‘Unprecedented’ Utah bill would allow developers to create own districts. Here’s why that matters
Supporters say bill could help lower costs for housing, but detractors worry new entity would lack elected officials
A new bill has emerged on Utah’s Capitol Hill seeking to allow landowners to form their own special districts in order to finance infrastructure projects with the aim of helping developers cut down on housing costs.
Supporters say it’s all in the name of facilitating more affordable housing development, but critics argue it would be an “unprecedented” move to create a new political subdivision that could assess taxes and yet not be accountable to elected officials.
The bill, SB295, cleared its first legislative hurdle Monday, with less than five days left in the legislative session set to end at midnight Friday, when it won an endorsement from the Senate Economic Development and Workforce Services Committee on a 4-1 vote. It now goes to the full Senate for consideration.
The bill is advancing — but not without hesitancy from even those lawmakers who voted in favor of it.
“I will tell you, I am not convinced this is the best thing since sliced bread,” said Senate Budget Chairman Jerry Stevenson, R-Layton, though he called it a “very interesting” proposal. Before voting in favor of the bill, Stevenson said he’d like to give it an opportunity to be debated on the Senate floor.
What would the bill do?
Sen. Dan McCay, R-Riverton, told the Senate committee he’s sponsoring SB295 as part of a “constant effort to try and find financing solutions” for infrastructure projects while also helping facilitate affordable housing development.
The bill would allow for the creation of a “dedicated infrastructure district,” which would allow a landowner, if 100% of the property owners in an area sign on, to file a petition with the lieutenant governor to create the district.
To be eligible, the project must require at least $2 million in infrastructure investments (such as roads, water lines, electricity or other improvements) and have at least 100 housing units, at least 50,000 or more square feet of non-residential development, or a minimum estimated appraised valuation upon completion of at least $50 million.
If formed, the district would be a political subdivision of the state and therefore be able to access cheaper financing.
“What it does is allows access to capital that is less expensive, thereby making it so that the product that is provided, be it housing or otherwise, can be less expensive than it otherwise would be.” said Wade Budge, an attorney with the firm Snell & Wilmer, who joined McCay for his presentation of the bill.
“So the idea is it has to act like a government, because that’s what it is. And that’s the reason why it’s able to obtain that financing at a lower cost,” Budge said.
The district could also finance improvements by using an assessment levied against the property, Budge said, but it would have to be paid off before selling homes to a homebuyer, “so when the homebuyer becomes the owner they don’t have an assessment to deal with.” Or, he said, the district could impose a limited tax.
The developer would still be required to abide by local land-use zoning regulations as well as infrastructure standards and inspections. It would also be required to follow Utah’s open meetings laws, McCay and Budge said.
“This is purely a financial tool, not an entitlement tool,” McCay said. “So entitlements will still be done by whatever local government entity controls the land use for this property.”
In most scenarios, Budge said, the district would be formed to finance the infrastructure improvements, which would eventually be transferred to a city, which would then maintain the roads, sewer lines, or whatever was built. “At that point, the (district) would likely be wound down,” Budge said.
However, if there’s an improvement that a city would not want to accept, perhaps a park, “then in that situation ... the residents would have to then be elected and govern that particular entity as that community matures and there are actually residents there,” Budge said.
He added it would behave similar to a homeowners association, “but that would probably be the exception because in reality the majority of improvements that this is designed to build are the types of things that a municipality would be the one to own and operate.”
Richard Catten, former West Valley City attorney who now works as a consultant, spoke in favor of the bill, saying it has more “guardrails, frankly, than most other special districts.” He said the bill would create districts that are “still subject to local control.”
“In my mind, it’s an excellent tool in the toolbox to further development,” he said.
No elected officials?
Cameron Diehl, executive director of the Utah League of Cities and Towns, expressed concerns about creating entities that could behave as a government without elected officials at the helm.
“We’re very concerned about the idea of the state authorizing the creation of these political subdivisions with that tax authority without elected officials operating as the gatekeeper,” he said.
Diehl argued tools are already in place to finance infrastructure projects, such as public infrastructure districts and assessment bonds.
“But the key distinction is that local government, cities or counties with their elected officials, are still the gatekeepers of those tools. The reason for that matters,” Diehl said. “The reason for that is the accountability of the property tax and because local government is responsible in perpetuity to own and maintain the infrastructure.”
The bill would essentially “create a new class of political entity that would not be governed by elected officials in the creation of those entities and would have property tax authority,” Diehl said.
“It really does come down to this fundamental question of do you as a state want to allow the creation of a political subdivision without elected officials that will have control over property tax?” Diehl said. Or, he said, would lawmakers instead want to continue to use existing tools “that we currently have where local government acts as a gatekeeper.”
Salt Lake City Councilman Dan Dugan also spoke against the bill, arguing it provides “no benefits to any entity other than the developer at the expense of the sovereign power of the municipality.”
A new tool
Others, including Zach Hartman, managing director for Land Advisors Organization, Utah’s largest land advisory firm, urged lawmakers to support the bill.
“When I wake up in the morning and I’m trying to create new projects that will work, affordability is probably the biggest thing on my mind,” he said. “Between inflation, interest rate increases, I think when you go through the current tool bucket that we have ... they don’t cover what you need.”
Landowners can often get “different outcomes” depending on the city council, Hartman said, while SB295 would allow the landowner to better decide the “fate of their property.” That will lead to more developments and “lower housing prices through a natural market, not through different cities kind of picking who the winners and losers are.”
Chris Gamvroulas, president of Ivory Development with Ivory Homes, Utah’s largest homebuilder, also spoke in favor of the bill, saying it would simply let landowners access a new financing tool.
“That’s really all this is,” Gamvroulas said. “This is about local control, and this isn’t about building infrastructure that isn’t designed and isn’t planned ... all of those protections are there (in the bill).
Several senators expressed reservations with the bill, but only Sen. Karen Kwan, D-Murray, voted against it.
“I feel like it’s asking to do something that is unprecedented,” Kwan said.
Before the committee’s vote, McCay said he wished the bill would have been drafted sooner in the session and he welcomed more conversations about it.
“I think I have a very good reputation of continuing to work through things,” McCay said, “and I’m confident that with a lot of conversations with people we can get more done over the next four days in this issue than I can over the next eight months of interim.”