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NOTICE OF THE
REGULAR SESSION
OF THE FOUNTAIN HILLS TOWN COUNCIL
TIME: 6:30 P.M.
WHEN: THURSDAY, MARCH 21, 2013
WHERE: FOUNTAIN HILLS COUNCIL CHAMBERS
16705 E. AVENUE OF THE FOUNTAINS, FOUNTAIN HILLS, AZ
Councilmembers of the Town of Fountain Hills will attend either in person or by telephone conference call; a quorum
of the Town’s various Commissions or Boards may be in attendance at the Council meeting.
Notice is hereby given that pursuant to A.R.S. § 1-602.A.9, subject to certain specified statutory exceptions, parents have a right to
consent before the State or any of its political subdivisions make a video or audio recording of a minor child. Meetings of the Town
Council are audio and/or video recorded and, as a result, proceedings in which children are present may be subject to such recording.
Parents, in order to exercise their rights may either file written consent with the Town Clerk to such recording, or take personal
action to ensure that their child or children are not present when a recording may be made. If a child is present at the time a
recording is made, the Town will assume that the rights afforded parents pursuant to A.R.S. § 1-602.A.9 have been waived.
PROCEDURE FOR ADDRESSING THE COUNCIL
Anyone wishing to speak before the Council must fill out a speaker’s card and submit it to the Town Clerk
prior to Council discussion of that Agenda item. Speaker Cards are located in the Council Chamber
Lobby and near the Clerk’s position on the dais.
Speakers will be called in the order in which the speaker cards were received either by the Clerk or the
Mayor. At that time, speakers should stand and approach the podium. Speakers are asked to state their
name prior to commenting and to direct their comments to the Presiding Officer and not to individual
Councilmembers. Speakers’ statements should not be repetitive. If a speaker chooses not to speak when
called, the speaker will be deemed to have waived his or her opportunity to speak on the matter.
Speakers may not (i) reserve a portion of their time for a later time or (ii) transfer any portion of their
time to another speaker.
If there is a Public Hearing, please submit the speaker card to speak to that issue during the Public
Hearing.
Individual speakers will be allowed three contiguous minutes to address the Council. Time limits may be
waived by (i) discretion of the Town Manager upon request by the speaker not less than 24 hours prior to
a Meeting, (ii) consensus of the Council at Meeting or (iii) the Mayor either prior to or during a Meeting.
Please be respectful when making your comments. If you do not comply with these rules, you will be
asked to leave.
Mayor Linda M. Kavanagh
Councilmember Dennis Brown Councilmember Cassie Hansen
Councilmember Ginny Dickey Councilmember Henry Leger
Vice Mayor Tait D. Elkie Councilmember Cecil A. Yates
Last printed 3/14/2013 10:51 AM Page 2 of 3
REGULAR SESSION AGENDA
CALL TO ORDER AND PLEDGE OF ALLEGIANCE – Mayor Linda M. Kavanagh
INVOCATION – Mary Kubes, Bookkeeper and member of the Church of the Ascension
ROLL CALL – Mayor Linda M. Kavanagh
MAYOR’S REPORT
i) The MAYOR may review recent events attended relating to economic development.
SCHEDULED PUBLIC APPEARANCES/PRESENTATIONS
i) PRESENTATION by ARIZONA SENATOR MICHELE REAGAN regarding
matters relating to any new legislation that may impact Fountain Hills and its
citizens.
ii) PRESENTATION by the MARICOPA COUNTY SHERIFFS’ POSSE with a
report on FY12-13 funding.
iii) UPDATE by Jim McKee, Vice President of Corporate Services, and Tom
Broderick, Director of Rates, regarding EPCOR/CHAPARRAL CITY WATER
AND AN ANTICIPATE RATE APPLICATION.
CALL TO THE PUBLIC
Pursuant to A.R.S. §38-431-01(G), public comment is permitted (not required) on matters not listed on the agenda.
Any such comment (i) must be within the jurisdiction of the Council and (ii) is subject to reasonable time, place, and
manner restrictions. The Council will not discuss or take legal action on matters raised during “Call to the Public”
unless the matters are properly noticed for discussion and legal action. At the conclusion of the call to the public,
individual Councilmembers may (i) respond to criticism, (ii) ask staff to review a matter or (iii) ask that the matter be
placed on a future Council agenda.
CONSENT AGENDA ITEMS (1 – 4)
All items listed on the Consent Agenda are considered to be routine, non-controversial matters and will be enacted by
one motion and one roll call vote of the Council. All motions and subsequent approvals of consent items will i nclude
all recommended staff stipulations unless otherwise stated. There will be no separate discussion of these items unless a
Councilmember or member of the public so requests. If a Councilmember or member of the public wishes to discuss
an item on the consent agenda, they may request so prior to the motion to accept the Consent Agenda. The item will be
removed from the Consent Agenda and considered its normal sequence on the Agenda.
1. CONSIDERATION of approving the TOWN COUNCIL MEETING MINUTES from
March 7, 2013.
2. CONSIDERATION of approving a SPECIAL EVENT LIQUOR LICENSE APPLICATION
submitted by Paula Lynn Hatch representing Fearless Kitty Rescue for the purpose of a fund
raiser. Event to be held at El Dorado Animal Hospital, 16765 E. Parkview, scheduled to be
held on Friday, April 5, 2013, from 6:00 PM to 8:00 PM.
3. CONSIDERATION of approving RESOLUTION 2013-17, abandoning whatever right, title,
or interest the Town has in portions of the certain public utility and drainage easements
located at the rear property lines of Plat 602-B, Block 2, Lot 17 (15951 E. El Lago
Boulevard) as recorded in Book 166 of Maps, Page 32, Records of Maricopa County,
Arizona. EA2013-02 (Hollobaugh)
Last printed 3/14/2013 10:51 AM Page 3 of 3
4. CONSIDERATION of approving RESOLUTION 2013-14, approving the third amendment
to the intergovernmental agreement with the Superior Court of Arizona in Maricopa County
for jury management services.
REGULAR AGENDA ITEMS
5. CONSIDERATION of approving a BOOKING POLICY AND PROCEDURES for the
Senior Activity Center.
6. CONSIDERATION of the UPDATED MASTER PLAN for Four Peaks Park.
7. CONSIDERATION of the Maricopa Association of Governments (MAG) ARTERIAL LIFE
CYCLE PROGRAM (ALCP) ADDENDUM for the Shea-Saguaro Project and authorizing
the Town Manager to execute the addendum.
8. CONSIDERATION of APPOINTING AN AD HOC COMMITTEE to work with the Town
Manager to complete the Draft Economic Development Plan for presentation to the Council
for consideration no later than July 2013.
9. PRESENTATION AND CONSIDERATION of RESOLUTION 2013-05, ordering and
calling a Special Bond Election to be held in and for the Town of Fountain Hills, Arizona, on
November 5, 2013, to submit to the qualified electors thereof the question of authorizing the issuance
and sale of eight million two hundred thousand dollars ($8,200,000) principal amount of General
Obligation Bonds, Project of 2013.
10. DISCUSSION WITH POSSIBLE DIRECTION TO STAFF relating to any item included
in the League of Arizona Cities and Towns weekly LEGISLATIVE BULLETIN or relating to
any ACTION PROPOSED OR PENDING BEFORE THE STATE LEGISLATURE.
11. COUNCIL DISCUSSION/DIRECTION to the TOWN MANAGER Ken Buchanan.
Items listed below are related only to the propriety of (i) placing such items on a future agenda for action or (ii)
directing staff to conduct further research and report back to the Council:
A. NONE.
12. SUMMARY of Council requests and REPORT ON RECENT ACTIVITIES by the Town
Manager Ken Buchanan.
13. ADJOURNMENT.
DATED this 14th day of March, 2013.
_____________________________________
Bevelyn J. Bender, Town Clerk
The Town of Fountain Hills endeavors to make all public meetings accessible to persons with disabilities. Please call 480 -816-5100
(voice) or 1-800-367-8939 (TDD) 48 hours prior to the meeting to request a reasonable accommodation to participate in this meeting
or to obtain agenda information in large print format. Supporting documentation and staff reports furnished the Council with this
agenda are available for review in the Clerk’s office.
NOTICE OF THE
REGULAR SESSION
OF THE FOUNTAIN HILLS TOWN COUNCIL
TIME: 6:30 P.M.
WHEN: THURSDAY, MARCH 21, 2013
WHERE: FOUNTAIN HILLS COUNCIL CHAMBERS
16705 E. AVENUE OF THE FOUNTAINS, FOUNTAIN HILLS, AZ
Councilmembers of the Town of Fountain Hills will attend either in person or by telephone conference call; a quorum
of the Town’s various Commissions or Boards may be in attendance at the Council meeting.
Notice is hereby given that pursuant to A.R.S. § 1-602.A.9, subject to certain specified statutory exceptions, parents have a right to
consent before the State or any of its political subdivisions make a video or audio recording of a minor child. Meetings of the Town
Council are audio and/or video recorded and, as a result, proceedings in which children are present may be subject to such recording.
Parents, in order to exercise their rights may either file written consent with the Town Clerk to such recording, or take personal
action to ensure that their child or children are not present when a recording may be made. If a child is present at the time a
recording is made, the Town will assume that the rights afforded parents pursuant to A.R.S. § 1-602.A.9 have been waived.
