Assigned to NREW FOR COMMITTEE
ARIZONA STATE SENATE
Fifty-Sixth Legislature, Second Regular Session
FACT SHEET FOR H.B. 2030
cities; towns; water service; audit
Purpose
Requires a city or town that meets specified conditions to conduct a full rate audit and
cost-of-service study of their water and sewer service by an independent auditor (auditor).
Prescribes the aspects of the water and sewer service that must be investigated and included in the
auditor's report.
Background
A governing body of each incorporated city or town must cause an audit to be made by a
certified public accountant who is currently certified by the Arizona State Board of Accountancy
or who has a limited reciprocity privilege and who is not an employee of the city or town. The
audit and the audit report must include all of the accounts and funds of the city or town, including
operating, special, utility, debt, trust and pension, and all other money or property for which the
city or town, or any department or officer of the city or town, is responsible either directly or
indirectly. The audits must be made in accordance with generally accepted auditing standards
(A.R.S. § 9-481).
The Assured Water Supply Program operates within Arizona’s six active management
areas (AMAs) and is designed to sustain Arizona's economic health by preserving groundwater
resources and promoting long-term water supply planning. Any subdivider, before recording plats
or selling parcels within an AMA, must demonstrate an assured water supply. Demonstration of
an assured water supply requires the demonstration of: 1) the physical, legal and continuous
availability of water for 100 years to satisfy the projected use of the land; 2) financial capability to
construct water delivery facilities and related infrastructure; and 3) consistency with the
management goals of the AMA (ADWR).
There is no anticipated fiscal impact to the state General Fund associated with this
legislation.
Provisions
1. Requires a city or town with a population of more than 240,000 persons that has a designation
of assured water supply and is located within an AMA to hire an auditor to conduct a full rate
audit and cost-of-service study of the city's or town's water and sewer service if the city or
town has:
a) entered into a contract or subcontract with the Central Arizona Project;
b) participated in an intentionally created surplus program;
c) received federal monies for voluntary conservation measures of the Colorado River; or
d) sold long-term storage credits to a third-party using effluent generated within the city's or
town's water service area. FACT SHEET
H.B. 2030
Page 2
2. Requires, for the purposes of the rate audit and cost-of-service study:
a) a city or town to provide all books and records requested by the auditor; and
b) the auditor's report to be a public record.
3. Requires the auditor to investigate:
a) the cost of hookup fees that are charged and collected by the city or town, the methods,
factors and formulas that are used to determine hookup fees, the specific assets that are
funded with hookup fees and the amount of the capital assets that are included in utility
rates;
b) the revenue that is earned from hookup fees;
c) the use and usefulness of excess capacity and capital expenditures across all asset classes,
including unpledged long-term storage credits and other stored water that are held by the
city or town;
d) the reasonableness and prudence of all capital and operating expenditures that are incurred
and planned compared to known and reasonable alternatives;
e) the amount of monies that is charged to customers for non-utility related expenses,
including operating transfers, operating reserves, capital stabilization reserves and
franchise fees;
f) whether customers are double charged for any water or sewer service and the gross amount
of those charges;
g) the amount of revenue that the city or town has collected from the sale of effluent or
long-term storage credits and whether the monies collected were used to offset utility rates
for consumers;
h) the amount of revenue that the city or town has collected from the federal government for
voluntary system conservation and whether the monies collected were used to offset utility
rates for consumers;
i) whether any acquisition premiums are included in utility rates and the amount of those
acquisition premiums;
j) the amount of revenues from contracts with commercial or industrial customers or other
private or municipal water service providers and whether proceeds from those revenues are
used to offset utility rates, including the amount of the proceeds and offsets;
k) details on all land included in utility rates, whether vacant or not or used for the provision
of utility service or other municipal services or purposes;
l) the allocation of shared resources included in utility rates, including office supplies, fleet
vehicles, information, technology and other shared resources;
m) the cost of recordkeeping for utility infrastructure;
n) the rate of water loss and whether the cost of lost water is included in utility rates, including
the amount of that cost;
o) the amount of city or county taxes or fees that have been used to offset utility costs and the
amount of utility rates that are used to offset city or county taxes or fees; and
p) whether any utility revenue is used for non-utility purposes.
4. Requires the city or town, by January 1, 2025, to submit a copy of the auditor's report to the
Governor, the President of the Senate and the Speaker of the House of Representatives and
provide a copy of the rate audit and cost-of-service study to the Secretary of State.
5. Repeals the requirement to audit on January 1, 2027.
6. Becomes effective on the general effective date. FACT SHEET
H.B. 2030
Page 3
House Action
NREW 2/13/24 DP 5-4-0-1
3
rd
Read 2/28/24 31-28-0-0-1
Prepared by Senate Research
March 12, 2024
RA/KP/slp