Apache Junction Sewer District considering higher nonprofit status to save money

By Richard Dyer
Mail | X: @RHDyer

The five-member Apache Junction Sewer District Board sees benefits in seeking 501(c) tax-exempt status for the nonprofit utility such as not paying sales taxes on items needed to construct new facilities.

Board Member Roy Starr made the suggestion during an Aug. 26 meeting that the district’s qualification for tax-exempt status as a utility and not-for-profit organization be discussed, according to the meeting’s minutes.

District Counsel Jason Cassidy worked 7.5 hours on the issue, billing the sewer district $2,920 in legal fees to research 501(c) eligibility for governmental entities, research transaction privilege tax exemptions, confer with an individual on tax exemptions and indemnity risks, begin drafting a memo, finishing the first draft of the tax-exemption memo, and focusing on available options and their ramifications, according to an invoice from Cassidy Law Firm PLC.

“You will be shocked to learn this is a very complicated area of law with a lot of different parts to it,” Cassidy told the board Sept. 23. “Essentially it is possible theoretically for the district to get the necessary classification but there is a lot of ‘if, if, if, if’ criteria that all has to be met in order to get it. It is unlikely that the district would qualify for a 501(c).”

Governmental units cannot qualify as 501(c) entities as they do more than just science, health care and testing, he said.

“They also provide services to the public and that inherent distinction means that they cannot in and of themselves qualify,” Cassidy said.

A political subdivision — like the sewer district — that is an affiliate of a governmental entity can qualify as a 501(c) but it has to be a separate entity from the municipality and it has to be organized in a specific way, he said.

“The district’s primary sole purpose is to treat and accept wastewater and while that involves science, while that involves safety testing, it’s different. The provision of treatment of wastewater is a bigger umbrella than the narrow services listed under 501(c)(3),” Cassidy said.

Without voting, the board on Sept. 23 directed the district manager to reach out to Arizona Water Association, a statewide utility organization, to determine if the sewer district could become a 501(c) nonprofit and if any of its member organizations have sought such a designation.

“First of all, ask the association and then if they say, ‘Yeah, we’ve had a water district that has already done this,’ then we can get that information. Then we can find out how much were gonna save. But let’s find out if we can even do it,” Chairperson Kathleen Waldron said.

Vice Chairman Jim Reynolds asked that a public works organization such as the American Water Works Association be contacted.

“Tens of thousands of members must have some case law,” he said.

The sewer district is an independent, public, nonprofit entity developed solely for the benefit of its customers and the Apache Junction community to operate and maintain a regional system for the collection, transport and treatment of sewage from the properties existing within its boundaries.

Board members to the sewer district are appointed by the Apache Junction City Council.

Members of the district board serve as volunteers who are responsible for setting policy and rates, adopting a budget and other high-level decision making regarding all aspects of the district’s operation and on-going business affairs.

By state law, board members cannot own 40 acres in the district, cannot be an employee or agent of a landowner who owns 40 acres or more in the district, cannot be an employee of the city or the county and cannot be an elected official of the city or county.

Richard H. Dyer can be reached at rdyer@iniusa.org, or on X @rhdyer. Please submit comments at yourvalley.net/letters or email them to AzOpinions@iniusa.org. We are committed to publishing a wide variety of reader opinions, as long as they meet our Civility Guidelines, https://www.yourvalley.net/civility-checklist/.

Richard Dyer
Managing Editor | East Valley

rdyer@iniusa.org

Meet Richard
Richard Dyer has worked at Independent Newsmedia Inc. USA since 1987, starting his career in Apache Junction as a copy editor and being promoted over the years to work as the editor of the Mesa Independent, news services editor for the East Valley office in Apache Junction, managing editor for the East Valley office, news services editor for the East Valley office and eventually also for the newspapers at INI’s then-Chandler office, managing editor again and as a news editor covering Apache Junction/Gold Canyon and Queen Creek. He helped start the Florence Independent while the news editor covering Apache Junction and Mesa news. In January 2023, he became associate managing editor for the East Valley newspapers and in August 2023 became managing editor for the East Valley newspapers of Chandler/Tempe, Gilbert, Queen Creek, Florence, Mesa and Apache Junction/Gold Canyon, while also reporting on Mesa and Apache Junction/Gold Canyon.  

Community: Since 2009, he has worked as a volunteer to design The Blue Guitar Magazine, Blue Guitar Jr. magazine and Unstrung magazine, which are projects of The Arizona Consortium for the Arts; and since 2014, has been overseeing the art submissions. 

Education: University of Arizona with a master of arts in journalism and a bachelor of science in agricultural communication. Also continuing education at Mesa Community College in welding in a metal art sculpture class.

Random fact: Saw his first tornado on May 31, 2010, which was classified as an EF-2, as part of a stormchasing tour group.

Hobbies: He is an artist of welded-steel sculptures, selling his artwork at juried and non-juried art shows.