PROCEDURE FOR ADDRESSING THE COUNCIL
Anyone wishing to speak before the Council must fill out a speaker’s card and submit it to the Town Clerk
prior to Council discussion of that Agenda item. Speaker Cards are located in the Council Chamber
Lobby and near the Clerk’s position on the dais.
Speakers will be called in the order in which the speaker cards were received either by the Clerk or the
Mayor. At that time, speakers should stand and approach the podium. Speakers are asked to state their
name prior to commenting and to direct their comments to the Presiding Officer and not to individual
Councilmembers. Speakers’ statements should not be repetitive. If a speaker chooses not to speak when
called, the speaker will be deemed to have waived his or her opportunity to speak on the matter.
Speakers may not (i) reserve a portion of their time for a later time or (ii) transfer any portion of their
time to another speaker.
If there is a Public Hearing, please submit the speaker card to speak to that issue during the Public
Hearing.
Individual speakers will be allowed three contiguous minutes to address the Council. Time limits may be
waived by (i) discretion of the Town Manager upon request by the speaker not less than 24 hours prior to
a Meeting, (ii) consensus of the Council at Meeting or (iii) the Mayor either prior to or during a Meeting.
Please be respectful when making your comments. If you do not comply with these rules, you will be
asked to leave.
Mayor Linda M. Kavanagh
Councilmember Dennis Brown Councilmember Cassie Hansen
Councilmember Ginny Dickey Councilmember Henry Leger
Vice Mayor Tait D. Elkie Councilmember Cecil A. Yates
Last printed 3/14/2013 10:51 AM Page 2 of 3
REGULAR SESSION AGENDA
CALL TO ORDER AND PLEDGE OF ALLEGIANCE – Mayor Linda M. Kavanagh
INVOCATION – Mary Kubes, Bookkeeper and member of the Church of the Ascension
ROLL CALL – Mayor Linda M. Kavanagh
MAYOR’S REPORT
i) The MAYOR may review recent events attended relating to economic development.
SCHEDULED PUBLIC APPEARANCES/PRESENTATIONS
i) PRESENTATION by ARIZONA SENATOR MICHELE REAGAN regarding
matters relating to any new legislation that may impact Fountain Hills and its
citizens.
ii) PRESENTATION by the MARICOPA COUNTY SHERIFFS’ POSSE with a
report on FY12-13 funding.
iii) UPDATE by Jim McKee, Vice President of Corporate Services, and Tom
Broderick, Director of Rates, regarding EPCOR/CHAPARRAL CITY WATER
AND AN ANTICIPATE RATE APPLICATION.
CALL TO THE PUBLIC
Pursuant to A.R.S. §38-431-01(G), public comment is permitted (not required) on matters not listed on the agenda.
Any such comment (i) must be within the jurisdiction of the Council and (ii) is subject to reasonable time, place, and
manner restrictions. The Council will not discuss or take legal action on matters raised during “Call to the Public”
unless the matters are properly noticed for discussion and legal action. At the conclusion of the call to the public,
individual Councilmembers may (i) respond to criticism, (ii) ask staff to review a matter or (iii) ask that the matter be
placed on a future Council agenda.
CONSENT AGENDA ITEMS (1 – 4)
All items listed on the Consent Agenda are considered to be routine, non-controversial matters and will be enacted by
one motion and one roll call vote of the Council. All motions and subsequent approvals of consent items will i nclude
all recommended staff stipulations unless otherwise stated. There will be no separate discussion of these items unless a
Councilmember or member of the public so requests. If a Councilmember or member of the public wishes to discuss
an item on the consent agenda, they may request so prior to the motion to accept the Consent Agenda. The item will be
removed from the Consent Agenda and considered its normal sequence on the Agenda.
1. CONSIDERATION of approving the TOWN COUNCIL MEETING MINUTES from
March 7, 2013.
2. CONSIDERATION of approving a SPECIAL EVENT LIQUOR LICENSE APPLICATION
submitted by Paula Lynn Hatch representing Fearless Kitty Rescue for the purpose of a fund
raiser. Event to be held at El Dorado Animal Hospital, 16765 E. Parkview, scheduled to be
held on Friday, April 5, 2013, from 6:00 PM to 8:00 PM.
3. CONSIDERATION of approving RESOLUTION 2013-17, abandoning whatever right, title,
or interest the Town has in portions of the certain public utility and drainage easements
located at the rear property lines of Plat 602-B, Block 2, Lot 17 (15951 E. El Lago
Boulevard) as recorded in Book 166 of Maps, Page 32, Records of Maricopa County,
Arizona. EA2013-02 (Hollobaugh)
Last printed 3/14/2013 10:51 AM Page 3 of 3
4. CONSIDERATION of approving RESOLUTION 2013-14, approving the third amendment
to the intergovernmental agreement with the Superior Court of Arizona in Maricopa County
for jury management services.
REGULAR AGENDA ITEMS
5. CONSIDERATION of approving a BOOKING POLICY AND PROCEDURES for the
Senior Activity Center.
6. CONSIDERATION of the UPDATED MASTER PLAN for Four Peaks Park.
7. CONSIDERATION of the Maricopa Association of Governments (MAG) ARTERIAL LIFE
CYCLE PROGRAM (ALCP) ADDENDUM for the Shea-Saguaro Project and authorizing
the Town Manager to execute the addendum.
8. CONSIDERATION of APPOINTING AN AD HOC COMMITTEE to work with the Town
Manager to complete the Draft Economic Development Plan for presentation to the Council
for consideration no later than July 2013.
9. PRESENTATION AND CONSIDERATION of RESOLUTION 2013-05, ordering and
calling a Special Bond Election to be held in and for the Town of Fountain Hills, Arizona, on
November 5, 2013, to submit to the qualified electors thereof the question of authorizing the issuance
and sale of eight million two hundred thousand dollars ($8,200,000) principal amount of General
Obligation Bonds, Project of 2013.
10. DISCUSSION WITH POSSIBLE DIRECTION TO STAFF relating to any item included
in the League of Arizona Cities and Towns weekly LEGISLATIVE BULLETIN or relating to
any ACTION PROPOSED OR PENDING BEFORE THE STATE LEGISLATURE.
11. COUNCIL DISCUSSION/DIRECTION to the TOWN MANAGER Ken Buchanan.
Items listed below are related only to the propriety of (i) placing such items on a future agenda for action or (ii)
directing staff to conduct further research and report back to the Council:
A. NONE.
12. SUMMARY of Council requests and REPORT ON RECENT ACTIVITIES by the Town
Manager Ken Buchanan.
13. ADJOURNMENT.
DATED this 14th day of March, 2013.
_____________________________________
Bevelyn J. Bender, Town Clerk
The Town of Fountain Hills endeavors to make all public meetings accessible to persons with disabilities. Please call 480-816-5100
(voice) or 1-800-367-8939 (TDD) 48 hours prior to the meeting to request a reasonable accommodation to participate in this meeting
or to obtain agenda information in large print format. Supporting documentation and staff reports furnished the Council with this
agenda are available for review in the Clerk’s office.
Chaparral City Water Company
Our Vision. Our Values.
To be a premier provider of safe, reliable and high -
quality water and wastewater services in the
Southwestern United States.
A company whose employees work safe to go home safe to
their families every night
A company committed to and involved in the communities it
serves, and to environmental stewardship
A company that strives to deliver best -in-class service and
product to its customers, stakeholders and partners .
Local Focus. Long-term Commitment
EPCOR acquired Chaparral City Water Company
(CCWC) in June 2011
The company’s first U.S. acquisition, followed by the
acquisition of American Water’s Arizona and New
Mexico assets and operations in February 2012
Headquartered in Phoenix, EPCOR provides water and
wastewater service to approximately 193,000 customer
connections across Arizona and New Mexico
Delivering Water to Fountain Hills
As an EPCOR Water district, Chaparral City Water
Company serves approximately 13,600 customers
Delivering 3 million gallons of water daily (MGD) during
winter months, and 6 million gallons of water daily
during the summer
One Surface Water Treatment Plant
Two groundwater wells (one in service)
Eight storage tanks and reservoirs
Eight pumping stations
2013 Rate Case Application
Why is a Rate Increase Requested?
■Current water and water service rates in CCWC
have been effective since October 15, 2009 and
are based on a 2006 test year
•Operating costs, like electricity, purchased water and labor,
have increased
•Capital investments have been made to maintain the
system and meet new Federal guidelines on water quality
What’s Next?
February 15, 2013 Notice of Intent to File
~April 1, 2013 Rate Case filed with the Arizona
Corporation Commission
~6 Months ACC staff, RUCO & other Intervenors
Evaluation and Opinion Complete
~7 Months Company Response to Opinion of Intervenors
~8 Months Settlement reached with parties or hearing set
by Judge
~10 Months “ROO” – Judge issues Recommended Opinion
and Order
~12 Months Commissioners discuss ROO and vote at an
Open Meeting
~May 1, 2014 New Rates Implemented
Thank You.
