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SALT LAKE CITY — The Utah Inland Port Authority, created by the Utah Legislature in 2018, has seen accelerated growth in the past year, rolling out 10 separate project areas across Utah since April 2023 to total over 95,000 acres.
Before a meeting on Sept. 5, the port authority's executive director, Ben Hart, addressed criticism that has been levied against the agency and its flagship project area, the Northwest Quadrant — a 16,000-acre zone extending from the Salt Lake City International Airport to the shores of the Great Salt Lake.
About 1.9 million square feet in the area is under construction, according to Stephen Smith, a project area development vice president for the agency.
"We're talking about tax dollars being redirected away from school districts, away from cities and away from counties and other governments that provide services that are critical to our citizens," Hart said. "Even though I've been doing this my whole career, the burden of the Northwest Quadrant tax increment is something that weighs very heavily on me; it's something that keeps me up at night."
Tax increment financing, also called a tax differential, is a tool that's used by land use authorities across the state, including Point of the Mountain, the Military Installation Development Authority and the Utah Inland Port Authority.
Benn Buys, the chief financial officer at the port authority, told the board he wanted to address "misinformation and lies" related to the authority's funding mechanisms. "The use of (tax increment financing) is not unique," Buys said, finding at least 236 different entities within the state using the same framework.
Hart said that 87% of that tax increment financing occurs along the Wasatch Front, with 62% of it in Salt Lake County.
Hart sees port authority project areas spreading these tools to benefit more rural areas of the state, like the newly proposed project area across Sanpete, Sevier, and Wayne counties that was introduced to the board as the potential 12th project.
It works by freezing the tax values of an area at their current levels for a period of time, commonly 20 to 30 years, and borrowing against any expected increase in property tax revenue. The proceeds from the sale of bonds are then used to jumpstart development that, ideally, would not have occurred otherwise.
This is currently the inland port's primary tool but is speculative in nature. Finance professor Andra Ghent from the University of Utah says this financing method must balance the questions — is this project a public good and would it develop without the financing?
Both answers must be in the affirmative for the agency to use tax differential per statute.
"We're counting on the growth of the project area, resulting in buildings being built, property taxes being paid, and us getting that property tax will be turned over to the public infrastructure district to pay the bonds," Buys told KSL.com
In each project area, the port authority creates a public infrastructure district, which is a separate government entity. "(The district) will bond off those future revenues in order to get the money upfront to put in that public infrastructure, and then enables the development to occur," Buys said.
Incentives in the form of rebates on the tax differential can also be used to entice new businesses.
The bonds offered by these public infrastructure districts set up by the port authority are unrated, as opposed to triple-A rated bonds issued by the state. At a time when interest rates are high, the bonds come with 6% to 7% interest, due to the uncertainty attached.
Two different members of the public expressed concern that the board was moving too fast at a time when interest rates were high. "Haste makes waste," a former DuPont executive, Craig Wallentine, said.
"There is a reality that if the (Federal Reserve) drops interest rates by a full percent or something over the next six months, then we could probably get lower interest rates," Hart told KSL.com. "But how long do you wait? It's kind of the never-ending death cycle."
Hart said that the market is all speculative, and "you've got to pull the trigger at some point." Ghent supported this, saying that in these types of bonding situations, the interest rate is more or less "baked in."
In August, at a meeting with the State Finance Review Commission, which was created by the Legislature in 2022, it was explained that these bonds would almost definitely be sold to large institutional investors.
"The liability begins and ends with the public infrastructure district," Hart said in an interview. "If there's a shortfall, and they can't make the payments, it doesn't come back to us, it doesn't come back to the local community, it doesn't go back to the state."
The review commission does not have any power to approve bonds proposed by the inland port, but state finance experts review the deals for an extra level of oversight.
Worst case scenario, according to Hart, "The bondholder is gonna take that loss, which is why you're going to see a little bit higher interest rates in one of these bonds compared to what you see in a general obligation bond that the city or the state may issue."
At the Sept. 5 board meeting, an interlocal tax-sharing agreement was approved between the Tooele Valley Public Infrastructure District and the port authority. Lasting 50 years, it dictates that 75% of any increase in tax revenue will go toward the district, and 25% will go back to the port authority. The district will use that money to build infrastructure to support and encourage development in the project area.
An unusual feature of this project area, however, is that Tooele Valley signed an agreement with the project developers GSL Industrial and Zenith Bolinder.
"Because this area is so far from the other county infrastructure, the county has entered into an agreement with the developer that they would own and maintain that infrastructure," Buys said.
"The county and the infrastructure district made that agreement before we even knew they were in talks to do it, frankly," director Hart told KSL.com. "We didn't know they were going to do it. It doesn't impact our financing, and it's probably the only time we're going to see a situation like that in our project areas."
Deeda Seed, a campaigner for the Center for Biological Diversity, expressed concerns about the board's perceived speed of approving new project areas.
"It is not obvious Tooele should be engaged in fast-track industrial development," Seed later told KSL.com, "in an area with significant water challenges that have not been adequately studied."
Regarding the terms of the Tooele Valley infrastructure district agreement, she said, "I think fiscal conservatives are going to be really upset when they hear about this."
Hart told the board and public that the port authority is developing projects "in a very deliberate and very targeted way to make sure what we were doing was in the best interest of those respective communities."
"We're not going to go into realms where we're seen as using money frivolously and wastefully," he said.
Correction: An earlier version misspelled Bolinder as Bolander.
