NAIOP AZ Policy Brief

Policy Brief - May 19

Mon, 19 May 2025 19:03:36 GMT

May 19, 2025

TOP LINE UPDATE

May 19 is the 127th day of the 2025 legislative session. The State Senate has taken a break from May 7 to May 28, while the State House of Representatives recessed from May 7 to May 20 , after sending just over 100 bills to the governor, with a total of 352 so far this year. There is still no clear path forward to a state budget, as the House, Senate and Governor's office remain at odds.

The City of Phoenix is considering a draft ordinance on data centers, with the expedited schedule of a Council vote on the measure by June 18. The draft would require all data centers obtain a special use permit, adds new design, setback, shade and walkability standards and prioritizes placement away from city centers, cores and areas the city has identified as priority for high density and mixed-use.

The Finance Advisory Committee warned of the potential for a recession and argued the legislature should reduce spending . The Joint Legislative Budget Committee (JLBC) has repeatedly lowered their estimated surplus for the state general fund, which only furthers the divide among lawmakers on how to craft the budget. With the April fiscal highlights released, the JLBC noted lower than expected tax collections, increased uncertainty with federal tax, trade and spending policy and overall weaker economic indicators in construction and retail . Lawmakers have until July 1 to pass a state budget.

After Governor Hobbs signed SB 1543 , the "Axon bill", the City of Scottsdale voted to approve spending $100,000 in outside legal counsel to review the law. Meanwhile, opponents the development have filed paperwork with the Secretary of State's office to begin collecting signatures to refer the measure to the ballot . If the group gathers enough valid signatures and survives legal challenges, the law - SB 1543 - would be put on hold and placed on the 2026 ballot for voters to keep or repeal.

The governor signed the utility securitization bill - HB 2679 - after significant amendments in the Senate. The bill faced opposition from Senate Democrats and environmental groups. After negotiations with the governor, the bill was amended to require transition assets be currently or previously in operation for the purpose of generating power for customers, add requirements in the application process for securitization and that the assets financed will result in lower costs to the utility customers.

Save the date for a NAIOP lunch and learn on energy policy in Arizona on June 10, from 11:30 AM to 1:00 PM.

STATE LEGISLATURE & POLITICS

As noted above, lawmakers and the governor are no closer on a state budget. The House and Senate leadership are taking different approaches to the underlying budget process , with the Senate having a "member-driven" budget that assigns a specific dollar amount to each lawmaker to spend or pool together, while the House wants a "leadership-driven" budget, which would consist of select group negotiating with the governor and then presenting the resulting deal or proposal to the larger body. With the recess for most of May, it's unlikely that lawmakers have made any progress on negotiations .

Governor Hobbs' nominee to run the Land Department, Robin Sahid, received a full recommendation from the Committee on Director Nominations in the Senate . The chair of the committee spent most of his time questioning Sahid on the canceled land auction in North Phoenix that was expected to house the relocation for the Arizona Coyotes. Sahid said the deal was canceled in part because of the need for a special use permit from the City of Phoenix. Sahid's nominations awaits full Senate confirmation, which is expected after they return from their May 7-28 recess.

The Arizona Department of Water Resources (ADWR) wants the courts to dismiss a lawsuit brough by the Homebuilders Association of Central Arizona . In the motion, ADWR argued the homebuilders association doesn't have standing to file the lawsuit, and that their Groundwater Offset Rule is consistent with state statutes. The homebuilders argue the new rule - which requires homebuilders to obtain a 25% renewable water source - is ultimately a tax, and invalid. No date has been set for a hearing.

The K-12 funding mechanism known as Prop. 123 is set to expire unless lawmakers refer a continuation to the ballot . Passed in 2016, Prop. 123 increased the distribution from the State Land Trust sales from 2.5% to 6.9% to public education over ten years, with more than $3 billion additional dollars going into the system. Without an extension of Prop. 123, roughly $300 million a year in education funding would need to be offset by the state general fund. Republicans are considering a measure that would tie the Prop. 123 extension to the Empowerment Scholarship Account (ESA) program. The strategy would enshrine ESAs in the state constitution and make them voter-protected. Governor Hobbs, legislative Democrats and education groups oppose the combining of the two subjects, but legislative referrals do not require the governor's signature .

