SUBJECT: Strike Everything Amendment to S.B. 1133 (CORP; retirees; health insurance subsidy) relating to rural tourism promotion district

Purpose

Provides for the creation of rural tourism promotion districts allowed to bond and use transaction privilege taxes (TPT) to promote tourism and to construct and operate tourism facilities and services in the district.

Background

Remote communities located near popular tourism destinations often lack the means to develop facilities to serve community and visitor needs. The amendment to S.B. 1133 allows voters who live in unincorporated areas near Arizona’s national parks to create special taxing districts, known as rural tourism promotion districts (RTPD). Arizona currently has three national parks: Grand Canyon, Petrified Forest and Saguaro. However, because of county population restrictions, only voters living near the Grand Canyon and Petrified Forest National Parks are expected to be eligible to form an RTPD.

An RTPD is authorized to issue bonds and to levy a TPT of up to three percent on district businesses and monies generated are earmarked for tourism facilities and services, with at least 25 percent being dedicated for tourism promotion. Other uses for the monies that have been identified in communities near the Grand Canyon include health services, public safety, transportation and related infrastructure.

The amendment to S.B. 1133 may have some fiscal impact on the Department of Revenue since the Department will be responsible for collecting any district TPT. However, to offset these costs, the amendment allows the Department to receive up to five percent of district revenues.

Provisions

RTPD Establishment, Governance and Taxing Authority

1. Provides for the establishment of voter-approved RTPDs in counties with populations of less than 500,000.

2. Provides for the county board of supervisors to initiate an election on the formation of an RTPD if petitioned by a majority of qualified electors or real property owners who reside in the district. Petitions must be received by December 31, 2004.

3. Requires an RTPD petition to describe the boundaries of the district, which must be within 40 miles of the boundaries of a national park in Arizona, and at least 5 miles from the boundaries of any incorporated city or town. In addition, if the boundaries include any part of a national park, the petition must include written permission from the park’s superintendent and its primary concessionaire.

4. Requires the county board of supervisors to call for an RTPD election to be held on the next election date that is at least 90 days after a qualifying petition is received.

5. Stipulates that an RTPD election notice must state that the proposition is to establish a rural tourism promotion district and to levy a TPT in the district, and requires the election ballot to ask voters whether an RTPD should be established to collect TPT for tourism promotion purposes.

6. Provides for the RTPD, if approved by a majority of the voters, to be established on either January 1 or July 1, whichever date occurs first at least 90 days after the election results are certified.

7. Provides for an RTPD that does not include any area of a national park to be governed by a five-member board of directors who reside in the district and are appointed by the Governor.

8. Provides for an RTPD that includes any area of a national park to be governed by a seven-member board of directors who meet the following criteria:

Four Governor-appointed persons who own real property in the district and at least one business in the district that is subject to the district TPT;
One Governor-appointed officer or employee of the county where the district is located;
One Governor-appointed representative of the national park concessionaires;
One representative of the national park service who is appointed by the park’s superintendent.

9. Specifies that an RTPD is a public improvement district with the rights of a municipal corporation including constitutional immunities and exemptions relating generally to gifts or loans of credit and local debt limits.

10. Specifies that RTPD board decisions are subject to judicial review to the same extent and in the same manner as decisions of other special taxing districts.

11. Exempts RTPDs from paying taxes or assessments on properties acquired or constructed, on activities involving maintaining real property or on monies derived from the property.

12. Requires RTPD boards to:

§ Appoint a chair, secretary and other necessary officers, with the county treasurer designated ex officio as the TFD treasurer. All directors, officers and employees are subject to laws relating to conflicts of interest;

§ Keep and maintain records that are open to the public;

§ Provide for the use, maintenance and operations of RTPD properties.

13. Authorizes RTPD boards to perform other activities necessary to carry out its duties, including such things as entering into contracts, adopting administrative rules, employing staff, pledging RTPD revenues to secure bonds or other financial obligations and acquiring real and personal property through lawful means except for eminent domain.

