A.R.S. § 48-7003: Authority; formation order; limitations on rejection; fees

A. A district shall be formed only on the issuance of a formation order by the authority. The authority shall review the petition submitted pursuant to section 48-7002 and accompanying materials to evaluate, solely on the basis of the information included with the petition, the following:

1. Whether any appraisal, third-party market study or opinion of value that is provided in connection with the petition is complete.

2. Whether the description of the proposed public infrastructure in the general plan appears complete on its face and does not contain obvious errors, without any independent engineering investigation, analysis or verification.

3. Whether the preliminary financing plan includes the anticipated sources and uses of monies for the public infrastructure.

4. Whether the district is reasonably expected to have the financial ability to discharge its proposed indebtedness within the maximum authorized tax rate and maximum aggregate assessment amount, as applicable.

5. Whether formation of the district will violate any existing and applicable development agreement or other agreement with the municipality or the county that relates to the land included within the boundaries of the district that was submitted to the authority in connection with the petition.

B. The authority shall approve formation of the district and issue the formation order for the district if the authority finds that all of the following occurred:

1. All required documents have been submitted in the form prescribed by this chapter.

2. The proposed district meets all statutory eligibility and boundary requirements that are established under this chapter.

3. The notice to each affected municipality and, if the district is located in an unincorporated area, to the county has been provided as prescribed by section 48-7002, subsection D.

4. Solely on the basis of the information submitted in connection with the petition, including any appraisal, third-party market study or opinion of value, the district has, or will have, the financial ability to discharge its proposed indebtedness within the maximum authorized tax rate and maximum aggregate assessment amount, as applicable.

C. If the requirements of subsection B of this section are satisfied, the authority shall issue a formation order within sixty days after the submission of a complete petition. The formation order shall include all of the following:

1. The name of the district.

2. A metes and bounds description and a map of the district's boundaries.

3. A general description of the public infrastructure that the district may finance.

4. A statement that a general plan and a preliminary financing plan for the district will be on file with the clerk.

5. The types of bonds that the district is authorized to issue.

6. The maximum authorized tax rate, the maximum authorized aggregate principal amount of general obligation bonds, the maximum aggregate assessment amount and the maximum O/M tax rate.

7. The names and initial terms of the initial board of directors and that the district will be governed by directors who are chosen pursuant to this chapter.

8. A statement that:

(a) The formation of the district may result in the levy of ad valorem taxes or assessments to pay the costs of authorized public infrastructure that is constructed by the district and for operating and maintaining the authorized public infrastructure.

(b) Any ad valorem tax that is levied for the payment of general obligation bonds may not be levied at a rate that exceeds the maximum authorized tax rate that is approved at the election that authorized the levy and the issuance of the bonds, except as prescribed in section 48-7021, subsection B.

(c) Any bonds or other obligations of the district will not be a debt, legal or moral, of this state or any municipality or any county of this state, are not obligations of this state or any municipality or any county of this state, are obligations of the district and are payable only from the sources pledged for their payment.

D. The authority shall approve formation of the district and issue the formation order if the authority determines that the petition and accompanying materials meet the statutory requirements of this chapter. The authority's review is limited to confirming that the statutory requirements of this chapter have been satisfied and the authority may deny a petition only on a written finding of one of the following:

1. The petition is incomplete.

2. The financial information submitted in connection with the petition, including any appraisal, third-party market study or opinion of value, is incomplete or illustrates that the district will not have the financial ability to discharge its proposed indebtedness within the maximum authorized tax rate and maximum aggregate assessment amount, as applicable.

3. The proposed district violates a statutory prohibition or boundary rule under this chapter, and in each case the petitioner failed to submit proposed corrections of the deficiencies within sixty days after notice.

4. The formation of the proposed district will materially violate any existing and applicable development agreement or other agreement with the municipality or the county that relates to public infrastructure and that is recorded against the land included within the boundaries of the district with respect to the design, construction, conveyance, operation or maintenance of the public infrastructure.

