Utah lawmaker pitching $10M grant program to boost rural economies

(Trent Nelson | Tribune file photo) While Utah has one of the hottest economies in the country, much of rural Utah has been left behind in the areas of business expansion and job growth. A bill in the Legislature would plow $10 million annually into economic development projects pushed by rural counties. This Aug. 21, 2018, file photo shows a job fair hosted by Catholic Community Services at the Weigand Center in Salt Lake City.

During the 2020 legislative session, state leaders have repeatedly said that the current economy is the strongest in Utah’s history.

But that praise comes with an asterisk, because much of Utah’s commercial growth has been concentrated in urban areas with rural communities struggling to close the gap.

“We do have a tale of two economies in this state,” said Sen. Scott Sandall, R-Tremonton. “We have the Wasatch Front, and we have rural Utah.”

This year, Sandall is sponsoring SB95, legislation that would create a pair of taxpayer-supported grant programs for the state’s rural counties, totaling $10 million each year. Every qualifying county would receive at least $200,000, with the option to compete for up to $1 million that would go toward locally developed projects.

And with budgets tight after the collapse of December’s controversial tax reforms, the money to create SB95 would be taken from the remains of the Utah Science Technology and Research Initiative, or USTAR, an embattled and now-defunct business investment program that would be formally abolished from state law with the passage of Sandall’s legislation.

Sandall believes his proposal can succeed where other rural investment programs have failed because it empowers county governments to direct the use of funds toward their particular needs. And by splitting the funding into two grant pools, Sandall hopes to give a boost to projects both large and quite small.

“This is honestly about trying to create one, two, five or 10 jobs in towns where that may be a third of their workforce,” he said.

Out with the old

Sandall is quick to point out that he sees his grant program and USTAR as distinct, unrelated programs.

But his request for $10 million would undoubtedly face a steeper climb on Capitol Hill if not for the roughly $14 million in USTAR funding that is currently parked in a restricted account on the state’s books.

“We put a pause button on USTAR,” Sandall said.

Created in 2006 and pushed by then-Gov. Jon Huntsman, USTAR was intended to help university researchers turn their academic work into profit-generating businesses, with hundreds of millions of taxpayer dollars spent on facility construction, talent recruitment and commercialization.

But cracks began to appear with the release of a scathing legislative audit in 2013 that found the program had inflated its job and revenue numbers. The program went through a turnover in its leadership and was restructured to focus on investments in startup businesses but never regained its luster in the eyes of lawmakers.

“Quite honestly, the state is really poor at picking winners,” Sandall said. “If venture capital can’t pick it, the state’s in a worse spot at picking which technologies can actually come to fruition.”

Val Hale, executive director of the Governor’s Office of Economic Development, or GOED, said USTAR was “doomed right from the beginning.” The program was pitched to lawmakers as a job creator, he said, when in reality it required long-term investment in uncertain private ventures.

“A lot of legislators were looking for the results much sooner than when they ever would have materialized,” he said.

Every state is struggling to find ways to support and bolster rural communities, Hale said, with no one yet finding “a silver bullet.”

But he praised Sandall’s approach for allowing rural counties to identify their own approaches to economic development, whether that be a focus on tourism and amenities in one area or employer incentives in another.

“That’s the beauty of it, they can identify their own need and then submit a grant proposal to address those needs,” Hale said. “I think at the end of the day, the bill will accomplish a lot of what [Sandall] is hoping to do.”

Last week, the Senate Economic Development and Workforce Services Committee voted unanimously to recommend SB95 to the full Senate.

But the ghost of USTAR lingered over that hearing, with Sen. Karen Mayne, D-West Valley City, asking who would have ultimate oversight — and accountability — over the grants, and how lawmakers could be sure the money is spent on worthwhile efforts.

“We want to make sure that those dollars generate jobs,” she said.

In with the new

Under Sandall’s proposal, the economic development grants would be available to any county of the third class or smaller, which excludes the Wasatch Front counties Cache, Weber, Davis, Salt Lake and Utah, as well as Washington County in the southwest corner of the state.

To qualify for the first pool of grant funding, counties must create an economic development advisory board to develop and submit plans and must commit to matching a percentage of their state funding, with larger counties required to meet a higher matching threshold.

The second pool of grant funding would be competitive, with the proposals screened by the Governor’s Rural Partnership Board and ultimately approved by the GOED executive director, who would also be responsible for reporting back to the Legislature.

“If you have a larger ask and you have a bigger project," Sandall said, "bring that to the other pool of money and compete for the other $5 million that’s there.”

But Sandall’s bill also ends a number of preexisting economic initiatives, such as the Rural Fast Track grant and enterprise zones, which offer post-performance tax breaks for development in designated areas.

Lincoln Shurtz, director of government affairs for the Utah Association of Counties, said there was initially some concern among association members regarding the end of enterprise zones. But the organization voted to support SB95 this week, Shurtz said, in part because Sandall agreed to delay the expiration of those tax credits for three years.

And while the bill excludes Utah’s urban counties, Shurtz said there are other resources available to those communities that typically do not reach the more rural portions of the state.

“We love the block grant idea," he said, “and thought this was a nice way to bridge and get us to that place.”

The bill also has the added quirk of improving the state’s budgetary position. Because its $10 million price tag is cheaper than the $14 million that would otherwise go to USTAR — and with additional savings to the state from ending other initiatives — Sandall says his legislation can repurpose economic development funding to a more effective effort while freeing up several million dollars of general fund revenue each year.

“The fiscal note on it is quite complex, but it’s positive,” Sandall said. “We don’t see many fiscal notes that are this big and this positive.”

Editor’s note • Jon Huntsman is a brother of Paul Huntsman, owner and publisher of The Salt Lake Tribune.