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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
AMENDED
tourism improvement areas; municipalities; counties
Purpose
Allows a municipality or county governing body (governing body) to establish a tourism improvement area, approve lodging business assessments on specified lodging businesses within the area and contract with a destination marketing organization to manage the area and its activities. Outlines procedures for tourism improvement area formation petitions, public hearings, management, plans and activities, assessments, amendments and dissolution.
Background
Special taxing districts are usually created to fill a need and to enable the provision of services in an area that might otherwise be limited from receiving those services for various reasons, including size, location, financial limitations or unavailability of other government support. The formation of a special taxing district creates a funding stream to pay for the desired or needed services by placing the responsibility on those who benefit from that service.
Statute allows and outlines the process for the formation of 36 types of special taxing districts including fire districts, irrigation districts, hospital districts, pest abatement districts and power districts. Although the specific process depends on the type of district created, the formation in many cases requires the submission of petitions to the county board of supervisors, followed by a public hearing. Statute also prescribes mechanisms for the dissolution of districts and methods for changing district boundaries (A.R.S. Title 48).
The transient lodging classification of transaction privilege tax is comprised of the business of operating a hotel or motel for occupancy by transients who obtain the lodging space on a daily or weekly basis or on any other basis for less than 30 consecutive days (A.R.S. § 42-5070).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
Tourism Improvement Area Petition, Formation and Public Hearing
1. Allows a governing body to approve the formation of a tourism improvement area and the lodging business assessment rate on presentation of a formation petition that includes:
a) the signatures of lodging business owners of two or more lodging businesses within the proposed area that agreed to participate in the area, as prescribed;
b) the geographic boundaries of the area;
c) the types or classes of lodging businesses that will be subject to the proposed lodging business assessment;
d) the proposed lodging business assessment rate for each type or class of lodging business that will be subject to the assessment; and
e) information specifying where the complete area plan may be obtained and that the complete area plan is available upon request.
2. Requires a tourism improvement area plan to be prepared before the governing body holds a public hearing to consider forming the area and requires the plan to include:
a) a map that identifies the boundaries of the proposed area in sufficient detail to allow a lodging business owner to reasonably determine whether the business is located within the proposed boundaries;
b) the name of the area;
c) the planned activities of the proposed area and an estimate of the annual cost of the planned activities;
d) a definition describing the type or class of lodging businesses, including property size and room information, to be included in the proposed area and the lodging businesses that will be subject to the proposed lodging business assessment;
e) the proposed source of financing, including the proposed method and basis of levying the lodging business assessment in sufficient detail to allow each lodging business owner to estimate the amount of the assessment to be levied against the business;
f) the estimated total proposed lodging business assessments to be spent for area activities during the first year of operation of the proposed area and the formula used to determine each lodging business owner's assessment, which must be based on benefit; and
g) the term of the proposed area.
3. Caps the initial term of a formed tourism improvement area at 10 years and renewals at 10 years per renewal.
4. Requires tourism improvement area activities to be designed to promote tourism and lodging to enhance the economic development climate in the tourism improvement area in accordance with all applicable state and federal laws, regulations and requirements.
5. Allows a governing body, on receipt of a formation petition, to adopt a resolution of intention to consider the formation of a tourism improvement area, if adopted by the governing body.
6. Requires the governing body's resolution of intention to consider forming a tourism improvement area to state:
a) the date, time and place of a public hearing to consider the formation petition;
b) the proposed area activities;
c) an estimated amount of funding necessary to implement the area plan;
d) the boundaries of the proposed area; and
e) the amount of the proposed lodging business assessment.
7. Requires, if a governing body adopts a resolution that meets the outlined requirements, a public hearing notice that includes a description of the tourism improvement area to be sent by mail to each lodging business owner subject to assessment in the proposed tourism improvement area and published in a newspaper or online at least 30 days before the hearing.
8. Requires the governing body to conduct the public hearing at least 30 days after mailing the notice to all lodging business owners subject to assessment in the proposed tourism improvement area.
9. Requires the governing board to consider public testimony regarding the proposed tourism improvement area.
10. Allows any lodging business owner proposed to be subjected to a lodging business assessment to submit a written objection to the governing body at any time before the public hearing concludes.
11. Stipulates that, if written objections are received from lodging business owners that represent 50 percent or more of the total rooms subject to the lodging business assessment, the governing body must end the hearing and the municipality or county may not hold further proceedings on the proposed tourism improvement area's formation for one year after the hearing date.
