Shortly after being sworn into office more than seven years ago, Gov. Doug Ducey made it clear to the heads of every state agency that he wanted the needs of residents to be better served and to make Arizona an attractive location for businesses.
The result was the rollout of the Arizona Management System (AMS), a results-driven philosophy which empowers state employees to identify ways to make the government work more efficiently while eliminating waste, all with an emphasis on enhancing customer service. And AMS is paying dividends, according to several agency directors who recently provided updates to Ducey.
Arizona Department of Veterans’ Services
Building upon Arizona’s commitment to veterans, the Arizona Department of Veterans’ Services embraced AMS to identify and work to solve the root causes of veteran suicides. Stakeholders -including the Department, the Governor’s Office, and the Arizona Coalition for Military Families- came together with a different approach to veteran suicide prevention.
The result, according to Col. Wanda Wright, is Arizona’s Be Connected program, which was recognized by the U.S. Department of Veterans Affairs with the 2021 Abraham Lincoln Pillars of Excellence Award.
Arizona Department of Water Resources
Drought response and preparedness plays a vital role in guiding Arizona Department of Water Resources, but there was a time that the state’s water professionals had limited involvement in federal strategic planning related to drought.
Under AMS, ADWR expanded its network of experts in academia, the private sector, and industry groups to lead statewide drought planning efforts. One outcome, according to ADWR Director Tom Buschatzke, is Arizona’s active participation in the Intermountain West Drought Early Warning System.
Arizona Department of Transportation
Prior to integrating the AMS philosophy in Arizona Department of Transportation projects, stakeholders often complained that deadlines were of higher concern than local impacts. But with AMS in place, Director John S. Halikowski says ADOT employees are applying several innovative approaches to keep vehicles -and commerce- moving during construction projects to minimize potentially disruptive restrictions and closures.
Arizona Department of Environmental Quality
Misael Cabrera was named director of the Arizona Department of Environmental Quality shortly after Ducey announced the AMS initiative in 2015. In response, ADEQ has developed the “My Community” dashboard to provide environmental and demographic map data on its website. The timely information is accessible via an easy-to-use, online tool the public can use to understand what ADEQ is doing to address environmental issues in various communities.
Arizona Department of Housing
Another state agency which embraced the AMS philosophy early on is the Arizona Department of Housing. It saw several increases in efficiency by implementing a more visual method of keeping staff updated on deadlines and department goals. And that has continued since Director Tom Simplot took the helm in 2021, with an emphasis on faster inspections and decision-making. More information on how AMS is improving state agencies is available here.
One of President Joe Biden’s signature initiatives is not going smoothly, with one of the government’s largest users of construction materials taking steps to forgo the May 14 deadline to ensure the manufacturing of all construction materials used in federally assisted infrastructure projects occurs in the United States.
In January 2021, Biden issued Executive Order 14005 to announce his Made in America initiative. It directed all federal agencies to maximize the use of goods, products, and materials produced in the U.S. when providing financial assistance awards and in procurements.
There have been longstanding federal rules for when iron and steel is American made, but implementing the Build America, Buy America Act enacted in November as part of the Infrastructure Investment and Jobs Act is not something the U.S. Department of Transportation can have in place by May 14 deadline.
Federal agencies had to wait for the Office of Management and Budget to determine the manufacturing process criteria for other construction materials. Which did not happen until two weeks ago when OMD announced its “preliminary and non-binding guidance.”
And that poses “a significant problem,” according to Polly Trottenberg, DOT’s deputy secretary.
DOT is responsible for funding thousands of road, bridge, rail, and transit infrastructure projects across the country through the Federal Aviation Administration, Federal Highway Administration, Federal Railroad Administration, Federal Transit Administration, and the National Highway Traffic Safety Administration. Under the new law, DOT will now also be responsible for ensuring those federally funded projects comply with Buy America.
But figuring out criteria for compliance based on non-binding guidance released only two weeks ago is not workable. Which is why Trottenberg is moving toward obtaining a 180 day temporary, transitional waiver of the deadline under a public interest declaration.
“The Department recognizes both the importance of ensuring Buy America compliant construction materials and the need to implement the requirement in a way that is not overly burdensome,” Trottenberg recently wrote.
According to Trottenberg, DOT officials have received concerns from stakeholders about the new Buy America manufacturing requirements as it relates to construction materials other than iron and steel. A waiver would avoid delays to much needed projects.
“Until we have more complete information on how construction materials are manufactured, and whether the manufacturing process complies with the OMB guidance, the Department is unable to ensure that transportation infrastructure projects continue to be obligated in compliance with these new requirements,” Trottenberg wrote.
