HB2338 - 511R

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

Section 1. Title 45, Arizona Revised Statutes, is amended by adding chapter 17, to read:

CHAPTER 17

REGIONAL WATER AUGMENTATION AUTHORITIES

ARTICLE 1. FORMATION

START_STATUTE45-2901. Definitions

In this chapter, unless the context otherwise requires:

1. "Authority" means a regional water augmentation authority established under this chapter.

2. "Board" means the board of directors of the authority.

3. "Private water company" means any entity that distributes or sells water, except a political subdivision or any entity that is established pursuant to title 48 and that is not regulated as a public service corporation by the Arizona corporation commission under a certificate of public convenience and necessity.

4. "Public agency" includes this state and any county, city, town, district or other public agency or entity established under the laws of this state.

5. "Water project" means any facilities necessary or convenient to obtain, divert, withdraw, transport, exchange, deliver, treat, reuse, store, recharge or recover water, including rights-of-way, real and personal property, interests in property and improvements to property that are necessary or appropriate to maintain and operate the facilities. END_STATUTE

START_STATUTE45-2902. Formation

A. Two or more of the following entities, at least one of which must be a public agency, may form a regional water augmentation authority that has a clear public purpose:

1. Any city or town.

2. Any county.

3. Any entity established under title 45, chapter 11 or chapter 13.

4. Any entity established under title 48, chapter 4, article 6 or title 48, chapter 17, 18, 19, 20, 21, 22, 28 or 34.

5. Any domestic water or domestic water and wastewater improvement district established under title 48, chapter 6.

6. The state land department.

7. Any Indian tribe located in this state.

8. Any private entity, including a private water company.

B. The authority shall be formed on the adoption of resolutions by each participating entity approving its membership in the authority and approving the authority's formation. Each participating entity shall concurrently appoint the person who will represent it on the authority's board.

C. On full compliance with subsection B of this section, the authority shall:

1. Notify the board of supervisors in each county in which a proposed use of water from the authority will be located of the authority's formation, and file with each board of supervisors the organizational documents of the authority. The organizational documents of the authority shall include its membership, the water issues to be addressed by the authority and the proposed locations of uses of water to be supplied by the authority.

2. Publish a notice of the authority's formation once each week for two consecutive weeks in a newspaper of general circulation in the county in which a proposed use of water from the authority will be located.

3. Notify each authority member that the events prescribed by subsection B of this section have occurred.

D. Authority members must share in the costs of financing authority water projects and services of the authority.

E. Authority members are not required to have adjoining or coterminous boundaries. END_STATUTE

START_STATUTE45-2903. Protest against formation; appeal

A. Any aggrieved person or entity may protest the formation of the authority under this chapter by filing an action in the superior court in any county in which a proposed use of water from the authority will be located. The grounds for any protest are limited to whether the formation of the authority occurred in substantial compliance with section 45-2902. Any protest must be filed within thirty days after the second publication of notice of the authority's formation as provided in section 45-2902. If more than one protest is pending, they shall be consolidated for trial.

B. The superior court shall try all protests without delay and shall determine whether the formation of the authority occurred in substantial compliance with section 45-2902.

C. The formation of the authority is lawful and conclusive against all persons if an action is not filed as provided in subsection A of this section. If an action is filed as provided in subsection A of this section and that action is unsuccessful, the formation of the authority is lawful and conclusive against all persons on the date that the judgment dismissing the action is no longer subject to judicial review.

D. The authority may exercise all of the powers provided by this chapter notwithstanding the pendency of any protest. END_STATUTE

START_STATUTE45-2904. Corporate existence; exemption from regulation

A. The authority is a political subdivision of this state and is a corporate and political body that may act in its official corporate name and shall have all of the rights and immunities of municipal corporations that are granted by the constitution and statutes of this state, including immunity of its property from taxation.

B. The authority is not a public service corporation subject to regulation by the Arizona corporation commission. END_STATUTE

START_STATUTE45-2905. Dissolution of authority

A. The authority may be dissolved only by a unanimous vote of the directors and only if all contractual obligations and debts of the authority are satisfied and another governmental entity or entities accept dedication of all authority projects.

B. After unanimously voting to dissolve the authority as provided in subsection A of this section, the directors shall adopt by resolution a plan of termination to be executed within a stated period of time after it is adopted. The plan of termination is judicially enforceable.

C. All unexpended and unencumbered monies of the authority shall be deposited in the water supply development revolving fund established by section 49-1271. END_STATUTE

ARTICLE 2. POWERS AND DUTIES

START_STATUTE45-2921. Board of directors; organization; compensation

A. The authority shall have a board of directors. Each director appointed pursuant to this section shall have one vote.

B. The board consists of persons appointed by formal action of the entities that are authority members. Each authority member shall appoint one director to the board. Each director appointed pursuant to this subsection shall serve at the pleasure of the authority member that appointed the director. Each director appointed pursuant to this subsection may be removed from the board by formal action of the authority member that appointed the director. An authority member that removes a director from the board shall appoint another director to the board.

C. The board shall select a chairperson, vice-chairperson and secretary-treasurer from among its appointed directors. Officers shall serve at the pleasure of the directors.

D. Board members are not eligible to receive compensation but are eligible for reimbursement of actual and necessary expenses while engaged in official business under order of the board.

E. The board members of the authority are public officers for purposes of title 38, chapter 3, article 8. The employees of the authority are employees for purposes of title 38, chapter 3, article 8. END_STATUTE

START_STATUTE45-2922. Meetings; notice

A. The board shall hold regular meetings every calendar quarter and additional meetings on the call of the chairperson or a majority of the board members. The secretary-treasurer shall give at least three days' notice of each meeting to each board member in addition to the public notices required by law.

B. The authority is a public body for purposes of title 38, chapter 3, article 3.1.

C. A majority of the board constitutes a quorum. Except as provided in section 45-2905, all actions taken by the board require a majority vote of the board, unless the bylaws require a larger number of votes. END_STATUTE

START_STATUTE45-2923. Administrative powers and duties; executive director

A. The board shall:

1. Determine its organizational and procedural structure.

2. Adopt organizational documents that describe the authority's purpose and membership and the water issues to be addressed by the authority.