Lodging Business Assessments
12. Allows a lodging business assessment to be levied based on either:
a) fixed rate lodging room rental of up to $5 per night; or
b) percentage of receipts from lodging room rentals of up to 5 percent by the lodging business.
13. Requires the governing body to contract with its destination marketing organization to manage and implement the activities specified in the tourism improvement area.
14. Defines destination marketing organization as a nonprofit organization or governmental unit that is designated by the governing body as being responsible for the tourism promotion and marketing of the municipality or county.
15. Requires the lodging business assessment to be levied beginning on the first day of the first month 90 days after the governing body's approval of the tourism improvement area formation petition and requires the assessment to be paid to the Arizona Department of Revenue (ADOR).
16. Requires lodging business assessments that are levied to conduct tourism improvement area activities to provide benefits to lodging businesses and associated industries located within the area and that are subject to the assessment.
17. Allows lodging business assessments to vary by types or classes of lodging businesses as described in the tourism improvement area plan, including the size of the lodging property or number of rooms at the property.
18. Requires ADOR to report to the State Treasurer the amount of collected lodging business assessments.
19. Requires the State Treasurer to transmit monthly to the treasurer of the municipality or county where the tourism improvement area is located the amount collected from lodging business assessments within the area and requires that amount to be transmitted from the treasurer to the destination marketing organization managing the area.
20. Requires the destination marketing organization managing the tourism improvement area and the governing body to report to ADOR the amount of the lodging business assessment and supply ADOR and the State Treasurer with all requested information necessary.
21. Requires ADOR and the applicable governing body to enter into an intergovernmental agreement that provides for ADOR to receive monies for the costs of administering the lodging business assessment from the proceeds of that lodging business assessment.
22. Prohibits the validity of a lodging business assessment from being contested in an action or proceeding, unless the action or proceeding is commenced within 30 days after the resolution levying the lodging business assessment is adopted.
23. Requires any appeal from a final judgment in an action or proceeding contesting the validity of a lodging business assessment to be perfected within 30 days after the entry of judgment.
Tourism Improvement Area Management by Lodging Business Owners' Board
24. Requires each tourism improvement area to be governed by an owners' board composed of a majority of the assessed lodging business owners located within the tourism improvement area or their authorized representatives.
25. Allows a representative of the county or municipality to have a nonvoting, ex officio seat on the owner's board.
26. Requires the owners' board, on governing body approval of the tourism improvement area and annually thereafter, to submit to ADOR the approved tourism improvement area map with details on the assessed properties in a form and manner required by ADOR.
27. Grants a destination marketing organization that manages the tourism improvement area all the powers possessed by a nonprofit corporation organized pursuant to Arizona laws, including the authority to accept donations or gifts of monies and property, to apply for and receive grants from public and private sources and to carry over monies from one fiscal year to the next.
28. Requires the destination marketing organization that manages the tourism improvement area, beginning the first full year of formation, to file an annual report with the governing body within 120 days after the end of the tourism improvement area's fiscal year that includes:
a) the area activities provided for the previous year;
b) the amount of area monies spent on area activities for the previous fiscal year; and
c) the estimated amount of any surplus or deficit monies to be carried over from the previous fiscal year.
Tourism Improvement Area Plan Amendments
29. Allows, on the written request of the destination marketing organization that manages the tourism improvement area and after approval by a majority of the lodging business owners' board, to amend the tourism improvement area plan as prescribed.
30. Requires the governing body, if the amendment includes a new or increased lodging business assessment, to:
a) provide notice of a public hearing by mail to each lodging business owner that is subject to lodging business assessment in the tourism improvement area and publish the notice in a newspaper or online at least 30 days before the hearing;
b) hold a public hearing on the amendment at least 30 days after mailing the notice to the assessed lodging business owners; and
c) provide notice of any approved tourism improvement area plan amendment to ADOR in the manner required ADOR.
31. Specifies that the governing body is not required to hold a public hearing on an amendment that does not include a new or increased assessment.
32. Prohibits a tourism improvement area plan amendment from including any changes to the tourism improvement plan's boundaries.
Tourism Improvement Area Participation and Dissolution
33. Deems a lodging business owner who signed the tourism improvement area formation petition to have joined the area on its establishment.
34. Specifies that an owner of a lodging business located with the tourism improvement area who did not sign the formation petition is not a participant of the area but may join the area within 60 days after establishment of the area by filing a notice of joinder.
35. Establishes s 60-day period each year in which lodging business owners that have paid lodging business assessments may request dissolution of the tourism improvement area.
36. Requires the initial 60-day period to begin one year after the date of establishment of the tourism improvement area.