LOCAL SPOTLIGHT

The proposed data center ordinance for the City of Phoenix is set to go before the Planning Commission on June 5, and City Council by June 18. The new rules would:

Restrict data centers away from city cores and ush them away from mixed-use and transit-oriented communities
Require a permit before locating in industrial or commercial zoned areas
Require noise mitigation within 300 feet of residential areas and a third party study
Require a will serve letterer from a utility confirming energy availability within two years

Draft Overview

Draft Ordinance

The nonprofit group Worker Power continues to engage in Arizona localities to block major commercial projects . Notable projects they've opposed include the Tempe Entertainment District that would have housed the Arizona Coyotes, the Axon development in Scottsdale and the VAI resort in Glendale.

Tempe is exploring development opportunities as part of the Rio Salado Master Plan . The plan serves as a roadmap for improvements over the next 20 to 30 years and outlines activity zones, programming and amenity opportunities. Read more .

Phoenix acquired an industrial site along 7th Street as part of the effort to revitalize development along the Rio Salado. The site, Rio Reimagined, will involve the cities of Phoenix, Avondale, Buckeye, Mesa, Phoenix and Tempe and the Salt River Pima and Gila River Indian communities. The portion of Phoenix's stretch of Rio Reimagined spans roughly 20 miles and will consist of four phases. Read more .

Tucson announced its third draft of Plan Tucson 2025 , which was approved by the Planning Commission unanimously. The City Council will hear public comment and vote on the proposal on May 20. Key components of the plan include affordable housing, transparency and accountability, and administrative flexibility. Live stream the hearing here . Review the plan here .

In response to a 2024 law, Tucson is conducting public meetings to review options to complying with the middle housing legislation . The law requires larger cities to allow middle housing on single family lots within one mile of the downtown core, and that new, larger developments include 20% middle housing. Learn more .

The City of Maricopa voted to adopt a dedicated funding source to widen State Route 347. The sales tax is expected to generate $8 million per year. The City also authorized an intergovernmental agreement with the Arizona Department of Transportation. The next step is for ADOT to adopt the widening of SR 347 in its five-year construction plan.

LEGISLATION WE'RE TRACKING

HB 2679 (power; public utilities; UCC; securities - Rep. Griffin) : Allows utilities to initiate securitization transactions and establishes a framework for utilities to adopt financing resolutions, submit proposals and conduct public comment.

NAIOP Position: Support

Status: Signed Into Law

HB 2201 (wildfire mitigation planning; utilities; approval - Rep. Griffin) : Establishes legal framework for liability related to wildfires. Utilities are required to submit mitigation plans on a biennial basis and approved by either the Corporation Commission or the utility's board.

NAIOP Position: Support

Status: Signed Into Law

SB 1523 (water use; prohibition; landscaping - Sen. Dunn) : Prohibits a municipality from requiring specific number of trees, plants, turf or lot coverage for developments.

NAIOP Position: Support

Status: Awaiting Full Senate

HB 2594 (GRRC; continuation - Rep. Blackman) : Continues the Governor's Regulatory Review Council for two years. Modifies the composition of GRRC and the appointment process. Prohibits GRRC from adopting a rule when in study session, and allows any person to petition GRRC to review agency practice, policy or requirement.

NAIOP Position: Monitor

Status: Awaiting Full Senate

IN OTHER NEWS

NAIOP Arizona advocates for public policy at all levels of government to help grow the economy and drive demand for commercial real estate in greater Phoenix and throughout Arizona. Email policy@naiopaz.org for questions.

Policy Brief - April 24

Thu, 24 Apr 2025 18:27:56 GMT

April 24, 2025

TOP LINE UPDATE

April 22 marked the 100th day of the 2025 legislative session , with no end in sight. Last week Governor Hobbs issued a bill signing moratorium until Legislative Republicans pass a developmental disabilities funding bill with no strings attached. After several false starts, the House of Representatives overwhelmingly passed a bill to fund the program. The bill has to clear the Senate, where it's fate is uncertain, before going to the governor to sign.

Meanwhile, one of the last bills to receive the governor's signature was SB 1543 - dubbed the "Axon bill." The new law nullifies the effort by opponents of the Axon development in Scottsdale from referring the rezoning to the 2026 ballot.

The Finance Advisory Committee met last week, with economists underscoring the uncertainty of the state's revenues and budget . The meeting - which does not included legislators - comes at a time as lawmakers and the governor's office remain at odds on the Fiscal Year 2026 budget.