Town of Fountain Hills, Arizona - Four Peaks Park
Opinion of Probable Cost - Final Master Plan
Site Work
Quantity Unit Unit Cost Total
SITE PREPARATION
Mobilization, Demobilization 1 LS 35,000.00$ 35,000.00$
Construction Surveying 1 LS 12,000.00$ 12,000.00$
Construction Surveying As-Builts 1 LS 2,500.00$ 2,500.00$
Clearing and Grubbing 9.8 AC 400.00$ 3,920.00$
Construction Water 1,200 MGAL 3.50$ 4,200.00$
Temporary Construction Fence 1 LS 15,000.00$ 15,000.00$
Stormwater Pollution Prevention Plan 1 LS 5,000.00$ 5,000.00$
Demolition 1 LS 7,500.00$ 7,500.00$
85,120.00$
Civil Engineering
Quantity Unit Unit Cost Total
PAVING, GRADING AND DRAINAGE
Sealcoat (2 applications) & Restripe existing Asphalt Parking Lot 23,492 SF 0.23$ 5,403.16$
New Asphalt Parking Lot - 3-inch AC over 6-inch ABC 3,250 SY 28.00$ 91,000.00$
Trash Enclosure and Pad 1 EA 8,000.00$ 8,000.00$
Maintenance Drive and Yard (Asphalt) - 3-inch AC over 6-inch ABC 250 SY 28.00$ 7,000.00$
4" Thick Concrete Sidewalk 28,410 SF 3.50$ 99,435.00$
4" Thick Concrete Plaza 22,918 SF 4.50$ 103,131.00$
Concrete Steps 375 SF 5.00$ 1,875.00$
6" Curb and Gutter as per MAG Std. Dtl. 220 800 LF 19.00$ 15,200.00$
Concrete Scupper as per map 206 2 EA 2,500.00$ 5,000.00$
New Driveway along Del Cambre Ave 1 EA 3,500.00$ 3,500.00$
Earthwork 3,500 CY 7.50$ 26,250.00$
Catch Basin Inlet and Grate as per MAG Std Dtl 535, Type F 2 EA 2,800.00$ 5,600.00$
12" HDPE Storm Drain Pipe 100 LF 35.00$ 3,500.00$
18" HDPE Storm Drain Pipe 220 LF 45.00$ 9,900.00$
Concrete Headwall with Safety Rail and Trash Rack as per MAG Std Dtl 501 1 EA 2,500.00$ 2,500.00$
387,294.16$
Landscape Architecture
Quantity Unit Unit Cost Total
HARDSCAPE/ AMENITIES
Landscape Turf Header 259 LF 8.00$ 2,072.00$
Maintenance/ Cell Phone Yard Enclosure Wall 222 LF 150.00$ 33,300.00$
Seat Wall 350 LF 65.00$ 22,750.00$
Baseball Backstop and Dugouts 2 EA 47,500.00$ 95,000.00$
Playground (includes surfacing, equipment and shade)2 EA 100,000.00$ 200,000.00$
Small Ramada 6 EA 35,000.00$ 210,000.00$
Medium Ramada 1 EA 60,000.00$ 60,000.00$
Large Ramada 1 EA 85,000.00$ 85,000.00$
Basketball/ Tennis Court Shade Structure 4 EA 25,000.00$ 100,000.00$
Basketball Court (includes surface, goals, nets, poles, fencing and striping)2 EA 50,000.00$ 100,000.00$
Tennis Court (includes surface, nets, poles, fencing and striping)2 EA 60,000.00$ 120,000.00$
Pickle Ball Court (includes surface, nets, poles, fencing and striping)4 EA 12,500.00$ 50,000.00$
Bench 20 EA 900.00$ 18,000.00$
Trash Receptacle 24 EA 750.00$ 18,000.00$
Dog Bag Dispenser 6 EA 250.00$ 1,500.00$
Picnic Table 16 EA 1,500.00$ 24,000.00$
Drinking Fountain 3 EA 4,500.00$ 13,500.00$
BBQ Grill 10 EA 500.00$ 5,000.00$
Subtotal 1,158,122.00$
Section Total
Section Total
Page 1 of 2
LANDSCAPE MATERIALS/ IRRIGATION
Fine Grading 261,646 SF 0.10$ 26,164.60$
Decomposed Granite 110,767 SF 0.40$ 44,306.80$
24" Box Tree 125 EA 250.00$ 31,250.00$
5 Gallon Shrub 750 EA 20.00$ 15,000.00$
Turf (Sod)150,879 SF 0.30$ 45,263.70$
Infield Mix 626 SF 1.25$ 782.50$
Landscape Turf Irrigation 150,879 SF 0.50$ 75,439.50$
Landscape Drip Irrigation 110,767 SF 0.35$ 38,768.45$
Irrigation Electrical Service 1 EA 1,500.00$ 1,500.00$
Subtotal 278,475.55$
1,436,597.55$
Electrical Engineering
Quantity Unit Unit Cost Total
Walk/ Parking Lot Light 24 EA 1,700.00$ 40,800.00$
Sport Court Light 5 EA 27,500.00$ 137,500.00$
Sports Field Light, Complete, Fixtures, Conduit & Wire 1 LS 185,000.00$ 185,000.00$
Conduit, Wire and Pull Boxes 1 LS 50,000.00$ 50,000.00$
Ramada/ Court Shade Structure Electrical 14 EA 1,500.00$ 21,000.00$
APS Utility Electrical/Service Entrance Section/Transformer/Design 1 LS 25,000.00$ 25,000.00$
459,300.00$
Architecture
Quantity Unit Unit Cost Total
SITE PREPARATION
Renovate/ Remodel Existing Restroom Building 1 LS 50,000.00$ 50,000.00$
Renovate Existing Bridge 1 LS 20,000.00$ 20,000.00$
Maintenance Building 1 LS 150,000.00$ 150,000.00$
220,000.00$
NOTE:
1. This information is not intended for use in ordering of equipment or materials, the contractor is 258,831.17$ 10%
responsible for determining if additional contingency factors should be applied for preliminary
cost basis. This information and actual project equipment quantities and/ or construction costs Construction Fee 336,480.52$ 13%
may differ.
Opinion of Probable Cost Assumptions:
This Opinion of probable cost has been derived from the Final Master Plan. Due to the preliminary nature of the design, assumptions
on line items and unit quantities have been made. Additional line items and adjustments to the unit quantities are likely as the design
progresses. Unit costs have been derived from projects of similar type and size. Those on the design team are not cost estimators
and the unit costs are only impressions of the current market cost. If a cost estimate is needed, it is suggested that the Town hire an
objective, third party professional cost estimator for exact current market conditions. Mobilization/ Demobilization, SWPPP compliance,
and temporary construction fencing are approximations based upon projects of similar size.
3,183,623.40$ Grand Total:
Section Total
Section Total
Contingency
Section Total
Subtotal all Sections 2,588,311.71$
Page 2 of 2
1922168.5
RESOLUTION NO. 2013-05
A RESOLUTION OF THE MAYOR AND COUNCIL OF THE TOWN OF
FOUNTAIN HILLS, ARIZONA, ORDERING AND CALLING A SPECIAL
BOND ELECTION TO BE HELD IN AND FOR THE TOWN OF FOUNTAIN
HILLS, ARIZONA, ON NOVEMBER 5, 2013, TO SUBMIT TO THE
QUALIFIED ELECTORS THEREOF THE QUESTION OF AUTHORIZING
THE ISSUANCE AND SALE OF EIGHT MILLION TWO HUNDRED
THOUSAND DOLLARS ($8,200,000) PRINCIPAL AMOUNT OF GENERAL
OBLIGATION BONDS, PROJECT OF 2013.
WHEREAS, the Mayor and Council of the Town of Fountain Hills, Arizona, (the “Town
Council”) believe it to be in the best interest of the Town of Fountain Hills (the “Town”) to
authorize the issuance and sale of eight million two hundred thousand dollars ($8,200,000)
principal amount of General Obligation Bonds, which bonds would provide funding for the
purposes set forth in the form of the ballot attached hereto as Exhibit A; and
WHEREAS, it is necessary that the Town Council submit the question of the issuance
and sale of such bonds to the qualified electors of the Town; and
WHEREAS, the Council may consolidate the special election with any other election
conducted in the Town on November 5, 2013.
NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND COUNCIL OF
THE TOWN OF FOUNTAIN HILLS as follows:
SECTION 1. Order Election. Pursuant to Arizona Revised Statutes (“A.R.S.”), Section
35-453, as amended, a special election in the Town of Fountain Hills, Arizona, is hereby ordered
and called to be held on November 5, 2013, to submit to the qualified electors of the Town the
question as shown on the form of ballot attached hereto and marked Exhibit A, which is a part of
this Resolution and the terms of which are incorporated by reference herein.
SECTION 2. Call for Election. Pursuant to A.R.S. § 35-455(B), the aggregate amount of
bonds set forth above shall bear a maximum rate of interest of eight percent (8%), may run for a
minimum number of years from their date of one (1) year or fraction thereof and a maximum of
fifteen (15) years. The current outstanding general obligation debt of the Town for the purposes
included in the twenty percent (20%) debt limit category is $3,755,000.00 and for the purposes
included in the six percent (6%) debt limit category is $0.00. The current twenty percent (20%)
and six percent (6%) constitutional debt limits of the Town are $75,504,344.00 and
$22,651,303.00, respectively. For purposes of completion and distribution of the informational
pamphlet described in Section 4 of this Resolution, the amounts of the Town’s outstanding
general obligation debt and the constitutional debt limits stated in this Section may be
recalculated, revised and replaced with updated amounts based upon and calculated from
updated information. The bonds may be refunded by the issuance of refunding bonds of a
weighted average maturity of less than 75% of the weighted average maturity of the bonds being
refunded.
