Title 35 — Public Finances

Chapter 1 Budgetary and Fiscal Provisions for State Agencies

Article 1 General Provisions

§ 35-101 Definitions

In this chapter, unless the context otherwise requires:

1. "Allotment" means the allocation of an appropriation or other fund source over a full fiscal year within a budget program or expenditure class.

2. "Authorized agent" means a commercial enterprise that is contracted to process transactions on behalf of a state agency.

3. "Budget estimates" means statements with accompanying explanations, as provided by this chapter, in which a budget unit states its financial requirements and requests appropriations.

4. "Budget program" means functions and activities of a budget unit or within a budget unit that are preplanned to fulfill a distinct mission.

5. "Budget unit" means any department, commission, board, institution or other agency of this state receiving, expending or disbursing state monies or incurring obligations against this state.

6. "Cardholder" means any person:

(a) Named on the face of a credit card to whom or for whose benefit the credit card is issued by an issuer.

(b) In possession of a credit card with the consent of the person to whom the credit card was issued.

7. "Claim" means a demand against the state for payment for either:

(a) Goods delivered or, in the case of highway construction, goods or facilities to be delivered by the federal government.

(b) Services performed.

8. "Convenience fee" means an additional fee that is imposed by an authorized agent on a web-based or voice response portal transaction for the acceptance of a credit card that would not be charged if the same transaction were completed by an alternate method of payment.

9. "Credit card" means:

(a) Any instrument or device, whether known as a credit card, charge card, credit plate, courtesy card or identification card or by any other name, that is issued with or without a fee by an issuer for the use of the cardholder in obtaining money, goods, services or anything else of value, either on credit or in possession or in consideration of an undertaking or guaranty by the issuer of the payment of a check drawn by the cardholder, on a promise to pay in part or in full at a future time, whether or not all or any part of the indebtedness represented by this promise to make deferred payment is secured or unsecured.

(b) Any debit card, electronic benefit transfer card or other access instrument or device, other than a check that is signed by the holder or other authorized signatory on the deposit account, that draws monies from a deposit account in order to obtain money, goods, services or anything else of value.

(c) Any stored value card, smart card or other instrument or device that enables a person to obtain goods, services or anything else of value through the use of value stored on the instrument or device.

(d) The number assigned to an instrument or device described in subdivision (a), (b) or (c) of this paragraph even if the physical instrument or device is not used or presented.

10. "Discount fee" means the fee that is calculated and charged by the credit card issuer or a financial institution pursuant to an agreement for the processing of any credit card transaction.

11. "Encumbrance" means an obligation in the form of any purchase order, contract or other commitment that is chargeable to an appropriation or any other authorized fund source and for which a part of the fund source is reserved. It ceases to be an encumbrance when paid or canceled.

12. "Expenditure class" means one of the kinds of expenditure denoting a class of services or commodities purchased or properties acquired as specified in the classification of expenditures prescribed by the director of the department of administration for use in expenditure accounting, in making budget estimates and in the budget reports and budgets.

13. "Issuer" means any business organization, state agency or financial institution, or its duly authorized agent, that issues a credit card.

14. "Prepayment" means the payment of a claim before receiving the goods or services.

15. "Processing fee" means a fee that is charged by an entity other than a credit card issuer or the processing financial institution to process a credit card transaction.

16. "Purchase order" means a document that is signed by the appropriate agency authorized signatory, that requests a vendor to deliver described goods or services at a specific price and that on delivery and acceptance of the goods or services by this state becomes an obligation of this state.

17. "Service fee or surcharge" means a fee, whether fixed or variable, that is in addition to the transaction amount, that is charged by a state agency when the state agency accepts a credit card for payment and that is necessary for the state agency to process the payment.

18. "Transaction amount" means the total amount due to the state for any goods, service or license or anything else of value.

§ 35-101.01 Definition of substitute check

In this title, unless the context otherwise requires, "substitute check" means a paper reproduction of an original warrant or check that is created from an electronic image of the original warrant or check and that meets all of the following:

1. Contains an image of the front and back of the original warrant or check.

2. Bears a magnetic ink character recognition line containing all of the information in the magnetic ink character recognition line of the original warrant or check.

3. Conforms in paper stock and dimension and otherwise with generally applicable industry standards for substitute checks.

4. Is suitable for automated processing in the same manner as the original warrant or check.

§ 35-102 Fiscal year

A. The fiscal year of the state and for the expenditure of appropriations shall commence July 1 each year. Accounts or annual reports of state officials required by law to be published, shall be prepared and published for the fiscal year as established by this section.

B. The fiscal year beginning July 1, 1955, shall be known as the forty-fourth fiscal year and thereafter each fiscal year shall be designated in progressive numerical sequence.

§ 35-103 Annual financial reports; notification; payments

A. All state or county officers, boards, commissions or agencies that are required by law to prepare, make or publish annual reports of financial condition or operations, except the industrial commission, shall, notwithstanding any law to the contrary, prepare, make or publish those reports within ninety days after the close of each fiscal year. The reports shall disclose with respect to the fiscal year, rather than the calendar year, all matters and things required by law.

B. State officers, boards, commissions or agencies shall deliver five copies of their annual reports to the Arizona state library, archives and public records or its agent to satisfy the requirements of the state documents program or arrangements or agreements entered into pursuant to section 41-151.05, subsection A, paragraph 5.

C. The administrative head of a state board, commission or agency who fails to comply with this section shall have all compensation the administrative head receives from public monies withheld until such time as the administrative head complies with this section.

D. The governmental units described in subsection A of this section shall:

1. Notify the Arizona state library, archives and public records if the reports subject to this section are posted on an internet website.

2. Pay the Arizona state library, archives and public records the fee charged pursuant to section 41-151.12 if the governmental unit refuses the state library's request to deliver, and the state library incurs any expenses in obtaining, the copies that are required to be delivered pursuant to this section.

Article 2 Budget Preparation

§ 35-111 Executive budget

Not later than five days after the regular session of the legislature convenes, the governor shall submit to the legislature a budget containing a complete plan of expenditures proposed to be made before the close of the next fiscal year for budget units and all monies and revenues estimated to be available therefor, together with an explanation of the basis of the estimates and recommendations as to proposed legislation, if any, that the governor deems necessary to provide revenues sufficient to meet the proposed expenditures.

§ 35-112 Forms for budget unit estimates; date of transmittal

A. The governor shall prescribe the forms to be used by budget units in submitting their budget estimates and requests for appropriations in accordance with this chapter and shall prepare necessary instructions for guiding officials in preparing the budget estimates and requests.

B. On or before July 1 each year, the governor shall transmit to the administrative head of each budget unit at least three complete sets of prescribed forms on which budget estimates and requests for appropriations for the ensuing fiscal year are to be submitted.

§ 35-113 Submission of budget estimates

The administrative head of each budget unit, not later than September 1 of each year or at a later date not to exceed thirty days after September 1 if approved by the director of the governor's office of strategic planning and budgeting, shall submit to the governor, with two copies, estimates of the financial requirements and of receipts, including appropriated and nonappropriated monies in no less detail than the state general fund, of the budget unit for the next fiscal year. The estimates shall include a detailed estimate of the cost to the budget unit in the next fiscal year attributable to a county's, city's or town's establishment of a minimum wage if that minimum wage exceeds the minimum wage established by this state pursuant to section 23-363. The estimates shall be on the forms and in the manner prescribed by the governor with explanatory data that may be required, together with additional information the head of the budget unit desires to submit. The estimates submitted shall bear the approval of the administrative head of the budget unit.

§ 35-113.01 Request for federal funds

A. All state agencies, boards, commissions and departments shall submit to the department of administration for acknowledgment, copies of all agreements, contracts and copies of all applications and requests for federal funds, to be used for any purpose.

B. Every state agency, board, commission or department seeking federal funds for any project or program shall furnish to the department of administration with each copy of application or request a statement of the purposes for which any such project or program is desired or advocated, the source and amount of funds to be granted or provided therefor, and a statement of the conditions, if any, upon which such funds are to be provided. The director may at his discretion accept from the state agency, board, commission or department a summary of the information required in this section.

C. All departments, agencies, boards or commissions, shall forward an acknowledgment to the department of administration upon receipt of federal funds.

§ 35-114 Continuous financial planning; submission of tentative budget report; appropriations estimate report

A. The governor shall have in continuous process of preparation and revision a tentative budget report for the next fiscal year for budget units. On receipt of the estimates of the several budget units, the governor shall check the estimates with information available to the governor and shall make further inquiries and investigations and recommend changes in the tentative budget report the governor deems warranted.

B. The governor's office of strategic planning and budgeting in consultation with the joint legislative budget committee staff shall determine and report to the governor and the legislature an estimate of appropriations subject to the limit imposed by article IX, section 17, Constitution of Arizona. The report shall be published by February 15 of each year for the preceding fiscal year, for the current fiscal year and for the ensuing fiscal year to reflect the budget recommendations of the governor.

§ 35-115 Contents of budget report

Each budget report required by section 35-114 shall include the following:

1. Summary statements of the financial condition of the state, including:

(a) A consolidated balance sheet showing all current assets and liabilities of the state at the close of the fiscal year last concluded.

(b) Summary statements of the actual income and expenditures of the fiscal year last concluded.

(c) Similar summary statements of estimated fund balances for the current fiscal year.

2. Schedules showing actual income from each source for the preceding fiscal year and the estimated income of the current fiscal year and for the next fiscal year for budget units. The statements of income and estimated income shall be itemized by source, by budget units and sources and by funds and shall show separately revenue from nonrevenue, all detailed by sources.

3. Detailed comparative statements of expenditures and requests for appropriations by funds, budget units, budget programs and budget classes, showing the expenditures for the fiscal year last concluded, the estimated expenditures for the current year, the request of each budget unit and the governor's recommendations for appropriations for the next fiscal year for budget units, all distributed according to budget programs and budget classes. In connection with each expenditure involving construction projects to be completed in one or more fiscal years, the budget report shall show the total estimated cost of each project and the amount recommended to be appropriated and expended in each ensuing fiscal year until completion of the project. The state capital improvement plan and the governor's recommendations concerning the plan shall be incorporated into the budget report.

4. A summary statement for each fund of the cash resources estimated to be available at the beginning of the next fiscal year for budget units and the estimated cash receipts for the next fiscal year for budget units, as compared with the total recommended amounts for appropriations for all budget programs and budget classes for the next fiscal year for budget units. If the total of the recommended expenditures exceeds the total of the estimated resources, the summary statement shall include recommendations as to how the deficiency is to be met and estimates of receipts from any proposed additional revenues.

5. A summary statement of expenditures and full-time equivalent positions for each retirement system, delineated by fund source.

6. Each fiscal year for budget units, a delineation of requested expenditures for administrative costs, including administrative personnel salaries and employee-related expenses and direct, indirect and shared costs for administrative office space, equipment, supplies and overhead. For the purposes of this paragraph, "administrative" means any supportive activity relating to management, supervision, budget or execution of the affairs of the budget unit as distinguished from activities relating to the budget unit's primary direct service functions. The process of delineation and determination of what constitutes administrative costs for each budget unit shall be developed by the governor's office of strategic planning and budgeting in consultation with the director and staff of the joint legislative budget committee.

7. A summary on one page or less providing selected performance measures of the budget unit for the previous fiscal year and the budget years. The performance measures may be expressed as service level measures on a unit cost basis and shall be established by the governor's office of strategic planning and budgeting in consultation with the director and staff of the joint legislative budget committee.

§ 35-116 Supervisory powers of governor relating to budget report; exceptions

A. Prior to submission of the budget report to the legislature, the governor shall examine the statements and estimates and shall make or cause to be made further investigations, with hearings before the governor, or the governor's designee, and shall make changes or revisions in appropriations requested that the governor deems advisable.

B. The legislature shall not be subject to the control of the governor in the preparation and submission of budgets, but shall submit its requests for appropriations for the two ensuing fiscal years to the governor for review by the legislature.

C. The judiciary shall not be subject to the control of the governor in the preparation and submission of budgets, but shall submit its requests for appropriations for the ensuing fiscal year to the governor for review by the legislature.

D. The appropriation requests of the Arizona board of regents and the department of transportation for the ensuing fiscal year may be revised by the governor, but the governor shall also submit the appropriation request prepared and submitted by the budget unit in its original form to the legislature for review.

§ 35-117 Participation of governor-elect in budget hearings

The governor-elect shall be entitled to participate in all budget hearings and shall be furnished a copy of the budget report as approved by the governor.

§ 35-118 Transmission of budget report to legislature

The governor shall have the budget report prepared in such number of copies as he deems necessary, and copies thereof shall be transmitted to the legislature not later than five days after the regular session of the legislature convenes.

§ 35-119 Assistance to appropriation committees

From the time of transmission of the budget report to the legislature until the appropriation act or acts have been finally disposed of, the director of the governor's office of strategic planning and budgeting, in person or by an assistant, shall be available to the legislature and the appropriation committees thereof for explanation of any recommendation made in the governor's budget report to the legislature.

§ 35-120 Additional powers of governor

A. In aid of any powers vested in the governor under this article, the governor:

1. Shall have access to offices of all budget units.

2. May examine all books, papers, records and documents in the office of any budget unit.

3. May require any state officer or head of any budget unit to furnish such data, information or statements as may be necessary.

B. The provisions of this section shall apply to the board of regents and the institutions under the jurisdiction of the board of regents, only as they relate to the appropriations requested.

C. The power of the governor as prescribed by the terms of this section, to investigate budget units, including the board of regents, may be delegated to the office of strategic planning and budgeting or the department of administration. Such power may be used and shall extend to funds appropriated by the legislature in its relation to budget preparation for the current and preceding fiscal year. The powers granted by the terms of this section may be exercised by the governor during any period of the fiscal year.

§ 35-121 Format of appropriations

The format of the appropriations for the support and maintenance of state departments and institutions shall be for each fiscal year for all budget units.

§ 35-121.01 Local minimum wage; reimbursement of state costs; collection; withholding

A. After considering the information in the budget estimates required by section 35-113, the legislature may allocate and, if allocated, the department of administration shall assess and collect from a county, city or town an amount to reimburse this state for the cost to this state in the next fiscal year attributable to the county's, city's or town's establishment of a minimum wage if that minimum wage exceeds the minimum wage established by this state pursuant to section 23-363.

B. The department shall assess the amounts under this section not later than July 31 of each year. The amounts are payable immediately on assessment. If the county, city or town does not pay to the department the amount allocated pursuant to this section on or before December 31 of the year the allocation is made, the department shall notify the state treasurer, who shall subtract the amount owed by the county, city or town from any payments required to be made by the state treasurer to that county, city or town pursuant to section 42-5029, subsection D, plus interest on that amount pursuant to section 44-1201, retroactive to the first day the amount was due. If the amount the state treasurer withholds is insufficient to meet the requirements of this section, the state treasurer shall withhold from any other monies payable to that county, city or town from whatever state funding source is available an amount necessary to fulfill the requirement.

C. Unless otherwise required by law, the monies paid to the department or withheld by the state treasurer for the amounts assessed pursuant to subsection A of this section shall be credited to the funds in the amounts prescribed in the estimates required pursuant to section 35-113.

§ 35-122 Budget unit program lists; strategic plans; operating plans; compilation and publishing of master list

A. Consistent with instructions issued by the governor, the administrative head of each budget unit is responsible for developing a list of programs for the budget unit. For the purposes of this section, a program may include a subprogram as determined by the governor's office of strategic planning and budgeting and the staff of the joint legislative budget committee. In consultation with the staff of the joint legislative budget committee, the governor's office of strategic planning and budgeting may modify the list of programs submitted by each budget unit.

B. Consistent with instructions issued by the governor, the administrative head of each executive branch budget unit is responsible for developing a five-year strategic plan for the budget unit. The strategic plan shall be updated annually. The plan shall contain strategic issues, a mission statement, a description, strategies and resource assumptions. The resource assumptions shall include the number of full-time equivalent positions and budgetary data, including all funding sources categorized by state general fund, other appropriated funds, nonappropriated funds and federal funds that are required to support the strategic plan. The agency shall also provide an executive summary of the strategic plan. The executive summary shall not exceed five pages in length. The strategic plan, including the executive summary, shall be posted on the agency's official internet website and submitted to the governor's office of strategic planning and budgeting and to the staff of the joint legislative budget committee on or before January 1 of each year.

C. Consistent with instructions issued by the governor, the administrative head of each budget unit is responsible for:

1. Developing an operating plan for each program identified in subsection A of this section. The plan shall use the format required in subsection D of this section and be submitted to the governor's office of strategic planning and budgeting on or before September 1 of each year. Each budget unit shall annually submit performance measures and budgetary data for the prior, current and ensuing fiscal years.

2. Developing a mission statement, a description and strategic issues for the entire budget unit as part of the operating plan to be submitted to the governor's office of strategic planning and budgeting on or before September 1 of each year. The mission statement, description and strategic issues shall be submitted at the same time to the staff of the joint legislative budget committee.

D. The operating plan shall include a mission statement, a description, goals, performance measures that emphasize results and budgetary data. The budgetary data shall include funding amounts, regardless of source.

E. The governor's office of strategic planning and budgeting shall compile the submissions required in subsection C, paragraphs 1 and 2 of this section and, not later than five days after the regular session of the legislature convenes of each even-numbered year, shall publish a master list of programs that are performed or overseen by state government. The master list shall include the program description, agency description, mission statement, strategic issues, goals, performance measures and budgetary data.

§ 35-123 Nonappropriated monies; report

The governor's office of strategic planning and budgeting shall prepare and distribute a separate report on or before February 1 of each year on all nonappropriated monies. The report shall include actual receipts and expenditures for the prior fiscal year and estimates of receipts and expenditures for the current fiscal year and the next fiscal year.

§ 35-124 Performance pay component; identification

Any performance pay that is authorized by the legislature shall be separately stated on each employee's paycheck receipt as performance pay.

§ 35-125 Revenue and expenditure estimates; three-year plan; public hearing

The general appropriation act shall include a provision that delineates the revenue and expenditure estimates for the following three years. The expenditure estimates shall be based on existing statutory funding requirements. Before the adoption of the general appropriation act, the legislature shall discuss the estimates in a public hearing.

Article 2.1 Accounting for State Funds

§ 35-131 Accounting system; reports; notice of deficiency; forms

A. In accordance with generally accepted governmental accounting principles, the department of administration shall develop and prescribe for the use of all budget units a uniform accounting system so designed as to ensure compliance with all legal and constitutional requirements, including those respecting receiving, spending and accounting for public monies.

B. The department of administration shall maintain complete, accurate and current financial records relating to state monies and to other public monies in the state treasury available to, encumbered by or expended by each budget unit, including trust monies or other monies not subject to appropriation, setting out all revenues, charges against all funds, fund and appropriation balances, interfund transfers, outstanding warrants, checks, electronic funds transfer vouchers and encumbrances, in a manner consistent with the uniform state accounting system, to prepare statewide financial statements in accordance with generally accepted governmental accounting principles.

C. Each month the department of administration shall prepare and submit to the governor a report summarizing by budget unit and appropriation or other fund source the information prescribed in subsection B of this section in a form that will most clearly and accurately set out the current fiscal condition of the state and shall furnish to each budget unit a report of its transactions by appropriation or other fund source in a form that will clearly and accurately show the fiscal activity and condition of the appropriation or fund source.

D. The responsible official for each budget unit shall monitor reports prepared pursuant to subsection C of this section to identify any projected total deficiency for the budget unit fiscal year. On a determination of a projected deficiency, the official shall take any action necessary to ensure continuing compliance with section 1-254 by notifying the governor, the speaker of the house of representatives, the president of the senate and the chairman of the joint legislative budget committee of the deficiency and the reasons for the deficiency. The initial notification of the deficiency shall be followed within ten business days by a report from the responsible budget unit official that includes the following:

1. A complete explanation of the causes of the deficiency.

2. A plan that ensures that the deficiency will be resolved within the fiscal year without supplemental appropriation and that includes the policy and programmatic implications of the deficiency and the plan.

3. A commitment to provide a progress report if the projected degree of deficiency changes substantially. The report shall include additional measures necessary to ensure resolution of the deficiency within the fiscal year.

E. On or before December 1 of each year, the director of the department of administration shall submit to the governor a complete report of the financial transactions of the preceding fiscal year and of the financial condition of the state at the end of that year with such comments and supplementary data as the director of the department of administration deems necessary to make the report complete and readily understandable. The report shall include all appropriated and nonappropriated monies in no less detail than the state general fund.

F. On or before February 1 of each year, the director of the department of administration and the state treasurer shall submit to the joint legislative budget committee a report explaining any differences between the department of administration's estimate of the previous fiscal year's state general fund ending balance submitted pursuant to subsection E of this section and the state treasurer's estimate of the invested balance, including the state general fund share of that balance, as of June 30 of the previous fiscal year submitted pursuant to section 41-172.

G. In preparing the comprehensive annual financial report published in accordance with generally accepted accounting principles, the department of administration shall include supplementary schedules that reconcile any differences between the state general fund as reported in the comprehensive annual financial report and the state general fund as reported in the annual financial report required by subsection E of this section. This reconciliation shall address revenues, expenditures and fund balances.

H. The director of the department of administration shall prescribe uniform classifications for assets, liabilities, receipts and expenditures and forms for the periodic reporting of financial accounts, transactions and other matters by budget units compatible with the reports required of the director of the department of administration under this section. Such records and accounts shall be maintained and reconciled by budget units. If required for reporting, the department of administration may establish or delete funds and budget units may maintain additional records for reporting to the federal government or other funding source.

I. Each organization that is included in the state's reporting entity as defined by generally accepted accounting principles shall submit all necessary financial statements or information to the department of administration on a basis of accounting that is consistent with generally accepted accounting principles and that is in accordance with the policies and procedures of the department of administration.

Article 3 Control of Receipts and Expenditures

§ 35-141 General fund; payment of salaries and expenses

The general fund consists of all money received into the state treasury except money designated by law for other statutory funds. Salaries of state officers, salaries of deputies, assistants, clerks and employees, and expenses incident to the offices thereof, shall be paid from the general fund or the respective fund indicated when and as authorized in the general appropriation act or any other appropriation enacted by the legislature.

§ 35-142 Monies kept in funds separate from state general fund; receipt and withdrawal

A. All monies received for and belonging to this state shall be deposited in the state treasury and credited to the state general fund except the following, which shall be placed and retained in separate funds:

1. The unexpendable principal of monies received from federal land grants shall be placed in separate funds, and the account of each separate fund shall bear a title indicating the source and the institution or purpose to which the fund belongs.

2. The interest, rentals and other expendable monies received as income from federal land grants shall be placed in separate accounts, each account bearing a title indicating the source and the institution or purpose to which the fund belongs. Such expendable monies shall be expended only as authorized, regulated and controlled by the general appropriations act or other act of the legislature.

3. All private or quasi-private monies authorized by law to be paid to or held by the state treasurer shall be placed in separate accounts, each account bearing a title indicating the source and purpose of the fund.

4. All monies legally pledged to retire building indebtedness or bonds issued by those institutions authorized to incur such indebtedness or to issue such bonds shall be placed in separate accounts.

5. Monies of a multi-county water conservation district authorized by law to be paid to or held by the state treasurer shall be placed in separate accounts, each account bearing a title indicating the source and purpose of the fund.

6. All monies collected by the Arizona game and fish department shall be deposited in a special fund known as the state game and fish protection fund for the use of the Arizona game and fish commission in carrying out title 17.

7. All federal monies that are received by the department of economic security for family assistance benefits and medical eligibility as a result of efficiencies developed by the department of economic security and that would otherwise revert to the state general fund pursuant to section 35-190 shall be retained for use by the department of economic security in accordance with the terms and conditions imposed by the federal funding source in an account or accounts established or authorized by the state treasurer.

8. Monies designated by law as special state funds shall not be considered a part of the state general fund. Unless otherwise prescribed by law, the state treasurer is the custodian of all such funds.

9. All monies received and any accounts established and maintained by the director of the Arizona state retirement system or the administrator of the public safety personnel retirement system, the corrections officer retirement plan and the elected officials' retirement plan.

10. Monies received by a state agency or institution as a gift, devise or donation shall not be considered a part of the state general fund or transferred to the state general fund unless the gift, devise or donation specifically authorizes a general state use for the monies. A state agency or institution that receives a monetary gift, devise or donation shall account for those monies separately.

11. All monies received by the Arizona game and fish commission in connection with clean water act in-lieu fee projects shall be deposited in a special trust fund, known as the game and fish in-lieu fee program restoration endowment trust fund, established by section 17-265 for the use of the Arizona game and fish commission solely for the following:

(a) The purposes authorized under any enabling instrument between the commission, the United States army corps of engineers and the United States environmental protection agency.

(b) Site selection, design, implementation, monitoring, management and administrative costs related to the Arizona game and fish department's responsibilities as an in-lieu fee sponsor pursuant to sections 401 and 404 of the clean water act.

B. Monies shall not be received or held by the state treasurer except as authorized by law, and in every instance the treasurer shall issue a receipt for monies received and shall record the transaction in the statewide accounting system. Monies shall not be withdrawn from the treasury except on the warrant, check or substitute check, or electronic funds transfer voucher of the department of administration.

C. Monies received for and belonging to this state and resulting from compromises or settlements by or against this state, excluding restitution and reimbursement to state agencies for costs or attorney fees, shall be credited to the state general fund unless specifically credited to another fund by law. A fund consisting of monies other than monies received for restitution, costs or attorney fees shall not be established by a court order without prior legislative authorization. For the purposes of this subsection, "restitution" means monies intended to compensate a specific, identifiable person, including this state, for economic loss.

D. All federal monies granted and paid to this state by the federal government shall be accounted for in the accounts or funds of this state in the necessary detail to meet federal and state accounting, budgetary and auditing requirements, and all appropriations for matching such federal monies shall be transferred from the state general fund to such separate funds as needed, except as otherwise required by the federal government.

E. This section does not require the establishment of separate accounts or funds for such federal monies unless otherwise required by federal or state law. The department of administration may use the most efficient system of accounts and records, consistent with legal requirements and standard and necessary fiscal safeguards.

F. This section does not preclude the department of administration from establishing a clearing account or other acceptable accounting method to effect prompt payment of claims from an approved budget or appropriation. The department of administration shall report each account or fund established or cancelled to the directors of the joint legislative budget committee and the governor's office of strategic planning and budgeting.

G. This section and any other section do not preclude the use of monies kept in funds separate from the state general fund, the interest from which accrues to the state general fund, to pay claims against the state general fund if sufficient monies remain available to pay claims against such funds.

H. The department of administration may issue warrants, checks or electronic funds transfer vouchers for qualified expenditures of federal program monies before they are deposited in the state treasury. The receipt of federal monies shall be timed to coincide, as closely as administratively feasible, with the redemption of warrants, checks or substitute checks, or electronic funds transfer vouchers by the state treasurer. The department of administration shall limit expenditures to the amount that has been made available to use under the grant award by the federal government. The state agency initiating the expenditures is responsible for ensuring that expenditures qualify for coverage under the guidelines of the federal grant award.

I. The department of administration shall establish policies and procedures for all state agencies for drawing federal monies. When the established method results in federal monies being held by this state, the department of administration may use the interest earned on the monies to pay the federal government for any related interest liability. If an interest liability is incurred due to a state agency varying from the established policies and procedures, the department of administration shall charge the appropriate agency account or fund. Any federal interest liability owed to this state resulting from the delayed federal disbursements shall be used to offset this state's interest liability to the federal government. Any remaining interest earnings shall be deposited in the state general fund.

J. Any state agency or authorized agent of a state agency may accept credit cards pursuant to an agreement entered into by the state treasurer pursuant to section 35-315 to pay any amount due to that agency or agent or this state.

K. Except for the department of revenue, agencies or authorized agents on behalf of state agencies that accept credit cards shall deduct any applicable discount fee and processing fee associated with the transaction amount before depositing the net amount in the appropriate state fund. No other reduction is allowed against the transaction amount. The net amount deposited in the appropriate state fund shall be considered as the full deposit required by law of monies received by the agency or the authorized agent. Payment of any applicable discount fee and processing fee shall be accounted for in the annual report submitted to the governor's office of strategic planning and budgeting in accordance with section 41-1273. The transaction amount of any credit card transaction shall not be reduced by any discount fee or processing fee in an amount of more than the merchant card settlement fees reflected in the state banking contract with the state treasurer's office.

L. Any state agency that contracts with an authorized agent to electronically process transactions pursuant to title 41, chapter 23 may include a provision in the contract to allow the authorized agent to impose a convenience fee or a service fee or surcharge. If allowed, the convenience fee or the service fee or surcharge shall be charged to the cardholder in addition to the transaction amount, except for the following:

1. Except as provided in subsection R of this section, any permits, licenses or other authorizations needed to pursue a trade or occupation in this state.

2. Except as provided in subsection R of this section, any permits, licenses or other authorizations needed to establish, expand or operate a business in this state.

3. Except as provided in subsection R of this section, any permits, licenses or other authorizations needed to register a vehicle or license a driver in this state.

M. Each state agency or its authorized agent shall:

1. Deduct the amount of the convenience fee or the service fee or surcharge before depositing the transaction amount or the transaction amount reduced by the discount fee or the processing fee, or both, into the appropriate state fund.

2. Not deduct any part of the convenience fee or the service fee or surcharge from the transaction amount before depositing the net amount into the appropriate state fund.

3. Deduct the amount of the discount fee or the processing fee, or both, from the transaction amount before depositing the net amount into the appropriate state fund.

N. The net amount deposited in the appropriate state fund pursuant to subsection L or M of this section shall be considered as the full deposit of monies that is required by law and that is received by the agency.

O. Before charging a convenience fee or a service fee or surcharge, a state agency shall submit the proposed convenience fee or the proposed service fee or surcharge to the state treasurer for approval. If the state treasurer determines that the proposed convenience fee or the proposed service fee or surcharge is necessary to ensure the efficient processing of payments to the state agency and complies with the standards of the credit card industry, the state treasurer shall approve the convenience fee or the service fee or surcharge. Notwithstanding section 35-142.01, convenience fees received by a state agency or its authorized agent may be used to offset the costs imposed by the authorized agent in processing the transactions.

P. When the percentage of electronic transactions first exceeds at least thirty percent of a state agency's total transactions, the state agency shall perform a cost benefit report, including costs of convenience fees or the service fee or surcharge, the amount of revenue generated and any realized cost savings.

Q. This section and any other provision of law do not authorize any state agency, authorized agent of any state agency or budget unit to establish a bank account for any government monies. All monies received by or on behalf of this state shall be deposited with and in the custody of the state treasurer or in an account that is authorized by the state treasurer pursuant to this section. This subsection does not apply to monies received and any accounts established and maintained by the director of the Arizona state retirement system or the administrator of the public safety personnel retirement system, the corrections officer retirement plan and the elected officials' retirement plan.

R. If a state agency provides an alternative method of payment, the convenience fee or the service fee or surcharge may be charged to the cardholder in addition to the transaction amount.

§ 35-142.01 Reimbursement of appropriated funds; receipt and deposit; prohibition; inmate health care services; notice

A. Except as provided in subsections B and C of this section, when monies are appropriated to a budget unit for a specific program or purpose that is subject to reimbursement in whole or in part from federal monies or any other source, and that is so noted in the appropriation bill, the budget unit, on receipt of such reimbursement, shall deposit the monies, pursuant to sections 35-146 and 35-147, in the state general fund or the fund from which the appropriation was originally made. If the reimbursement is not noted in the appropriation bill, it may be credited to the account out of which the expenditure was incurred if the director of the budget unit determines that reimbursement within the fiscal year is necessary for operation of the budget unit and was not specifically considered and rejected by the legislature at the time of appropriating monies to the budget unit. The director of the budget unit shall notify the joint legislative budget committee, the governor's office of strategic planning and budgeting and the state comptroller in writing of determinations made pursuant to this section.

B. When monies are appropriated to the Arizona health care cost containment system administration or the department of health services and the specific program or purpose for which the monies are appropriated is subject to reimbursement for reconciliation payments from or penalties against program contractors or health plans, the department or administration, on receipt of such reimbursement, shall deposit the monies, pursuant to sections 35-146 and 35-147, in the state general fund or the fund from which the appropriation was originally made. The Arizona health care cost containment system administration and the department of health services are prohibited from allowing reconciliation payments from or penalties against program contractors or health plans to be credited against future payments to the program contractor or health plan.

C. Notwithstanding section 35-190, the state department of corrections may credit against payments owed in the current fiscal year to the department's health care contractor the amount of state and federal monies paid by the Arizona health care cost containment system administration for health care services on behalf of medicaid-eligible inmates regardless of the dates of service. On or before July 1 of each year, the director of the state department of corrections shall notify the directors of the joint legislative budget committee and the governor's office of strategic planning and budgeting of the amount of credits against payments for the previous fiscal year.

§ 35-143 Collection through budget units; time for collection; failure to collect; liability

A. Fees for licenses, permits, certificates of any kind and other amounts due any budget unit shall be collected at the time such licenses, permits or certificates are issued by the budget units issuing them. All other monies accruing to the various budget units or to the state through the various budget units shall also be collected at the time services are rendered, or at the time of accrual by the budget units rendering the services or assessing the charges, or otherwise giving rise to the claims in favor of the state.

B. Any person or officer who neglects the collection of such fees or monies shall be liable to the state, both personally and on his bond.

§ 35-143.01 Special funds; appropriation; reversion; use

A. All monies deposited in special agency funds of self-supporting regulatory agencies, as provided in section 35-142, to be used by such agency for administration and enforcement, shall be subject to annual legislative appropriation.

B. Unless otherwise provided by the legislature, a special fund self-supporting regulatory agency shall not expend more monies than are appropriated by the legislature for a fiscal year, and any monies remaining at the end of the fiscal year revert to the special agency fund.

C. Any unexpended or unencumbered balance of monies remaining in the special funds of self-supporting regulatory agencies as provided in section 35-142 at the end of the fiscal year shall not revert to the state general fund and may be made available by the legislature for use by the agency for the following fiscal year.

§ 35-144 Budget stabilization fund; definitions

A. The budget stabilization fund is established consisting of monies transferred from the state general fund pursuant to subsection B of this section. The state treasurer shall administer the budget stabilization fund and invest and divest monies in the budget stabilization fund as provided by sections 35-313 and 35-314.02, and monies earned from investment shall be credited to the budget stabilization fund. Except as provided by this section:

1. Monies in the budget stabilization fund are exempt from the provisions of section 35-190 relating to the reversion of monies to the state general fund.

2. The monies in the fund are separate monies to be used only for the purposes of the fund.

3. An amount sufficient to pay claims certified by the state forester pursuant to section 37-1305, subsection E, paragraph 4 is continuously appropriated from the fund to the state treasurer for payment of the certified claims. Not more than $20,000,000 in unreimbursed claims may be outstanding from the fund at any time from the monies appropriated pursuant to this paragraph.

B. In a calendar year in which the annual growth rate exceeds the trend growth rate, the excess growth when multiplied by total general fund revenue of the fiscal year ending in the calendar year determines the amount to be appropriated by the legislature to the budget stabilization fund in the fiscal year in which the calendar year ends.

C. In a calendar year in which the annual growth rate is both less than two percent and less than the trend growth rate, the difference between the annual growth rate and the trend growth rate when multiplied by the total general fund revenue of the fiscal year ending in the calendar year determines the amount to be transferred by the legislature from the budget stabilization fund to the state general fund at the end of the fiscal year in which the calendar year ends. The transfer calculated pursuant to this subsection shall not exceed the available balance in the budget stabilization fund, nor shall the legislature transfer an amount that exceeds the amount sufficient to balance the state general fund budget.

D. The legislature shall pass a bill that contains the emergency clause if the legislature either:

1. Reduces the amount for appropriation to the budget stabilization fund under subsection B of this section.

2. Increases the amount for transfer to the state general fund under subsection C of this section.

E. The annual budget recommendations of the governor and the joint legislative budget committee shall include estimates of appropriations or transfers required under subsection B or C of this section.

F. A final determination of the amount to be appropriated to or transferred from the budget stabilization fund shall be made using personal income and price deflator estimates as reported in the second calendar quarter for the preceding calendar year. The economic estimates commission shall determine the annual growth rate, the trend growth rate and the required appropriation to or transfer from the budget stabilization fund at its first meeting following the second calendar quarter report of the United States department of commerce, but not later than June 1. The commission shall certify and report its findings to the governor, the state treasurer, the president of the senate, the speaker of the house of representatives and the joint legislative budget committee.

G. The appropriation calculated pursuant to subsection B of this section may be included in the general appropriations bill for that fiscal year. Any additional appropriation calculated pursuant to subsection F of this section shall be made by a separate act.

H. At the end of a fiscal year, the budget stabilization fund balance shall not exceed ten percent of state general fund revenue for the fiscal year. Any surplus monies above ten percent shall be transferred by the state treasurer to the state general fund.

I. The state treasurer may temporarily divest monies in the budget stabilization fund to avoid a negative cash balance in operating monies. The amount divested shall not exceed the amount required to meet immediate cash needs. The state treasurer may divest monies in the budget stabilization fund only when the state general fund has a negative cash balance.

J. For the purposes of this section:

1. "Adjusted personal income" means personal income minus transfer payments, as reported by the United States department of commerce, bureau of economic analysis, or its successor agency.

2. "Annual growth rate" means the percentage change in real adjusted personal income in the calendar year ending during a fiscal year as compared to real adjusted personal income for the preceding calendar year. The annual growth rate shall be rounded to the nearest one-hundredth of one percent.

3. "GDP price deflator" means the gross domestic product price deflator reported by the United States department of commerce, bureau of economic analysis, or its successor agency.

4. "Personal income" means the total personal income of all persons in this state reported by the United States department of commerce, bureau of economic analysis, or its successor agency.

5. "Real adjusted personal income" means an amount that is determined by dividing adjusted personal income by the GDP price deflator and multiplying the result by one hundred.

6. "Transfer payments" means that portion of personal income that represents a government expenditure for which no service is rendered or product is delivered, as determined by the United States department of commerce, bureau of economic analysis, or its successor agency.

7. "Trend growth rate" means the average annual growth rate for the most recent seven calendar years, rounded to the nearest one-hundredth of one percent.

§ 35-145 Control of taxes receivable from counties; statements from county treasurer; violation; penalty

A. The treasurer of each county shall:

1. Remit to the state treasurer, on or before the fifteenth day of each month during each fiscal year, the portion of tax money belonging to the state which was collected during the previous month.

2. Transmit to the state treasurer a statement of financial transactions in a form authorized by the state treasurer.

B. Any county which fails or refuses to comply with the provisions of this section, or refuses to pay any obligations due the state from the county, shall be notified in writing by the state treasurer. Any county which persists in such failure or refusal for a period of thirty days after mailing the notice is disqualified from receiving any portion of the excise tax monies under section 42-5029 until the county complies with the provisions of this section and pays the state its obligations.

C. The provisions of this section shall not bar or suspend the state's right to commence an action for the purpose of compelling the collection or remitting of monies due the state.

§ 35-146 Deposit of receipts by budget units

A. All monies received by any officer or employee of any budget unit shall be promptly remitted to the state treasurer, and monies shall not be held, used or deposited in any personal or special bank account temporarily or otherwise by any agent or employee except as expressly provided by this chapter.

B. All monies received by the state treasurer shall be credited to the state general fund, unless otherwise prescribed by law.

C. All revenues included in the operating budget adopted by the Arizona board of regents for each university as prescribed in section 15-1626, subsection A shall be retained by each university. Tuition and fees shall be deposited in subaccounts as prescribed in section 15-1626, subsection A.

§ 35-147 Treasurer's deposits; preparation and disposition

A. The head of the budget unit or his authorized agent in depositing monies with the state treasurer shall use forms authorized by the state treasurer.

B. The treasurer's deposit shall be delivered to the state treasurer together with the remittance or proof of prior deposit with the state servicing bank. The state treasurer shall validate the deposit and provide a confirmation to the budget units to be retained by the issuing budget unit. The treasurer's confirmation shall show the amount, the date deposited and a unique identifying number that will link the deposit to accounting documents and fund details maintained in the statewide accounting system. The treasurer's deposit forms shall be issued to the budget units by the department of administration. The administrative head of each budget unit shall be held accountable for each deposit.

§ 35-148 Payment for interagency services as credit to account of agency; transfer of miscellaneous state monies to general fund; exceptions

A. Interagency service agreements entered into between budget units may provide for reimbursement for services performed or advancement of funds for services to be performed. In either instance, monies received by the budget unit performing the services shall be credited to its appropriation account for its use in performing the services. If funds are advanced, the agency performing the services shall make an accounting of expenditures and return any advances not used to the appropriation account of the advancing agency.

B. Except as provided in subsection A of this section, when money belonging to the state comes into the possession of a state officer, by recovery at law or otherwise, and no provision of law exists for the disposition of such money, it shall be deposited, pursuant to sections 35-146 and 35-147, in the state general fund.

C. The provisions of this section shall not apply to money realized from the sale of personal property or from the sale of real property or improvements thereon by the Arizona board of regents, or by educational institutions under the control of the Arizona board of regents, the department of child safety or the department of economic security.

§ 35-149 Disposition of private monies; contributions and suspense funds; exception

A. Every department, institution, board or commission receiving private monies or contributions available for its support or for the purpose of defraying expenses or work done under its direction, other receipts that are subject to refund or return to the sender or receipts that have not yet accrued to the state shall, in depositing such monies with the state treasurer as provided in this chapter, certify to the department of administration:

1. The source from which such monies were received.

2. The terms and conditions under which and the purpose for which the monies were received.

3. The names of the trustees or administrators of the monies or contributions.

4. The name of the person authorized to approve expenditures from each fund.

B. The department, institution, board or commission shall keep an accounting of each such fund or contribution prescribed in subsection A of this section entirely separate and distinct from all other funds.

C. All disbursements from such funds and contributions shall be made on warrants, checks or electronic funds transfer vouchers of the department of administration, which shall issue such warrants, checks or electronic funds transfer vouchers only on adequate vouchers approved by the person or persons authorized to approve the disbursements. Separate sets of accounts with each of such funds and contributions, and the receipts and disbursements thereof, shall be maintained by the department of administration.

D. This chapter does not apply to monies received by universities for the subsistence of dining halls, dormitories, bookstores or student activities, to federal monies or private monies of students received by state educational institutions, or to private monies of patients or inmates of state institutions, when such monies deposited with an officer of such an institution are declared not to be state monies.

§ 35-149.01 Private monies; state officers; employees; prohibition; exceptions; definitions

A. An agency may not allow any person to serve in any capacity as a state officer or employee if that person's salary, wages or other compensation for performing official state duties is paid in whole or in part by private monies.

B. This section does not apply to the department of public safety, the department of environmental quality or any public university under the jurisdiction of the Arizona board of regents.

C. For the purposes of this section:

1. "Agency" has the same meaning prescribed in section 41-1001.

2. "Private monies" means monies from a source other than this state, a political subdivision of this state or the federal government, including monies from a nonprofit organization, charitable foundation, university, private donor, or advocacy group.