3. Adopt, amend or repeal bylaws, rules and forms consistent with the requirements of this chapter.

4. Prescribe a system of accounts.

5. Exercise the powers and duties of the authority as prescribed by this chapter.

B. The board may:

1. Set policy and manage and conduct the business and affairs of the authority.

2. Make and execute all necessary contracts, including intergovernmental agreements pursuant to title 11, chapter 7, article 3.

3. Assume, adopt and ratify contracts transferred to the authority by an authority member.

4. Sue and be sued.

5. Adopt a seal for the authority to be used to attest to documents.

6. Invest and reinvest monies belonging to the authority.

7. Incur debts, liabilities and obligations.

8. Provide for payment of all debts and appropriate claims against the authority from the appropriate funds.

9. Employ an executive director and the administrative, legal, engineering, accounting, clerical and other staff as may be necessary and prescribe the duties, terms and conditions of employment.

10. Retain outside professional services including accounting, engineering, legal and other consulting services.

11. Acquire suitable offices, furnishings and necessary equipment and supplies.

12. Perform all other acts necessary to carry out the purposes of this chapter.

C. All actions taken by the authority under this chapter shall be in accordance with state and federal law. END_STATUTE

START_STATUTE45-2924. Functional powers of the board

A. The board, in the name of the authority and for the benefit of its members, may:

1. Lawfully acquire, sell, lease, exchange, occupy, manage, possess or otherwise dispose of real and personal property, easements and rights‑of‑way that are necessary or required for water supplies and projects for the use of the members 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. Acquire, hold, assign or otherwise dispose of water rights, including long-term storage credits as defined in section 45-802.01.

4. Acquire and sell water, unless the sale of water is directly to customers of a municipal provider as defined by section 45-561 and the municipal provider did not consent to the sale of water by the authority.

5. Treat water, unless treatment conflicts with another entity's jurisdiction and the entity did not consent to treatment by the authority.

6. Lease and exchange water.

7. Transport and deliver water, subject to chapter 2, articles 8 and 8.1 of this title, relating to transportation of groundwater.

8. Charge fees for services and water sales.

9. Assess membership fees and accept capital contributions from private entities.

10. Acquire electricity or other forms of energy necessary to transport water or operate authority projects.

11. Apply for and receive financial assistance from monies in the water supply development revolving trust fund established under section 49‑1271 notwithstanding section 49‑1273, subsection C.

12. Plan, coordinate, construct, operate, maintain, dismantle and own water projects.

13. Partner with Indian tribes or federal agencies on matters relating to the purpose of the authority.

14. Obtain grants and provide technical and financial assistance to authority members relating to the development of water projects.

15. Issue revenue bonds and pledge revenues of the authority for repayment of the bonds.

16. Exercise the power of eminent domain pursuant to title 12, chapter 8, article 3 for purposes of condemning real property necessary for pipelines, infrastructure and easements for authority water projects. The authority shall not exercise the power of eminent domain to condemn water, water rights, wells, existing water systems, land owned by another governmental entity or land for purposes of drilling wells or to acquire electrical facilities.

17. Conduct any other activities that are reasonably necessary and related to the powers and duties described by this chapter.

B. The board may:

1. Apply for and hold, in its own name or on behalf of an authority member, any permits required by law to engage in the activities described in this chapter.

2. Take conveyances for all property acquired by the authority in the authority's name.

3. Sell, lease, exchange or otherwise dispose of any of the authority's property that is no longer necessary or suitable for the uses and purposes of the authority and execute, acknowledge and deliver all such conveyances, leases, contracts or other instruments as the board deems necessary.

4. Institute and maintain actions and proceedings necessary to enforce, maintain, protect or preserve all contracts, subcontracts, rights, privileges and immunities created under or granted by this chapter.END_STATUTE

START_STATUTE45-2925. Water for subdivided land outside active management area; adequate water supply requirement

If an authority receives financial assistance from the water supply development revolving trust fund pursuant to section 49-1273:

1. The authority shall not provide water to subdivided land that is located outside of an active management area and for which a public report is issued after _______________ unless the director has determined that there is an adequate water supply for that subdivided land pursuant to section 45-108.

2. A member of the authority shall not provide water to subdivided land that is located outside of an active management area and for which a public report is issued after ______________ unless the director has determined that there is an adequate water supply for that subdivided land pursuant to section 45-108 or the director has designated the member as having an adequate water supply pursuant to section 45-108. END_STATUTE

ARTICLE 3. REVENUE BONDS

START_STATUTE45-2941. Definitions

In this article, unless the context otherwise requires:

1. "Bond" means any obligation authorized and issued pursuant to this article, including:

(a) Bonds, lease-purchase and installment purchase agreements.

(b) Certificates of participation in a lease-purchase or installment purchase agreement.

(c) Obligations that are authorized and issued to refund or refinance obligations that are authorized and issued pursuant to this article.

2. "Bond related expenses" means any expenses incurred by the authority for issuing and administering its bonds, including underwriting fees and costs, trustee fees, financial consultant fees, printing and advertising costs, paying agent fees, transfer agent fees, legal, accounting, feasibility consultant and other professional fees and expenses, credit enhancement fees, attorney and accounting fees and expenses related to credit enhancement, bond insurance or liquidity enhancement, remarketing fees, rating agency fees and costs, travel and telephone expenses and all other fees considered necessary by the authority in order to market and administer the bonds.

3. "Water project purpose" includes:

(a) The capital costs of acquiring, designing, developing, constructing, reconstructing, equipping, furnishing, repairing, maintaining and improving water projects, directly related improvements and public infrastructure, except as otherwise limited by this article.

(b) the costs of acquiring water and water rights.

(d) Bond related expenses. END_STATUTE

START_STATUTE45-2942. Obligation for the bonds

Bonds issued under this article:

1. Are payable only according to their terms.

2. Are obligations of the authority.

3. Are not general, special or other obligations of this state or any authority member, or of any city or county in which the authority is located. The members of the board and persons who execute the bonds are not personally liable for payment of the bonds.