EPA Administrator Lee Zeldin has rescinded previous guidance that would have negatively impacted Maricopa County for air quality standards by penalizing the region for pollution outside the state's control. The move comes after Administrator Lee met with Arizona business leaders, Senator Mark Kelly, and local policymakers, and will reduce uncertainty around the fate of advanced manufacturing and other industries key to national security in Maricopa County. Read Zeldin's statement .

The International Monetary Fund forecasts a 40% chance of global recession due to escalating tensions and high uncertainty with policy. Gold prices hit a record high, driven by investors seeking safety in foreign central bank purchases.

Starting November 2025, SRP's rates will increase , with general service plans increasing 2.7% and large general service plans increasing 4.4%. However, both plans will see a decrease in the fuel and purchased power adjustment mechanism (FPPAM) of 1.4% and 3.5%, respectively. Residential customers can expect to see a 3.5% increase. See details .

STATE LEGISLATURE & POLITICS

So far this session, Governor Hobbs has vetoed 52 bills and signed 92.

House and Senate Republicans introduced a bill to fund the developmental disability program , but the proposal was derided by Democrats and the governor in its initial form. House Democrats voted no on all legislation before the body on April 17 as a protest against the funding measure's lack of bipartisan support.

The disagreement over HB 2945 (developmental disabilities; appropriations; waivers) ultimately led Governor Hobbs to issue a bill moratorium until all sides come to an agreement, meaning she plans to veto any bills passed by the Legislature until they send a version of funding she supports. On Apr. 23, the House passed a funding bill to fill the $122 million shortfall for the program, sweeping funds from the Prescription Drug Rebate Fund. In addition to funding the program, the bill adds requirements and reporting for the Parents as Paid Caregivers Program and includes a requirement to obtain legislative approval before submitting waivers, renewals or amendments to the Centers for Medicare & Medicaid Services.

Former Farm Bureau director Paul Brierley's confirmation to lead the Arizona Department of Agriculture is being slow-walked after senators raise concerns over his 2020 comments about President Trump. He received a 3-2 vote out of the nominations committee, but has not been scheduled for a vote of the full Senate.

Seven director nominees are still awaiting consideration from the Senate's nomination committee , while Governor Hobbs' latest pick for the Department of Child Safety, Kathryn Ptak, is set for a hearing this week. Ptak previously served as assistant attorney general for the Department of Economic Security, and later served as the director of the Board of Executive Clemency under Governor Doug Ducey from 2019 to 2022.

Senator TJ Shope continues his stakeholder meetings on the ag-to-urban proposal , although the agriculture community, water providers, developers and the Department of Water Resources remain at odds over the fundamentals of what the policy should look like.

Governor Hobbs' campaign boasted a $1.1 million haul in the first quarter of 2025, with Republican Karrin Taylor Robson at $850,000 and Congressman Andy Biggs bringing in just over $200,000. Club for Growth, a conservative group, released results from a poll of 511 likely republican voters, showing Biggs leading Robson 45% to 16%. The poll shows Biggs trailing Hobbs in a general election contest 42% to 46%, and Robson 38% to Hobbs' 47%. Meanwhile, Noble Predictive Insights' poll showed Hobbs at 40% with Biggs at 38%, and Hobbs at 43% to Robson's 35%. Other polls conducted show varying levels of support for Republican potential candidates like Jack McCain, Turning Point's Charlie Kirk, State Sen. Jake Hoffman and Treasurer Kimberly Yee. Adding to the uncertainty of the 2026 gubernatorial race is the addition of the position of Lieutenant Governor.

STATE BUDGET & ECONOMY

The Finance Advisory Committee, a group of private and public sector economists who present their views on the condition of the U.S. and Arizona economies, met earlier this month to present on the state and national economies.

Economists from the Joint Legislative Budget Committee (JLBC) noted that tariffs, federal spending levels and federal tax policy were three major areas of uncertainty that could have significant impacts on Arizona and the state's revenues. JLBC also noted that the projected funding balance for FY 2026 has fallen to $277 million, down from earlier estimates of $612 million. Although they do not predict a recession, their stress test scenarios predict the state's budget shortfalls outsizing the state's rainy day fund, which has a balance of $1.6 billion.

