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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
community facilities districts; prompt pay
Purpose
Deems a municipality or county that authorized formation of a community facilities district (CFD) to be liable for unpaid payments for the construction of public infrastructure and authorizes the municipality or county to monitor and periodically audit CFD construction contract payments. Applies the Arizona Prompt Pay Act to construction contracts for CFD public infrastructure.
Background
A declaration of intention to form a CFD requires the owners of at least 25 percent of the proposed land area to sign a petition and, after a public hearing, the governing body of the municipality or county may adopt a resolution declaring its intent to form a CFD that is wholly within the corporate boundaries of the municipality or county. The resolution must include: 1) the purpose of the CFD; 2) a general plan setting out a description of the CFD's proposed public infrastructure, the general areas to be improved and the estimated costs of construction or acquisition of the public infrastructure to be financed, constructed or acquired; 3) that formation of the CFD may result in a levy of taxes to pay the costs of improvements, operation and maintenance; and 4) whether the CFD will be governed by a CFD board that consists of members of the governing body, ex officio, with two additional members or, at the option of the governing body, five directors appointed by the governing body.
The projects to be constructed
or acquired as shown in the general plan may be financed from the following
sources of revenue: 1) proceeds received from the sale of bonds issued for the
purpose of providing monies for any public infrastructure purposes
consistent with the general plan; 2)
monies of the municipality or county contributed to the CFD; 3) annual tax
levies;
4) special assessments; 5) state or federal grants or contributions; 6) private
contributions; 7) user, landowner and other fees and charges; 8) proceeds of
loans or advances; and 9) any other monies available to the CFD by law (A.R.S. ยง 48-702 and 48-720).
The Arizona Prompt Pay Act governs the timing of payments in construction contracts by requiring general contractors to pay subcontractors and suppliers within specific timeframes after receiving payment. A contractor may suspend performance under a construction contract or terminate a construction contract for failure by the owner to make timely payment. A subcontractor may suspend performance under a construction contract or terminate a construction contract if the owner fails to make timely payment for the subcontractor's work and the contractor fails to pay the subcontractor for the certified and approved work. The state and political subdivisions are exempt from the prompt pay requirements. A construction contract is a written or oral agreement relating to the construction, alteration, repair, maintenance, moving or demolition of any building, structure or improvement or relating to the excavation of or other development or improvement to land (A.R.S. Title 32, Chapter 10, Article 5).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Deems the county or municipality that authorized the formation of a CFD liable for unpaid payments owed by the CFD for construction of the CFD's public infrastructure.
2. Requires the county or municipality that authorized formation of the CFD to monitor construction contract progress and payments.
3. Allows the county or municipality that authorized formation of the CFD to:
a) periodically audit the CFD's construction contract payments; and
b) require the CFD to pay for the county's or municipality's monitoring and auditing and to pay a penalty to the county or municipality for failing to make legally required construction contract payments.
4. Applies the Arizona Prompt Pay Act to construction contracts for CFD public infrastructure and requires the prompt pay provisions to be included in CFD construction contracts.
5. Becomes effective on the general effective date.
Prepared by Senate Research
February 5, 2025
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