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The state House Commerce Committee on Tuesday advanced HB 4026, legislation sponsored by Rep. Michael Carbone (R-Buckeye) that modernizes and strengthens a public infrastructure tool that has helped make Arizona a national leader in advanced manufacturing investment.

The bill, supported by the Arizona Chamber of Commerce & Industry, the Arizona Manufacturers Council, and a broad coalition of business and community leaders, ensures that Arizona communities have the infrastructure capacity necessary to compete for high-wage manufacturing projects.

Modernizing a proven program

Arizona鈥檚 Public Infrastructure Program was established in 2012 and has since helped secure billions of dollars in private capital investment, positioning the state as the nation鈥檚 leader in semiconductor manufacturing investment.

The program allows cities, towns, and counties to recapture a portion of construction-related state sales tax revenues generated directly by a qualifying manufacturing project and reinvest those dollars into public infrastructure improvements 鈥� including roads, water, wastewater, and reclamation systems 鈥� that support both the facility and the broader community.

During committee testimony, advocates pointed out that the program does not create new taxes and instead reinvests tax revenue generated by the project itself into infrastructure that makes the investment possible.

Addressing a critical cap

Under current law, total distributions under the program statewide are subject to a $200 million lifetime cap. But as supporters pointed out in the hearing, the arbitrary cap is rapidly being reached, putting current and future public infrastructure projects at risk of being underfunded and limiting Arizona鈥檚 ability to compete for the next generation of mega-projects.

鈥淭his program has worked in helping cities build the infrastructure they need to support these massive projects,鈥� Arizona Chamber Executive Vice President Courtney Coolidge said. 鈥淲e don鈥檛 win these projects every day, but when we do, they鈥檙e a huge benefit to the entire state, supporting jobs, tax revenue, and small business.鈥�

The legislation replaces the lifetime cap with a $75 million annual cap, providing predictable, statewide access to the program. The bill also clarifies that payments are limited to the lesser of the state transaction privilege tax revenues generated from construction of the facility or 80% of the public infrastructure cost.

Queen Creek Mayor Julia Wheatley told committee members the program was essential to her town鈥檚 ability to attract a huge LG Energy investment on a former state land trust plot.

鈥淚n order to build on that barren state trust land, the town needed to build supporting public infrastructure,鈥� she said. 鈥淏uilding the infrastructure from scratch was a very costly endeavor for the town and we needed to utilize the public infrastructure program to help us recapture some of the $84 million in public investment from revenues generated as a result of LG鈥檚 own state construction sales tax dollars.鈥�

Strengthening accountability and transparency

HB 4026 enhances oversight by requiring a detailed analysis of the anticipated direct and indirect revenues the state will receive as a result of constructing the manufacturing facility, which must be provided to the Arizona Commerce Authority.

The bill also requires development and intergovernmental agreements entered into under the program to be posted publicly on the Department of Revenue鈥檚 website, further reinforcing transparency.

Supporting high-wage jobs, long-term growth

Greater Phoenix Economic Council Vice President Tim Bourcet said that as Arizona competes nationally and globally to attract advanced manufacturing projects, particularly in semiconductors and other high-tech sectors, infrastructure readiness is often the deciding factor.

鈥淭he public infrastructure reimbursement program has been vital to the advanced manufacturing industry,鈥� he said, pointing out that the program has played in role in investments by companies like TSMC and Amkor, in addition to the LG project in Queen Creek. 鈥淢odernization is now a necessity to continue to be the number one destination for advanced manufacturing in the United States.鈥�

By modernizing the distribution cap while maintaining strong accountability measures, HB 4026 ensures that Arizona has the policy tools to remain competitive in the race to onshore advanced manufacturing.

The bill now advances to the Rules Committee and to reviews by each party鈥檚 caucus and then to a vote of the full House. Assuming passage, the bill will repeat the process in the state Senate in the coming weeks.