1922168.5
2
SECTION 3. Publication of the Call and Notice of Election. The publication of the call
and notice of the special election shall be given, or caused to be given, by the Town Clerk, as
provided by law, and as may be deemed necessary and appropriate in the Town Clerk’s
discretion to advise the public of the election.
SECTION 4. Informational Pamphlet. The Town Clerk is hereby directed to cause the
preparation and distribution of an informational pamphlet, which shall include the sample ballot
for the Town pursuant to and meeting the requirements of A.R.S. § 35-454 and, if the Town
Clerk determines it to be in the Town’s best interests, combine such informational pamphlet and
sample ballot with any other informational pamphlet being prepared for the November 5, 2013
Special Election. The officers of the Town are hereby authorized to prepare and deliver or cause
to be prepared and delivered to the Town Clerk the information necessary or appropriate for
completing the informational pamphlet, including, without limitation: the estimated debt
retirement schedule for the current amount of bonds outstanding; the estimated debt retirement
schedule for the proposed bond authorization; source of repayment; the estimated issuance costs;
the estimated tax impact on an average owner-occupied residence, commercial, industrial and
agricultural or other vacant property; the estimated total cost of the proposed bond authorization,
including principal and interest; the current outstanding general obligation debt and
constitutional debt limitation; an introductory statement on behalf of the Town; and a statement
of the purpose for which the bonds are to be issued. The informational pamphlet is to be mailed
not less than thirty-five (35) days before the date of the special election to the residence of each
registered voter of the Town as shown on the general county register. The Town Clerk is hereby
directed to submit a copy of the informational pamphlet to the Arizona Department of Revenue
within thirty (30) days after the election.
SECTION 5. Submitting Arguments. Pursuant to A.R.S. § 35-454, as amended, the
Town hereby sets the date of August 7, 2013, at the hour of 5:00 p.m., as the deadline to submit
arguments “for” or “against” authorization to issue the bonds. The Town Clerk is authorized to
publish in a newspaper of general circulation within the Town a notice stating the deadline for
the filing with the Town of arguments “for” or “against” the bonds, for inclusion in the
informational pamphlet pertaining to the bonds. A form of the notice requesting arguments “for”
and “against”, including the deadline for submitting arguments, is attached hereto as Exhibit B.
The Town Clerk is authorized to revise the form of notice hereto as necessary to comply with all
applicable laws. Each argument shall not exceed 300 words in length and shall contain the
original, notarized signature of each person sponsoring it. If the argument is sponsored by an
organization, the original, notarized signatures of two executive officers are required. If the
argument is sponsored by a political committee, the original, notarized signature of the
committee’s chair or treasurer is required. Persons signing shall also identify themselves by
giving their residence or post office address and a telephone number, which shall not appear in
the pamphlet. With each argument supporting or opposing the proposition, one hundred dollars
($100.00) shall be deposited with the Town Clerk, for a proportionate cost of paper and printing
the argument.
SECTION 6. Conduct of Election. The election will be conducted by mail ballot
according to A.R.S. § 16-409, as amended, and the Town Clerk is hereby authorized to
determine the manner in which the election shall be conducted and to sign Maricopa County’s
Menu of Services agreement for the conduct of the November 5, 2013 Special Election. The
1922168.5
3
election shall be conducted and the votes cast thereat shall be counted and tabulated, and the
returns thereof shall be made in the manner provided by law. Only persons who are qualified
electors of the Town shall vote at the election. The Fountain Hills Town Hall, located at 16705
E. Avenue of the Fountains, and any office of the Maricopa County Recorder, are hereby
designated as ballot depositories pursuant to A.R.S. § 16-411, as amended, at which locations
voters may deposit marked ballots until 7:00 p.m. on November 5, 2013. Further, the Fountain
Hills Town Hall and any office of the Maricopa County Recorder are hereby designated as the
Town’s ballot replacement locations at which a voter may obtain a replacement ballot until 7:00
p.m. on November 5, 2013. The Town Clerk shall determine and develop the processes for
conducting an all mail ballot election for the question submitted to the qualified electors of the
Town. The special election may be consolidated with any other election conducted in the Town
on November 5, 2013.
SECTION 7. Deadline for Voter Registration and Mailing of Ballots. Maricopa County
registration and voting lists will be used for the special election. To be qualified to vote in the
special election, a Town resident must be registered to vote by Monday, October 7, 2013. In an
all-mail ballot election, all qualified electors who were registered by the registration deadline
will receive a mail ballot. Official ballots for the special election will be mailed by Maricopa
County Elections to qualified electors on Thursday, October 10, 2013. The Fountain Hills Town
Hall and Maricopa County Recorder offices will open as the ballot replacement location on
Monday, October 14, 2013.
SECTION 8. Voting Rights Act Submission and Spanish translation. To comply with
the Voting Rights Act of 1965, as amended, the proceedings pertaining to this election will be
translated into Spanish and posted, published, and/or recorded in each instance where posting,
publication, and/or recording for such proceedings are required, such as this call of election, the
notice of election, ballots, all early voting materials, and all instructions contained in the mail
ballot materials.
SECTION 9. Ballots. The Town Clerk is hereby authorized and directed to cause ballots
to be printed and mailed to the qualified electors offering to vote at the election. The special
bond election may be conducted in the manner determined to be in the best interests of the Town
by the Maricopa County Election Department and the Town Council or either of them. The
Mayor and the Town Clerk, or either of them, is authorized and directed to enter into one or
more contracts or agreements with the Maricopa County Recorder and with the Maricopa County
Elections Department for election services.
SECTION 10. Canvass of Election. The returns of the special election shall be made to
the Town Council, which shall meet on a day that is within twenty (20) days after the election to
canvass the returns and certify the results, all as provided by law. The Mayor and Council will
be governed by the vote of the majority on the question submitted. The Town Clerk shall record
a copy of the Council resolution canvassing the results in the office of the Maricopa County
Recorder.
[SIGNATURES ON FOLLOWING PAGE]
1922168.5
4
PASSED AND ADOPTED by the Mayor and Council of the Town of Fountain Hills,
Arizona, March 21, 2013.
FOR THE TOWN OF FOUNTAIN HILLS: ATTESTED TO:
Linda M. Kavanagh, Mayor Bevelyn J. Bender, Town Clerk
REVIEWED BY: APPROVED AS TO FORM:
Ken Buchanan, Town Manager Andrew J. McGuire, Town Attorney
CERTIFICATION
I, Bevelyn J. Bender, the duly appointed and acting Town Clerk of the Town of Fountain
Hills, Arizona, do hereby certify that the above and foregoing Resolution No. 2013-05 was duly
passed by the Town Council of the Town of Fountain Hills, Arizona, at a regular meeting held
on March 21, 2013, and the vote was ____ aye’s and ___ nay’s and that the Mayor and ____
Councilmembers were present thereat.
_______________________________________
Bevelyn J. Bender, Town Clerk
1922168.5
EXHIBIT A
TO
RESOLUTION NO. 2013-05
OFFICIAL BALLOT
FOR SPECIAL ELECTION IN AND FOR THE TOWN OF FOUNTAIN HILLS,
ARIZONA ON NOVEMBER 5, 2013
Question
Shall the Mayor and Council of the Town of Fountain Hills, Arizona, be authorized to issue and
sell bonds of the Town of Fountain Hills in the principal amount of $8,200,000, to provide funds
to design, improve, construct, reconstruct and rehabilitate Saguaro Boulevard, including any
curb, gutter, sidewalks, traffic signal/control systems, underground utility lines, landscaping, and
other improvements appurtenant or adjacent thereto; and to liquidate any indebtedness incurred
for such purposes? The bonds shall be issued as general obligation bonds of the Town, payable
from the levy of an ad valorem tax against the taxable property located within the Town. The
bonds shall bear interest at a rate of not to exceed eight percent (8%) per annum, said interest
being payable semiannually on the first day of January and the first day of July of each year until
the maturity of each bond. The bonds shall mature over a period of not to exceed fifteen (15)
years from the date of their issuance. The bonds, and any bonds issued to refund the Town’s
bonds, may be sold at prices that include premiums not greater than permitted by law, shall be
issued in the amount of $5,000 each or multiples thereof and mature on the first day of the same
month of each year which may be either January or July. The bonds may be refunded by the
issuance of refunding bonds of a weighted average maturity of less than 75% of the weighted
average maturity of the bonds being refunded.
The issuance of these bonds will result in a property tax increase sufficient to pay the annual debt
service on the bonds.
FOR THE BONDS
AGAINST THE BONDS
NOTICE TO VOTERS:
The voter shall place a mark in the square opposite the words “For the Bonds” or “Against the
Bonds”, whichever words express the voter’s choice. Only qualified electors of the Town of
Fountain Hills, Arizona are eligible to vote at this election.