David Livingston (R-Peoria), Arizona House of Representative Appropriations Committee Chair, estimates that the potential federal cuts to Arizona range from $1 billion to $3 billion, with the most extreme being $10 billion. It's unclear the extent to which the cuts would impact Arizona, as nearly every state agency receives federal monies.

The March revenue collections for the state were $45 million below the January forecast, with individual income tax down $18 million, corporate income tax down $17 million, and sales tax down $20 million. Overall, however, the state saw a $15 million cumulative gain since January. The state's general fund revenues from taxes are 48% sales tax, 33% income tax, 10% corporate income tax, and 5% insurance premium tax, with the remaining tax revenues coming from "luxury" or "sin" taxes.

JLBC April Fiscal Highlights

April FAC Meeting Materials

JLBC FAC Slideshow

LOCAL GOVERNMENT

The City of Phoenix is updating its historic preservation plan , which is expected to go before the City Council in September. Goals include exploring preservation incentives, increasing awareness and creating a city-affiliated nonprofit dedicated to historic preservation.

Maricopa County is updating its Comprehensive Plan , which covers land use, transportation, housing among other policy areas. The county and supervisorial districts are holding open meetings to receive public comment on updating the plan. Learn more and RSVP to attend sessions .

The City of Mesa is inviting residents to learn more and provide feedback on their Fiscal Year 2026 budget. The council will host two informational sessions on May 7 and 14. Learn more .

The Town of Gilbert approved sewer rate increases - in some instances up to 95% - to replace aging water and sewer infrastructure. The council approved the plan to fully fund repairs, replacement and maintenance without incurring debt.

The City of Surprise released updates to its engineering standards . View the standards here .

LEGISLATION WE'RE TRACKING

SB 1543 (ancillary use; international headquarters campus - Sen. Carroll) : Mandates municipalities with population between 200,000 and 500,000 permit hotel and multifamily residential as ancillary use in industrial zoned districts for headquarter of international corporations.

NAIOP Position: Support

Status: SIGNED INTO LAW

HB 2110 (development; adaptive reuse; rezoning; prohibition - Rep. Biasiucci) : Requires at least 10% of existing commercial, office or mixed-use be allowed for adaptive reuse. Prohibits a municipality from designating specific parcels to qualify. Clarifies sound level language.

NAIOP Position: Support

Status: SIGNED INTO LAW

HB 2447 (self-certification program; administrative review - Rep. Carbone) : Requires municipalities to allow for administrative review of site plans, development plans, and lot adjustments without public hearings. Allows municipalities to adopt programs for architects and engineers to self-certify.

NAIOP Position: Support

Status: SIGNED INTO LAW

SB 1286 (counties; board; administrative review; approval - Sen. Gowan) : Adds assurances to the list of administrative approvals that do not require public hearings. Allows authorized employees to review and approve subdivision plats.

NAIOP Position: Support

Status: SIGNED INTO LAW

SB 1050 (GPLET; notice; abatement period - Sen. Leach) : Limits development agreements under the GPLET program and excludes school district taxes from the abatement.

NAIOP Position: Oppose

Status: VETOED

NAIOP Position: Support

Status: Awaiting Full Senate

SB 1523 (water use; prohibition; landscaping - Sen. Dunn) : Prohibits a municipality from requiring specific number of trees, plants, turf or lot coverage for developments.

NAIOP Position: Support

Status: Awaiting Full Senate

NAIOP Position: Support

Status: Awaiting Full Senate

NAIOP Position: Monitor

Status: Awaiting Full Senate

IN OTHER NEWS

Mar. 19 Legislative Update

Wed, 19 Mar 2025 09:17:06 GMT

National Conference of State Legislatures Launches Executive Order Tracker

The nonpartisan organization NCSL has launched an executive order tracker to help monitor the evolving landscape with executive actions. The tool includes timelines, overviews and full text of executive orders, memoranda and policies issued by the administration.

Housing Development Remains Major Focus

Arizona lawmakers are advancing a variety of initiatives to address the state’s growing housing crisis, though not without controversy and challenges. There are two competing bills both dubbed "the Starter Homes Act" that aim to address the housing supply shortage. Governor Hobbs is promoting her own version, aimed at increasing access to affordable, entry-level homes for Arizona residents and limiting purchases by outside investors.

At the same time, a proposed bill would allow churches to bypass local zoning rules - HB 2191 (religious institutions; development; allowed use) - to build affordable housing on their property—an effort praised by housing advocates, but municipalities have voiced concerns, and local neighborhood groups oppose due to the change in public input on land use decisions.