4. Do not constitute a debt of this state or of the city or county in which the authority is located.

5. Are not enforceable against this state. Payment of the bonds is enforceable only out of any monies or assets of the authority specifically pledged and assigned to or in trust for the benefit of the holder or holders of the bonds. END_STATUTE

START_STATUTE45-2943. Authorization of bonds

A. The authority may issue bonds pursuant to this article in a principal amount that, in the opinion of the board, is necessary to:

1. Provide sufficient monies for any water project purposes.

2. Establish and fully or partially fund any required reserves or sinking accounts.

3. Issue refunding bonds to refund bonds issued by the authority if the board considers refunding to be expedient. The board may provide for investing and holding the proceeds of the refunding bonds in trust for the benefit of the holders of the bonds being refunded.

4. Pay any reasonably necessary bond related expenses.

B. The board shall authorize the bonds by resolution. The resolution shall be considered for adoption at a public hearing of the board after notice to the public and shall prescribe:

1. The authority's revenue sources that are pledged and dedicated to secure the bonds.

2. The rate or rates of interest, which may be fixed or variable, the date or dates on which interest is payable and the denominations of the bonds.

3. The date or dates of the bonds and maturity, which shall be within fifty years after the date of issuance.

4. The manner of executing the bonds.

5. The medium and place of payment.

6. The terms of redemption, which may provide for a premium for early redemption.

C. Any publicly offered bonds must be fully insured or guaranteed as to timely payment of principal and interest by a financial institution rated "AA" or better by a nationally recognized rating agency. END_STATUTE

START_STATUTE45-2944. Issuance and sale of bonds

A. The board shall issue the bonds in the number and amount provided in the resolution. The board shall provide notice of its intention to issue bonds in a manner consistent with market practice.

B. The bonds may be sold by competitive public sale, through an online bidding process or at negotiated sale for public or private offering at the price and on the terms prescribed in the resolution. For the purposes of this subsection, "online bidding process" means a procurement process in which the board receives bids electronically over the internet in a real‑time, competitive bidding event.

C. The proceeds from the sale of the bonds shall be deposited in the bond proceeds account established pursuant to section 45‑2945.

D. Title 35, chapter 3, article 7 applies to the board and to bonds issued under this article. END_STATUTE

START_STATUTE45-2945. Bond proceeds account

A. If the authority issues bonds under this article, the board shall establish a bond proceeds account within the general fund consisting of monies received from the sale of the bonds.

B. The authority may use monies in the bond proceeds account only for water project purposes in the manner prescribed by this chapter.

C. The fiscal agent of the authority shall administer and account for the bond proceeds account. END_STATUTE

START_STATUTE45-2946. Debt service account

A. If the authority issues bonds under this article, the board shall establish a debt service account within the general fund consisting of monies designated and dedicated by the board for repayment of the bonds and payment of costs and related expenses associated with redeeming the bonds.

B. Monies in the debt service account may be used only for the purposes authorized by this article.

C. The fiscal agent of the authority shall administer and account for the debt service account. END_STATUTE

START_STATUTE45-2947. Securing principal and interest

In connection with issuing bonds authorized by this article and to secure the principal and interest on the bonds, the board by resolution may:

1. Pledge for the payment of principal and interest on the bonds all or part of the revenues and other monies received by the authority and deposited in the general fund or any account or subaccount of the general fund.

2. Pledge and assign to or in trust for the benefit of the holder or holders of the bonds all or part of the monies in the debt service account or any other account or subaccount as necessary to secure and pay the principal, the interest and any premium on the bonds as they come due.

3. Segregate the debt service account into one or more subaccounts and provide that bonds issued under this article may be secured by a lien on all or part of the monies paid into the debt service account or into any subaccount in the debt service account.

4. Establish priorities among bondholders based on criteria adopted by the board.

5. Set aside, regulate and dispose of reserves and sinking accounts.

6. Prescribe the procedure, if any, by which the terms of any contract with bondholders may be amended or abrogated, the amount of bonds the holders of which must consent to and the manner in which the consent may be given.

7. Provide for payment of bond related expenses from the proceeds of the sale of the bonds or other revenues available to the board.

8. Provide for the services of trustees, cotrustees, agents and consultants and other specialized services with respect to the bonds.

9. Take any other action that in any way may enhance the security and protection of the bonds or interest on the bonds. END_STATUTE

START_STATUTE45-2948. Lien of pledge

A. Any pledge made under this article is valid and binding from the time when the pledge is made.

B. The monies pledged to the holders of the bonds and received by the authority for placement in the debt service account are immediately subject to the lien of the pledge without any further act. Any lien of any pledge is valid and binding against all parties who have claims of any kind against the authority, regardless of whether the parties have notice of the lien. The official resolution or any instrument by which this pledge is created, when adopted by the board, is notice to all concerned of the creation of the pledge, and those instruments need not be recorded in any other place to perfect the pledge. END_STATUTE

START_STATUTE45-2949. Bond purchase for cancellation

The board may purchase bonds for cancellation, using any available monies, at a price not exceeding the following:

1. If the bonds are redeemable at the time of purchase, the applicable redemption price plus accrued interest to the next interest payment date.

2. If the bonds are not redeemable at the time of purchase, the applicable redemption price on the first date after purchase on which the bonds become subject to redemption plus accrued interest to that date. END_STATUTE

START_STATUTE45-2950. Payment of bonds

A. The bonds shall be paid solely from monies in the debt service account.

B. The members of the board and any persons who execute the bonds are not personally liable for the payment of the bonds.

C. The fiscal agent of the authority shall cancel all bonds when paid. END_STATUTE

START_STATUTE45-2951. Use of surplus monies

A. If a balance remains in the bond proceeds account after all acquisition, construction and related costs have been paid:

1. The board shall credit the balance to repay any other outstanding indebtedness of the authority.

2. If the authority has no outstanding indebtedness, the board shall credit the remaining balance to the authority's general fund.

B. If a balance remains in the debt service account after payment of all bonds, interest and other charges related to bonds issued under this article, the board shall credit the balance to the general fund. END_STATUTE

START_STATUTE45-2952. Investment of monies in the bond proceeds account

A. The board may authorize the authority fiscal agent to invest monies in the bond proceeds account in the manner prescribed by section 45‑2954.