1922168.5
EXHIBIT B
TO
RESOLUTION NO. 2013-05
TOWN OF FOUNTAIN HILLS
NOVEMBER 5, 2013 SPECIAL ELECTION
REQUEST FOR STATEMENTS “FOR” OR “AGAINST”
THE TOWN OF FOUNTAIN HILLS, ARIZONA
BOND PROPOSITION
The Town of Fountain Hills, Arizona (the “Town”), will hold a Special Election, on Tuesday,
November 5, 2013 to seek approval of bonds for transportation and street upgrades in the
principal amount not to exceed $8,200,000. The estimated average tax rate for the proposed
bond authorization is $____ per $100 of secondary assessed valuation.
Ballot language for Proposition ___ is available in the Town Clerk’s Office and on the Internet:
www.fh.az.gov.
Proposition ___ will be presented to the qualified voters of the Town of Fountain Hills in an
informational pamphlet. The pamphlet will be mailed to the households of all registered voters
prior to the start of early voting.
Any persons wishing to submit a statement “for” or “against” the bond question may be
submitted for publication in the informational pamphlet. Each argument cannot exceed 300
words in length and must contain the original, notarized signature of each person sponsoring it.
The residence or post office address and phone number of each signer must be on the argument,
but will not be printed in the informational pamphlet. If an argument is sponsored by an
organization, the original, notarized signatures of two executive officers of the organization are
required. If an argument is sponsored by a political committee, the original, notarized signature
of the committee’s chair or treasurer is required. A payment of $100.00, to offset a portion of
the cost of paper and printing the pamphlet, must accompany the filing of each argument.
Arguments must be submitted by 5:00 p.m., Wednesday, August 7, 2013 at the following
location:
Fountain Hills Town Clerk’s Office,
16705 E. Avenue of the Fountains, Fountain Hills, Arizona 85268
For more information, please call the Fountain Hills Town Clerk at (480) 816-5115.
In June of 2012 the Town contracted with RAMM Geotechnical Engineering to take core samples in
order to determine the actual pavement thickness and subgrade profile of Saguaro Blvd. from
Shea Blvd. to Fountain Hills Blvd.
The results of the geotechnical investigation showed that the pavement thickness and subgrade
profile varied greatly. The asphalt thickness on Saguaro Blvd. was typically between 1” and 2”
thick over a 2” to 3” subgrade which is far less than normal standards of 4” of asphalt on 6” of
subgrade.
Due to the existing conditions of Saguaro Blvd. the RAMM report recommends full reconstruction
for the entire length which consists of removing the top 10” of existing asphalt and subgrade,
scarifying and compacting the exposed subgrade and placing a new pavement section of 4” of
asphalt on 6” of base course.
Based on the information and recommendations provided by the RAMM Engineering report staff
has developed the following scope of work for reconstruction of Saguaro Blvd.
• engineering design and construction oversight
• asphalt reconstruction (full depth)
• drainage improvements (Palisades Blvd. and Desert Canyon Golf Course areas)
• valve & manhole adjustments
• ADA ramp modifications as required
• curb repair & replacement
• striping and pavement markings
• Ave. of the Fountains intersection 3-way stop modifications & fountain reconstruction
• traffic signal replacement at Palisades Blvd. (CIP Fund)
Project Coordination:
• Ashbrook Wash drainage improvements (2015)
• State Trust Land sanitary sewer (timing unknown)
• Fountain Hills Sanitary District
• Chaparral City Water
• SRP, SW Gas, Cox, Century Link, etc.
Estimated cost of design and construction is $8.6 Million with $400,000 for the traffic signal
coming out of the CIP Fund.
Bonds = $8.2 Million
CIP Fund = $0.4 Million
Total = $8.6 Million
The intersection at Saguaro Blvd. and Avenue of the Fountains will be modified to provide
increased pedestrian safety. Reconstruction of the existing water feature is anticipated to be
included in the project.
October 2010
December 2011
The photographs below show Saguaro Blvd. near the Desert Canyon Golf Course. The inlets to
various drainage structures on the west side of the street are undersized and do no allow for
proper drainage. The Saguaro Blvd. Reconstruction estimate includes design and construction of
properly sized drainage structures in this area to prevent standing water which is not only a hazard
to motorists but accelerates deterioration of the asphalt and subgrade.
Saguaro Blvd.: Palisades Blvd. to Parkview Ave.
Saguaro Blvd. & Palisades Blvd. Intersection
The photographs below show southbound Saguaro Blvd. from Palisades Blvd. to Parkview Ave.
after a rainstorm in October of 2010. Due to the lack of storm drains in this area the water drains to
a catch basin south of Parkview Avenue which then flows into Fountain Park. The Saguaro Blvd.
Reconstruction estimate includes design and construction of proper drainage structures and storm
drains in this area to prevent standing water.
Assessor’s Full
Cash Value
Average Additional
Annual Cost
(Residential) – 5 yr.
Repayment Schedule
Average Additional
Annual Cost
(Residential) – 7 yr.
Repayment Schedule
Average Additional
Annual Cost
(Residential) – 10 yr.
Repayment Schedule
$100,000 $52.00 $39.00 $31.00
$350,000 $182.00 $136.50 $108.50
$500,000 $260.00 $195.00 $155.50
$1,000,000 $520.00 $390.00 $310.00
Repayment
Schedule
Assumed
Interest Rate
Approximate
Interest
5 Year 5.0% $1,275,000
7 Year 5.25% $1,827,000
10 Year 5.5% $2,990,000
November 2013 – January 2014: Engineering Selection & Contract
February – September 2014: Design
October – November 2014: Public Bid Process for Construction
December 2014 – July 2015: Construction
Contact: Paul Mood, 480-816-5129, pmood@fh.az.gov
JLBC
Joint Legislative Budget Committee
Staff Memorandum
1716 West Adams Telephone: (602) 926-5491
Phoenix, Arizona 85007 Facsimile: (602) 926-5416
DATE: March 11, 2013
TO: Richard Stavneak
FROM: Hans Olofsson, Chief Economist
SUBJECT: HB 2657 TRANSACTION PRIVILEGE TAX CHANGES
We have received several inquiries on the fiscal impact estimate of HB 2657, which makes changes to the state and
local transaction privilege tax (TPT). Among other revisions, the bill would eliminate the prime contracting tax.
While contractors are currently exempt from paying the retail TPT on building materials, they would become subject
to the tax under HB 2657. Please see the attachment for more information on the bill, as amended by the House
Ways and Means Committee.
Estimated Impact
The fiscal impact of HB 2657 is difficult to determine with certainty due to significant data limitations. The
magnitude of the impact is highly sensitive to 3 main assumptions: (1) the current levels of non-compliance with the
prime contracting tax, (2) the cost of materials as a percent of the total contract and (3) the increase in the retail
taxable sales base. In each of these circumstances, there is a lack of definitive data to measure the impact of HB
2657. While methodologies have been developed to address the data uncertainty, these approaches are speculative
at best.
As a result, the JLBC Staff has developed 2 estimates of the fiscal impact to provide a perspective on the possible
outcomes. Estimate A attempts to replicate the Department of Revenue (DOR) methodology and its key
assumptions. Estimate B uses a different set of assumptions for the 3 main issues. Both assumption sets are equally
plausible.
Depending on the assumptions, the potential state General Fund impact varies widely during the first full year of
implementation in FY 2016. Under Estimate A, the bill would generate a net gain of $19 million in General Fund
revenue. In contrast, there would be a General Fund revenue reduction of $(137) million in that same year under
Estimate B. See Table 2 for the impact of individual provisions.
At the local level, counties and cities are likely to experience a net gain from the TPT revenue sharing formula under
either option. The estimates range from $50 million in Estimate B to $102 million in Estimate A.
Unlike the revenue sharing formula, the fiscal impact on local option TPT is likely to be negative. The estimates
range from a net loss of $(24) million under Estimate A to a net loss of $(61) million under Estimate B.
All local estimates reflect systemwide impacts. City-specific impacts are difficult to derive. For example, there is
insufficient information regarding the site of building material purchases compared to the location of the
construction contract. Without more detailed evidence of this comparison, any individual city estimates are highly
uncertain.
(Continued)
- 2 -
Analysis
The elimination of the prime contracting tax is expected to reduce General Fund revenues by $(520) million in FY
2016. This loss would be partially offset by the TPT being applied to contractor building material purchases
previously exempt under the retail tax. Materials are estimated to be 38% to 41% of the value of the contract. Prior
to changes in the compliance rate, eliminating the exemption is forecast to generate $269 million to $290 million in
new revenue.
Non-Compliance - Part of the remaining General Fund revenue gap would be closed with greater compliance. At
the current time, some contractors may fail to levy the prime contracting TPT. Since they have a contractor’s retail
exemption, the whole transaction may escape taxation. If this TPT exemption no longer existed, it would be more
difficult for contractors to evade paying TPT on building materials. Measuring non-compliance with any tax,
however, is inherently difficult.
Various statistical analyses suggest that the current contracting non-compliance rate is 20% to 40%. While these
methodologies have merit, they should also be evaluated from a total dollar loss perspective. At these rates, the total
level of contracting non-compliance would range from $4.6 billion to $12.3 billion. Given that the largest contracts
are typically audited in some fashion, there are reasonable questions as to whether Arizona’s “underground”
contracting economy is that large.