§ 35-150 Current record of revenues; enforcement powers

A. The department of administration shall keep current a completely detailed list of all sources from which monies accrue to the state, classified according to the budget units and other agencies responsible for the collection of public monies, showing for each of the various budget units and each of the other revenue-collecting agencies of the state the various kinds of taxes, fees, permits and other public monies collected or to be collected.

B. The department of administration may take steps deemed necessary, including court action, to enforce the provisions of this chapter with respect to collecting and depositing public monies.

C. Notwithstanding any other law, budget units and other agencies responsible for the collection of public monies shall provide the state comptroller with an accounting of all collections of monies owed to this state regardless of the source pursuant to section 38-414.

D. Any employee or officer who refers a debt to the attorney general's office for collection pursuant to section 41-191.03 and certifies the uncollectible amount to the state comptroller is exempt from section 35-143, subsection B.

E. The attorney general's office shall annually notify the state comptroller of all uncollectible debts owed to this state. After receiving this notice and review by the joint legislative budget committee, the state comptroller may remove the total receivable or any portion of the receivable from the state accounting system.

§ 35-151 Encumbrance documents; issuance and disposition; exception

A. An encumbrance document shall be processed in this state's accounting system before a budget unit issues a purchase order or encumbrance document against appropriations to cover an obligation, actual or anticipated, except that encumbrance documents are not required for:

1. Reimbursements to employees for travel or other expenses incurred.

2. Gross payrolls and related employee expenses of a budget unit.

3. Eligibility payments.

4. Required payments that are not discretionary.

5. Under procedures prescribed in the state accounting manual of the department of administration, expenditures not exceeding $5,000.

B. Copies of the encumbrance documents shall be submitted immediately to or entered into the state accounting system of the department of administration. The budget unit shall certify that the proposed expenditure is authorized by appropriation and allotment and that the amount involved does not exceed the unencumbered and unexpended balance of the appropriation as recorded in the state's accounting system. If any proposed certified expenditure is found to exceed the unencumbered and unexpended balance or to be contrary to this chapter or any other law, the head of the budget unit or the head's designee shall disallow the proposed expenditure. If the encumbrance is found to be in order, it shall be immediately submitted or electronically transmitted to the department of administration central accounting system, which shall not accept an encumbrance in excess of the appropriation. The amount of the encumbrance shall be set aside to be used exclusively to pay the claim when presented. If an adequate appropriation balance is not available, the accounting system shall reject the transaction.

C. The department of administration may require encumbrances for all funds of this state, except for the investment of public monies or permanent endowment funds, which are not appropriated but are held in custody by the state treasurer.

D. An encumbrance document may not be approved by or for any budget unit that will involve an expenditure of any amount in excess of the unencumbered and unexpended balance of the appropriation or fund source to which the resulting expenditure will be chargeable.

E. Except for an expenditure that is exempt under subsection A of this section, an expenditure under section 35-191 shall be encumbered regardless of the dollar amount of the expenditure.

§ 35-152 Special masters; payment of fees and expenses

A. An officer, employee or agent of this state shall not open and maintain an account for the purpose of paying fees and expenses that are incurred by a special master who is appointed by a federal court.

B. Notwithstanding any law to the contrary, an officer, employee or agent of this state is not subject to personal liability for complying with subsection A.

C. An officer, employee or agent of this state shall not pay fees and expenses for special masters appointed by a federal court unless the legislature appropriates monies for the payment of the special master fees and expenses.

D. Notwithstanding any law to the contrary, the failure of the legislature to appropriate monies for the payment of fees and expenses for special masters appointed by a federal court does not subject an officer, employee or agent of this state to personal liability for the special master fees and expenses.

E. This section applies to all bills for fees and expenses for special masters appointed by a federal court that are submitted after the effective date of this section.

§ 35-154 Unauthorized obligations; effect; liability

A. No person shall incur, order or vote for the incurrence of any obligation against the state or for any expenditure not authorized by an appropriation and an allotment. Any obligation incurred in contravention of this chapter shall not be binding upon the state and shall be null and void and incapable of ratification by any executive authority to give effect thereto against the state.

B. Every person incurring, or ordering or voting for the incurrence of such obligations, and his bondsmen, shall be jointly and severally liable therefor. Every payment made in violation of the provisions of this chapter shall be deemed illegal, and every official authorizing or approving such payment, or taking part therein, and every person receiving such payment, or any part thereof, shall be jointly and severally liable to the state for the full amount so paid or received.

§ 35-155 Cash deposit as an alternative to a surety bond

A. Any budget unit which requires a person to post a surety bond to guarantee the faithful performance of a legal obligation may accept, in lieu of the surety bond, a cash deposit in the form of cash or alternatives to cash. The budget unit may accept as an alternative to cash any of the following:

1. Certificates of deposit or investment certificates payable or assigned to the state treasurer issued by banks doing business in this state and insured by the federal deposit insurance corporation.

2. Certificates of deposit, investment certificates or share accounts payable or assigned to the state treasurer and issued by a savings and loan association doing business in this state and insured by the federal savings and loan insurance corporation.

3. Certificates of deposit, investment certificates or share accounts payable or assigned to the state treasurer and issued by a credit union doing business in this state and insured by the national credit union administration.

B. The budget unit shall deposit the cash deposit received under this section with the state treasurer. The state treasurer shall hold the cash or alternatives to cash in the name of this state to guarantee the faithful performance of all legal obligations of the person required to post the bond. The person is entitled to receive any accrued interest earned from the alternatives to cash. The state treasurer may impose a fee to reimburse the state treasurer for administrative expenses. The fee shall not exceed ten dollars for each cash deposit.

C. A person depositing cash in lieu of a surety bond may withdraw the deposit upon satisfactory performance of the legal obligation or upon replacing the cash deposit with a commercial surety bond.

D. The budget unit and the state treasurer have no personal liability for the performance of duties relating to the cash deposits permitted by this section as long as those duties are performed in good faith.

E. The state treasurer may prescribe rules relating to the terms and conditions of each type of security provided by this section.

Article 4 Classification and Allotment of Funds

§ 35-171 Bookkeeping procedures for treasurer

All public monies in the custody or possession of the state treasurer shall be placed and retained in a state fund pursuant to section 35-142. The total of these monies constitutes the cash fund of the state. Warrants, checks or substitute checks, or electronic funds transfer vouchers shall be credited to the fund as they are paid.

§ 35-172 Authorized expenditures classed as appropriated

A. For the purpose of accounting, budgeting, allotting and reporting, all expenditures authorized by either the general appropriation act or by any separate or special act shall be classed as appropriated by the legislature.

B. Expenditures under the general classes provided by subsection A shall be subdivided by the department of administration in accordance with the objects and character of the expenditures and in such manner that the true and actual cost of each object will be reflected perpetually on the division's books.

§ 35-173 Definition of allotment schedule; appropriations; requirements; limits; exceptions

A. "Allotment schedule" means a detailed plan of expenditures for a full fiscal year within a budget program or expenditure class.

B. Before monies from an authorized appropriation, or any other source, can be obligated, an allotment schedule must be approved and established by the department of administration and the governor's office of strategic planning and budgeting. The allotment schedule shall be based on the estimated annual requirement and shall distribute the available spending authority to cover the entire fiscal year's operations.

C. With the exception of the department of administration, the budget unit, on approval of the director of the department of administration and the governor's office of strategic planning and budgeting, may:

1. Transfer spending authority from one expenditure class to another.

2. Transfer spending authority between and within programs if spending authority is appropriated to the budget unit by programs.

D. A transfer within a budget unit of spending authority appropriated for land acquisition, capital projects or building renewal is allowed only on approval of the joint committee on capital review.

E. A transfer to or from personal services or employee related expenditures from or to any other budget program or expenditure class is not allowed unless recommended by the joint legislative budget committee and approved by the director of the department of administration and the governor's office of strategic planning and budgeting, except that the director of the department of administration may transfer amounts equal to the gross payroll and related employee expenses of a budget unit from the monies of a budget unit available for this purpose to payroll imprest accounts for the purpose of paying employees of the budget unit and disbursing related employee expenses.

F. A transfer of spending authority within the department of administration shall be made only with the approval of the joint legislative budget committee and the governor's office of strategic planning and budgeting, except as provided in subsection E of this section.

G. This section does not apply to the universities.

§ 35-174 Vacancy savings; definition; personal services and employee related expenditures; reversion

A. A "vacancy saving" is any monies saved or generated in personal services and employee related expenditures by:

1. Not filling a position which has become vacant by termination of an employee.

2. Not filling a newly authorized position.

3. Filling an authorized position at a grade or step lower than is authorized by the legislature.

4. A downward reclassification of an authorized position.

B. A vacancy saving shall not be expended by the budget unit, except upon approval of the director of the department of administration, for any of the following purposes:

1. Awarding merit increases to state employees.

2. Funding reclassified positions.

3. Creating new positions that exceed the total number of full-time equivalent positions as approved by the joint appropriations committees and reported annually in the appropriations report.

C. An unexpended vacancy saving shall revert to the fund from which appropriated except as provided in section 15-1661, subsection E. The reversion shall occur at the end of each fiscal year.

D. This section applies only to funds appropriated by the legislature.

Article 5 Fiscal Procedures, Controls and Reports

§ 35-181.01 Presentation, approval and payment of claims and payrolls; amended claims

A. All claims against the state for obligations authorized, required or permitted to be incurred by any state officer or agency shall be paid in accordance with procedures prescribed by the director of the department of administration. The director may prescribe procedures for prepayment for goods or services if it is the industry standard or if it is in the best interests of this state to prepay.

B. Any claim made and approved contrary to subsection A of this section, in the absence of fraud or bad faith on the part of the claimant or disbursing officer, may be amended at any time during the fiscal year in which it was originally submitted to conform to the requirements of subsection A of this section and upon amendment such claim shall be exempt from the provisions of section 35-211.

C. Any public funds paid or received pursuant to law, in the absence of fraud or bad faith in the disbursement or receipt of such funds prior to such law being declared unconstitutional by the supreme court of the state of Arizona, shall be exempt from the provisions of section 35-211.

§ 35-181.02 Audit, adjustment and settlement of claims; procedures for rejection

A. The director of the department of administration shall audit, adjust and settle the amount of claims against this state payable out of funds of this state, except claims expressly required or permitted by law to be audited and settled by some other officer. The director of the department of administration shall establish audit policies consistent with accepted accounting principles in order to effect prompt and correct payment of state obligations. The director of the department of administration shall also determine whether the funds are available for payment and that the claim is signed by the authorized representative as required by section 35-182.

B. The director of the department of administration shall establish procedures for the return and resolution of any claim for which funds are not available or which payment is contrary to law.

§ 35-181.03 Audit of nonprofit corporations receiving state monies; definition

A. All state contracts with nonprofit corporations for assistance shall include requirements concerning financial and compliance audits.

B. Each nonprofit corporation that receives in excess of two hundred fifty thousand dollars in state assistance in any fiscal year shall file for each such fiscal year at the corporation's expense with the grantor agency either audited financial statements prepared in accordance with federal single audit regulations or financial statements prepared in accordance with generally accepted accounting principles and audited by an independent certified public accountant.

C. Each nonprofit corporation receiving two hundred fifty thousand dollars or less in state assistance in any fiscal year shall comply with contract requirements concerning financial and compliance audits contained in contract agreements governing such programs.

D. For the purposes of this section, "nonprofit corporation" means a corporation as defined in section 10-3140.

§ 35-182 Certification of claims

Before any claim against the state is paid by the department of administration, the department shall require a certification in a form prescribed by the director of the department of administration and signed by the authorized representative or representatives of the budget unit presenting the claim.

§ 35-183 Countersigning of warrants, checks and electronic funds transfer vouchers

All warrants, checks and electronic funds transfer vouchers issued by the department of administration shall be countersigned by the governor, or shall bear the facsimile signature of the governor, before presentation to the state treasurer for payment or endorsement. Unless so countersigned, the warrants, checks or electronic funds transfer vouchers shall not be considered complete in form or effect as legal obligations against this state.

§ 35-184 Numbering of warrants, checks and electronic funds transfer vouchers

A. All warrants, checks and electronic funds transfer vouchers issued by the department of administration shall be numbered in the manner prescribed by the director of the department of administration to maintain accountability.

B. All warrants, checks and electronic funds transfer vouchers issued by the department of administration shall bear on the face of the warrant, check or electronic funds transfer voucher a void date that does not exceed two years after the date of issuance.

§ 35-185 Disbursements of monies

A. All warrants, checks and electronic funds transfer vouchers of the department of administration issued pursuant to this chapter shall constitute full and sufficient authority for the state treasurer to disburse public monies in the amount set forth on the face of the warrant, check or electronic funds transfer voucher. The state treasurer shall issue a check on a state depository bank or authorize the transfer of monies by the state depository bank in payment of the warrants, checks or substitute checks, and electronic funds transfer vouchers. The director of the department of administration may establish by rule and collect a fee for each warrant, check and electronic funds transfer voucher issued to a vendor that provides materials, services or construction to this state. The fee shall be deposited in the state general fund.

B. The director of the department of administration shall credit the state treasurer with the amount of all warrants, checks or substitute checks, or electronic funds transfer vouchers that the state treasurer redeems. If monies are not available to pay such warrants, checks or substitute checks, or electronic funds transfer vouchers, the state treasurer shall issue in lieu of payment a treasurer's warrant note or notes as provided in section 35-185.01.

C. Monies shall not be withdrawn from the treasury for any purpose except to pay warrants, checks and electronic funds transfer vouchers issued by the director of the department of administration or to pay treasurer's warrant notes.

D. This chapter does not apply to withdrawals of monies from state depository banks for immediate redeposit into other state depository banks.

§ 35-185.01 Treasurer's warrant notes; form; redemption; exception

A. If monies are not available to pay warrants, checks or substitute checks, or electronic funds transfer vouchers of the department of administration presented to the state treasurer pursuant to section 35-185, the treasurer, in lieu of payment, shall issue and shall exchange or sell a treasurer's warrant note or notes in the amount or amounts equal to the sum of the face value of the warrants, checks or substitute checks, or electronic funds transfer vouchers presented for payment. Treasurer's warrant notes shall be issued in lieu of payment of state general fund warrants, checks or substitute checks, or electronic funds transfer vouchers only or in exchange for previously issued treasurer's warrant notes. Before issuing warrant notes, the state treasurer is not required to divest from program funding obligations issued pursuant to section 41-5857, board funding obligations issued pursuant to section 28-7678, monies in the budget stabilization fund or operating monies invested in securities that are earning a rate of interest greater than the cost of issuing warrant notes. For the purposes of this subsection, "monies are not available" means an operating cash balance is not available to pay warrants, checks or substitute checks, or electronic funds transfer vouchers except for those operating monies invested in program funding obligations issued pursuant to section 41-5857, board funding obligations issued pursuant to section 28-7678, monies in the budget stabilization fund or operating monies invested in securities that are earning a rate of interest greater than the total cost of issuing any warrant notes.

B. The face value of a treasurer's warrant note may be equal to the sum of any combination of warrants, checks or substitute checks, and electronic funds transfer vouchers presented for payment. The treasurer may sell warrant notes at public or private sale and shall use the proceeds of the sale to pay warrants, checks or substitute checks, and electronic funds transfer vouchers previously presented pursuant to section 35-185. Treasurer's warrant notes shall not be sold at a price below their face value.

C. Each treasurer's warrant note sold or exchanged shall be dated the date the respective warrants are presented for payment. If the date of delivery of a treasurer's warrant note that is sold is later than the date of presentment of the respective warrant or warrants, the purchaser of the treasurer's warrant note shall pay the accrued interest as an additional purchase price. The accrued interest shall be paid to the holder of the respective unpaid warrant or warrants, which shall be deemed to bear interest at the same rate as the respective treasurer's warrant note from presentment to payment from the proceeds of warrant notes sold.

D. The treasurer shall establish a maturity date for each treasurer's warrant note of not longer than ninety days from the date of initial issue. The treasurer may specify that treasurer's warrant notes may be called for redemption at any time before the specified maturity date.

E. The treasurer shall pay interest from the treasurer's warrant note redemption fund on the face value of each warrant note at the rate established by the state treasurer at the time of issuing the warrant note. Interest shall be paid from the date of the treasurer's warrant note until the maturity date or redemption date. The treasurer shall establish the interest rate before the exchange or sale of warrant notes at a rate of not more than the maximum rate permitted by the state loan commissioners.

F. The state loan commissioners, at a meeting called and chaired by the state treasurer, shall fix or change the maximum rate of interest that may be paid on warrant notes. Any change of the maximum allowable rate of interest as established by the state loan commissioners shall not affect warrant notes issued before the date of the change.

G. Each treasurer's warrant note shall be signed by the treasurer or the treasurer's designated agent and countersigned by the director of the department of administration or the director's designated agent. The required signatures may be electronic signatures. All treasurer's warrant notes shall be substantially in the following form:

Treasurer's warrant note

(20__ to ____ fiscal year)

Number _____________________

Phoenix, Arizona _______________, 20

On , 20, the treasurer of the state of Arizona will pay to the order of _______________ at ___________________ $______ with interest at _______ per annum from the date of issuance until paid (calculated on a 365/366 day basis).

(insert early redemption provisions)

---

(Countersigned) State Treasurer

Director of the department

of administration

H. Treasurer's warrant notes may be exchanged or sold for the combined face value of any number of treasurer's warrant notes previously issued. Except for those treasurer's warrant notes issued in exchange for or to redeem treasurer's warrant notes previously issued, treasurer's warrant notes may not be issued, exchanged or sold except in payment of or to provide monies to pay warrants, checks or substitute checks, and electronic funds transfer vouchers presented for payment as provided in section 35-185.

I. Treasurer's warrant notes issued in any fiscal year shall be numbered consecutively beginning with the number one. Treasurer's warrant notes shall be redeemed in numerical order. If the treasurer has sufficient monies to pay only a portion of the lowest numbered outstanding warrant note, the treasurer may deposit the monies with the paying agent pursuant to subsection K of this section or call in the lowest numbered warrant note, before maturity according to its terms, and pay the bearer the amount available and issue to the bearer a new warrant note bearing a number that will preserve, for the new warrant note, the priority of the partially paid warrant note and bearing a value equal to the amount of principal and interest remaining unpaid. The new warrant note and the partial payment of principal and interest on the partially paid warrant note shall be exchanged for the partially paid warrant note. The new warrant note shall pay interest at the same rate as the partially paid warrant note. The treasurer may make the changes in the form and date of the new warrant note as necessary to reflect the amount of unpaid interest on the partially paid warrant note.

J. The treasurer may include in the form of the treasurer's warrant notes provisions regarding the redemption and payment of treasurer's warrant notes before maturity as are consistent with subsections I and K of this section and section 35-185.02. If prior redemption is to be a provision of a treasurer's warrant note, the note shall provide a method to notify the holder of the note by publication or written, telegraphic or electronic means as chosen by the treasurer.

K. The treasurer may appoint a paying agent to facilitate the redemption and payment of treasurer's warrant notes. Monies deposited with the paying agent shall be allocated to pay the principal of, interest on and any prior redemption premiums associated with treasurer's warrant notes in numerical order. A treasurer's warrant note is deemed paid for all purposes of this section and section 35-185.02 when there is deposited with the paying agent sufficient monies to pay all amounts when due on the treasurer's warrant note and all amounts when due on all outstanding treasurer's warrant notes bearing a lower number. A paying agent appointed pursuant to this subsection shall provide security deposits as required by the treasurer.

L. When the treasurer or the paying agent, if payment is made to a paying agent, pursuant to subsection K of this section, pays treasurer's warrant notes or when the warrant notes are redeemed, the treasurer or paying agent shall mark on the face of the treasurer's warrant notes the word "cancelled" or shall cancel the warrant notes by electronic means indicating the date of cancellation and shall promptly present the notes to the director of the department of administration who shall give the state treasurer a receipt therefor.

M. If the state loan commissioners determine that it will result in a lower net effective interest rate on one, some or all warrant notes to be issued by the treasurer during the current fiscal year, the commissioners may authorize the treasurer to purchase letters of credit and to incur and pay insurance premiums, attorney fees or other related costs incurred with respect to treasurer's warrant notes. All such payments shall be treated in the same manner as interest to be paid on treasurer's warrant notes and shall be paid from the treasurer's warrant note redemption fund.

N. If treasurer's warrant notes are to be exchanged for warrants, checks or substitute checks, or electronic funds transfer vouchers held by banks or savings and loan associations, the treasurer may enter into agreements with such banks or savings and loan associations to provide for the issuance, reissuance and custody of treasurer's warrant notes, the fixing of the interest rates on the treasurer's warrant notes and the method of giving notice to the holders of the notes. Such agreements may provide for a book entry system for the treasurer's warrant notes or may provide for the issuance of one note with an appropriate grid on the reverse, which shall show the advancements made by the banks or savings and loan associations and also the payments of interest and reductions of principal. Such agreements may be continuing in nature, may be executed at any time and may apply to any treasurer's warrant notes exchanged for either warrants, checks or substitute checks, or electronic funds transfer vouchers or treasurer's warrant notes at any time during the remainder of the fiscal year in which the agreement is made. The agreements shall provide a method to preserve the priority of, interest rate on and other terms of each treasurer's warrant note exchanged pursuant to the agreement. Any such agreement shall not become effective until approved by the state loan commissioners.

§ 35-185.02 Treasurer's warrant note redemption fund; receipt; appropriation

A. The treasurer's warrant note redemption fund is established. Any time treasurer's warrant notes are issued and remain outstanding, all monies that would otherwise be paid into the state general fund, except for amounts sufficient to pay the salaries of constitutional officers of this state, shall be deposited in the treasurer's warrant note redemption fund. All monies in the treasurer's warrant note redemption fund shall be used exclusively to pay the principal of and interest on treasurer's warrant notes, and to pay the fees and charges authorized by this chapter. Monies in the treasurer's warrant note redemption fund shall be invested by the state treasurer, or a paying agent appointed pursuant to section 35-185.01, subsection K, and shall be credited to the treasurer's warrant note redemption fund.

B. If all warrant notes have been redeemed and the principal of and interest on such warrant notes have been paid along with any fees and charges authorized by this chapter, the paying agent shall return all unused and unneeded monies to the treasurer and the treasurer shall transfer any remaining amounts in the treasurer's warrant note redemption fund to the state general fund.

C. All monies deposited in the treasurer's warrant note redemption fund are appropriated to the state treasurer to pay the principal of and interest on outstanding treasurer's warrant notes and to pay any fees and charges authorized by this chapter. The amount appropriated to the treasurer pursuant to this subsection constitutes a continuing appropriation and shall not exceed the sum of the face values of the treasurer's warrant notes issued plus an additional one-fifth of that sum for paying interest on the treasurer's warrant notes and fees and charges authorized by this chapter. The state treasurer, if authorized by the state loan commission, may provide for the payment of a premium on redemption and payment of warrant notes before the maturity date established at the time of issuance.

D. The presentation on or after the maturity date or earlier call date of a treasurer's warrant note shall constitute full and sufficient authority for the state treasurer or a paying agent appointed pursuant to section 35-185.01, subsection K to disburse public monies from the treasurer's warrant note redemption fund in the amount stated on the face of the treasurer's warrant note plus any interest and prior redemption premiums, if applicable, when due.

E. All amounts deposited in the treasurer's warrant note redemption fund are pledged and held in trust for the benefit of the holders of the treasurer's warrant notes for the exclusive payment of the principal of and interest on outstanding treasurer's warrant notes and the payment of the fees and charges authorized by this chapter. All monies so pledged and received by the treasurer to be placed in the treasurer's warrant note redemption fund are immediately deemed assigned to and held in trust, without notice or recording of any nature whatsoever, for the holders of outstanding treasurer's warrant notes and other persons to be paid as provided by this article.

§ 35-186 Duplicate warrants or checks; notice; bond; form and effect

A. If it appears to the satisfaction of the department of administration, by affidavit or otherwise, that any warrant or check has been lost or destroyed before payment and there is no reasonable probability of its being found or presented or that a warrant or check has not been presented for payment within the time specified on the face of the warrant or check, the department of administration may issue to the owner a duplicate of the lost, destroyed or out-of-date warrant or check. Before issuing the duplicate, the department of administration shall send a written stop payment notice to the state treasurer giving the number, amount and date of the lost, destroyed or out-of-date warrant or check, the payee and the fund on which drawn.

B. The director of the department of administration shall establish procedures for issuing duplicate warrants or checks that protect this state and provide the owner with a duplicate warrant or check within a reasonable time.

§ 35-187 Warrants, checks and substitute checks; limit on payment

A warrant, check or substitute check on the state treasury shall not be paid unless presented to the state treasurer for payment before the void date printed on the face of the warrant, check or substitute check. Any warrant, check or substitute check that includes federal, trust or donated monies held for the payment of void warrants or checks shall be transferred or reverted to the fund from which it was drawn. All other monies held for the payment of void warrants, checks or substitute checks are deemed property presumed abandoned under section 44-302, subsection A, paragraph 11 and shall be transmitted to the department of revenue each month. For the purposes of this section and title 44, chapter 3, a warrant, check or substitute check does not include a state-issued check for support as defined in section 25-500 or for spousal maintenance.

§ 35-188 Allowance of set-off against state; audit of claim

In all actions brought on behalf of the state, no debt shall be allowed against the state as a set-off unless it has been exhibited to the director of the department of administration and by him allowed or disallowed. A debt may be allowed as a set-off when it is proved to the satisfaction of the court that the defendant, at the time of trial, is in possession of vouchers which he could not produce to the department of administration, or that he was prevented from exhibiting the claim to the department of administration by absence from the state, sickness or unavoidable accident.

§ 35-189 Issuance of certificate for claim for which no appropriation made

In all instances in which the law recognizes a claim for money against the state, but no appropriation has been made by law to pay such claim, the department of administration shall audit and adjust the claim, if presented to it, and give the claimant a certificate of the amount thereof, under its official seal if demanded, and shall report it to the next succeeding regular session of the legislature.

§ 35-190 Incurring obligations after close of fiscal year; lapsing appropriations; exceptions

A. Except as provided in section 35-191, an officer or other agency of the state, after the close of any fiscal year, shall not incur or order or approve incurring any obligation or expenditure under any appropriation made by the legislature for that fiscal year. An expenditure shall not be made from or be charged to any appropriation made by the legislature for any fiscal year that has expired at the time the obligation for such an expenditure was incurred.

B. The department of administration may draw warrants, checks or electronic funds transfer vouchers against the available balances of appropriations made for a fiscal year for a period of one month after the close of that fiscal year:

1. To pay obligations incurred during the fiscal year for which such appropriations were made.

2. To fulfill contracts properly made during the year as determined by the director of the department of administration.

C. One month after the beginning of each fiscal year, all balances of appropriations for the prior fiscal year lapse and further payments shall not be made on any claim due to expenditures for the prior fiscal year.

D. Appropriations for construction or other permanent improvements do not lapse until the purpose for which the appropriation was made has been accomplished or abandoned, unless the appropriation is available during the entire fiscal year without an expenditure from or encumbrance on the appropriation.

E. This section does not require reversion to the state general fund of any balance derived wholly or partly from federal grants, earnings or other sources, and remaining in any special revenue, endowment, interest, redemption or suspense agency fund at the close of the fiscal year unless expressly provided by law, or require reversion to the state general fund of any balance of fiscal year appropriations made for state institutions under the control of the Arizona board of regents.

§ 35-190.01 Deferral of obligation; future fiscal year; prohibition; exceptions

A. Except as provided in section 35-190 and subsection B of this section, an obligation of this state that is required by law to be paid with state general fund monies in one fiscal year may not be deferred in whole or in part for payment in another fiscal year.

B. This section does not apply to funding deferrals for basic state aid and additional state aid entitlement that otherwise would be apportioned to school districts pursuant to section 15-973.

§ 35-191 Administrative adjustment; refunds; presentation and disposition of claims; report; exemption

A. A claim against this state arising out of contractual relations that has not been paid because of failure to file within the time prescribed by law, or because of any other technical defect not affecting the validity or the contractual liability of this state, is subject to administrative adjustment as provided in this section. A claim against this state arising from orders for goods or services made in one fiscal year and received in the next fiscal year is subject to administrative adjustment as provided in this section if written documentation is provided by the ordering budget unit and written approval is granted by the director of the department of administration. The budget unit shall keep on file the written documentation and authorization by the director.

B. If a claim from the prior fiscal year is presented within one year and if sufficient funds remain in the reverted appropriation to pay the claim, the department of administration, on approval of the claim, shall draw a warrant, check or electronic funds transfer voucher to pay the claim and the warrant, check or electronic funds transfer voucher shall be paid out of the fund to which the unused appropriation reverted.

C. If a claim is presented that is more than one fiscal year and less than four fiscal years old and if sufficient monies remain in the reverted appropriation to pay the claim, the department of administration shall present the claim to the legislature requesting an appropriation of monies sufficient to pay the claim.

D. A claim of $300 or less from a prior fiscal year presented for payment on or before June 30 of the fourth subsequent fiscal year may be paid out of an available current year appropriation of the budget unit if the claim is determined to be in the best interest of this state and is approved by the director of the department of administration.

E. A claim for refund on any fee, license, permit or erroneous payment, the revenue having been placed in any separate fund or the state general fund, is subject to this section if no specific provision for refund is prescribed by law. If a claim for refund is approved, payment shall be made from any unexpended or unappropriated balance in the separate fund or the state general fund.

F. If this state's liability cannot be determined until a subsequent fiscal year but is resolved administratively after one fiscal year, the claim shall be paid from the appropriation for the year in which the liability is determined in accordance with the procedures established by the department of administration.

G. All claims filed under this section shall be presented to the department of administration in the manner prescribed by law and procedures established by the department of administration for presentation and audit of claims.

H. On or before November 1 of each year, the director of the department of administration shall submit a report to the director of the joint legislative budget committee listing the written approvals granted by the director of the department of administration for administrative adjustment of orders for goods or services made in one fiscal year and received on or after August 31 of the next fiscal year.

I. This section does not apply to a claim for damages for injury to a person or property or to any claim if the goods or services were received four fiscal years before the presentation of the claim.

§ 35-192 Authorization for declaration of disaster; authorization for liabilities and expenses; priorities and limitations; review and report of expenditures

(L21, Ch. 405, sec. 9)

A. The governor may declare an emergency arising from major disasters as provided in this section and incur liabilities therefor, regardless of whether or not the legislature is in session.

B. When the governor, or the director of the division of emergency management in the department of emergency and military affairs pursuant to section 26-303, subsection J, determines that a contingency or disaster so justifies, and declares an emergency, specific liabilities and expenses provided for in this section are authorized to be incurred against and to be paid as claims against the state from unrestricted monies from the general fund to mitigate and meet contingencies and emergencies arising from:

1. Invasions, hostile attacks, riots or insurrections.

2. Epidemics of disease or plagues of insects.

3. Floods or floodwaters.

4. Acts of God or any major disaster.

5. Wildland fires, but only after all necessary authorizations under section 37-1305 are exhausted.

C. When authorized by the governor, specific liabilities and expenses provided for in this section may be incurred against and may be paid as claims against the state from unrestricted monies from the general fund to meet contingencies and emergencies arising from incidents relating to hazardous materials as defined in section 26-301 and search or rescue operations conducted pursuant to section 11-251.02, section 11-441, subsection C or section 26-306 subject to the limitations provided in section 35-192.01. Within ninety days after monies are awarded under this section, the department of emergency and military affairs shall post in a prominent location on the department's official website the amount of monies awarded under this section, who received the monies and how the monies were spent.

D. Liabilities and expenses authorized under subsection B of this section may be incurred for any of the emergencies or contingencies prescribed in subsection B of this section in the following order of priority:

1. Reimbursement for expenses incurred to combat a menace to the health, lives or property of any considerable number of persons of the state, or to property of the state or its political subdivisions.

2. Reimbursement for expenses incurred to repair damage to any property of the state.

3. Reimbursement for expenses incurred to repair damage to any property of the political subdivisions of the state.

4. Reimbursement for expenses incurred in search or rescue operations.

5. Reimbursement for expenses incurred in emergency or disaster recovery activities or in matching federal disaster recovery programs.

6. Reimbursement for expenses for property loss mitigation measures or to match federal property loss mitigation programs.

E. The auditor of the department of emergency and military affairs shall review liabilities incurred and expenditures made under this section and report to the state emergency council at ninety-day intervals during the emergency and conduct a final review of each emergency within ninety days after the termination of the emergency. The state emergency council shall make a written report not later than September 1 of each year to the legislature of the actions of the state emergency council during the preceding fiscal year, including an itemized statement of expenditures for each emergency during the year. The department of emergency and military affairs shall post the report in a prominent location on the department's official website.

F. All liabilities incurred under this section shall be subject to the following limitations:

1. No liability shall be incurred against the monies authorized without the approval of the governor, or the adjutant general pursuant to section 26-303, subsection J, for each contingency or emergency.

2. Except as provided in paragraph 5 of this subsection, incurring of liabilities in excess of $200,000 in any single disaster or emergency shall not be made without consent of a majority of the members of the state emergency council.

3. The aggregate amount of all liabilities incurred under this section shall not exceed $4,000,000 for any fiscal year beginning July 1 through June 30. Monies authorized for disasters and emergencies in prior fiscal years may be used in subsequent fiscal years only for the disaster or emergency for which they were authorized. Monies authorized for disasters and emergencies in prior fiscal years, and expended in subsequent fiscal years for the disaster or emergency for which they were authorized, apply toward the $4,000,000 liability limit for the fiscal year in which they were authorized.

4. Notwithstanding the limitations in paragraph 3 of this subsection, monies that were previously obligated but not used for a declared emergency or disaster may be reallocated to an outstanding obligation for another declared emergency or disaster and shall remain available for expenditure for the outstanding obligation. The reallocation of monies pursuant to this paragraph does not apply toward the $4,000,000 liability limit of the fiscal year to which the monies were reallocated or in which the monies are spent.

5. Liabilities in excess of $200,000 incurred by the Arizona department of forestry and fire management may be reimbursed with the approval of the governor or state emergency council. The reimbursement shall be made pursuant to rules adopted pursuant to section 37-1305, subsection G or, if rules are not adopted pursuant to section 37-1305, subsection G, pursuant to rules adopted pursuant to subsection G of this section.

6. An obligation of monies under this section may be made only when one or more of the following conditions exist:

(a) No appropriation or other authorization is available to meet the contingency or emergency.

(b) An appropriation is insufficient to meet the contingency or emergency.

(c) Federal monies available for such contingency or emergency require the use of state or other public monies.

G. The director of the division of emergency management in the department of emergency and military affairs shall develop rules for administering the monies authorized for liabilities under this section, subject to approval by the governor.

§ 35-192.01 Reimbursement procedures

A. Political subdivisions may apply to the state director of emergency management for reimbursement of necessary expenses incurred in search or rescue operations, not including purchase of equipment or facilities, under section 35-192, subsection C subject to the following limitations:

1. Not to exceed fifty per cent of the first one thousand dollars or less of such expenditures in any fiscal year.

2. Not to exceed seventy-five per cent of all such expenditures in excess of one thousand dollars up to twenty-one thousand dollars in any fiscal year.

3. One hundred per cent of expenditures in excess of twenty-one thousand dollars in any fiscal year.

B. A department of the state which expends funds for search or rescue operations in an amount in excess of that provided for in the regular appropriation and when directed to do so by the governor or state director of emergency management may apply for reimbursement of such excess expenditures to the state director of emergency management under the provisions of section 35-192.

C. The director of emergency management shall adopt with the approval of the governor rules concerning such reimbursement.

§ 35-192.02 Travel advances; administration; reimbursement

A. A budget unit shall record travel advances for state employees in the appropriate account as prescribed by procedures established by the department of administration.

B. If travel advances made to an employee are not reimbursed in a timely manner, the department of administration may deduct such advances from any salary or wages or travel expense reimbursement due to the employee or may take any other action necessary to effect reimbursement.

§ 35-193 Revolving funds

A. The supervisory official of a budget unit may apply to the department of administration to provide a revolving fund in an amount that will allow the budget unit to pay operating expense items under procedures prescribed by the department of administration.

B. The application for a revolving fund shall state the purposes for which required, the amount deemed necessary, the person who will have custody of and be charged with handling and accounting the fund and the appropriation or other fund to which the revolving fund is to be charged.

C. The department of administration shall review the application as to purpose and reasonableness of amount requested and if acceptable may draw a warrant, check or electronic funds transfer voucher to the order of the officer applying therefor, and charge the amount thereof against the appropriation or other fund of that budget unit as requested.

D. The manner of accounting for a revolving fund shall be as prescribed by the director of the department of administration. A revolving fund established under this section does not revert to the state general fund at the end of the fiscal year.

E. At the request of the director of the department of administration, the applicant shall return to the state treasurer the full amount of the revolving fund or amount requested, and claims for services of the officer applying therefor or the head of the budget unit shall not be paid until the request has been complied with.

§ 35-193.02 Special services revolving fund; contents; administration; annual excess reversion

A. There is established a permanent revolving fund to be known as the department of administration special services revolving fund. The services covered by this fund shall include office supplies, office services, printing and other administrative or management services. Payments into the fund shall be made by state agencies that have been appropriated monies for the purpose of paying for services performed by the department of administration for other state agencies or to be performed by the department and for such other purposes as may be designated by the legislature. The portion of the monies in the fund used by the department of administration to administer the central office management for agencies is subject to legislative appropriation. The amount of payments by the agencies shall not exceed the amounts budgeted to the agencies for such designated purposes.

B. The monies shall be spent only on authorization of the director of the department of administration.

C. The director shall adopt rules regarding the time and manner in which payment shall be made into the fund by the state agencies to which appropriations are made in accordance with subsection A of this section.

D. Any amounts in excess of two hundred fifty thousand dollars in the revolving fund at the close of the fiscal year shall revert to the state general fund.

§ 35-196 Illegal withholding or expenditure of state monies; civil liability

Any state officer or employee who illegally withholds, expends or otherwise converts any state money to an unauthorized purpose shall be liable, either individually or on his bond, for the amount of such money, plus a penal sum of twenty per cent thereof, and an action may be instituted by the director of the department of administration or the attorney general immediately upon the discovery thereof.

§ 35-196.01 Expenditure of state monies for certain purposes; report

A. Subject to the approval of the director of the department of administration, a budget unit may spend any monies for either of the following:

1. Transportation or other travel expenses necessary for bringing any person into this state who is not a resident of this state for an interview for prospective employment.

2. Transportation or moving expenses for any person newly employed or retained.

B. A budget unit may spend monies to reimburse current employees for reasonable relocation expenses related to management initiated geographical reassignments of more than fifty miles from an employee's current work site pursuant to rules adopted by the director of the department of administration.

C. On or before September 1 of each year, a budget unit shall report to the governor's office of strategic planning and budgeting and the joint legislative budget committee regarding any monies spent for the prior fiscal year for the purposes prescribed in this section.

§ 35-196.02 Use of public funds or insurance for abortion prohibited; exception

A. Notwithstanding any provisions of law to the contrary, no public funds nor tax monies of this state or any political subdivision of this state nor any federal funds passing through the state treasury or the treasury of any political subdivision of this state may be expended for payment to any person or entity for the performance of any abortion unless an abortion is necessary to save the life of the woman having the abortion.

B. Notwithstanding any other law, public monies or tax monies of this state or any political subdivision of this state shall not be expended directly or indirectly to pay the costs, premiums or charges associated with a health insurance policy, contract or plan that provides coverage, benefits or services related to the performance of any abortion unless an abortion is necessary to either:

1. Save the life of the woman having the abortion.

2. Avert substantial and irreversible impairment of a major bodily function of the woman having the abortion.

C. Notwithstanding any other law, public monies or tax monies of this state or any political subdivision of this state or any federal funds passing through the state treasury or the treasury of any political subdivision of this state or monies paid by students as part of tuition or fees to a state university or a community college shall not be expended or allocated for training to perform abortions.

D. This section does not prohibit the state from complying with the requirements of federal law in title XIX and title XXI of the social security act.

§ 35-196.03 Refunds for invalid tax laws; appropriation required

Notwithstanding any provision of law to the contrary, no monies may be paid from the state treasury to refund monies collected under a law imposing a tax if the law is declared invalid by a final judgment of a court of competent jurisdiction until the legislature has made a specific appropriation for that purpose after the judgment has become final.

§ 35-196.04 Use of public monies prohibited; human cloning research involving fetal remains from abortion; other prohibited research; definition

A. Notwithstanding any other law, tax monies of this state or any political subdivision of this state, federal monies passing through the state treasury or the treasury of any political subdivision of this state or any other public monies shall not be used by any person or entity, including any state funded institution or facility, for human somatic cell nuclear transfer, commonly known as human cloning.

B. Notwithstanding any other law, public monies or tax monies of this state or any political subdivision of this state, any federal monies passing through the state treasury or the treasury of any political subdivision of this state or monies paid by students as part of tuition or fees to a state university or a community college shall not be expended or allocated for or granted to or on behalf of an existing or proposed research project that involves fetal remains from an abortion or human somatic cell nuclear transfer or any research that is prohibited by title 36, chapter 23.

C. This section does not restrict areas of scientific research that are not specifically prohibited by this section, including research in the use of nuclear transfer or other cloning techniques to produce molecules, deoxyribonucleic acid, cells other than human embryos, tissues, organs, plants or animals other than humans.

D. For the purposes of this section, "human somatic cell nuclear transfer" means human asexual reproduction that is accomplished by introducing the genetic material from one or more human somatic cells into a fertilized or unfertilized oocyte whose nuclear material has been removed or inactivated so as to produce an organism, at any stage of development, that is genetically virtually identical to an existing or previously existing human organism.

§ 35-196.05 Public funding; family planning services; contracting with certain facilities; prohibition; enforcement; definitions

A. Subject to any applicable requirements of federal law, regulations or guidelines, any appropriation, expenditure or grant of public monies for family planning services by this state or any political subdivision of this state shall be made in the following order of priority:

1. To health care facilities that are owned or operated by this state or any political subdivision of this state.

2. To hospitals and federally qualified health centers.

3. To rural health clinics.

4. To health care providers whose primary area of practice is the provision of primary health services as enumerated in 42 United States Code section 254b(b)(1).

B. This state or any political subdivision of this state may not enter into a contract with or make a grant to any person that performs nonfederally qualified abortions or maintains or operates a facility where nonfederally qualified abortions are performed for the provision of family planning services.

C. The attorney general or the county attorney may bring an action in law or equity to enforce this section, and relief shall be made available in appropriate circumstances, including recoupment and declaratory and injunctive relief.

D. Any entity that is eligible for the receipt of public monies has standing to bring any action that the attorney general or the county attorney may bring pursuant to subsection C of this section, if the expenditure or grant of public monies has resulted in the reduction of public monies available to that entity.

E. Any monies that are recouped under actions taken pursuant to subsection C or D of this section shall revert to the fund from which the monies were appropriated or granted. A prevailing plaintiff under subsection C or D of this section shall be awarded reasonable attorney fees and costs.

