Since Utah introduced public infrastructure districts in 2019, they’ve exploded in popularity.
That’s partly because developers can use them to access low-interest loans usually reserved for governments, in the form of bonds.
Utah State Auditor Tina Cannon’s office says PIDs have been able to issue up to $3.9 billion in debt over the past seven years.
That’s as compared to less than $1 billion in pending general obligation bonds, the kind of financing governments traditionally use for open space or schools, for example.
“So you have four times the amount of financing in public infrastructure districts than the full state of Utah has in general obligation bonds right now,” Cannon told KPCW.
PIDs, which must be approved by local governments, typically pay back bonds with property taxes similar to general obligation bonding.
The difference is PIDs only tax the select group of property owners who asked for the PID, including future property owners within the boundaries.
“So the question, and why it has become a hotter topic, is what happens when they fail? And who is responsible for the assets when they fail?” Cannon said.
Wohali, a golf resort in Coalville, is the highest profile development with accompanying PIDs to have gone belly-up.
That prompted Cannon’s office to draft an alert to local governments advising caution with PIDs, an opinion she finalized Thursday. She told KPCW other PID-related projects have gone bankrupt, not just Wohali.
Many in the Utah legal community maintain that cities, counties and their taxpayers aren’t liable for PIDs if they fail. It’s the responsibility of the properties who opted into the district to make their creditors whole.
Cannon said her office isn’t saying local governments are liable or that PIDs should hurt their credit. She is saying there’s a “reputational” risk for cities, counties or the state.
“This is a very attractive financing tool for developers,” she said. “That does not always make it the best financing tool for the taxpayer who eventually pays the debt.”
To Cannon, a key issue in the case of Wohali is that the resort had to pay its PID first, before its actual lenders. That’s because the PID had its own debt too.
In that scenario, the auditor said public infrastructure districts could end up issuing more bonds than they need in order to stay above water.
“And it further encumbers the taxpayer down the road for interest expenses, instead of having the market correct at a sooner point in the process,” Cannon said. “So it's creating a new problem within a bankruptcy.”
Her office’s data shows at least 24 PIDs or similar tax districts have popped up in Summit and Wasatch counties since 2019.
That includes one for Canyons Village approved March 11, three for Deer Valley Resort’s Snow Park base redevelopment and three for the Military Installation Development Authority’s work at Deer Valley East Village.
The March 19 auditor’s alert recommends that local governments consider including PID finances on their own balance sheets to provide a complete picture of what taxpayers in their borders are on the hook for.