DOR estimates the non-compliance rate at 31%. Assuming that non-compliance falls from 31% to 0%, $140 million
in new revenue is generated in Estimate A. Estimate B assumes a non-compliance rate of 20%. The lower rate
serves to moderate the “underground economy” magnitude as well as demonstrate the sensitivity of the fiscal impact
to the compliance rate. At the lower rate, retail TPT would increase by $72 million in Estimate B.
Retail Tax Base - Another possible revenue generator in the bill involves the expansion of the retail TPT tax base.
DOR estimates that the bill would increase the retail base by 4%. Among other items, DOR has linked its 4%
estimate to the elimination of the TPT exemption for non-residents shipping materials out of state. DOR notes that
retailers claim that there are $197 million of these exemptions each year. Believing that estimate to be too high,
DOR has reduced the estimated impact to $100 million. Even at this dollar level, however, the total dollar value of
non-resident shipping would approach $2 billion. From a practical standpoint, it is difficult to envision the types of
nonresident shipping activity that would generate $2 billion in sales.
The Estimate A analysis includes the 4% DOR estimate and would generate $88 million for the state General Fund
after accounting for revenue sharing. Estimate B assumes a 1.2% increase in the retail base, which would generate
$26 million in new revenue.
Table 1 summarizes the main assumption differences.
Table 1
Summary of Estimate A and B Assumptions
Estimate A Estimate B
Level of Non-Compliance with Prime Contracting Tax 31% 20%
Cost of Materials as a Percent of the Total Contract 41% 38%
Increase in Remote Sales Tax Taxation 4% 1.2%
FY 2015
The major provisions in the bill would become effective January 1, 2015. As a simplifying assumption, the FY
2015 fiscal impact can be viewed as being approximately 40% of the full FY 2016 estimate. Any contracts signed
prior to January 1, 2015, however, would still be taxed under the prime contracting classification. As a result, this
provision would likely further lessen the impact during the first 6 months of implementation.
HO:lm
Attachments
- 3 -
Table 2
HB 2657 - Transaction Privilege Tax Changes
FY 2016
HB 2657 and Other Assumptions with Fiscal Impact $ in Millions
General Fund Impact: Estimate A Estimate B
Eliminate Prime Contracting Tax ($519.6) ($519.6)
Impose Retail TPT on Contractor Building Materials [60/40 Split]:
- Materials Rate = 41% $290.3
- Materials Rate = 38% 269.1
Eliminate Use Tax Exemption on Building Materials (Interstate Sales)20.7 19.2
Increased TPT Compliance on Building Materials:
- Non-compliance Rate = 31% 139.7
- Non-compliance Rate = 20% 72.1
Expansion of Existing Retail Taxable Sales:
- 4% Increase 88.3
- Clarify Sourcing Statutes for Remote Sales 18.4
- Eliminate Nonresident Shipping Retail Exemption 7.4
Add DOR Auditors in Place of City Audit TBD (1.9)
DOR BRITS Programming Changes TBD (2.0)
General Fund Net Impact $19.5 ($137.4)
County Revenue Sharing Impact:
Eliminate Prime Contracting Tax ($48.4) ($48.4)
Impose Retail TPT on Building Materials [60/40 Split]
- Materials Rate = 41% 63.7
- Materials Rate = 38% 59.1
Eliminate Use Tax Exemption on Building Materials (Interstate Sales)0.0 0.0
Increased TPT Compliance on Building Materials
- Non-compliance Rate = 31% 28.6
- Non-compliance Rate = 20% 14.8
Expansion of Existing Retail Taxable Sales:
- 4% Increase 19.4
- Clarify Sourcing Statutes for Remote Sales 4.1
- Eliminate Nonresident Shipping Retail Exemption 1.6
County Revenue Sharing Net Impact $63.3 $31.1
City Revenue Sharing Impact: 1/
Eliminate Prime Contracting Tax ($29.9) ($29.9)
Impose Retail TPT on Building Materials [60/40 Split]
- Materials Rate = 41% 39.3
- Materials Rate = 38% 36.5
Eliminate Use Tax Exemption on Building Materials (Interstate Sales)0.0 0.0
Increased TPT Compliance on Building Materials
- Non-compliance Rate = 31% 17.7
- Non-compliance Rate = 20% 9.1
- 4 -
FY 2016
$ in Millions
Estimate A Estimate B
Expansion of Existing Retail Taxable Sales:
- 4% Increase 12.0
- Clarify Sourcing Statutes for Remote Sales 2.5
- Eliminate Nonresident Shipping Retail Exemption 1.0
City Revenue Sharing Net Impact $39.1 $19.2
Local Option Tax
Eliminate Contracting Tax ($208.3) ($208.3)
Impose Municipal Retail TPT on Building Materials
- Materials Rate = 41% 127.1
- Materials Rate = 38% 117.8
Increased TPT Compliance on Building Materials
- Non-compliance Rate = 31% 57.1
- Non-compliance Rate = 20% 29.5
Reduce City Auditors in Place of DOR Audit TBD TBD
Net Local Option Impact ($24.0) ($61.0)
____________
1/ Excludes impact associated with local option tax.
TBD = To Be Determined
- 5 -
Attachment
Description of the Fiscal Impact of HB 2657 (as Amended by House Ways & Means Committee)
Eliminate Prime Contracting Tax
Prime contracting comprises the business of construction, alteration, or demolition of any building, road, railroad, or
other structure or project. The bill eliminates the prime contracting tax, beginning January 1, 2015. Under current
law, the retail sales tax does not apply to the sale of materials to a contractor if such materials are incorporated into a
construction project. Contracts entered into before January 1, 2015, however, will be subject to the contracting tax.
Under Estimate A or B, this provision is estimated to result in a General Fund revenue loss of $(519.6) million when
fully implemented in FY 2016. The estimated fiscal impact of this provision as well as the other provisions listed
below are based on projected sales tax growth under the JLBC January Baseline.
Impose Retail TPT on Contractor Building Materials
With the elimination of the prime contracting tax, the sale of tangible personal property, such as building materials
and supplies, to a contractor would be subject to retail TPT, beginning January 1, 2015. Additionally, under retail
TPT, 60% of collections go directly to the General Fund and 40% are deposited into the revenue sharing
“distribution” base (compared to 20% of the prime contracting tax). After adjusting for the General Fund share of
the distribution base, 26% of these revenues are distributed to cities and counties (compared to 13% of prime
contracting).
In calculating the revenue generated by the elimination of the Contractor Building Materials TPT exemption, a key
assumption is the percent of contracts related to materials. Under current law, the tax base for the prime contracting
classification is 65% of the contract. The 65% figure was originally intended to represent the cost of materials
associated with a contract. The remaining 35% represents the cost of labor and is deducted from the contract before
the tax rate is applied. The 65% figure is currently believed to overstate the impact of materials on current contracts.
Estimate A assumes that the average cost of materials is 41% of the total contract. This estimate is based on a 1999
study by the consulting firm Arthur Andersen. Estimate B uses an alternate materials rate of 38% based on Arizona
construction data from the 2007 Economic Census. This provision is estimated to generate General Fund revenue of
$290.3 million under Estimate A and $269.1 million under Estimate B. Use tax proceeds are not shared with local
governments.
Eliminate Use Tax Exemption on Building Materials (Interstate Sales)
Under current law, materials purchased outside of Arizona and brought into the state to be used in a contract are not
subject to the use tax. HB 2657 eliminates this exemption and instead imposes a use tax on such materials. While
the amount of building materials purchased out of state is not currently known, the Department of Revenue (DOR)
estimates this figure to be 5% of the value of materials incorporated into construction projects in Arizona.
According to DOR, this estimate was based on anecdotal information furnished by representatives of the
homebuilding industry. The elimination of the use tax exemption on materials bought out of state is estimated to
increase General Fund revenues by $20.7 million under Estimate A and $19.2 million under Estimate B. Use tax
proceeds are not shared with local governments.
Increased TPT Compliance on Building Materials
According to the final report issued by the Governor’s Transaction Privilege Tax Simplification Task Force in
December 2012, the complexity of the current prime contracting tax is believed to result in some level of non-
compliance. Taxpayer non-compliance results in a loss of state and local government taxes, since such revenues go
uncollected. One source of non-compliance is contractors failing to levy the TPT on their contracts. Another source
is the erroneous use of exemption certificates by contractors for purchases of items that are not tax-free under retail
TPT. The retail TPT is more difficult to evade than the prime contracting tax. As a result, the bill is expected to
increase overall TPT compliance and generate added revenue.
By its nature, taxpayer non-compliance is difficult to measure with any certainty. The Simplification Task Force
Report noted that estimates of noncompliance range from 20% to 40%. DOR estimates the rate at 31%, which has
been incorporated into Estimate A.
The 31% non-compliance rate was calculated in 2 steps. First, DOR attempted to determine the amount of prime
contracting tax that would be collected if there was 100% taxpayer compliance. To estimate this amount, DOR
determined the net value of construction by Arizona companies with at least one employee from the 2007 Economic
- 6 -
Census and added to this figure total receipts by Arizona construction firms with no employees from a separate data
series provided by the U.S. Census Bureau. This calculation was intended to capture the construction activity of all
construction establishments in the state. Second, DOR compared the estimated construction tax base based on
Census data to the actual amount of taxable prime contracting receipts.