B. The order directing an investment shall state a date on which the proceeds from the sale of the bonds will be needed for use, and the fiscal agent shall make the investment in such a way as to mature on or before the specified date.

C. All monies earned as interest or otherwise derived from the investment of the monies in the bond proceeds account shall be credited to the bond proceeds account. END_STATUTE

START_STATUTE45-2953. Investment of monies in the debt service account

A. The board may authorize the authority fiscal agent to invest and reinvest any monies in the debt service account as provided by section 45‑2954.

B. The order directing an investment shall state a date on which the monies and other resources in the debt service account will be needed for use, and the fiscal agent shall make the investment in such a way as to mature on or before the specified date.

C. All monies earned as interest or otherwise derived from the investment of the monies in the debt service account shall be credited to the authority's general fund. END_STATUTE

START_STATUTE45-2954. Authorized investments of monies

A. The monies in either the bond proceeds account or the debt service account may be invested and reinvested at the direction of the board in any of the following:

1. United States treasury obligations.

2. Consolidated farm loan bonds.

3. Obligations issued by the federal intermediate credit banks or bonds for cooperatives on authority of the farm credit act of 1933.

4. Any other obligations guaranteed by the United States government.

5. Any investments that are authorized by any other agencies of the United States government and that are authorized to secure public deposits.

6. State and local government series United States treasury securities.

7. State, county or municipal bonds issued in this state and on which the payments of interest have not been deferred.

8. Investment agreements and repurchase agreements collateralized by investments described in paragraphs 1 through 5.

B. The purchase of the securities shall be made by the authority fiscal agent on authority of a resolution of the board. The fiscal agent shall act as custodian of all securities purchased.

C. The board may place any restrictions on reinvestment yield on bond proceeds or on any monies pledged to pay the bonds if necessary to comply with federal income tax laws and regulations to gain any federal tax benefits available with respect to the bonds. END_STATUTE

START_STATUTE45-2955. Deposit and disbursement of monies

A. Monies derived from selling bonds under this article or pledged or assigned to or in trust for the benefit of the holder or holders of the bonds shall be deposited by the authority fiscal agent in financial institutions that the board designates and that are insured by an agency or instrumentality of the United States. The monies shall be disbursed as the board directs and according to the terms of any agreements with the holder or holders of the bonds.

B. This section does not limit the power of the board to agree in connection with the issuance of any of its bonds as to the custody and disposition of the monies received from selling bonds or from the income and revenues pledged or assigned to or in trust for the benefit of the holder or holders of the bonds. END_STATUTE

START_STATUTE45-2956. Characteristics of bonds; negotiability; legal investments; exemption from taxation

A. Bonds issued under this article are fully negotiable within the meaning and for all purposes of the uniform commercial code, subject only to any provisions for registration, regardless of whether the bonds actually constitute negotiable instruments under the uniform commercial code.

B. The bonds, their transfer and the income from the bonds are at all times free from taxation in this state.

C. Bonds issued under this article:

1. Are securities in which public officers and bodies of this state and of municipalities and political subdivisions of this state, all companies, associations and other persons carrying on an insurance business, all financial institutions, investment companies and other persons carrying on a banking business, all fiduciaries and all other persons who are authorized to invest in government obligations may properly and legally invest.

2. Are securities that may be deposited with public officers or bodies of this state and municipalities and political subdivisions of this state for purposes that require the deposit of government bonds or obligations. END_STATUTE

START_STATUTE45-2957. Effect of changing circumstances on bonds; agreement of state

A. Bonds issued under this article remain valid and binding obligations of the authority notwithstanding that before the delivery of the bonds any person whose signature appears on the bonds ceases to be an officer of the authority.

B. An amendment of any provision in this chapter does not diminish or impair the validity of bonds issued under this article or the remedies and rights of bondholders.

C. This state pledges to and agrees with the holders of the bonds authorized by this article that this state will not limit, alter or impair the rights vested in the authority to receive the monies necessary to fulfill the terms of any agreements made with the holders of the bonds, or in any way impair the rights and remedies of the bondholders, until all bonds issued under this article, together with interest on the bonds, interest on any unpaid installments of principal or interest and all costs and expenses in connection with any action or proceedings by or on behalf of the bondholders, are fully met and discharged. The board, as agent for this state, may include this pledge and undertaking in its resolutions and indentures authorizing and securing its bonds. END_STATUTE

START_STATUTE45-2958. Validity of bonds; legal opinion

A. This article constitutes full authority for authorizing and issuing bonds without reference to any other law of this state. No other law with regard to authorizing or issuing obligations or that in any way impedes or restricts performing the acts authorized by this article may be construed to apply to any proceedings taken or acts done pursuant to this article.

B. The validity of bonds issued under this article does not depend on and is not affected by the legality of any proceeding relating to the acquisition, construction, improvement, operation or maintenance of a water project for which the bonds are issued.

C. The board may submit any bonds to be issued under this article to legal counsel after all proceedings for authorizing the bonds have been completed. On submission the counsel shall examine and pass on the validity of the bonds and the regularity of the proceedings. If the proceedings comply with this article, and if the bonds when delivered and paid for will constitute binding and legal obligations of the authority, the counsel shall certify on the back of each bond, in substance, that it is issued according to the constitution and laws of this state and that the interest on the bonds will be exempt from state taxes as provided by law.

D. The bonds shall recite that they are regularly issued pursuant to this article. That recital, together with the legal opinion under subsection C, constitutes prima facie evidence of the legality and validity of the bonds. From and after the sale and delivery of the bonds, they are incontestable by this state or the district. END_STATUTE

Sec. 2. Section 48-6415, Arizona Revised Statutes, is amended to read:

START_STATUTE48-6415. District and municipal water delivery systems in district eligible to receive financial assistance from water supply development revolving trust fund

The district is deemed to be a water provider for the purposes of title 49, chapter 8. The district and municipal water delivery systems serving water in the district are eligible to apply for and receive financial assistance from monies in the water supply development revolving trust fund established under section 49‑1271 notwithstanding section 49‑1273, subsection C.END_STATUTE

Sec. 3. Section 49-1201, Arizona Revised Statutes, is amended to read:

START_STATUTE49-1201. Definitions

In this chapter, unless the context otherwise requires:

1. "Authority" means the water infrastructure finance authority of Arizona.