F. For the purposes of this section:

1. "Abortion" has the same meaning prescribed in section 36-2151.

2. "Federally qualified health center" means a health care provider that is eligible for federal funding under 42 United States Code section 1396d(1)(2)(B).

3. "Hospital" means a primary or tertiary care facility licensed pursuant to title 36, chapter 4, article 2.

4. "Nonfederally qualified abortion" means an abortion that does not meet the requirements for federal reimbursement under title XIX of the social security act.

5. "Public monies" means state monies from whatever source, monies of a political subdivision from whatever source and federal monies provided under title X of the public health service act (42 United States Code sections 300 through 300a-8) and titles V, XIX and XX of the social security act.

6. "Rural health clinic" means a health care provider that is eligible to receive federal funding under 42 United States Code section 1395x(aa)(2).

§ 35-197 Violations; classification

Any officer, agent or employee of the state who knowingly fails or refuses to comply with any of the provisions of this chapter is guilty of a class 1 misdemeanor.

Article 6 Recovery of State Monies Illegally Paid

§ 35-211 Approval, allowance or payment of unauthorized claim; liability of parties; penalty

When any person who is obligated to approve, audit, allow or pay claims or demands upon the state, approves, audits, allows or pays, or consents to, or connives at, approving, auditing, allowing or paying a claim or demand against the state not authorized by law, such person, and the person in whose favor the claim or demand was made, shall be liable for any funds procured in such manner, plus twenty per cent of such amount and legal interest upon the amount paid from date of payment.

§ 35-212 Injunctive and civil remedies; time limit; definition

(L21, Ch. 404, sec. 50)

A. The attorney general in the attorney general's discretion may bring an action in the name of this state to:

1. Enjoin the illegal payment of public monies, including violations of section 11-952 and title 41, chapter 23.

2. Recover illegally paid public monies plus twenty percent of that amount together with interest and costs, including reasonable attorney fees, to be paid to the state treasurer or other appropriate official or, in the case of public monies of a political subdivision that did not originate or were not received from this state, to the political subdivision, to the credit of the fund from which the payment was made.

B. The attorney general may bring an action to recover illegally paid public monies against:

1. Any person who received the illegal payment.

2. The public body or the public officer acting in the officer's official capacity who ordered or caused the illegal payment or has supervisory authority over the person that ordered or caused the illegal payment.

3. The public official, employee or agent who ordered or caused the illegal payment, including a payment ordered or caused to be made without authorization of law.

4. The public official, employee or agent of this state, a political subdivision of this state or a budget unit who knowingly uses public monies or other public resources, including email, equipment or compensated work time, to organize, plan or execute any activity that impedes or prevents a public school from operating for any period of time, unless the public official, employee or agent is acting in good faith and in furtherance of the official's, employee's or agent's official duties.

5. The teacher, administrator or other employee of a school district or charter school or the state employee whose violation of section 15-717.02 resulted in an illegal use of public monies.

C. A public official, employee or agent of this state, a political subdivision of this state or a budget unit who is charged with collecting, receiving, safekeeping, transferring or disbursing public monies may be held personally liable for an illegal payment of public monies, including payment made without authorization of law.

D. A public official, employee or agent of this state, a political subdivision of this state or a budget unit who is responsible for disbursing, collecting, receiving, safekeeping or transferring public monies pursuant to a warrant, check or substitute check, electronic funds transfer voucher or other form of claim that does not originate from the public official, employee or agent making the disbursal may not be held personally liable for illegal payments made pursuant to such warrants, checks or substitute checks, electronic funds transfer vouchers or other claims unless the public official, employee or agent knew or should have known that a warrant, check or substitute check, electronic funds transfer voucher or other claim would result in an illegal payment of public monies.

E. An action brought pursuant to this article is subject to title 12, chapter 7, article 2. If the action is brought by the attorney general, the action must be brought within five years after the date an illegal payment was ordered and section 12-821.01 does not apply to the action.

F. For the purposes of this section, "public monies" includes all monies coming into the lawful possession, custody or control of budget units, state agencies, boards, commissions or departments or a state officer, employee or agent in an official capacity, and all monies coming into the lawful possession, custody or control of a tax-supported political subdivision or an officer, employee or agent of a tax-supported political subdivision in an official capacity irrespective of the source from which, or the manner in which, the monies are received.

§ 35-213 Failure of attorney general to bring action; action by taxpayer; bond; amount of recovery and attorney fees

A. An action to recover illegally paid public monies pursuant to section 35-212, subsection B, paragraph 1 or 3 may be brought only by the attorney general.

B. A taxpayer of this state may request, in writing, the attorney general to institute an action pursuant to section 35-212. A request made regarding a political subdivision may be made only by a taxpayer of the political subdivision that is the subject of the request. A request made regarding a county may only be submitted twenty-one days after a request is made to the county attorney pursuant to section 11-642. If, for sixty days after the request made by the taxpayer in writing, the attorney general fails to institute an action as provided in section 35-212, the taxpayer who made the request may institute the action pursuant to section 35-212, subsection A or subsection B, paragraph 2 in the taxpayer's own name and at the taxpayer's own cost with the same effect as if brought by the attorney general.

C. The person instituting the action shall execute a bond payable to the defendant in the action, conditioned that the plaintiff will prosecute the action with diligence and finality and will pay all damages sustained by the defendant by reason of the action and all costs incurred in the action, including attorney fees awarded to the defendant.

D. The court may award the prevailing party costs and reasonable attorney fees, not to exceed forty percent of the amount sought to be recovered or saved to the state or political subdivision.

§ 35-214 Inspection and audit of contract provisions

A. Except as provided in subsection C, in all contracts and subcontracts for the furnishing of goods, equipment, labor, materials or services to the state, or any of its agencies, boards, commissions or departments, there shall be a provision that all books, accounts, reports, files and other records relating to the contract shall be subject at all reasonable times to inspection and audit by the state for five years after completion of the contract. The contract provision shall also require that such records be produced at such state offices as designated by the state in the contract.

B. Nothing in subsection A shall preclude a more stringent audit requirement agreed to by the parties in any state contract, and no rule of procedure shall limit the authority of the state to exercise its rights under this section.

C. This section does not apply to contracts or subcontracts for the furnishing of goods, equipment, materials or services to any agency, board, commission or department of this state by another agency, board, commission or department of this state or a political subdivision of this state.

§ 35-215 Influencing, obstructing or impairing audit; classification

A person who, with intent to defraud, or deceive, improperly influences, obstructs or impairs an audit being conducted or about to be conducted in relation to any contract or subcontract with the state is guilty of a class 5 felony.

Chapter 2 Handling of Public Funds

Article 1 Custodians of Public Money

§ 35-301 Duties and liabilities of custodian of public monies; violations; classification

A public officer or other person, including justices of the peace and constables, who is charged with receiving, safekeeping, transferring or disbursing public monies is guilty of a class 4 felony who:

1. Without authority of law, appropriates the monies or any portion thereof to the person's own use or to the use of another.

2. Knowingly loans the monies or any portion thereof.

3. Knowingly fails to keep the monies in the person's possession until disbursed or paid by authority of law.

4. Without authority of law knowingly deposits the monies or any portion thereof in a bank, or with a banker or other person, except on special deposit for safekeeping.

5. Knowingly keeps a false account or makes a false entry or erasure in an account of or relating to the monies.

6. Alters, falsifies, conceals, destroys or obliterates such an account with an intent to defraud or deceive.

7. Knowingly refuses or omits to pay on demand public monies in the person's custody on presentation of a draft, order or warrant, check or substitute check, or electronic funds transfer voucher drawn on such monies by competent authority.

8. Knowingly omits or refuses to transfer the monies when a transfer is required by law.

9. Knowingly transfers the monies when not authorized or directed by law.

10. Knowingly omits or refuses to pay to an officer or person authorized by law to receive the monies any monies received by the person if a duty is imposed by law to pay the monies.

§ 35-302 Public money defined

The phrase "public money" as used in this article includes bonds and evidence of indebtedness, and money belonging to, received or held by, state, county, district, city or town officers in their official capacity.

Article 2 State Management of Public Monies

§ 35-310 Definitions

In this article, unless the context otherwise requires:

1. "Eligible depository" means any commercial or savings bank or savings and loan association with its principal place of business in the United States which is insured by the federal deposit insurance corporation or any successor, or any other insuring instrumentality of the United States, in accordance with the applicable law of the United States or credit union which is insured by the national credit union administration.

2. "Operating monies" means those treasury monies the interest from which is paid to the state general fund.

3. "Permanent endowment funds" means those funds or any part of a fund, established by law, to retain trust monies, not wholly expendable by the beneficiary on a current basis.

4. "Treasury monies" means all monies in the treasury of this state or coming lawfully into the possession or custody of the state treasurer.

5. "Trust monies" means treasury monies, other than operating monies, that are entrusted to the state treasurer for preservation and investment.

§ 35-311 State board of investment; membership; powers and duties

A. The state board of investment is established consisting of the state treasurer, the director of the department of administration or the director of the department of administration's designee, the director of the department of insurance and financial institutions or the director of the department of insurance and financial institutions' designee and two individuals appointed by the state treasurer, one of whom has verifiable expertise in investment management and one of whom represents a public entity with current deposits in a local government investment pool. The state treasurer is chairperson of the board. The board shall keep an accurate record of its proceedings. A certified copy of the record is prima facie evidence of the matters appearing in the record in any court. A meeting of the board may be called at any time by the chairperson or a majority of the board members.

B. The state board of investment shall:

1. Hold regular monthly meetings.

2. Review investments of treasury monies.

3. Serve as trustee of the permanent state land funds and manage the assets of the funds consistent with the requirements of article X, section 7, Constitution of Arizona.

4. Serve as trustee of any endowments established pursuant to section 35-314.03.

5. Serve as trustee of AZ529, Arizona's education savings plan established by title 15, chapter 14, article 7.

6. Serve as trustee of any pension prefunding plan investment accounts established pursuant to section 35-314.04.

C. The state treasurer shall furnish to the board of investment at its regular monthly meeting a report of the performance of current investments and a report of the current investments as of the close of business of the preceding month. The state treasurer shall make these reports available for inspection by the public during normal working hours at the office of the state treasurer for a period of time of not less than two years after the date of the report.

D. The board of investment may order the state treasurer to sell any of the securities, and any order shall specifically describe the securities and fix the time period during which they are to be sold. Securities so ordered to be sold shall be sold for cash by the state treasurer at the current market price. The state treasurer and the members of the board are not accountable for any loss occasioned by sales of securities at prices lower than their book value. Any loss shall be charged against earnings received from interest or capital gains on the applicable treasury monies.

E. The board may establish standards in addition to those established by section 35-317, subsection A for the qualification of agents acting pursuant to section 35-317, subsection B.

§ 35-312 Eligible depositories; collateral

A. Any eligible depository that receives an investment or any deposit of treasury monies of more than the amount insured by an instrumentality of the United States shall collateralize those deposits with any of the following:

1. Securities listed in section 35-313, subsection A, paragraphs 1 and 3.

2. State treasurer's warrant notes.

3. The safekeeping receipt of a federal reserve bank or any bank located in a reserve city, or any bank authorized to do business in this state, whose combined capital, surplus and outstanding capital notes and debentures on the date of the safekeeping receipt are $100,000,000 or more, evidencing the deposit therein of any securities or instruments described in this section. A safekeeping receipt does not qualify as security if issued by a bank to secure its own public deposits unless issued directly through its trust department. The safekeeping receipt shall show on its face that it is issued for the account of the state treasurer and shall be delivered to the state treasurer.

4. Letters of credit issued by a federal home loan bank if:

(a) The letter of credit has been delivered pursuant to this section or chapter 10, article 1 of this title to the statewide collateral pool administrator.

(b) The letter of credit meets the required conditions of:

(i) Being irrevocable.

(ii) Being issued, presentable and payable at a federal home loan bank in United States dollars. Presentation may be made by the beneficiary submitting the original letter of credit, including any amendments, and the demand in writing, by overnight delivery.

(iii) If the letter of credit is for purposes of chapter 10, article 1 of this title, containing a statement that identifies the statewide collateral pool administrator as the beneficiary.

(iv) Containing an issue date and a date of expiration.

(c) For the purposes of chapter 10, article 1 of this title, the eligible depository, if notified by the statewide collateral pool administrator, may not use new letters of credit issued by a federal home loan bank if that federal home loan bank fails to pay a draw request as provided for in the letters of credit or fails to properly complete a confirmation of the letters of credit.

B. The securities, warrants or safekeeping receipt for those items shall be accepted at market value equal to one hundred two percent of the deposit liability to the state treasurer, and, if at any time their market value becomes less than one hundred two percent of the deposit liability to the state treasurer, additional items required to guarantee deposits shall be deposited immediately with the state treasurer by the eligible depository. When items pledged as collateral mature or are called for redemption, the cash received for the item shall be held in place of the items until the eligible depository has obtained a written release or provided substitute securities, instruments or warrants.

C. The deposit of securities, warrants or a safekeeping receipt must be such that the eligible depository will promptly pay to the state treasurer monies in its custody on lawful demand and will, when required by law, pay the monies to the state treasurer.

D. The securities, warrants or safekeeping receipt of an eligible depository shall be deposited with the state treasurer, and the state treasurer is the custodian of those items. The state treasurer may then deposit with the eligible depository monies then in the state treasurer's possession in accordance with this article.

E. Eligible depositories shall report to the state treasurer monthly and on demand the par and market value of any pledged collateral and the total deposits of the state treasurer.

§ 35-313 Investment of trust and treasury monies; loan of securities

A. The state treasurer shall invest and reinvest trust and treasury monies in any of the following items:

1. Obligations issued or guaranteed by the United States or any of its agencies, sponsored agencies, corporations, sponsored corporations or instrumentalities.

2. Repurchase agreements collateralized with securities that are authorized for investment pursuant to state law and that are purchased from authorized counterparties that have adequate capital and liquidity as determined by the state treasurer.

3. Bonds or other evidences of indebtedness of this state or any of the counties or incorporated cities, towns or duly organized school districts.

4. Commercial paper whose issuer is investment grade for short-term obligations by any two nationally recognized statistical rating organizations.

5. Bills of exchange or time drafts known as banker's acceptances that are drawn on and accepted by a commercial bank.

6. Negotiable certificates of deposit issued by a nationally or state-chartered bank or savings and loan association.

7. Bonds, debentures, notes or other evidences of indebtedness that are denominated in United States dollars and that carry an investment grade rating by a nationally recognized bond rating agency.

8. Securities of or any other interests in any open-end or closed-end management type investment company or investment trust, including exchange traded products whose underlying investments are invested in securities allowed by state law, registered under the investment company act of 1940 (54 Stat. 789; 15 United States Code sections 80a-1 through 80a-64), as amended. For any treasurer investment pool that seeks to maintain a constant share price, both of the following apply:

(a) The investment company or investment trust takes delivery of the collateral for any repurchase agreement either directly or through an authorized custodian.

(b) The investment policy of the investment company or investment trust includes seeking to maintain a constant share price.

9. Certificates of deferred property taxes as provided by section 42-17309.

10. Treasurer's warrant notes issued pursuant to section 35-185.01 or registered warrants of a county issued pursuant to section 11-605, if the yield is equal to or greater than yields on eligible investment instruments of comparable maturities.

11. Shares in the treasurer's local government investment pools pursuant to section 35-326 if investment policies of the pool seek to maintain a constant share price.

12. Shares in the treasurer's long-term local government investment pools, the terms of which are determined by the state board of investment, pursuant to section 35-326.01.

13. Subject to subsection D of this section, state transportation board funding obligations delivered pursuant to section 28-7678.

14. Deposits placed in accordance with the procedures prescribed in section 35-323.01.

15. Institutional common trust funds whose underlying investments are invested in securities allowed by state law.

16. Program funding obligations delivered by the credit enhancement eligibility board pursuant to section 41-5857.

B. In case of default or failure to honor a county treasurer's warrant, the state treasurer may withhold the first state shared revenues that would otherwise be distributed to the defaulting county in the amount necessary to honor the note, including accrued interest to and beyond the date of default.

C. The state treasurer may contract to loan securities owned by the trust funds and operating monies deposited in the investment pools pursuant to section 35-316, subsection B to the financial or dealer community through one or more of the entities listed in section 35-317, subsection A, or authorized by the board of investment pursuant to section 35-311, subsection E, if the borrower transfers collateral to the state treasurer or acting agent of the state in the form of cash or securities authorized for investment pursuant to state law. Collateral posted in the form of cash shall be in an amount equal to at least one hundred percent of the market value of the loaned securities as agreed. Collateral posted in the form of securities shall be in an amount of at least one hundred two percent of the market value of the loaned securities as established from time to time by the board of investment. The loaned securities shall be valued as to market value daily, and, if necessary, the borrower shall post additional collateral, as agreed, to ensure that the required margin is maintained. The state treasurer may collect from the borrower all dividends, interest, premiums, rights and other distributions to which the lender of securities would otherwise be entitled. The state treasurer may terminate the contract on at least five business days' notice, as agreed, and the borrower may terminate the contract on at least two business days' notice, as agreed.

D. The state treasurer shall invest operating monies in state transportation board funding obligations delivered pursuant to section 28-7678 pursuant to the following:

1. The state treasurer shall liquidate investments of operating monies if necessary to invest in state transportation board funding obligations, except that if operating monies in the state general fund fall below an $800,000,000 average over the previous twelve consecutive months, the state treasurer is not required to purchase state transportation board funding obligations pursuant to this subsection.

2. Each series of state transportation board funding obligations shall bear interest at a fixed interest rate equal to the mean bid-ask price of the United States treasury obligation with a maturity date closest to the maturity date of the state transportation board funding obligation as determined by the pricing system used by the state treasurer before the date the state treasurer receives a certificate from the state transportation board that states the board's determination to deliver an obligation to the state treasurer and the anticipated delivery date of the obligation. The delivery date shall be between fifteen and sixty days after the day the state treasurer receives the certificate.

3. The state treasurer shall notify the state transportation board and the director of the department of transportation in writing when the operating monies fall below $400,000,000. If operating monies fall below $200,000,000, the state treasurer may call the investment in the state transportation board funding obligations in $25,000,000 increments up to the amount that the operating monies are below $200,000,000. The state treasurer shall give the state transportation board and the director of the department of transportation at least fifteen days' notice of the call.

§ 35-314 Equity investment of trust and treasury monies; definition

A. The state treasurer may invest and reinvest monies in equity securities for any fund for which equity investment is authorized.

B. The state treasurer shall exercise prudence, judgment and care under the prevailing circumstances when investing in equity securities and may reduce the portion of equity securities held by any fund in order to avoid a reduction in current return on investments.

C. Equity securities that are eligible for purchase are restricted to stocks listed on any national stock exchange or eligible for trading through the United States national association of securities dealers automated quotation system, or successor institutions, except as may be prohibited by general criteria or by a restriction on investment in a specific security adopted pursuant to this section.

D. Not more than five per cent of a fund at cost may be invested in equity securities issued by the same institution, agency or corporation, other than securities issued as direct obligations of and fully guaranteed by the United States government or any of its agencies, sponsored agencies, corporations, sponsored corporations or instrumentalities.

E. For the purposes of this section, "equity securities" means shares of stock, certificates of stock or any other evidence of equity interest in a corporation. Equity securities do not include exchange traded products whose underlying investments are fixed income securities that are allowed by state law.

§ 35-314.01 Permanent state land fund monies; investment

In addition to the investment authority in section 35-313, the state treasurer may invest and reinvest monies of the state land funds established in sections 37-521 through 37-525 in equity securities pursuant to section 35-314, except that not more than sixty per cent of the monies in each of the funds may be invested in equity securities at any time. The percentage of investment shall be calculated at cost.

§ 35-314.02 Budget stabilization fund monies; investment

In addition to the investment authority in section 35-313, the state treasurer may invest and reinvest monies of the budget stabilization fund established in section 35-144 in equity securities pursuant to section 35-314, except that not more than twenty-five per cent of the monies may be invested in equity securities at any time. The percentage of investment shall be calculated at cost.

§ 35-314.03 State, tribal and political subdivision endowment funds; state investment authority

A. In addition to the investment authority in section 35-313, the state treasurer may invest and reinvest trust monies of this state, state agencies, political subdivisions and tribal nations in equity securities pursuant to section 35-314 for long-term endowment funds.

B. Monies shall not be taken from one endowment fund for deposit in any other endowment fund.

C. All monies in these endowment funds shall be invested in safe interest-bearing securities and prudent equity securities consistent with the requirements of section 35-314.

D. The earnings, interest, dividends and realized capital gains and losses from investment of each endowment fund shall be credited to that fund.

E. The governing body of any political subdivision, public trust or public entity, including tribal nations, by the adoption of a resolution of continuing effect, may authorize and request the state treasurer to invest trust monies into a long-term endowment and set forth the terms of the distributions from such endowment for the governing body pursuant to this section.

§ 35-314.04 Pension prefunding plan investment accounts; state treasurer; investment authority; definitions

A. In addition to the investment authority pursuant to section 35-313, the state treasurer may invest and reinvest pension prefunding plan monies in equity securities pursuant to section 35-314 for pension prefunding plan investment accounts.

B. All pension prefunding plan monies shall be accounted for separately from all other funds. Monies may not be taken from one investment account for deposit in any other investment account.

C. All monies in pension prefunding plan investment accounts shall be invested in safe interest-bearing securities and prudent equity securities consistent with the requirements of section 35-314.

D. The earnings, interest, dividends and realized capital gains and losses from the investment of each investment account shall be credited to that investment account.

E. Pension prefunding plan monies are for the purpose of allowing employers that provide a defined benefit pension plan to their employees to prefund the employer's required defined benefit pension payments.

F. Pension prefunding plan monies are an integral part of this state and of the political subdivisions of this state and perform an essential governmental function. Investments of pension prefunding plan monies are intended to be structured and administered in a manner that results in the tax-exempt status of the pension prefunding plan's income. The state board of investment may adopt rules, policies and procedures as the board deems necessary to ensure that the prefunding plan's income is not subject to federal income tax.

G. The governing body of an employer may authorize and request the state treasurer to invest pension prefunding plan monies in a pension prefunding plan investment account and set forth the terms of the distributions from such investment account for the employer pursuant to this section.

H. Pension prefunding plan investment accounts established pursuant to this section or any other section in this title and the pension prefunding plan monies in such accounts are separate and apart from the Arizona employers' pension prefunding plan established by title 38, chapter 5, article 7.1 and the assets, receipts, earnings and income of that plan.

I. For the purposes of this section:

1. "Defined benefit pension" means:

(a) The Arizona state retirement system established by title 38, chapter 5, articles 2 and 2.1.

(b) The elected officials' retirement plan established by title 38, chapter 5, article 3.

(c) The public safety personnel retirement system established by title 38, chapter 5, article 4.

(d) The corrections officer retirement plan established by title 38, chapter 5, article 6.

(e) Any defined benefit pension plan established by the governing body of any political subdivision of this state for its employees.

2. "Employer" means an employer as defined in section 38-711, 38-801, 38-842 or 38-881 or any governing body of a political subdivision of this state that has established a defined benefit pension plan for its employees.

3. "Tax-exempt status of pension prefunding plan's income" means that the prefunding plan's income is excluded from gross income for the purposes of the assessment of federal income tax under section 115 of the internal revenue code, intergovernmental immunity or similar grounds.

§ 35-315 Servicing banks; qualifications; proposals; definitions

A. Any bank that is eligible to become an eligible depository having a total capital structure of $10,000,000 or more and assets of $100,000,000 or more and that is otherwise in a sound condition is eligible to be the servicing bank for the state.

B. The state board of investment shall provide for public notice to the banks qualified to be a servicing bank of the time and place at which servicing proposals will be received. Requests for proposals shall clearly specify all services required to be performed by the servicing bank. The servicing proposal submitted shall be the compensation for which the qualified bank will agree to perform the required services as a servicing bank for the ensuing period of designation as established by the board of investment. The award shall be made for a period of not more than five years and may be paid from state general fund interest earnings according to rules adopted by the board of investment.

C. The state treasurer shall receive the servicing proposals in writing. Only those proposals that conform to the specifications set forth in the request for proposals shall be considered. The qualified bank submitting the proposal with the highest value to this state, as determined by the state treasurer and the board of investment, shall be designated as the servicing bank. Designations shall be evidenced by the signing of the final proposal by the state treasurer, the board of investment and the designee bank. The state treasurer may maintain a bank account in conjunction with the servicing bank account, which must always have on deposit a sum of money approximating the average dollar value of daily warrants paid by the bank the previous month.

D. The state treasurer may request and qualified banks may submit proposals for any or all of the services required. The state treasurer may specify differing contract periods for any of the services required.

E. The state treasurer or servicing bank may terminate a servicing bank contract at any time after sixty days' prior written notice is given.

F. In addition to the services required of the servicing bank, the state treasurer shall contract for all other financial services required by any state agency. A state agency shall not contract for financial services except with the written permission of the state treasurer.

G. This section does not require the state treasurer to use a servicing bank.

H. This section or the specifications set forth in the request for proposals do not require the servicing bank to purchase warrants.

I. Deposits and withdrawals of monies shall be made by the state treasurer on the servicing bank.

J. A merchant servicer or payment service provider may provide payment processing and gateway services.

K. For the purposes of this section:

1. "Financial services" means banking and merchant services provided by a bank, credit union, financial institution, financial services company or financial technology company and includes:

(a) Establishing bank accounts.

(b) Depository services.

(c) Electronic payment services.

(d) Providing merchant card equipment.

(e) Payment processing and gateway services.

2. "Payment processing and gateway services" means a payment gateway that facilitates a payment transaction by transferring information between a payment portal, including a website, mobile phone or interactive voice response service, and the front-end processor or acquiring bank.

§ 35-316 Investment pools; deduction; state treasurer's operating fund

A. The state treasurer may establish and maintain investment pools for the collective investment of trust monies in this state.

B. The state treasurer may deposit operating monies in the investment pools and receive into such pools any monies a state agency, county, city or town or any other political subdivision or public entity in this state may supply. When a depositor provides monies, the state treasurer may ask the depositor to specify the date or dates on which the monies will be withdrawn. All investment pools shall be invested by the state treasurer for such periods as will facilitate the highest return on the monies deposited and provide the required liquidity to the depositors.

C. The state treasurer shall compute on a monthly basis the rate of earnings on the investment pools for that month, and, except as provided in subsection D of this section, each depositor shall be credited with an amount determined by applying the calculated monthly rate to the principal amount of its deposit balance for the period of the deposit. Interest shall be credited monthly promptly after calculation.

D. The state treasurer may deduct monthly a management fee not to exceed six-hundredths of one percent from the rate of earnings calculated pursuant to subsection C of this section on investment pools other than permanent endowment funds for the operating budget appropriated to the state treasurer's office each fiscal year.

E. The state treasurer's operating fund is established consisting of monies collected pursuant to subsection D of this section and section 35-326.01. The state treasurer's office shall administer the state treasurer's operating fund. Monies in the fund are subject to legislative appropriation. Any management fees collected in excess of the amount appropriated to the state treasurer's office from the state treasurer's operating fund shall be deposited in the state general fund.

§ 35-317 State treasurer; duties; safekeeping of securities; interest; exemptions; responsibilities

A. The state treasurer is responsible for the safekeeping of all securities acquired by him under this article and those for which he is the lawful custodian. Securities may be deposited for safekeeping with any bank eligible to be the state servicing bank pursuant to section 35-315 or any trust company or trust department of any bank qualified to do business in this state.

B. The state treasurer may at the expense of the state enter into an agreement with any of those entities listed in subsection A of this section or authorized by section 35-311, subsection E for the safekeeping and handling of securities. The agreement shall be entered into under terms and conditions which secure the proper safeguarding, inventory, withdrawal and handling of the securities and lending of securities to the financial or dealer community pursuant to section 35-313, subsection C. Access to deposits or withdrawals of the securities from any place of deposit selected by the officers shall not be permitted or made except as the terms of the agreement provide. The agreement need not require that securities be physically located in this state, if the securities are represented by safekeeping receipts issued for the account of the state treasurer by a federal reserve bank or any bank located in a reserve city whose combined capital and surplus on the date of the safekeeping receipt are ten million dollars or more.

C. The state treasurer shall regularly account for, itemize and inventory according to general public fund accounting practices all securities coming lawfully into his possession. Such practice shall be audited by the auditor general at the time of the regular audit as prescribed by law.

D. When securities acquired under this article mature and become due and payable, the state treasurer shall present them for payment according to their terms and collect the monies payable on them. The monies collected shall be treated as treasury monies subject to reinvestment under the appropriate section of this article.

E. Interest and appreciation realized on any investment authorized by this article shall be collected by the state treasurer and credited by him in accordance with general public fund accounting practices.

F. All interest realized on any investment of treasury monies not otherwise apportioned by law shall be credited to the general fund of this state.

G. The investment of treasury monies as provided in this article is exempt from the provisions of section 35-142, subsection B and sections 35-154, 35-181.01, 35-181.02, 35-182 through 35-185, 35-185.01, 35-185.02, 35-186 through 35-192, 35-192.01, 35-192.02, 35-193, 35-193.02 and 41-732.

H. The state treasurer is responsible for the safekeeping, management and disbursement of any investment made and any interest received in compliance with this article.

§ 35-318 Investment managers and advisors; treasury monies; investment services account

A. The state treasurer may enter into an agreement with investment managers to invest treasury monies or with advisors to recommend investment strategies or tactics for the investment of treasury monies, including legal advisors and software to assist with the analysis, tracking and trading of securities. Qualification and selection of investment managers or advisors pursuant to this section are exempt from title 41, chapter 23 but must be conducted by a process that is substantially equivalent to procedures prescribed by title 41, chapter 23. Managers or advisors who enter into a contract pursuant to this section shall be paid from earnings on investments. A contract established pursuant to this section may be annually renewable but shall be limited to a period of not more than three years. A contract may be cancelled by the treasurer with forty-five days' written notice.

B. An agreement established pursuant to subsection A of this section shall require the investment manager to regularly account for, itemize and inventory all securities under management consistent with the requirements of section 35-317, subsections C, D and E and report the findings to the state treasurer at least monthly or on demand.

C. The state treasurer shall maintain an investment services account consisting of all monies for payment of contractual financial services authorized by this section. The account shall consist of monies apportioned from the investment earnings of assets under management that are necessary for the payment of current contractual obligations.

D. Expenditures for investment management and advisory fees required by contract pursuant to subsection A of this section shall be paid on approval of the state treasurer from the investment services account established by subsection C of this section.

Article 2.1 Money Management

§ 35-321 Definitions

In this article, unless the context otherwise requires:

1. "Agency pool participant" means a subdivision or an entity of a subdivision that has monies maintained by the treasurer and that has the authority to draw negotiable instruments on the treasurer or make other disbursements from monies that the treasurer holds for the subdivision or entity.

2. "Board of deposit" means, in the case of a county, the board of supervisors, and in the case of a city or town, the common council.

3. "Capital structure" means the amount of the capital of the eligible depository shown by the latest call statement of condition as defined by rule of the department of insurance and financial institutions for the purpose of administration of this article.

4. "Collecting entity" means the entity from which the treasurer receives general funding including the county for collections performed by a county treasurer, the city for collections performed by a city treasurer or the district for collections performed by a district treasurer.

5. "Eligible depository" means any:

(a) Commercial or savings bank or savings and loan association that has either a branch in this state or its principal place of business in this state and that is insured by the federal deposit insurance corporation or its successor or any other insuring instrumentality of the United States according to the applicable federal law.

(b) Credit union that is insured by the national credit union administration or its successor.

6. "Involuntary pool participant" means a subdivision that only receives the principal ratio of the monies collected, for which the principal monies are mandated to be distributed on a specific date and for which the interest earned on the monies between the time of collection and other statutory requirements reverts to the general fund of the collecting entity.

7. "Permissible rate of interest" means a rate of interest that an eligible financial institution is permitted to pay by state or federal law or valid state rules or federal regulations.

8. "Public deposit" means public monies deposited in an eligible depository pursuant to this article.

9. "Public monies" includes subdivision monies.

10. "State monies" means all monies in the treasury of this state or coming lawfully into the possession or custody of the state treasurer.

11. "Subdivision" means any county, noncharter city or town. Cities governed by charter have the option of operating under this article.

12. "Subdivision monies" means all monies in the treasury of a subdivision or coming lawfully into the possession or custody of the treasurer.

13. "Treasurer" includes the treasurer or officer exercising the functions of treasurer of any subdivision but excludes the state treasurer.

14. "Trust funds" means those monies entrusted to a public body or official for preservation and investment, as prescribed by the instrument establishing such funds.

§ 35-323 Investment of public monies; bidding; security and other requirements

A. The treasurer shall invest and reinvest public monies in securities and deposits with a maximum maturity of five years. All public monies shall be invested in eligible investments. Eligible investments are:

1. Certificates of deposit in eligible depositories.

2. Deposits in one or more federally insured banks or savings and loan associations placed in accordance with the procedures prescribed in section 35-323.01.

3. Interest bearing savings accounts in banks and savings and loan institutions doing business in this state whose accounts are insured by federal deposit insurance for their industry, but only if deposits of more than the insured amount are secured by the eligible depository to the same extent and in the same manner as required under this article.

4. Repurchase agreements with a maximum maturity of one hundred eighty days.

5. The pooled investment funds established by the state treasurer pursuant to section 35-326.

6. Obligations issued or guaranteed by the United States or any of the senior debt of its agencies, sponsored agencies, corporations, sponsored corporations or instrumentalities.

7. Bonds, notes or other evidences of indebtedness of this state or any of its counties, incorporated cities or towns, school districts or special taxing districts, including registered warrants, substitute checks, and electronic funds transfer vouchers that bear interest pursuant to section 11-635.

8. Bonds, notes or evidences of indebtedness of any county, municipal district, municipal utility or special taxing district of any state that are payable from revenues, earnings or a special tax specifically pledged for the payment of the principal of and interest on the obligations, and for the payment of which a lawful sinking fund or reserve fund has been established and is being maintained, but only if a default in payment on principal or interest on the obligations to be purchased has not occurred within five years after the date of investment, or, if such obligations were issued less than five years before the date of investment, a default in payment of principal or interest has not occurred on the obligations to be purchased or any other obligations of the issuer within five years after the investment.

9. Bonds, notes or evidences of indebtedness issued by any county improvement district or municipal improvement district of any state to finance local improvements authorized by law, if the principal and interest of the obligations are payable from assessments on real property within the improvement district. An investment shall not be made if:

(a) The face value of all such obligations, and similar obligations outstanding, exceeds fifty percent of the market value of the real property, and if improvements on which the bonds or the assessments for the payment of principal and interest on the bonds are liens inferior only to the liens for general ad valorem taxes.

(b) A default in payment of principal or interest on the obligations to be purchased has occurred within five years after the date of investment, or, if the obligations were issued less than five years before the date of investment, a default in the payment of principal or interest has occurred on the obligations to be purchased or on any other obligation of the issuer within five years after the investment.

10. Commercial paper of prime quality that is rated within the top two ratings by a nationally recognized rating agency. All commercial paper must be issued by corporations organized and doing business in the United States.

11. Bonds, debentures, notes or other evidences of indebtedness that are denominated in United States dollars and that carry at a minimum an "A" or better rating, at the time of purchase, from at least two nationally recognized rating agencies.

12. Negotiable or brokered certificates of deposit issued by a nationally or state-chartered bank or savings and loan association.

13. Securities of or any other interests in any open-end or closed-end management type investment company or investment trust, including exchange traded funds whose underlying investments are invested in securities allowed by state law, registered under the investment company act of 1940 (54 Stat. 789; 15 United States Code sections 80a-1 through 80a-64), as amended.

B. Certificates of deposit shall be purchased from the eligible depository bidding the highest permissible rate of interest. Monies over $100,000 may not be awarded at any interest rate less than one hundred three percent of the equivalent bond yield of the offer side of United States treasury bills having a similar term. If the eligible depository offering to pay the highest rate of interest has bid only for a portion of the monies to be awarded, the remainder of the monies shall be awarded to eligible depositories bidding the next highest rates of interest.

C. An eligible depository is not eligible to receive total aggregate deposits from this state and all its subdivisions in an amount exceeding twice its capital structure as outlined in the last call of condition of the deputy director of the financial institutions division of the department of insurance and financial institutions.

D. If two or more eligible depositories submit bids of an identical rate of interest for all or any portion of the monies to be deposited, the award of the deposit of the monies shall be made to the eligible depository among those submitting identical bids having, at the time of the bid opening, the lowest ratio of total public deposits in relation to its capital structure.

E. Each bid that is submitted and not withdrawn before the time specified constitutes an irrevocable offer to pay interest as specified in the bid on the deposit, or portion bid for, and the award of a deposit in accordance with this section obligates the depository to accept the deposit and pay interest as specified in the bid pursuant to which the deposit is awarded.

F. The treasurer shall maintain a record of all bids received and shall make available to the board of deposit at its next regularly scheduled meeting a correct list showing the bidders, the bids received and the amount awarded. These records shall be available to the public and shall be kept in the possession of the treasurer for at least two years after the date of the report.

G. Any eligible depository, before receiving a deposit of more than the insured amount under this article, shall deliver collateral for the purposes of this subsection equal to at least one hundred two percent of the deposit. The collateral shall be any of the following:

1. A bond executed by a surety company that is approved by the treasury department of the United States and authorized to do business in this state. The bond shall be approved as to form by the legal advisor of the treasurer.

2. Securities or instruments of the following character:

(a) United States government or agency obligations.

(b) State, county, school district and other district municipal bonds.

3. The safekeeping receipt of a federal reserve bank or any bank located in a reserve city, or any bank authorized to do business in this state, whose combined capital, surplus and outstanding capital notes and debentures on the date of the safekeeping receipt are $10,000,000 or more, evidencing the deposit therein of any securities or instruments described in this section. A safekeeping receipt shall not qualify as security, if issued by a bank to secure its own public deposits, unless issued directly through its trust department. The safekeeping receipt shall show on its face that it is issued for the account of the treasurer and shall be delivered to the treasurer. The safekeeping receipt may provide for the substitution of securities or instruments that qualify under this section with the affirmative act of the treasurer.

4. Letters of credit issued by a federal home loan bank if:

(a) The letter of credit has been delivered pursuant to this section or chapter 10, article 1 of this title to the statewide collateral pool administrator.

(b) The letter of credit meets the required conditions of:

(i) Being irrevocable.

(ii) Being issued, presentable and payable at a federal home loan bank in United States dollars. Presentation may be made by the beneficiary submitting the original letter of credit, including any amendments, and the demand in writing, by overnight delivery.

(iii) If the letter of credit is for purposes of chapter 10, article 1 of this title, containing a statement that identifies the statewide collateral pool administrator as the beneficiary.

(iv) Containing an issue date and a date of expiration.

(c) For the purposes of chapter 10, article 1 of this title, the eligible depository, if notified by the statewide collateral pool administrator, is not allowed to use new letters of credit issued by a federal home loan bank if that federal home loan bank fails to pay a draw request as provided for in the letters of credit or fails to properly complete a confirmation of such letters of credit.

H. The securities, instruments or safekeeping receipt for the securities and instruments shall be accepted at market value if not above par, and, if at any time their market value becomes less than the deposit liability to that treasurer, additional securities or instruments required to guarantee deposits shall be deposited immediately with the treasurer who made the deposit and deposited by the eligible depository in which the deposit was made.

I. The condition of the surety bond, or the deposit of securities, instruments or a safekeeping receipt, must be such that the eligible depository will promptly pay to the parties entitled public monies in its custody, on lawful demand, and will, when required by law, pay the monies to the treasurer making the deposit.

J. Notwithstanding the requirements of this section, any institution qualifying as an eligible depository may accept deposits of public monies to the total then authorized insurance of accounts, insured by federal deposit insurance, without depositing a surety bond or securities in lieu of the surety bond.

K. An eligible depository shall report monthly to the treasurer the total deposits of that treasurer and the par value and the market value of any pledged collateral securing those deposits.

L. When a security or instrument pledged as collateral matures or is called for redemption, the cash received for the security or instrument shall be held in place of the security until the depository has obtained a written release or provided substitute securities or instruments.

M. The surety bond, securities, instruments or safekeeping receipt of an eligible depository shall be deposited with the treasurer making the deposit, and the treasurer is the custodian of the bond, securities, instruments or safekeeping receipt. The treasurer may then deposit with the depository public monies then in the treasurer's possession in accordance with this article, but not in an amount of more than the surety bond, securities, instruments or safekeeping receipt deposited, except for federal deposit insurance.

N. The following restrictions on investments apply:

1. Public operating fund monies shall not be invested for a maturity of longer than five years.

2. The board of deposit may order the treasurer to sell any of the securities, and any order shall specifically describe the securities and fix the date on which they are to be sold. Securities so ordered to be sold shall be sold for cash by the treasurer on the date fixed in the order, at the then-current market price. The treasurer and the members of the board are not accountable for any loss occasioned by sales of securities at prices lower than their cost. Any loss or expense shall be charged against earnings received from investment of public monies.

3. Investments shall not be made in companies identified pursuant to section 35-392, subsection A, paragraph 1.

O. If the total amount of subdivision monies available for deposit at any time is less than the maximum coverage amount of the federal deposit insurance corporation, the subdivision board of deposit shall award the deposit of the monies to an eligible depository in accordance with an ordinance or resolution of the governing body of the subdivision. Deposits of less than the maximum coverage amount of the federal deposit insurance corporation are not subject to the requirements of this chapter.

§ 35-323.01 Investment of government monies in deposits; conditions; definition

A. If an investing entity invests in deposits pursuant to this section, the investing entity shall invest those monies in accordance with all of the following conditions:

1. The monies are initially invested through an eligible depository in this state selected by the investing entity.

2. The selected eligible depository arranges for the deposit of the monies in one or more federally insured banks or savings and loan associations wherever located, for the account of the investing entity.

3. The full amount of principal and any accrued interest of each such deposit is insured by the federal deposit insurance corporation.

4. The selected eligible depository acts as custodian for the investing entity with respect to such deposits.

5. On the same date that the investing entity's monies are deposited pursuant to paragraph 2 of this subsection, the selected eligible depository receives an amount of federally insured deposits from customers of other financial institutions equal to or greater than the amount of the monies initially invested by the investing entity through the selected eligible depository.

B. Monies invested in accordance with all of the conditions prescribed in this section are not subject to any security or collateral requirements.

C. For the purposes of this section, "investing entity" means this state, a political subdivision, the governing body of a municipality or the governing body of a school district.

§ 35-324 Investment of trust funds

The treasurer shall invest and reinvest monies of trust funds in:

1. Any securities allowed for the investment of public monies.

2. Fixed income securities of corporations organized and doing business in any state of the United States or the District of Columbia that carry one of the two highest ratings of Moody's investors service and Standard and Poor's rating service or their successors. If only one of these services rates the security, it must carry the highest rating of that service. If a rating change occurs after purchase, it is not mandatory to sell the security.

