revenue bonds, hold public hearings relating to the issuance of revenue bonds and enter into loan repayment agreements with the Water Infrastructure Finance Authority (WIFA).
Background
An authority may
be established in any active management area (AMA) in which the following
conditions exist on the date the authority is organized: 1) over 50 percent of
the area of the AMA lies within a single county; 2) the population of the
county is fewer than 150,000 persons according to the most recent U.S.
decennial census; and 3) a political subdivision of Arizona within the AMA
directly receives Colorado River water pursuant to contracts with the Central
Arizona Groundwater Replenishment District and the U.S. Secretary of the
Interior through the facilities of the Central Arizona Project (A.R.S.
§ 45-1902). The board of directors of an authority (board) may: 1) acquire,
sell, lease, exchange or otherwise dispose of real and personal property,
easements and rights-of-way that are necessary or required for the uses and
purposes of the authority;
2) construct, maintain and operate all works and other property acquired and
used for any of the projects owned by the authority; 3) issue bonds and pledge
all or part of its revenue from any source for security and payments of its
bonds; 4) provide technical or financial assistance to operating units relating
to developing water supplies for purposes of the outlined management goals; and
5) perform other statutorily outlined functions (A.R.S.
§ 45-1943).
WIFA is an independent state authority authorized to finance the construction, rehabilitation, acquisition and improvement of water infrastructure throughout Arizona. WIFA is governed by the WIFA Board of Directors consisting of nine voting members appointed by the Governor and the Legislature and nine nonvoting ex-officio members representing legislative leadership and state agency heads. WIFA administers several federal and state-capitalized programs, including the Drinking Water State Revolving Fund, the Clean Water State Revolving Fund, the Water Supply Development Fund, the Water Conservation Grant Fund and the Long-Term Water Augmentation Fund (WIFA).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Allows an authority, acting through its board, to issue revenue bonds in a principal amount that the authority determines is necessary to provide sufficient monies to acquire or construct projects.
2. Allows an authority to issue revenue bonds in conjunction with any other outlined optional or alternative plans.
3. Removes the requirement that resolutions for a bond issue or issues state that all other methods of necessary financing by the authority have been found impractical, inadvisable or inadequate.
4. Removes the requirement that the chairperson of a board, at the earliest practical date, fix a time and place for a hearing at least 20 but not more than 30 days after adopting a bond resolution.
5. Allows the secretary-treasurer of an authority to deposit monies that are collected from the contracting and bonding powers of the authority to the bond fund of the authority.
6. Requires the secretary-treasurer of an authority to pay principal due on bonds of the authority from the bond fund and invest monies in the bond fund, under the direction of its board as provided in the statutes relating to the handling of public funds.
7. Requires the chairperson of a board, the executive director of a board or the chairperson's or director's designee to fix a time and place for a hearing before adopting a bond resolution.
8. Requires the authority to provide, rather than publish, notice of the time and place fixed for the hearing at least 20 days in advance of the hearing, rather than twice, in a newspaper of general circulation in the county in which the authority is established.
9. Requires a board, at the conclusion of a hearing, to approve the bond issue in whole or in part if it finds that all precedent requirements and conditions have been fulfilled or disapprove the bond issue as a whole or as to such features or proposals do not meet the essential requirements.
10. Removes the ability for any person who holds an original agreement or proposal made with the authority relating to or concerning the handling, sale, control or disposition of a proposed issue of bonds or who has previously made an offer or bid in good faith to purchase the bonds pursuant to a published invitation for bids by the authority, and any operating unit holding contracts with the authority to qualify to be heard.
11. Removes the requirement that the bonds must provide that:
a) the bond is purchased and taken after a complete disclosure and with a full knowledge of all of the surrounding relevant facts and circumstances and not on the representation, faith or credit of the authority, this state or any of its political subdivisions;
b) the holder in order to obtain payment may not compel this state or any of its political subdivisions to exercise its appropriation or taxing power; and
c) the bond does not constitute a debt of this state, any political subdivision of Arizona or any operating unit and is payable only from revenues of the authority.
