CLOSING THE LOOPHOLE: ARIZONA ADDS PROMPT PAY PROTECTIONS TO REVITALIZATION DISTRICTS
Arizona contractors operating in public and quasi-public sectors sometimes rely on Prompt Pay statutes to help maintain cash flow. However, a statutory loophole created risk for civil and infrastructure contractors when working for Revitalization Districts—special taxing entities utilized by municipalities to help finance roads, utilities, drainage systems, and other public infrastructure needs.
When Revitalization Districts faced internal funding delays or bureaucratic standstills, contractors could find themselves stuck between slow or no payment and having to self-finance and continue performance, under the threat of default or claims from higher tiers. That risk was significantly reduced on June 22, 2026, when the Governor signed Senate Bill 1189 into law. Protections of Arizona Prompt Pay Statutes are now available for Revitalization District projects.
Prime contractors now have statutory rights to suspend or entirely terminate work if a Revitalization District fails to issue timely payments, provided the contractor delivers a formal seven-day written notice. Subcontractors receive parallel protections, also with required written notice. This added protection does not necessarily trump your contract requirements, which may still be enforceable depending on your situation.
Also under these statutory changes, contractors cannot be deemed in breach of contract for executing a lawful work stoppage. There is also a provision allowing a prevailing party to recover attorneys fees for successful enforcement.
Moving forward, contractors bidding on Arizona infrastructure projects funded by local taxing districts can proceed knowing that their right to timely payment is now better protected.
Government Liability for Third-Party Delays
Generally, the Government is not responsible for delays caused by third parties, even other contractors at its own project site, unless the Government affirmatively indicates the site will be ready and available.
Keep a Pass-Thru Claim Burning, Don’t Extinguish Liability
Prime contractors, have you ever submitted a subcontractor’s claim to a public owner? Subcontractors, have you ever wanted to submit a claim against the government, but you had no contract with government?
When You Can’t Recover from a Third-Party (The Economic Loss Doctrine)
Suppose that you (the Contractor) had extra costs and want payment for those extra costs from the designer.
Barbecue and Construction Contracts
While barbecue recipes can be short and simple, contracts can be long and complicated. Fundamentally, though, recipes are very much like contracts: what’s required, how much of each part/ingredient, in what order should they be assembled/added, when, and for how long?
Show Your Work
A mentor of mine once said that process and procedures can be more important than substance and results. Like solving a math problem, how you solve it is often more important than the answer itself. The same is true in resolving construction contract disputes with public owners.
Substandard is Not Defective
The government need not follow the industry standard. It can do less or more.
Hide, Seek, & Seek
Have you ever played hide and seek? If you are the seeker, do you win the game when you find the hidden person? Yes, of course! Unless, you’re a government contractor.
Contractor Schooled School
Have you ever done exactly what you were supposed to do, but it didn’t work and you were blamed anyway? Nevertheless, if contractors follow the owner’s plans and it still doesn’t work, the contractor may be without fault – this is as it should be.
Walk It Off, Keep Going
During a recent soccer game, my seven-year-old son took the ball squarely in the face. But, he walked it off and continued playing. Contractors must do the same with changes.