Based on most recent Economic Census data, this calculation yielded an estimated non-compliance rate of 27.2% in
2007. Finally, DOR adjusted its non-compliance estimate to 31% to account for unspecified non-compliance not
captured by Census data.
While Census data provides some gauge of contracting activity, the quality of this information depends on the
accuracy of construction firms in completing their questionnaires. The data could understate non-compliance in so
far as contractors underreport the value of construction. In the opposite direction, contractors may not always
distinguish between regular contracts and subcontracts. If the latter are included, the state's overall level of
construction activity would be overstated.
In dollar terms, the 31% non-compliance rate means that $8.3 billion in contracting activity would be untaxed.
Given that large scale construction activity tends to be monitored more closely by state and local auditors, there is a
reasonable question as to whether non-compliance on smaller projects could approach the magnitude of $8.3 billion.
If DOR's Census methodology is updated for the latest 2010 data, the non-compliance rate is 22.7%, or a decline
from 27.2% in FY 2007. Given the questions about the magnitude of the level of non-compliance and the later
Census data, Estimate B assumes a non-compliance rate of 20% as an alternative assumption. The use of a lower
rate also helps demonstrate the sensitivity of the revenue gain to the non-compliance assumption.
Assuming full compliance under the proposed materials retail TPT, JLBC Staff estimates that Estimate A will
generate additional General Fund revenues of $139.7 million compared to $72.1 million under Estimate B.
Expansion of Existing Retail Taxable Sales
DOR estimates that the various provisions in the bill would increase the size of the retail sales tax base by 4%.
Estimate A incorporates this assumption, which would generate $88.3 million in General Fund revenue. The overall
4% estimate is not related to any single provision in the bill. Among other provisions, it is intended to include the
impact of eliminating 2 retail TPT exemptions related to the sales of tangible personal property to nonresidents when
such property is shipped or delivered out of state. The 4% figure may also be related to language in the bill
clarifying the sourcing of remote sales.
In its FY 2012 Tax Expenditure Report, DOR estimates that the dollar value of the nonresident shipping exemptions
is $197 million. This estimate is based on the exemptions that retailers record on the TPT forms submitted to DOR.
The Department, however, believes that the dollar value of the exemptions is overstated and estimates that the
impact is closer to $100 million.
At the $100 million level, the dollar value of goods shipped out of state by nonresidents would be $2 billion. As
with the non-compliance information, there is a reasonable question as to whether this magnitude is correct. It is
difficult to determine the type of nonresident shipping that would generate that level of activity.
Unlike the 4% assumption in Estimate A, the alternative estimate attempts to provide a dollar value for each
provision separately.
Based on anecdotal information provided by DOR, JLBC Staff expects that the provision related to the clarification
of sourcing statutes will generate $18.4 million in additional General Fund revenue. The elimination of the
nonresident retail TPT exemptions is assumed to generate $10 million rather than $100 million in new state tax
revenue. Of the $10 million, an amount of $7.4 million would be allocated to the General Fund. Added together,
the 2 provisions estimated under Estimate B equate to a 1.2% expansion of the existing retail sales tax base.
DOR Administrative Costs
HB 2657 transfers TPT administration related to collections, enforcements, and audits from the cities to DOR. This
change will primarily involve those (“non-program”) cities that are currently administering their own sales tax. In
addition, DOR will also be required to reprogram its current computer system to facilitate the use of its online portal.
- 7 -
DOR has not yet released any estimate of the additional administrative costs associated with the changes under the
bill. As a result, Estimate A labels the DOR administrative costs as “to be determined” (TBD).
In contrast, Estimate B attempts to quantify these DOR costs so as to acknowledge some potential impact.
According to the League of Arizona Cities and Towns, the state’s 91 cities and towns had a total of 70 TPT auditors
on staff in FY 2012. In addition, there were 34 contract auditors working for the cities as well. Estimate B assumes
that centralizing auditing to DOR will result in some economies of scale and that DOR will need to employ 50 new
auditors. However, DOR will be able to redeploy its existing 25 prime contracting tax auditors to retail TPT audits.
The DOR staffing need would therefore be 25 FTEs. This added staff would cost $1.9 million in FY 2016.
This estimate reflects an average annual salary of $52,500, a benefits rate of 35%, and other operating costs equal to
10% of labor costs.
BRITS (Business Reengineering/Integrated Tax System) is the computer information system currently used by DOR
to integrate separate tax systems. In addition, BRITS also effectively serves as the web portal for business taxpayers
to file and pay their taxes online. Since HB 2657 would make DOR’s online portal the single point of contact for all
licensing and tax filing in the state, BRITS would need to be reprogrammed to facilitate such change. To date, DOR
has not released any cost estimate of such programming changes. For this reason, this cost is labeled as “to be
determined” under Estimate A. While the cost of reprogramming BRITS is not currently known, Estimate B
includes a placeholder estimate of $2.0 million.
Local Government Impact
As shown in Table 2, JLBC Staff estimates that counties will receive an additional $31.1 million (Estimate B) to
$63.3 million (Estimate A) in state shared revenue under the bill. The corresponding revenue increase for cities is
estimated to be $19.2 million under Estimate B and $39.1 million under Estimate A. These figures were calculated
based on the estimated change in state TPT revenue under the bill, of which a stipulated percentage is distributed to
counties and cities under the state’s revenue sharing formula.
Separate from revenue sharing, cities may also have their own local TPT option. Each city retains 100% of the local
option tax. Based on information from the League of Arizona Cities and Towns, local option contracting taxes
generated $168.1 million in FY 2012. This amount includes both the prime contracting tax and speculative builder
tax. Unlike the state, cities have a separate speculative builder tax that is imposed on the sale of improved real
property (which includes custom, model or inventory homes, and commercial buildings). Detailed information on
the breakdown between local option prime contracting tax and speculative builder tax is not currently available.
Assuming the same growth rates as under state TPT, JLBC Staff estimates that the elimination of local option
contracting taxes would reduce local revenues by $(208.3) million in FY 2016. If cities replace the prime
contracting tax with a local option retail TPT, they would gain $117.8 million to $127.1 million. These estimates
assume an average city prime contracting tax rate of 1.9% and an average city retail tax rate of 2.0%. Increased
compliance would add another $29.5 million to $57.1 million.
In total, local option TPT under the bill is estimated to decrease by $(24.0) million under Estimate A and $(61.0)
million under Estimate B.
This analysis does not attempt to address the fiscal impact on any individual city. City-specific impacts will depend,
in part, on each city’s expected level of contracting activity and its ability to capture the related TPT building
materials from retail establishments in its jurisdiction. Such city-specific information is not currently available.
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Issue 9 - M arch 8, 2013
Legisla tiv e Ov erv iew
To day marks the 54th day o f th e Fir st Re gular Sessio n o f th e 51st Le gislature. Th is we e k saw c o mmitte e age ndas
gro w as bills moved th ro u gh the c h ambe rs. Floo r ac tivity also remain ed h igh as bo th c h ambe rs wo rked to ge t bills
into the o pposite c h amber for additio n al c o nside r atio n. The deadlin e to hear bills in c o mmitte e, M arc h 22,
c o ntinu e s to appro ac h , u rging the c h ambe rs to maintain th e ir labo rs in e arn est.
Th ere h as bee n little to no new pu blic info rmatio n abo ut bu dge t n ego tiation s e ith er between the Ho use an d
Sen ate , o r the go ve r n o r. The Leagu e remain s ale rt fo r develo pme n ts o n th e bu dge t an d will pro vide info rmatio n
abo ut pro po sals as the y be c o me available .
Cha nges to T ra nsa ction Priv ilege T axes
Disc u ssio n s o n HB 2657 (tr ansac tio n privile ge tax c han ges) c o n tin ue. Le gislato rs, mayo r s an d re presen tative s from th e
gove rn o r 's o ffic e met last week to disc uss the bill an d alth o ugh no c o n c lusion s were reac hed, the disc ussio ns have
remain e d largely positive and c o o pe r ative. At the time o f this writin g, a similar gro u p o f in dividuals is sc h e du led to
mee t o n Friday mo rn ing to c o ntinue the dialo gue. Bo th side s are evalu atin g the pro p o sals fro m e ac h c amp with o pe n
minds and an ho nest de sire to re ac h c o n se nsus. The Le ague is ho pe ful th at a pac kage c an be assemble d that brings
greater tax simplic ity to tho se do ing busine ss in Arizo n a while preserving ke y mu nic ipal in te re sts.
Dedica ted Property Ta x
SB 1470 (NO W: dedic ated pro perty tax) passed o u t o f the Sen ate 25-3 o n M o n day and is c u r re n tly awaiting
c o mmitte e assign men t in th e Ho use o f Re presen tatives. The bill, spo nso red by Se n ato r Adam Dr iggs (R-Pho enix),
auth o r ize s mu nic ipalitie s to levy pro pe r ty taxes de dic ate d to the c o sts o f pro viding po lic e , fire, and e mergen c y
medic al se rvic e s. The r e spec tive vo te r s o f the munic ipality mu st app ro ve the tax be fo re it c an be impleme nted. Th e
bill also spe c ifie s spec ific info rmation to be c on tain ed in th e public ity pamphlet c o n c ernin g the elec tio n.