The impact of new Buy America’s construction materials standards “could be significant,” said Trottenberg, who noted the National Bridge Inventory shows more than 62,500 bridges in America made with wood or timber elements, of which nearly 17,000 bridges have a main span consisting of wood or timber elements.
Another 19,562 bridges contain polymer-based products elements while 2,281 bridges contain non-ferrous metal elements, none of which have currently defined manufacturing processes to ensure compliance with Buy America standards.
DOT officials would use the waiver period to seek information state, local, industry, and other partners and stakeholders on challenges and solutions in connection with the Buy America construction materials mandate. It would also allow DOT to gather data on the sourcing of a full range of materials and products used in federally funded transportation projects while giving officials time to strategize for building up domestic capacity of construction materials.
Further, DOT hopes OMB will have issued its final standards by then.
“By the end of the waiver period, DOT expects state, industry, and other partners to establish an effective review process, as already in place for products such as iron and steel, as appropriate for construction materials, consistent with the [Bipartisan Infrastructure Law] and interpreting guidance and standards,” according to Trottenberg.
Comments and feedback on the proposed temporary waiver can be made here. All submissions received, including any personal information therein, will be posted to the agency’s website without change or alteration.
On Wednesday, the State Senate approved legislation lowering the percentage of assessed valuation for commercial property to 15 percent. SB1093 would reduce the property assessment ratio gradually over the next five years.
According to the bill sponsor in a press release, State Senator J.D. Mesnard (R-Chandler), explained that the aim was to ensure that Arizonans have more money to spend and, ultimately, invest back into the economy.
“Property taxes are a critical issue to all businesses, but especially for our smaller establishments. This bill will provide broad relief to our job creators,” said Mesnard. “Reducing the tax burden allows our small businesses to invest more money in their workforce and in expanding operations.”
The bill passed along party lines in both the House and Senate.
SB1093 would impact class one property: commercial and industrial properties that include those for mining, telecommunication companies, utilities, standing timber, airport fuel delivery, oil and gas production, pipelines, shopping centers, golf courses, and property devoted to any commercial or industrial use. Additionally, SB1093 prohibits fire district tax from increasing beyond $3.75 per $100 of assessed valuation.
State Senator Kelly Townsend (R-Mesa) commended Mesnard for the bill.
Grateful to Sen. @JDMesnard for his efforts in passing SB1093 which lowers the % of assessed valuation for commercial properties. It will reduce the imbalance in taxes that affect small businesses. Good job!
Legislature Democrats disliked that funds accrued from those property taxes would no longer be available, arguing that the state would turn elsewhere for the lost funds: homeowners, sales taxes, and the general fund.
State Senator Lela Alston (D-Phoenix) insisted during the Senate floor vote that the legislation would result in a tax increase on homeowners down the road.
State Representative Mitzi Epstein (D-Chandler) offered similar sentiments last month during the House floor vote. She added that the fund was a slippery slope mindset that would ultimately lead to steep cutoffs of education funding. State Representative Pamela Powers Hannley (D-Tucson) argued that the bill was based on trickle-down economics that she said only made the rich richer and the poor poorer.
“This bill picks winners and losers with the regular folks being losers in the state of Arizona,” said Powers Hannley.
State Representative Kelli Butler (D-Phoenix) added that the bill would result in county deficits that must either be mitigated or result in cuts. Butler said that the deficit would hurt rural areas the most.
“If you want to continue to fund law enforcement, like I do, if you want to continue to fund really important things in your counties and rural Arizona, you need to vote against this bill,” said Butler.
State Representative Neal Carter (R-Queen Creek) rebutted the arguments put forth by his Democratic colleagues. He insinuated that their calculations were simplistic and neglecting the potential for exponential and possibly unprecedented growth inspired by low tax rates.
“In reality, the loss is less than it may appear by simply subtracting the revenue that’s brought in,” said Carter.
State Representative Shawnna Bolick (R-Phoenix) noted that the assessment ratio is applied across the state equally and would eventually make Arizona more competitive with Texas, Colorado, and Utah.
SB1093 now heads to Governor Doug Ducey for approval.
Corinne Murdock is a reporter for AZ Free News. Follow her latest on Twitter, or email tips to corinne@azfreenews.com.
Arizona ranked as the top state for economic performance and third for economic competitiveness according to a nationally-renowned, conservative model legislation nonprofit. Those numbers come from the American Legislative Exchange Council’s (ALEC) latest report is their 15th annual “Rich States, Poor States” index on state economies.
State Senate President Pro Tempore Vince Leach (R-Tucson), ALEC Tax and Fiscal Policy Task Force chairman, attributed the ranking to conservative policies. Leach serves as vice chairman of both the Senate Appropriations Committee and Senate Finance Committee.