12. Removes the ability for the gross or net revenue derived from any project or any part of a project to be pledged to secure the payment of any series of bonds.
13. Allows a board, to secure bonds, to:
a) provide that bonds may be secured by a first lien on all or part of the monies paid into the appropriate account or subaccount administered by the authority;
b) pledge or assign to or in trust for the benefit of the holder any part or appropriate account or subaccount of the monies in the funds as is necessary to pay the principal and interest of the bonds as they come due;
c) set aside, regulate and dispose of any reserves and sinking funds;
d) provide that sufficient amounts of the proceeds from the sale of the bonds may be used to fully or partly fund any reserves or sinking funds established by the resolution;
e) prescribe the procedure, if any, by which the terms of any contract with bondholders may be amended or abrogated, the amount of bonds that the holders must consent to and the manner in which that consent may be given;
f) provide for payment from the proceeds of the sale of the bonds of all legal and financial expenses incurred by the board in issuing, selling, delivering and paying the bonds; or
g) do any other matters that may affect the security and protection of the bonds.
14. Requires
the bonds to be signed by the chairperson or vice-chairperson
and the
secretary-treasurer of the authority.
15. Deems that board members or any person executing the bonds are not personally liable for the payment of the bonds.
16. Determines that the bonds are valid and binding obligations unless before the delivery of the bonds any of the persons whose signatures appear on the bonds ceases to be a board member.
17. Prohibits a board, from and after the sale and delivery of the bonds, from contesting the validity of a bond.
18. Allows a board to use available monies to purchase bonds that may be cancelled at a price not exceeding:
a) if the bonds are then redeemable, the redemption price then applicable plus accrued interest to the next interest payment date; or
b) if the bonds are not then redeemable, the redemption price applicable on the first date after purchase on which the bonds become subject to redemption plus accrued interest to that date.
19. Deems that any pledge made for outlined revenue bonds is valid and binding from the time the pledge is made.
20. Stipulates that the monies pledged and received to be placed in the appropriate fund are immediately subject to the lien of the pledge without any future physical delivery or further act, and any such lien of any pledge is valid or binding against all parties having claims of any kind against a board regardless of whether the parties have notice of the lien.
21. Determines that the resolution or trust indenture or any instrument by which a pledge is created and placed in a board's records serve as notice to all concerned with the creation of the pledge.
22. Stipulates that a board is not required to record these instruments of creation in any other place.
23. Exempts outlined revenue bonds, the transfer of such bonds and the income such bonds produce from taxation by this state or any of its political subdivisions.
24. Stipulates that outlined revenue bonds are obligations of the authority and are payable only according to their terms and are not obligations general, special or otherwise of this state, the county in which the authority is established or, other than the authority, a political subdivision of Arizona.
25. Stipulates that payment of the bonds is not enforceable out of any monies of this state other than the income and revenue pledged and assigned to or in trust for the benefit of the holder or holders of the bonds.
26. Removes the requirement that the bonds must be signed by the chairman or vice-chairman and the secretary-treasurer of the authority in office at the date of signing and the specification that the bonds are valid obligations of the authority, as prescribed.
27. Requires each operating unit that owns, operates or otherwise benefits from projects that are financed by outlined revenue bonds to collect from each end user that benefits from the projects, a proportion of the revenue that is equal to the proportion of the benefits of the projects allocated to each end user to ensure all necessary fiscal reserves, operation costs, maintenance and depreciation charges and payment amounts due to the authority in connection with the authority's payment of principle and interest of the bonds.
28. Stipulates that the outlined regulations relating to the sale of outlined revenue bonds does not affect the Arizona Corporation Commission's authority to prescribe just and reasonable classifications to be used and just and reasonable rates and charges to be made and collected by public service corporations.
29. Subjects any project allocation by an operating unit to the statutorily prescribed restrictions on place of use relating to waters.
30. Requires a board to notify the Attorney General (AG) of the authority's intention to issue bonds.
31. Requires the notification to adequately describe the project.
32. Requires the AG to inform the board within 10 days after receiving the notice, whether the AG believes the proposed project does not comply with the statutorily prescribed requirements relating to authorities.
