This article continues our series of content on Blue Sky laws. With subtle but important differences in each state, and sharply divided opinions on interpretation, the nuances of blue sky laws are as varied and unique as geographic terrain itself. Today we’re visiting the desert and exploring Arizona’s approach to this important area of public finance law.

Our previous content addresses the finer points of exclusion from the use of the municipal issuer exemption. Some states exclude from the municipal exemption the registration of municipal securities that are paid from a non-governmental industrial or commercial enterprise, unless the payments and insured are guaranteed by a person whose securities are exempt from registration under certain other enumerated sections of the law.

Arizona Revised Statutes provide a general exemption from registration for municipal bonds, but excludes from the exemption certain bonds issued by Arizona issuers (“Arizona Issuer Bonds”), including:

• “Industrial development bonds” (as defined in the 1954 Code), other than such bonds issued to provide residential real property for family units, airports, docks, wharves, mass commuting facilities, parking facilities, sewage or solid waste disposal facilities, air or water pollution control facilities or facilities for the furnishing of water.
• Certain bond anticipation notes and improvement district bonds.
• Securities of public subdivisions used to provide monies to finance the acquiring, constructing, improving, equipping or furnishing of medical office buildings, sanitariums, clinics, medical hotels, mortuaries, cemeteries, mausoleums, rest homes, nursing homes, skilled nursing facilities or other similar facilities for use by corporations or entities other than municipal which bonds or notes are not fully secured by an entity owning or operating, repurchasing or leasing a hospital from a political subdivision.

Arizona Issuer Bonds for the purposes above are not subject to registration if a notice of the proposed offering, a trust indenture, a $200 filing fee and an offering document containing the extensive disclosures are filed with the state securities commission and the exemption from registration is not denied within 20 days of receipt by the state securities commission. These bonds, plus bonds secured only by special assessments, when issued by someone outside Arizona, provided they qualify under the Securities Act of 1933, are subject to a notice filing requirement and a $200 filing fee.

As we’ve seen in this and previous posts, Blue Sky laws do not have the clarity their name implies. Navigating this area in any state is easier with an experienced counselor.