2. "Board" means the board of directors of the authority.

3. "Bonds of a political subdivision" means bonds issued by a political subdivision as authorized by law.

4. "Clean water act" means the federal water pollution control act amendments of 1972 (P.L. 92‑500; 86 Stat. 816), as amended by the water quality act of 1987 (P.L. 100‑4; 101 Stat. 7).

5. "Committee" means the water supply development fund committee established by section 49-1202, subsection B.

6. "Drinking water facility" means a community water system or a nonprofit noncommunity water system as defined in the safe drinking water act (P.L. 93‑523; 88 Stat. 1660; P.L. 95‑190; 91 Stat. 1393; P.L. 104‑182; 110 Stat. 1613) that is located in this state. For purposes of this article chapter, drinking water facility does not include water systems owned by federal agencies.

7. "Financial assistance loan repayment agreement" means an agreement to repay a loan provided to design, construct, acquire, rehabilitate or improve water or wastewater infrastructure, related property and appurtenances or a loan provided to finance a water supply development project.

8. "Indian tribe" means any Indian tribe, band, group or community that is recognized by the United States secretary of the interior and that exercises governmental authority within the limits of any Indian reservation under the jurisdiction of the United States government, notwithstanding the issuance of any patent and including rights‑of‑way running through the reservation.

9. "Nonpoint source project" means a project designed to implement a certified water quality management plan.

10. "Political subdivision" means a county, city, town or special taxing district authorized by law to construct wastewater treatment facilities, drinking water facilities or nonpoint source projects, and includes a regional water augmentation authority.

11. "Regional water augmentation authority" means an authority established pursuant to title 45, chapter 17.

11. 12. "Safe drinking water act" means the federal safe drinking water act (P.L. 93‑523; 88 Stat. 1660; P.L. 95‑190; 91 Stat. 1393; P.L. 104‑182; 110 Stat. 1613), as amended in 1996.

12. 13. "Technical assistance loan repayment agreement" means either of the following:

(a) An agreement to repay a loan provided to develop, plan and design water or wastewater infrastructure, related property and appurtenances. The agreement shall be for a term of not more than three years and the maximum amount that may be borrowed is limited to not more than five hundred thousand dollars.

(b) An agreement to repay a loan provided to develop, plan or design a water supply development project.

13. 14. "Wastewater treatment facility" means a treatment works, as defined in section 212 of the clean water act, that is located in this state and that is designed to hold, cleanse or purify or to prevent the discharge of untreated or inadequately treated sewage or other polluted waters for purposes of complying with the clean water act.

14. 15. "Water provider" means any of the following:

(a) A municipal water delivery system as defined in section 42‑5301, paragraphs 1 and 3.

(b) A municipal water delivery system as defined in section 42‑5301, paragraph 2, which has entered into a partnership with a city, town or county for a water supply augmentation plan.

(d) A county water authority established under title 45, chapter 13.

(e) An Indian tribe.

(f) A community facilities district as established by title 48, chapter 4.

15. 16. "Water supply development" means either of the following:

(a) The acquisition of water or rights to or contracts for water to augment the water supply of a water provider, including any environmental or other reviews, permits or plans reasonably necessary for that acquisition.

(b) The development of facilities, including any environmental or other reviews, permits or plans reasonably necessary for those facilities, for any of the following purposes:

(i) Conveyance, storage or recovery of water.

(ii) Reclamation and reuse of water.

(iii) Replenishment of groundwater. END_STATUTE

Sec. 4. Section 49-1202, Arizona Revised Statutes, is amended to read:

START_STATUTE49-1202. Water infrastructure finance authority of Arizona; board; water supply development fund committee; violation; classification

A. The water infrastructure finance authority of Arizona is established. A board of directors shall govern the authority. The board of directors consists of:

1. The director of environmental quality, or the director's representative, who serves as chairman.

2. The chief executive officer of the Arizona commerce authority or the chief executive officer's representative.

3. The state treasurer or the treasurer's representative.

4. One member who is appointed by the governor to represent municipalities with populations of fifty thousand persons or more.

5. One member who is appointed by the governor to represent municipalities with populations of less than fifty thousand persons from a county with a population of less than five hundred thousand persons.

6. One member who is appointed by the governor to represent counties with populations of five hundred thousand persons or more.

7. One member who is appointed by the governor to represent sanitary districts in counties with populations of less than five hundred thousand persons.

8. The director of water resources or the director's representative.

9. The chairman of the Arizona corporation commission or the chairman's representative.

10. One member who is appointed by the governor from a public water system that serves five hundred persons or more.

11. One member who is appointed by the governor from a public water system that serves fewer than five hundred persons.

12. One member who is appointed by the governor to represent Indian tribes.

B. The water supply development fund committee of the authority is established. The committee consists of:

1. The director of water resources, or the director's representative, who serves as chairperson of the committee.

2. The director of environmental quality, or the director's representative, who serves as vice‑chairperson of the committee.

3. The chairman of the Arizona corporation commission or the chairman's representative.

4. The state treasurer or the treasurer's representative.

5. One member who is appointed by the governor to represent municipalities with populations of fifty thousand persons or more but less than one hundred thousand persons.

6. One member who is appointed by the governor to represent municipalities with populations of less than fifty thousand persons from a county with a population of less than five hundred thousand persons.

7. One member who is appointed by the governor to represent municipalities with populations of more than one hundred thousand persons in a county with a population of eight hundred thousand persons or more and less than one million five hundred thousand persons.

7. 8. One member who is appointed by the governor to represent counties with populations of less than eight hundred thousand persons.

8. 9. One member who is appointed by the governor to represent counties with populations of eight hundred thousand persons or more but less than one million five hundred thousand persons.

9. 10. One member who is appointed by the governor to represent counties with populations of one million five hundred thousand persons or more.

10. 11. One member who is appointed by the governor to represent cities with populations of more than one hundred thousand persons in counties with populations of more than one million persons.

11. 12. One member who is appointed by the governor from a public service corporation that serves one thousand eight hundred fifty persons or more.

12. 13. One member who is appointed by the governor from a public water system that serves fewer than one thousand eight hundred fifty persons.

13. 14. One member who is appointed by the governor to represent Indian tribes.

C. Members of the board and the committee who are appointed by the governor serve at the governor's pleasure and serve staggered five year terms. Members of the board and the committee are not eligible to receive compensation for their services but are eligible for reimbursement for travel and other expenses pursuant to title 38, chapter 4, article 2. Members of the board and the committee are public officers for purposes of title 38, and the authority and the committee are public bodies for purposes of title 38, chapter 3, article 3.1.

D. Members of the board shall not have any direct or indirect personal financial interest in any clean water or drinking water project financed under this article. Members of the committee shall not have any direct or indirect personal financial interest in any water supply development project financed under this article. For the purposes of this subsection, a member of the board or the committee who is a full‑time employee of a participant in or applicant for a loan does not have a direct or indirect personal financial interest in a project. A violation of this subsection is a class 1 misdemeanor.

E. The department of environmental quality shall provide clerical support and office and meeting space to the board.

F. The department of water resources shall provide technical assistance to the committee as requested by the committee. END_STATUTE

Sec. 5. Section 49-1203, Arizona Revised Statutes, is amended to read:

START_STATUTE49-1203. Powers and duties of authority; definition

A. The authority is a corporate and politic body and shall have an official seal that shall be judicially noticed. The authority may sue and be sued, contract and acquire, hold, operate and dispose of property.

B. The authority, through its board, may:

1. Issue negotiable water quality bonds pursuant to section 49‑1261 for the following purposes:

(a) To generate the state match required by the clean water act for the clean water revolving fund and to generate the match required by the safe drinking water act for the drinking water revolving fund.

(b) To provide financial assistance to political subdivisions, Indian tribes and eligible drinking water facilities for constructing, acquiring or improving wastewater treatment facilities, drinking water facilities, nonpoint source projects and other related water quality facilities and projects.

2. Issue water supply development bonds for the purpose of providing financial assistance to water providers for water supply development purposes pursuant to sections 49‑1274 and 49‑1275.

3. Provide financial assistance to political subdivisions and Indian tribes from monies in the clean water revolving fund to finance wastewater treatment projects.

4. Provide financial assistance to drinking water facilities from monies in the drinking water revolving fund to finance these facilities.

5. Provide financial assistance to water providers from monies in the water supply development revolving trust fund to finance water supply development.

6. Guarantee debt obligations of, and provide linked deposit guarantees through third party lenders to:

(a) Political subdivisions that are issued to finance wastewater treatment projects.

(b) Drinking water facilities that are issued to finance these facilities.

7. Provide linked deposit guarantees through third party lenders to political subdivisions, drinking water facilities and water providers.

8. Apply for, accept and administer grants and other financial assistance from the United States government and from other public and private sources.

9. Enter into capitalization grant agreements with the United States environmental protection agency.

10. Adopt rules pursuant to title 41, chapter 6 governing the application for and awarding of wastewater treatment facility, drinking water facility and nonpoint source project financial assistance under this chapter, the administration of the clean water revolving fund and the drinking water revolving fund and the issuance of water quality bonds.

11. Subject to title 41, chapter 4, article 4, hire a director and staff for the authority.

12. Contract for the services of outside advisors, attorneys, consultants and aides reasonably necessary or desirable to allow the authority to adequately perform its duties.

13. Contract and incur obligations as reasonably necessary or desirable within the general scope of authority activities and operations to allow the authority to adequately perform its duties.

14. Assess financial assistance origination fees and annual fees to cover the reasonable costs of administering the authority and the monies administered by the authority. Any fees collected pursuant to this paragraph constitute governmental revenue and may be used for any purpose consistent with the mission and objectives of the authority.

15. Perform any function of a fund manager under the CERCLA Brownfields cleanup revolving loan fund program as requested by the department. The board shall perform any action authorized under this article on behalf of the Brownfields cleanup revolving loan fund program established pursuant to chapter 2, article 1.1 of this title at the request of the department. In order to perform these functions, the board shall enter into a written agreement with the department.

16. Provide grants, staff assistance or technical assistance in the form of loan repayment agreements and other professional assistance to political subdivisions, any county with a population of less than five hundred thousand persons, Indian tribes and community water systems in connection with the development or financing of wastewater, drinking water, water reclamation or related water infrastructure. Assistance provided under a technical assistance loan repayment agreement shall be in a form and under terms determined by the authority and shall be repaid not more than three years after the date that the monies are advanced to the applicant. The provision of technical assistance by the authority does not create any liability for the authority or this state regarding the design, construction or operation of any infrastructure project.

17. Provide grants, staff assistance or technical assistance in the form of loan repayment agreements and other professional assistance to water providers in connection with the planning or design of water supply development projects as determined by the committee pursuant to section 49‑1274. A single grant shall not exceed one hundred thousand dollars. Assistance provided under a technical assistance loan repayment agreement shall be in a form and under terms determined by the committee and shall be repaid not more than three years after the date that the monies are advanced to the applicant. The provision of technical assistance by the authority or the committee does not create any liability for the authority, the committee or this state regarding the design, construction or operation of any water supply development project.

C. The authority, in consultation with the committee, may:

1. Adopt rules pursuant to title 41, chapter 6 governing the application for and awarding of water supply development fund project financial assistance under this chapter and the administration of the water supply development revolving trust fund.

2. Appoint a technical advisory subcommittee of not more than five persons with expertise in water resource planning and development to advise the committee regarding the technical feasibility of water supply development projects.

D. The board shall deposit, pursuant to sections 35‑146 and 35‑147, any monies received pursuant to subsection B, paragraph 8 of this section in the appropriate fund as prescribed by the grant or other financial assistance agreement.

E. Disbursements of monies by the water infrastructure finance authority pursuant to a financial assistance agreement are not subject to title 41, chapter 23.

F. For the purposes of the safe drinking water act, the department of environmental quality is the state agency with primary responsibility for administration of this state's public water system supervision program and, in consultation with other appropriate state agencies, is the lead agency in establishing assistance priorities as prescribed by section 49‑1243, subsection A, paragraph 6 and section 49‑1244, subsection B, paragraph 3.

G. For the purposes of this section, "CERCLA" has the same meaning prescribed in section 49‑201. END_STATUTE

Sec. 6. Section 49-1271, Arizona Revised Statutes, is amended to read:

START_STATUTE49-1271. Water supply development revolving trust fund; legislative intent

A. The water supply development revolving trust fund is established for the exclusive purpose of implementing, continuing and supporting the findings established in subsection E of this section, and all monies collected under the provisions of this article and title 45, chapter 17 shall be deposited in the trust fund. The water supply development revolving trust fund is to be maintained in perpetuity consisting of:

1. Monies received from the issuance and sale of water supply development bonds under section 49‑1278.

2. Monies appropriated by the legislature to the water supply development revolving trust fund.

3. Monies received for water supply development purposes from the United States government.

4. Monies received from water providers and regional water augmentation authorities as loan repayments, interest and penalties.

5. Interest and other income received from investing monies in the fund.

6. Gifts, grants and donations received for water supply development purposes from any public or private source.

B. Monies in the fund are continuously appropriated and are exempt from the provisions of section 35‑190 relating to lapsing of appropriations.

B. The executive director of the authority shall administer the trust fund as trustee. The state treasurer shall accept, separately account for and hold in trust any monies deposited in the state treasury, which are considered to be trust monies as defined in section 35‑310 and which shall not be commingled with any other monies in the state treasury except for investment purposes. On notice from the executive director, the state treasurer shall invest and divest any trust fund monies deposited in the state treasury as provided by sections 35‑313 and 35‑314‑03, and monies earned from investment shall be credited to the trust fund.

C. The beneficiaries of the trust are the programs established by this article and by title 45, chapter 17. The trust fund shall be used solely for the purposes of this article and title 45, chapter 17 on the order of the executive director.

D. Surplus monies, including any unexpended and unencumbered balance at the end of the fiscal year, do not revert to the state general fund.

C. E. The legislature finds that many water providers entities that provide water in this state, particularly in rural areas, lack access to sufficient water supplies to meet their long‑term water demands and need financial assistance to construct water supply projects and obtain additional water supplies. It is the intent of the legislature that the water supply development revolving trust fund established by this section be used to provide financial assistance to these water providers eligible entities under the terms set forth in this article. END_STATUTE

Sec. 7. Repeal

Section 49‑1272, Arizona Revised Statutes, is repealed.

Sec. 8. Section 49-1273, Arizona Revised Statutes, is amended to read:

START_STATUTE49-1273. Water supply development revolving trust fund; purposes; limitation

A. Monies in the water supply development revolving trust fund may be used for the following purposes:

1. Making water supply development loans to water providers and regional water augmentation authorities in this state under section 49‑1274 for water supply development purposes.

2. Making loans or grants to water providers and regional water augmentation authorities for the planning or design of water supply development projects. A single grant shall not exceed one hundred thousand dollars.

3. Purchasing or refinancing debt obligations of water providers and regional water augmentation authorities at or below market rate if the debt obligation was issued for a water supply development purpose.

4. Providing financial assistance to water providers and regional water augmentation authorities with bonding authority to purchase insurance for local bond obligations incurred by them for water supply development purposes.

5. Paying the costs to administer the fund.

6. Providing linked deposit guarantees through third party lenders by depositing monies with the lender on the condition that the lender make a loan on terms approved by the committee, at a rate of return on the deposit approved by the committee and the state treasurer and by giving the lender recourse against the deposit of loan repayments that are not made when due.

B. If the monies pledged to secure water supply development bonds issued pursuant to section 49‑1278 become insufficient to pay the principal and interest on the water supply development bonds guaranteed by the water supply development revolving trust fund, the authority shall direct the state treasurer to liquidate securities in the fund as may be necessary and shall apply those proceeds to make current all payments then due on the bonds. The state treasurer shall immediately notify the attorney general and auditor general of the insufficiency. The auditor general shall audit the circumstances surrounding the depletion of the fund and report the findings to the attorney general. The attorney general shall conduct an investigation and report those findings to the governor and the legislature.

C. Except as provided in section 45‑2925, monies in the water supply development revolving trust fund shall not be used to provide financial assistance to a water provider, other than an Indian tribe, unless one of the following applies:

1. The board of supervisors of the county in which the water provider is located has adopted the provision authorized by section 11‑823, subsection A.

2. The water provider is located in a city or town and the legislative body of the city or town has enacted the ordinance authorized by section 9‑463.01, subsection O.

3. The water provider is located in an active management area established pursuant to title 45, chapter 2, article 2.END_STATUTE

Sec. 9. Section 49-1274, Arizona Revised Statutes, is amended to read:

START_STATUTE49-1274. Water supply development revolving trust fund financial assistance; procedures

A. In compliance with any applicable requirements, a water provider or a regional water augmentation authority may apply to the authority for and accept and incur indebtedness as a result of a loan or any other financial assistance pursuant to section 49‑1273 from the water supply development revolving trust fund for water supply development purposes. In compliance with any applicable requirements, a water provider or a regional water augmentation authority may also apply to the authority for and accept grants, staff assistance or technical assistance for the planning or design of a water supply development project. A water provider that applies for and accepts a loan or other financial assistance under this article is not precluded from applying for and accepting a loan or other financial assistance under article 2 of this chapter or under any other law.

B. The authority, in consultation with the committee, shall:

1. Prescribe a simplified form and procedure to apply for and approve assistance.

2. Establish by rule criteria by which assistance will be awarded, including requirements for local participation in project costs, if deemed advisable. The criteria shall include:

(a) A determination of the ability of the applicant to repay a loan according to the terms and conditions established by this section. At the option of the committee, the existence of a current investment grade rating on existing debt of the applicant that is secured by the same revenues to be pledged to secure repayment under the loan repayment agreement constitutes evidence regarding ability to repay a loan.

(b) A determination of the applicant's legal capability to enter into a loan repayment agreement.

(c) A determination of the applicant's financial ability to construct, operate and maintain the project if it receives the financial assistance.

(d) A determination of the applicant's ability to manage the project.

(e) A determination of the applicant's ability to meet any applicable environmental requirements imposed by federal or state agencies.

(f) A determination of the applicant's ability to acquire any necessary regulatory permits.

(g) For projects involving a regional water augmentation authority, a determination of the applicant's ability to comply with section 45‑2925.

3. Determine the order and priority of projects assisted under this section based on the merits of the application with respect to water supply development issues, including the following:

(a) Existing, near-term and long-term water demands of the water provider or regional water augmentation authority compared to the existing water supplies of the water provider or regional water augmentation authority.

(b) Existing and planned conservation and water management programs of the water provider or regional water augmentation authority.

(d) The sustainability of the water supply to be developed through the project.

(e) The water provider's or regional water augmentation authority's need for financial assistance.

(f) The cost-effectiveness of the project.

C. The committee shall review on its merits each application received and shall inform the applicant of the committee's determination within ninety days after receipt of a complete and correct application. If the application is not approved, the committee shall notify the applicant, stating the reasons. If the application is approved, the committee may condition the approval on assurances the committee deems necessary to ensure that the financial assistance will be used according to law and the terms of the application.

D. On approval of an application under this section by the committee, the authority shall use monies in the water supply development revolving trust fund to finance the project. END_STATUTE

Sec. 10. Section 49-1275, Arizona Revised Statutes, is amended to read:

START_STATUTE49-1275. Water supply development revolving trust fund financial assistance; terms

A. A loan from the water supply development revolving trust fund shall be evidenced by bonds, if the water provider or regional water augmentation authority has bonding authority, or by a financial assistance agreement, delivered to and held by the authority.

B. A loan under this section shall:

1. Be repaid not more than thirty fifty years after the date incurred.

2. Require that interest payments begin not later than the next date that either principal or interest must be paid by the authority to the holders of any of the authority's bonds that provided funding for the loan. If the loan is for construction of water supply development facilities, the authority may provide that loan interest accruing during construction and one year after completion of the construction be capitalized in the loan.

3. Be conditioned on the establishment of a dedicated revenue source for repaying the loan.

C. The authority, in consultation with the committee, shall prescribe the rate of interest on loans made under this section, but the rate shall not exceed the prevailing market rate for similar types of loans. The authority, upon on recommendations from the committee, may adopt rules which that provide for flexible interest rates and interest free loans. All financial assistance agreements or bonds of a water provider or regional water augmentation authority shall clearly specify the amount of principal and interest and any redemption premium that is due on any payment date.

D. The approval of a loan is conditioned on a written commitment by the water provider borrower to complete all applicable reviews and approvals and to secure all required permits in a timely manner.

E. A loan made to a water provider borrower under this section may be secured additionally by an irrevocable pledge of any shared state revenues due to the water provider borrower for the duration of the loan as prescribed by a resolution of the committee. If the committee requires an irrevocable pledge of the shared state revenues for financial assistance loan repayment agreements, the authority shall enter into an intercreditor agreement with the greater Arizona development authority to define the allocation of shared state revenues in relation to individual borrowers. If a pledge is required and a water provider borrower fails to make any payment due to the authority under its loan repayment agreement or bonds, the authority shall certify to the state treasurer and notify the governing body of the defaulting water provider borrower that the water provider borrower has failed to make the required payment and shall direct a withholding of state shared revenues as prescribed in subsection F of this section. The certificate of default shall be in the form determined by the authority, except that the certificate shall specify the amount required to satisfy the unpaid payment obligation of the water provider borrower.

F. On receipt of a certificate of default from the authority, the state treasurer, to the extent not expressly prohibited by law, shall withhold any monies due to the defaulting water provider borrower from the next succeeding distribution of monies pursuant to section 42‑5029. In the case of a city or town, the state treasurer shall also withhold from the monies due to the defaulting city or town from the next succeeding distribution of monies pursuant to section 43‑206 the amount specified in the certificate of default and shall immediately deposit the monies in the water supply development revolving trust fund. The state treasurer shall continue to withhold and deposit monies until the authority certifies to the state treasurer that the default has been cured. The state treasurer shall not withhold any amount that is necessary to make any required deposits then due for the payment of principal and interest on bonds of the water provider borrower if so certified by the defaulting water provider borrower to the state treasurer and the authority. The water provider borrower shall not certify deposits as necessary for payment for bonds unless the bonds were issued before the date of the loan repayment agreement and the bonds were secured by a pledge of distribution made pursuant to sections 42‑5029 and 43‑206. END_STATUTE

Sec. 11. Section 49-1278, Arizona Revised Statutes, is amended to read:

START_STATUTE49-1278. Water supply development bonds; purpose

A. Water supply development bonds may be issued to provide financial assistance under this article and to increase the capitalization of the water supply development revolving trust fund to accomplish the purposes stated in section 49‑1273. These bonds may be secured by any monies received or to be received in the water supply development revolving trust fund. Amounts in the water supply development revolving trust fund may be used to cure defaults on loans made from the water supply development revolving trust fund to the extent otherwise permitted by law.

B. Any pledge made under this article is valid and binding from the time when the pledge is made. 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 in tort, contract or otherwise against the board regardless of whether the parties have notice of the lien. The official resolution or trust indenture or any instrument by which this pledge is created, when placed in the board's records, is notice to all concerned of the creation of the pledge, and those instruments need not be recorded in any other place.

C. The bonds issued under this section, their transfer and the income they produce are exempt from taxation by this state or by any political subdivision of this state. END_STATUTE

Sec. 12. Appropriation; water supply development revolving trust fund; purpose; exemption from lapsing

A. The sum of $30,000,000 is appropriated from the state general fund in fiscal year 2013-2014 to the water supply development revolving trust fund established pursuant to section 49-1271, Arizona Revised Statutes, as amended by this act, for the purposes provided in this act.

B. The appropriation made in this section is exempt from the provisions of section 35-190, Arizona Revised Statutes, relating to lapsing of appropriations.