Meanwhile, Representative Leo Biasiuicci's adaptive reuse bill - HB 2110 - awaits a full vote of the Senate. The bill refines provisions from the 2024 law that opened the door for expedited processes to convert underutilized commercial properties into housing and mixed-use development.

In Phoenix, the City Council rezoned former police department land downtown to allow for high-rise residential development, dramatically increasing height and density limits. The city hopes this move will help alleviate the housing shortage and bring new vitality to a key downtown corridor.

However, housing development faces headwinds elsewhere. The Arizona Department of Water Resources' new rule requiring developers to prove long-term water supplies has sparked legal challenges, with critics arguing it overreaches the agency’s authority and could slow much-needed housing growth, especially in water-scarce regions.

State Budget Uncertain

The Arizona House Appropriations Committee aims to finalize a state budget by the end of April, according to Chairman David Livingston (R-Peoria). This is due in large part to a $122 million shortfall in the funding for Division of Developmental Disabilities, which could hinder payments to service providers by May if the state doesn't act beforehand. A change in federal funding policies will likely have an impact on the state's budget process, as a loss of funding for Medicaid could lead to significant strains on the state's healthcare and social programs. Despite this, formal budget negotiations between the legislature and the governor's office have yet to commence in earnest

The Department of Child Safety (DCS) has requested a $6.5 million fund transfer by March 24 to sustain group home operations for children in state care. House Republicans have accused the administration of financial mismanagement, citing delayed communication about the funding need. House Speaker Steve Montenegro (R-Goodyear) has announced the Ad Hoc on Executive Budget Mismanagement committee to look into this and other budget concerns. The governor's office contends that such funding adjustments are routine and said the issue is being politicized.

The Governor's Office of Strategic Planning and Budgeting, the Joint Legislative Budget Committee and House and Senate Republican leaders have varying figures on what the state's fiscal position will look like by the end of this fiscal year, as well as the ending balance for the General Fund. Lawmakers face a deadline of June 30 to enact a state budget

Governor's Executive Nominations Start to Move

The Senate Director Nominations (DINO) Committee held its second hearing of the 2025 session to consider several of Governor Hobbs’ nominees, including:

Cynthia Zwick – Nominated to lead the Residential Utility Consumer Office (RUCO). Zwick, previously at anti-poverty nonprofit Wildfire, has faced criticism in the past from Republicans over RUCO’s stances in utility rate cases, but her nomination has not sparked public opposition.

Alec Thomson – Nominated to head the State Lottery Commission. A former Ducey administration official and past Lottery commissioner, Thomson’s past work in DEI marketing may draw scrutiny from DINO Chair Sen. Jake Hoffman, a vocal critic of diversity policies. However, no public opposition has been made yet.

Jackie Johnson – Nominated to lead the Department of Gaming. An attorney with experience in tribal and gaming law, Johnson was initially appointed in 2023 but served in a deputy role while awaiting confirmation. Her hearing is expected to touch on gambling addiction, a bipartisan concern, especially in light of questions raised during Thomson’s earlier hearing.

All three nominees—Zwick, Thomson, and Johnson—have so far avoided major Republican pushback, and Zwick and Thomson have already been recommended for confirmation by DINO, pending a full Senate vote.

NAIOP Political Action Committee Report

The 2024 NAIOP Arizona PAC Report is a powerful reminder of why investing in our industry’s political future matters more than ever. With over $52,000 raised and 33 pro-business candidates supported , the PAC delivered a 91% general election win rate and successfully advanced legislation critical to commercial real estate – from adaptive reuse to water management and tax policy.

These wins didn’t happen by chance—they happened because industry leaders stepped up .

Yet, challenges are mounting: water regulation, zoning battles, infrastructure needs, and threats to development tools like GPLET. Without a strong, well-funded PAC, our voice risks being drowned out by opposing interests.

This year, we aim higher—with a $100,000 goal—and we need your help to get there. Whether you're a developer, broker, investor, or service provider, your contribution directly fuels our advocacy , ensuring Arizona remains a top destination for business and development.

✅ Protect your business
✅ Promote pro-growth policies
✅ Empower industry champions

Join the ranks of PAC Visionaries, Champions, and Advocates. Invest today—because the future of CRE in Arizona depends on it.

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