State Attorney General Tom Horne had championed the bill, saying Colorado City officers who are members of the Fundamentalist Church of Jesus Christ of Latter-Day Saints flout the law and are simply replaced by other followers of imprisoned FLDS leader Warren Jeffs if removed individually.
Jeffs is serving a prison sentence of life and 20 years in Texas, where he was convicted of sexually assaulting two underage sect girls he took as plural wives at a remote ranch built by followers.
The FLDS practices polygamy, a legacy of early Mormon church teachings that held plural marriage brought exaltation in heaven.
However, the mainstream Church of Jesus Christ of Latter-day Saints abandoned the practice in 1890 as a condition of Utah's statehood and ex-communicates members who engage in the practice.
Rep. Cecil Ash, R-Mesa, unsuccessfully argued for passage of the bill, saying young men and women have been victimized by FLDS members. The victims are afraid or believe it is futile to turn to the town marshal's office.
"We have a problem up there that's lasted 50 or 60 years," Ash said. "Other methods to stop this problem have not been successful."
The bill would have set up a process for a local police agency to be replaced by the county Sheriff's Department if at least half of its officers have lost their law enforcement certifications in an eight-year period.
Horne's office said the marshal's office in Colorado City already met that threshold with multiple revocations between 2003 and 2007, while Rep. Nancy McLain said current officers have either been cleared by investigations or are newly hired.
"Things are changing up there and it just doesn't seem fair to go backward in time when things are opening up," said McLain, a Bullhead City Republican who also represents Colorado City.
Opponents also argued that the bill unconstitutionally targeted a single community.
Mohave County Sheriff Tom Sheahan told Horne's office in March that his department was prepared to provide law enforcement from Colorado City, initially by sending current deputies temporarily and longer term by hiring additional deputies.
The House vote rejecting the bill crossed party lines. The Senate approved the bill unanimously on Feb. 27.
A similar bill failed this year in the Utah Legislature. Colorado City officers also police neighboring Hildale, Utah.A twin bill that would have disbanded the department on the Utah side was dead on arrival in the Utah Legislature last month.
Tribune reporter Lindsay Whitehurst contributed to this story.