To control, or not to control? That’s the question for city and county governments when it comes to PIDs, or public infrastructure districts.
The Utah Legislature created the development tool in 2019, and it’s proven popular, especially in Summit and Wasatch counties.
Since then, dozens of PID boards — which by default are unelected — have raised more than $5 billion statewide by issuing bonds, or cheap loans reserved for governmental entities.
City and county councils decide whether to form a PID because future taxpayers within its boundaries must pay off the debt. After that, the amount of control local governments wield over these independent agencies varies.
Utah State Auditor Tina Cannon worries that PIDs have become unwieldy. She hosted the U.S. Securities and Exchange Commission at the Utah State Capitol Monday, where federal officials expressed concerns of their own.
“Indirect risks may not be appreciated by folks making these policy decisions, and indirect risks may not be being explained to you by your municipal advisor by the broker dealer or by bond counsel,” SEC Office of Municipal Securities Director Dave Sanchez said Monday.
Wasatch Back resorts such as Deer Valley, Canyons Village and Wohali in Coalville all have them. The auditor started raising concerns after Wohali’s developer went bankrupt.
Lawmakers intended PIDs to be independent of cities and counties so they don’t pose any financial burden to taxpayers outside of their boundaries.
But at the auditor’s event, Sanchez asked attendees to consider another risk: “control person liability.”
“If you have any ability to control that entity, you may be responsible for their securities law violations,” he said.
Coalville city leaders attended the conference. Mayor Rory Swensen called it “highly technical” with very few “concrete answers.”
“It was all: you need to evaluate it based on these standards, and this is what you're going to be looking at. They were very hesitant to make any determinations,” he told KPCW afterward.
Swensen said he came away confident in Coalville’s position.
The city had been in a tug-of-war with the auditor’s office over whether it needs to disclose the Wohali PIDs’ finances on city financial reports.
City and county officials have tried to limit their influence on PIDs to keep them off their balance sheets. That’s because they worry that disclosing PID debt could affect their own ability to issue bonds cheaply.
For the SEC, there is such a thing as a leash that’s too long.
“We can bring charges not just against the PID, but also against the creating entity for, again, breathing life into a governance structure that's so irresponsible that it is highly likely to result in securities law violations,” Sanchez said.
Whether or not PIDs are good policy though, Sanchez said, is not for the SEC to decide.
