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.

Read More from the Arizona Chapter of the AGC.