Legislative Update

AAED’s legislative round-up

The Arizona Legislature gaveled into session the second week of January. As lawmakers reach the informal halfway point in the session, the Arizona Association for Economic Development continues work on several bills that impact economic development, including:

I-10 WIDENING (SB 1239)

The section of I-10 between Casa Grande and Phoenix is only two lanes in each direction. This stretch of I-10 is not only dangerous but also impedes the efficient movement of goods and people between Arizona’s largest cities. This bill, a likely budget item, appropriates $400 million for the widening of one of Arizona’s key commerce corridors.

MARICOPA TRANSPORTATION PLAN (HB 2598/SB 1356)

In 2005, Maricopa County voters reauthorized a half-cent sales tax for roads, highways, and transit in the Phoenix metro area. The plan and tax sunset in 2025. These bills would allow the county to put an extension of the tax and a new regional transportation plan on the ballot for voters to consider again.

Carrie Kelly

AAED

BUSINESS PROPERTY TAX REDUCTION (SB 1093)

Arizona property taxes on business are higher when compared to surrounding states. This places Arizona at a competitive disadvantage for business locates. This bill would reduce the Class 1 (commercial) property assessment ratio from 16.0% in 2025 to 15.5% in 2026 and 15.0% in 2027. This reduction continues the downward assessment ratio momentum passed in last year’s budget.

ELECTRIC RELIABILITY (HB 2101/SB 1048)

While the Texas power grid is unique compared to the rest of the nation, outages caused by recent storms produced a business focus on reliability of electricity. These bills attempt to modernize Arizona deregulation statutes, prevent selective customer acquisition, add consumer protections, and ensure reliability of the grid.

WORKFORCE DEVELOPMENT (HB 2122)

Workforce challenges impact every industry. This bill would establish a continuing high school and workforce training program within the Arizona Department of Education to provide adult learners with alternative study services that lead to the issuance of a high school diploma and industryrecognized credentials.

DEVELOPER UNCERTAINTY (SB 1241)

Inappropriate use of incentives for property development or business locates, violate the Gift Clause of the Arizona Constitution. However, incentives may be used if there is a public benefit. This bill reduces the amount of time someone can bring a lawsuit against a government entity for an alleged violation of the Gift Clause. The net effect will provide certainty for developers once a government approves the agreement.

ARTS COMMISSION CONTINUATION (HB 2051)

The Arizona Arts Commission provides a vital service to the state of Arizona. There is a flow of federal and state dollars to the largest cities and the smallest towns through grants from the commission. The commission provides a central point of contact for artists and the creative industry in Arizona, and they catalyze economic vitality through developing statewide and local strategies to support the arts and cultural sectors in Arizona. Over the last five years, the state invested $2.8 million, and the creative industries in Arizona contributed $10.87 billion to Arizona’s economy in 2019. This bill would provide funding to the Commission and allow them to continue their work.

Carrie Kelly is the executive director of the Arizona Association for Economic Development.

HB 2674: Housing by right is wrong

The last decade has brought tremendous economic growth and prosperity to Arizona and its metropolitan areas. Lured by a supportive business climate and a highquality workforce, businesses large and small have been flocking to the desert. One need only flip through the pages of this magazine to understand the scope of recent growth and economic activity.

This economic boom has had many profoundly positive impacts and has helped Arizona emerge from the pandemic with a strong tailwind. However, it has also exacerbated issues around housing affordability and availability. The recent rapid increase in home prices is not unique to Arizona, but it is uniquely acute. The Phoenix area, in particular, ranked first among all tracked major metropolitan areas with a year-overyear increase of 32.35%, according to the S&P CoreLogic Case-Schiller U.S. National Home Price Index. There are a number of factors that have contributed to this spike, ranging from supply chain constraints to an influx of new residents from pricier markets. At some point, these affordability challenges will begin to hinder our economic growth.

Recently, the Arizona State Legislature jumped into the fray with HB 2674. Introduced by Reps. Steve Kaiser and Cesar Chavez, HB 2674 is a bill ostensibly aimed at reducing housing costs by eliminating zoning and other municipal regulatory barriers to housing development. However, though well intentioned, HB 2674 would trample a process that, while flawed, plays an important role in shaping the neighborhoods, towns, and communities that make Arizona desirable in the first place. It’s a chainsaw where a scalpel is required and the unintended consequences would be myriad. The bill, if passed, would create “by right housing,” drastically changing the real estate development landscape in Arizona and forever altering the way municipalities plan the growth of their communities.

HB 2674 would, among other things, allow by right the construction of eight single-family dwelling units per acre and twelve two-family attached dwelling units per acre on agricultural or single-family residential zoned districts. Municipalities would be required to permit any development standards to accommodate this density. In areas designated to support multifamily, commercial, or mixed-use, the densities permitted by right would be equal to the greatest densities found within a mile of a given site. These changes alone would have a substantial impact on the look and feel of communities across the state, with the likely result being investors snapping up single-family homes to replace them with a significantly denser housing product. The implications would be profound, impacting everything from the availability of water resources to the number of students in classrooms.

What’s most alarming though is the sidelining of planning professionals and community members in the development process. Anyone even tangentially involved in real estate development likely has a story of bureaucracy-induced headaches, but the net result of municipal oversight and the processes established is cohesive, forward-thinking communities that consider the longterm needs of their residents.

For now, HB 2674 has been placed on “indefinite hold” by the sponsors, but it could reemerge. If it does, it must consider the important role municipalities play in residential development. Though there is no denying that solutions are needed to increase the supply and availability, and in turn affordability, of housing in Arizona, this challenge should be met with thoughtful consideration.

Alex Hayes

Withey Morris, PLC

Alex Hayes is a land use and zoning attorney at Withey Morris, PLC. He is a skilled and highly effective communicator with broad experience developing and influencing public policy. With over a decade of political and government relations experience, Alex has a nuanced understanding of how to navigate complex regulatory environments and achieve desired results.