The Arizona Community Facilities District Act (the "Act") became effective in 1988, allowing a Town, on petition (request) of property owners, to establish a Community Facilities District (CFD) to finance and provide public infrastructure, such as water, sewer, schools and streets, within a defined area, i.e. the "District".
A CFD is a special purpose, tax levying public improvement district of the State of Arizona which may only be located within the corporate boundaries of a municipality causing its creation. The Act allows the Town to deal with the costs of new growth through public financing mechanisms that assess only the lands and landowners that benefit from the specific improvements, infrastructure or enhanced municipal services provided by the District.
Owners of at least 25% of the land area in a proposed district petition the Town Council for formation. The Town Council performs as the Board for the District. Financing may take the form of general obligation bonds, revenue bonds or assessment bonds within the improved area, or through the levying of a maintenance and operation property tax. With the issuance of bonds, they are repaid either with ad valorem taxes levied directly on the property within the CFD (approved by vote of the property owners and collected by Yavapai County), or with assessments applied against property benefited by the improvements.
Aside from nominal costs the Town may incur based on intergovernmental agreements to administer CFDs, the Town has no liability for CFD bonds, though a default or failed project could have lasting consequences on the Town's own bonding program and standing in the debt markets.