Legislative Update

Arizona Economic Development Wins With Infrastructure Law

In November 2021, President Joe Biden signed H.R. 3684, the bipartisan Infrastructure Investment and Jobs Act. The compromise legislation, brokered in part by Arizona Senator Kyrsten Sinema, will provide a much-needed boost to the nation’s aging infrastructure. From ports, waterways and electricity to roads, transit and broadband, infrastructure improvements bolster the efficient movement of people and goods and act as a force multiplier for economic development activity.

So, what’s in it for Arizona?

Arizona Senator Mark Kelly released a list of state projects that will result from the passage of the infrastructure bill. These projects and the funding included in the bill will strengthen economic development with the following:

ROADS, BRIDGES AND MAJOR PROJECTS — $8.2 BILLION

In addition to reauthorizing the Surface Transportation Reauthorization Act, the bill provides $8.2 billion for roads, bridges, and transit throughout Arizona. Arizona construction companies such as Skanska and Sundt will benefit greatly from projects funded by the bill through the Arizona Department of Transportation.

Workforce transit in rural and urban areas of Arizona will receive the following allocations: • $499.3 million for Valley Metro in the

Phoenix Area • $118 million for SunTran in Tucson • $21 million for Yuma County Area Transit • $20.5 million for Mountain Line in the Flagstaff area • $11.1 million for Yavapai Regional Transit in the Prescott area • $7.5 million for Central Arizona Regional

Carrie Kelly

AAED

Transit in the Casa Grande area • $7.2 million for Lake Havasu City Transit • $6.5 million for Vista Transit in Sierra Vista

The Capital Investment and National Infrastructure Project Assistance programs will provide grant and discretionary funding for projects such as the I-10 expansion, I-11, light rail extensions and streetcars.

WATER INFRASTRUCTURE — $9 BILLION

Water infrastructure is critical to Arizona’s future. Utility providers such as SRP and Central Arizona Project will benefit as the state will receive hundreds of millions for backlogged repairs to aging dams, canals, aqueducts and pumping plants. The bill funds water settlements for our tribal partners, including the Gila River Indian Community, the Tohono O’odham Nation and the White Mountain Apache Tribe. While not Arizona-specific, $250 million will fund grants for desalination projects. Western states will receive $300 million to fund the Lower Basin Drought Contingency Plan, Lake Powell and the Upper Basin drought mitigation. Arizona will also receive $79.6 million annually to help public wastewater systems finance significant infrastructure investments.

HIGH-SPEED INTERNET ACCESS — $58 BILLION

Rural Arizona, in particular, needs better connectivity for economic development and health and safety. Through grants to states, companies such as Cox and Lumen will help with rural broadband deployment and “middle mile” deficiencies throughout Arizona.

ENVIRONMENTAL — $5 BILLION

Arizona companies such as Terracon and Ninyo & Moore will see a boost since the bill funds the Hazardous Substance Superfund program. The bill also includes $1.5 billion for the Brownfields program to help governments reuse contaminated properties.

RURAL FORESTS — $460 MILLION

The bill includes a $400 million program at Forest Service to provide financial assistance to sawmills and wood products facilities that support forest restoration operations, including those in Arizona, and $60 million for grants under the USDA program to promote the use of wood biomass energy and the use of wood in construction materials.

These are only a few of the economic development funding opportunities for Arizona in the bipartisan infrastructure bill. Arizona is a leader in innovation and economic development, and this funding will allow our state to continue to lead the way and provide opportunities for citizens in every community.

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

Housing is a statewide concern

Local decision-making is resulting in an unaffordable Arizona

“O ver the past three decades, local barriers to housing development have intensified, particularly in the high-growth metropolitan areas increasingly fueling the national economy. The accumulation of such barriers — including zoning, other land use regulations and lengthy development approval processes — has reduced the ability of many housing markets to respond to growing demand.”

These were not the words of a greedy developer or a special interest. Rather, these were the words of President Barack Obama prior to leaving office in 2016.

Interestingly enough, President Obama was not alone in his sentiments.

President Donald Trump, seemingly in agreement with his predecessor, established a White House Council on Eliminating Regulatory Barriers to Affordable Housing with the goal of providing recommendations to address the nation’s housing shortage.

In his executive order that established the council, President Trump noted that “[d]riving the rise in housing costs is a lack of housing supply to meet demand. Federal, state, local and tribal governments impose a multitude of regulatory barriers — laws, regulations and administrative practices — that hinder the development of housing. These include overly restrictive zoning and growth management controls, rent controls, cumbersome building and rehabilitation codes, excessive energy and water efficiency mandates, unreasonable maximum-density allowances …”

In short, the country is facing a housing supply crisis due to years, if not decades, of poor growth management, and unless the state changes course, Arizona may soon be facing its own day of reckoning.

According to the Arizona Department of Housing, 250,000 homes must be built simply to keep pace with current and future demand. Last year, Maricopa County added 86,820 residents, making it the fastest-growing county in the nation, according to the U.S. Census.

The problem is, Arizona is not equipped (or motivated) to respond to this surging population growth.

In fact, according to the U.S. Department of Housing and Urban Development, Census Bureau data indicates that from 2010 to 2016, only seven homes were built for every 10 households formed.

This isn’t because developers aren’t interested or available to answer the state’s need. It’s simply because the political appetite at the local level to allow the market to respond is waning.

For years, developers have complained, mostly to deaf ears, about the toxic realities of housing development in Arizona. Developers have pointed to neighborhood hostility and the not-in-my-backyard (NIMBY) mentality as the No. 1 threat to the state’s housing market.

Unfortunately, years of ceding to the NIMBYs has set Arizona up for a California-style housing crisis.