§ 35-325 Servicing bank of public monies

A. Any bank that qualifies to become an eligible depository of the deposits of public monies, that has a total capital structure of ten million dollars or more, resources of one hundred million dollars or more and that is otherwise in a sound condition is eligible to be the servicing bank for the deposits of state and county monies.

B. No later than the first Monday in March of each year of award, the county boards of deposit shall in writing notify each of the banks qualified to be a servicing bank of the time and place at which servicing bids will be received. Notification of bids shall clearly specify all services required to be performed by the servicing bank. The servicing bid solicited shall be the sum of dollars for which the qualified bank will agree to perform the required services as a servicing bank for the ensuing period of designation as established by the board of deposit. The award shall be made for an initial period of not more than three years with the option to renew for two years on the mutual consent of the parties and may be paid from general fund interest earnings according to rules adopted by the board of deposit.

C. No later than the fourth Monday in April of the year of the award, county boards of deposit shall meet and receive the servicing bids in writing. Only those bids which conform to the specifications set forth in the notification of bids shall be considered. Bids shall be evaluated based on response, price, services, qualifications and other scope of work factors that are detailed in the bid documents. The qualified bank representing the highest rated bid shall be designated as the servicing bank. Designations shall be evidenced by the signing of the notification of bid by the treasurer and the designee bank.

D. A treasurer or servicing bank may terminate a servicing bank contract at any time after one hundred eighty days' prior written notice is given.

E. This section does not require any treasurer to utilize a servicing bank.

F. This section or the specifications set forth in the notification of bids shall not be construed to require the servicing bank to purchase warrants.

§ 35-326 Local government investment pool: definition

A. The state treasurer may maintain one or more pooled investment funds for the collective investment of monies in this state. Securities or other instruments in which the monies may be invested are those that are provided for in article 2 of this chapter.

B. The state treasurer may deposit state monies in a pooled investment fund and may also receive into a fund monies that are deposited by any political subdivision or public entity in this state or public trust that is legally authorized or required to deposit monies with the state treasurer for investment. When a depositor provides monies to a pooled investment fund, the state treasurer may require the depositor to specify the date or dates on which it will require the monies. The assets of a pooled investment fund shall be invested by the state treasurer for such periods as will facilitate the return of the monies to the depositing entities in accordance with the instructions received at the time of deposit. Earnings shall be credited promptly after calculation.

C. The state treasurer shall compute on a monthly basis the rate of earnings on the pooled investment fund for that month, and each depositor shall be credited with an amount determined by applying the calculated monthly rate to the principal amount of its deposit balance for the period of the deposit. Interest shall be credited monthly.

D. The governing body of any political subdivision, public trust or public entity, by adopting a resolution of continuing effect, may authorize and request the state treasurer to invest monies for the governing body pursuant to this section.

E. For the purposes of this section, "political subdivision" means any governmental entity operating under the authority of this state, including a city, town, county, school district or community college district or any other entity organized under state law.

§ 35-326.01 Long-term local government investment pools; management fees; deposit

A. The state treasurer may establish new long-term local government investment pools for trust and treasury monies, cities, towns, tribal governments, counties and political subdivisions of this state. The terms of the investment pools shall be as determined by the state board of investment.

B. Monies received by the state treasurer from management fees of the long-term local government investment pools shall be deposited in the state treasurer's operating fund established by section 35-316.

§ 35-327 Treasurer; duties; safekeeping of securities; warrants of financial officers; earnings; exemptions; responsibilities

A. In investing trust monies, the responsible financial officer shall draw a warrant, check or electronic funds transfer voucher at the direction of the treasurer, payable from the proper fund to pay for the security purchased.

B. A treasurer is responsible for the safekeeping of all securities acquired by the treasurer under this section. Any such securities may be deposited for safekeeping with any trust company that has its principal place of business in this state or that is qualified to do a trust business in this state.

C. A treasurer shall regularly account for, itemize and inventory according to general public fund accounting practices all securities coming lawfully into the treasurer's possession. Such practice shall be audited by the auditor general for the counties and by an independent auditor for cities and towns at the time of the regular audit as prescribed by law.

D. The treasurer, at the expense of the subdivision and with the approval of the governing board, may enter into an agreement with the trust department of any bank or banks authorized to do a trust business in this state for safekeeping and handling securities of which the treasurer is lawful custodian. The agreement shall be entered into under terms and conditions that secure the proper safeguarding, inventory, withdrawal and handling of the securities. Access to, deposits of or withdrawals of the securities from any place of deposit selected by the officers shall not be permitted or made except as the terms of the agreement provide. The agreement need not require that securities be physically located in this state if the securities are represented by safekeeping receipts issued for the account of the treasurer by a federal reserve bank or any bank located in a reserve city whose combined capital and surplus on the date of the safekeeping receipt is $10,000,000 or more.

E. When securities acquired under this section mature and become due and payable, the treasurer shall present them for payment according to their terms and collect the monies payable on them. The monies collected shall be treated as subdivision monies subject to reinvestment or operating needs or trust monies subject to the provisions of the trust.

F. The treasurer shall allocate pooled income earnings on a pro rata basis to agency pool participants. Involuntary pool participants shall have the income earnings for their monies deposited in the general fund of the collecting entity.

G. As provided in this article, the governing body of any subdivision or of any agency, department, board or commission of this state or of any subdivision, by adopting a resolution of continuing effect, may authorize the treasurer to invest monies collected for the governing body.

H. The investment of public monies as provided in this section is exempt from section 35-142, subsection B and sections 35-154, 35-181.01, 35-181.02, 35-182, 35-183, 35-184, 35-185, 35-185.01, 35-185.02, 35-186, 35-187, 35-188, 35-189, 35-190, 35-191, 35-192, 35-192.01, 35-192.02, 35-193, 35-193.02 and 41-732.

I. A treasurer is responsible for safekeeping, managing and disbursing any investment made and any interest received in compliance with this article.

§ 35-328 Investment of sinking funds

A. All sinking funds of this state, or a county, city, town or school district, or hospital, irrigation or drainage district organized as provided by law may be invested and reinvested by the governing body or officer in charge of the sinking funds. The investment shall be made for the best interests of the state or political subdivision described in this subsection.

B. In the absence of specific direction in the bond indenture, the funds may be invested or reinvested in any of the investment securities allowed for trust funds.

§ 35-329 Funds of charter cities

The provisions of this article relating to collateral for deposits of public monies in financial institutions apply to deposits in financial institutions of the funds of cities governed by charter.

Article 3 Payment of Agency Accounts

§ 35-341 Definitions

In this article, unless the context otherwise requires:

1. "Agency" means any state agency, school district or office or agency established by either title 11 or a county board of supervisors.

2. "Goods" means all personal property purchased, procured or contracted for by an agency, including leases of real property or other arrangements for the use of space.

3. "Services" means all services purchased, procured or contracted for by an agency, including construction services.

§ 35-342 Payment of agency accounts; delinquency; interest

A. Any agency which purchases or procures goods and services from a nongovernmental entity on account shall pay the account in full within thirty days after receipt of goods or services and correct notice of amount due in writing to the agency or shall pay interest on the outstanding balance at the rate prescribed in section 44-1201 until the account is paid in full, unless a good faith dispute exists as to the agency's obligation to pay all or a portion of the account.

B. Any nongovernmental entity which purchases or procures goods or services from another nongovernmental entity on account for the purpose of providing such goods or services to an agency shall pay the account when due in full in accordance with current industry standards relating to the time of payment or in no event later than thirty days after receipt of the goods or services and correct notice in writing of the amount due on the account or shall pay interest on the outstanding balance at the rate prescribed in section 44-1201, or at such other interest rate or other terms as may be agreed in writing by the parties, until the account is paid in full, unless a good faith dispute exists as to the obligation to pay all or a portion of the account. If the delay in payment is caused by the agency and no interest or payment is received by the nongovernmental entity on the account, interest shall not be paid to the other nongovernmental entity on the account under this section unless otherwise agreed in writing by the parties.

C. The accounts of the agency referred to in this section shall not be deemed paid until all interest provided for under subsection A of this section is paid in full. If a dispute as to the amount due under this section relates only to a portion of an account due interest shall be paid on the remaining sums due on the account until paid.

Article 6 Acceptance of County or Municipal Warrants as Payment of Public Debts

§ 35-381 Acceptance of warrants in payment of debts; exception

Warrants that are lawfully issued by a county, city or town, or by a county school superintendent on behalf of a school district, are assignable and shall be accepted at face value with accrued interest in payment of not more than seventy-five percent of any debt or demand, including taxes, due the political subdivision on behalf of which the warrants are issued. Any such warrant shall not be accepted to pay taxes levied for a political subdivision other than that against which the warrant is drawn.

§ 35-382 Effect of acceptance of warrants by county treasurer

Warrants of a city, town or school district accepted in accordance with the provision of section 35-381 by the county treasurer as tax collector, shall in all matters of accounting between the treasurer and such city, town or school district, be treated as money to the face value thereof with interest accrued to the date of acceptance by the treasurer.

§ 35-383 Charging warrant to respective funds

Warrants accepted in payment of debts or demands, including taxes, shall be charged to the respective funds against which they are drawn. In the case of county warrants the board of supervisors shall direct the county treasurer to transfer from the general fund to the funds against which the warrants are drawn, sufficient money to cover the warrants.

Article 7 Credit Card Payments by Governmental Entities

§ 35-391 Credit card payments by governmental entities; disclosure; definitions

A. A governmental entity may require that a vendor accept a specific method of payment exclusively for any goods or services provided by the vendor to the governmental entity. If a governmental entity requires a specific method of payment be used exclusively, the governmental entity must disclose the required method of payment during the bid process or amend the contract under mutual agreement with the vendor.

B. If a governmental entity pays a vendor by credit card for goods or services provided by the vendor to the governmental entity, the governmental entity shall disclose in its annual financial report the amount of any reward, discount, incentive or other financial consideration received by the governmental entity resulting from the credit card payment.

C. For the purposes of this section:

1. "Credit card" has the same meaning prescribed in section 35-101.

2. "Governmental entity" means an agency, board, commission, department or other entity operating under the authority of this state or a city, town, county, school district, community college district or special taxing district.

Article 8 Terrorism Country Divestments

§ 35-392 State treasurer and retirement system divestments; policy notices

A. The state board of investment, the Arizona state retirement system board and the board of trustees of the public safety personnel retirement system shall each adopt a policy, and submit a copy of the policy to the president of the senate and the speaker of the house of representatives, regarding the countries identified as those countries currently designated by the United States department of state as state sponsors of terrorism. The policy shall include:

1. The procedure to identify United States companies that are in violation of section 6(j) of the export administration act.

2. The process for communicating with the companies and appropriate federal officials, including this state's congressional delegation, in regard to its findings pursuant to this section.

3. The process for divestment from the companies that are identified pursuant to paragraph 1.

B. The state treasurer, the Arizona state retirement system board and the board of trustees of the public safety personnel retirement system shall divest from those companies, based on public information, identified pursuant to subsection A, paragraph 1.

C. The state treasurer, the Arizona state retirement system board and the board of trustees of the public safety personnel retirement system shall notify the governor, the president of the senate, the speaker of the house of representatives, the director of the department of administration and each other of any divestments and the reasons for the divestments.

D. Within fourteen days after receipt of the notice pursuant to subsection C, the director of the department of administration shall send notice to the company indicating that this state and its political subdivisions are prohibited from purchasing any product or service from the company until the company is no longer identified pursuant to subsection A, paragraph 1.

E. The prohibition in subsection D does not apply to any existing contract but does apply to any renewal of a contract.

F. This section applies to all affiliated companies and subsidiaries of the company.

Article 9 Israel Boycott Divestments

§ 35-393 Definitions

In this article, unless the context otherwise requires:

1. "Boycott" means engaging in a refusal to deal, terminating business activities or performing other actions that are intended to limit commercial relations with entities doing business in Israel or in territories controlled by Israel, if those actions are taken either:

(a) Based in part on the fact that the entity does business in Israel or in territories controlled by Israel.

(b) In a manner that discriminates on the basis of nationality, national origin or religion and that is not based on a valid business reason.

2. "Company" means an organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company or other entity or business association, including a wholly owned subsidiary, majority-owned subsidiary, parent company or affiliate, that engages in for-profit activity and that has ten or more full-time employees.

3. "Direct holdings" means all publicly traded securities of a company that are held directly by the state treasurer or a retirement system in an actively managed account or fund in which the retirement system owns all shares or interests.

4. "Indirect holdings" means all securities of a company that are held in an account or fund, including a mutual fund, that is managed by one or more persons who are not employed by the state treasurer or a retirement system, if the state treasurer or retirement system owns shares or interests either:

(a) Together with other investors that are not subject to this section.

(b) That are held in an index fund.

5. "Public entity":

(a) Means this state, a political subdivision of this state or an agency, board, commission or department of this state or a political subdivision of this state.

(b) Includes the universities under the jurisdiction of the Arizona board of regents and community college districts as defined in section 15-1401.

6. "Public fund" means the state treasurer or a retirement system.

7. "Restricted companies" means companies that boycott Israel.

8. "Retirement system" means a retirement plan or system that is established by or pursuant to title 38.

§ 35-393.01 Contracting; procurement; investment; prohibitions

A. A public entity may not enter into a contract with a value of $100,000 or more with a company to acquire or dispose of services, supplies, information technology or construction unless the contract includes a written certification that the company is not currently engaged in, and agrees for the duration of the contract to not engage in, a boycott of goods or services from Israel.

B. A public entity may not adopt a procurement, investment or other policy that has the effect of inducing or requiring a person or company to boycott Israel.

§ 35-393.02 Investment; restricted companies list; notice; immunity; exception

A. On or before April 1 of each year, each public fund shall prepare a list of restricted companies and shall provide a copy of the list on request.

B. In preparing the list of restricted companies, the public fund may consider at least the following:

1. Publicly available information, including information provided by nonprofit organizations, research firms and government entities.

2. Information prepared by an independent research firm retained by the public fund.

3. A statement by a company that it is participating in a boycott of Israel or that it has taken a boycott action at the request of, in compliance with or in furtherance of calls for a boycott of Israel.

C. The public fund shall notify each company that is included on the list of restricted companies that the company is subject to divestment by the state treasurer, the retirement systems and each public entity.

D. If a company that receives notice pursuant to subsection C of this section submits a written certification to the public fund that it has ceased its boycott of Israel and will not engage in a boycott of Israel for the period of time that the state treasurer or a retirement system invests in the company, the public fund shall remove the company from the restricted list.

E. Each public fund and each public entity shall:

1. Sell, redeem, divest or withdraw all direct holdings of a restricted company from the assets under its management in an orderly and fiducially responsible manner within three months after the lists of restricted companies are prepared pursuant to subsection A of this section. On or before August 1 of each year, the state treasurer, each retirement system and each public entity shall post on their websites a list of investments that are sold, redeemed, divested or withdrawn pursuant to this paragraph.

2. Not acquire securities of a restricted company as part of its direct holdings.

3. Request that managers of its indirect holdings consider selling, redeeming, divesting or withdrawing holdings of a restricted company from the assets under its management.

F. With respect to any action performed pursuant to this section, the state treasurer, each retirement system, each public entity and any person acting on behalf of the state treasurer, the retirement system or the public entity:

1. Are exempt from any conflicting statutory or common law obligation or fiduciary duties with respect to choice of asset managers, investment funds or investments.

2. Are subject to title 12, chapter 7, article 2 regarding immunity for acts and omissions.

3. Are indemnified and held harmless by this state from claims, demands, suits, actions, damages, judgments, costs, charges and expenses, including attorney fees, and against all liability, losses and damages because of a decision to sell, redeem, divest or withdraw holdings of a restricted company made pursuant to this section.

G. This section does not apply to investments that are made by the state treasurer pursuant to section 35-314.01.

§ 35-393.03 Applicability; severability

A. This article does not apply to a boycott prohibited by 50 United States Code section 4842 or a regulation issued pursuant to that section.

B. If any provision of this article or its application to any person or circumstance is held invalid, the invalidity does not affect any other provision or application of this article that can be given effect without the invalid provision or application, and to this end the provisions of this article are severable.

Article 10 Forced Labor of Ethnic Uyghurs

§ 35-394 Contracting; procurement; prohibition; written certification; remedy; termination; exception; definitions

A. A public entity may not enter into or renew a contract with a company to acquire or dispose of services, supplies, information technology, goods or construction unless the contract includes a written certification that the company does not currently, and agrees for the duration of the contract that it will not, use:

1. The forced labor of ethnic Uyghurs in the People's Republic of China.

2. Any goods or services produced by the forced labor of ethnic Uyghurs in the People's Republic of China.

3. Any contractors, subcontractors or suppliers that use the forced labor or any goods or services produced by the forced labor of ethnic Uyghurs in the People's Republic of China.

B. If a company that has provided a written certification pursuant to subsection A of this section becomes aware during the term of the contract that the company is not in compliance with the written certification, the company shall notify the public entity within five business days after becoming aware of the noncompliance. If the company does not provide the public entity with a written certification that the company has remedied the noncompliance within one hundred eighty days after notifying the public entity of the noncompliance, the contract terminates, except that If the contract termination date occurs before the end of the remedy period, the contract terminates on the contract termination date.

C. This section does not apply to a contract entered into before September 24, 2022.

D. For the purposes of this section:

1. "Company" means an organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company or other entity or business association, including a wholly owned subsidiary, majority-owned subsidiary, parent company or affiliate, that engages in for-profit activity and that has ten or more full-time employees.

2. "Public entity" means this state, a political subdivision of this state or an agency, board, commission or department of this state or a political subdivision of this state.

Article 11 Divestment From China

§ 35-395 Publicly managed funds; Chinese companies and investments; divestment; immunity; severability; definitions

A. A publicly managed fund may not hold an investment in any of the following:

1. The People's Republic of China.

2. A company that is owned by the People's Republic of China.

3. A company that is domiciled, incorporated or headquartered within the People's Republic of China.

4. A company that is controlled by the government of the People's Republic of China, the Chinese Communist Party, the Chinese military or any instrumentality of the government of the People's Republic of China, the Chinese Communist Party or the Chinese military.

5. A company that is majority-owned by an entity controlled by the government of the People's Republic of China, the Chinese Communist Party, the Chinese military or any instrumentality of the government of the People's Republic of China, the Chinese Communist Party or the Chinese military.

B. Subsection A of this section does not apply to a company solely because the company has a subsidiary or affiliate described in subsection A, paragraphs 1 through 5 of this section.

C. Except as provided in subsection D of this section, on September 26, 2025, a publicly managed fund shall immediately begin divestment of any holdings or investments prohibited by subsection A of this section. A publicly managed fund shall complete total divestment as soon as financially prudent but not later than one year after September 26, 2025. In order to identify the prohibited holdings or investments, each publicly managed fund shall do at least one of the following:

1. Review publicly available information regarding the companies and investments, including information provided by nonprofit organizations, research firms and governmental entities.

2. Contact asset managers and fund managers contracted by a publicly managed fund that invest in companies and in funds that are owned by or are domiciled within China or whose primary affairs are conducted within China.

3. Contact institutional investors that have divested from or engaged with companies that are owned by or are domiciled within China or whose primary affairs are conducted within China.

4. Retain an independent research firm to identify companies that are direct or indirect investment holdings of the publicly managed fund and that are owned by or are domiciled within China or whose primary affairs are conducted within China.

D. A publicly managed fund is not required to divest holdings or investments prohibited by subsection A of this section if less than one percent of the value of the total holdings or investments of the fund are made up of investments in Chinese companies and the cost to the publicly managed fund of divesting from the prohibited holdings or investments over the next five years is more than one percent of the value of the total holdings or investments otherwise prohibited pursuant to subsection A of this section.

E. This section does not inhibit, conflict with, impede or otherwise interfere with any required financial safeguards, fiduciary requirements or other sound investment criteria that a publicly managed fund is subject to, including any obligations with respect to choice of asset managers, investment funds or investments for fund investment portfolios.

F. With respect to any action performed pursuant to this section, each publicly managed fund and any person acting on behalf of the publicly managed fund:

1. Are exempt from any conflicting statutory or common law obligation or fiduciary duties with respect to choice of asset managers, investment funds or investments.

2. Are subject to title 12, chapter 7, article 2 regarding immunity for acts and omissions.

3. Are indemnified and held harmless by this state from claims, demands, suits, actions, damages, judgments, costs, charges and expenses, including attorney fees, and against all liability, losses and damages because of a decision to sell, redeem, divest or withdraw holdings of a restricted company made pursuant to this section.

G. If any provision of this section or its application to any person or circumstance is held invalid, the invalidity does not affect any other provision or application of this section that can be given effect without the invalid provision or application, and to this end the provisions of this section are severable.

H. For the purposes of this section:

1. "Company" means any sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company or other entity or business association, including a wholly owned subsidiary, a majority-owned subsidiary, a parent company or an affiliate of those entities or business associations, that exists for the purpose of making a profit, including a bank or other financial institution.

2. "Divestment" means the sale, forfeiture or other contractual end of any current or planned investments.

3. "Domicile" means the country where a company is registered, where the company's affairs are primarily completed or where the majority of the ownership share is held.

4. "Investment" means a transfer of monies into any active, passive, direct or indirect structure that seeks to generate revenue or accomplish any other gain, including nonmonetary gains.

5. "Publicly managed fund" means a short-term or long-term investment structure that is managed, run, controlled or otherwise overseen by this state or a political subdivision of this state.

Chapter 3 Public Indebtedness

Article 1 State Tax Anticipation Bonds

§ 35-401 Definitions

In this article, unless the context otherwise requires:

1. "Bonds" means tax anticipation bonds issued pursuant to this article.

2. "Loan commissioners" means the loan commissioners of this state.

3. "Taxes" means state excise taxes levied pursuant to lawful appropriations, which are due or will become due prior to the end of the fiscal year but which remain uncollected, in anticipation of which bonds may be issued.

4. "Treasurer" means state treasurer.

§ 35-402 Issuance of bonds

When the legislature has made appropriations for any fiscal year as authorized by law, and when ad valorem and excise taxes sufficient to produce funds to pay such appropriations have been levied, if the loan commissioners of the state ascertain that the proceeds of the taxes levied will not be received in the state treasury in time to pay in cash the expenses provided for by such appropriations, they may anticipate the collection of such taxes by issuing and selling bonds designated as "state of Arizona tax anticipation bonds".

§ 35-403 Form and contents of bonds

A. Tax anticipations bonds shall be signed by the governor, attested by the director of the department of administration and countersigned by the state treasurer, and shall be payable within six months from the date. They shall bear interest at such rate or rates, not exceeding nine per cent per annum, bear such date and shall be payable at such place as determined by the loan commissioners.

B. Each bond shall recite:

1. That it is issued in anticipation of state taxes theretofore levied but remaining uncollected.

2. The fiscal year or years for which the taxes were levied.

3. Whether it is payable from the proceeds of ad valorem taxes levied upon taxable property or from the state's share of excise taxes, or both.

4. That the bond is issued pursuant to this article.

§ 35-404 Amount of bonds; limitation

The total amount of tax anticipation bonds, including both principal and interest, shall not exceed fifty per cent of the ad valorem taxes, plus fifty per cent of the state's portion of excise taxes as estimated by the department of revenue, for the years recited in the bonds, uncollected and not in the state treasury at the time of issuance of the bonds.

§ 35-405 Resolution for issuance

The loan commissioners shall by resolution authorize the issuance of the bonds, which shall prescribe the form of the bonds, the form of the interest coupons, the manner in which the coupons shall be signed and the particular taxes upon which the bonds are based, and shall fix the manner, terms and conditions under which the bonds shall be sold.

§ 35-406 Sale of bonds; use of proceeds

A. The tax anticipation bonds shall be sold to the highest bidder that meets the conditions imposed by the loan commissioners, but shall not be sold at less than par.

B. When the issuance and sale of any bonds have been completed, the treasurer shall immediately call in and pay from the proceeds of the sale all state warrants, checks or substitute checks, and electronic funds transfer vouchers that are registered and accumulated at that date, or otherwise the proceeds of the bonds shall be used solely for the purposes for which the taxes on which the bonds are based were levied.

§ 35-407 Payment of bonds and interest

When bonds are issued, the taxes upon which they are based and by which they are secured shall, when and as collected, be kept by the treasurer and used solely for payment of the bonds and interest thereon, until all of the bonds, together with the interest, are paid in full. The treasurer may pay the interest on the bonds from the general fund. No interest shall be paid on any bond for any period after the date it is payable or after the date the treasurer calls the bond for payment, whichever date is later.

§ 35-408 Rights of holder of bond

The holder of any tax anticipation bond may, in his own name and on his own behalf, or on behalf of all the holders of the bonds, compel by mandamus the performance of any duty imposed by this article.

Article 2 State Indebtedness Bonds

§ 35-421 State loan commissioners; issuance of bonds; exemption of bonds from taxes

A. The governor, the director of the department of administration and the state treasurer shall constitute the loan commissioners of the state of Arizona.

B. The loan commissioners shall provide for payment of state indebtedness. For the purpose of paying, redeeming and refunding all or any part of the principal and interest of such indebtedness, the loan commissioners may, from time to time issue negotiable coupon bonds of the state when they can be sold at a lower rate of interest than previously paid or when they can be issued and sold at a profit and benefit to the state.

C. Bonds issued under the provisions of this article shall not be taxed within this state.

§ 35-422 Denominations and terms of bonds

A. The bonds provided for in section 35-421 shall be issued as nearly as practicable in denominations of one thousand dollars, but bonds of a lower denomination not less than one hundred dollars may be issued when necessary. The bonds shall bear interest at a rate fixed by the commissioners, not exceeding nine per cent per annum, payable semiannually at the office of the state treasurer or at some bank or trust company in New York City, New York, at the option of the purchaser of the bonds. The principal shall be payable within twenty-five years after the date of issuance of the bonds, and the state shall reserve the right to redeem at par any bonds in their numerical order at any time after fifteen years from the date thereof. The bonds shall bear the date of their issue, state where and to whom payable, the rate of interest, shall be signed by the loan commissioners with the seal of the state affixed, shall be countersigned by the state treasurer and bear his official seal, and shall be registered by the department of administration in a book kept for that purpose which shall disclose the amount the bonds sold for, or if exchanged, for what exchanged.

B. The faith and credit of the state shall be pledged for the payment of the bonds and the interest accruing thereon.

§ 35-423 Interest coupons

A. Coupons for interest shall be attached to each bond, shall be consecutively numbered and bear the same number as the bond to which it is attached, shall bear the facsimile signature of the state treasurer and shall cover the interest expressed in the bond from the date of issue until paid.

B. Bonds shall not bear interest, nor shall interest be paid thereon, for any time before they are delivered to the purchaser.

§ 35-424 Sale of bonds; notice, publication and bids

A. When the loan commissioners are authorized to issue bonds, or decide to refund or redeem all or any of the existing indebtedness of the state, they shall direct the state treasurer to advertise the sale of the bonds to be issued for that purpose by causing a notice of such sale to be published once a week for one month in three newspapers published in the state, no two of which shall be published in the same county, and, in their discretion, in a publication in New York City, New York, and in San Francisco, California. Such notice shall state the amount of bonds to be sold, the place, day and hour of sale, and that bids will be received by the treasurer for the purchase of the bonds within one month from expiration of such publication.

B. At the place and time named in the notice the loan commissioners shall open the bids received by the treasurer and shall award the purchase of the bonds, or any part thereof, to the best bidder.

C. The loan commissioners may reject any and all bids, and may refuse to make an award unless sufficient security is furnished by the bidder insuring compliance with his bid.

§ 35-425 Delivery of bonds

A. When the sale is awarded, the loan commissioners shall procure the necessary bonds, and, after signing the bonds, deliver them to the state treasurer, taking his receipt for the bonds, and charging him therewith. The treasurer shall deliver the bonds to the purchaser for cash, or exchange them for any of the indebtedness for the redemption of which they were issued.

B. Bonds shall not be sold or exchanged for less than their face value and accrued interest at the time of delivery, nor shall any indebtedness be redeemed at more than its face value and accrued interest.

C. The state treasurer shall endorse the time when and the amount for which exchanged upon the face of the paper evidencing the indebtedness received by him in exchange.

§ 35-426 Application of proceeds to redemption of indebtedness; notice to redeem

A. The state treasurer shall apply monies received to redeem the indebtedness of the bonds issued and shall give notice in the same manner as for paying and redeeming state warrants, checks and substitute checks, and electronic funds transfer vouchers. After the state treasurer redeems such indebtedness, interest on all such indebtedness due and outstanding shall cease.

B. Before such indebtedness is paid, the director of the department of administration shall endorse on each certificate the amount due thereon, and write across the face of each the date of its surrender and the name of the person surrendering, and shall keep a record thereof.

§ 35-427 Tax levy for amortization of bonds; determination of tax rate; additional levy; application of monies; violation; penalty

A. There shall be levied annually upon the taxable property in this state, in addition to other levies, an amount sufficient to pay the interest on all bonds issued under the provisions of this article, to be placed in the state treasury in the interest fund. Each year after such bonds have been issued, an additional amount shall be levied annually sufficient to pay four per cent of the total amount issued, until all the bonds are paid and discharged, and the amount shall be placed in the state redemption fund as collected.

B. The director of the department of administration shall determine the rate of tax to be levied for the purpose provided in subsection A in the different counties in the state and certify the rate to the boards of supervisors in each county. The boards of supervisors shall enter such rate on the assessment rolls as other taxes. If any county is or becomes delinquent in the payment of such taxes, the board of supervisors shall, before the next levy, prorate such delinquencies and make such additional levy, in addition to the current annual rate certified to it by the director of the department of administration necessary to pay the interest and principal of such bonds on maturity. The director of the department of administration may reconvene the board of supervisors for the purpose of entering such rate or additional rate or levy or additional levy as the director certifies. The county, district or municipal treasurer shall, on or before June 1 each year, pay to the state treasurer the total amount so certified to the board of supervisors, whether or not the whole amount has been collected.

C. The money derived from such taxes shall be paid into the state treasury and shall be applied, first, to the payment of the interest on the bonds issued under this article and, second, to the payment of the principal of such bonds. Whenever sufficient funds accrue to the credit of the state, the loan commissioners may direct the state treasurer to call such bonds for payment, if the call is optional.

D. Any interest earned by monies in the redemption fund shall be credited to the state, county, district or municipality in proportion to the amount paid into the fund by the state, or such county, district or municipality.

E. Any money remaining in the interest fund after payment of interest, and any money remaining in the redemption fund after all of the bonds have been paid and discharged, shall be returned by the treasurer to the county, district or municipality remitting such money.

F. If the board of supervisors refuses or omits to enter and levy the rate of tax as certified to it by the joint legislative tax committee or the director of the department of administration, or refuses or omits to do any act required by this article, the members thereof are guilty of nonfeasance in office and are individually liable on their bonds for the total amount so omitted, and the attorney general, upon being informed of such refusal, shall commence an action against such officials and their sureties.

§ 35-428 Redemption of bonds; notice; record of bonds redeemed

A. When, after the expiration of fifteen years from the date of issuance of any bonds, there is in the redemption fund a surplus of ten thousand dollars or more, the state treasurer shall advertise, in the same manner as required for bids for the sale of bonds, stating the amount of money in the redemption fund, and that such amount has been set apart to pay and discharge a certain number of bonds, naming them by number in the order of their issuance. A copy of such advertisement shall be mailed to each bank or trust company at which the interest on the bonds is payable. If the bonds numbered in the advertisements are not presented for payment and cancellation at the expiration of such publication, the fund shall remain in the treasury to discharge the bonds when presented, but such bonds shall draw no interest after expiration of the publication. Before such bonds are paid they shall be presented to the director of the department of administration, who shall endorse on each bond the amount due thereon, and shall write across the face of each bond the date of its surrender and the name of the person surrendering the bond.

B. The director of the department of administration shall keep a record of all bonds issued and disposed of by the state treasurer, showing for each bond the number, rate of interest, date, amount of sale, when, where and to whom payable, and if exchanged, for what, and when presented for redemption the date, amount due thereon, and person surrendering.

§ 35-429 Issuance of state bonds for county, municipal or school district indebtedness

A. The board of supervisors of each county and the proper municipal or school authority shall report to the state loan commissioners the bonded and outstanding indebtedness of the county, municipality or school district, and, upon demand of such authorities, the loan commissioners shall provide for redeeming or refunding such indebtedness in the same manner as other state indebtedness and shall issue bonds of the state for any indebtedness authorized by law to be incurred by such county, municipality or school district.

B. The bonds shall be issued upon the faith and credit of the state only to the extent that it will cause to be levied and collected taxes for the payment of the principal and interest of such bonds, and pay the principal and interest when such bonds have been issued.

C. The county, municipality or school district shall pay into the state treasury, in addition to all other taxes authorized by law, amounts as directed by the director of the department of administration, to be levied for the payment of the principal and interest of such bonds issued for such county, municipality or school district, in the same manner provided for the payment of the principal and interest of state indebtedness.

§ 35-430 Cancellation of redeemed bonds; record of redemption; transmittal of abstract of record; payment of interest

A. When the state treasurer pays or redeems any indebtedness, the treasurer shall endorse, by writing or stamping in ink, on the face of the paper evidencing such indebtedness so paid or redeemed, the words "redeemed and canceled" with the date of cancellation.

B. The state treasurer shall keep a complete record of all bonds redeemed and surrendered and shall transmit to the governor an abstract of the record with the annual report, which shall be submitted by the governor to the legislature.

C. The treasurer shall pay the interest on the bonds, when due, from the interest fund, if sufficient, and if not sufficient, from the state general fund. If a deficiency exists, the director of the department of administration shall draw a warrant, check or electronic funds transfer voucher on the state treasurer, payable to the order of the state treasurer from the state general fund.

§ 35-431 Registration of bond; effect; entry of registration

When the owner of a bond authorized to be issued by this article presents it to the director of the department of administration with a request for its conversion into a registered bond, the director of the department of administration shall detach and cancel the coupons, and stamp or write upon such bond that it is registered in the name of the owner and that thereafter the interest and principal of the bond are payable to the registered owner only. The bond may be transferred by the registered owner by presenting it to the director of the department of administration, and the bond shall again be registered. When so registered, the principal and interest of the bond shall be payable to the registered owner. The director of the department of administration shall enter in the register of bonds the registration of each bond and the name of the owner thereof.

Article 3 County and Other Municipal Indebtedness

§ 35-451 Local debt limit; increase in limitation; authority to issue bonds; definitions

A. The aggregate indebtedness of a county, city, town or similar municipal corporation may be increased above six percent of the net assessed value of the full cash value of the property in such a political subdivision only as provided in this article.

B. A multi-county water conservation district may become indebted and issue bonds in the manner provided in this article.

C. Bonds may be issued under this article for any lawful or necessary purpose.

D. For the purposes of this section, "full cash value" and "net assessed value" have the same meanings prescribed in section 42-11001.

§ 35-451.01 Power to use outstanding bond authorizations of common or high school districts

A. All outstanding authorizations permitting the issuance of bonds, as provided in this article, or the incurring of debt by a common school district or a high school district at the time either such district becomes part of a unified school district, shall remain in full force and effect. The unified school district shall be vested with all powers to act for and on behalf of such common school district or high school district to issue the bonds for the purposes for which such authorizations were granted. The school district governing board may submit the bonds for approval by the attorney general.

B. The bonds shall be issued pursuant to the provisions of this article, except that the effect of the bonds issued pursuant to this section shall be the same as if the questions pertaining to the issuance of the bonds had been submitted to and approved by the electors of the unified district after its formation.

C. The provisions of this section shall not be construed as authorizing indebtedness in excess of the percentage limitation as prescribed for a unified school district in article 9, section 8.1, Constitution of Arizona.

§ 35-452 Election to authorize indebtedness; costs

A. The governing body or board of a political subdivision enumerated in section 35-451 may, and upon petition signed by fifteen per cent of the qualified electors shall, order an election by such electors to determine whether such indebtedness shall be authorized. The election shall be held on the first Tuesday following the first Monday in November as prescribed by section 16-204, subsection B, paragraph 1, subdivision (d).

B. If a majority of the qualified electors voting at the election votes in favor of creating an indebtedness such political subdivision may become so indebted.

C. Bond counsel fees, financial advisory fees, printing costs and paying agent and registrar fees shall be paid from either the amount authorized by the qualified electors of the political subdivision or current operating funds.

D. Bond election expenses shall be paid from current operating funds only.

§ 35-453 Order for election

A. The governing body or board of the political subdivision shall order the election to be held at the regular voting places within the limits of such subdivision on the first Tuesday following the first Monday in November as prescribed by section 16-204, subsection B, paragraph 1, subdivision (d).

B. If the election is to be held for creating an indebtedness by a county, the order shall be made by the board of supervisors of the county in which the election will be held.

C. The order shall state the object of the election, and shall be prima facie evidence that all provisions necessary to give the order validity or qualify the governing body or board to make such order have been fully complied with.

§ 35-454 Informational pamphlet for bond election; review; ballot; election; return; canvass of votes; certificate of election

A. The governing body or board of the political subdivision shall:

1. At least thirty-five days before the bond election, mail a copy of an informational pamphlet to every household within the political subdivision that contains a registered voter. The pamphlet shall contain information on the:

(a) Amount of the bond authorization.

(b) Maximum interest rate of the bonds.

(c) Estimated debt retirement schedule for the current amount of bonds outstanding, showing both principal and interest payments, the current net assessed valuation as reported by the department of revenue and the current adopted and estimated tax rates. For the purposes of this paragraph, "net assessed valuation" may include the values used to determine voluntary contributions collected pursuant to title 9, chapter 4, article 3 and title 48, chapter 1, article 8.

(d) Estimated debt retirement schedule for the proposed bond authorization, showing both the estimated principal and interest payments and the estimated average annual tax rate for the proposed bond authorization. In preparing this information and the information prescribed by subdivision (c) of this paragraph, the projected total annual increase in net assessed valuation for any future year shall not exceed:

(i) For the first five years of the estimated debt retirement schedule, the average of the annual percentage growth for the previous ten years in the net assessed valuation of the political subdivision.

(ii) For the remaining years of the estimated debt retirement schedule, twenty percent of the average of the annual percentage growth for the previous ten years in the net assessed valuation of the political subdivision.

(e) Source of repayment.

(f) Estimated issuance costs.

(g) Estimated tax impact of debt service for the bonds on an owner-occupied residence classified as class three pursuant to section 42-12003, on commercial property classified as class one pursuant to section 42-12001, paragraph 12 and on agricultural or other vacant property classified as class two pursuant to section 42-12002, assuming the net assessed valuation of the property increases annually at the lesser of five percent or fifty percent of the projected total annual increase in net assessed valuation as determined pursuant to subdivision (d) of this paragraph over the term of the bonds using the same average annual tax rate as under subdivision (d) of this paragraph, as follows:

The tax impact over the term of the bonds on an owner-occupied residence valued by the county assessor at $250,000 is estimated to be $___ per year for __ years, or $___ total cost.

The tax impact over the term of the bonds on commercial property valued by the county assessor at $1,000,000 is estimated to be $____ per year for __ years, or $______ total cost.

The tax impact over the term of the bonds on agricultural or other vacant property valued by the county assessor at $100,000 is estimated to be $____ per year for ___ years, or $______ total cost.

(h) In bold-faced type, estimated total cost of the proposed bond authorization, including principal and interest.

(i) Current outstanding general obligation debt and constitutional debt limitation.

(j) Projects and expenditures for which the bonds are to be issued. The purpose statement shall only present factual information in a neutral manner. Advocacy for the expenditures is strictly limited to the arguments submitted pursuant to subdivision (n) of this paragraph.

(k) Purpose for which the bonds are to be issued and, if applicable, in bold-faced type, that the amount of the proposed bond authorization combined with the current outstanding debt exceeds the political subdivision's constitutional debt limit.

(l) Polling location for the addressee.

(m) Hours during the day when the polls will be open.

(n) Arguments for and against the authorization of one or more of the bond propositions. Each argument filed shall contain the sworn statement of the person submitting it. If the argument is submitted by an organization, it shall contain the sworn statement of two executive officers of the organization. If the argument is submitted by a political committee, it shall contain the sworn statement of the committee's chairperson or treasurer. If the argument is submitted by an individual and not on behalf of an organization, a political committee or any other group, the person shall submit the argument with a sworn, notarized statement. The names of persons and entities submitting written arguments shall be included in the informational pamphlet. Persons signing the argument shall identify themselves by giving their residence address and telephone number, which may not appear in the informational pamphlet, except that the person's city or town and state of residence shall appear in the pamphlet. Any argument that is submitted and that does not comply with this subdivision may not be included in the pamphlet.

2. Set a deadline to submit arguments for and against the authorization of one or more of the bond propositions at a public meeting and publish the deadline in a newspaper of general circulation in the jurisdiction of the political subdivision.

B. The failure of any one or more electors to receive the informational pamphlet shall not be grounds to invalidate the election. The election shall conform with the general election laws of this state. The return of the election held in a county shall be made to the board of supervisors and, in any other case, to the governing body or board of the municipal corporation or district within twelve days after the election.

C. For any proposed general obligation bond authorization for which the principal and interest will be paid by a levy of property taxes, the ballot shall contain the phrase "the issuance of these bonds will result in a property tax increase sufficient to pay the annual debt service on bonds". Any written information provided by the political subdivision pertaining to the bond election shall include financial information showing the estimated average tax rate for the proposed bond authorization. If the bonds are to be repaid with secondary property taxes, the ballot shall contain the words "bond approval, yes" and "bond approval, no", and the voter shall signify the voter's desired choice. The ballot shall also contain the following statement:

A "yes" vote shall authorize the ______ governing body to issue and sell $______ of ______ bonds of the district to be repaid with secondary property taxes.

A "no" vote shall not authorize the ______ governing body to issue and sell such bonds of the district.

D. If the governing body intends to use revenues other than property taxes to pay the debt on proposed general obligation bonds, the ballot shall contain the phrase "the issuance of these bonds will result in a property tax increase sufficient to pay the annual debt service on bonds, unless the governing body provides for payment from other sources".

E. The board of supervisors, governing body or governing board shall hold a special meeting within twenty days after the election to canvass the votes cast and certify the result. The certificate of the result shall be prima facie evidence of full performance of all conditions and requirements precedent to holding the election.

F. The governing board or body shall file and record in the office of the county recorder a certificate disclosing the purpose of the election, the total number of votes cast and the total number of votes for and against creating the indebtedness, and stating whether or not the indebtedness is ordered. On filing and recording the certificate, the governing board or body shall carry out the purpose of the election.

G. Variations between the estimates required by subsection A of this section and the actual debt retirement schedules, issuance costs, annual and total costs and tax rates shall not invalidate either the election or the bonds.

§ 35-455 Issuance and sale of bonds; call for election

A. When the political subdivision designated in this article desires to issue bonds or other evidences of indebtedness, the governing body or board thereof, with the assent of a majority of the qualified electors therein voting at the election held as provided by section 35-454, may issue and sell bonds in the amount authorized at the election.