“While serving as the Vice Chair of both the Senate Appropriations Committee and the Senate Finance Committee, I’ve advocated for fiscally conservative policies focusing on paying off state debt, cutting taxes, and creating an environment competitive for attracting new business and growing a strong workforce, while removing big government red tape that suppresses the economic success and viability of the states,” said Leach.
Arizona’s ranking for economic outlook has varied over the last ten years — 13th in 2021, 10th in 2020, 11th in 2019, 5th in 2018, 8th in 2017, 5th in 2016 and 2015, 7th in 2014, 6th in 2013, and 9th in 2012. The last time Arizona ranked this high was from 2007 to 2010.
ALEC determined their rankings using each state’s current standing in 15 state policy variables. These are the top marginal personal income tax rate, top marginal corporate income tax rate, personal income tax progressivity, property tax burden, sales tax burden, remaining tax burden, estate/inheritance tax levying, recently legislated tax changes, debt service as a share of tax revenue, public employees per 10,000 of population, state liability system survey, state minimum wage, average workers’ compensation costs, right-to-work status, and tax expenditure limits.
ALEC noted that states with lower expenditures and less taxes generally experienced higher economic growth.
FOR IMMEDIATE RELEASE: Arizona is the 3rd Most Economically Competitive State
While Arizona climbed upward in the 15 years of the annual ALEC index, the top state didn’t budge. Utah has ranked first in economic competitiveness every year.
The top ten states on ALEC’s list were as follows, in order: Utah, North Carolina, Arizona, Oklahoma, Idaho, Nevada, Indiana, Florida, North Dakota, and Wyoming.
The middle pack of states, in order of ranking: Texas, South Dakota, Tennessee, Wisconsin, Georgia, Arkansas, Michigan, New Hampshire, Ohio, Louisiana, Alaska, Colorado, Alabama, Virginia, West Virginia, South Carolina, Mississippi, Delaware, Montana, Iowa, Massachusetts, Kentucky, Connecticut, Nebraska, Pennsylvania, New Mexico, Washington, and Rhode Island.
The bottom ten states, in order: Oregon, Maryland, Hawaii, Maine, Illinois, Minnesota, Vermont, California, New Jersey, and New York.
Last October, the Arizona Department of Housing published a Notice of Funding Availability which resulted in more than 20 developers expressing interest in sharing $24.5 million which came available to help fund affordable housing projects.
Nine applications came in by the end of January for a total of nearly 1,200 units; all but two of the applications were for projects in Maricopa or Pima counties. One was for a project serving Yuma County, while the other is the long-awaited second phase of an affordable housing complex in Sierra Vista being developed by Walling Affordable Communities, LP.
Glenn and Mary Walling specialize in the development of affordable housing apartment projects across Arizona and have been involved in bring more than 1,500 residential units to the market utilizing tax credits. One of the projects was Casa Del Sol in Sierra Vista, where Mary Walling grew up.
Casa Del Sol – Phase One of the project brough 88 badly needed low income adult housing to the area, which is home to the U.S. Army’s Fort Huachuca. Planning for Phase Two began in 2019 with the use of Federal Low Income Housing Tax Credits as part of the funding mechanism.
But COVID-19 in 2020 and then uncontrolled price increases and labor challenges throughout 2021 put pressure on the company’s plans. Walling turned to the Arizona Department of Housing, which began offering a competitive State Low Income Housing Tax Credit program in further support of bringing as many affordable housing units to market as possible.
ADOH also made available the $24.5 million pool to help provide several projects with some gap financing to address the unrelenting surge in costs. In late February, the Wallings were told by ADOH that underwriting for the Casa Del Sol project could still take another 60 days.
But on March 31, ADOH told AZ Free News that underwriting was completed and the developer has received their award.
“We at the Arizona Department of Housing are proud to help fund this exciting project to bring much-needed affordable housing to Cochise County,” Sheree Bouchee – ADOH Rental Programs Administrator. “We are thrilled to collaborate in creating housing solutions for rural Arizona communities.”
It was welcome news for city officials in Sierra Vista, where there are currently only 503 affordable housing units despite the fact more than one-third of Cochise County’s 125,000 residents live in the area. The presence of Fort Huachuca and the city’s proximity a U.S. Border Patrol station near Bisbee has led local rents outpacing the ability of many non-government employees to afford local housing.
According to Sierra Vista spokesman Adam Curtis, the city staff worked with the Wallings to waive some fees and approve modifications to code requirements to help facilitate and incentivize the project. Those actions were consistent with strategies identified in the City’s voter-approved Vistas 2030 General Plan.
And with the site plan approved and a building permit already issued, city officials are looking forward the announcement of a ground-breaking ceremony.