14. Provides for the district to levy, and DOR to collect, a TPT from businesses in the district of up to three percent of gross sales proceeds or income.

15. Stipulates that the RTPD board of directors has no authority independent from the district’s qualified electors to impose or collect a tax or assessment.

16. Allows RTPDs to use tax or bond proceeds to acquire land, and to construct, maintain, improve, operate and promote the use of tourism facilities and services in the district, including needed infrastructure. Facilities and infrastructure must conform to applicable standards and requirements.

17. Sets aside 25 percent of RTPD monies for tourism promotion, and allows up to five percent of the monies to be paid to DOR to offset TPT administration costs.

18. Provides for counties to be reimbursed for services provided to an RTPD.

RTPD Accounting, Budget and Audit Requirements

19. Establishes an RTPD general fund, which is administered by the RTPD treasurer and consists of monies received from RTPD properties, interest and other investment income; gifts, grants and donations; and district TPT taxes that are deposited monthly by the State Treasurer unless they are pledged for debt service for district bonds. Bond proceeds are to be kept in a separate subaccount.

20. Allows for RTPD general fund monies to be invested in such things as certificates of deposit, federally insured accounts and U.S. and municipal bonds.

21. Requires the RTPD board to obtain for an annual audit of the RTPD general fund by an independent CPA and to file the audit with the Office of the Auditor General. The Auditor General may make further audits and examinations, but if no official action is taken within 30 days, the audit is considered sufficient.

22. Specifies that the RTPD board is responsible for paying fees and costs of the CPA and Auditor General in connection to its annual audit.

23. Requires the RTPD board to submit an annual budget, as well as periodic expenditure plans, to the county board of supervisors. The budget, which may be amended by the board, must include information about actual and expected revenues and expenditures, assets, liabilities and obligations.

RTPD Bonding Authority

24. Authorizes an RTPD to issue negotiable bonds upon a resolution of the RTPD board prescribing such things as the revenue sources pledged; interest rates; payment dates and bond denominations; maturity dates; manner of execution; place of payment; and terms of redemption.

25. Provides for an RTPD, if it issues bonds, to establish a debt service account administered by the treasurer and consisting of monies dedicated for bond repayment and related costs.

26. Allows the RTPD board, at its option, to perform the following activities by way of its bond resolution:

Pledge all or part of RTPD monies in the RTPD general fund, subaccounts or debt service account to pay bond principal and interest;
Segregate the debt service account into one or more subaccounts and provide that bonds may be secured by a lien on all or part of monies paid into the debt service account or any of its subaccounts;
Establish priorities among bond holders;
Set aside, regulate and dispose of reserves and sinking accounts;
Prescribe procedures, if any, for amending or abrogating terms of bondholder contracts;
Provide for the payment of bond-related expenses from bond proceeds or other RTPD revenues;
Provide for the services of trustees, co-trustees, agents, consultants and others as needed;
Contract with a financial institution, insurance company or indemnity company to provide additional security for bonds; or
Take any other action that affects the security and protection of bonds or bond interest.

27. Provides for RTPD bonds to be sold by competitive bid, negotiated sale or electronic bidding for public or private offering at the resolution price and terms.

28. Allows for authorized bonds to be issued to provide sufficient monies for tourism, educational or community facility purposes, pay bond-related expenses, establish and fund any reserves or sinking accounts, and refund bonds.

29. Allows the RTPD board to perform the following when refunding bonds:

Provide for investing and holding refund proceeds in trust;
Issue new bonds as refunds if they are secured from the same source of revenues as the refunded bonds, whether or not the refunded bonds have matured;
Issue bonds to partly refund outstanding bonds and partly for any appropriate purpose.