B. The call for the election shall set forth the aggregate amount of the bonds, the maximum rate of interest to be paid thereon, the minimum and maximum number of years bonds of any issue or series may run from their date, the purposes for which the money derived from the sale of the bonds will be expended, the current outstanding general obligation debt and the constitutional debt limitation of the political subdivision.

C. Bonds of any issue or series of bonds voted under this section may run for any number of years not exceeding the longest period permitted by the voted proposition.

D. The governing body or board may expend the monies received from the sale of the bonds only for the purposes stated in the ballot and for the necessary costs and expenses of the issuance and sale of the bonds. If an unexpended balance remains after satisfying the purposes of the bonds, the balance shall be used to retire the bonded indebtedness.

§ 35-456 Amount, denomination and form of bonds

A. The governing body or board shall cause the bonds to be prepared in the amount and denominations authorized, or whole multiples of such denominations, bearing the date of issuance and numbered in a convenient manner. Bonds voted at one or more elections, for one or more different purposes and subject to one or more debt limits may be combined into a single issue or series maturing at such times and containing such options for redemption prior to maturity, with or without premium, as the governing body or board may determine prior to the issuance of the bonds. On or before retirement of bonds of such a combined issue, the governing body or board shall determine the voted purpose or purposes for which the bonds being retired were issued. This determination is conclusive in calculating the amount of bonds remaining outstanding for each such voted purpose and for calculating outstanding bonded indebtedness with respect to article IX, sections 8 and 8.1, Constitution of Arizona.

B. The bonds shall be signed and attested:

1. When issued by the county, by the chairman and the clerk of the board of supervisors.

2. When issued by a city or town, by the mayor and the city clerk.

3. When issued by any other municipal corporation, by the executive officer and clerk of the governing body of such corporation. Any signature may be affixed either by manual signature or by a facsimile reproduction of a manual signature if the signer adopts the facsimile reproduction as and for such person's actual signature.

C. The corporate seal of any such political subdivision or municipal corporation may be affixed to the bonds either manually or by photographic reproduction.

D. The bonds may be payable to bearer or may be in fully registered form without coupons and shall mature in not to exceed forty years from the date of their issuance. Coupons for the interest may be attached to each bearer bond bearing a facsimile of the signatures of the officers as they appear upon the bonds.

E. The form, including whether registrable as to principal or as to both principal and interest, denomination and manner of execution of tax secured bonds issued pursuant to both this article and title 9, chapter 5, article 3 shall be governed by title 9, chapter 5, article 3.

F. The governing body may employ registrars and transfer and paying agents to administer the bonds. All or any part of the costs of registration, transfer and payment may be deducted from bond proceeds or may be treated as interest and such costs may be added to and paid from the proceeds of taxes levied to pay interest on the bonds.

§ 35-456.01 Bonds; manual affixing of signatures

Wherever any statute requires that any bond issued by a public body be signed manually by two or more officers or other individuals, all such signatures and counter signatures may be printed, lithographed, engraved, or otherwise mechanically reproduced, except that one of the signatures or counter signatures to the bonds shall be manually affixed.

§ 35-457 Sale of bonds; bids; forfeiture of deposit; definitions

A. Any or all of the bonds may be sold at public sale or through an online bidding process in a manner prescribed by the governing body or board that includes the following:

1. If sold by public sale before the sale of any bonds the governing body or board shall meet and enter on its record an order directing the sale of the bonds and the date and hour of the sale, and cause a copy of the order to be published at least once a week for two successive weeks in cities having a population of fifteen thousand or more persons, and once a week for four successive weeks in all other political subdivisions before the sale in one or more designated daily or weekly newspapers, together with a notice that sealed proposals will be received for purchase of the bonds on the date and hour named in the order.

2. If sold through an online bidding process, bids for the bonds that are entered into the system may be concealed until a specified time or disclosed in the online bidding process, may be subject to improvement in favor of the political subdivision before a specified time and may be for an entire issue of bonds or specified maturities according to the manner, terms and notice provisions ordered by the governing body.

B. If the bonds are sold by public sale or through an online bidding process, all proposals shall be received on the date and hour or in the manner stated in the order and the governing body or board shall award the bonds to the highest and most responsible bidder. The successful bidder shall provide a bid guarantee for not less than two percent of the total par value of the bonds within twenty-four hours after the date and time the bid is awarded. The bid guarantee may be in the form of a certified check or a bond issued by a surety company licensed by the department of insurance and financial institutions to do business in this state. The governing body or board may reject any and all bids. If the successful bidder does not carry out the terms of the proposal to purchase the bonds, the bid guarantee shall be forfeited as stipulated and liquidated damages.

C. Notwithstanding any other provision of this section, bonds may be sold by negotiated sale on terms the governing body deems to be the best then available and may bear interest payable at such times as shall be determined by the governing body.

D. The bonds may be sold below, at or above par. If an issue of bonds is sold below par, the aggregate amount of discount plus interest to be paid on the bonds must not exceed the amount of interest that would be payable on the bonds over the maturity schedule prescribed by the governing body at the maximum rate set out in the resolution calling the election at which the bonds were voted. The amount of net premium associated with a bond issue may be used only for one or more of the following:

1. To pay costs incurred in issuing the bonds, subject to section 35-452, subsection C.

2. As a deposit in a debt service fund and used only to pay interest on the bonds.

3. For any other purpose, if the political subdivision has voter authorization and available capacity under its debt limitations and the amount of net premium used for such purpose will reduce in an equal amount both:

(a) The available aggregate indebtedness capacity of the political subdivision under the statutes and constitution of this state.

(b) The principal amount authorized at the election for the political subdivision from which the issue of bonds is being sold.

E. Any net premium used as provided in subsection D, paragraph 3 of this section shall be amortized for all debt limitation purposes on a pro rata basis each year by multiplying the net premium used by a percentage equal to the percentage of the total principal amount of the bond issue that matures in that year.

F. For the purposes of this section:

1. "Net premium" means the difference between the par amount of the bond issue and the bond issue price determined pursuant to United States treasury regulations.

2. "Online bidding process" means a procurement process in which the governing body receives bids electronically over the internet in a real-time, competitive bidding event.

§ 35-458 Levy of tax for payment of bonds; security

A. After the bonds are issued, the governing body or board shall enter on its minutes a record of the bonds sold and their numbers and dates, and shall annually levy and cause to be collected a tax, at the same time and in the same manner as other taxes are levied and collected on all taxable property in the political subdivision, sufficient to pay the annual interest on the bonds when due, and shall likewise annually levy a tax sufficient to redeem the bonds when they mature. The annual levy shall not exceed the net amount necessary to meet annual payments of principal and interest, projected payments of principal and interest on new debt planned for the ensuing year, a reasonable delinquency factor, including an amount necessary to correct prior year errors or shortages in the levy, if applicable, and any expenses and fees required in conjunction with the authorization pursuant to section 35-512. The levy shall be the net of all cash in excess of ten percent of the annual payments of principal and interest in the current fiscal year from the previous year remaining in the fund or funds prescribed by subsection B of this section.

B. Monies derived from the levy of the tax when collected shall constitute a fund for payment of interest and the bonds. The fund shall be kept separately and shall be known as the "interest fund" and "redemption fund", or the two funds may be combined into a single "interest and redemption fund".

C. All bonds, heretofore and hereafter issued, are secured by a lien on all revenues received pursuant to the tax levy. The lien arises automatically without the need for any action or authorization by the political subdivision or the political subdivision's governing body or board. The lien is valid and binding from the time of the issuance of the bonds. The revenues received pursuant to the levy of the tax are immediately subject to the lien. The lien attaches immediately to the revenues and is effective, binding and enforceable against the political subdivision, the political subdivision's successors, transferees and creditors and all other parties asserting rights in the revenues, irrespective of whether the parties have notice of the lien, without the need for any physical delivery, recordation, filing or further act.

§ 35-458.01 Commercial paper; variable rate bonds; compound interest bonds; bonds subject to tender

A. Bonds issued by a city or town may bear interest at any rate or rates not in excess of the maximum voted rate, payable at the times determined by the governing body, provided that each such bond may be evidenced by one instrument, or if commercial paper by a succession of instruments each bearing interest payable only at maturity. Bonds issued under this section shall be subject to the following:

1. The bonds may bear interest at a fixed or variable rate or any combination thereof, none of which exceeds the maximum voted rate.

2. A variable rate shall be based on any objective measure of the current value of money borrowed such as the announced prime rate of a bank, the rates borne by obligations of the United States or an index or other formula provided for by the governing body. The governing body shall employ a recognized agent in municipal bonds to market and remarket the bonds or commercial paper issued and to establish an interest rate in accordance with the approved index or formula.

3. The governing body may grant to the owner of any bond a right to tender, or may require the tender of, such bond for payment or purchase at one or more times before maturity and, in such event, shall enter into appropriate agreements with any bank, financial institution, insurance company or indemnity company for purchase of bonds so tendered. Such agreement may provide that while the bonds are held by the bank, financial institution, insurance company or indemnity company the bonds may bear interest at a rate higher than when the bonds are held by other owners, but not in excess of the maximum voted rate.

4. If bonds are tendered before maturity under an agreement to pay for or purchase bonds when tendered, the city or town may provide for the purchase and resale of such bonds pursuant to the tenders without extinguishing the indebtedness represented by them or incurring new indebtedness on the resale, whether or not such bonds are represented by the same instruments when purchased as when resold.

5. Compensation for the resale of the bonds shall not be based on or measured by the difference between the price at which the bonds are purchased and the price at which they are resold.

B. The governing body may contract with a bank, financial institution, insurance company or indemnity company to provide additional security for the bonds in the form of a line of credit, letter of credit, insurance policy or other security, may pay the costs of such additional security from amounts provided in the bond issue or from other available sources and may enter into reimbursement obligations in connection therewith, subject to the following:

1. Any reimbursement obligation entered into with the bank, financial institution, insurance company or indemnity company shall not provide for the payment of interest in excess of the maximum voted rate. The reimbursement obligation does not constitute separate indebtedness of the city or town but is payable from the same source as the bonds, or from other available revenues, as determined by the governing body.

2. Administrative costs related to the reimbursement obligation may be deducted from bond proceeds or may be treated as interest, and these costs may be added to and paid from the proceeds of taxes levied to pay interest on the bonds, subject to the maximum rate and amount approved by the voters.

C. If the bonds are issued as commercial paper or bear interest at a variable rate, taxes shall be levied for the payment of principal and interest on such bonds based on the assumption that the bonds will bear interest at the maximum rate permitted under the terms of their issuance. If monies collected pursuant to such levy are more than sufficient to pay currently maturing principal and interest, the excess may be retained in the fund for the payment of interest and principal of the bonds and the next succeeding tax levy shall be reduced by the amount of the excess or the excess shall be used in whole or in part to pay the fees of any bank, financial institution, insurance company or indemnity company which has agreed to provide monies with which to buy bonds tendered for purchase or is providing additional security for the bonds.

D. Variable rate bonds and commercial paper may be sold at competitive public sale or at negotiated sale. Notwithstanding section 35-457, a competitive public sale may be accomplished pursuant to a notice of sale which states such terms and conditions as may be provided by the governing body. The governing body shall distribute the notice of sale in the manner deemed to be in the best interests of the city or town.

E. If the bonds are to be issued in the form of commercial paper the governing body shall first provide for the establishment of the schedule for the maturities of the bonds within the maximum period permitted by the voted proposition. The individual instruments representing the bonds shall mature over shorter periods and may be retired with proceeds of subsequent instruments, or with the proceeds of definitive bonds, but they shall be finally paid according to the schedule of bond maturities or earlier. Bonds issued in the form of commercial paper may be sold through an agent in the form of instruments which mature at intervals the agent determines to be most advantageous to the issuer after giving public notice to potential investors as determined by the governing body.

F. Bonds may be issued as compound interest bonds bearing interest payable only at maturity but compounded periodically until that date at a rate no higher than the maximum voted rate. Notwithstanding section 35-458, taxes to pay the compound interest shall be levied annually and accumulated as the interest accrues unless the compound interest bonds are part of an issue which is amortized according to a plan that calls for the payment of other bonds as to principal and interest in earlier years and in amounts which would at least equal the annual interest payments on such compound interest bonds at the rate or rates borne by the bonds.

§ 35-459 Redemption of bonds and coupons

A. When any bonds mature, the county treasurer, when the bonds have been issued by the county, the city or town treasurer, when the bonds have been issued by a city or town, or the fiscal officer of other political subdivisions shall give notice for four weeks in a newspaper published in the county of intention to redeem and the amount of such bonds. The redemption shall be made and all such bonds shall cease to draw interest at the expiration of four weeks after the date of the notice. If the bonds so called for redemption are not presented within three months from the date of the notice, the treasurer shall apply the money to the redemption of the bonds next in the order of the number of their issue.

B. The interest coupons when due and payable shall be delivered to the treasurer or proper fiscal officer, who shall pay them and write the word "canceled" across the face of the coupons. Such canceled coupons shall be the treasurer's receipt for their payment.

C. When any bonds are redeemed, the treasurer or proper fiscal officer shall in like manner mark them "canceled" on the face of the bonds over his signature, and deliver them to the clerk or secretary of the governing body, taking a receipt for the cancelled bonds. The clerk or secretary shall file the bonds in his office and report the redemptions to the governing body.

§ 35-460 Erection of buildings

If bonds for the purpose of erecting and furnishing a public building are authorized at the election, the board of supervisors for a county and the governing body of a city, town or other municipal corporation shall authorize the design and construction of the building in accordance with title 34.

§ 35-461 Payment of expenses of bond issues

The expenses of the proceedings provided for in this article shall be borne by the political subdivision instituting the proceedings. If the bonds authorized by this article are sold, the expenses thereof shall be deducted from the proceeds of the sale.

§ 35-462 Bonds; change of purpose; election; informational pamphlet; ballot

A. The governing body or board of a political subdivision may call an election to change the purposes for which the monies derived from the sale of bonds authorized at a prior bond election may be spent provided the bonds have not been issued.

B. The governing body or board shall order the election to be held and the election notice and procedures to be conducted in the manner prescribed by this article. An election called to change the purposes for which the monies may be spent may be held only on the first Tuesday following the first Monday in November.

C. At least thirty-five days before the election, the governing body or board shall mail a copy of an informational pamphlet to each household within the political subdivision that contains a registered voter. The pamphlet shall contain at least the following information:

1. The date of the election.

2. The polling location for the addressee.

3. The hours during the day when the polls will be open.

4. The purposes for which the bonds were issued, as described in the informational pamphlet mailed before the prior bond election pursuant to section 35-454.

5. The proposed new purposes for which the monies derived from the sale of bonds will be spent.

6. The proposed new projects and expenditures for which the monies derived from the sale of bonds will be spent.

7. Arguments for and against changing the purposes for which the monies derived from the sale of bonds may be spent.

D. The ballot shall contain the words "change capital improvements, yes" and "change capital improvements, no", and the voter shall signify the voter's desired choice.

Article 3.1 Tax Anticipation Notes

§ 35-465 Definitions

In this article, unless the context otherwise requires:

1. "City" means any city incorporated under the laws of this state. "City" also includes any town incorporated under the laws of this state.

2. "County" means any county now or hereafter in existence in the state.

3. "Fiscal year" means the period commencing on July 1 of any year and terminating on June 30 of the next succeeding year.

4. "Governing body" means the body constituted by law to be the legislative department of the taxing district.

5. "Municipal corporation" means any sanitary district, electrical district, irrigation district, hospital district or any other similar municipal corporation which is required by law to adopt a budget.

6. "School district" means any school district now or hereafter in existence in the state.

7. "State" means the state of Arizona.

8. "Taxes" means ad valorem taxes levied or to be levied by the taxing district in the fiscal year, sales taxes and transaction privilege taxes levied by the taxing district and all amounts returned to the taxing district by the state. The term "taxes" does not include ad valorem taxes levied to pay principal of or interest or redemption charges on any bonded indebtedness of the taxing district or sales or transaction privilege taxes which by law or contract must be used by such district for specified purposes, such as motor vehicle fuel taxes.

9. "Taxing district" means any city, county, school district or municipal corporation having the power to levy ad valorem taxes.

10. "Treasurer" means the treasurer of the taxing district or the ex officio tax collector of the taxing district.

§ 35-465.01 Tax anticipation notes

After a taxing district has adopted a budget for the current fiscal year as provided by law and the governing body thereof ascertains that the taxes to be received by such district will not be received in time to pay the district's projected expenses, as set forth in such budget, the governing body may issue and sell tax anticipation notes, the principal and interest on which are to be paid solely from the taxes estimated by such taxing district to be received for the current fiscal year and from the proceeds of the sale of such notes.

§ 35-465.02 Form of notes

The notes may be issued in one or more series, bear such dates, be in such denomination or denominations, mature on any date or dates occurring on or prior to the next July 31 following the end of the fiscal year in which the notes are issued, mature in such amount or amounts, bear interest at such rate or rates, be in such form and be executed in such medium of payment, be payable at such place or places, and be subject to such terms of redemption with or without premium as the resolution of the governing body authorizing the issuance of the notes may provide. The notes may be sold above, at or below par at either public or private sale. The term "public sale" shall include sale by either auction or sealed bid upon such terms, conditions and notice as the governing body may prescribe. The notes shall be fully negotiable for all purposes as set forth in title 47, chapter 3.

§ 35-465.03 Limitations on issuance of notes

The amount of such notes issued by such taxing district in any fiscal year shall not exceed ninety per cent of the aggregate of all uncollected taxes estimated to be received by the district for the fiscal year as shown by the current budget.

§ 35-465.04 Application of taxes; payment of notes

Upon the issuance of any tax anticipation notes all taxes which are pledged to pay the notes and which are thereafter received by the taxing district shall be collected and held in the manner set forth in the resolution authorizing the notes or the notes themselves. The resolution authorizing the issuance of the notes shall set forth a pledge of tax revenues describing the times and amount of taxes which must be set aside to repay the notes. Monies pledged to repay the notes shall be used to pay principal and interest on the tax anticipation notes in the manner provided in such resolution. These notes shall be paid on or before July 31 following the end of the fiscal year in which the notes are issued. Any other law to the contrary notwithstanding, this article shall be full authority for the payment when due, or for redemption in advance of maturity, of all principal and interest and redemption premiums on the notes.

§ 35-465.05 Investment of tax anticipation note proceeds; period of investment covenants

A. Tax anticipation note proceeds and taxes pledged to repay the tax anticipation notes may be invested by the treasurer in any securities or deposits eligible for investment of public monies pursuant to chapter 2, article 2.1 of this title or, if taxes, in the same manner such taxes could have been invested if the notes had not been issued.

B. A resolution pertaining to the issuance of tax anticipation notes may contain covenants prescribing the period that proceeds may be invested and the maximum yield on such investments during any period mentioned in the covenant.

C. Investment income received from tax anticipation note proceeds and taxes set aside to pay the tax anticipation notes shall be applied against the tax anticipation note interest expense incurred on the same tax anticipation notes as a reduction of the expenditure, except that the reduction of expenditure shall not exceed the amount of actual tax anticipation note interest expense. In making such calculation, taxing districts may combine the investment income from all series of tax anticipation notes issued within a fiscal year and also combine all tax anticipation note interest expense to be incurred from such issuance.

§ 35-465.06 Use of proceeds

The proceeds from the sale of the notes shall be paid into the treasury of the taxing district. The proceeds shall be used by the taxing district to pay the expenses of such district as set forth in the annual budget and to pay the expenses of the proceedings and the issuer's costs incurred for the administration of note repayment.

§ 35-465.07 Rights of holders

The holder of any anticipation note may, in the holder's own name and on the holder's own behalf, or on behalf of all of the holders of the notes, take whatever action may be necessary to compel the performance of any duty required by any section of this article.

Article 3.2 Grant Anticipation Notes

§ 35-466 Definitions

In this article, unless the context otherwise requires:

1. "Governing body" means the body constituted by law to be the governing board of the issuer.

2. "Grant agreement" means any written agreement entered into with the issuer and the United States of America or any of its departments or agencies by which the issuer will receive a grant or subvention for which the funds to be advanced have been appropriated to the department or agency making the grant and by which the issuer incurs no monetary liability to repay the grant or subvention except for the obligation to construct a project or projects.

3. "Grant anticipation notes" means notes authorized by this article and also notes to refund grant anticipation notes.

4. "Grant revenues" means any revenues the issuer will receive under a grant agreement, proceeds of grant anticipation notes and income and gain from investment of such revenues and proceeds.

5. "Issuer" means any city, charter city, town, county, sanitary district, electrical district, irrigation district, hospital district, improvement district or any other similar municipal corporation.

6. "State" means this state or any of its departments, agencies or authorities.

§ 35-466.01 Grant anticipation notes

After any issuer has entered into one or more grant agreements, its governing body may issue and sell grant anticipation notes, the principal and interest on which are to be paid solely from the grant revenues to be received under the terms of such grant agreement or agreements. The governing body may also issue grant anticipation notes to refund grant anticipation notes previously issued.

§ 35-466.02 Form of notes

The notes may be issued in one or more series, bear such dates, be in such denomination or denominations, mature on any date or dates not later than thirty days after the last date the grant revenues are to be received under the terms of the grant agreement or agreements, or within the period the governing body of the issuer expects to receive the grant revenues if no date for final receipt is set forth in the grant agreement, mature in such amount or amounts, bear interest at such rate or rates not exceeding twelve per cent per annum, be in such form and be executed in such medium of payment, be payable at such place or places and be subject to such terms of redemption with or without premium as the resolution of the governing body of the issuer authorizing the issuance of the notes may provide. The notes may be sold at not less than par at either public or private sale. The term "public sale" includes sale by either auction or sealed bid upon such terms, conditions and notice as the governing body of the issuer may prescribe. The notes shall be fully negotiable for all purposes as set forth in title 47, chapter 3.

§ 35-466.03 Limitations on issuance of notes

The amount of such notes secured by grant revenues issued by the issuer shall not exceed the aggregate of all uncollected grant revenues to be received by the governing body under the terms of the applicable grant agreement or agreements.

§ 35-466.04 Application of grant revenues; principal and interest redemption fund; payment of notes

Upon the issuance of any grant anticipation notes, all grant revenues received by the issuer pursuant to the applicable grant agreement shall be collected and paid into a special fund to be known as the grant anticipation note principal and interest redemption fund until such time as monies in the fund are sufficient to pay all principal and interest on the notes when due, or redeemed prior to maturity. All monies in the special fund shall be used to pay principal and interest on the grant anticipation notes and shall be used for no other purpose so long as the notes are outstanding. Any law to the contrary notwithstanding, this article shall be full authority for the payment when due, or for redemption in advance of maturity, if the notes so provide, of all principal and interest and redemption premiums on the notes from the monies in the special fund.

§ 35-466.05 Investment of note proceeds; period of investment covenants

A. Note proceeds may be invested in any of the following securities:

1. Bonds or other evidences of indebtedness of the United States of America or any of its agencies or instrumentalities when such obligations are guaranteed as to principal and interest by the United States of America or by any agency or instrumentality of the United States.

2. Bonds or other evidences of indebtedness of this state or any of the counties, incorporated cities or towns or duly organized school districts of this state.

3. Interest-bearing savings accounts or certificates of deposit of banks or savings and loan associations doing business in this state if such banks or savings and loan associations are insured by the federal deposit insurance corporation or the federal savings and loan insurance corporation. Amounts in excess of that covered by federal insurance shall be secured by the depository to the same extent and in the same manner as required by the general depository law of this state.

4. Deposits placed in accordance with the procedures prescribed in section 35-323.01.

B. A resolution pertaining to the issuance of notes may contain covenants prescribing the period that proceeds may be invested and the maximum yield on such investments during any period mentioned in the covenant and any other covenants deemed necessary or desirable by the governing body.

§ 35-466.06 Use of proceeds

The proceeds from the sale of the notes shall be paid into the treasury of the issuer and used by the issuer to defray the costs and expenses of the construction or acquisition of the project for which the grant or grants are being made, the legal and financial costs and expenses of issuing and administering the notes and, if desired by the governing body of the issuer, interest to accrue on the notes during their life.

§ 35-466.07 Rights of holders

The holder of any grant anticipation note may, in the holder's own name and on the holder's own behalf, or on behalf of all of the holders of the notes, take whatever action may be necessary to compel the performance of any duty required by any section of this article.

§ 35-466.08 Prohibition against obligating state or political subdivisions; payment from grant revenues

The state or any political subdivision shall not in any event be liable for the payment of the principal of or interest on any grant anticipation notes. Grant anticipation notes shall not be obligations of the state or any political subdivision and shall not constitute a debt, legal or moral, of the state or any political subdivision. The payment of the principal and interest on such notes shall not be made from or be enforceable against any funds of the state or a political subdivision other than grant revenues which have been paid into a grant anticipation note principal and interest redemption fund established pursuant to section 35-466.04. A holder of a grant anticipation note may not compel the payment of grant revenues to an issuer.

Article 3.3 Revenue Anticipation Notes

§ 35-467 Definitions

In this article, unless the context otherwise requires:

1. "City" means a city or town incorporated under the laws of this state.

2. "Fiscal year" means the period commencing on July 1 of any year and terminating on June 30 of the next succeeding year.

3. "Governing body" means the body constituted by law to be the legislative department of the taxing district.

4. "Municipal corporation" means a sanitary district, electrical district, irrigation district or hospital district or any other similar municipal corporation which is required by law to adopt a budget.

5. "Revenue" means any monies derived other than from grants, ad valorem taxes, sales taxes or transaction privilege taxes or from this state. Revenue does not include monies received by a municipal corporation which are restricted in their use or application by law.

6. "Taxing district" means a city, county, school district or municipal corporation having the power to levy ad valorem taxes.

§ 35-467.01 Revenue anticipation notes

After a taxing district has adopted a budget for the fiscal year as provided by law and the governing body determines that the revenues to be received by the district will not be received in time to pay the district's projected expenses as set forth in the budget, the governing body may issue and sell revenue anticipation notes. The principal and interest on the revenue anticipation notes shall be paid solely from the revenues estimated by the taxing district to be received within that fiscal year.

§ 35-467.02 Form of notes; definition

Revenue anticipation notes may be issued in one or more series, bear such dates, be in such denomination or denominations, mature on any date or dates occurring on or before the last day of the fiscal year, mature in such amount or amounts, bear interest at such rate or rates, be in such form and be executed in such medium of payment, be payable at such place or places and be subject to such terms of redemption with or without premium as the resolution of the governing body authorizing the issuance of the notes provides. The notes may be sold at not less than par at either public or private sale. "Public sale" means sale by either auction or sealed bid on such terms, conditions and notice as the governing body prescribes. The notes shall be fully negotiable for all purposes in accordance with the provisions of title 47, chapter 3.

§ 35-467.03 Limitations on issuance of notes

The amount of revenue anticipation notes issued by a taxing district in any fiscal year shall not exceed fifty per cent of the aggregate of all uncollected revenues estimated to be received by the district in the fiscal year as shown by the budget. Such revenues shall be limited to assessments, charges, fees or other revenues derived from or associated with facilities existing and operating at the time the revenue anticipation notes are sold.

§ 35-467.04 Application of revenues, principal and interest redemption fund; payment of notes

After the issuance of any revenue anticipation notes all revenues received by the taxing district shall be collected and paid into a special fund to be known as the revenue anticipation note principal and interest redemption fund until such time as monies in the fund are sufficient to pay when due all principal and interest on the notes. All monies in the special fund shall be used to pay principal and interest on the revenue anticipation notes and shall be used for no other purpose. Notwithstanding any other provision of law, this article is the only authority for the payment when due, or for redemption in advance of maturity, of all principal and interest and redemption premiums on the notes from monies in the special fund.

§ 35-467.05 Investment of note proceeds; period of investment covenants

A. Note proceeds may be invested in any of the following:

1. Bonds or other evidences of indebtedness of the United States or any of its agencies or instrumentalities if such obligations are guaranteed as to principal and interest by the United States or by the agency or instrumentality.

2. Bonds or other evidences of indebtedness of this state, counties, cities, towns or school districts.

3. Interest-bearing savings accounts or certificates of deposit of banks or savings and loan associations doing business in this state if such banks or savings and loan associations are insured by the federal deposit insurance corporation or the federal savings and loan insurance corporation. Amounts in excess of those covered by federal insurance must be secured by the depository to the same extent and in the same manner as required by the general depository law of this state.

4. The local government pooled investment fund established pursuant to section 35-326.

5. Deposits placed in accordance with the procedures prescribed in section 35-323.01.

B. A resolution pertaining to the issuance of notes may contain covenants prescribing the period that proceeds may be invested and the maximum yield on such investments during any period mentioned in the covenant.

§ 35-467.06 Use of proceeds

The proceeds from the sale of revenue anticipation notes shall be paid into the treasury of the taxing district. The proceeds shall be used by the taxing district to defray the expenses of the district as set forth in the annual budget.

§ 35-467.07 Rights of holders

The holder of a revenue anticipation note, in the holder's name and on the holder's behalf or on behalf of all of the holders of the notes, may take action necessary to compel the performance of any duty required by this article.

§ 35-467.08 Prohibition against obligating state or political subdivisions; payment from revenues

This state or a political subdivision is not liable for the payment of the principal or interest on any revenue anticipation notes. Revenue anticipation notes are not obligations of this state or a political subdivision and do not constitute a debt, legal or moral, of this state or a political subdivision. The payment of the principal and interest on such notes shall not be made from or be enforceable against any monies of this state or a political subdivision other than revenues which have been paid into a revenue anticipation note principal and interest redemption fund established pursuant to section 35-467.04. A holder of a revenue anticipation note shall not compel the payment of grant revenues to an issuer.

Article 3.4 Bonds Secured by Water Transportation Revenues

§ 35-468 Definitions

In this article, unless the context otherwise requires:

1. "Bond" means a bond authorized and issued under this article.

2. "Political subdivision" means any county, school district, community college district or special taxing district organized under title 48 in which remote municipal property, as defined in section 42-15251, is located.

3. "Water transportation revenues" means monies received by a political subdivision pursuant to section 9-433.

§ 35-468.01 Bonds secured by water transportation revenues

A. If a majority of the electors of a political subdivision voting at an election held pursuant to either article 3 of this chapter or title 15, chapter 4, article 5 authorizes the issuance of bonds, the political subdivision may issue the bonds so authorized either in the manner provided in this article or the manner prescribed by the article under which the election was authorized.

B. Bonds having an aggregate principal sum that exceeds the political subdivision's debt limit as set forth in article IX, section 8, Constitution of Arizona, may nonetheless be issued pursuant to this section if an amount equal to all principal in excess of the debt limit and all interest on that portion of principal is payable solely from water transportation revenues pledged by the political subdivision to payment of principal and interest on the bonds.

C. On sale of the bonds, a schedule shall be filed with the treasurer of the issuer showing the amounts of principal and interest to be paid at each principal and interest payment date. The schedule shall prorate each payment between the amounts to be paid from taxes and the amounts paid from water transportation revenues. The governing body may use any reasonable method of allocation as long as the total principal amount to be paid from ad valorem taxes computed as of the date of initial issuance of the bonds does not exceed the political subdivision's debt limit.

D. The political subdivision may pledge all or any part of the water transportation revenues it will thereafter receive to the payment of an amount of the debt service on the bonds equal to the principal and interest on the bonds that are not payable from taxes. This pledge constitutes an irrevocable assignment to the officer charged with paying the bonds that is binding on the political subdivision. No notice of the assignment need be filed or recorded and no public notice of any nature is required to make the pledge effective against any person claiming an interest in the water transportation revenues except a holder of the bonds. On receipt of any payment of water transportation revenues, the officer shall cause a sufficient portion of the amount received to be deposited in the redemption fund and interest fund established under section 35-468.03 pertaining to the bonds.

E. No bondholder may claim a preference as to source of payment over any other bondholder of the same series.

F. Neither a bondholder nor a political subdivision has any right or claim to receive payment from a city or town that makes payments relating to remote municipal property under title 9, chapter 4, article 3.

§ 35-468.02 Issuance of bonds

A. The governing body of the political subdivision shall authorize and issue the bonds, except that the board of supervisors of the county where a school district is located, or the larger portion of a school district, if the district is located in more than one county, shall act as the governing body of the school district solely for the purpose of selling, authorizing and issuing bonds of the school district. The bonds are fully negotiable within the meaning and for all purposes provided by title 47.

B. The bonds may be issued in one or more series, bear such dates, be payable in such medium of payment and at such places, bear such rates of interest, including variable rates, carry such registration privileges and prior redemption provisions, be executed in such manner, contain such other terms, covenants and conditions and be in such form as the governing body of the political subdivision may prescribe. The bonds shall be sold at, above or below par in such manner as the governing body may determine.

C. The portion of the principal of the bonds payable from water transportation revenues shall not be construed to be a debt of the political subdivision.

§ 35-468.03 Supplemental tax levy; interest fund; redemption fund

A. After the bonds are issued, the governing body or board issuing the bonds shall annually levy and cause to be collected a tax, at the same time and in the same manner as other taxes are levied and collected on all taxable property in the political subdivision, sufficient to pay the interest on the bonds when due and shall likewise annually levy a tax sufficient to pay the bonds at maturity, in each instance net of amounts to be paid from water transportation revenues so that the levy does not exceed the amount required to pay debt service on the bonds to be paid from taxes pursuant to the schedule filed under section 35-468.01, subsection C. Monies derived from the levy of the tax when collected shall be deposited in the interest fund and the redemption fund pertaining to the bonds.

B. The treasurer of the political subdivision issuing the bonds shall establish an interest fund and a redemption fund for paying the bonds. The treasurer shall deposit into such funds revenues received from taxes and water transportation revenues in amounts sufficient to pay the interest and principal of such bonds next maturing. The funds shall be used solely to pay principal and interest on the bonds.

§ 35-468.04 Pledge of revenues to secure debt instruments

Notwithstanding any other provision of this article, a political subdivision that receives water transportation revenues may pledge, by separate covenant included in the resolution authorizing the issuance of any bonds under this article or obligations it may incur, future receipts of such revenues to the payment of those bonds or obligations. The resolution authorizing those bonds or obligations may also provide for the assignment of such revenues to a trustee or paying agent for the purpose of securing the bonds. The pledge may be included in the resolution whether or not a reference to the pledge was included in the ballot submitted to the electorate of the political subdivision at the election authorizing the issuance of the bonds or obligations.

§ 35-468.05 Agreement of state

This state pledges to and agrees with the holders of the bonds that this state will not limit, alter or impair the rights vested in any political subdivision under this article to receive the monies, including water transportation revenues or an equivalent source, necessary to produce sufficient revenue to fulfill the terms of any agreements made with the holders of the bonds, or in any way impair the rights and remedies of the bondholders, until all bonds issued under this article, together with interest, including interest on any unpaid installments of interest, and all costs and expenses in connection with any action or proceedings by or on behalf of the bondholders are fully met and discharged. The political subdivision may include this pledge and undertaking in its resolutions and indentures securing its bonds under this article.

§ 35-468.06 Bonds as obligation of political subdivision

Bonds issued under this article are obligations of the issuing political subdivision, are payable only according to their terms and are not general, special or other obligations of this state. The bonds do not constitute a legal debt of this state and are not enforceable against this state. Payment of the bonds is not enforceable out of any state monies other than the revenue pledged and assigned to, or in trust for the benefit of, the holders of the bonds.

§ 35-468.07 Supplemental law

This article is supplemental and alternative to any other provision of law that also enables a political subdivision to issue bonds.

Article 4 Refunding County and Other Municipal Indebtedness

§ 35-471 Refunding bonds; resolution authorizing issuance; definition

A. The board of supervisors, on behalf of the county, the governing body of a city or town or similar municipal corporation and a school district governing board may issue refunding bonds to refund the bonded indebtedness of such county, school district, city or town or other similar municipal corporation when it is expedient to do so.

B. The board of supervisors or other governing body desiring to issue refunding bonds shall adopt and include in its minutes a resolution stating:

1. The facts and determination of the necessity or advisability of refunding such bonded indebtedness, including an estimate of the present value of the debt service savings, net of all costs associated with the refunding bonds, that will occur.

2. The amount of bonds to be issued, the date of such bonds and the denominations.

3. The rate of interest and the maturity date.

4. The place of payment, within or without the state, of the principal and interest.

C. The amount of net premium associated with a refunding bond issue may be used only for one or more of the following:

1. To fund the escrow account to pay the bonds to be refunded.

2. To pay the costs incurred in issuing the refunding bonds.

3. As a deposit in a debt service fund and used to pay interest on the bonds.

D. If the net premium associated with a refunding bond issue is used to fund the escrow account to pay the bonds to be refunded and the principal amount of the refunding bonds is less than the principal amount of the bonds being refunded, the difference between such principal amounts reduces the available aggregate indebtedness capacity of the political subdivision under the constitution and statutes of this state in an equal amount, provided that the difference in the amounts may not exceed the aggregate available indebtedness capacity of the political subdivision. The difference in principal amount will not cause any increase or decrease in the principal amount authorized pursuant to any bond election. Any net premium used as provided in this subsection shall be amortized for all debt limitation purposes on a pro rata basis each year by multiplying the net premium used by a percentage equal to the percentage of the total principal amount of the bond issue that matures in that year.

E. For the purposes of this section, "net premium" means the difference between the par amount of the bond issue and the bond issue price determined pursuant to United States treasury regulations.

§ 35-472 Form and contents of bonds; payment of principal and interest

A. The refunding bonds shall be negotiable in form, executed in the name of the county, school district, city or town or similar municipal corporation, signed by the chairman of the governing board or body, countersigned by the county or municipal treasurer, sealed with the seal of the county or municipality and attested by the clerk.

B. The principal and interest of the bonds shall be payable at the office of the county or municipal treasurer or at such other place as designated in the bonds and coupons, at the option of the holder.

§ 35-473 Limitation on issuance of refunding bonds

A. Notwithstanding the provisions of section 35-426 through section 35-429, or any other provision of law to the contrary, no bonds shall be issued by or on behalf of any county, school district, city or town, or other municipal corporation or political subdivision of the state for the purpose of calling or redeeming outstanding bonds which have not matured or which are not callable for redemption under the express provisions of the proceedings authorizing such bonds, but if the holder or holders of all or any portion of such bonds first consent thereto in writing, refunding bonds may be issued for the purpose of redeeming the bonds held by such consenting holder or holders.

B. Refunding bonds issued in advance of maturity of the bonds to be refunded shall only be issued in the manner set forth in section 35-473.01.

§ 35-473.01 Refunding bonds issued in advance of maturity of the bonds to be refunded; definition

A. Refunding bonds, designated as such, may also be authorized, issued and sold pursuant to this article for the purpose of refunding any bonds theretofore issued under the authority of article 3 of this chapter or under the authority of both article 3 of this chapter and title 9, chapter 5, article 3 or under the authority of title 15, chapter 4, article 5 and chapter 9, article 7 or by any political subdivision that is a public, corporate body under the laws of this state the property of which is exempt from taxation, for the purpose of refunding any bonds, theretofore issued under authority of law and payable from the proceeds of taxes, including assessments, which may be levied annually at uniform rates and are secured by property subject thereto in the political subdivision, in advance of the maturity or call date of such bonds to be refunded. If the weighted average maturity of the refunding bonds is at least seventy-five percent of the weighted average maturity of the bonds being refunded, no election on the issuance of the refunding bonds shall be required. If the refunding bonds are combined into a single issue with bonds authorized for nonrefunding purposes, the bonds so authorized for nonrefunding purposes shall have been submitted at an election as otherwise provided by law.

B. When refunding bonds issued pursuant to this section are sold, the net proceeds shall be invested in obligations issued by or guaranteed by the United States government, if these investments will mature with interest so as to provide funds to pay when due, or called for redemption, the bonds to be refunded together with interest thereon and redemption premiums, if any, and such proceeds or obligations shall, and other funds legally available for such purposes may, be deposited in the respective principal and interest redemption funds and shall be held in trust for the payment of the refunded bonds with interest and redemption premiums, if any, on maturity or upon an available redemption date or on an earlier voluntary surrender with the consent of the issuer.

C. For bonds that are issued to refund outstanding bonds that are issued before September 1, 2016, in advance of the maturity dates of such bonds, the holder of the refunding bonds shall rely on the sufficiency of the funds or securities held in trust for the payment of the refunded bonds. The issuance of refunding bonds shall in no way infringe on the rights of the holder of the refunded bonds to rely on a tax levy for the payment of principal and interest on the refunded bonds if the investments in the redemption funds prove insufficient. The total aggregate of taxes levied to pay principal and interest on the refunding bonds in the aggregate shall not exceed the total aggregate principal and interest to become due on the refunded bonds from the date of issuance of the refunding bonds to the final date of maturity on the bonds being refunded. Subject to such limitation, taxes in an amount sufficient to pay the interest on all refunding bonds issued pursuant to this section, then outstanding, the installments of the principal thereof becoming due and payable in the ensuing year, and the annual portion of such sinking fund as may be set up for retirement thereof, shall be levied, assessed and collected as other taxes of the political subdivision and the proceeds therefrom kept in a special fund and used only for the purposes for which collected.

D. For bonds that are issued to refund or refinance bonds that are issued from and after August 31, 2016, in advance of the maturity dates of such bonds, the holder of the refunded bonds shall rely on the sufficiency of the funds or securities held in trust for the payment of the refunded bonds. To the extent that payment of amounts on the refunded bonds is provided for by the deposit of funds and securities held in trust for the payment of the refunded bonds, all obligations of the political subdivision to levy a tax for the payment of such amounts shall cease and terminate. The refunded bonds shall in no way infringe on the rights of the holders of the refunding bonds to rely on a tax levy for the payment of principal of and interest on the refunding bonds if the investments in the redemption funds prove insufficient. The total aggregate of taxes levied to pay principal of and interest on the refunding bonds in the aggregate shall not exceed the total aggregate principal and interest to become due on the refunded bonds from the date of issuance of the refunding bonds to the final date of maturity on the bonds being refunded. Subject to such limitation, taxes in an amount sufficient to pay the interest on all refunding bonds issued pursuant to this section, then outstanding, the installments of the principal thereof becoming due and payable in the ensuing year, and the annual portion of such sinking fund as may be set up for retirement thereof, shall be levied, assessed and collected as other taxes of the political subdivision and the proceeds therefrom kept in a special fund and used only for the purposes for which collected.

E. Proceedings pursuant to this section shall be had by the board or boards that would be authorized to issue and sell the bonds to be refunded if such bonds were then to be issued and sold. The refunding bonds to be issued pursuant hereto may be of serial, including semiannual, or term maturities payable at any time on or before the maximum maturity date otherwise authorized by this article, and the provisions relating to execution, validity, records, place of payment and payment, cancellation and destruction on maturity of the bonds to be refunded shall apply to such refunding bonds.

F. Refunding bonds to be issued pursuant to this section may be combined with bonds otherwise authorized, provided that they are of equal priority.

