Third time’s the charm: Arizona’s new special  district opportunity 

John McManus: Carter, Arizona just passed House Bill 2999, which creates State Affordability Infrastructure Districts (“SAID” or “Districts”).  Why does this matter to builders and developers?

Carter Froelich: What matters most is that Arizona finally has a district financing tool that is built for the way land development actually happens. For years, Arizona has been competing with Texas, Florida, Colorado and Utah, and those states have had much more usable and efficient infrastructure finance platforms. The numbers tell the story.

From 2019 through 2025, Arizona community facilities districts (“CFD”) produced roughly $347 million in transaction volume, while Colorado metro districts produced about $11.7 billion, Texas MUDs about $8.9 billion, Florida CDDs about $8.4 billion and Utah PIDs about $4.5 billion. That financing gap is huge, and it impacts whether infrastructure gets built, whether lots are delivered and whether homebuilders can bring product to market at a price buyers can afford.

John McManus: You have said this has been a long effort for Launch. What was the history behind the bill?

Carter Froelich: Launch has been working with the private sector for close to 20 years to get better infrastructure financing legislation passed in Arizona. This was the third serious attempt, and the third time was the charm. The effort was led by representatives from the Central Arizona Home Builders Association, Valley Partnership and a number of private sector participants who understood that Arizona needed to catch up in the infrastructure financing space.

Tyler Cobb at Taft Law did an excellent job drafting the legislation, and Launch had significant input behind the scenes because we have lived with these Arizona financing structures in the field since 1991. We know where the law needs to be precise, where it needs to be flexible and where it needs to be practical.

This is also the fifth time Launch has helped write, lobby for and/or assist with legislation that improves private sector district financing around the US. We do it because our clients need tools that work, not tools that sound good in theory, and then fail when a project needs capital.

John McManus: What is the biggest practical change?

Carter Froelich: The biggest change is that a SAID is formed through an application to the Arizona Finance Authority (“Authority” or “AFA”), and local jurisdiction approval is not required. That is an extremely big deal. Historically, district finance in Arizona has often depended on city or county approval, which can bring politics, uncertainty and delay into the financing equation.

Under Arizona House Bill 2999, the Authority reviews the petition for compliance with the statute. It is a yes-or-no compliance review, not an open-ended political negotiation with the jurisdiction. That kind of predictability is important to developers and builders because time and uncertainty both show up as costs in the pro forma.

For example, I can’t make this stuff up because no one would believe me, but prior to the law change, a client and I were in year 20 of trying to set up a CFD in a suburban community north of Tucson.

John McManus: How does the District get created?

Carter Froelich: The petition has to be supported by 100% of the landowners, and the public infrastructure costs have to exceed $5 million. The District can include contiguous or noncontiguous property, which is important because real projects do not always fit snugly inside one contiguous boundary. The petition includes the finance plan, general plan, estimated costs, maximum tax rate, appraisal, bond counsel certificate, consultant list, petitioner experience, legal description, title report and other materials.

There is also notice to the jurisdiction, but the jurisdiction is not the approval body. Once the Authority has completed its review and the formation order is issued, the District can move toward bond issuance after the required steps, including the AFA submittal, a short waiting period, District hearing, the preparation of bond documents, pricing and the ultimate bond closing.

John McManus: How is the SAID governed?

Carter Froelich: The District starts with a three-member appointed board made up of fee property owners or people designated by property owners. The first board’s terms are staggered at three, four and five years, and regular terms are three years after that. Bond elections are required for GO bond authorizations and for dissolution. The qualified voters are property owners, including corporations, with voting based on acreage.

That structure makes sense because the people carrying the early development risk are the landowners, and they are the ones responsible for delivering the infrastructure. Over time, as the project builds out and ownership changes, governance naturally evolves to homeowners, similar to MUDS, metro districts and CDDs.

John McManus: What can these Districts finance?

Carter Froelich: The eligible improvements are broad public infrastructure items. SAIDs can finance water, sewer, stormwater, flood control, streets, roads, highways, bridges, parking, sidewalks, trails, pathways, bicycle facilities, equestrian routes, lighting, parks, open space, recreational facilities, public safety buildings, communications and digital infrastructure, real property, soft costs and financing costs. They can also finance rail corridors, crossings, grade separations, sidings and signalization.

Just as important, they can finance development impact fees when those fees fund public infrastructure that serves or is necessitated by development within the District. The impact fee piece is an especially important part of the legislation and will be a game changer for Arizona homebuilders both big and small.

John McManus: What kinds of bonds can be issued?

Carter Froelich: The law allows general obligation bonds, special assessment bonds and revenue bonds. The bonds are tax exempt municipal bonds, which helps lower the cost of capital compared with taxable alternatives. General obligation bonds are backed by the annual ad valorem tax, special assessment bonds are backed by special assessment liens and payments and revenue bonds are backed by dedicated revenue sources, including user fees, rates or charges for public infrastructure or services.

The point is that the District provides flexibility as well as certainty. Different projects need different financing structures. A master planned community, an industrial project, a mixed-use project and a residential subdivision may all have different infrastructure burdens and different repayment profiles. 

John McManus: What should the industry take away from this?

Carter Froelich: The takeaway is that Arizona now has a serious financing tool to deliver public infrastructure, lots and homes. This is not a silver bullet, and it will not fit every project. But for projects with meaningful public infrastructure costs, impact fees, rail or transportation needs, it should be evaluated early. Infrastructure finance should be part of the land strategy, the entitlement strategy and the capital strategy from the beginning.

John McManus: Final thought?

Carter Froelich: Arizona is and will remain a growth state, but providing for growth is more complicated and more expensive than any time in our history. If we want jobs, housing and economic development, we have to have better and more cost-effective ways to pay for the public infrastructure that supports growth and housing.

The SAID Act is a major step in that direction. For Launch, this is exactly the kind of financing structure we believe in. This bill gives Arizona a better chance to compete, and more importantly, it gives our clients another way to turn land into lots.

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