Rent pricing is no different than any other sector of the U.S. economy. If you limit the supply of a product or service, prices will increase. On the other hand, if you produce more of the product, prices will stabilize or even decrease.

This basic economic principal is true for housing prices as well. If we limit new housing development — as we are doing in Scottsdale, Mesa, Chandler, Goodyear, Surprise, Buckeye, Tucson and Flagstaff — then rental prices will increase.

We are also seeing a proliferation of new regulations, including new design guidelines, energy efficiency codes, parking standards and so on, that have added considerable costs to housing construction.

So, what’s the answer?

It’s fair to say that cities and towns are not equipped to respond to current housing needs. Perhaps it is time for the legislature to provide the tools necessary to dig Arizona out of this hole. Other states have taken drastic measures to increase the supply of housing, such as allowing housing to be built “by right,” removing onerous zoning restrictions or discretionary review processes, or providing statelevel review boards to overturn local land use decisions.

While it’s uncertain if these measures will become law in Arizona, policymakers are more willing to listen to ideas than ever before.

Courtney Gilstrap LeVinus

AMA

Courtney Gilstrap LeVinus is the executive director of the Arizona Multihousing Association.

Ballot Initiative Reform: Restoring Integrity to the Process

Back in 1912 when Arizona became the 48th state, populism was afoot. As a state founded on big industries such as mining and railroads, there was discontent among workers who demanded more rights in a political system they believed was stacked against them. Thus, the Citizens’ Initiative process was enshrined in our state constitution. It looked very different from its eastern state counterparts.

Jump forward 110 years, and we find ourselves in a vastly different situation. Far from being a workable system for residents who feel their representatives in government are not listening to them, it has evolved into a boondoggle for well-financed special interests outside of Arizona to “try out” ideas they could not get onto the ballots of states with more restrictive initiative processes. We’ve seen billionaire hedge fund manager Tom Steyer, a Portlandbased activist group, and labor unions from California to New York pour tens of millions of dollars into Arizona ballot initiatives to persuade voters.

Because the U.S. Supreme Court ruled that political involvement is a form of free speech, we can’t prevent outside groups from bankrolling initiatives in Arizona. What we can do is put in place protections that have worked well in other states. These include raising the threshold required for passage, modifying geographic requirements for petition signatures to qualify for the ballot, or adding a sunset provision.

Who could be against concepts such as renewable energy, investments in education and affordable healthcare? These sound benign enough until the details are revealed. Then a more disconcerting narrative emerges: higher energy costs with less service reliability, income tax rates among the 10 highest in the nation that hit small businesses already struggling to survive through the COVID pandemic, and the closure of rural hospitals that can’t afford mandated salary increases for all workers. These ballot measures are but a few recent examples of close calls. They either failed to pass or were struck down by the courts for containing illegal or misleading language.

It is important to remember that Proposition 105 as passed in 1998 prevents the state legislature from addressing any unintended consequences that result from ballot initiatives. Even if uncompetitive taxes cause business attraction to grind to a halt, costly mandates result in hospitals closing down or energy portfolio requirements lead to rolling brownouts, the legislature’s hands are tied.

Over the past decade, several controversial initiatives, most recently Proposition 208 in 2020, have squeaked by in Arizona, passing with slightly more than 50% of the vote. Several states require a super-majority of 55% to 60% for initiatives to pass. Nevada requires Constitutional amendments to pass in two consecutive elections. Raising the threshold above a simple majority could result in only those measures that enjoy broad support becoming law.

To get an initiative on the ballot, proponents must collect valid signatures from eligible voters representing 10% of the gubernatorial vote in the prior election for statutory changes and 15% percent for constitutional amendments. While these may seem like high thresholds, most well-funded out-of-state interests simply pay professional signature gatherers to get the job done. In doing so, they generally stand in highly trafficked areas in Metro Phoenix while ignoring the remainder of the state. Adding a requirement that signatures be collected in all counties or from every Congressional or legislative district would improve fairness by including the voices of all Arizonans.

Finally, change is the only constant in the world today. Under current law, once an initiative has passed, it is here to stay. An automatic sunset provision of around 10 years would give voters the opportunity to re-evaluate the effects of an initiative. Measures that stand the test of time will continue to receive broad support, whereas those that have fallen short of expectations or that need to be modernized won’t hold back the state’s progress.

Arizona’s ballot initiative process is being abused by agenda-driven outsiders. The upcoming election provides an opportunity for Arizonans to take back control of the initiative process though common-sense reforms that increase transparency, respect the voices of all voters and prevent the state from being saddled with unintended consequences.

Suzanne Kinney

NAIOP

Suzanne Kinney is the president and CEO of the Arizona Chapter of NAIOP, the Commercial Real Estate Development Association.

THANK YOU 33rd Annual Community Project Donor’s for making this year’s project a success!

Advanced Structural Engineering, Inc. AZ Proffessional Painting Anna Leja BBR Foundation Ben Butler Ben Graff Bill Landis Burch & Cracchiolo, P.A. Butler Design Group Carlton Johnson Carolyn Oberholtzer CBRE Chasse Cushman & Wakefi eld Dibble Engingeering Divine Nine DMB Elizabeth Sylvester Gammage & Burnham Hunter Contracting Co Jay Kramer JE Dunn Jim & Kathy Belfi ore Jim Adams John Graham Kitchell Lisa Atkins Lloyd Engineering Michele Pino Mirabella Tempe NAI Horizon Norris Design PB Bell Quarles & Brady RENCO Roofi ng Riddel Painting Ron Hilgart Ryan Companies US Inc Shannon Francoeur Susie Stevens Southwest Traffi c Engineering Telgian The Sieb Organization, Inc. The Weitz Company ViaWest Group

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