“The second phase of Casa Del Sol will be a welcomed and much needed addition to our West End,” Community Development Director Matt McLachlan said. “The Wallings have a tremendous track record of building high quality affordable housing in our community and have been a great partner in advancing the City’s affordable housing goals.”
Tucson-based Tofel Dent Construction will serve as general contractor for Phase Two, which encompasses more than five dozen new units and a swimming pool to complement the existing recreation center. The hope now is for construction to begin in late summer with occupancy set for the end of 2023.
In the meantime, the Wallings are already moving forward with plans for Phase Three which could be ready for occupancy by the end of 2024.
News of ADOH’s assistance for the Casa Del Sol project is just one of the recent efforts across the state to address Arizona’s lack of affordable housing.
Last week the Maricopa County Board of Supervisors approved applying $17 million of American Rescue Plan Act (ARPA) funds toward adding more than 600 new units to the Valley’s affordable housing stock. Arizona Housing, Inc. will received $8 million of those funds to convert an existing hotel in central Phoenix into 50 permanent, supportive housing units.
In addition to the living spaces, the property will include on-site case management services to provide residents with employment assistance and social services options. Maricopa County says construction could begin yet this year with estimated completion in Summer 2023.
The remaining $9 million will support the construction of affordable rental projects in the West Valley and in central Phoenix. The Centerline on Glendale will go up at the southeast corner of 67th and Glendale Avenues. The 368-unit project by The Gorman Group will take place in two phases, starting with 186 units.
“It’s going to take awhile to get our inventory where it needs to be, but the addition of nearly 400 new rentals in the heart of Glendale is an example of how we can address our affordable housing shortage one investment and one partnership at a time,” said Maricopa County Supervisor Clint Hickman.
In downtown Phoenix, Ulysses Development is slated to construct a 192-unit affordable rental complex called Salt River Flats. It will be built near Broadway and 14th Street, with an expected opening in Spring 2024. All of the unit figures are estimates.
How to interpret changes enacted in 2011 to Arizona’s development impact fee law will be heard by the Arizona Supreme Court, it was announced last week.
At issue is Arizona Revised Statute 9-463.05 which was amended in 2011 to redefine the circumstances under which a municipality can lawfully assess development impact fees. The Legislature noted its intent that courts would “narrowly” construe a town or city’s privilege to assess development fees.
Specifically, the 2011 version of ARS 9-463.05 prohibits impact development fees on new residents to pay for “a burden all taxpayers of a municipality should bear equally.”
In 2018, the Southern Arizona Home Builders Association (SAHBA) sued the Town of Marana after town officials spent more than $16 million in 2013 to acquire a water reclamation facility formally operated by Pima County. At the time, the facility only had capacity to serve current residents.
Marana then spent more than $17.5 million as part of a multi-phase Capital Improvement Project (CIP) to expand, upgrade, and modernize the facility, including compliance with environmental regulations. 20-year bonds were issued to cover the costs, with bond payments coming from impact fees charged on new homes and other development projects.
SAHBA’s lawsuit contends the expansion of the water reclamation facility and other upgrades undertaken as part of the project benefitted all existing residents as well as new residents. As a result, much of the impact fees violated ARS 9-463.05, the lawsuit argued.
The town, however, contended there was already sufficient water resources and wastewater treatment capacity to serve existing residents. It only acquired the Water Reclamation Facility and expanded the facility in order “to meet the needs” of future development, town attorney’s argued.
Marana also argued the project was developed “over years of careful consideration” by engineers, consultants, the public, and the Town Council. SAHBA was among the stakeholders involved in a planning process which started years earlier but took no action until 2018, according to town attorneys.
A Pima County judge and later the Arizona Court of Appeals sided with Marana’s position. Attorneys for the town later argued that review by the Arizona Supreme Court is “unwarranted” because the two lower court ruling were rightly decided.
“The trial court and the court of appeals evaluated whether the Town’s impact fee ordinances met the statutory requirements under A.R.S. § 9-463.05,” Marana’s response stated. “Both courts held the statutory requirements were met.”
But on April 5, the Arizona Supreme Court announced it will take up the case later this year, representing the first time the amended law will be subjected to review by the justices. The questions to be addressed during oral arguments are:
Did Marana violate A.R.S § 9-463.05 by making future development bear 100 percent of the cost of acquiring the Facility?
Did Marana violate the same statute by making future development bear nearly all of the cost of upgrading, modernizing, and improving the Facility?
Did Marana further violate the statute by failing to take into account what could or could not be included in development fees under that statute, and by failing to make any proportionate allocation of costs between existing and future development?
The Home Builders Association of Central Arizona, which is a trade association representing nearly 500 member companies engaged in residential construction and development, filed an amicus curiae (friend of the court) brief in support of SAHBA’s case.