G. The powers conferred by this section are in addition to, and not in substitution of, and the limitations imposed by this section shall not affect the powers conferred by any other law.

H. The amount of net premium associated with a refunding bond issue may be used only for one or more of the following:

1. To fund the escrow account to pay the bonds to be refunded.

2. To pay the costs incurred in issuing the refunding bonds.

3. As a deposit in a debt service fund and only to pay interest on the bonds.

I. If the net premium associated with a refunding bond issue is used to fund the escrow account to pay the bonds to be refunded and the principal amount of the refunding bonds is less than the principal amount of the bonds being refunded, the difference between such principal amounts reduces the available aggregate indebtedness capacity of the political subdivision under the constitution and statutes of this state in an equal amount, provided that the difference in the amounts may not exceed the aggregate available indebtedness capacity of the political subdivision. The difference in principal amount will not cause any increase or decrease in the principal amount authorized pursuant to any bond election. Any net premium used as provided in this subsection shall be amortized for all debt limitation purposes on a pro rata basis each year by multiplying the net premium used by a percentage equal to the percentage of the total principal amount of the bond issue that matures in that year.

J. For the purposes of this section, "net premium" means the difference between the par amount of the bond issue and the bond issue price determined pursuant to United States treasury regulations.

§ 35-474 Levy of tax for payment of bonds; security

A. The board of supervisors, on behalf of the county or a school district in the county, or the governing body or board of a municipal corporation that has issued refunding bonds shall levy, during each year in which the bonds are outstanding, a tax on all property in the political subdivision for which the bonds are issued, sufficient to pay the annual interest on all bonds then outstanding and the annual installment of the principal thereof becoming due and payable in the next ensuing year. The annual levy shall not exceed the net amount necessary to meet annual payments of principal and interest, projected payments of principal and interest on new debt planned for the ensuing year, a reasonable delinquency factor, including an amount necessary to correct prior year errors or shortages in the levy, if applicable, and any expenses and fees required in conjunction with the authorization pursuant to section 35-512. Such taxes shall be levied, assessed and collected at the same time and in the same manner as other taxes are levied, assessed and collected. The proceeds of the taxes shall be kept in a special segregated fund and shall be used only for the purpose for which collected.

B. All bonds, heretofore and hereafter issued, are secured by a lien on all revenues received pursuant to the tax levy. The lien arises automatically without the need for any action or authorization by the political subdivision or the political subdivision's governing body or board. The lien is valid and binding from the time of the issuance of the bonds. The revenues received pursuant to the levy of the tax are immediately subject to the lien. The lien attaches immediately to the revenues and is effective, binding and enforceable against the political subdivision, the political subdivision's successors, transferees and creditors and all other parties asserting rights in the revenues, irrespective of whether the parties have notice of the lien, without the need for any physical delivery, recordation, filing or further act.

§ 35-475 Exchange or sale of bonds; record of bonds paid or retired

A. The refunding bonds may be exchanged in like amount for the bonds to be refunded, or they may be sold by the governing board or body at not less than par and accrued interest, and the proceeds applied to the purpose for which the bonds were issued.

B. The governing board or body shall keep a record disclosing the date, number, amount and maturity of each bond, the payments of interest or principal thereon, and its destruction when paid or retired. All bonds paid and retired shall be burned and destroyed by the governing board or body.

Article 4.1 Summary Sale of Property for Special Assessment Default

§ 35-481 Applicability

A. The provisions of this article shall be applicable when installments of principal and interest of a special assessment in a specific amount secured by a lien on property and on the security of which bonds shall have been issued either collectible in the manner and by the officers provided for the collection and enforcement of the general taxes levied by a municipality or district only, or which may be collectible by such method and for which a resolution providing for such collection shall have been adopted.

B. Notwithstanding any provision of law to the contrary relating to, or any informalities, illegalities or irregularities in the collection of such installments, the remedy provided by this article shall be available, in addition to the other remedies provided by law, in the collection of delinquent installments.

§ 35-482 Summary sale of delinquent property

A. As a cumulative remedy, if any installment is delinquent, the governing body may order the summary sale of the property as provided in this section.

B. The order of the governing body shall identify the property and shall state the amount of the delinquent installments for which the property is to be sold.

C. Notice of such order shall be mailed to the owners of the property to be sold as their names and addresses appear on the last equalized tax roll or as filed with the superintendent or as known to the clerk, within twenty days of such order.

D. In the case of a municipality, section 48-601, section 48-603, subsection A, section 48-604, section 48-605, subsections A and B, and sections 48-606 and 48-607, and in the case of a district including a flood protection district, section 48-939, section 48-941, subsection A, section 48-942, section 48-943, subsections A and B, and sections 48-944 and 48-945, shall be applicable, except that the list of assessments of delinquent property ordered sold shall be published within twenty days of the order for sale, the notice appended to same shall make no provision for declaring the whole amount of the assessment due, redemption may be had prior to sale by paying the delinquent amounts, together with interest, penalties and charges then due, and the amounts for which property is sold shall include, in addition to interest and penalties, the delinquent installments and charges for costs of the tax delinquency and summary sale proceedings.

E. The purchaser at a summary sale, as to assessments, shall take the property subject to all unpaid installments, interest and penalties under the same proceeding, to all public improvement assessments and installments which shall not be subordinate thereto, and to any contingent or supplemental obligations for deficiencies.

F. On the summary sale of a lot, acre or parcel subject to an assessment lien levied by a flood protection district, if there are no offers to purchase the assessment lien, the lot, acre or parcel shall be struck off to the municipality or district without any payment being made by the flood protection district, and the district shall be deemed the purchaser and shall be vested with all remedies that a purchaser at the sale would have obtained. In addition, the district or municipality may bring a judicial action to foreclose the delinquent assessment lien at any time after it becomes the purchaser. Such action shall be filed in the superior court in the county in which the district and the assessed lot, acre or parcel are located, and shall be prosecuted by the district in the same manner and with the same results as the foreclosure of a mortgage or other lien on real property. This subsection shall not be construed to change the priority of the assessment lien levied by a flood protection district, and such a lien shall remain a first lien, subject only to the lien for general taxes.

G. This section applies to a flood protection district that levies assessments pursuant to title 48, chapter 18, article 11.

§ 35-483 Option to accelerate upon delinquency

A. If any installment is delinquent, the governing body may order that the whole of the unpaid principal amount of the assessment become immediately due and payable, and be collected by summary sale proceedings pursuant to section 35-482.

B. If such order is made, the amount for which the property is to be sold shall include, in addition to the delinquent installments, penalties, interest and charges, the other amounts necessary to prepay such assessment in full computed pursuant to applicable law.

C. If such order is made, the owner or persons interested may, at any time prior to sale, pay the delinquent installments, with interest, penalties and charges, and thereupon be restored to the right thereafter to pay in installments in the same manner as if default has not occurred, and the amount of interest, penalties and charges which shall accrue shall be unaffected by exercise of the option to accelerate hereby provided.

D. Notices pursuant to section 35-482 shall, when the option to accelerate has been exercised, so state and shall state the unpaid principal balance of the assessment for which the property is to be sold.

Article 5 Registration and Payment of Bonds

§ 35-491 Registration of bonds; payment of principal and interest; paying agent; security for deposits; record date; definition

A. Bonds of this state, any department, agency or instrumentality of this state or any political subdivision, municipal corporation or other entity authorized by statute to issue bonds may be issued in a form that is registrable as to the principal or as to both principal and interest by a registrar designated by the issuer for such a purpose or may be in book entry form on the books of the registrar. In the case of entities for which bonds are issued by other bodies, the issuing body shall employ registrars, transfer agents or paying agents if requested to do so by the governing body of the entity or entities obligated to repay the bonds. All costs incurred due to employing registrars or paying agents are the liability of the entity or entities obligated to repay the bonds. The costs may be paid from bond proceeds.

B. Evidence of registration shall be entered in a bond register, disclosing the name of the holder, the number and amount of the bond, the date of registry and other information deemed necessary. If required by the proceedings authorizing the issuance of the bonds, the registrar shall endorse on the bond a certificate, signed by the registrar, that the bond is registered and that the principal or principal and interest are payable to the registered holder only, naming the registered holder or the registered holder's legal representative.

C. Notwithstanding any provision of law pertaining to the authorization and issuance of any bond, in addition and supplemental to the form of bond prescribed in such law, the issuer may prescribe a form of bond that meets the provisions of this section.

D. Notwithstanding any provision of law pertaining to the authorization and issuance of any bond, the governing body that authorizes the issuance of any bond may prescribe that the bond be executed by one or more facsimile signatures of designated officials. The governing body of the issuer may provide that a bond be authenticated by the registrar or by an authorized officer of the registrar.

E. The issuer may provide for paying principal of or principal and interest on any bond by check or warrant drawn on either the treasurer of the issuer or on a paying agent and may provide for mailing the check to the registered owner or for wire or other electronic transfer of monies to the registered owner. An issuer may contract with one or more banks or trust companies as paying agents and a registrar for any issue or series of bonds and may pay the costs either from bond proceeds or current revenues collected by the issuer. All banks and trust companies shall pledge assets to secure the deposits made for the purpose of paying either principal of, interest on or both principal and interest on any series of bonds.

F. The proceedings for the issuance of any bond may provide for setting a record date before each date set to pay principal or interest. The record date is then the date the registrar shall use to determine the ownership of the bonds for the next payment of principal or interest.

G. For the purposes of this article, "registrar" includes the recorder, secretary or clerk of the issuer or any other entity designated by the issuer to act as the registrar.

§ 35-492 Reregistration or cancellation of registry of bond

A. The registered holder of a bond may, either in person or by a bank or trust company authorized to do business in this state, present the bond to the registrar with a written request endorsed on the bond that the bond be registered in the name of another person or that the registry be canceled and the bond be again made payable to bearer. Upon such request the registrar shall cancel the former registration and register the bond in the name of the person designated in the request and shall endorse upon the bond a certificate as required of an original registration. If the bond may be and the owner requests that it be made payable to bearer, the registration shall be canceled and the certificate upon the bond shall declare that the bond is payable to bearer. The registrar shall keep a record thereof in a book provided for that purpose.

B. The proceedings pertaining to the issuance of any bond may prohibit its issuance or registration in bearer form.

§ 35-493 Collection and payment of bond through bank or trust company; effect

The proceedings authorizing any bond may permit the registered holder of the bond to authorize any bank or trust company authorized to do business in this state to present the bond to the treasurer, finance director or paying agent of the issuer for payment of the principal thereof, or, if the obligor has a fiscal agent without this state, the obligor may authorize any bank or trust company doing business where such agent is located to make the presentment. Payment to such bank or trust company constitutes payment and satisfaction of the indebtedness.

§ 35-494 Contracts as long-term obligations

Contracts employing registrars and paying agents made pursuant to this article are deemed to be long-term obligations within the meaning of article IX, sections 18 and 19, Constitution of Arizona.

§ 35-495 Supplemental nature of article

If the provisions of this article are inconsistent with any other provision of law, in order to prescribe a form of bond which will comply with the tax equity and fiscal responsibility act of 1982 (P.L. 97-248), the provisions of this article are controlling. The powers conferred by this article are in addition and supplemental to the powers conferred by any other law.

Article 6 Recording State, County and Municipal Bonds

§ 35-501 Records of bond issues; debt-level analysis and report; definitions

A. On or before June 30 of each year, the department of administration shall ascertain and record in its office all issues of bonds, certificates of participation or other securities issued for a term in excess of one year by this state or a county, city, town, school district, irrigation district, other political subdivision or municipal property corporation within this state. The record shall show the date of issuance, amount, denomination, rates of interest, maturity, dates of the bonds, certificates of participation or securities and other information the department of administration requires.

B. The reports relating to the issuance of bonds and securities required under subsection A of this section shall be filed with the department of administration within sixty days after the issuance and shall contain the following information:

1. The par amount of the bonds or securities.

2. The interest rate, by maturity of the bonds or securities.

3. The repayment schedule, showing both principal and interest for the issue.

4. The sources of repayment.

5. The original issue price and any premium or discount, by maturity, for the issue.

6. A detailed listing of all issuance costs, regardless of source of payment, including underwriter's compensation, bond counsel fees, financial advisor fees, verification agent fees, placement agent fees, investment securities brokerage fees, registrar fees, trustee fees, credit enhancement fees, rating agency fees, printing costs, registration fees, transfer and recording fees and any other costs directly or indirectly earned or paid as a result of the issuance of the bonds or securities, as determined by the department of administration.

7. The total amount of parity bonds or securities outstanding, including the issue, at the time of issuance.

8. The total amount of any bonds or securities, senior or subordinate to the issue outstanding at the time of issuance.

9. The amount of any constitutional or statutory limitation on the issuance of bonds or securities of the type issued.

10. The remaining amount of bonds or securities that may be issued within the limitation determined in paragraph 9 of this subsection.

11. The amount of any constitutional or statutory voter authorization applicable to the issuance of bonds or securities of the type issued.

12. The remaining amount of bonds or securities that may be issued within the authorization determined in paragraph 9 of this subsection.

13. Any other similar or related information the department of administration may determine.

C. The department of administration shall include the following information in the reports prescribed by subsection B of this section:

1. A list of each lending program and credit support program and the statutory or other authority for each program.

2. The total dollar amount of all monies offered pursuant to lending programs, specified by program.

3. The total dollar amount of all debts guaranteed or to which credit enhancements are given pursuant to credit support programs, specified by program.

4. An estimate of the cost of likely defaults on lending programs and credit support programs, specified by program. If practicable, the department shall use recognized standard accounting practices in the private sector to evaluate the likelihood and cost of the defaults.

D. On or before December 15 of each year, the department of administration shall provide to the governor, the president of the senate and the speaker of the house of representatives a report of the information collected pursuant to subsections A and C of this section. This report shall include an analysis of the outstanding indebtedness of each jurisdiction and the relationship of the outstanding indebtedness to the appropriate debt limitations in article IX, sections 5, 8 and 8.1, Constitution of Arizona.

E. If as a result of the analysis conducted pursuant to subsection D of this section the department of administration determines that the outstanding indebtedness of a jurisdiction is in excess of the debt limitation prescribed by the Constitution or statutes of Arizona, the department of administration shall notify the governing body or board of the jurisdiction, the governor, the president of the senate, the speaker of the house of representatives and, in the case of a school district, the superintendent of public instruction.

F. The department of administration shall notify the person or governing body responsible for complying with this section of a failure to comply in whole or in part with the requirements of this section. Any person or governing body so notified shall comply within thirty days. Any county, city, town, school district, irrigation district or other political subdivision of this state that fails to comply fully with this article shall not issue any additional bonds or other securities.

G. For the purposes of this section:

1. "Credit support program" means any program that is operated by this state or a public body that is entirely controlled or funded by this state, that guarantees or provides a credit enhancement, including state support for interest or principal payments, to the debt of a private party or political subdivision of this state and that offers monies if the private party or political subdivision fails to pay the debt.

2. "Lending program" means any program that is operated by this state or a public body that is entirely controlled or funded by this state and that offers monies to a private party or political subdivision of this state if the private party or political subdivision is expected to repay the monies to this state.

§ 35-502 Reports; omission or refusal to comply; violation; classification

A. The governing body of the county, city, town, district or other political subdivision shall make such reports to the department of administration as the department requires relating to the issuance of the bonds and securities provided by section 35-501 and shall notify the department of the retirement of any such bonds and of all payments of interest on the bonds, immediately on retirement of the bond or payment of interest.

B. Any person or member of any governing body knowingly omitting or refusing to comply with the orders of the department of administration issued pursuant to this article is guilty of a class 2 misdemeanor.

§ 35-503 Calculation of debt limits

A. For purposes of calculating all debt limits pursuant to article IX, section 8 or 8.1, Constitution of Arizona, the outstanding indebtedness of a jurisdiction shall equal the total principal amount of all bonds outstanding at the time of calculation. Bonds outstanding shall include the principal amount of all bonds issued by the jurisdiction except principal that has been paid or for which monies have been deposited into a dedicated fund for the payment of the principal. The principal amount of a bond shall equal the par amount of the bond exclusive of any premium or discount.

B. The net assessed value of the full cash value is the basis for calculating the debt limitations prescribed in article IX, section 8 or 8.1, Constitution of Arizona.

§ 35-504 Debt oversight commission; membership; compensation; duties

A. In order to provide more accurate and meaningful information to the public regarding bond issues, the debt oversight commission is established in the department of administration.

B. The commission consists of the director of the department of administration, who serves as chairperson, and four private citizens who are knowledgeable in the area of finance or bond financing, one who is appointed by the governor and three who are appointed jointly by the president of the senate and the speaker of the house of representatives. The terms of appointive members are three years.

C. An appointment to fill a vacancy on the commission resulting from other than expiration of term is for the unexpired portion of the term.

D. The department of administration shall provide secretarial and staff support services to the commission.

E. The private citizen members of the commission are eligible to receive $50 per day for time spent in the performance of their duties. These monies shall be paid from monies appropriated to the department of administration.

F. The commission shall meet at least annually and, in addition, at the call of the chairperson. The commission shall meet at such times and places as convenient or necessary to conduct its affairs and shall render its findings, reports and recommendations in writing to the governor and to the legislature.

G. The commission shall:

1. Review the information provided to the department of administration as prescribed in section 35-501.

2. Ascertain the bonded indebtedness of all taxing jurisdictions and the relationship to the appropriate debt limitation.

§ 35-505 Exemption; industrial development

This article does not apply to corporations formed pursuant to chapters 5 and 6 of this title.

Article 7 Federal Income Tax Considerations

§ 35-511 Definitions

In this article unless the context otherwise requires:

1. "Bond" means any bond, note, warrant, lease, lease purchase agreement or other interest bearing obligation issued pursuant to any provision of law by this state or any political subdivision.

2. "Political subdivision" means city, town, county, school district, community college district, multi-county water conservation district, agriculture improvement district, industrial development authority, pollution control corporation, special taxing district in title 48 and any other agency, instrumentality, municipal corporation or other entity created by a law of this state which has the power to issue bonds.

3. "Rebate" means the payment of monies to the federal government pursuant to any law enacted by the Congress of the United States in consideration of retaining any exemption from federal income taxes for the interest income on an issuer's bonds.

4. "Treasurer" means the treasurer, finance director or other person acting in the capacity of the treasurer of this state or any political subdivision.

§ 35-512 Authority to comply with federal income tax laws

A. The governing body of any department, agency, instrumentality of this state or any political subdivision may make any covenant, order any rebate, file any tax return, report any information and order the limitation on the yield of any investment made with the proceeds from the sale of its bonds or with taxes, revenues or other income pledged, held in trust or otherwise used to pay principal, interest and premium, if any, on its bonds in consideration for any federal tax benefits, payments or credits relating to a bond issued under any provision of law, including federal tax credits, federal subsidy payments and retention of the exemption from federal income taxes for the interest income on a bond issued.

B. To induce prospective purchasers to purchase bonds, the governing body of any department, agency or instrumentality of this state or any political subdivision may provide in any resolution, ordinance, indenture or contract authorizing or providing for the issuance of bonds, or in the bonds themselves, that in the event the interest on such bonds is declared to be subject to federal income taxation in a final decision of a court having jurisdiction in the matter and on such additional conditions as the governing body may prescribe, the interest rate, including prior interest paid if applicable, may increase to a predetermined rate. The predetermined rate may be calculated in any manner. This subsection shall not be construed to allow interest rates to increase above the maximum rate that otherwise may be provided by law, election or contractual agreement.

§ 35-513 Rebate set-aside; authorization

The state treasurer or the treasurer of any political subdivision may set aside such amounts as may be directed by the governing body or may in such treasurer's discretion be sufficient to meet potential rebate requirements.

§ 35-514 Construction; right to contest; supplemental nature of article

A. This article is to be construed to be supplemental to and govern over any provision of law which prohibits rebates or other actions authorized in this article. The rebates authorized in this article are deemed to be made for a public purpose and to be made in furtherance of the purposes for which the bonds are issued. No findings of necessity need be made by the governing body of any political subdivision or of any department, agency or instrumentality of this state before exercising, or ordering the exercise of, any power granted hereunder. The preservation of exemptions from federal income tax or interest on bonds is found and determined to be of statewide interest, and this article applies to charter cities as well as all other political subdivisions.

B. Neither this article nor the actions of any department, instrumentality of this state or any political subdivision shall be construed as a waiver of any right to contest the constitutionality of any act or law of the United States which seeks to tax the debts or obligations of this state or any political subdivision or interest income thereon or otherwise impose restrictions of any nature on the issuance of any bonds.

C. All treasurers shall conform investment and accounting practices in accordance with the resolutions, ordinances, indentures or contracts made in accordance with this article.

§ 35-515 Rebate reporting; state agencies

A. The state treasurer shall report to the United States government any rebate resulting from bonds issued by any state agency. The state treasurer may contract with professional consultants deemed necessary by the state treasurer in order to comply with the provisions of this section. The state treasurer may charge any costs associated with this section proportionally among the state agencies for which reports are made. Rebate reporting by the state treasurer does not relieve the state agency from the responsibility for any payment of any rebate that may become due.

B. State agencies shall deliver to the state treasurer in a timely manner all information required by the state treasurer to comply with rebate reporting requirements. Such information shall include official statements, certificates of rebate, certificates of yield, investment accounting documentation, amortization schedules and contract documents.

C. The state treasurer shall make rebate payments on behalf of the agency as required. The rebate payment and any charges incurred pursuant to subsection A shall be transferred from the account of the state agency to the state treasurer for such payments.

D. This section shall apply to the Arizona board of regents and the institutions under the jurisdiction of the board upon the approval of the board of regents.

Chapter 4 Bankruptcy of Taxing District

Article 1 In General

§ 35-601 Definitions

For the purposes of this article:

1. "Federal bankruptcy statute" means the act of Congress entitled, "An act to establish a uniform system of bankruptcy throughout the United States," approved July 1, 1898, as amended or supplemented.

2. "Taxing district" means a "taxing district" as defined in the federal bankruptcy statute.

§ 35-602 Exercise of powers

All powers granted by this article to taxing districts may be exercised by such districts, or, if such districts have no officers of their own, may be exercised by the officers who have the authority to contract on behalf of such districts, or to levy special assessments or special taxes within such districts.

§ 35-603 Filing petition; payment of expenses

Any taxing district in this state is authorized to file the petition provided for in the federal bankruptcy statute and to incur and pay the expenses thereof and any and all other expenses necessary or incidental to the consummation of the plan of readjustment contemplated in such petition or as it may be modified from time to time.

§ 35-604 Resolution authorizing filing of petition and representation of district by attorney

Before the filing of the petition referred to in section 35-603, the taxing district shall adopt a resolution authorizing the filing thereof and authorizing its duly and regularly elected or appointed attorney, or special counsel appointed for such purpose, to file the petition and to represent the taxing district in the proceedings with respect thereto in the United States district court having jurisdiction thereof.

§ 35-605 Powers of taxing district

Any taxing district is authorized and empowered to take any and all action necessary to carry out any plan of readjustment contemplated in the petition, or as such petition is modified from time to time, subject only to the provisions of the constitution of this state, any other provision of law to the contrary notwithstanding.

§ 35-606 Resolution of district assenting to plan as prerequisite of final decree of court becoming effective

No final decree or order of the United States district court confirming a plan of readjustment shall be effective for the purpose of binding the taxing district unless and until the taxing district files with the court a certified copy of a resolution of such taxing district, adopted by it or by the officials referred to in section 35-602, consenting to the plan of readjustment set forth or referred to in such final decree or order.

§ 35-607 Powers of district to consummate plan; issuance of refunding bonds; hearing upon resolution; notice

A. Upon filing a certified copy of the resolution as provided by section 35-606, the taxing district may consummate the plan of readjustment, and in doing so, shall have the following powers and duties:

1. To cancel in whole or in part, or remit or reduce, the monies payable under any bonds, warrants or evidences of indebtedness or other obligations of, or issued by, the taxing district sought to be refunded by the plan of readjustment.

2. To issue refunding bonds to refund obligations specified in subdivision (e) of this paragraph, subject to the following:

(a) Such obligations may be those of, or issued by, the taxing district, as described in the plan of readjustment. The refunding bonds shall have such denominations, rates of interest and maturities, and shall be payable by taxes, special assessment taxes or special assessments, levied or assessed in the manner provided in the plan of readjustment, except that no such refunding bonds shall exceed in amount, or bear a higher rate of interest than, the total obligations sought to be refunded.

(b) If the bonds sought to be refunded were issued pursuant to statute requiring an election as a prerequisite for the issuance of the bonds, it is not necessary to hold an election to authorize the issuance of the refunding bonds, except as may be required by the constitution and laws of this state.

(c) The refunding bonds need not be payable from taxes or special assessments levied or assessed in the manner in which the bonds sought to be refunded were payable. By way of illustration of, but not by way of limitation upon, the powers granted by this article, bonds payable by taxes levied in whole or in part according to the assessed valuation of real or taxable property in a district may be refunded by the issuance of refunding bonds so payable or by the issuance of refunding bonds constituting specific liens upon real property described in the refunding bonds and subject to enforcement, collection and foreclosure pursuant to the plan of readjustment, but anything to the contrary in this article notwithstanding, no refunding bonds shall be payable by the levy of taxes or special assessment taxes upon all taxable property in a district unless the bonds sought to be refunded were payable by the levy of taxes or special assessment taxes upon all such taxable property in a district.

(d) It is sufficient for the purpose of this article that the petition sets forth by reference or authorizes:

(i) The procedure to be followed, respectively, in the levy and collection of taxes, special assessment taxes or special assessment for the payment of the refunding bonds.

(ii) The character, effect of and method of enforcing the liens sought to be created by the issuance of the refunding bonds.

(iii) The rights of the holders of the refunding bonds upon the issuance thereof.

(e) The refunding bonds authorized by this article shall include bonds to refund bonds secured by unpaid assessments already levied upon real property in a district, and shall also include bonds to fund or refund or pay any obligation of the taxing district whether or not reduced to judgment, whether or not represented by any written instrument and whether arising by contract, statute or otherwise.

3. To issue new securities, notes, warrants and obligations, and to enter into contracts, agreements, arrangements and readjustments with creditors or other persons as authorized or contemplated by any law of the state and approved by the court under the provisions of the federal bankruptcy statute.

4. To adopt ordinances necessary to accomplish the purposes of this article or to provide due process of law with respect to any proceedings authorized by this article. The officers of the taxing district, or the officers referred to in section 35-602, are constituted a legislative body of the taxing district for such purpose.

5. To assess, levy and collect taxes, special assessment taxes and special assessments and to enforce the collection thereof by officers as provided by law.

6. To cancel or reduce the taxes or special assessment taxes already levied or assessed by the taxing district or in its behalf upon any taxable or real property within the district, if such levy or assessment was for the purpose of paying the principal or interest on the bonds sought to be refunded by the plan of readjustment, in the manner and as set forth in the plan of readjustment. The powers granted by this article shall include cancellation or reduction of interest, penalties and costs which may be levied as assessed upon the property within the district by reason of any previous delinquency in the payment of the taxes or special assessments.

B. If the plan of readjustment contemplates the issuance of refunding bonds payable by special assessment taxes or by special assessments or reassessments which will constitute liens upon real property, the taxing district may not adopt the resolution provided by section 35-606 unless, before entry of the final decree or order confirming the plan of readjustment, it holds a hearing after notice thereof as provided in this article. In such event before signing of the order or decree of the federal district court approving the plan of readjustment, the taxing district shall give notice, for a reasonable time and in a reasonable manner, of its intention to adopt the resolution provided by section 35-606 after the entry of the final decree or order, of the fact that by the plan of readjustment it is proposed to levy special assessments or reassessments or special assessment taxes upon real property in the amounts and in the manner set forth in the plan of readjustment and of the time and place when and where all persons interested in any such assessments or reassessments or special assessment taxes may be heard by the taxing district.

C. The taxing district shall prescribe by ordinance or resolution the manner of holding the hearing provided by subsection B of this section and of giving notice thereof and the effect to be given to its determination at the hearing.

D. The enumeration of powers in this section shall not be deemed to exclude powers not provided for in this article that may be necessary for or incidental to the accomplishment of the purposes of this article.

§ 35-608 Purpose of article

This article shall not affect any other law covering the same subject matter, or apply to any proceedings thereunder, but is intended to and does provide, among other matters, an alternative system for refunding bonds pursuant to the provisions of, and in conjunction with, the federal bankruptcy statute.

Chapter 5 Industrial Development Financing

Article 1 Incorporation

§ 35-701 Definitions

In this chapter, unless the context otherwise requires:

1. "Corporation" means any corporation organized as an authority as provided in this chapter.

2. "Governing body" means:

(a) The board or body in which the general legislative powers of the municipality or the county are vested.

(b) The Arizona board of regents with respect to a corporation formed with the permission of the Arizona board of regents.

(c) The Arizona finance authority board of directors established by title 41, chapter 53, article 2.

3. "Income" means gross earnings from wages, salary, commissions, bonuses or tips from all jobs, net earnings from such person's or family's own nonfarm business, professional practice or partnership, and net earnings from such person's or family's own farm. Income includes income, other than earnings, that consists of amounts received from social security or railroad retirement, interest, dividends, veterans payments, pensions and other regular payments, public assistance or welfare payments, including aid for dependent children, old age assistance and aid to the blind or persons with total disability, but excluding separate payments for hospital or other medical care.

4. "Manufactured house" means a structure that is manufactured in a factory after June 15, 1976, that is delivered to a homesite in more than one section and that is placed on a permanent foundation. The dimensions of the completed house shall not be less than twenty feet by forty feet, the roof must be sloping, the siding and roofing must be the same as those found in site-built houses and the house must be eligible for thirty-year real estate mortgage financing.

5. "Municipality" or "county" means the Arizona finance authority, the Arizona board of regents or any incorporated city or town, including charter cities, or any county in this state in which a corporation may be organized and in which it is contemplated the corporation will function.

6. "Persons of low and moderate income" means, for the purposes of financing owner-occupied single family dwelling units in areas that the municipality has found, pursuant to section 36-1479, to be slum or blighted areas, as defined in section 36-1471, persons and families whose income does not exceed two and one-half times the median family income of this state. In all other areas it means persons and families whose income does not exceed one and one-half times the median family income of this state.

7. "Project" means any land, any building or any other improvement and all real and personal properties, including machinery and equipment whether or not now in existence or under construction and whether located within or without this state or the municipality or county approving the formation of the corporation, that are suitable for any of the following:

(a) With respect to a corporation formed with the permission of the Arizona finance authority, a municipality or a county other than the Arizona board of regents:

(i) Any enterprise for the manufacturing, processing or assembling of any agricultural or manufactured products.

(ii) Any commercial enterprise for the storing, warehousing, distributing or selling of products of agriculture, mining or industry, or of processes related thereto, including research and development.

(iii) A health care institution as defined in section 36-401.

(iv) Residential real property for dwelling units located within the municipality or county approving the formation of the corporation and, in the case of a county, whether or not also within a municipality that is within the county.

(v) Repairing or rehabilitating single family dwelling units or constructing or repairing residential fences and walls.

(vi) Convention or trade show facilities.

(vii) Airports, docks, wharves, mass commuting facilities, parking facilities or storage or training facilities directly related to any of the facilities as provided in this item.

(viii) Sewage or solid waste disposal facilities or facilities for the furnishing of electric energy, gas or water.

(ix) Industrial park facilities.

(x) Air or water pollution control facilities.

(xi) Any educational institution that is operated by a nonprofit educational organization that is exempt from taxation under section 501(c)(3) of the United States internal revenue code and that is not otherwise funded by state monies, any educational institution or organization that is established under title 15, chapter 1, article 8 and that is owned by a nonprofit organization, any private nonsectarian school or any private nonsectarian organization established for the purpose of funding a career technical education district.

(xii) Research and development facilities.

(xiii) Any commercial enterprises, including facilities for manufacturing, office, recreational, hotel, motel and service uses.

(xiv) A child welfare agency, as defined in section 8-501, owned and operated by a nonprofit organization.

(xv) A transportation facility constructed or operated pursuant to title 28, chapter 22.

(xvi) A museum operated by a nonprofit organization.

(xvii) Facilities owned or operated by a nonprofit organization described in section 501(c) of the United States internal revenue code of 1986.

(xviii) New or existing correctional facilities within this state.

(b) With respect to a corporation formed with the permission of the Arizona board of regents, any facility consisting of classrooms, lecture halls or conference centers or any facility for research and development or for manufacturing, processing, assembling, marketing, storing and transferring items developed through or connected with research and development or in which the results of such research and development are utilized, but only if the facility is located in an area designated as a research park by the Arizona board of regents.

8. "Property" means any land, improvements thereon, buildings and any improvements thereto, machinery and equipment of any and all kinds necessary to a project and any other personal properties deemed necessary in connection with a project.

9. "Research park" means an area of land that has been designated by the Arizona board of regents as a research park for a university and that, at the date of designation, is owned by this state or by the Arizona board of regents.

10. "Single family dwelling unit" includes any new, used or manufactured house that meets the insuring requirements of the federal housing administration, the United States department of veterans affairs or any other insuring entity of the United States government or any private mortgage insurance or surety company that is approved by the federal home loan mortgage corporation or the federal national mortgage association.

§ 35-702 Proceedings to incorporate industrial development authority

A. Whenever any number of natural persons, not less than three, each of whom is a qualified elector of the municipality or the county or, in the case of a corporation to be formed with the permission of the Arizona finance authority or the Arizona board of regents, qualified electors of this state, file with any governing body thereof an application in writing seeking permission to apply for the incorporation of an industrial development board of the municipality or county, the governing body shall consider the application. If the governing body by resolution finds and determines that it is wise, expedient, necessary or advisable that the corporation be formed and authorizes the persons making the application to form the corporation, then the persons making the application shall proceed to incorporate as prescribed by this chapter. A corporation may not be formed unless the application first has been filed with the governing body having jurisdiction and the governing body adopts a resolution as provided in this section. Any corporation when formed shall be a political subdivision of this state and have only the governmental powers as are set forth in this chapter or in chapter 6 of this title and the power to enter into intergovernmental agreements in accordance with title 11, chapter 7, article 3.

B. Only one corporation shall be approved by a municipality or county for operation at any time.

§ 35-703 Articles of incorporation of industrial development authority

In addition to the requirements of title 10, the articles of incorporation shall set forth:

1. The names and residences of the applicants, together with a recital that each of them is a qualified elector of the municipality or the county or, in the case of a corporation to be formed with the permission of the Arizona finance authority or the Arizona board of regents, a qualified elector of this state.

2. The name of the corporation, which shall be "the industrial development authority of the ____________ of _____________," (the blank spaces to be filled in with the name of the municipality or the county). In the case of a corporation formed with the permission of the Arizona finance authority the name shall be the "Arizona industrial development authority". In the case of a corporation formed with the permission of the Arizona board of regents the name shall be the "Arizona research park authority".

3. A recital that permission to organize the authority has been granted by resolution duly adopted by the governing body of the municipality or county and the date of the adoption of such resolution.

4. The location of the principal office of the authority, which shall be in the municipality or county. In the case of a corporation formed with the permission of the Arizona board of regents the principal office of the corporation shall be the principal office of the Arizona board of regents. In the case of a corporation formed with the permission of the Arizona finance authority, the Arizona finance authority is the principal office of the corporation.

§ 35-704 Amendment to articles

The articles of incorporation may at any time and from time to time be amended to make any changes therein and add any provisions thereto which might have been included in the certificate of incorporation in the first instance, provided that the members of the board of directors of the authority first shall file with the authorizing governing body an application in writing seeking permission to amend the articles of incorporation, specifying in such application the amendment proposed to be made. The governing body thereof shall consider such application and, if by resolution it finds and determines that it is wise, expedient, necessary or advisable that the proposed amendment be made, authorizes the same to be made, and approves the form of the proposed amendment, then the persons making such application shall proceed to amend the articles in accordance with the provisions of title 10.

§ 35-705 Board of directors

The authority shall have a board of directors in which all powers of the authority shall be vested and that shall consist of any number of directors, not less than three nor more than nine, all of whom shall be duly qualified electors of the municipality or county with respect to which the authority was formed, except that a corporation that is formed by the Arizona finance authority shall be governed pursuant to section 41-5353. In the case of a corporation formed with the permission of the Arizona board of regents the directors must be qualified electors of this state. In the case of a corporation formed with the permission of the Arizona finance authority, the Arizona finance authority board shall serve as the board of the industrial development authority. The directors shall serve without compensation, except that the directors shall be reimbursed for their actual expenses incurred in the performance of their duties in the same manner as is provided for other state officers. A director shall not be an officer or employee of the authorizing municipality or county. All directors shall declare any conflict of interest as provided in title 38, chapter 3, article 8. The directors shall be elected by the governing body of the authorizing municipality or county, and they shall be so elected that they shall hold office for overlapping terms. At the time of the election of the first board of directors the governing body of the municipality or the county shall divide the directors into three groups containing as nearly equal whole numbers as possible. The first term of the directors included in the first group shall be two years, the first term of the directors included in the second group shall be four years, the first term of the directors included in the third group shall be six years, and thereafter the terms of all directors shall be six years. The governing body may remove a director at any time, with or without cause.

§ 35-706 Corporate powers

A. In addition to the powers granted to an industrial development authority by law, the authority has the following powers, together with all powers incidental or necessary for the performance of those powers:

1. To acquire, whether by purchase, exchange, gift, lease or otherwise establish, construct, improve, maintain, equip and furnish one or more projects.

2. To lease to others any or all of its projects, to charge and collect rent and to terminate any lease on the failure of the lessee to comply with any of the obligations of the lease.

3. To sell, exchange, donate and convey to others any or all of its projects or properties on terms and conditions as its board of directors may deem advisable, including the power to receive for any sale the note or notes of the purchaser of the project or property, whenever its board of directors finds the action to further advance the interest of the corporation.

4. To issue its bonds for the purpose of carrying out any of its powers.

5. To mortgage and pledge any or all of its projects and properties, whether owned or acquired, and to pledge the revenues, proceeds and receipts or any portion of the revenues, proceeds and receipts from a project as security for the payment of the principal of and interest on any bonds so issued and any agreements made in connection therewith.

6. To contract with and employ others to provide and to pay compensation for professional services and other services as the board of directors deems necessary for the financing of projects and for the business of the corporation.

7. To refund outstanding obligations incurred by an enterprise to finance the cost of a project when the board of directors finds that the refinancing is in the public interest.

8. To invest and reinvest funds under the control of the corporation and bond proceeds pending application thereof to the purposes for which the bonds were issued, subject only to the provisions of any bond resolution, lease or other agreement entered into by the board of directors.

9. To make secured or unsecured loans for the purpose of financing or refinancing the acquisition, construction, improvement, equipping or operating of a project and to charge and collect interest on the loans and pledge the proceeds of loan agreements as security for the payment of the principal and interest of any bonds, or designated issues of bonds, issued by the corporation, and any agreements made in connection with the loan, whenever the board of directors finds the loans to further advance the interest of the corporation or the public.

10. To acquire and hold obligations of any kind to carry out any of its purposes.

11. Subject to this section, to make loans to any bank, savings and loan institution, credit union or other mortgage lender, whether organized or existing under the laws of this state, another state or the United States, that is qualified to do business in this state, for the purpose of enabling the institutions to make loans to finance the acquisition, construction, improvement or equipping of projects that are owner-occupied single family dwelling units to be occupied by persons of low and moderate income, as determined by the corporation. The loans shall be fully secured in the same manner as deposits of public funds or by loans secured by mortgages, deeds of trust or other security instruments guaranteed or insured by the United States, or any instrumentality thereof, or by any private mortgage insurance or surety company that is approved by the federal home loan mortgage corporation or the federal national mortgage association and that is licensed to do business in this state, if the private mortgage insurance shall be in a dollar amount sufficient to satisfy the mortgage insurance requirements for loans eligible to be purchased by the federal home loan mortgage corporation or the federal national mortgage association or any other agency or department of the United States. The security shall not be necessary if the bonds issued to make the loans are guaranteed or insured by an agency, department or instrumentality of the United States. Any bonds issued to make loans shall be ratable as "A" or better by a nationally recognized bond rating agency.

12. Subject to this section, to purchase or enter into advance commitments to purchase loans or any loan interests secured by mortgages, deeds of trust or other security instruments relating to projects that are owner-occupied single family dwelling units from or with any bank, savings and loan institution, credit union or other mortgage lender, whether organized or existing under the laws of this state, another state or the United States, that is qualified to do business in this state, on terms and conditions as may be determined by the corporation. The purpose of the purchases shall be to finance directly or indirectly the acquisition, construction, improvement or equipping of projects that are owner-occupied single family dwelling units to be occupied by persons of low and moderate income. If the bonds issued to make purchases are not guaranteed or insured by an agency, department or instrumentality of the United States or secured by a letter of credit, insurance policy, surety bond or other credit facility from a financial institution or a combination of such instruments, the purchased loans shall be guaranteed or insured by the United States or any agency, department, or instrumentality thereof, or by any private mortgage insurance or surety company that is approved by the federal home loan mortgage corporation or the federal national mortgage association or secured by a letter of credit, insurance policy, surety bond or other credit facility from a financial institution or a combination of such instruments. In the case of private mortgage insurance, the insurance shall be in a dollar amount sufficient to satisfy the mortgage insurance requirements for loans eligible to be purchased by the federal home loan mortgage corporation or the federal national mortgage association or any other agency or department of the United States. Any bonds issued to purchase loans shall be ratable as "A" or better by a nationally recognized bond rating agency. If the purchased loans have not been originated on behalf of the corporation to directly finance projects, the corporation shall require that the institution receiving proceeds from the sale of the loans use the proceeds to make loans to finance or refinance the acquisition, construction, improvement or equipping of projects that are owner-occupied single family dwelling units to be occupied by persons of low and moderate income, as determined by the corporation.

13. To elect not to issue an amount of qualified mortgage revenue bonds which it may otherwise issue during any calendar year and to issue instead mortgage credit certificates pursuant to a qualified mortgage credit certificate program as defined in section 35-901.

14. To make loans to any person or entity owning residential property or to make loans to any bank, savings and loan association, credit union or other mortgage lender, or to purchase or enter into advance commitments to purchase funding for the repair or improvement of property related to residential or neighborhood improvement projects. An authority may issue its bonds or incur other obligations to fund loans or purchases. An authority shall establish the provisions relating to bonds or other obligations, including the security for the loans, and shall establish the guidelines for the approval, funding, purchasing and security of the loans.

15. To enter into contracts and execute any agreements or instrument and do any other act necessary or appropriate to carry out its purposes.

16. To exercise the powers granted by this chapter, including through the issuance of bonds, to provide financing or refinancing for projects other than a project as defined in section 35-701, paragraph 7, subdivision (a), item (ii), located in whole or in part outside this state, provided that the board of directors of the corporation has determined that the exercise of such powers will provide a benefit within this state.