33. Allows a board to issue the bonds if the AG does not issue an opinion within 10 days after receiving the notice.
34. Prohibits a board from issuing the bonds if, within 10 days after receiving the notice, the AG issues an opinion that the bond does not comply with the statutorily prescribed requirements relating to Authorities.
35. Prohibits a person from bringing an action challenging the legality of any contract, agreement, lease, mortgage, obligation or proceeding or the issuance of bonds from and after 30 calendar days from when a board is authorized to issue bonds.
36. Removes the requirement that the AG, on submission of bonds from a board, examine and pass on the validity of the bonds and the regularity of the proceedings.
37. Removes the requirements that the AG certify on the back of each bond, that it is issued according to the Arizona Constitution and the laws of Arizona, if the proceedings comply with statutorily prescribed requirements and if the AG determines that, when delivered and paid for, the bonds will constitute binding and legal obligations of the board.
38. Allows an authority to construct, acquire or improve a wastewater treatment facility, drinking water facility or nonpoint source project with monies borrowed from or financial assistance, including forgivable principal, provided by WIFA.
39. Allows an authority to enter into a loan repayment agreement with WIFA.
40. Stipulates that a loan repayment agreement is payable from any revenues otherwise authorized by law to be used to pay long-term obligations.
41. Requires a board to obtain approval for the loan repayment agreement in the same manner provided by law for approving and issuing other bonds or long-term obligations payable from revenues that are to be used to pay the loan.
42. Requires a loan repayment agreement to contain the covenants and conditions pertaining to the construction, acquisition or improvement of a wastewater treatment facility, drinking water facility or nonpoint source project and repayment of the loan as WIFA deems proper.
43. Allows loan agreements to provide for the payment of interest on the unpaid principal balance of that agreement at the rates established in the agreement.
44. Allows the agreement to provide for payment of the authority's proportionate share of the expense of administering the Clean Water and Drinking Water Revolving Funds and may provide that the authority pay financing and loan administration fees approved by WIFA.
45. Allows the outlined costs to be included in the assessment amounts pledged to repay the loan.
46. Stipulates that an authority is bound by and must fully perform the loan repayment agreements, and that the agreements are incontestable after the loan is funded by WIFA.
47. Requires a board to agree to pay any costs incurred by WIFA in issuing bonds or otherwise borrowing to fund a loan.
48. Stipulates that a loan repayment does not create a debt of the authority.
49. Prohibits WIFA from requiring the authority to make payment on a loan agreement from any source other than revenues otherwise authorized by law to be used to pay long-term obligations.
50. Allows an authority to employ or contract for the services of attorneys, accountants, financial consultants and other experts in their fields as deemed necessary to perform services with respect to the loan repayment agreement.
51. Stipulates that the outlined requirements relating to loan repayments are supplemental and alternative to any other law under which an authority may borrow money or issue bonds.
52. Specifies that the outlined requirements relating to loan repayments provide the exclusive authorization to enter into loan agreements with WIFA.
53. Adds to the definition of project:
a) any facility necessary or convenient to conserve or store water including, canals, pipelines, pumping stations, storage projects, recovery wells, delivery and retention facilities and water and wastewater treatment plants;
b) the acquisition of water and rights to water; or
c) a loan of bond proceeds from an authority to an operating unit to acquire or construct any prescribed facility.
54. Defines drinking water facility and wastewater treatment facility.
55. Makes technical and conforming changes.
56. Becomes effective on the general effective date.
Revisions
1. Corrects the provision relating to the list of prescribed actions a board may take to secure bonds by adding that the board may do any other matters that may affect the security and protection of the bonds.
2. Adds the provision that requires a board, at the conclusion of a hearing, to approve the bond issue in whole or in part if it finds that all precedent requirements and conditions have been fulfilled or disapprove the bond issue as a whole or as to such features or proposals do not meet the essential requirements.
House Action
NREW 1/27/26 DP 10-0-0-0
3rd Read 2/23/26 55-2-3
Prepared by Senate Research
March 9, 2026
SB/hk