Building the capital stack and closing the gap — Arizona

What actually happens, and the first fork: scored 9% vs. first-come bonds

Structurally, Arizona looks like every other state: structuring, soft-money assembly, and debt/equity procurement run as interleaved workstreams over roughly the same 24–48-month window it takes anywhere to get from site control to a construction closing.

The fork that actually matters: a 9% deal competes for a small, capped annual credit ceiling through the Arizona Department of Housing's (ADOH) Qualified Allocation Plan (QAP), scored like every other state's 9% round. A 4%-plus-bond deal does not compete for anything at the state level — Arizona's private activity bond volume cap is allocated first-come-first-served, with no requirement that a bond applicant first win a separate competitive state-credit round the way California's CDLAC requires. That single difference reshapes the calendar risk in this phase, from 'did we score high enough' to 'did our paperwork clear the queue in time' — covered in its own section below.

Arizona's bond queue: first-come-first-served, not a scored round

The Arizona Finance Authority (AFA) — recently spun out to its own site (afa.az.gov) from the Arizona Office of Economic Opportunity — administers the state's private activity bond volume cap under A.R.S. § 35-902. The statute fixes the split by category, not by project score.

That total is a derived figure, not a number this pass could confirm against AFA's own site (afa.az.gov returned an access error every time it was checked). It comes from two independently verified primary sources: IRC § 146(d)'s 2026 per-capita bond-cap figure, confirmed directly in IRS Rev. Proc. 2025-32 (§4.19) as the greater of $135 × state population or $397,625,000; and Arizona's 2025 population estimate of 7,623,818 (U.S. Census Bureau). AFA's own published total may run somewhat higher than this baseline — a common reason is unused volume cap carried forward from the prior year (A.R.S. § 35-907) added on top of the fresh per-capita allocation. Confirm the exact current-year figure against AFA's own tracking sheet before sizing a bond request against it.

Confirmations are issued strictly first-come, first-served, starting on the first business day of each year (A.R.S. § 35-904(B)) — in most years that falls on January 2, but it shifts when January 1–2 land on a weekend or holiday, so don't treat 'January 2' as a fixed statutory date. Every request must comply with IRC § 146. A request that isn't confirmed by 5:00 p.m. on March 31 expires (subject to specified statutory exceptions), and an issuer cannot hold more than one outstanding request for the same project at the same time — both confirmed directly against the current statute text. From October 30, 2023 through July 31, 2030, a temporary rule (added by S.B. 1718, 56th Legislature, 1st Regular Session) also redirects 60% of the remaining state ceiling to mortgage and rental projects combined during March through July each year, with the mortgage share capped at $35,000,000 during that window. S.B. 1718 is also the identified vehicle behind the current 25/30/40/5 split, though this pass could only directly confirm the final, currently-codified percentages — not every intermediate drafting step the bill went through before passage.

AFA doesn't issue the bonds itself — a local Industrial Development Authority does, formed under A.R.S. Title 35, Chapter 5 (§ 35-701 et seq.), the same chapter used by entities like the Maricopa County Industrial Development Authority (MCIDA). That means a real bond deal has two separate boards in its critical path before AFA ever confirms volume cap: the developer's, and the IDA's own — and IDAs don't necessarily meet on the developer's schedule.

The federal bond test — identical everywhere, and no confirmed Arizona overlay

A.R.S. § 35-902's percentages cap shares of the statewide volume-cap pool, not any individual project's own aggregate basis. This pass did not find an Arizona statutory analog to CDLAC's project-level 30%/40% aggregate-basis ceiling or its 27.5% tiebreaker floor — but a QAP can layer its own overlay on top of a bond statute that is otherwise silent, and that possibility was not checked against the current QAP text here. Confirm directly before assuming Arizona imposes no project-level bond-sizing ceiling at all.

The 9% ceiling — competitive, capped, and not independently confirmed here for 2026

Arizona's 9% credits are allocated competitively through ADOH's QAP, subject to the federal nonprofit set-aside (IRC § 42(h)(5), at least 10%) like every state. The 2026-2027 QAP is ADOH's current governing document; it states that available credits equal the annual ceiling adjusted for prior allocations, forward commitments, returns, carryover, and any national-pool award, with the exact projected figure to be published in ADOH's own information bulletin.

A rough order-of-magnitude figure can be estimated from the federal per-capita formula: the national 2026 multiplier, confirmed directly in IRS Rev. Proc. 2025-32 (§4.08), is $3.416 per capita (permanently increased for calendar years after 2025 by Pub. L. 119-21 § 70422(a), amending IRC § 42(h)(3)(I)), and Arizona's most recent reported population estimate is 7,623,818 (2025 vintage, U.S. Census Bureau). Multiplying gives approximately $26.0 million. That is a computed estimate, not ADOH's own published Credit Estimate figure — which was not located in a directly citable form this pass — so treat it as illustrative only and confirm the real number against ADOH's current information bulletin before sizing a 9% round against it.