B. The corporation shall not have the power to operate any project as a business other than as lessor or seller nor shall any corporation make any loans pursuant to subsection A, paragraph 9 of this section for projects that are owner-occupied single family dwelling units except by utilizing as its contract agent a mortgage lender, whether organized or existing under the laws of this state, another state or the United States, that is qualified to do business in this state. Any project established pursuant to subsection A, paragraph 14 of this section is not required to use a mortgage lender as its contract agent. The corporation shall not permit any funds derived from the sale of its bonds to be used, loaned or provided for the acquisition of any facilities of a public utility or public service corporation, except as provided in section 35-701. The corporation shall comply with title 38, chapter 3, article 3.1.

C. A person's or family's eligibility for an owner-occupied single family dwelling unit financed pursuant to subsection A, paragraph 11, 12 or 13 of this section shall be determined by considering the person's or family's income. Owner-occupied single family dwelling units shall only be financed as provided in subsection A, paragraphs 11, 12 and 13 of this section unless the owner-occupied single family dwelling units are located in an area designated pursuant to section 36-1479 as a slum or blighted area as defined in section 36-1471 by a municipality having a population of more than two hundred fifty thousand persons according to the most recent United States decennial census or a special census conducted in accordance with section 42-5033.

D. In the exercise of its powers authorized in this section with respect to projects that are owner-occupied single family dwelling units to be occupied by persons of low and moderate income and financed pursuant to subsection A, paragraphs 11 and 12 of this section, the corporation shall establish, subject to approval by the governing body of the authorizing county or municipality, standards and requirements applicable to the purchase of loans or the making of loans to mortgage lenders, including:

1. The eligibility of mortgage lenders, including the requirement that all mortgage lenders be approved as mortgagees by the federal housing administration and the United States department of veterans affairs and be approved as sellers and servicers of mortgage loans by the federal national mortgage association or federal home loan mortgage corporation.

2. The time within which mortgage lenders must make commitments and disbursements for mortgage loans.

3. The character of residences to be financed by mortgage loans.

4. The eligibility of persons of low and moderate income, including the requirement that no person of low and moderate income may receive, more than once in a three year period, a mortgage loan financed directly or indirectly from the proceeds of bonds issued by the corporation.

5. The terms and conditions of mortgage loans to be acquired.

6. The amounts and types of insurance coverage required on residences, mortgages and bonds.

7. The representations and warranties of mortgage lenders confirming compliance with the standards and requirements.

8. Restrictions as to interest rate and other terms of mortgage loans and the return realized on mortgage loans by mortgage lenders.

9. The type and amount of collateral security to be provided to assure repayment of any loans from the corporation and to assure repayment of bonds.

10. Assignment of the mortgage loans to a trustee acting on behalf of the corporation which shall be either a bank or trust company doing business in this state, having an officially reported combined capital surplus, undivided profits and reserves of not less than fifteen million dollars. Trustees must be approved to sell mortgages to and service mortgages for the federal national mortgage association and the federal home loan mortgage corporation.

11. Any other matters related to the purchase of mortgage loans or the making of loans to mortgage lenders deemed relevant by the corporation. In establishing standards and requirements, the corporation shall be guided by the following standards:

(a) The amount of mortgage monies proposed to be made available in the area is to be reasonably related to the demand for mortgage monies.

(b) For projects of owner-occupied single family dwelling units to be occupied by persons of low and moderate income and financed pursuant to subsection A, paragraphs 11 and 12 of this section, at least ten percent of all mortgage monies proposed to be made available by the corporations other than mortgage monies reserved for any period to finance mortgage loans on residences located within an area designated as a slum or blighted area as defined in section 36-1471 shall be reserved for at least a three month period for the financing of mortgage loans on manufactured housing unless the Arizona commerce authority determines that any bonds issued to make loans will not be ratable as "A" or better by a nationally recognized bond rating agency, in which case no such reservation is required. If all the mortgage monies reserved for manufactured housing are not committed or used to make mortgage loans during this three month period, the mortgage lender may allocate the remaining monies to finance mortgage loans on any single family dwelling unit.

(c) Any departure from the level of commitment fees, origination fees or servicing fees normally charged by a mortgage lender is to be justified in the context of the transaction.

(d) The costs, fees and expenditures associated with the issuance of bonds are to be reasonably related to the services provided.

E. Only corporations, the formations of which have been approved by the governing body of a county having a population of more than seven percent of the total state population computed according to the most recent United States decennial census or by the governing body of a municipality having a population of more than seven percent of the total state population computed according to the most recent United States decennial census, shall have the powers granted in subsection A, paragraphs 11, 12 and 13 of this section. Except as provided in section 35-913, subsections E and F, a corporation shall not exercise the powers granted in subsection A, paragraphs 11, 12 and 13 of this section outside of its jurisdiction. For the purposes of a refunding of any mortgage revenue bond issued before January 1, 2000, the proceeds from the refunding may be used outside the jurisdiction of the corporation issuing the refunding bonds except the corporation issuing the refunding bonds shall obtain the consent from another corporation with powers granted in subsection A, paragraphs 11, 12 and 13 of this section if the proceeds of the refunding are to be used within the jurisdiction of that corporation. For the purposes of exercising the powers granted in subsection A, paragraphs 11, 12 and 13 of this section, the jurisdiction of a corporation formed on behalf of a county includes all incorporated and unincorporated territory in the county.

F. A corporation may not permit proceeds of bonds or a qualified mortgage credit certificate program to be used to finance projects that are owner-occupied single family dwelling units within the corporate limits of an incorporated city or town unless the governing body of the city or town has approved the general location and character of the residences to be financed. The corporation, prior to the issuance of bonds or mortgage credit certificates for that purpose, shall give written notice to the governing body of each city or town in which it intends to permit proceeds of an issue of bonds or mortgage credit certificates to be used to finance projects that are owner-occupied single family dwelling units and of the general location and character of the residences that may be financed. The governing body of the city or town shall be deemed to have given its approval unless it has denied approval by formal action of the governing body within twenty-one days after receiving the written notice from the corporation. Approvals given or deemed to have been given with respect to use of proceeds of an issue of bonds or mortgage credit certificates under this subsection may not be withdrawn. Denials may be withdrawn by the governing body of a city or town and approval may be given thereafter if the corporation issuing the bonds or mortgage credit certificates approves the withdrawal of the denial.

G. Two or more corporations with the powers granted by subsection E of this section may provide:

1. That a corporation, the formation of which was approved by the governing body of a county or city, may exercise the powers granted in subsection A, paragraphs 11, 12 and 13 of this section, with respect to owner-occupied single family dwelling units located in all counties and cities that are parties to a cooperative agreement.

2. For the joint exercise by two or more corporations, each formed with the approval of a governing body executing the cooperative agreement, of the powers granted in subsection A, paragraphs 11, 12 and 13 of this section, with respect to owner-occupied single family dwelling units located in all counties and cities that are parties to the cooperative agreement. The agreement shall specify the calendar year or years for which it is effective, the means by which the agreement may be terminated prior to the expiration of the calendar year or years and the aggregate principal amount of bonds that may be issued by the designated corporation or corporations to exercise the powers pursuant to the agreement. The corporation or corporations designated in the agreement to exercise the powers in the counties and cities that are parties to the agreement are the only corporation or corporations authorized and having jurisdiction to exercise the powers and to issue bonds to carry out the powers in the counties and cities while the agreement is in effect. The combined jurisdictions of all the counties and cities that are parties to the cooperative agreement are the jurisdictions of the corporation or corporations designated to exercise the powers granted in subsection A, paragraphs 11, 12 and 13 of this section within the meaning of the mortgage subsidy bond tax act of 1980 (P.L. 96-499; 26 United States Code section 103A).

H. It shall not be a conflict of interest under title 38, chapter 3, article 8, and this chapter, for any trustee or any mortgage lender to enter into loan agreements with, or to sell mortgage loans to, the corporation as contemplated in subsection A, paragraphs 11, 12 and 13 of this section, act for or under contract with the corporation as a mortgage originator, servicer, paying agent or depository, act as holder or dealer of bonds of the corporation or have as a director, officer or employee any member of the board of directors of the corporation or any combination.

I. The department of economic security shall once in each calendar year on or before March 1 determine the median family income of this state for the purposes of this chapter.

J. All areas in this state that are either designated pursuant to section 36-1479 as slum or blighted areas as defined in section 36-1471 or designated as pockets of poverty by the United States department of housing and urban development are designated as areas of chronic economic distress within the meaning of the mortgage subsidy bond tax act of 1980 (P.L. 96-499; 26 United States Code section 103A).

K. Any corporation that is described in subsection E of this section and that desires to exercise the powers granted in subsection A, paragraphs 11, 12 and 13 of this section, with respect to owner-occupied single family dwelling units located in two or more counties, may do so if the corporation, before issuing bonds or mortgage credit certificates for that purpose, gives written notice to the governing bodies of the other counties and their respective corporations, if any, of its intent to permit the proceeds of an issue of bonds or mortgage credit certificates to finance projects within its jurisdiction that are owner-occupied single family dwelling units. The governing body of a county and its respective corporation, if any, that have been given notice are deemed to have approved the use of the proceeds or mortgage credit certificates for owner-occupied single family dwelling units within their jurisdiction and approved the use of any state ceiling, as defined in section 35-901, unless approval is denied by formal action of the governing body or the board of directors of the corporation, if any, within twenty-one days after receiving written notice from the corporation. Absent a denial of approval as stated in this subsection, a cooperative agreement providing for the exercise of the powers granted in subsection A, paragraphs 11, 12 and 13 of this section is deemed to exist among the applicable counties or corporations. Approvals given or deemed to have been given with respect to the matters stated in this subsection may not be withdrawn. Denials by the governing body of a county apply only to the unincorporated areas of the county. Denials may be withdrawn by the governing body of a county and approval may be given thereafter if the corporation issuing the bonds or mortgage credit certificates approves the withdrawal of the denial. Mortgage credit certificates and bond proceeds issued pursuant to this subsection shall be available on an equitable basis within each of the participating counties.

L. The corporation within thirty days shall upon actual notice notify the governing body of:

1. Any lawsuit filed against the corporation related to the issuance of bonds.

2. Any formal investigation of the corporation initiated by the United States securities and exchange commission.

§ 35-707 Assumption of mortgage loans

Notwithstanding the provisions of any other law, a corporation may prohibit the assumption of any single family mortgage loan purchased by it in accordance with the provisions of section 35-706 and require prepayment of the loan if the person proposing to assume the loan or the single family dwelling unit to which the loan relates fails to meet such eligibility criteria relating to mortgagors or single family dwelling units, respectively, as may be established by the corporation as the purchaser of such loan.

§ 35-708 Financing certain owner-occupied single family dwellings; exception

A. For purposes of section 35-701, paragraph 6, in areas other than a slum or blighted area, the authority undertaking the bond issue shall set aside for sixty days thirty percent of the mortgages for owner-occupied single family dwelling units for persons and families whose income is below the median family income of this state.

B. This section does not apply to projects described in section 35-701, paragraph 7, subdivision (a), item (iii) or programs established pursuant to section 35-706, subsection A, paragraph 14.

Article 2 Bonds

§ 35-721 Bonds of the corporation

A. All principal and interest of bonds issued by the corporation shall be payable solely out of the revenues, proceeds and receipts derived from the corporation's sale of property, loan repayments or lease rentals, or out of the proceeds of bonds issued hereunder, or of any revenues, proceeds and receipts thereof as shall be specified in the proceedings of the board of directors under which the bonds shall be authorized to be issued.

B. The proceedings under which such bonds are to be issued shall require the approval of the governing body of each issuance of bonds.

C. The bonds prescribed by subsection A of this section may:

1. Be executed and delivered by the corporation at any time and from time to time.

2. Be in such form and denominations and of such tenor and maturities.

3. Be in registered or bearer form either as to principal or interest or both.

4. Be payable in such installments and at such time or times not exceeding forty years from the date thereof.

5. Be payable at such place or places within or without this state.

6. Bear interest at such rate or rates, payable at such time or times and at such place or places and evidenced in such manner.

7. Be executed by such officers of the corporation and in such manner, and may contain such provisions not inconsistent herewith, all as shall be provided in the proceedings of the board of directors whereunder the bonds are authorized to be issued.

D. If deemed advisable by the board of directors, there may be retained in the proceedings under which any bonds of the corporation are authorized to be issued an option to redeem all or any part thereof as may be specified in such proceedings, at such price or prices and after such notice or notices and on such terms and conditions as may be set forth in such proceedings and as may be briefly recited on the face of the bonds, but nothing in this article shall be construed to confer on the corporation any right or option to redeem any bonds except as may be provided in the proceedings under which they shall be issued.

E. Any bonds of the corporation may be sold at public or private sale in such manner and from time to time as may be determined by the board of directors of the corporation to be most advantageous, and the corporation may pay all expenses, premiums and commissions which its board of directors may deem necessary or advantageous in connection with the issuance thereof. Issuance by the corporation of one or more series of bonds for one or more purposes shall not preclude it from issuing other bonds in connection with the same project or any other project, but the proceedings whereunder any subsequent bonds may be issued shall recognize and protect any prior pledge or mortgage made for any prior issue of bonds. Any bonds of the corporation at any time outstanding may at any time and from time to time be refunded by the corporation by the issuance of its refunding bonds in such amount as the board of directors may deem necessary but not exceeding an amount sufficient to refund the principal of the bonds so to be refunded, together with any unpaid interest thereon and any premiums and commissions necessary to be paid in connection therewith. Any such refunding may be effected whether the bonds to be refunded shall have then matured or shall thereafter mature, either by sale of the refunding bonds and the application of the proceeds thereof for the payment of the bonds to be refunded thereby, or by the exchange of the refunding bonds for the bonds to be refunded thereby with the consent of the holders of the bonds so to be refunded, and regardless of whether or not the bonds to be refunded were issued in connection with the same projects or separate projects, and regardless of whether or not the bonds proposed to be refunded shall be payable at the same date or different dates or shall be due serially or otherwise. All such bonds and the interest coupons applicable thereto are hereby made and shall be construed to be negotiable instruments.

F. Unless the corporation was approved by the Arizona finance authority, the corporation shall notify the attorney general of its intention to issue bonds. Such notification shall adequately describe the project. The attorney general shall inform the corporation within ten days if in the attorney general's opinion the project sought to be financed does not come within the purview of this chapter. If after ten days the attorney general has not issued an opinion that the project does not so conform, the corporation may issue such bonds. If the attorney general's negative opinion is issued within ten days, such bonds shall not be issued. Action shall not be brought questioning the legality of any contract, lease, mortgage, proceedings or the issuance of bonds hereunder from and after ninety calendar days after the date the bonds are authorized to be issued by the governing body.

§ 35-722 Approval by elected official if required by federal law

The governor or the attorney general, or the state treasurer if designated by the governor, may approve the issuance of any bonds issued by a corporation formed with the permission of the Arizona finance authority or the Arizona board of regents for purposes of complying with federal laws requiring approval by an applicable elected representative.

§ 35-723 Prohibition on state debt

This chapter shall not be construed to authorize the incurrence of a debt by this state within the meaning of any constitutional provision or to permit the pledging of student fees, charges or tuition to the payment of any bonds issued pursuant to this chapter.

§ 35-724 Security for bonds

The principal of and interest on any bonds issued by the corporation shall be secured by a pledge of the revenues, proceeds and receipts or any portion thereof out of which the principal and interest are made payable, and may be secured by a mortgage covering all or any part of the projects and properties from which the revenues, proceeds or receipts so pledged may be derived, including any enlargements of and additions to any such projects and properties thereafter made. The resolution under which the bonds are authorized to be issued and any such mortgage may contain any agreements and provisions respecting the maintenance of the projects and properties covered thereby, the fixing and collection of rents for any portions thereof leased by the corporation to others, the fixing and collection of proceeds from the sale of any projects and properties by the corporation to others, the creation and maintenance of special funds from such revenues and the rights and remedies available in the event of default, all as the board of directors shall deem advisable and not in conflict with the provisions of this article. Each pledge, lease, agreement and mortgage made by the corporation for the benefit or security of any of the bonds of the corporation shall continue effective until the principal of and interest on the bonds for the benefit of which the same were made have been fully paid. In the event of default in such payment or in any agreements of the corporation made as a part of the contract under which the bonds were issued, whether contained in the proceedings authorizing the bonds or in any mortgage executed as security therefor, may be enforced by mandamus, the appointment of a receiver, or by foreclosure of any such mortgage, or any one or more of such remedies.

§ 35-725 Bonds made legal investments

Bonds issued under the provisions of this chapter shall be legal investments for all banks, trust companies and insurance companies organized and operating under the laws of this state.

§ 35-726 Approval of general plan before issuing bonds; fee; definition

A. Bonds shall not be issued by a corporation for the purpose of financing single family dwelling units pursuant to section 35-706, subsection A, paragraph 11 or 12 without approval of a general plan by its governing body. The corporation shall submit a general plan for each respective series of bonds to its governing body. The general plan shall briefly describe:

1. The amount of the proposed bonds.

2. The maximum term of the bonds.

3. The maximum interest rate on the bonds.

4. The need for the bond issue.

5. The terms and conditions for originating or purchasing mortgage loans or making loans to lenders.

6. The area in which the single family dwelling units to be financed may be located.

7. The proposed fees, charges and expenditures to be paid for originators, servicers, trustees, custodians, mortgage administrators and others.

8. All insurance requirements with respect to mortgage loans, mortgaged property, mortgagors, originators, servicers and trustees.

9. The anticipated date of issuance of the bonds.

B. The governing body shall review general plans submitted by corporations pursuant to subsection A of this section. In reviewing the plans the governing body shall consider:

1. Whether the amount of the mortgage monies proposed to be made available is reasonably related to the demand for the mortgage monies.

2. Whether the terms of the general plan are justifiable in the context of the transaction and in the context of similar transactions.

3. Whether the fees, costs and expenditures as set forth in the general plan are reasonably related to the services provided.

4. For projects of owner-occupied single family dwelling units to be occupied by persons of low and moderate income and financed pursuant to section 35-706, subsection A, paragraphs 11 and 12, whether the proposed mortgage monies to be made available will fulfill a public purpose by providing housing for persons of low and moderate income or by encouraging single family developments in all participating jurisdictions, including such jurisdictions' slum or blighted areas as defined in section 36-1471.

C. The governing body shall approve or disapprove the general plan not later than thirty days after receipt of the plan. If the governing body does not act on the general plan within thirty days after the date of receipt, the general plan shall be deemed approved. If a general plan is approved, the corporation may issue the series of bonds covered by the general plan with a total principal amount, maximum term and maximum interest rate no greater than that which is set forth in the general plan. The origination and servicing fees pertaining to mortgage loans to be financed in accordance with the general plan shall not exceed those proposed in the general plan. The corporation may vary other items in the general plan on a finding that the variation is minor and that the variations will not impair the security for the bonds or substantially increase the cost of financing the single family dwelling units and the findings of the corporation shall be conclusive.

D. The governing body may charge any corporation submitting a general plan for review a fee of not to exceed ten thousand dollars together with reimbursement of its actual costs and expenses incurred in reviewing the general plan.

E. Except for a corporation approved by the Arizona finance authority or a governing body of a county or a municipality having a population of more than seven percent of the total state population, a corporation shall not issue bonds, other than refunding bonds the proceeds of which are used exclusively to refund a prior bond issue, to finance a multifamily residential rental project, sanitarium, clinic, medical hotel, rest home, nursing home, skilled nursing facility or life care facility as prescribed in section 20-1801, unless the department approves the project. The department, with or without a hearing, shall review the project and consider at least the following factors:

1. The demand for and feasibility of the project in the area set forth in the application to the corporation.

2. The terms and conditions of the proposed bonds.

3. The proposed use of bond proceeds.

4. The benefit to the public if the project provides rental housing for persons of low and moderate income or encourages rental housing in slum or blighted areas as defined in section 36-1471.

5. If the project consists of a nursing home, or a life care facility as prescribed in section 20-1801, the benefit to the public of the project, including the proposed rent, fees and other charges of the project in relation to the level of services to be offered.

F. Subsection E of this section does not apply to bonds issued to finance:

1. A sanitarium, clinic, medical hotel, rest home, nursing home, skilled nursing facility, or life care facility as prescribed in section 20-1801, if the facility is to be owned and operated by this state or a political subdivision or agency of this state.

2. A nursing home, rest home, skilled nursing facility, life care facility or senior residential facility providing on-site medical and support services if the facility is owned and operated by a nonprofit organization that is exempt from taxation under section 501(c)(3) of the United States internal revenue code.

G. Except for a corporation that is exempt under subsection E of this section, the department with or without a hearing shall approve or disapprove the project not later than thirty days after receipt of the request for approval. If the project is approved the corporation may issue the bonds described in the approval request with the total principal amount, maximum term and maximum interest rate no greater than as set forth in the request. The department shall charge each applicant submitting a project approval request pursuant to this subsection a fee of not to exceed five thousand dollars together with reimbursement of its actual costs and expenses incurred in reviewing the project. The department shall remit the fees to the state treasurer for deposit in the Arizona department of housing program fund established by section 41-3957.

H. For the purposes of this section, "department" means the Arizona department of housing.

§ 35-728 Additional powers; allocating low-income housing tax credits; report; definition

A. In addition to the other powers granted to the department, the department may:

1. Adopt rules for the conduct of its business and its review of the activities described in this article.

2. Contract with, retain or designate financial consultants, attorneys and such other consultants and independent contractors as it determines necessary or appropriate to carry out the purposes of this article.

3. Undertake and carry out or authorize the completion of studies and analyses of housing conditions and needs within this state relevant to the purposes of this section to the extent not otherwise undertaken by other departments or agencies of this state satisfactory for such purpose.

B. The department is designated the housing credit agency for this state for purposes of section 42 of the United States internal revenue code and is responsible for allocating the federal low-income housing tax credits available to this state. After reviewing applications the department may assess the applicant a reasonable fee in connection with processing the applications and monitoring compliance with the program. Beginning on October 1, 2002, the department shall remit the fees to the state treasurer for deposit in the Arizona department of housing program fund established by section 41-3957.

C. For the activities authorized in this section, the department shall notify a city, town, county or tribal government that a multifamily rental project is planned for its jurisdiction and, before proceeding, shall request and obtain written consent from the governing body of the city, town, county or tribal government or an official authorized by the governing body of the city, town, county or tribal government. The department shall not interfere with or attempt to override the local jurisdiction's planning, zoning or land use regulations. This subsection shall not be interpreted to interfere in any way with the requirements of state or federal fair housing laws.

D. The department shall provide to the governor, the president of the senate, the speaker of the house of representatives and the auditor general not later than September 30 of each year a report of the activities of the department during the preceding fiscal year. The report shall include information on the following matters:

1. An assessment of the number and geographic location of housing units or developments financed or otherwise assisted by the department or by the corporations reporting to the department.

2. An assessment of the assistance in obtaining housing provided by the department or by the corporations reporting to the department to persons of low or moderate income and to other persons.

3. An assessment of the approximate amount of money used in the housing industry as a result of the department's activities.

E. For the purposes of this section, "department" means the Arizona department of housing.

§ 35-729 Exemption from procurement code

For purposes of this article and chapter 7 of this title, the following are exempt from title 41, chapter 23 or other restrictions on the procedure for entering into contracts:

1. The Arizona commerce authority.

2. The Arizona department of housing.

Article 3 Tax Exemption and Liability

§ 35-741 Exemption from taxation

The corporation and its income and all bonds issued by it and the income therefrom shall be exempt from all taxation in this state, except that property of the corporation shall be subject to all applicable ad valorem taxes. If such property is leased, such ad valorem taxes shall be charged to the lessee as fully as if the lessee were the owner of such leased property except that no ad valorem tax shall be imposed upon any property of the corporation which is leased to a person qualified for exemption from such taxes by article 9, section 2, Constitution of Arizona and no charge for such a tax shall be made to any such lessee.

§ 35-742 Municipality or county not liable

The municipality or the county shall not in any event be liable for the payment of the principal of or interest on any bonds of the corporation, formed thereby or for the performance of any pledge, mortgage, obligation or agreement of any kind whatsoever which may be undertaken by the corporation, and none of the bonds of the corporation or any of its agreements or obligations shall be construed to constitute an indebtedness of the municipality or county within the meaning of any constitutional or statutory provision whatsoever.

§ 35-743 Liability insurance

Notwithstanding any other provision of law, the municipality or county in which an industrial development authority corporation has been organized may expend public monies to procure liability insurance covering the corporation and its board directors, members, officers, agents and employees, or may include the corporation and its board directors, members, officers, agents and employees in a self-insurance program in the same manner and to the same extent that the municipality or county is authorized by law to do so for its officers, agents and employees.

Article 4 Corporations

§ 35-751 Earnings of the corporation and exemption from restrictions

A. The corporation shall be a nonprofit corporation, and no part of its net earnings remaining after payment of its expenses shall inure to the benefit of any individual, firm or corporation.

B. A project shall be exempt from any requirement of competitive bidding or other restrictions imposed on the procedure for the financing of public improvements or the award of contracts for the construction of public improvements and shall also be exempt from any restrictions imposed on municipalities, counties or political subdivisions relating to the leasing, sale or other disposition of property or funds.

C. At the end of each fiscal year, the Arizona industrial development authority shall:

1. Transfer all unencumbered monies in excess of the authority's operating costs generated after August 6, 2016 from single family mortgage programs that were in existence before August 6, 2016 to the housing trust fund established by section 41-3955.

2. After the transfer is made pursuant to paragraph 1 of this subsection, transfer all unencumbered monies in excess of the authority's operating costs to the economic development fund established by section 41-5302.

§ 35-752 Dissolution of corporation and vesting of title in municipality or county

Whenever the board of directors of the corporation, by resolution, determines that the purposes for which the corporation was formed have been substantially complied with and that all bonds and mortgage credit certificates theretofore issued and all obligations theretofore incurred by the corporation have been fully paid or discharged, the members of the board of directors of the corporation shall thereupon dissolve the corporation in accordance with the provisions of title 10 and all funds held by the corporation and title to its property shall vest in the municipality or county with respect to which it was organized.

§ 35-753 Recordation of documents

The articles of incorporation of the corporation and the certificate of dissolution of the corporation shall be filed for record with the corporation commission.

§ 35-754 Chapter cumulative; no notice required

Neither this chapter nor anything herein contained shall be construed as a restriction or limitation upon any powers which the corporation otherwise might have under any laws of this state, but shall be construed as cumulative of any such powers. Except as provided in title 44, chapter 12, article 4, no proceedings, notice or approval shall be required for the organization of the corporation or the issuance of any bonds or any instrument as security therefor, except as is provided in this chapter, any other law to the contrary notwithstanding, provided that nothing in this chapter shall be construed to deprive the state and its governmental subdivisions of their respective police powers over any properties of the corporation, or to impair any power thereover of any official or agency of the state and its governmental subdivisions which may be otherwise provided by law.

Article 5 Cooperation With Governmental Bodies

§ 35-761 Cooperation with public bodies

For the purposes of carrying out the intent and provisions of this chapter, the authorizing governing body may enter into cooperative agreements with any other governing bodies or with a state or any department or agency thereof, or with the United States or with any agency, department, or instrumentality thereof.

§ 35-762 Reviewing entities; approval of developments; coordination; definitions

A. Any reviewing entity exercising its statutory duties in connection with a project may agree with any other reviewing entity to share information, coordinate review schedules or jointly conduct reviews.

B. A reviewing entity, in its discretion, may cooperate in the review of a project financing by adopting in whole or in part substantially similar review work performed on the project financing by another reviewing entity that is also charged with review of the project financing if the review work completed by the other entity meets the standards of the reviewing entity.

C. A reviewing entity that adopts in whole or in part review work performed on the project financing by another reviewing entity is deemed for all purposes to have complied with its review responsibilities as if the review work had been performed by the reviewing entity itself.

D. For the purposes of this section:

1. "Project" means a nursing home, rest home, skilled nursing facility, senior residential facility providing on-site medical and support services or life care facility owned and operated by a nonprofit organization that is exempt from taxation under section 501(c)(3) of the United States internal revenue code that is seeking debt financing pursuant to this chapter or a permit pursuant to title 20, chapter 8.

2. "Reviewing entity" means an industrial development authority formed pursuant to this chapter, a governing body approving the formation of an industrial development authority or the department of insurance and financial institutions.

Article 6 Student Loan Bond Programs

§ 35-771 Definitions

In this article, unless the context otherwise requires:

1. "Educational institution" means a university under the jurisdiction of the Arizona board of regents, a community college in this state, an accredited private postsecondary institution eligible under title IV of the higher education act of 1965 licensed by this state and any other accredited institution eligible under title IV of the higher education act of 1965 offering postsecondary education or courses, whether located within or outside of the boundaries of this state, that awards any eligible degree.

2. "Eligible degree" means any postsecondary degree or program.

3. "Eligible lender" means an entity affiliated or contracting with a corporation or a qualified educational institution that may make student loans to eligible students or to the parents of eligible students or a nonprofit entity that is exempt from taxation under section 501(c)(3) of the internal revenue code and that makes student loans.

4. "Eligible student" means any student attending any qualified educational institution and any resident of this state attending any educational institution.

5. "Parent" means a student's mother, father, adoptive parent, grandparent or guardian or any person with the duty and authority to make important decisions in matters having a permanent effect on the life and development of a student and to be concerned about the student's general welfare.

6. "Qualified educational institution" means an educational institution, as defined in paragraph 1 of this section, with a campus and facilities located in this state that offers one or more eligible degrees.

7. "State program representative" means the state treasurer or the state treasurer's designee.

8. "Student loan" means a loan to or for the benefit of an eligible student for the purpose of financing all or a part of the eligible student's cost of attending an educational institution in pursuit of an eligible degree or refinancing any such loan previously made.

§ 35-772 Student loan bonds

A. In addition to any powers granted under this chapter, a corporation is authorized to issue bonds in order to finance student loans made in a student loan program established pursuant to this article and to issue refunding bonds to refund bonds previously issued under this article as provided in this chapter.

B. A corporation, in furtherance of a student loan program, shall have the power to:

1. Determine the nature of student loan programs for eligible students or their parents for which the corporation will issue bonds.

2. Enter into contracts for any or all student loan program purposes.

3. Enter into contracts for the origination, administration or servicing of student loans.

4. Designate a particular qualified educational institution or institutions, or eligible lender or lenders, as its agent for accomplishing its purposes.

5. Make loans with proceeds of the sale of its bonds to any eligible student, any parent of an eligible student, any educational institution or any eligible lender in accordance with an agreement between the corporation and other parties. The agreements may provide that the proceeds of any loan made to an educational institution or eligible lender shall be used by the educational institution or eligible lender to purchase, originate or make loans only to or for the benefit of eligible students attending designated qualified educational institutions, or to the parents of those students.

6. Acquire, purchase and make commitments to purchase student loans with proceeds of the sale of its bonds from any educational institution or eligible lender in accordance with an agreement between the corporation and other parties. The agreement may provide that the student loans be made only to or for the benefit of eligible students attending designated educational institutions, or to the parents of those students.

7. Receive and accept from any public agency or any other source loans, grants, guarantees or insurance with respect to student loans and student loan programs.

8. Establish guidelines governing the actions of qualified educational institutions and eligible lenders participating in the corporation's student loan program.

9. Perform any acts incidental to and that it deems necessary to execute the powers listed in this article.

C. Except as provided in subsection D of this section, a corporation shall not issue bonds to finance student loans pursuant to this article unless the corporation has approved a plan for the student loan program to be financed by the bonds and has submitted the plan for review and approval by the state program representative pursuant to section 35-773. A corporation shall follow the plan as submitted and approved except for insubstantial deviations determined by the corporation's board of directors to be necessary for the successful issuance of the bonds and establishment and operation of the program. The plan submitted to the state program representative must establish at least the following:

1. The criteria for participation in the program by educational institutions, eligible lenders and eligible students.

2. The general terms of the student loans and the program.

3. Any other information reasonably requested by the state program representative.

D. A corporation may issue bonds without approving a plan or submitting a plan for review and approval to the state program representative if the issuance is for either:

1. Refunding bonds, the proceeds of which are exclusively used to refund bonds previously issued pursuant to this article.

2. Additional bonds issued under the same governing documents and secured on the same basis as bonds described in a plan previously approved by the corporation and reviewed and approved by the state program representative if the additional bonds are rated in the "A" category or better, without regard to modifiers within the "A" category, by a nationally recognized bond rating agency.

E. A corporation shall notify the state program representative in writing at least sixty days before issuing bonds pursuant to subsection D of this section. The written notification must set forth the basis under subsection D of this section for the issuance.

F. A corporation that has approved a plan for issuing student loan bonds and a student loan program to be financed by the bonds under this article is a student loan corporation for the purposes of chapter 7 of this title.

§ 35-773 State program; representative; plan approval; bond rating

A. All industrial development authorities are authorized to exercise powers and issue revenue bonds to finance student loans in accordance with this chapter so that the state's student loan program is available for eligible students at educational institutions as a student loan program of general application in this state and approved by this state.

B. The state program representative shall approve or disapprove a plan submitted under section 35-772, with or without a hearing, not later than thirty days after receipt of the plan and shall promptly notify the corporation that submitted the plan of the approval or disapproval. If the state program representative does not notify the corporation that submitted the plan of the approval or disapproval within forty-five days after receiving the plan, the plan is deemed approved. Approval of a plan constitutes a finding by the state program representative that:

1. The origination or acquisition of student loans by the corporation or its agent or agents, a qualified educational institution or an eligible lender to eligible students or their parents will assist the students in attending an educational institution and financing the student's education.

2. Adequate provision has been or will be made for the payment of the principal of or interest on any bonds issued by the corporation to finance the loan program and for the reasonable expenses of the administration of the loan program.

3. The proposed procedures for application of the bond proceeds, the collection of payments, interest charges and any other matters concerning the administration of the loan program are in conformance with the laws of this state.

C. If the bonds are rated in the "A" category or better, without regard to modifiers within the "A" category, by a nationally recognized bond rating agency, that rating is conclusive proof that adequate provision for payment has been made pursuant to subsection B, paragraph 2 of this section.

Chapter 6 Pollution Control Financing

Article 1 Incorporation

§ 35-801 Definitions

In this chapter, unless the context otherwise requires:

1. "Corporation" means any pollution control corporation incorporated by a municipality or county pursuant to the provisions of this chapter. Any such corporation when formed shall be a political subdivision of the state and have only such governmental powers as are set forth in this chapter.

2. "County" means any county in this state in which a corporation may be organized and in which it is contemplated the corporation will function.

3. "Governing body" means the board or body in which the general powers of the municipality or the county are vested.

4. "Municipality" means any incorporated city or town, including charter cities, in this state in which a corporation may be organized and in which it is contemplated the corporation will function.

5. "Pollution control facilities" means real and personal properties including but not limited to machinery and equipment, whether or not now in existence or under construction, which are used in whole or in part to control, prevent, abate, alter, dispose or store, solid waste, thermal, noise, atmospheric or water pollutants, contaminants or products therefrom, whether such facilities serve one or more purposes or functions in addition to controlling, preventing, abating, altering, disposing or storing such pollutants, contaminants or the products therefrom.

§ 35-802 Proceedings to incorporate pollution control corporations

A. Any three or more natural persons, each of whom is a qualified elector of the municipality or the county, may file with the clerk of the governing body thereof written application for permission to incorporate a pollution control corporation for such municipality or county. The governing body shall approve or reject such application within thirty days after the filing date. If the governing body determines that it is advisable for the corporation to be formed it shall adopt a resolution approving the application and authorizing the persons making application to proceed with incorporation as prescribed by this chapter. No corporation may be formed unless an application first has been approved by the governing body having jurisdiction as provided in this section.

B. The number of corporations to be formed in any municipality or county hereunder shall not exceed the number deemed advisable by the governing body thereof to accomplish the purposes of this title.

§ 35-803 Articles of incorporation of pollution control corporations

In addition to the requirements of title 10, the articles of incorporation shall set forth:

1. The names and residences of the applicants and a statement that each is an elector of the municipality or county.

2. The name of the corporation, which shall include the words "pollution control corporation" and the name of the authorizing county or municipality.

3. A statement that approval for incorporation has been granted by the governing body of the municipality or county and the date of approval.

4. The location of the principal office of the corporation, which shall be in the municipality or county.

§ 35-804 Amendment to articles

The articles of incorporation may be amended, provided that a majority of the members of the board of directors of the corporation first shall file with the governing body a written application seeking permission to amend the articles and specifying the amendment proposed to be made. The governing body shall approve or reject the application within thirty days following the filing date. If it approves the proposed amendment, it shall adopt a resolution authorizing the directors to amend the articles in accordance with the provisions of title 10.

§ 35-805 Board of directors

The corporation shall have a board of directors in which all powers of the corporation shall be vested and which shall consist of not less than three nor more than nine directors, all of whom shall be duly qualified electors of the municipality or county in which the corporation was formed. Decisions of the board of directors shall be by majority vote. The directors shall serve without compensation except that they shall be reimbursed for their actual expenses incurred in the performance of their duties. No director shall be an officer or employee of the authorizing municipality or county. The initial directors shall be elected by the incorporators of the corporation. Directors shall hold office for overlapping terms. At the time of the election of the first board of directors the directors shall be divided into three groups containing as nearly equal numbers as possible. The first term of the directors included in the first group shall be two years, the first term of the directors included in the second group shall be four years, the first term of the directors included in the third group shall be six years. The terms of all directors thereafter shall be six years. The directors shall elect their successors and fill vacancies in the board of directors, subject to the approval of the governing body of the authorizing county or municipality.

§ 35-806 Corporate powers

A. In addition to the powers granted corporations by title 10, or otherwise, the corporation shall have the following powers, together with all powers incidental thereto or necessary or convenient for the performance of the following:

1. To issue bonds to carry out any of its purposes.

2. To pay compensation for professional and other services as the board of directors shall deem necessary for the business of the corporation.

3. To acquire by purchase, exchange, gift, lease or otherwise and to construct, improve and equip pollution control facilities.

4. To sell for cash or terms, exchange and convey pollution control facilities whenever its board of directors finds such action to be in furtherance of the purposes of the corporation.

5. To lease pollution control facilities and collect rent therefor and terminate any such lease upon the failure of the lessee to comply with any of the lease obligations.

6. To make secured or unsecured loans for the purpose of financing or refinancing the acquisition, construction, improvement or equipping of pollution control facilities, to charge and collect interest on such loans and pledge the proceeds of loan agreements as security for the payment of the principal and interest of bonds, or designated issues of bonds, issued by the corporation and any agreements made in connection therewith, whenever the board of directors finds such loans to be in furtherance of the purposes of the corporation.

7. To mortgage, pledge or otherwise encumber any or all of its properties, or any part or parts thereof, whether then owned or later acquired and to pledge the revenues and receipts from such properties as security for the payment of the principal and interest of bonds or designated issues of bonds, issued by the corporation and any agreements made in connection therewith.

8. To invest funds of the corporation as the board of directors shall direct.

9. To acquire and hold obligations of any kind to carry out any of its purposes.

10. To enter into contracts and execute any agreements or instrument and do any other act necessary or appropriate to carry out its purposes.

B. The corporation shall not have the power to operate any pollution control facility as a business other than as lessor.

§ 35-807 Earnings of the corporation

The corporation shall be a nonprofit corporation and no part of its net earnings remaining after payment of its debts and expenses shall inure to the benefit of any individual, firm or corporation.

§ 35-808 Dissolution of corporation

Whenever the board of directors of the corporation shall determine that the purpose for which the corporation was formed has been substantially accomplished and that all issued bonds and other obligations of the corporation have been fully paid, the members of the board of directors of the corporation shall thereupon dissolve the corporation in accordance with the provisions of title 10, and any properties of the corporation shall be distributed and vest in the municipality or county.

§ 35-809 Recordation of documents

The articles of incorporation and the certificate of dissolution of the corporation shall be filed for record with the corporation commission.

§ 35-810 Chapter cumulative; no notice required

A. This chapter shall not be construed as a restriction or limitation upon any powers which the corporation otherwise might have under any laws of this state, but shall be construed as cumulative of any such powers. Except as provided in title 44, chapter 12, article 4, no proceedings, notice or approval shall be required for the issuance of any bonds of the corporation or any security therefor, except as provided in this chapter, any other law to the contrary notwithstanding, provided that nothing in this chapter shall be construed to deprive the state and its governmental subdivisions of their respective police powers over any properties of the corporation or to impair any powers of any official or agency of the state and its governmental subdivisions.

B. Pollution control facilities may be financed, refinanced, purchased, constructed, leased, improved, extended and disposed of pursuant to this chapter, and bonds may be issued under this chapter for any of such purposes, notwithstanding that any other law may also provide for the acquisition, purchase, construction, improvement and extension or disposition of a similar project or for the issuance of bonds for like purposes and with the exception of the requirements imposed pursuant to title 44, chapter 12, article 4, without regard to the requirements, restrictions, limitations or other provisions contained in any other law. Insofar as the provisions of this chapter are inconsistent with any other law of this state, the provisions of this chapter shall be controlling, except that the provisions of this chapter shall in no manner diminish the power of any corporation or authority formed under the provisions of chapter 5 of this title, or impair or diminish any rights, privileges and immunities of a corporation formed thereunder and any such corporation or authority organized under chapter 5 of this title shall be authorized to issue bonds hereunder for pollution control facilities and shall, in addition to the powers conferred by chapter 5 of this title, have all powers conferred by the provisions of this chapter. The provisions of title 34 and this title have no application to corporations or their activities or property or to transactions entered into by them or on their behalf in accordance with this chapter or in the exercise of powers conferred upon them by law or this chapter.

Article 2 Bonds

§ 35-821 Bonds of the corporation

A. All principal and interest of bonds issued by the corporation shall be payable solely out of the revenues and receipts derived from the corporation's sale of property, loan repayments or lease rentals, or out of the proceeds of bonds issued hereunder, as shall be specified in the proceedings of the board of directors by which issuance of bonds shall have been authorized.

B. The proceedings by which bonds are to be issued shall require approval of the board of directors and the governing body of each issuance of bonds.

C. The bonds prescribed by subsection A may:

1. Be executed and delivered by the corporation at any time and from time to time.

2. Be in any form, denomination, tenor and maturity.

3. Be in registered or bearer form either as to principal or interest or both.

4. Be payable in any installments and at any time or times not exceeding sixty years from the date thereof.

5. Bear interest at any rate or rates and be payable at any time or times and at any place or places within or without the state of Arizona.

6. Be executed by such officers of the corporation and in such manner, and contain such provisions, not inconsistent herewith, as shall be provided in the proceedings of the board of directors authorizing the bonds to be issued, and in case an officer signing the bonds or coupons shall cease to be an officer of the corporation before the delivery of such bonds, such signature shall, nevertheless, be valid and sufficient for all purposes, the same as if the officer had remained in office until delivery.

D. If deemed advisable by the board of directors, there may be retained in the proceedings under which any bonds of the corporation are authorized to be issued an option to redeem all or any part thereof, at such time or times, as may be specified in such proceedings, at such price or prices and after such notice or notices and on such terms and conditions as may be set forth in such proceedings, but nothing in this article shall be construed to confer on the corporation any right or option to redeem any bonds except as may be provided in the proceedings under which they shall be issued.