Other Bills of Note
(All b ills bein g ac tively mo nito red by th e Le ague c an b e fo un d h ere.)
Bi ll Number - Short Ti tl e - Subject(s)
HB 2005: po litic al subdivisio n entities; public ac c ess - tran spare nc y
HB 2259: NO W: ortho do n tic de vic es; transac tion privilege tax - finan c e
HB 2292: pho to radar c itatio ns; se rvic e times - tran spo rtatio n, c riminal justic e
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HB 2324: mu nic ipal tax c o de ; le ase s - finan c e
HB 2544: c ity parc el tax; pro hibition - fin anc e
Legis lative Bulletin is p ublished b y the League of Ar izona Cities and Towns.
For war d your comments or suggestions to league@azleague.or g.
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Issue 10 - M arch 15, 2013
Legisla tiv e Ov erv iew
To day marks th e 61st day o f th e First Re gular Sessio n o f the 51st Le gislature. Flo o r ac tivity was limite d as eac h
c h ambe r so u ght to mo ve re mainin g bills to th e oth e r bo dy. No twith stan ding c ertain exc eption s, th e de adlin e to
he ar bills in c o mmitte e is M arc h 22.
Pe rh aps th e biggest n ews at the Capito l was the go verno r's unveilin g o f her pro p o sal o n M edic aid. Amo n g o the r
provisio n s, th e pro p o sal wo uld inc re ase e ligibility fo r th e Arizo na He alth Care Co st Co ntainme nt Syste m to c ove r
everyo n e be lo w 133 perc e nt o f th e fe deral poverty le ve l and allow AHCCCS to asse ss a fee o n ho spitals to pay fo r
the expan sio n. A press r e lease on the bill c an be fo un d h e re. Additio nally, the legislative language p ro po sed by Go v.
Brewe r c an be fo und h e r e an d is like ly to be spo nso re d by Re p. He ath er Carter (R-Cave Cre ek).
Cha nges to T ra nsa ction Priv ilege T axes
Altho ugh disc u ssion s o n HB 2657 (tran sac tio n privilege tax c h anges) c o n tin ue d this wee k, it sh o uld b e n o te d that HB
2111 (in ve stme nts; public mo n ies) is sc h eduled to be he ard in th e Se n ate Financ e Co mmitte e on We dne sday at 2
p.m. Ac c o rding to th e age nda, a str ike -e ve rythin g ame ndme nt may be o ffe re d o n th e bill with the subjec t o f
"transac tio n privilege tax c hange s." The langu age o f th at strike-everyth ing amendmen t is n o t required to be available
un til 4 p.m o n M on day. The Leagu e c o ntinu es to mo n ito r th e situatio n and will pro vide info rmatio n as it bec o me s
available .
Scrap M eta l Dea lers
HB 2262 (sc rap metal de alers; re gistratio n) u nanimo usly passed bo th th e Sen ate Go ve r n men t and Envir o nme nt an d
the P u blic Safe ty c o mmitte e s this we ek. Th e measure, spo n so re d by Rep. Tom Fo rese (R - Ch andle r ) an d suppo rte d
by the Le ague, requires sc rap me tal de alers to registe r with the Departmen t of Public Safety and also re qu ire s all
Arizo n a law e nfo rc eme n t to be re giste re d o n a free th eft no tific atio n we bsite. Th e bill c o ntains n ume ro u s provisio n s
inten de d to dec re ase me tal th eft wh ile still allo wing sc r ap me tal deale r s to o perate witho ut u ndu e burde ns. The bill
do es state that the Le gislatu re de te r min es deale r re gistratio n is a matte r o f statewide c o n c ern and that th e po we r
to re giste r de alers is pre e mpted, bu t a c ity, town o r c o un ty may c o n tin ue to en fo rc e business lic en sin g laws. Th e
bill no w go e s to Sen ate Ru les.
Election Rev isions
O n Tue sday, M arc h 12, HB 2536 (c ampaign fin anc e ; c o mmitte es; revisio ns) was ame n de d in th e Se nate Ele c tio n s
Co mmitte e to add the pro vision s o f HB 2527 (ele c tio n s; revisio ns). The amended b ill passe d o ut o n a 5-1 vo te . HB
2536 make s c hange s regardin g inde pe n de nt expe nd itu re s an d po litic al c o mmittee c o n tribu tio ns. Th e ame ndme nt:
auth o r ize s munic ipalities to len gth en o r sho rten th eir te rms in o rder to tran sition to c an didate ele c tio n s in th e fall
of e ve n ye ars; modifie s mun ic ipal in c o rpo ratio n statutes ac c o rdingly; an d pro vides mu nic ipalities with th e ir "ho me
rule" au th o rization e xpir in g in the spring o f 2014 the o ppo rtun ity to mo ve tho se ele c tio n s to the fall o f 2014 with o u t
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suffering finan c ial pe n altie s. The Leagu e su ppo rts the bill as the se ke y c h ange s will e nsure th e smo o the st transitio n
to a c o nso lidate d e lec tio n sc hedule . Th e Le ague th an ks Re p. M ic h ele Ugen ti (R-Sc o ttsdale) fo r he r spo n so rsh ip an d
c o ntinu e d su ppo rt.
Ala rm Regula tions
O n We dne sday, M arc h 13, th e Hou se passed HB 2185 (alarm businesses; alarm agents) in the Co mmitte e o f the Who le
and Th ird Read. As amen ded th e bill allo ws fo r alarm c o mpan ies to pr o vide lo c al law e nfo rc emen t the nec essary
info rmatio n to respo nd to alarm c alls. The bill also h as mec hanisms in plac e for bac kgro u nd c h ec ks fo r alarm agents.
Th is bill is a c le an-u p me asure to last ye ar 's HB 2748.
Th e Leagu e is in su ppo r t o f th e bill and is grate ful fo r all o f the h ard wo rk o f th e spo nso r, Rep. Kare n Fann (R -
Presc o tt). The bill n o w go es to th e Se nate.
Public Notices
HB 2533 (lo c al go vernme nts; pu blic no tic e s; we bsite ) failed in its th ird reading in th e Hou se o n M arc h 13th .
Spo nso red by Re p. Warr e n Pe te rson (R - Gilbe rt) HB 2533 allows c itie s, to wns and c o u n tie s to pro vide pu blic no tic e
on th e ir o wn websites, instead of in a n e wspape r. If a c ity o r town do e s no t have a website, the Le ague will ho st
the po stin g. O nc e a ye ar, the mun ic ipality will have to pu blish in a n e wspape r th e lo c ation o f th e public no tic e
website . The bill was also amen ded in th e Ho use Co mmitte e o f th e Who le to exc lu de mun ic ipalities u nde r 100,000.
Th is issu e h as bee n impo rtant to c itie s and to wns fo r man y ye ars. We ar e than kful to Re p. Pe te rson an d the bill's c o -
spon so r s fo r this e ffo r t. Th e bill will be re c o n sidered o n M o nday, M arc h 18.
Ineligible Employees
O n We dn e sday, HB 2562 (public retireme nt syste ms; ine ligible emplo ye e s) was sign ific an tly amen de d in the Se nate
Finan c e Co mmitte e. As ame nded th e bills aims to pr e ve nt future emp lo yee s seekin g e nro llme nt in the Arizo n a State
Re tire me nt System (ASRS) an d the Public Safety Pe rso n nel Re tire me nt System (PSPRS) fro m bein g impro perly
partic ipatin g in o ne o f the state 's pen sio n plans. Alth o u gh so me final adju stmen ts are ne e de d to the bill, the Leagu e
is sup po rtive o f bo th th e statuto ry an d administrative path go ing fo r ward in orde r to bo th preven t fu tu re in c orrec t
en ro llmen ts as we ll as pro pe rly and r e spec tfully address existing ine ligible emp lo yee s. Th e Le ague than ks th e
spon so r , Re p. Bo b Ro bso n (R-Chandler) fo r his patien c e and leadersh ip o n th is issue an d willingne ss to no t o nly bring
stake ho lders to gethe r , bu t also listen s to the c on c e rn s raised, in ord e r to c raft a viable so lution .
Other Bills of Note
(All b ills bein g ac tively mo nito red by th e Le ague c an b e fo un d h ere.)
Bi ll Number - Short Ti tl e - Subject(s)
HB 2292: pho to radar c itatio ns; se rvic e times - tran spo rtatio n, c riminal justic e
HB 2347: tax le vy; bo nd c o sts - finan c e
HB 2443: c itie s; c o un tie s; re gulatory re vie w - re gulato ry refo rm
SB 1231: public build in gs; c o nstru c tio n ; in demn ity - ge ne ral go vernme n t
SB 1278: h o me o wne r s' asso c iation s; p u blic ro adways - h o meo wners' asso c iatio ns
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SB 1365: plann ed c ommu nities; zo nin g; pro hibition s - h o me o wne rs' asso c iatio n s
SB 1403: Un ite d Natio n s Rio dec laratio n ; pro hibitio n. - ge ne ral go vernme n t
Legis lative Bulletin is p ublished b y the League of Ar izona Cities and Towns.
For war d your comments or suggestions to league@azleague.or g.