E. If the authority does not issue the formation order within sixty days after submission of a complete petition, the authority shall provide a written basis for not adopting the formation order and shall identify the specific changes that are needed for the petition to be approved and for the district to be formed. Such action will not constitute a denial of the petition and the petition may be revised and resubmitted at any time.

F. On issuance of the formation order by the authority, the district shall cause the formation order to be recorded in the real property records of the county in which the district is located and shall cause a copy of the formation order to be delivered to the county assessor and the board of supervisors of the county in which the district is located, to any municipality in which the district is located and to the department of revenue. On recording the formation order, the district is established as a political subdivision of this state.

G. Before recording a formation order under this section, a general plan for the district shall be recorded with the county recorder of the county in which the district is located that sets out a general description of the improvements for which the district is proposed to be formed and the areas to be improved.

H. On formation, the district is a special purpose district for the purposes of article IX, section 19, Constitution of Arizona, a tax levying public improvement district for the purposes of article XIII, section 7, Constitution of Arizona, and a municipal corporation for all purposes of title 35, chapter 3, articles 3, 3.1, 3.2, 4 and 5. A district that distributes or sells groundwater is a private water company only for the purposes of title 45, chapters 2 and 3.1. Except as otherwise provided in this section, a district is considered to be a municipal corporation and political subdivision of this state, separate and apart from any municipality or county in which the district is located. Notwithstanding any other law, a district formed pursuant to this chapter does not have the power of eminent domain and does not have the power to enact zoning ordinances. Notwithstanding any other law, this chapter does not impose any additional regulation or requirements on or alter the service territory, including certificates of convenience and necessity, of any county, irrigation district, electrical district, agricultural improvement district, municipality or public service corporation.

I. On formation of the district, the board shall implement the general plan for the public infrastructure of the district.

j. Fees and other charges assessed by the authority in connection with the submission and consideration of a petition to form a district may not exceed $15,000. If a petition is denied by the authority, it may not assess a fee or other charge in connection with submitting and considering a substantially similar petition that is submitted within ninety days after the denial. Fees and other charges assessed by a district in connection with administering the district, including the issuance and sale of bonds, may not exceed the actual expense incurred by the district for staff and consultant services and support facilities supplied by the district or the financial, legal and administrative costs of the district that are not reimbursed from proceeds of the bonds or other district revenue.

K. After the formation order is issued, the owners of at least fifty percent of the land in the district may petition the authority to amend the formation order to modify the powers or financial parameters of the district, including any maximum authorized tax rate, maximum authorized aggregate principal amount of general obligation bonds, maximum aggregate assessment amount or maximum operations and maintenance tax rate. Any such petition for amendment shall:

1. Describe the proposed amendments to the formation order and general plan.

2. Include updated financial information, including an updated preliminary financing plan, sufficient to allow the authority to determine whether the district is reasonably expected to have the financial ability to discharge its proposed indebtedness within the revised maximum authorized tax rate and maximum aggregate assessment amount, as applicable.

3. Demonstrate that the proposed amendments do not violate any applicable statutory eligibility or boundary requirements or any development agreement or other agreement with the municipality or county relating to the land within the district.

L. The authority shall review and act on a petition for amendment under the standards and within the time periods prescribed in subsections A through E of this section, and, if approved, shall issue and cause to be recorded an amended formation order reflecting the approved changes.

M. Any petition to amend the formation order that increases the maximum authorized tax rate or maximum aggregate assessment amount shall be signed by all owners of all real property in the district.

N. The authority’s issuance of a formation order pursuant to this chapter is a governmental determination of statewide financial compliance and does not constitute zoning, planning or land use approval. Any action of the authority or the executive director pursuant to this article is the exercise of an administrative function involving the determination of fundamental governmental policy as prescribed in section 12-820.01.