Questions, misconceptions addressed at hearing on infrastructure district

EPHRAIM—An official of the Utah Inland Port Authority and a bond specialist from Zions Bank provided details, cleared up some misconceptions and assuaged some fears during a public hearing on a potential “Public Infrastructure District” (PID) last week.

            The PIDs are being created around Utah as mechanisms for financing roads, sewer systems and other improvements that local governments or private developers might not be able to afford on their own.

            At the hearing before the Ephraim City Council on Wednesday, Feb. 5, Jenna Draper, Central Utah director for the Utah Inland Port Authority, said getting such  improvements in place can be the linchpin that makes economic growth possible.

            “The most important thing we look at when agreeing to do these (PIDs) is what’s called a ‘but for’ statement,” she said. “It simply means that if not for this tool…we would not be able to have this development.”

            UIPA, an operation set up by the Utah Legislature, has defined “project areas” all around the state, including in Sanpete County. The areas are recommended by local governments, such as counties and cities, as sites with potential for economic development. One such project area takes in Ephraim Crossing, a mixed housing, business and industrial development southwest of McDonald’s.

            At a meeting in late January, Mike Ballard, a partner the Camino Verde Group, the company developing Ephraim Crossing, asked Ephraim City to support a PID, which would issue $10 million in bonds to help develop roads in what could become a nearly 300-acre complex.

            The key to a PID (and the main tool in the whole UPIA toolkit) is something called “tax increment financing.” When a development is proposed, and with support of local government, UPIA determines how much property tax is coming in. “We freeze the current value, the (property) tax that is going to all the current taxing entities as it is today,” Draper said.

            As improvements are completed, development occurs, and property values in the designated area rise, UPIA determines how much new tax revenue is coming in.

            Under UPIA guidelines, all of the base revenue—the property tax that was coming in before development started—plus 25 percent of the new revenue, continues to flow to the local taxing entities. In the case of the PID being proposed in Ephraim, those entities are Sanpete County, the South Sanpete School District and Ephraim City.

            The rest (75 percent) of the new revenue goes to pay off  bonds taken out by the PID to  financed the initial improvements. A PID can continue in operation for as long as 25 years.

            Japheth McGee, the Zions Bank bond specialist, emphasized that the proposed PID in the Ephraim Crossing project area would not be an Ephraim City entity. It would be its own jurisdiction. He said the PID would issue tax-exempt bonds in amounts of $100,000 or more. Purchasers would primarily be “high-net-worth individuals.”

            “The bonds themselves are not obligations of the city,” he said. If a project area failed to bring in enough new tax revenue to cover the bond payments, the investors would be the losers. Neither UPIA, the PID nor the city would be responsible for any default.

            Steve Butterfield, one of the citizens at the hearing, was under the impression that a PID was like a special improvement district, where extra taxes are levied on residents or businesses to cover improvements. That could give developers in the district an unfair advantage over other developers who have to finance their own roads, he said.

            But Draper explained that as a project area, such as Ephraim Crossing develops, homeowners and business owners pay the same property tax rate as people throughout the city. The only difference is how the revenue coming out of the project area is distributed.

            Ballard, who was at the hearing, said the roads he is asking the PID to finance are arterials, not residential streets. They provide access to a prospective hospital, which would be located in the PID, could connect some housing areas and could provide access to a proposed industrial area in Ephraim Crossing.

            While Camino Verde will take charge of overall planning of Ephraim Crossing, it will sell tracks of its land to other developers and builders. They will develop various housing areas.

            Ballard said those parties will have to pay for roads and utilities, just like traditional subdivision developers. Under such a scenario, he suggested, PID bond funding would not give Camino Verde or their partner developers an unfair advantage over other developers.

            Another question was what would happen if, over the 25 years, the PID brought in a lot more money than required to pay off the bonds. With tax revenue from Ephraim Crossing projected to reach $52 million per year 25 years from now, excess revenue appears to be a strong possibility.

            “The leftover amount is under the control of Ephraim City,” Draper said. If the city needed additional snowplows to maintain the roads, the PID could pay for them. If the city needed a new sewer lagoon, which would serve the whole town, including Ephraim Crossing, PID money could be used to pay for it.