37. Requires the destination marketing organization to annually notify, six months in advance, lodging business owners within the tourism improvement area that any owner may join or withdraw from the area during the annual 60-day dissolution period.
38. Allows any lodging business owner to join or withdraw from the tourism improvement area during the annual 60-day period provided for dissolution by filing a written notice of joinder or withdrawal with the owners' board.
39. Requires
the owners' board to notify ADOR and the applicable governing body if a lodging
business owner joins or withdraws from the tourism improvement area during the
annual
60-day period.
40. Specifies that a lodging business owner that files a notice of withdrawal is not subject to the lodging business assessment and is no longer eligible for membership on the owners' board.
41. Allows a lodging business owner that has withdrawn from the tourism improvement area to rescind its withdrawal by filing written notice of rescission with the owners' board thereby becoming subject to the lodging business assessment on the first day of the fiscal year after rescission.
42. Requires the governing body, after receiving a petition submitted by the lodging business owners that represent 50 percent or more of the total assessed rooms within the tourism improvement area, to pass a resolution of intent to dissolve the area.
43. Requires the governing body to hold a hearing on the dissolution petition and provide notice of the hearing, as prescribed.
44. Allows the governing body to adopt a dissolution resolution only when the tourism improvement area has satisfied all debts or the governing body finds there has been a misappropriation of monies, malfeasance or a violation of law in connection with the management of the area.
45. Requires a dissolution resolution to state the reason for the dissolution and the time and place of the public hearing and to contain a proposal to dispose of any assets acquired with the monies of the lodging business assessments levied within the tourism improvement area.
46. Requires the governing body to conduct the public hearing at least 30 days after mailing the notice of hearing but before 60 days after adopting the dissolution resolution.
47. Requires, on dissolution or expiration of a tourism improvement area, any monies that remain after all debts of the area are paid to be spent in accordance with the tourism improvement area plan or be refunded to the lodging business owners within the area at the time of dissolution.
48. Requires monies refunded to lodging business owners to be refunded using the same method and basis used by the destination marketing organization to establish the lodging business assessments levied in the fiscal year in which the tourism improvement area terminates.
Tourism Improvement Area Renewal
49. Allows a tourism improvement area to be renewed for a new term and requires, on renewal, the governing body to transfer any remaining monies held by the area to the renewed area.
50. Allows a renewed tourism improvement area to engage in different area activities than the original area.
Lodging Business Owner Representatives
51. Allows a lodging business owner to appoint an authorized agent to act as the owner's representative for the purposes of forming and managing a tourism improvement area.
52. Considers a lodging business owner's representative as the owner for the purposes of any signature required for a formation petition, serving on a board or committee or any other purpose authorized by the owner.
53. Specifies that a governing body has no obligation to obtain other information as to the ownership of a lodging business and its determination of ownership must be final and conclusive for the purposes prescribed in statute.
Miscellaneous
54. Prohibits a governing body from forming a proposed tourism improvement area within the jurisdiction of another local government without the consent of the other jurisdiction's governing body.
55. Specifies that, unless the context otherwise requires, the statutes governing transaction privilege tax governs the administration of the lodging business assessment, except that:
a) a separate license is not required for the lodging business assessment; and
b) a separate bond is not required for employees of ADOR to administer the assessments.
56. Defines terms.
57. Contains a statement of legislative findings.
58. Becomes effective on the general effective date.
Amendments Adopted by Committee of the Whole
1. Removes the requirement for the destination marking organization that manages a tourism improvement area to establish lodging business assessments on lodging businesses within the area and removes the authority for the organization to levy the assessments.
2. Allows a city, town or county governing body to approve a lodging business assessment rate on presentation of a tourism improvement area formation petition.
3. Requires the lodging business assessment to be levied 90 days after the governing body approves the formation petition, rather than 90 days after the lodging business owners' board is established.
4. Specifies that a lodging business owner within a tourism improvement area who did not sign the formation petition is not a tourism improvement area participant.
5. Removes the specification that any lodging business that commences operations during a tourism improvement area's term is subject to a lodging business assessment.
6. Stipulates that a city, town or county governing body may amend a tourism improvement area's plan only after approval by a majority of the lodging business owners' board.
7. Specifies that the signatures of two lodging business owners that are required to be included in a tourism improvement area formation petition must be from lodging business owners that agreed to participate in the area.
8. Makes technical and conforming changes.
House Action Senate Action
RED 2/19/26 DP 7-0-0-0 FIN 3/23/26 DP 5-2-0
3rd Read 3/16/26 42-9-8-0-1
Prepared by Senate Research
April 21, 2026
MG/hk