E. Any bonds of the corporation may be sold at public or private sale in such manner and from time to time as may be determined by the board of directors of the corporation to be most advantageous, and the corporation may pay all expenses, premiums and commissions which its board of directors may deem necessary or advantageous in connection with the issuance thereof. Issuance by the corporation of any one or more series of bonds for one or more purposes shall not preclude it from issuing other bonds in connection with the same purpose or any other purpose, but the proceedings authorizing the issuance of any subsequent bonds shall recognize and protect any prior pledge or mortgage made to secure any prior issue of bonds. Any bonds of the corporation at any time outstanding may, if permitted by the conditions of issuance, be refunded at any time and from time to time by the issuance of refunding bonds in such amount as the board of directors may deem necessary but not exceeding any amount sufficient to refund the principal of the bonds so to be refunded, together with any unpaid interest thereof and any premiums and commissions necessary to be paid in connection therewith. The provisions of subsections A, B and D shall apply to all such bonds. Any such refunding may be effected whether the bonds to be refunded shall have then matured or shall thereafter mature, either by sale of the refunding bonds and the application of the proceeds thereof for the payment of the bonds to be refunded or by the exchange of the refunding bonds for the bonds to be refunded thereby with the consent of the holders of the bonds so to be refunded, regardless of whether the bonds proposed to be refunded shall be payable at the same date or different dates or shall be due serially or otherwise. All such bonds and the interest coupons applicable thereto are hereby made and shall be construed to be negotiable instruments.

F. The corporation may notify the attorney general of this state of its intent to issue bonds. The attorney general shall within ten days of the receipt of any such notice issue an opinion as to whether such issue is in conformity with the provisions of this chapter.

G. No action shall be brought questioning the legality of any contract, lease, mortgage, proceedings or the issuance of bonds hereunder from and after three months from the date the bonds are authorized to be issued by the board of directors.

§ 35-822 Security for bonds

The principal and interest of any bonds issued by the corporation may be secured by a pledge of the revenues and receipts of the corporation out of which the principal and interest are to be made payable, by a mortgage covering all or any part of the properties of the corporation or corporations from which the revenues or receipts so pledged may be derived or a mortgage covering any properties of a borrower or lessee, including any enlargements and additions to any such properties, or by such other security as may be prescribed in the proceedings of the board of directors authorizing the issuance of the bonds. The proceedings under which bonds are authorized to be issued and any mortgage may contain any agreements and provisions respecting the maintenance of the properties covered thereby, the fixing and collection of rents for any portions thereof leased by the corporation to others, the creation and maintenance of special funds from such revenues and the rights and remedies available in the event of default and such other provisions as are not inconsistent with the provisions of this chapter, all as the board of directors shall deem advisable and not in conflict with the provisions of this article. Each pledge, lease, loan agreement or mortgage made to secure any of the bonds of the corporation shall continue to be effective until the principal and interest of the bonds so secured have been fully paid or adequate provisions for such payment have been made. A default in any agreement of the corporation made as a part of the contract under which the bonds were issued, whether contained in the proceedings authorizing the bonds or in any mortgage executed as security therefor, may be enforced by suit, by the appointment of a receiver, by the foreclosure of any mortgage, or any one or more of the remedies specified in the proceedings authorizing the issuance of such bonds.

§ 35-823 Bonds as legal investments

Bonds issued under the provisions of this chapter are legal investments for all banks, trust companies and insurance companies organized and operating under the laws of this state.

Article 3 Tax Exemption and Liabilities

§ 35-831 Exemption from taxation

The corporation and its income and all bonds issued by it and the income therefrom shall be exempt from all taxation in this state, except that property of the corporation shall be subject to all applicable ad valorem taxes. If such property is leased, such ad valorem taxes shall be charged to the lessee as fully as if the lessee were the owner of such leased property.

§ 35-832 Municipality or county not liable

The municipality or the county shall not in any event be liable for the payment of the principal or interest of any bonds of the corporation or for the performance of any pledge, mortgage, obligation or agreement of any kind whatsoever which may be undertaken by the corporation, and none of the bonds of the corporation or any of its agreements or obligations shall be construed to constitute an indebtedness of the municipality or county within the meaning of any constitutional or statutory provisions of this state whatsoever.

Article 4 Cooperation With Governmental Bodies

§ 35-841 Cooperation with governmental bodies

For the purposes of carrying out the provisions of this chapter, the governing body of a municipality or county may enter into cooperative agreements with governing bodies of any other municipality or county or with the state or any department or agent thereof, or with the United States or with any agency, department or instrumentality thereof.

Chapter 7 Allocation of Private Activity Bonding Authority

Article 1 General Provisions

§ 35-901 Definitions

In this chapter, unless the context otherwise requires:

1. "Authority" means the Arizona finance authority established by title 41, chapter 53, article 2.

2. "Board" means the board of directors of the authority.

3. "Bond" means any obligation that is subject to the provisions of section 146 of the code, excluding obligations that received a carry-forward allocation in a prior year.

4. "Business day" means between the hours of 8:00 a.m. and 5:00 p.m., mountain standard time, any day of the week other than a Saturday, a Sunday or a legal holiday or a day on which the authority is authorized or obligated by law or executive order to close.

5. "Carry-forward project" means any project receiving a carry-forward allocation pursuant to section 35-907.

6. "Certificate of closing" means the certificate of closing adopted for use by and to be filed with the authority declaring that bonds were issued or that a qualified mortgage credit certificate program has been established.

7. "Code" means the United States internal revenue code of 1986, as amended, and its applicable regulations.

8. "Confirmation" means the allocation confirmation that confirms an allocation to a project in the form adopted for use by the authority.

9. "Director" means the director of the authority.

10. "Issued" means, with respect to a bond or bonds, either of the following:

(a) The bond or bonds have been delivered and paid for in full.

(b) For bonds issued pursuant to a draw-down loan for which a bond purchaser has agreed to receive and pay for the bonds of the issue in increments from time to time, all of the bonds are treated as issued on the first date on which the aggregate principal amount of such bonds delivered and paid for exceeds the lesser of fifty thousand dollars or five percent of the aggregate issue price of the issue.

11. "Issuer" means an entity or person issuing bonds.

12. "Manufacturing project" means a project as described in section 35-701, paragraph 7, subdivision (a), item (vii) or (xiii).

13. "Mortgage credit certificate" means a certificate as described in section 25(c)(1) of the code.

14. "Nonurban area" means all areas of this state not within the boundaries of the urban cities.

15. "Notice of intent" means the notice of intent to be filed with the authority in the form adopted for use by the authority.

16. "Project" means a qualified mortgage credit certificate program or any construction, acquisition, planned expenditure or other activity, including all phases of a multiphased project that requests allocations in the same year and including costs of issuance, capitalized interest and discounts, financed with bonds and located in this state or directly benefiting residents of this state. All qualified mortgage credit certificate programs and qualified mortgage revenue bonds, or combinations of such programs and bonds, of a single issuer or group of issuers acting together, constitute a single project for the purposes of this paragraph.

17. "Qualified mortgage credit certificate program" means a qualified mortgage credit certificate program as described in section 25(c)(2) of the code.

18. "Qualified mortgage revenue bonds" means an issue of bonds as described in section 143(a) of the code.

19. "Qualified student loan project" means an issue of bonds as described in section 144(b) of the code.

20. "Request" means the request for allocation to be filed with the authority in the form adopted for use by the authority.

21. "Security deposit" means cash, a bank cashier's check, a surety bond, a letter of credit or any other form of security approved by the director in favor of the authority that is received by the authority from an issuer or user to secure or extend an allocation.

22. "State ceiling" means the dollar limit of the aggregate amount of private activity bonds that may be issued in this state pursuant to section 146 of the code for each calendar year, beginning in 1988.

23. "Tax reform act of 1986" means P.L. 99-514 enacted by the ninety-ninth Congress, second session in 1986.

24. "Urban city" means a city having a population of not less than one hundred thousand persons according to the most recent United States decennial or special census. The area of each urban city is the boundary of the city as of January 1 of the current calendar year.

25. "Year" means the calendar year.

§ 35-902 Allocation

A. Subject to this chapter, the total amount of the state ceiling is allocated among projects pursuant to this section. The director shall issue confirmations on a first-come, first-served basis, subject to section 35-904, subsection A in the event of oversubscription, within any particular category of projects as described in subsection C, D or E of this section.

B. Twenty-five percent of the state ceiling is allocated to projects that are designated at the sole discretion of the director.

C. Thirty percent of the state ceiling is allocated to qualified mortgage revenue bonds and qualified mortgage credit certificate programs, including bonds and certificate programs for home improvement and rehabilitation.

D. Forty percent of the state ceiling is allocated to qualified residential rental projects as described in section 142(d) of the United States internal revenue code of 1986.

E. Five percent of the state ceiling is allocated to manufacturing projects.

F. A request shall not be filed and a confirmation shall not be issued to a project unless the project is subject to section 146 of the code. A project is not deemed to have been allocated any portion of the state ceiling unless, in connection with the project, this chapter has been substantially complied with.

G. Any request on file with the authority for which a confirmation has not been issued by 5:00 p.m. on March 31, other than a request for an allocation pursuant to subsection B or D of this section, is deemed to have expired at 5:00 p.m. on March 31. Other than a confirmation made pursuant to subsection B of this section or for which confirmations have not been extended pursuant to section 35-910, all or any part of any confirmation for which bonds have not been issued or for which a qualified mortgage credit certificate program has not been established by 5:00 p.m. on March 31, evidenced by the filing of a certificate of closing with the authority, is deemed to have expired.

H. At any given time, an issuer, or an issuer together with one or more other issuers, may not file more than one request for each project, except that the authority may satisfy an allocation request from one or more categories of projects as described in subsection B, C, D or E of this section. This subsection does not prohibit an issuer from refiling a request for a given project if a prior request has expired or filing a request for each separate and distinct project.

I. Beginning from and after October 30, 2023 until July 31, 2030:

1. From March 31 through July 31 of each year, except for the percentage allocated by the director pursuant to subsection B of this section, sixty percent of the remaining state ceiling is allocated to projects prescribed in subsections C and D of this section.

2. Notwithstanding section 35-905, subsection A, from March 31 through July 31 of each year, a confirmation may not be allocated to a project prescribed in subsection C of this section in an amount greater than $35,000,000.

§ 35-903 Arizona finance authority designated as state registry; fee

A. The Arizona finance authority is designated as the exclusive state registry for:

1. Requests.

2. Recordation of confirmations, whether outstanding or lapsed.

3. Certificates of closing.

4. Recordation of all requests for carry-forward amounts for specific projects.

5. Other records required for the administration of this chapter.

B. The authority shall develop and maintain separate lists for urban cities, nonurban areas, statewide uses and the aggregate for all categories that summarize all information received pursuant to subsection A of this section.

C. Requests and confirmations adopted or issued under this chapter shall be dated and numbered by the director in the order received and issued, and each item shall be independently entered on the proper list. Each list shall be composed in a manner sufficient to show, at any time:

1. The dollar amount of confirmations outstanding and not then lapsed.

2. The dollar amount of the remaining allocation then available.

3. The amount of confirmations actually closed.

D. The authority may assess an application fee for processing the requests.

§ 35-904 Obtaining and issuing confirmations

A. Subject to section 35-905, a confirmation allocating a portion of the state ceiling to a project must be obtained before the sale or issuance of bonds or mortgage credit certificates by the issuer. A confirmation may be obtained by filing with the authority a request and evidence of an inducement resolution or other official action taken by the issuer in connection with the project. Requests filed by mail are deemed to be filed with the authority at 5:00 p.m. on the business day the request is actually received at the authority, whether by mail or email. All requests received on the same date and at the same time shall be dated and numbered by lot and confirmations to those requests shall be issued in the order determined by lot.

B. On and after the first business day of each year, a request may be prepared and filed by the issuer or on behalf of the issuer by bond counsel or any other interested person.

C. Except as provided in section 35-902, subsection G, section 35-909 and subsection D of this section, a confirmation issued before 5:00 p.m. on March 31 expires and an allocation is not deemed to be made unless the applicable bonds have been issued or a qualified mortgage credit certificate program has been established and a certificate of closing has been actually filed and received, not merely postmarked, including by email, with the authority not later than ninety days after the date of the confirmation or the first business day after the ninetieth day if the ninetieth day is not a business day. The confirmation may be extended as provided in section 35-910 beyond the ninety-day period or 5:00 p.m. on March 31.

D. Notwithstanding subsection C of this section, a confirmation issued for a project to be funded in part with an urban development action grant to be made under section 119 of the housing and community development act of 1974 (P.L. 93-383; 88 Stat. 633) or a housing development grant to be made under section 301 of the housing and urban-rural recovery act of 1983 (P.L. 98-181, title III, section 301, 97 Stat. 1196 and amended October 17, 1984, P.L. 98-479, title III, section 103, 98 Stat. 2223) expires and an allocation is not deemed to be made unless the applicable bonds have been issued and a certificate of closing and evidence satisfactory to the director of the commitment to make an urban development action grant or a housing development grant with respect to such project have been actually filed and received, not merely postmarked, including by email, with the authority not later than 5:00 p.m. on December 26 or the next business day if December 26 is not a business day.

E. Subject to this section and section 35-909, the confirmation shall ensure allocation in the manner prescribed by the code for a dollar amount of bonds or a qualified mortgage credit certificate program not in excess of the amount set forth in the confirmation.

F. The director shall decline to issue confirmations at such time as the aggregate amount of bonds or mortgage credit certificates allocated under all confirmations previously issued and not expired, together with the proposed issue of bonds or mortgage credit certificates as to which a request has been received, would, through 5:00 p.m. on March 31, exceed the respective aggregate amount allocated under section 35-902, subsection C, D or E for such purpose, and from April 1, exceed the aggregate amount of the state ceiling that is not allocated under an unexpired confirmation nor within the discretion of the director pursuant to section 35-902, subsection B. On expiration of a confirmation or release of an allocation by the related issuer, the director shall issue a confirmation to the next numbered request which is equal to or less than the then available portion of the state ceiling or to the next numbered request if the principal amount of such request is reduced to an amount equal to or less than the then available portion of the state ceiling available for such purpose. Except for confirmations made pursuant to section 35-902, subsection B, the director may only issue a single confirmation for each request.

G. A confirmation made pursuant to section 35-902, subsection B may be accompanied by a certificate executed by the director. On request, the director shall execute a certificate stating that the confirmation was not made in consideration of any bribe, gift, gratuity or direct or indirect contribution to any political campaign. The director may require such oaths or affirmations as the director considers to be necessary to verify the accuracy of the certificate.

H. The director shall issue confirmations within three business days after receipt and shall issue confirmations in the order of receipt of fully and properly completed requests within the limitations of subsection F of this section. The authority shall notify the issuer and any other contact person listed in the request in writing, by email or by telephone of the issuance of a confirmation. The authority is not responsible for returning confirmations to the filing party. A confirmation shall be available for pickup at the authority after issuance of the confirmation.

§ 35-905 Restrictions on confirmations; definition

A. Before August 31, a confirmation shall not be allocated to a project in an amount greater than $35,000,000, except that this subsection does not apply to any project that is eligible to receive an allocation pursuant to section 35-902, subsection B, C or D. For the purposes of this section, the amount of allocation to a project shall also include any other state ceiling allocation received by any related person to the project.

B. For the purposes of this section, "related person" has the same meaning as provided in section 147(a)(2) of the code, except that all references to fifty percent shall be changed to twenty-five percent.

§ 35-906 Allocations obtained after March 31 through 5:00 p.m. December 16

A. Any portions of the state ceiling, including any portions of the state ceiling subject to a confirmation for which bonds have not been issued or for which a qualified mortgage credit certificate program has not been established by 5:00 p.m. on March 31, other than confirmations extended pursuant to section 35-910 and the state ceiling allocated to the discretion of the director pursuant to section 35-902, subsection B, shall be pooled and are subject to allocation among requests on a first come, first served basis.

B. Obtaining and issuing confirmations on or after April 1 through 5:00 p.m. December 16 shall occur as provided in section 35-904, subject to the following restrictions and changes:

1. Requests may be filed on or after April 1 of each year.

2. A confirmation issued on or after April 1 through 5:00 p.m. December 16 expires and no issuer is deemed to have been allocated any portion of the state ceiling unless the issuer's bonds have been issued or a qualified mortgage credit certificate program has been established and a certificate of closing has been actually filed, and not merely postmarked, with the authority no later than ninety days after the date of the confirmation or the first business day after the ninetieth day if the ninetieth day is not a business day, or before 5:00 p.m. December 16, whichever occurs first. The confirmation may be extended as provided in section 35-910.

3. Before the director issues the confirmation, the authority must receive a security deposit in the amount of one percent of the principal amount stated in the request. The security deposit is forfeited to the authority if the bonds are not issued before the expiration of the confirmation or any extension. The security deposit shall not be required pursuant to this paragraph if the direct beneficiary of the bond proceeds is this state or a county, city, town or nonprofit entity, the issuer is a student loan corporation or the project will include urban development action grant or housing development grant financing, is a qualified mortgage revenue bond or is a qualified mortgage credit certificate program.

§ 35-907 Allocations after 5:00 p.m. December 16; reallocation of carryforwards

A. Any portions of the state ceiling for which bonds have not been issued by 5:00 p.m. December 16, other than confirmations extended pursuant to section 35-910, shall be pooled and are subject to allocation by the director to projects eligible for a carryforward allocation under the code.

B. Obtaining and issuing a confirmation after 5:00 p.m. December 16 shall occur as provided in section 35-904, subject to the following restrictions and changes:

1. Before 5:00 p.m. on December 15, a notice of intent shall be filed with and received by the authority by any issuer, bond counsel or other interested person. The notice of intent shall be dated and numbered and confirmations shall be issued by the director to the issuers on December 17. Any portions of the state ceiling for which bonds have not been issued or carried forward pursuant to this section or for which a qualified mortgage credit certificate program has not been established by 5:00 p.m. December 26 shall be allocated by the director and confirmations shall be provided to such issuers before January 1. Issuers shall not file elections of carryforward purpose with the federal government under section 146 of the code until a confirmation has been delivered by the authority under this section for the bonds pertaining to a project. The failure to file a notice of intent results in the exclusion of the project from allocations to issuers of any portion of the current calendar year state ceiling.

2. A security deposit equal to one percent of the principal amount stated in the notice of intent shall be received by the authority within five days after notification by the director that the project is eligible for a carryforward allocation. A security deposit is not required if the direct beneficiary of the bonds proceeds is this state or a county, city, town or nonprofit entity, the issuer is a student loan corporation, the project includes urban development action grant or housing development grant financing, is a qualified mortgage revenue bond project or is a qualified mortgage credit certificate program or the confirmation is issued by the director on or after December 26. The security deposit is forfeited to the authority if bonds are not issued within three years after the receipt of the deposit. For bonds that are issued from and after December 31, 2015, any security deposit made in relation to the project for which the bonds are issued shall be refunded if the bonds are issued within three years after the receipt of the deposit that is required under this paragraph, whether or not carryforward allocation is used.

C. Notwithstanding subsection B of this section and section 35-904, on written notice to the director, an issuer may reallocate all or a portion of any carryforward confirmation within the same carryforward purpose. A reallocation made pursuant to this subsection must be consistent with this section and with applicable federal law. A reallocation made pursuant to this subsection does not increase the aggregate amount of the original carryforward confirmation to which the reallocation relates or extends the term of the original carryforward confirmation during which the bonds must be issued. Reallocation of carryforward confirmation by an issuer will not result in a refund of any security deposit previously received by the authority on account of the original carryforward confirmation. The certificate of closing shall indicate to the authority if the carryforward confirmation was reallocated.

§ 35-908 Principal amount of bonds issued less than confirmation; fee

A confirmation is effective as to bonds or mortgage credit certificates issued in lesser amounts than the principal amount set forth in the confirmation, but for bonds issued after 5:00 p.m. June 1, if the principal amount of bonds issued is less than the principal amount set forth in the confirmation, a fee of one percent of the difference between the confirmation and the principal amount of the bonds shall be paid to the authority on filing the certificate of closing unless the direct beneficiary of the bond proceeds is this state or a county, city, town or nonprofit entity, the issuer is a student loan corporation or the project includes urban development action grant or housing development grant financing, is a project described in section 1317(3)(N) of the tax reform act of 1986, is a qualified mortgage revenue bond or is a qualified mortgage credit certificate program. The failure to make such payment within ten days after the filing shall result in a retroactive cancellation of the allocation and the barring of the direct private obligor from any future allocations.

§ 35-909 Confirmation fees

On the earlier of three business days after notice of issuance of the confirmation pursuant to section 35-904, subsection H or the filing of a certificate of closing, the authority shall be paid a nonrefundable confirmation fee of three hundred twenty dollars per million dollars for which a confirmation is issued. The failure to make timely payments of the confirmation fee shall result in the retroactive cancellation of the confirmation.

§ 35-910 Extension of confirmations

A. A confirmation may be extended one time for up to ninety days but not later than December 16 on providing the authority with a security deposit equal to one per cent of the principal amount set forth in the confirmation. The security deposit and request for extension shall be submitted to the authority before the expiration of the confirmation. Except as provided in subsection B, all extensions granted pursuant to this section expire on the earlier of ninety days from the date of the extension or at 5:00 p.m. December 16. No security deposit is required pursuant to this section if the project is a qualified student loan project, is a qualified mortgage revenue bond, is a qualified mortgage credit certificate program or is for home improvement and rehabilitation. Requests shall not be extended.

B. A confirmation or extension of confirmation which expires at 5:00 p.m. December 16 may be extended to 5:00 p.m. December 26 by filing with the authority on or before 5:00 p.m. on December 16 a certificate certifying that the bonds will be issued before 5:00 p.m. December 26, and providing the authority with an additional security deposit equal to one per cent of the principal amount stated in the confirmation. All extensions granted pursuant to this subsection expire at 5:00 p.m. December 26.

C. All security deposits received by the authority pursuant to this section are forfeited in favor of the authority if bonds are not issued before the expiration of the extension.

§ 35-911 Powers of the authority; certifications

The authority may do all things necessary or desirable to carry out the purpose of this chapter, including issuing certifications regarding the aggregate amounts of allocations on bonds or mortgage credit certificates.

§ 35-912 Limitation of liability

No pecuniary recourse may be had for any claim based on any obligation contained in this chapter against this state or the authority or any of the past, present or future agencies, officers, directors, employees or agents.

§ 35-913 Special allocations for mortgage revenue bonds and mortgage credit certificates; definitions

A. This section governs allocations of the state ceiling made by the director pursuant to section 35-902, subsection C.

B. If the portion of a corporation's allocation computed pursuant to subsection C of this section is less than ten million dollars, the director shall first award ten million dollars of the state allocation to that corporation. Thereafter, the director shall award the remaining state allocation in the same proportion that the population of each of the remaining corporations' jurisdictions bears to the population of this state according to the census, minus the population of the corporations receiving a ten million dollar allocation pursuant to this subsection.

C. Each corporation that is described in section 35-706, subsection E and that submits a request for allocation pursuant to section 35-902, subsection C shall receive a portion of the allocation made by the director in the same proportion that the population of that corporation's jurisdiction bears to the population of this state, according to the census but in no event less than ten million dollars.

D. At any time before submitting a formal request for allocation, but no later than January 31, a corporation described in section 35-706, subsection E may submit to the director an allocation reservation for an amount not to exceed that portion of the allocation to which the corporation is entitled pursuant to this subsection. The allocation reservation may include an offer to use additional allocation amounts described in subsection E of this section for rural areas. On or before January 31, the Arizona industrial development authority may submit to the director an allocation reservation for the amounts described in subsection E of this section for rural areas. The allocation reservation does not constitute a formal request for allocation and does not obligate the Arizona industrial development authority or a corporation to submit a request for allocation.

E. The director shall require that one or more qualified mortgage revenue bond or qualified mortgage credit certificate programs benefit the residents of rural areas. Between February 1 and March 1, an allocation of the unreserved portion of the state ceiling under section 35-902, subsection C shall be made by the director for this purpose. The recipient of this allocation shall be the Arizona industrial development authority, or the Arizona industrial development authority and one or more corporations, or one or more corporations that have executed a cooperative agreement and that have jointly submitted an allocation reservation pursuant to subsection C of this section. The director shall determine the recipient of the allocation described in this subsection by March 1 from the Arizona industrial development authority or one or more of those corporations that have offered to use the allocation described in this subsection in an allocation reservation submitted before February 1. If neither the Arizona industrial development authority nor any corporation offers an allocation reservation to use this allocation before February 1 the director shall select the Arizona industrial development authority or a corporation for that purpose.

F. If the director selects the Arizona industrial development authority, or the Arizona industrial development authority and one or more corporations or one or more corporations to serve rural areas, the Arizona industrial development authority, the Arizona industrial development authority and one or more corporations or the corporation or corporations shall receive confirmation of the allocation described in subsection E of this section before March 1. Mortgage credit certificates or the proceeds of qualified mortgage revenue bonds made available through the portion of the state ceiling allocated pursuant to subsection E of this section shall be reserved for at least a one hundred eighty-day period exclusively for the financing of single family dwelling units in rural areas. The director may extend the one hundred eighty-day period at the time of allocation or a later time based on market conditions. The director at any time may modify any extension based on market conditions at the time. After the one hundred eighty-day period or any extension, whichever is later, the director may allocate any reservation that has not been used for use within the jurisdiction of any corporation that is described in section 35-706, subsection E and that gives its consent.

G. The validity of a confirmation for qualified mortgage revenue bonds or a qualified mortgage credit certificate program to benefit residents of part of the state shall not be affected by reason of qualified mortgage revenue bonds or a qualified mortgage credit certificate program receiving a confirmation to benefit residents of another part of the state not being issued.

H. Except as provided in subsections F and G of this section, a corporation shall not exercise the powers granted under section 35-706, subsection A, paragraphs 11, 12 and 13 outside of its own jurisdiction.

I. At the time a confirmation is issued the director shall determine in writing the allocation amounts in the manner described in this section. In determining the recipient or recipients for the allocation described in subsection E of this section, the director may consider the effectiveness of alternative program structures in rural areas. No action may be brought questioning the accuracy of any determination made by the director pursuant to this section without a finding of the director's bad faith or wilful misconduct.

J. Confirmations of the state ceiling under section 35-902, subsection C may be applied toward a qualified mortgage revenue bond program or qualified mortgage credit certificate program in any combination deemed appropriate by the issuing corporation with the approval of its governing body or by the board of the Arizona industrial development authority for a program for rural areas established by the Arizona industrial development authority.

K. Denial of approval of the use of qualified mortgage revenue bond proceeds or qualified mortgage credit certificates in a city or town pursuant to section 35-706 or subsection L of this section does not affect the validity of the allocation or affect the amount of state allocation that is allocated for that purpose.

L. The Arizona industrial development authority may not permit proceeds of bonds or a qualified mortgage credit certificate program in rural areas to be used to finance projects that are owner-occupied single family dwelling units within the corporate limits of an incorporated city or town, the unincorporated area of a county or a reservation for an Indian tribe, unless the governing body of the city, town, county or tribe has approved the general location and character of the residences to be financed. Before the issuance of bonds or mortgage credit certificates for that purpose, the authority shall give written notice to the governing body of each city, town, county or tribal reservation in which it intends to permit proceeds of an issue of bonds or mortgage credit certificates to be used to finance projects that are owner-occupied single family dwelling units and of the general location and character of the residences that may be financed. The governing body of the city, town, county or tribe is deemed to have given its approval unless it denies approval by formal action of the governing body within twenty-one days after receiving the written notice from the authority. Approvals given or deemed to have been given with respect to use of proceeds of an issue of bonds or mortgage credit certificates under this subsection may not be withdrawn. Denials may be withdrawn by the governing body of a city, town, county or tribe and approval may be given after a denial is withdrawn if the authority approves the withdrawal of the denial.

M. For the purposes of this section:

1. "Census" means the most recent United States decennial census or the special census conducted in accordance with section 42-5033 if it is more recent than the most recent United States decennial census.

2. "Population" of a corporation's jurisdiction means population according to the census. The population of a corporation formed on behalf of a county equals the population of the county minus the population of any other corporation that is within the county, that is described in section 35-706, subsection E and that submits a request for allocation pursuant to section 35-902, subsection C.

3. "Rural areas" means all of the area of this state that is not located within the jurisdiction of a corporation described in section 35-706, subsection E.

Chapter 8 Swap Agreements

Article 1 General Provisions

§ 35-1001 Definitions

In this chapter, unless the context otherwise requires:

1. "Governmental entity" means this state, any county, city, town, municipality or other political subdivision of this state or any department, agency, board, commission, authority, political subdivision, public corporation or other public entity of any of the foregoing or controlled by any of the foregoing, provided that each of the foregoing must comprise a geographical area with a population of at least three hundred thousand persons according to the most recent United States decennial census or special census.

2. "Obligations" means bonds, notes, bond anticipation notes, commercial paper or other evidences of indebtedness or lease, installment purchase or other agreements or purchasing programs or certificates of participation.

3. "Swap agreement" means an agreement, between a governmental entity and a financial institution, including an insurance company, bank indemnity company or a company related to a financial institution, pursuant to which payments are to be made by the governmental entity to the financial institution and are also to be made by the financial institution to the governmental entity, and which is entered into in order to manage interest rate risk, investment risk, or commodity prices or is entered into in connection with carrying or securing of obligations of a governmental entity.

§ 35-1002 Swap agreements; provisions; purposes; credit enhancement

A. A governmental entity may enter into, modify, amend and terminate one or more swap agreements that it determines to be necessary or desirable in connection with, or incidental to, the conduct of its activities, including in connection with the issuance, carrying or securing of obligations or the acquisition or carrying of investments. A governmental entity may enter into swap agreements that are to be effective at a future date or that constitute an option to enter into swap agreements. Swap agreements entered into by a governmental entity shall contain such provisions, including payment, term, security, collateralization, termination penalty, default and remedy provisions, and shall be with such parties as the governmental entity determines to be necessary or desirable after due consideration to the creditworthiness of the parties. If the party to the swap agreement that is not the governmental entity is not rated by a nationally recognized rating agency in one of the top two rating categories of the rating agency at the time the swap agreement is entered into, the party shall collateralize its obligations under the swap agreement with securities or cash acceptable to the governmental entity. Swap agreements may be payable from revenues of a utility undertaking, excise taxes, ad valorem taxes, street and highway revenues, monies that may be pledged to pay debt service on any bonds or other long-term obligations relating to the swap agreements, or any other legally available monies, as determined by the governmental entity.

B. A governmental entity shall not enter into a swap agreement other than to implement its investment policy or for the purpose of managing an interest rate, commodity price, investment or similar risk that arises in connection with, or incidental to, the activities of the governmental entity. A governmental entity shall not carry on a business of acting as a dealer in swap agreements.

C. In connection with entering into any swap agreement a governmental entity may enter into agreements that enhance the governmental entity's credit in the swap agreement or enhance the liquidity of the swap agreement, including a line of credit, letter of credit, insurance policy or other security.

§ 35-1003 Enforceability

Absent bad faith or actual knowledge to the contrary, a counterparty that enters into a swap agreement with a governmental entity may rely on a representation by that governmental entity that it is authorized or empowered to enter into the swap agreement. Notwithstanding the failure by that governmental entity to comply with the provisions of this chapter, that counterparty may enforce the swap agreement against the governmental entity.

§ 35-1004 Treatment, calculation and payment of amounts due under swap agreements; exemptions from budget

A. A governmental entity may deduct amounts which the governmental entity is to receive pursuant to swap agreements from the amounts due on its bonds or other long-term obligations for the purposes of determining:

1. Whether a governmental entity has satisfied statutory requirements concerning revenue coverage that are applicable to its bonds or other long-term obligations.

2. Whether a governmental entity has satisfied any maximum rate of interest that may be paid on the bonds or other long-term obligations.

3. The amount of taxes, rates or charges to be levied or collected to pay amounts due upon its bonds or other long-term obligations.

B. Until payment of all obligations under swap agreements and the expiration of the fiscal year in which swap agreements are paid in full, no amounts collected for the purpose of paying amounts due under the swap agreements shall be subject to the provisions of title 42, chapter 17, article 2.

§ 35-1005 Limitation on effect of chapter

For purposes of this chapter, "governmental entity" does not include any agricultural improvement district formed or operating under title 48, chapter 17, and this chapter shall not restrict or modify the powers of an agricultural improvement district to enter into swap agreements and otherwise engage in transactions pertaining to such agreements that such district deems to be advisable for the interest of the district or to carry out or accomplish any of the purposes authorized or permitted by title 48, chapter 17.

Chapter 9 Trust Funds

Article 1 General Provisions

§ 35-1101 Legislative consideration; funds; trust status; report; requirements

A. A statutory fund established prior to the effective date of this section may not be reclassified as a fund held in trust unless the fund under consideration meets the following factors:

1. Serves at least one of the following purposes:

(a) Protects public health or safety.

(b) Provides consumer protection by ensuring quality standards of an industry.

(c) Provides research grants for projects designed to further the purposes of the program.

2. Is for a program that meets both of the following requirements:

(a) Is funded primarily by industry fees assessed on a specified group of people and designated for a particular purpose.

(b) Has independent industry council review of the program budget and fees.

B. Any legislative standing committee considering legislation to reclassify a statutory fund to a fund held in trust shall affirm that the fund seeking reclassification meets the factors outlined in subsection A.

Chapter 10 Public Deposits

Article 1 General Provisions

§ 35-1201 Definitions

In this chapter, unless the context otherwise requires:

1. "Administrator" means the statewide collateral pool administrator.

2. "Default or insolvency" includes the failure or refusal of any eligible depository to return any public deposit on demand or at maturity and the issuance of an order of supervisory authority restraining that depository from making payments of deposit liabilities or the appointment of a receiver for that depository.

3. "Defaulting depository" means any eligible depository determined to be in default or insolvent.

4. "Eligible collateral" means any collateral that is authorized pursuant to section 35-323.

5. "Eligible depository" has the same meaning prescribed in section 35-321.

6. "Public deposit":

(a) Means public monies deposited in an eligible depository pursuant to this chapter.

(b) Does not include monies that have been collateralized pursuant to regulations adopted by the United States department of housing and urban development.

7. "Public depositor":

(a) Means this state or any county, city, town or other political subdivision of this state, including any commission, institution, committee, board or officer and any state court.

(b) Does not include a charter school, a Native American tribe or tribal entity, a federal agency or a housing authority, provided that the housing authority deposits are secured in accordance with regulations or guidelines of the United States department of housing and urban development.

8. "Public monies" means monies belonging to or received or held by officers of public depositors in their official capacity.

9. "Qualified escrow agent" means any bank or trust company that is qualified to hold collateral pledged to secure public deposits pursuant to section 35-1208.

10. "Required collateral" means the amount of eligible collateral required for an eligible depository to secure public deposits set by the policies and procedures of the administrator.

§ 35-1202 Powers of the statewide collateral pool administrator

The statewide collateral pool administrator is established in the office of the state treasurer. On or before July 1, 2014, the administrator shall have the necessary policies and procedures in place to implement this chapter. The administrator may:

1. Adopt and enforce the policies and procedures necessary to carry out this chapter. Any policies set forth by the administrator shall be developed, including a comment period, in consultation with financial institutions that serve as eligible depositories and public depositors.

2. Prescribe and enforce policies fixing the terms and conditions under which uninsured public deposits must be secured by collateral under this chapter.

3. Require any eligible depository to provide information concerning its public deposits as requested by the administrator.

4. Determine when a default or insolvency has occurred and take such action as the administrator may deem advisable for the protection, collection, compromise or settlement of any claim arising in case of default or insolvency.

§ 35-1203 Subrogation of administrator to depositor's rights; distribution of assets; payment

On payment in full to any public depositor on any claim presented pursuant to this chapter, the administrator shall be subrogated to all of the depositor's rights, title and interest against the depository that is in default or insolvent and shall share in any distribution of the defaulting or insolvent depository's assets ratably with other depositors. The sums received from any distribution shall be paid to the other eligible depositories against which assessments were made, in proportion to those assessments, after any proper payment or expense of the administrator in enforcing the claim is paid.

§ 35-1204 Mandatory deposit of public funds in eligible depositories; notice; exemption

A. Uninsured public deposits required to be secured by collateral pursuant to this chapter shall be deposited in an eligible depository.

B. On written notice to the administrator, a city that is governed by a charter and that has a population of more than one million persons is exempt from the requirements of this article.

§ 35-1205 Authority to make public deposits

A. All public depositors may make public deposits under the depositor's control in eligible depositories. The eligible depository shall secure any uninsured public deposits pursuant to this chapter or in accordance with the procedures prescribed in section 35-323.01.

B. Local officials handling public deposits in this state may not require from an eligible depository any pledge of collateral for the deposits in excess of the requirements of this chapter.

§ 35-1206 Public depositors; immunity

When deposits are made in accordance with this chapter, an official of a public depositor is not personally liable for any loss resulting from the default or insolvency of any eligible depository in the absence of negligence, malfeasance, misfeasance or nonfeasance on the part of public depositor or the depositor's agents.

§ 35-1207 Collateral for public deposits

A. An eligible depository shall not accept or retain any public deposit that is required to be secured unless the eligible depository has deposited the required collateral with a qualified escrow agent or the administrator, if required. Every eligible depository shall deposit with a qualified escrow agent eligible collateral equal to or in excess of the required collateral. Required collateral shall be one hundred two percent of public deposits less any applicable deposit insurance. Eligible collateral shall be valued at current market value. Substitutions and withdrawals of eligible collateral may be made without prior notification or consent by the public depositor. The administrator shall provide written consent before withdrawals of collateral. Substitutions of collateral may be made with notification to the administrator.

B. Notwithstanding any other provisions of law, an eligible depository shall not be required to give bond or pledge securities or instruments in the manner provided in this section for the purpose of securing deposits that are received or held in the trust department of the depository and that are secured pursuant to 12 United States Code section 92a.

§ 35-1208 Qualified escrow agent; substitutions

A. Eligible collateral shall be held as provided in this article or by policy of the administrator. Eligible collateral shall be held in the custody of any bank, including a federal reserve bank, or any depository trust company.

B. Each eligible depository shall provide in a written deposit or pledge agreement between the eligible depository and the custodian of the collateral, or in such other manner as prescribed by the administrator by policy, that:

1. In the event of default or insolvency of the eligible depository for which the collateral is held, the custodian shall surrender the collateral to the administrator.

2. The custodian shall reasonably make available to the administrator any books, records and papers pertaining thereto for any examination or other reason necessary for the administration of this article.

C. An eligible depository at any time may make substitutions of eligible collateral maintained or pledged for the purposes of this article and shall at all times be entitled to collect and retain all income derived from the collateral without restriction. The authorization to make substitutions of eligible collateral pursuant to this subsection may be suspended or revoked by the administrator if the eligible depository has become the subject of increased regulatory oversight as a result of the eligible depository's failure to maintain capital standards required by the depository's primary regulator.

§ 35-1209 Reports of eligible depositories

At the request of the administrator, each eligible depository shall submit to the administrator a report, as prescribed by the administrator, showing the current market value of the depository's pledged collateral. The report shall be certified as to its accuracy by an authorized official of the eligible depository.

§ 35-1210 Procedure for payment of losses

When the administrator determines that an eligible depository securing public deposits in accordance with this section is a defaulting depository, the administrator shall take steps as promptly as practicable to reimburse public depositors of all uninsured public deposits held by the defaulting depository using the following procedures:

1. The administrator shall determine the amount of uninsured public deposits net of any deposit insurance held by the defaulting depository either with the cooperation of the department of insurance and financial institutions or the receiver appointed for the defaulting depository or by any other means available.

2. The administrator shall assess the amount of the uninsured public deposits determined under paragraph 1 of this section against the defaulting depository. The administrator shall promptly take possession of the eligible collateral deposited by the defaulting depository with the depository's qualified escrow agent, to the extent necessary to satisfy the administrator's assessment, and shall liquidate the eligible collateral.

3. On receipt of the liquidated eligible collateral, the administrator shall reimburse the public depositors from the proceeds of the collateral to the extent of the defaulting depository's deposit liability to the depositor, net of any applicable deposit insurance.

§ 35-1211 Civil penalties; hearing; noncompliance

A. The administrator may assess against and collect the following from an eligible depository for noncompliance with the requirements of this chapter:

1. A civil penalty of not more than two hundred fifty dollars for each day the eligible depository fails to maintain with its qualified escrow agent eligible collateral as required by this article.

2. A civil penalty of not more than one hundred dollars for each day beyond the time period specified in this article or by the policy of the administrator that the depository negligently or wilfully fails to file in the office of the administrator a written report required by this article.

B. The eligible depository deemed in noncompliance may request a hearing before a civil penalty is imposed pursuant to this section. Any civil penalty assessed under this section shall be paid within thirty days after receipt of the assessment, or the administrator may assess and collect an additional penalty of five per cent of the amount of the civil penalty for each month or part of a month that the payment is delinquent. The administrator may make available to the public relevant information regarding civil penalties assessed against an eligible depository.

C. Any penalties collected pursuant to this section shall be deposited, pursuant to sections 35-146 and 35-147, in the state general fund.

D. If an eligible depository fails to pay the penalties assessed by the administrator pursuant to this section, the administrator may notify local agency treasurers with deposits in the eligible depository of the noncompliance.

§ 35-1212 Fees; public deposit administration fund

A. The administrator shall annually assess every eligible depository that is securing any uninsured public deposits pursuant to this chapter a fee in an amount established by the administrator for the enforcement and administration of this chapter. The fees shall fairly and equitably apply to all eligible depositories that are securing any uninsured public deposits pursuant to this chapter calculated according to the proportion of aggregate public monies that each depository holds in relation to the total of all aggregate public deposits held by those eligible depositories for each annual period. For the purposes of this subsection, monies initially invested pursuant to section 35-323.01, subsection A, paragraph 1 and deposited pursuant to section 35-323.01, subsection A, paragraph 2 shall not be included in determining the aggregate public monies held by an eligible depository that is securing any uninsured public deposits pursuant to this chapter. The administrator shall deposit the fees in the public deposit administration fund.

B. The public deposit administration fund is established in the state treasury. The fund shall consist of fees deposited pursuant to subsection A of this section and all interest earned on the investment of the monies in the fund. Any interest shall be credited at least annually to the fund. Except as otherwise provided in subsection A of this section, monies in the fund are continuously appropriated to the administrator for the administration and enforcement of this chapter. Monies in the fund are exempt from the provisions of section 35-190, relating to lapsing of appropriations. Monies shall not be appropriated from the state general fund for payment of any expenses incurred under this chapter, and the expenses shall not be charged against the state. Any monies remaining in the fund at the end of each fiscal year that exceed the cost of administering this chapter for that fiscal year shall be applied as a credit for fees assessed pursuant to this section or refunded the following calendar year to the participating eligible depositories.