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Public Infrastructure Districts: Utah’s Brand New Economic Development Tool for
Cities and Towns
GILMORE & BELL, P.C.Presented by:
PUBLIC INFRASTRUCTURE DISTRICTS: UTAH’S BRAND NEWECONOMIC DEVELOPMENT TOOL FOR CITIES AND TOWNS
WELCOME
RANDALL LARSENDirect: 801.258.2722 / Mobile: 801.541.1108
AARON WADEDirect: 801.258.2730
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UTAH SENATE BILL 228PUBLIC INFRASTRUCTURE
DISTRICT ACT
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PUBLIC INFRASTRUCTURE DISTRICTS: UTAH’S BRAND NEWECONOMIC DEVELOPMENT TOOL FOR CITIES AND TOWNS
Economic Development Tools
• Historically, there have been two key economic development financing tools used by cities and towns: Tax Increment Financing (TIF)
Assessment Areas & Bonds
• Senate Bill 228, The Public Infrastructure District Act gives cities and towns a new economic development financing tool
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Introduction to Senate Bill 228
Effective May 14, 2019 • This bill grants cities and counties in Utah the power to create
Public Infrastructure Districts (PIDs) to finance public infrastructure for new development and redevelopment
• PIDs can issue debt repayable from property taxes or assessments on the property owners within its boundaries
• PIDs can be an effective tool to the interests of both municipalities and property owners when potentially competing interests are balanced
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Limitations of Existing Tools
• Cities and towns may be hesitant to issue bonds to pay for development infrastructure due to balance sheet implications and/or the potential burden of foreclosure enforcement against residents
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Distinction from Existing Local Districts
• PIDs are similar to other specialized district tools available under the statutes with a few key distinctions: PIDs are local districts under Title 17B and constitute an
independent political subdivision, not a component unit of the city or county that creates the PID (Creating Entity)
Debt issued by a PID is not a liability of the Creating Entity or the State, therefore PID debt is a non-balance sheet item
Debt is repaid from a Limited Property Taxes or Assessments imposed by the PID
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Distinction from Existing Local Districts
• Key distinctions, continued: Formation requires 100% consent of property owners and any
voters in the PID boundaries
PIDs have fairly broad powers to finance public infrastructure of many types generally including any improvement that will be owned by a state or local government, including the PID
Authority to finance capital costs of improvements in an energy assessment area, commonly referred to as Property Assessed Clean Energy (PACE) improvements
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Scenario #1 – Incentivizing Development
• City has large amounts of vacant land and wants to attract mixed use development favorable to long-term revenue/cost budgeting
• Developers are hesitant due to large up-front infrastructure costs
• PID financing may reduce up-front costs and incentivize the development
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PID Formation and Governance
• Creation At the discretion of the Creating Entity
Requires consent of 100% of property owners and voters within the PID boundaries
• Creating Entity Best Practices Adopt standard policies for evaluating all PID requests in light of the
Creating Entity’s overall objectives
Engage legal counsel to represent the Creating Entity in negotiations with any property owner on a PID request, costs will be paid by the property owner and are not contingent on a successful PID creation
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Governing Document
• In addition to the statutory requirements, PIDs are governed by a Governing Document agreed to at the time of creation with the Creating Entity
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• The Governing Document may: Include limitations on the powers of the PID
Establish reporting requirements
Establish debt and mill rate levy limits
Incorporate other limitations in accordance with the Creating Entity’s policies and objectives
Governing Document, continued
• The Governing Document is enforced contractually through an Interlocal Agreement entered into between the Creating Entity and the PID
• Again here, the Creating Entity and the property owner will each be represented by counsel at the expense of the property owner
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Scenario #2 – Bridging Financing Gap
• Developer approaches city about a large scale development• City wants developer to build a park as part of the
development, but Developer does not have funds available to pay for the park on top of infrastructure costs
• City creates PID to finance the infrastructure at a lower cost and requires park be built as part of development
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Governance
• PIDs are governed by a board with members initially appointed by the Creating Entity
• Initial board members must be property owners or designated representatives of property owners
• The appointed board then transitions to an elected board as new electors reside or own property in the PID, as established by the Governing Document
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Bonds, PID Bonds
• PIDs may issue: Special Assessment Bonds General Obligation Bonds Limited Tax Bonds
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Limited Tax Bonds
• Limited Tax bonds: Not subject to a fair market value ratio prior to issuance Repaid from a limited ad valorem property tax Statutorily, this rate may not to exceed 15 mills A lower limit may be established by the Creating Entity
in the Governing Document or in the bond documents Must mature within 40 years of issuance
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Limited Tax Bonds, continued
• In the event the proceeds of the limited tax are insufficient to meet annual debt service as it comes due: Not an event of default Bondholder has no statutory remedy to require
additional taxes or fees of the PID No statutory recourse to the property or the
property owner
• Because of these risks, the statute limits sale of limited tax bonds to qualified institutional buyers or to be sold in denominations of $500,000
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Considerations for the Creating Entity in Drafting the Governing Document
• Keep in mind that the statute only establishes the outer limits of what a PID can do, greater limitations or requirements may be imposed by the Creating Entity
• Creating Entity may use the Governing Document to ensure that its policies and objectives will be met
• Creating Entity may limit the types of infrastructure a PID is allowed to finance
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Considerations for the Creating Entity in Drafting the Governing Document, continued
• Establish a mill rate limit appropriate to accomplish financing of approved improvements (will want to utilize financial advisor expertise here)
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• Establish Standards for:
Any general obligation bonding Procurement (including requirement of
third-party engineer certification for acquisitions of improvements by PID)
Transition to elected Board PID lifespan and dissolution if no
activity within a certain timeframe
• Creating Entity input into enhanced disclosure to future property owners within the PID
• Proper legal tax analysis over all Governing Document negotiations to ensure eligibility for desired tax-exempt financing and that the PID constitutes a “separate political subdivision” for tax purposes
• Ability to leverage with TIF, assessment, and other economic development revenues
• Interface with impact fees
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Considerations for the Creating Entity in Drafting the Governing Document, continued
Questions?
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THANK YOU
RANDALL LARSENDirect: 801.258.2722 / Mobile: 801.541.1108
AARON WADEDirect: 801.258.2730
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