Inland port is cashing in on Salt Lake City’s building boom

Audit shows surge in property tax revenue and tighter procurement policy bolstered the port authority’s coffers.

(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.

The Utah Inland Port Authority is raking in a whole lot of property tax from all the warehouses popping up in Salt Lake City’s west side.

Reports released by the Office of the State Auditor provide insight into the port authority’s finances and contracts during the 2023 fiscal year, which started in July of 2022 and ended in June. It’s saving boatloads of money from canceled no-bid contracts that auditors previously deemed problematic. It’s still shelling out millions on land leases it can’t get out of or find a use for. And it amassed a whopping $15.6 million in property tax differential, up from $6 million the year before.

All that tax revenue came from its Salt Lake County jurisdictional area, which mostly lies in Utah’s capital city. The port authority has yet to collect funds from all its other port projects around the state, in communities like Box Elder, Tooele and Juab counties, confirmed executive director Ben Hart.

“These audits are critical to restoring public trust,” Hart said, “and also giving ourselves guidance as to where we want to take the port and ensure it’s in a good place financially.”

But the port’s control over tax in a jurisdictional footprint that covers 16,000 acres has long been a sore spot for Salt Lake City. The city filed a lawsuit over the port authority’s creation in 2019 and renegotiated the terms of tax differential collection with lawmakers in 2022.

Hart said the many sprawling distribution warehouses constructed in the months since have been good for the port authority’s bank account, since development increases property values, which generates more taxes. But it hasn’t exactly been a boon for Salt Lake City’s residents.

“Most of that is trucks and warehouses that are not doing good things for economy or the environment,” Hart said.

The warehouses bring low-wage drops and increased truck traffic that spews more emissions in west side neighborhoods, Hart acknowledged. He said he wants to “reposition” the tax differential windfall to shift that trend.

Under agreements with Salt Lake City leaders, the port authority must invest 80% of the tax it collects into mitigating environmental and community harms spurred by port development.

Unraveling a ‘boondoggle’

The Utah Inland Port Authority is a quasi-governmental institution the Legislature formed in 2018. It is not subject to the public procurement process required by other state agencies.

Lawmakers restructured the Inland Port Authority’s leadership in 2022 after a slew of no-bid contracts led to a lot of spending with little to show for it. The new port authority board, along with Hart, developed stronger policies in response.

“After a legislative audit came out in fall of last year, it pointed to some procurement issues,” said Benn Buys, the port authority’s chief financial officer. “So we canceled several contracts.”

The move meant spending on “professional services” dropped from $3.1 million in 2022 to $1.5 million in 2023.

One of the vendors, a company called Quaychain, was supposed to build an “Intelligent Crossroads Network” in the port, which was essentially a bunch of cameras using AI to track freight. The company’s CEO had business ties to the port authority’s previous director. Quaychain sued the port authority in July for $8 million over its canceled contract. The port authority has since countersued, claiming it paid Quaychain $2 million over the course of the contract and has little to show for it.

“No way are we going to ... pay money to an operation we had significant concerns with,” Hart said.

Still, the state auditor dinged the port authority Thursday for not going far enough in tightening its overhauled procurement rules. The policy includes loopholes for “very specialized or confidential services” and its guidance is not as comprehensive as other state agencies.

The port also remains entangled in several large land leases it can’t rescind. The audit notes a $8 million payment for an eight-acre “railroad test track” lease with a term of 99 years, signed in December 2021. Previous leadership approved the payment, Buys said, and meant for it to provide rail access to the Copper Crossing industrial warehouse park near Interstate 80.

“At end of the day, having more rail in the northwest quadrant is exactly what we’re going for,” Hart said. “We’re trying to take trucks off the road. Ultimately, we want less pollution in the air.”

The port authority continues to pay up to $155,000 per month for an old livestock feed warehouse and associated 23-acre parking lot for a term of 10 years, although a temporary tenant pays $59,445 a month through a sublease that expires in February.

The port authority also has a 30-year lease with developers the Boyer Co. and Gardner Batt for a 42-acre vacant lot at 1100 South and 5600 West. Previous port leadership intended to build a train-to-truck cargo transloading facility on the property, but those plans were abandoned.

The port authority still pays $147,757 a month for the property, which increases by 2% each year.

“We’d like to do something that makes it not a boondoggle,” Buys said. “We’re hoping we can put something there that’s beneficial for the community and helps us completely pay for that lease.”

The only property the port authority actively uses — its downtown office space in Salt Lake City — costs $17,088 a month.

The port authority’s biggest ticket item was supposed to be the purchase of the North Temple Landfill from the Utah State Trust Lands Administration for $31 million, along with associated cleanup. That deal has since fallen through. Hart declined to say why.

Editor’s note 11 a.m., Jan. 24, 2024: This story has been updated to clarify developers associated with the port authority’s leases.