Originally published in the Journal of Environmental Management Arizona (Vol. 9 Issue No. 6).
IS YOUR BUSINESS LICENSED BY A LOCAL GOVERNMENT IN ARIZONA? IF YES, YOU MAY BENEFIT FROM A NEW LAW PROVIDING ADDITIONAL TOOLS FOR REGULATED ENTITIES.
Have you ever been befuddled by a local ordinance, unsure what steps are required to bring your business into compliance? Have you ever applied for a local license, permit, or other approval and experienced delays that did not make sense? Has your business been subject to municipal or county inspections that you felt were conducted unfairly? Take note, change is coming. A new law passed during the 2011 legislative session creates a “regulatory bill of rights” applicable to municipalities, counties, and county flood control districts (referred to collectively as “local governments”). SB 1598 will provide Arizona business regulated by local governments with additional tools to navigate the regulatory maze.
I. Enactment of SB 1598
A. Echoes of State Agency Regulatory Reform
SB 1598’s regulatory bill of rights is modeled after the bill of rights governing state agencies, codified in Title 41 of the Arizona Revised Statutes. In the late 1990s, the Arizona Legislature embarked upon a series of changes to the operation of state government in relation to the regulated community. While many saw these changes as revolutionary and sweeping, others viewed them merely as needed improvements to promote transparency and provide greater certainty to individuals and businesses navigating the regulatory maze. These measures now seem a matter of course on the state level, but when enacted, these new laws meant that applicants for a state license or other approval for the first time had a right to receive notice of the information required to process an application, expected processing times, and the procedure to appeal the denial of an application.
SB 1598 applies these and other fundamental aspects of the state agency regulatory reform laws to local governments. As a result, regulated Arizona businesses will have additional tools to navigate the varied local regulatory processes they face.
B. Drafting the Bill
The aggregates industry, including the Arizona Rock Products Association, began the effort for regulatory reform at the local level. Difficulties experienced by mining companies in obtaining timely review of zoning and flood control applications served as the impetus for the measure. The regulatory reform effort soon spread throughout the larger business community, with the Arizona Chamber of Commerce and Industry also becoming involved and broadening the scope of the bill. The bill’s proponents recognized the need to include local government representatives early in the process to identify and resolve concerns cooperatively before bringing the bill to the floor.
The extensive negotiations behind SB 1598 resulted in a bill that both industry and local government could support. Initially, local governments expressed concern that SB 1598 was a “copy and paste” job from state agency statutes, and as such, did not account for various differences between how and what state and local governments regulate. For example, a municipal building code inspection requested by a developer during the construction process differs considerably from an air quality inspection by the Arizona Department of Environmental Quality, rendering several of the required inspection protocols unnecessary. Similarly, the public health concerns associated with restaurant inspections prompted the drafters to ensure that local governments could still conduct unannounced inspections under certain circumstances. SB 1598 includes exceptions to account for these and other similar nuances arising in the context of local government licensing and inspection processes.
The licensing time frames provision of SB 1598 also presented potential controversy. Some felt that licensing time frames could heighten the tension between local governments and regulated entities, leading to more frequent denials as the default position taken by regulators when concerns could not be timely resolved. By allowing local governments to set their own time frames and providing well over a year to do so, the drafters of SB 1598 sought to minimize these concerns. Additionally, the bill allows the parties to agree to toll or waive a time frame that is not practicable in a particular instance, up to a maximum extension of 25 percent of the applicable time period. With this built-in flexibility, licensing time frames should increase certainty for regulated entities while still allowing local governments sufficient time to adequately review license applications.
In the Legislature, SB 1598 quickly gained momentum, while other bills seeking to more stringently regulate local government failed. For example, SB 1286 (held in the House of Representatives) would have required local governments to take action on all permit applications within 60 days or the application would be deemed approved. HB 2501 (held in the Senate) would have held that all rules, ordinances, and laws were to be construed in favor of a license applicant and against the local government. SB 1598 strikes a balance that avoids these drastic impacts on local government while still promoting business development.
II. How SB 1598 Will Impact Arizona Businesses
SB 1598’s regulatory bill of rights will give businesses regulated by local government agencies additional tools to timely obtain the approvals they need. For companies in the aggregates industry, SB 1598 also includes increased protections designed to alleviate land use conflicts that sometimes arise.
A. Regulatory Bill of Rights
Business regulated by local governments in Arizona will now be protected by a “regulatory bill of rights” similar to that already applicable to state agencies under the Administrative Procedure Act (“APA”), found in Title 41. Major provisions of SB 1598’s regulatory bill of rights track those of its Title 41 counterpart, including: (1) licensing time frames; (2) additional licensing protections; and (3) inspection protocols. Businesses regulated by state agencies will be familiar with these concepts.
