MUNICIPALITY FEES – A.R.S. § 45-118

Background

During the 2011 regular legislative session, the legislature passed and the Governor signed into law S.B. 1624, the Environment Budget Reconciliation Bill.  Section 2 of S.B. 1624 amended the Arizona Revised Statutes by adding section 45-118.  A.R.S. § 45-118 authorizes the Department of Water Resources (“Department”) to assess and collect a fee from each municipality in the state (“municipality fees”).  The fees must be assessed proportionally based on the population of each municipality, and all fees collected by the Department must be deposited in the water resources fund established by A.R.S. § 45-117.

Section 7(B) of S.B. 1624 provides that it is the intent of the legislature that the revenue generated by the municipality fees shall not exceed $7 million.  Section 7(C) of the bill provides that the Department is exempt from the rule making requirements of title 41, chapter 6, Arizona Revised Statutes, for the purpose of establishing the municipality fees until July 1, 2012.

Rule Establishing Municipality Fees for FY 2011-2012

On August 10, 2011, the Department filed with the Office of the Secretary of State a Notice of Exempt Rulemaking giving notice that it has adopted a rule establishing the municipality fees for fiscal year 2011-2012.  The Notice of Exempt Rulemaking includes the text of the rule.  The rule will repeal automatically on July 1, 2012.  Click here to view the Notice of Exempt Rulemaking.  

    The rule requires the Director to calculate a municipality’s fee as follows:

1. Determine the total amount of fees the Director will assess and collect from all municipalities during the fiscal year by subtracting the amount of unobligated monies in the water resources fund at the beginning of the fiscal year ($743,312.46 for FY 2011-2012) from $7 million (the maximum total amount of fees the Director may assess and collect from all municipalities during the fiscal year as expressed by the legislature).
2. Calculate the ratio expressed as a percentage that the municipality’s population bears to the total population of all municipalities in the state by dividing the municipality’s population by the total population of all municipalities in the state.
3. Multiply the amount determined in paragraph 1 by the percentage calculated in paragraph 2.

On August 15, 2011, the Department mailed each municipality in the state a notice of its municipality fee for fiscal year 2011-2012 as calculated in the manner described above.  A municipality must pay at least half of its fee by October 17, 2011 and any remaining portion of the fee by January 16, 2012. Click here to view the amount that each municipality was billed for fiscal year 2011-2012, including the population numbers used to calculate the fees.

Rule Establishing Municipality Fees for Fiscal Years Beginning with FY 2012-2013

On January 10, 2012, the Governor's Regulatory Review Council approved the Department's proposed rule establishing the municipalities fees for fiscal years beginning with 2012-2013.  The Rule will become effective on July 1, 2012.  Click here to review the Notice of Final Rulemaking.

The rule provides that the Department will calculate a municipality’s fee for a fiscal year using the same methodology as set forth above for fiscal year 2011-2012, with the following exceptions related to step 1 of the calculation:

• Should the legislature express its intent that the maximum total amount of municipality fees the Department may assess and collect in the fiscal year is different than $7 million, the Department would use the maximum total amount expressed by the legislature instead of $7 million.

• If reducing the maximum total amount of municipality fees by the amount of unobligated monies in the water resource fund at the beginning of the fiscal year would prevent the Department from using all the monies appropriated to it from the fund for that year or result in an excessive accumulation of unobligated monies in the fund at the end of the fiscal year, the Director may increase or decrease the amount of the reduction, as appropriate.  However, in no event would the total amount of fees assessed and collected from all municipalities during the fiscal year exceed the maximum total amount intended by the legislature, which currently is $7 million.

The Department has prepared an unofficial estimate of the fee each municipality will be billed for fiscal year 2012-2013 using the current $7 million cap and assuming that the Department will reduce that amount by the amount of unobligated monies in the water resources fund at the beginning of the fiscal year.  The Department estimates that the amount of unobligated monies in the water resources fund at the beginning of the fiscal year will be $500,000.

Click here to view a table with the unofficial fee estimates.  It is important to point out that the fees shown on the table are estimates and that actions taken by the legislature during the legislative session could result in the actual fees being significantly different that the estimated fees.

The rule provides that the Department shall notify each municipality of its actual fee for a fiscal year by July 15 of that fiscal year and that each municipality shall pay at least one-half of its fee by August 15 of the fiscal year and any remaining portion of the fee by January 15 of the fiscal year.

For further information on the final rule, please contact Michelle Moreno, ADWR Public Information Officer, at 602-771-8530 or at the following e-mail address:mamoreno@azwater.gov. 

July 12, 2011 Municipality Fees Assessment Meeting

On July 12, 2011 ADWR held a public meeting to present the draft rules.   ADWR asked for written comments on the draft rules.  Click here to view ADWR's responses to written comments that were submitted to the Department.  Click here to view public questions and ADWR answers from the July 12, 2011 meeting.

Rule Language Handout FY 2012

Rule Language Handout Permanent

Calculation Handout  

Powerpoint presentation