Legislative Action Resolves Yuma Issue
Date:
07/21/2010Summary:
The Arizona Legislature took a closer look at a timing dispute between the City of Yuma and the state's Auditor General.Contact:
HB 2335, Fixing Expenditure Limitation Language, Takes Effect July 29
Yuma, Ariz. - The Arizona Legislature took a closer look at a timing dispute between the City of Yuma and the state's Auditor General. Then they passed a measure that essentially says "no harm, no foul."
Among the legislation going into effect July 29 is HB 2335, which amends Section 41-1279.07, Arizona Revised Statutes, to allow cities and towns to exclude bond-related, long-term expenditures for capital improvements paid with utility revenues or excise taxes from the state's expenditure limitation requirements, provided that the expenditures have been repaid from bond proceeds or other long-term obligations, and if the debt is repaid before the Auditor General's formal hearing is conducted.
Introduced by Rep. Russ Jones, the bill removes the possibility of the City of Yuma facing a multi-million-dollar penalty for taking on expenses related to water and wastewater projects several months before bonds previously approved to repay those expenses were sold.
"After learning the details, it appears there was a perfect storm with the timing of the bond sale; there was no overt violation, just timing," Jones said. "It didn't appear there was much latitude in the way the statute was written. This bill fixes the system, making it better and more flexible for everyone."
Yuma-area co-sponsors Rep. Lynne Pancrazi and Sen. Amanda Aguirre also sought and received support for the bill in the House and Senate, respectively, making passage of HB 2335 a bipartisan effort.
"The City of Yuma greatly appreciates the efforts of Rep. Jones and the Yuma delegation - true to reputation, they stuck together again," said City Administrator Greg Wilkinson. "This legislation provides necessary clarifying changes that are not only critically necessary in resolving our own current situation, but will also help other jurisdictions to avoid suffering unintended consequences for actions done in good faith," Wilkinson added.
Rep. Jones said he was "more than happy" to help constituents in his district. "The state is in difficult times, and I'm sure others could have found use for the money, but it wouldn't have been right. In this case, we did the right thing for the right reasons."
Rep. Pancrazi also had concerns about the potential penalty. "The fine that could have applied would have taken money directly from Yuma's share of state-shared revenues and redistributed it to all the other counties in Arizona, and we need those dollars to balance the budget and provide services here," she said. "My job was to make sure my caucus understood what this bill would do, and once they did, they supported it."
"This legislation is a clarification of the Arizona statute for capital improvement projects as long as the expenditures are repaid before the required hearing by the Office of the Auditor General," said Sen. Aguirre. "For Yuma, this is a clarification of good-faith action."
Need for that clarification stemmed from the City paying for continued work on the City's Desert Dunes Wastewater Treatment Facility and Agua Viva Water Treatment Facility in Fiscal Year 2007. City Council-approved bonds to repay this expenditure were sold in November 2007, which is in Fiscal Year 2008, prompting the office of the Auditor General to look into the transactions as a potential violation of the state's expenditure limitation reporting for the 2007 draft report. The City was aware of no similar interpretation of this law being brought forward in Arizona and legally disagreed with the Auditor General.
"If the bond sale had occurred six months earlier, this would never have been an issue," said Pat Wicks, Director of Financial Services for the City of Yuma. "Our draft report showed us to be more than $700,000 under the expenditure limitation for 2007. Throughout this process, we remained confident we were going to have this dispute settled in our favor."
