Audit knocks Utah Inland Port Authority for its no-bid contracts

The port’s new leadership should ensure the agency has better transparency with its use of public funds, according to report.

(Francisco Kjolseth | The Salt Lake Tribune) Trucks carrying shipping containers move in and out of the Union Pacific intermodal terminal in the jurisdictional area of the Utah Inland Port, as seen on Wednesday, Nov. 10, 2021.

The Utah Inland Port Authority needs better planning and transparency of its spending, according to a limited audit presented to lawmakers Tuesday.

When the Legislature created the port authority in 2018, they made it exempt from many of the rules other state agencies must follow. That includes the contract procurement process. The port authority overly relied on this exception, according to the audit.

The Salt Lake Tribune previously reported on some of the port’s no-bid contracts, including a multimillion-dollar agreement with QuayChain, an obscure California company that has few credentials other than its business ties to the previous port director. Two Utah real estate firms were also handed a 30-year deal for a proposed transloading hub, with the port shelling out millions to lease the ground and pay the contractors to build the facility. The site remains a vacant lot, but the port has paid rent on it since January 2021.

The port authority has issued 43 contracts to date with 29 vendors, according to the audit. A whopping 81% of those agreements never went out for bid.

“This reduces transparency,” the audit report added, “and can foster an environment where public resources are not adequately safeguarded.”

More deals with hefty price tags come to light

The port authority’s revenue comes from legislative appropriations and property taxes collected within the port area, which mostly lies in Salt Lake City’s northwest quadrant. It also secured up to $150 million in bonds after forming a public infrastructure district last year.

The port authority’s budgets are vague, offering few clues as to where all its public funds are funneled. But the audit called out at least two previously unknown deals.

Just over $8 million went to a lease-to-own payment for the “Stadler Rail test track.” No further detail about this project was included in the report. The test track is a rail spur south of Interstate 80 and west of 5600 West that the port authority wants “for expanding rail access to manufacturers south of I-80 and [to] enhance rail circulation in the area,” according to a person contracted to handle the port’s PR.

The port authority also inked a $10 million contract with “NWQ, LLC” to build a road at 700 North. Road projects are typically funded by developers, the audit observed. The port authority has paid $4.6 million on this agreement so far.

“We reviewed available documents to understand why [the port authority] is paying the entire bill for the road construction,” the audit report noted. “We were not able to get sufficient evidence to make a determination.”

Other big-ticket items listed in the report include $2.4 million spent to lease the vacant transloading site and $500,000 paid to build out an IT network.

“While these decisions may prove to be prudent,” the audit report said, “we are concerned about significant financial commitments being made with public funds before a master development plan is developed and all options are considered.”

QuayChain has exceeded its $2 million no-bid contract by $1.7 million, and the report’s auditors raised questions about the relationship between the company’s CEO and the port’s previous executive director, Jack Hedge.

“This contract is a prime example of the necessity of board oversight and contract review,” the audit report added. “... A fundamental concern for engaging in sole source contracts is that decisions about how or why certain companies were hired can be difficult to defend.”

The audit further dinged the port for its lack of timelines, measurements and adequate accountability with its contractors.

Efforts to improve oversight

Despite all its deals and spending, the port authority has few accomplishments or projects of note.

An apparent frustration with the lack of movement at the port prompted lawmakers to shake up the authority earlier this year. A retooled and streamlined board was sworn in this spring. Members immediately commissioned the legislative audit. They also hired Ben Hart as the new executive director.

Most of the audit’s findings likely came as no surprise to the port’s new leadership, which has already implemented many of its recommendations.

The board has become more involved in the procurement process, for example, placing many of the port authority’s big spending projects on hold and updating policies. Hart vowed to complete a master plan to better guide investments moving forward. The board also formed an audit committee this month to improve internal controls.

“We’re dedicated to building an organization that has the public trust,” Hart told lawmakers at a Legislative Audit Subcommittee Tuesday.

Most of the port authority’s sole-source contracts will be “expired or terminated” by the end of the month, Hart said, although he clarified that the authority was not able to renegotiate any signed lease agreements. Work with QuayChain was on “pause” instead of outright canceled, Hart added, noting the port authority has only paid that company $2 million to date.

A contract for “environmental services” that cost less than $25,000 will also stand.

In a statement released Tuesday afternoon, the port authority thanked the Office of the Legislative Auditor General for its recommendations, adding that staff supported the review.

“We’re grateful for this audit,” Hart said in the statement, “and its part in making substantial updates to [the port authority’s] organizational policies and procedures.”

Read the full limited audit report below: