House Engrossed

cities; towns; water service; audit

State of Arizona

House of Representatives

Fifty-sixth Legislature

Second Regular Session

2024

HOUSE BILL 2030

An Act

providing for an audit of municipal water systems.

(TEXT OF BILL BEGINS ON NEXT PAGE)

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

Section 1. Municipal water systems; audit and study; delayed repeal

A. A city or town with a population of more than two hundred forty thousand persons that has a designation of assured water supply pursuant to section 45-576, Arizona Revised Statutes, and that is located within an initial active management area as prescribed in section 45-411, Arizona Revised Statutes, shall hire an independent auditor to conduct a full rate audit and cost-of-service study of the city's or town's water and sewer service if the city or town has done any of the following:

1. Entered into a contract or subcontract with the central Arizona project.

2. Participated in an intentionally created surplus program.

3. Received federal monies for voluntary conservation measures of the Colorado River.

4. Sold long-term storage credits held pursuant to section 45-852.01, Arizona Revised Statutes, to a third party using effluent generated within the city's or town's water service area.

B. For the purposes of the rate audit and cost-of-service study:

1. A city or town shall provide all books and records requested by the auditor.

2. The auditor's report is a public record pursuant to title 39, Arizona Revised Statutes.

C. The auditor shall investigate:

1. The cost of hookup fees that are charged and collected by the city or town, the methods, factors and formulas that are used to determine hookup fees, the specific assets that are funded with hookup fees and the amount of the capital assets that are included in utility rates.

2. The revenue that is earned from hookup fees.

3. The used and usefulness of excess capacity and capital expenditures across all asset classes, including unpledged long-term storage credits and other stored water that are held by the city or town.

4. The reasonableness and prudence of all capital and operating expenditures that are incurred and planned compared to known and reasonable alternatives.

5. The amount of monies that is charged to customers for nonutility related expenses, including operating transfers, operating reserves, capital stabilization reserves and franchise fees.

6. Whether customers are double charged for any water or sewer service and the gross amount of those charges.

7. The amount of revenue that the city or town has collected from the sale of effluent or long-term storage credits and whether the monies collected were used to offset utility rates for consumers.

8. The amount of revenue that the city or town has collected from the federal government for voluntary system conservation and whether the monies collected were used to offset utility rates for consumers.

9. Whether any acquisition premiums are included in utility rates and the amount of those acquisition premiums.

10. The amount of revenues from contracts with commercial or industrial customers or other private or municipal water service providers and whether proceeds from those revenues are used to offset utility rates, including the amount of the proceeds and offsets.

11. Details on all land included in utility rates, whether vacant or not or used for the provision of utility service or other municipal services or purposes.

12. The allocation of shared resources included in utility rates, including office supplies, fleet vehicles, information, technology and other shared resources.

13. The cost of recordkeeping for utility infrastructure.

14. The rate of water loss and whether the cost of lost water is included in utility rates, including the amount of that cost.

15. The amount of city or county taxes or fees that have been used to offset utility costs and the amount of utility rates that are used to offset city or county taxes or fees.

16. Whether any utility revenue is used for nonutility purposes.

D. On or before January 1, 2025, the city or town shall submit a copy of the auditor's report to the governor, the president of the senate and the speaker of the house of representatives and provide a copy of the rate audit and cost-of-service study to the secretary of state.

E. This section is repealed from and after December 31, 2026.