30. Provides for RTPD bonds to be subject to the same laws relating to federal income tax exemptions that govern state and political subdivision bonds, and allows the RTPD board to restrict reinvestment yield on bond proceeds or any monies pledged to pay the bonds to gain any federal tax benefits available.

31. Specifies that any RTPD bond pledge is valid from the time it is made, and that monies pledged to bond holders and placed in the district’s debt service account are immediately subject to a binding lien stemming from the pledge.

32. Allows the RTPD board to use any available monies to purchase bonds for cancellation at prices that do not exceed the following:

If the bonds are redeemable, the redemption price plus accrued interest to the next interest payment date;
If the bonds are not redeemable, the applicable redemption price on the first date that the bonds become redeemable, plus interest accrued to that date.

33. Requires bonds to be paid solely from monies in the debt services account.

34. Provides for the treasurer to cancel all bonds when paid, and specifies that RTPD board members and persons executing the bonds are not personally liable for bond payments.

35. Establishes the following provisions for surplus monies:

Surplus monies in the bond proceeds subaccount, after all acquisition, construction and related costs have been paid, shall be used to repay any other outstanding debts. If no outstanding debt exists, the monies shall be credited to the RTPD general fund;
Surplus monies in the debt service account, after payment of bonds, interest and related costs, shall be credited to the RTPD general fund.

36. Allows for monies in the bond proceeds subaccount and the debt service account to be invested and reinvested, at the direction of the RTPD board, in instruments such as U.S. Treasury obligations; federally guaranteed obligations; consolidated farm loan bonds; and state, county or municipal bonds.

37. Requires that all monies earned or interest or otherwise derived from investment of monies from the debt service account be credited to that account.

38. Requires any RTPD board order directing the investment of bond proceeds subaccount monies to state a date on which the monies will be needed, and requires that any investments mature before the specified date.

39. Allows the RTPD board to authorize the treasurer to purchase securities. The treasurer is the custodian of any securities purchased.

40. Requires monies derived from selling bonds, or pledged or assigned to or in trust for the benefit of bond holders be deposited in federally insured financial institutions. Proceeds held in trust for bond holders shall be disbursed as directed by the RTPD board and in accordance with any agreed-upon terms.

41. Specifies that the deposit requirements for bond proceeds do not limit the RTPD board’s power to agree on the custody and disposition of monies received from selling bonds, or from income and revenues pledged, assigned to or in trust for bond holders.

42. Specifies that RTPD bonds have the following characteristics:

Are fully negotiable for all purposes of the Uniform Commercial Code (UCC), subject only to any registration provisions, regardless of whether the bonds actually constitute negotiable instruments under the UCC;
Are free from state tax;
Are obligations of the RTPD, for which payment is enforceable only out of monies pledged and assigned to, or in trust for bond holders;
Are not general, special or other obligations of the state or the county, do not constitute a debt to the state or county and are not enforceable against the state or county;
Are securities that are considered government obligations;
Are valid and binding RTPD obligations regardless changes to RTPD officers or amendments to laws governing RTPD bonding authority.

43. Includes a pledge by the state to not limit, alter or impair RTPD rights to receive necessary monies to fulfill bond obligations, or impair the rights and remedies of bond holders until all bond obligations are discharged. The RTPD board may include the pledge in its bond resolutions.

44. Specifies that the laws establishing RTPD bonding authority constitute full authority to issue bonds without reference to any other state law, and that RTPD bonding activities are not impacted by any other state law that may impede or restrict the ability to bond.

45. Specifies that the validity of RTPD bonds does not depend on the legality of any proceeding relating to the purpose for which the bond is issued.

46. Provides RTPD bonds to be legal and binding if the bonds include a recital they are regularly issued pursuant to RTPD authority, and legal counsel certifies that the bonds are issued in accordance with applicable laws, and that the bonds’ interest is exempt from state taxes.

Miscellaneous

47. Defines terms.

48. Contains a delayed effective date of June 30, 2002.

DG/jas