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Lawmakers hear of ‘hurdles’ to state takeover of Utah Transit Authority

But still ‘very early in the process’ of overhauling transit agency

UTA’s Salt Lake City offices are pictured in 2017.
The Utah Transit Authority’s Salt Lake City office building is pictured in 2017.
Scott G Winterton, Deseret News

SALT LAKE CITY — There doesn’t seem to be much interest in a state takeover of the Utah Transit Authority and its $2 billion debt, but some Utah lawmakers aren’t ready to close the door entirely on the possibility it could still happen in the future.

“I think we are very early in the process,” Sen. Wayne Harper, R-Taylorsville, said at a Transportation Interim Committee meeting last week, after criticizing the final report from a consultant on the feasibility of transitioning the public transit district into a state entity for stopping short of making specific recommendations.

“There’s nothing new. I think there’s some great information, a regurgitation of things already known. Is this report exactly what I wanted? No,” Harper, the committee’s Senate chairman, said, noting it did not address whether UTA should be part of the Utah Department of Transportation or a separate state agency under the executive branch.

Still, Harper said the 2018 legislative overhaul of UTA that he sponsored appears to be working.

Lawmakers took action after UTA signed a nonprosecution agreement with the U.S. Attorney’s Office to cooperate in a probe of the agency’s dealings and submit to federal monitoring. Legislative auditors had previously raised concerns about transit deals, as well as the generous employment contracts for some top UTA officials.

“I am very pleased with the changes that I’m seeing. And at this point, I think it’s pretty clear the calls that we made a couple of years ago are working and we need to give those time to run the course,” Harper said. “Right now, I think we’re operating pretty good.”

However, should that assessment change in the future, he said lawmakers will look to the report prepared for the transit agency and UDOT as well as other information about what bringing UTA under state control would mean and pointed out again that “the report says there’s some hurdles if want to do it but no recommendations.”

The committee’s House chairman, Rep. Kay Christofferson, R-Lehi, also noted the report didn’t offer any recommendations. He said he’d like details of what it would take to transition UTA to a state entity, even if “it’s obvious to most of us it’s not a good time to change any more. There may be parts of this we can phase in.”

Christofferson suggested that may have to wait. He said that in reading the report, he “just felt like there’s too many things that are obstacles right now. Maybe down the road those obstacles can be handled, but that was my feeling.”

The 52-page report done by Baker Tilly, a Chicago-based public accounting and consulting firm, spells out in the executive summary why no recommendations were made.

“Considering the broad range of possible approaches in designing a new transit-service delivery model and the uncertainties involved in each approach, it is beyond the scope of this report to identify all risks, challenges and costs associated with a future transition,” it states.

But the report did detail key issues associated with some form of a state takeover. At the top of the list is the effect assuming the transit agency’s $2 billion in debt is expected to have on Utah’s enviable AAA bond rating that is utilized by school districts and other entities to keep interest rates low when borrowing funds.

That level of increase to the state’s debt load would downgrade to a lower rating that would increase the cost of issuing bonds because they would be seen as more risky to investors, while retiring or refinancing UTA’s debt would cost the state some $300 million, according to the report.

Other financial considerations in the report include an anticipated $71 million in additional bonding by UTA through 2024, a costly review of thousands of the agency’s existing contracts and assuming responsibility for addressing revenue shortfalls, such as occurred when ridership plummeted during the coronavirus pandemic.

The report also pointed out possible human resources, regulatory and governmental issues, including introducing unionized employees into the state workforce, since about two-thirds of UTA employees belong to a union and are covered by a collective bargaining agreement.

The state would also face the expense of explaining a new structure to the public. “Depending on the future organizational model for transit delivery, a rebranding of the new entity may be needed. The costs of such rebranding could prove to be substantial,” the report stated.

The price tag for rebranding UTA has already been an issue. Changing UTA’s name to Transit District of Utah was in the 2018 legislation to provide what lawmakers said would be a fresh start for the agency. But the name change was dropped amid a public outcry over UTA’s insistence it could cost $50 million.

UTA Board Chairman Carlton Christensen, appointed to lead the three-member full-time board that replaced a larger group of volunteer trustees as part of the legislative changes two years ago, made a case for letting the agency continue to run itself.

“As an organization, we’ve been through a lot. Certainly, there are some chapters that I wish could be rewritten, but I believe we’re heading in a strong direction,” he told the committee, highlighting the agency’s collaboration with UDOT.

“We feel like we’re in a good place and that the negatives don’t outweigh the positives of staying the course and could request that you continue to give us the opportunity to continue to improve our organization,” Christensen said.

He said the changes already made require UTA to get the go-ahead from the state before issuing new bonds. While there is a premium for retiring the agency’s debt early, Christensen said some bonds have been refinanced at a lower interest rate, saving about $7 million.

Some committee members made it clear they see no reason to involve the state more and no action was taken at the meeting on the report.

“I didn’t see any good reasons to do it. I saw a couple neutral and mostly bad, or difficult, I should say,” Rep. Marsha Judkins, R-Provo, said.

Sen. Gregg Buxton, R-Roy, said “the single biggest stumbling block” is the transit agency’s $2 billion debt. “That’s a big deal,” he said, that could have an affect on every school in the state and enough of a reason alone to prevent UTA from becoming a state entity.

Senate Minority Leader Karen Mayne, D-West Valley, offered support for keeping UTA as is.

“It needs to stand alone,” Mayne said. “It’s different. It’s complex. To move it any place would just be a catastrophe.”