Ephraim votes to create infrastructure district

“If they go belly up, what does Ephraim City lose? Zero. We’re getting some infrastructure it would take years for the city to create.”

Councilwoman Margie Anderson

EPHRAIM—The Ephraim City Council has voted unanimously to support creation of The Crossing Public Infrastructure Districts (PIDs), Nos. 1 and 2, with all council members saying the PIDs will generate tax revenue and pay for infrastructure that the city could not get on its own.

The “governing document” for the PIDs, which was what the council actually approved in its vote on Wednesday, March 19, was not markedly different from a draft circulated the first week in March.

But at the March 19 meeting, there was some discussion and clarification regarding the geographic territory that will be included in the PIDs and how, through annexation, the districts might increase in size over time.

In a press release, Mike Ballard, CEO of Camino Verde, said, “The Crossing PID will play a key role in delivering the infrastructure needed to support the orderly growth of Ephraim and support the Intermountain Health facilities, manufacturing companies and their future employees.”

A PID is a political subdivision set up to help private developers with projects designed to create economic growth.

In Utah, the districts operate under and are affiliated with the Utah Inland Port Authority (UIPA), an independent agency set up by the Legislature.

Before a PID begins operation, UIPA figures out how much property tax revenue is coming in from the defined PID territory. That amount serves as the “baseline.”

As the project develops and as property values rise, an amount equal to the baseline, plus 25 percent of new property tax generated in the PID, goes to the regular taxing entities, such as the city, county and school district.

But 75 percent of new property tax collections—that is, 75 percent of money in excess of the baseline—goes to the PID.

The PID issues tax-exempt bonds to large investors, such as pension funds and uses the funds from the bond sales for development costs. For instance, developers of Ephraim Crossing have said they plan to issue $15 million in bonds for arterial roads and a greenbelt in their 300-acre mixed housing, commercial and industrial development.

Once improvements are complete, an ongoing flow of incremental property tax revenue pays off the bonds. The payment term can extend as long as 30 years.

Some opposition to the PIDs did emerge at the March 19 city council meeting. In the public comment period, Tyra Taylor of Ephraim said, “I think the answer should be ‘no,’” because the city would be committing to forego 75 percent of the increased property tax generated by Ephraim Crossing for as long as 30 years.

“I would rather see five or 10 years that they would have to pay it back,” she said. With Ephraim getting just 25 percent of property tax from Ephraim Crossing, how will the city pay for maintenance and emergency services to the development? she asked.

Analisa Stone of Ephraim said her biggest concern was affordable housing and she wasn’t sure the Camino Verde project would provide it. Instead of tapping property tax, she said, Camino Verde could tap tax incentives and IRS credits. “I feel there are other avenues out there that would have less of an impact on tax revenues.”

Kimberly Beck, who lives in Gunnison Valley but has developed property in Ephraim, told the council, “I’m not trying to dissuade you.” But she said UIPA is controversial because it takes away local control.

She said Ephraim Crossing was launched in 2021, but “not a lot has been happening there…The tech center was one of the big selling points, hasn’t arrived yet.” She said the city should do an analysis of Camino Verde’s financial status. She urged the city council to look into the PID further “and not make a decision today.”

Before voting, each council member was given time to ask additional questions or state an opinion. Staff from UIPA and Zions Bank, as well as attorneys, were available to answer questions.

“Let’s just be real transparent,” Councilman Dennis Nordfelt said. “What’s the incentive for a developer to do this?”

Jepeth McGee, a public finance specialist with Zions Bank, said the rate on a tax-exempt bond is 5 to 6-1/2 percent, compared to 12 percent for a standard commercial loan. The benefit to the developer, he said, is lower cost of capital and being able to spread repayment over a longer period…”where they might not be able to access 30-year capital from a bank.”

“The Crossing PID will play a key role in delivering the infrastructure needed to support the orderly growth of Ephraim and support the Intermountain Health facilities, manufacturing companies and their future employees.”

Mike Ballard, CEO, Camino Verde Group

Summarizing his view, Nordfelt said, “If there’s no development, there’s no additional tax revenue coming into the city. Whether or not that development would happen without the PID, we don’t know. Even so, with that new development, the city is getting 25 percent. If it wasn’t happening, the city would get 25 percent of nothing.”

Councilman Lloyd Stevens wanted to know if the city had vetted Camino Verde to determine if it is financially capable of developing Ephraim Crossing as planned.

An attorney advising the city on the PID said he had not looked into Camino Verde’s finances. But McGee, from Zions Bank, said an underwriter would be engaged to market The Crossing PID bonds to investors.

McGee said an underwriter commonly used in Utah bond transactions does look into the financial backgrounds of companies seeking to float bonds.

Throughout deliberations, Camino Verde officials, McGee and Jenna Draper, regional vice president for UIPA, have emphasized that PID bonds are structured so investors, not cities, take the fall for any default.

Explaining her rationale for supporting the PID governing document and creation of the Ephraim Crossing PIDs, Councilwoman Marge Anderson said, “If they go belly up, what does Ephraim City lose? Zero. We’re getting some infrastructure it would take years for the city to create.”

Councilman Anthony Beal said when the PID concept first came up, he was opposed. In subsequent weeks, he said he went back and forth in his mind, weighing the pros and cons. He said he had heard from more than 40 residents, a large majority of whom opposed the concept.

One of the concerns residents expressed was whether the PIDs, as proposed, favored a nonlocal developer. But he said the concern he had heard most was, “This might not work out.”

The fact, he said, is that Ephraim is divided between people who are pro-growth and people who are growth-averse.

He said the more he listened, “the more clear it has become.” He joined the rest of the council in voting in favor of the PID governing document.

During the meeting, Draper, the UIPA vice president, reiterated her statement at an earlier meeting that if, in the future, the tax increment income from The Crossing PIDs exceeding the amount required to make bond payments, the surplus could go to the city for expenses related to the PID, such as a new snowplow to plow streets in the development.

During in the meeting, and in conversations with the Messenger afterward, Camino Verde officials noted that the PIDs as presently defined are 20 acres. They said the tax increment on a district that size might not be enough to support the bonds they foresee taking out. But they said they anticipate annexing additional territory and eventually encompassing most of their 300-acre development in their PIDs.

The next step for Camino Verde is winning approval of the UIPA board. They expect the board to take up the The Crossing PIDs at a meeting April 29.