Developer fee: what the QAP owns, and a state credit that has since expired

ADOH's own developer-fee cap, DSCR band, and operating-expense floor live in the QAP's Section VI underwriting standards, which every application must meet. Their current figures were not independently confirmed against the 2026-2027 QAP text this pass, so none is asserted here — do not carry forward a percentage, ratio, or dollar cap from a prior Arizona QAP cycle or from another state's QAP; pull it from Section VI directly.

A second, entirely separate fee-adjacent program is worth knowing even though it no longer appears to be live: Arizona's state Affordable Housing Tax Credit (AHTC), created by S.B. 1124 (55th Legislature, 1st Regular Session), signed by Governor Doug Ducey on July 9, 2021 — making Arizona the 20th state to adopt a state LIHTC-style credit. S.B. 1124 wrote AHTC to repeal effective January 1, 2026. Checking the Arizona Legislature's own current statute compilation (azleg.gov) directly, A.R.S. § 41-3954 (AHTC administration) and § 43-1075 (the individual-income-tax credit) both return not-found, while every neighboring section in the same chapter — §§ 41-3951, -3952, -3953, -3955, -3956 and -3957 — still loads with real, current text. That pattern is strong evidence the January 1, 2026 sunset took effect and the credit was not extended, though this pass found no explicit repeal announcement or news confirmation to pair with it.

ADOH's own program materials for the current 2026-2027 QAP still describe administering 'LIHTCs and state tax credits (STC)' — most likely boilerplate carried forward from language written for already-reserved, pre-2026 credit vintages, since the credit's own enabling statutes no longer appear in current Arizona law. Do not book 50% of a project's federal LIHTC as a state credit line without confirming AHTC's status directly with ADOH first — but the working assumption for a live 2026-or-later pro forma should now be that this credit is unavailable unless ADOH or the legislature says otherwise.

The Arizona soft-money map

HOME Investment Partnerships funds (24 CFR Part 92) route the same way they do in every state: a city or county large enough to be its own HUD-designated Participating Jurisdiction (PJ) runs its own HOME program inside its own boundary — Phoenix, Tucson, and Mesa are very likely PJs given their size, though the complete current PJ list was not independently re-verified here. Anywhere else in the state, ADOH administers the balance-of-state HOME allocation instead. Getting a site's PJ status wrong before recommending a HOME source produces the same categorical-ineligibility mistake documented in this library's Texas guide for this same phase.

The National Housing Trust Fund (24 CFR Part 93) is a federal formula program every state administers in some form; how ADOH structures its own NHTF NOFA — award size, set-asides, PJ treatment — was not confirmed this pass. USDA Rural Development's Section 515 and 538 programs apply in Arizona's substantial rural and tribal geography the same way they do everywhere, with no state agency standing between the developer and USDA.

The calendar here is a queue-position problem, not a scoring problem

In a scored state, a deal dies because it didn't score high enough. In Arizona's bond program, a deal dies because its paperwork didn't clear the queue in time. Confirmations start fresh on the first business day of each year (usually, but not always, January 2), unconfirmed requests expire at 5:00 p.m. on March 31, and the local IDA board that has to pass its own approving resolution before AFA will even look at the request sits on its own meeting calendar — often monthly or less. A deal whose IDA hasn't acted by the time another project's request consumes that year's qualified-residential-rental share, or by the March 31 deadline, loses the year regardless of how strong the underlying deal is.

Historically, the AHTC added its own fixed date to the calendar for any 4%/bond-financed deal — ADOH's public hearing on AHTC allocation for tax-exempt-bond projects had to happen on or before July 30 each year. With AHTC's implementing statutes now absent from current Arizona law (see the developer-fee section above), this deadline no longer appears to be operative for new deals, but confirm directly with ADOH before ruling it out of a project calendar entirely.

What this pass could not confirm — verify before modeling

These figures live in the current QAP or in ADOH's own bulletins and were not independently confirmed against the current 2026-2027 text this pass. None of them is asserted here as a number: ADOH's developer-fee cap; the minimum and maximum DSCR band; vacancy-rate and operating-expense-escalation assumptions; threshold basis limits; minimum and maximum per-project 9% credit award; the 9% application round's actual deadlines and full scoring/tie-breaker criteria; the complete current list of HOME Participating Jurisdictions; ADOH's own published 2026 9% Credit Estimate; and AFA's own published total 2026 volume-cap figure (this pass could only derive a baseline from the federal per-capita formula, not confirm AFA's own tracking-sheet total). AHTC's post-sunset status is now addressed with moderate-to-high confidence — see the developer-fee section — but was not confirmed via an explicit repeal announcement or ADOH statement, only via the statute's absence from the current Arizona Revised Statutes. Pull each remaining item from the current QAP and ADOH's own information bulletins directly before it goes into a live pro forma.