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Public infrastructure districts are surging in popularity in the Wasatch Back, and across Utah, as developers look to raise money to get shovels in the ground.
PID proponents bill them as a way for governments to spur economic development without extra liabilities or direct subsidies.
But a Nov. 18 draft memo from the Office of the Utah State Auditor warns local governments that they could be “financially accountable” for the PIDs they establish.
The advisory states it was prompted by the bankruptcy of an unspecified “developer associated with a public infrastructure district.”
“Obviously, even though I think this comes out of the Wohali situation, this auditor alert was statewide,” interim Coalville attorney Craig Smith said at the Dec. 8 Coalville City Council meeting.
Wohali, a luxury golf course and residential resort in western Coalville, filed for Chapter 11 bankruptcy in August.
That’s because it allegedly defaulted on an almost $80 million loan. But it had also used a PID — created by the city of Coalville — to issue more than $30 million in bonds for infrastructure like sewer and water.
Although the PID is legally separate from Wohali, the PID is wholly composed of the developer’s representatives.
Wohali was supposed to pay the bonds back with the tax revenue from new development. But building at Wohali has stalled, and the project has taken on more debt to pay its PID and avoid foreclosure.
“The bankruptcy creates concerns regarding the viability of the project and whether the associated PID will be able to satisfy bonding requirements,” the auditor alert states.
The auditor’s office goes on to suggest that most PIDs are a component of the government that creates them — rather than wholly independent from them.
Smith said that’s garnered “a tremendous amount of pushback.”
“PIDs, under Utah law, are separate legal entities,” he said. “The only role the city has is to create them. We don't control them. We appoint the initial board. We don't appoint any board after that.”
The state auditor’s office is taking public comment until Dec. 18 before making its draft opinion final.
Smith added that some of the state’s foremost bond attorneys submitted comments disagreeing with the auditor’s reasoning.
A public finance attorney is scheduled to appear before the Summit County Council Dec. 17, when they’re expected to vote on a PID in Canyons Village.
Elsewhere, the new owners of the DeJoria Center in High Star Ranch asked Kamas for a PID this year, although the city hasn’t approved it. Park City approved three PIDs this year for Deer Valley Resort’s Snow Park base redevelopment.
But Summit County is late to the party compared to Wasatch County and Heber.
A litany of developments there, including Jordanelle Ridge, Wakara, Black Rock Mountain Resort, Ameyalli, Wildwood Reserve and Benloch Ranch, all have PIDs or similar infrastructure financing districts.
The auditor alert is a nonbinding advisory document. It recommends that local governments look at the law, and potentially report PID finances on their own balance sheets.
