By Justin Adams | [email protected]

A new form of local government known as a “Public Infrastructure District” raised major concerns from Herriman City Council members at their most recent meeting.

Public infrastructure districts were introduced to the state of Utah last year when the legislature passed SB 228, sponsored by Sen. Dan McCay R-Riverton. In his words, the bill “allows private landowners... to create a debt-financing vehicle that will be tax free so they can then use it for large infrastructure costs... It requires 100% of the taxpayers that live in that district to enter into the district.”

Sounds simple and benign enough. At least, enough that no debate was had - or even a question asked - about the bill in either the House or Senate. It passed unanimously in the Senate (with a few absent votes) and only had one nay vote in the House (Rep. Adam Robertson). 

So what exactly does it do? 

The PID must be proposed and unanimously approved by the landowners within the boundaries of the potential district. It also must be approved by the city or county in which it resides. The city specifies what kinds of infrastructure the district will be responsible for (water, sidewalks, parks, electricity, etc.).

Once created, the district has taxing authority to levy property taxes of up to .015 per dollar. For context, Herriman residents’ current property tax is .014059 per dollar. So a PID within Herriman could potentially result in residents within that district paying twice as much in property taxes.

The district may then use the tax income as collateral to issue bonds, which it then uses to construct whatever public infrastructure improvements it has been charged with building. The property tax can then be increased again in order to pay off the bond.

All these decisions are made by a board of trustees, with members initially appointed by the city, but must be chosen from landowners. 

With the district’s creation depending on the unanimous vote of landowners, and the board of trustees being filled by landowners, it may seem like a very democratic form of local governance. The problem arises when you consider how such a district might be used in the case of a new residential development built by a single landowner. 

If the district is set up before a single home is sold, the requirement to have every landowner approve the formation of the district means just the developer has to approve it. Likewise, the initial board of trustees can be filled by the developer. Then they set the district’s tax rate before anyone moves in.

“This isn’t the fox guarding the hen house. This is locking the fox inside and walking away,” said Herriman Councilman Jared Henderson, in describing the operation of such a district.

The only other state with a similar law is Colorado. An op-ed in the Denver Post called the boards of such districts, “little more than a proxy for company officials.”

After setting up the district, the landowner can then sell new homes to people who may or may not realize that the area has much higher property tax rates. At least in Colorado, that information is only required in the fine print, according to The Denver Channel website. 

One woman interviewed for that story bought a home within a PID, and was surprised to learn that her property taxes amounted to $500 a month, 10 times as much as she had been led to believe.

“They sell it off to - I would say - unwitting purchasers, who are then on the hook for the cost,”  Henderson said.

“All we hear about is housing affordability. You think I can afford my house with double taxation on it?” said Councilwoman Sherrie Ohrn. 

Herriman City has already been approached by several developers with interest in creating a PID, according to City Manager Brett Wood.

“We’ve had staff push back and say we don’t think this is a good fit for residential at all,” he said.

So with Herriman City unlikely to approve PID’s for residential developments, where’s the threat for Herriman residents? 

First, PID’s could be set up in nearby areas that don’t currently belong to Herriman, but one day might be annexed in. For example, Herriman Finance Director Alan Rae said it’s possible  the developers of the Olympia Hills project may pursue it. 

Second, Henderson noted the potential negative impact to the region’s overall economy if PID’s are allowed to proliferate. 

“If you thought the last housing crash was bad, let’s fast forward 10 years with a bunch of these in place… You’d never climb out of that,” he said. “This isn’t kicking the can down the road. This is kicking the nuclear bomb down the road. When it blows up, it will blow up big.”

According to Wood, there are already a few moving forward throughout the state. However, it will be difficult to know exactly how many there are because the bill specifies no way of keeping track how many are approved state-wide. For comparison’s sake, Wood said there are about 2,000 of them in Colorado, and a separate 2019 Op-Ed by the Denver Post’s Megan Schrader asserts there are more than 400 in the Denver metropolitan area alone. 

Another piece of development which would be a potential candidate for a PID is the 105-acre Mountain Ridge development, which is proposed to be built on land owned by Suburban Land Reserve, the real-estate arm of the Church of Jesus Christ of Latter-day Saints. Coincidentally, Sen. McCay, the sponsor of the bill that instituted PID’s works for SLR and has been involved in the negotiation with the city regarding the Mountain Ridge development. 

The Herriman Journal reached out to Sen. McCay for comment on this story and has not received a response.