The state auditor proposed for the first time this year that certain independent development districts proliferating across Utah weren’t so independent after all.
A draft memo suggested criteria for assessing if public infrastructure districts, or PIDs, are actually part and parcel of a county or city government.
Local and state attorneys believe a PID in Coalville prompted the auditor to weigh in.
PIDs allow property owners or developers to issue bonds the way governments do. But a city audit responding to the Utah auditor’s comments found that Coalville and the PID are separate, so any trouble with the PID shouldn’t affect Coalville and its credit.
The context is that Coalville approved a public infrastructure district for the luxury golf resort Wohali, which would expand city sewer during the course of its development.
Now Wohali has run out of money, and the state auditor said that bankruptcies raise questions about whether associated PIDs can pay back bondholders.
The state report suggested counties and cities might need to include that debt on their own balance sheets to paint a clear picture of their overall financial health.
According to public finance attorney Aaron Wade, using the state auditor’s own criteria, Coalville’s auditor found just the opposite.
“The standard is: whether it would be misleading not to include an entity as a ‘component unit.’ And this [Coalville] auditor's conclusion was that it would be more misleading to include it as a component unit than to not include it,” Wade said at the Dec. 17 county council meeting. “So their conclusion was that it should not be a component unit of Coalville City — that there wasn't liability to Coalville City.”
But other attorneys have gone farther to suggest that the auditor’s criteria are flat-out wrong.
Wade was speaking at the same meeting where Summit County civil attorney Dave Thomas called the auditor’s report “infuriating” for conflating law with policy.
He pointed out that the auditor’s recommendations were based on accounting policies but that PIDs were a creation of the Utah Legislature.
And the law, Thomas and other attorneys have emphasized, says PIDs are independent, self-governing entities.
City and county governments might appoint the PID’s first board, but that’s usually where their influence stops.
“Essentially [the Coalville auditor’s] conclusion was that because the city can only appoint from a very, very limited pool, that's not actual control over the board,” Wade said. “It's not as if the city council could say, ‘Oh, let's put the mayor, and let's put two councilmembers on there.’ It's, ‘Oh, let's select from property owners.’”
PIDs are popular development tools in the Wasatch Back and beyond because they let property owners issue cheap debt in the form of tax-exempt bonds.
The properties that create a PID are deciding to tax themselves to pay off the bonds, without liability to other taxpayers.
The auditor’s opinion on that liability, or lack thereof, is still in a draft form. It accepted public comment earlier in December to incorporate into a final version which it has yet to be published.
