Inland port prevails in Utah Supreme Court ruling

Justices reject Salt Lake City’s arguments that the facility’s establishment and revenue grab are unconstitutional.

(Francisco Kjolseth | The Salt Lake Tribune) Trucks carrying shipping containers move in and out of the Union Pacific intermodal terminal at a steady pace, west of Salt Lake City. Directly south is the future site of the transloading facility, which will be the heart of the inland port, as seen on Wednesday, Nov. 10, 2021.

After more than a year of deliberating, the Utah Supreme Court came out Wednesday with a decision on whether the inland port is unconstitutional and illegally siphoning up a portion of Salt Lake City’s revenue.

In short, the answer is no.

The justices determined formation of the port did not violate Utah law and tossed out the city’s financial claims, though they did leave the issue of tax revenue up for additional debate.

The Utah Legislature formed the inland port in 2018, taking advantage of a growing international airport, a Union Pacific rail hub and the relocation of the Utah State Prison — and its supporting infrastructure — all in close proximity. The port area covers around 16,000 acres. It includes portions of West Valley City and Magna, but the vast majority rests in Salt Lake City’s northwest quadrant, occupying about a fifth of the capital’s landmass.

Lawmakers required that the three impacted municipalities allow zoning for the port to operate in their boundaries. They mandated that the cities allow transportation and storage of “natural resources” — which some have interpreted to mean Utah-mined coal — on port land. They also allowed the Utah Port Authority, formed to manage the facility’s development, a portion of the property, sales and use taxes that cities would have collected in the port area.

What SLC argued

Salt Lake City sued the Utah Inland Port Authority and the state in 2019. The lawsuit alleged creation of the port violated the Utah Constitution in two ways:

• First, it treated the three impacted municipalities differently than other cities in the state, running afoul, Salt Lake City argued, of the clause governing uniform operation of laws.

• Second, the city asserted the inland port ran counter to the constitution’s “ripper clause,” which bars legislators from directing a city’s money, taxing authority or property to a “special commission, private corporation or association.”

A 3rd District judge threw out the lawsuit January 2020, and Salt Lake City appealed to the state’s high court, which listened to oral arguments for the case in April 2021.

In their 13-page opinion issued Wednesday, all five justices sided with the district court over the constitutionality of the inland port.

While formation of the port “clearly” created disparate treatment for three cities, Salt Lake City’s lawyers failed to make a case as to how zoning requirements for the port “is not rationally related to a legitimate legislative objective,” Associate Chief Justice Thomas Rex Lee wrote. As such, there was no violation of the uniform operation of laws clause.

“Economic studies underlying the [port’s creation] projected that an inland port could create thousands of jobs, develop natural resource extraction industries, and make Utah a bigger player in the global economy,” wrote Lee, who will be retiring from the court Thursday. “These are legitimate objectives.”

As for the ripper clause, the justices determined lawmakers had not delegated land use or zoning powers to the port authority and dismissed the city’s claims.

“Here the Legislature is not ‘entrusting’ [the port authority] with the task or responsibility of enacting certain zoning ordinances,” Lee wrote. “[It] requires that Salt Lake City, West Valley City, and Magna ‘allow’ an inland port.”

Some tax questions remain

Earlier this year, the Utah Legislature negotiated reforms to the inland port with Salt Lake City, which included a restructured board and greater control for the city over property tax revenue generated by the venture.

Under HB443, the city agreed to turn over 65% of its property tax revenue coming from the port, a figure that decreases over time. In exchange, the port authority is required to invest significant portions of that revenue into environmental controls, traffic mitigation and job creation.

As such, the Supreme Court questioned whether the city’s complaints over its tax authority were moot. It directed the parties to submit supplemental briefings explaining whether they believed this is the case.

Read the entire opinion below:

The port authority issued a brief statement hours after the court’s opinion became public, noting it was “pleased” with the outcome.

“[The Utah Inland Port Authority] is committed to future-proofing Utah’s link in the global supply chain,” the statement said, “modernizing logistics to safeguard Utah’s natural beauty and reduce risk, and improving quality of life by enhancing community livability.”

The Utah Attorney General’s Office, which litigated the case on behalf of the state, sent a news release late Wednesday night on behalf of lawmakers who lauded the decision.

“Today’s ruling reaffirms the legitimate statewide purpose of the inland port,” said Utah House Majority Leader Mike Schultz, R-Hooper, “and allows us to continue to work toward bringing the benefits of the port to the people of Utah.”

The attorney general’s office said it would comply with the court’s request for a supplemental briefing about the tax differential.

“I appreciate the Utah Supreme Court’s thorough review of this case,” said Sen. Jerry Stevenson, R-Layton, who is also a member of the new port authority board. “Our state has a tremendous opportunity to enhance the crossroads to the West as Salt Lake City has direct rail connections to all major West Coast terminals.”

Salt Lake City Mayor Erin Mendenhall and the City Council, meanwhile, issued a joint statement calling the court’s decision “deeply disappointing.”

“The Legislature should not be allowed to unilaterally change municipal land uses it does not agree with or redirect tax revenues that belong to cities,” they stated. “The purpose of Salt Lake City’s litigation was to emphasize the unique authority of cities in Utah to directly respond to the needs of local constituents.”

The city will continue to negotiate with the port authority to mitigate impacts from its development, the statement said. City officials are also considering their next steps and how to address the court’s requested briefings about the mootness of their tax revenue claim.

They have until Aug. 12 to file, a spokesperson for the mayor confirmed.

Port foes say to keep fighting

Deeda Seed, with the Stop the Polluting Port coalition and who has long opposed the project due to concerns about environmental and community impacts, urged Salt Lake City to continue exploring its legal options.

“We disagree with the opinion,” Seed said, “and are urging the city to continue to push back against the notion that the tax revenue issue is moot. It isn’t.”

She pointed to recent reporting that revealed no-bid contracts to build the port’s Intelligent Crossroads Network and its multimillion-dollar transloading facility, as well as the port authority’s opaque budget.

“The public doesn’t have information about how this tax revenue is being spent,” Seed said. “It’s not clear that the contract negotiations are going to result in a satisfactory resolution of the issues our city residents are concerned about.”