Gov. Katie Hobbs signs bills on transportation sales tax measure, residential rental tax ban

Arizona Gov. Katie Hobbs on Tuesday signed a pair of bills — one that puts a question to voters about continuing a tax for transportation and one that eliminates taxes on residential rentals — that reached her desk after months of behind-the-scenes negotiations with GOP legislative leaders.

The first bill, which will ask Maricopa County voters whether to extend the half-cent sales tax known as Proposition 400, is an accomplishment for Hobbs, who overcame GOP objections predominantly over light rail funding.

At a stalemate with Republicans in the Legislature in June, Hobbs vetoed a GOP version of the Proposition 400 bill, and her administration continued negotiations on a compromise plan enshrined in Senate Bill 1102 that won bipartisan support in the Legislature on Monday.

In exchange, however, Hobbs signed a GOP-pushed bill that prohibits municipalities from taxing residential rentals, a change that may put a dent in city and town budgets and that could stress Hobbs' relationships with local leaders.

Hobbs had vetoed a similar rental tax bill in February, over the objections of Republican lawmakers who said the tax burdened Arizonans struggling with high inflation. The tax varies from 1.5% to almost 3% in the cities that impose it. Hobbs, in her February veto letter, said the prior bill lacked guarantees that the savings would be passed along to renters and not absorbed by landlords.

The bill she signed Tuesday prohibiting rental taxes, Senate Bill 1131, will take effect in January 2025.

Hobbs' office issued a statement on the signing of the Proposition 400 bill that mentioned in passing the governor's action on the rental tax bill and one other measure, House Bill 2670. That bill allows Arizona National Guard members and reservists to be buried in veterans' cemeteries and makes members of the nation's Space Force, which was created by then-President Donald Trump in 2019, eligible for the same state services as veterans of other branches of the military.

In a statement, the governor addressed only Proposition 400, saying it "showed we can put politics aside and work across party lines to get big things done for Arizona."

"With support spanning across political parties, businesses, workers and everyday Arizonans, Prop 400 will secure our economic future and give every Arizonan an opportunity to succeed in our thriving economy," her statement reads.

Hours earlier, Senate Republicans proclaimed the rental tax bill an accomplishment of their own that will provide relief to renters.

"Charging a rental tax is bad tax policy," Senate President Warren Petersen, R-Gilbert, said in a statement.

"While our first attempt at eliminating the tax passed out of the Legislature with solely Republican support and was eventually vetoed by the governor, we're grateful our Democrat colleagues came to the table with us and realized the real, tangible relief this reform will provide."

The Arizona Legislature adjourned its work for the year on Monday, after having reached the deal with Hobbs on Proposition 400 and the rental tax bill and confirming one of her nominees to lead a state agency. Most of those nominees have not yet been confirmed, leaving unfinished business for the state Senate and governor.

Reach reporter Stacey Barchenger at stacey.barchenger@arizonarepublic.com or 480-416-5669. Follow her on Twitter @sbarchenger.

This article originally appeared on Arizona Republic: AZ Gov. Hobbs signs bill allowing Maricopa County to vote on Prop. 400