Licensing time frames. When fully implemented, local governments will be required to act on license applications within a predetermined time frame. As under the state APA, each licensing time frame must be divided into two consecutive segments: an “administrative review” segment to determine whether the application is complete and a “substantive review” segment to determine whether to approve the license. SB 1598 allows local governments to establish the time frames for each type of license. In this way, SB 1598 sidesteps concerns over local autonomy and also serves to spur local governments to compete for business development by offering shorter time frames. Licensing time frames must be in place by December 30, 2012.
Additional licensing protections. Local governments must inform an applicant upfront—at the time an application is obtained—of all steps that must be taken to receive a license. Further, if a local government denies a license application, it must issue a written or electronic notice that includes the specific legal authority on which the denial is based and notice of the right to appeal. This prevents local governments from adding requirements during the application process or denying an application for undisclosed or vague reasons or grounds not stated in the law.
SB 1598 also provides that an applicant has the right to have a licensing decision not based on conditions or requirements that are not “specifically authorized” by law. The bill further states that a general grant of authority is not a basis for imposing a licensing requirement or condition that is not “specifically authorized.” While the exact scope of this language is not clear, it could be used to challenge local regulations that are perceived as too broad or vague.
Inspection protocols. The inspection protocols that SB 1598 requires include the following: 1) allowing a regulated business to have an on-site representative accompany an inspector; (2) providing the regulated business with copies of any documents removed from the premises and splits or duplicates of any samples taken; (3) allowing the regulated business an opportunity to correct identified deficiencies before initiating enforcement proceedings; and (4) providing notice of the regulated entity’s rights and any applicable inspection fees. These protocols apply to inspections necessary for issuance of a license or to assess compliance with licensing requirements.
Other. SB 1598 includes additional protections designed to increase the accountability and transparency of local government. It allows a person who prevails against a local government by adjudication on the merits to recover attorney’s fees and other expenses. SB 1598 also requires a local government to publish at least annually a directory summarizing its ordinances, codes, and substantive policy statements, and post the directory on its website.
Additionally, SB 1598 creates a procedure to allow a person to request and obtain clarification of a local government’s interpretation or application of any statute, rule, ordinance, or substantive policy statement that affects the license application process. This procedure is an innovation not present in Title 41. The local government must respond within thirty days and provide the person who made the request an opportunity to discuss the response.
B. Enforcing Rights Granted by SB 1598
A person who believes that an ordinance, code, or substantive policy statement violates the regulatory bill of rights may file a complaint with the governing body of the city, county, or county flood control district. If a complaint is filed, SB 1598 provides that the governing body may hold hearings on these allegations and recommend actions to correct the problem. This process differs from that under Title 41, which generally allows an aggrieved person to file a complaint and receive a hearing—not before the agency but before an independent Administrative Law Judge with the Office of Administrative Hearings. Because a local governing body is presumably the same entity that drafted the disputed ordinance, code or substantive policy statement, concerns remain about how effective it will be to raise complaints about noncompliance in that venue. Thus, future questions may arise regarding how a person may effectively enforce the rights granted by SB 1598.
C. Aggregate Protections
Aggregates (particulate materials such as sand, gravel, and crushed stone, used to make concrete) are typically mined from riverbeds and riverbanks, including from the Salt, Gila, and Agua Fria Rivers in Maricopa County. Aggregate mining, which is regulated by county flood control districts, sometimes leads to conflicts with nearby residents affected by noise, dust, traffic, or other impacts associated with mining activities. To address these problems, SB 1598 requires local governments to include in their general or long-term planning a land use element that identifies known sources of aggregates and establishes policies to preserve these resources and avoid incompatible land uses (e.g., distance and buffering policies). Thus, future conflicts between mining companies and local communities should be reduced.
SB 1598 should benefit Arizona businesses regulated by local government by making it easier and faster to obtain necessary licenses and other approvals. Licensing time frames will prevent applications from being lost in a regulatory abyss and enable businesses to anticipate when needed approvals will be obtained. Required inspection protocols should help to eliminate inconsistencies that often arise due to the idiosyncrasies of different inspectors. For the aggregates industry, the additional planning requirements will help to eliminate future land use conflicts. Areas of uncertainty may arise, however, as local governments begin to implement the statute. For example, as mentioned above, SB 1598 does not provide a uniform hearing process to facilitate appeals from licensing decisions comparable to the process of appealing to the Office of Administrative Hearings under Title 41. Additionally, questions could be raised as to the meaning of the provision that licensing conditions or requirements be “specifically authorized.” A bill to revise in minor respects various provisions enacted by SB 1598 is anticipated to be introduced in the 2012 legislative session. Despite questions that remain, the additional tools and protections that SB 1598 provides will help Arizona businesses cut through the regulatory morass and achieve their goals.