Legislators reject possible state takeover of UTA because of its heavy debt

(Rick Egan | Tribune file photo) A UTA bus in downtown Salt Lake City on Sept. 24, 2020. Legislators are discarding the idea of a state takeover of UTA after a study says that assuming the agency's $2 billion in debt could ruin the state's credit rating.

A couple years ago when state legislators were upset with scandals, exorbitant executive salaries and high debt at the Utah Transit Authority, they ordered a study on whether the state should take over UTA — perhaps as part of the Department of Transportation.

They heard results of that study on Wednesday and quickly agreed that a merger is a bad idea — mostly because absorbing UTA’s $2 billion in debt would likely ruin the state’s credit rating.

Lawmakers also said that the restructuring of UTA ordered two years ago — plus the departure of virtually all top UTA officials who had been involved in earlier controversies — has resulted in an agency that now seems to be working well without the need of more state intervention.

“There’s too many things that are obstacles” to making UTA a state entity, said Rep. Kay Christofferson, R-Lehi, co-chair of the Legislature’s Transportation Interim Committee.

“I don’t see any good reasons to do it,” added Rep. Marsha Judkins, R-Provo.

Senate Minority Leader Karen Mayne, D-West Valley City, said UTA “needs to stand alone. It’s different. It’s complex. And to move it in in any other place, it would be a catastrophe.”

The major finding in the study that caused lawmakers the most heartburn was how a state takeover of UTA’s $2 billion in debt — incurred to build its train system — would hurt the state government’s now-perfect AAA bond rating.

“It is estimated that it would it would knock us down to maybe AA-plus,” said Lyle McMillan, strategic investments director for the Utah Department of Transportation.

Because school districts, colleges and other entities essentially use the state’s credit rating for much of their own borrowing, he said the downgrade could cost Utah taxpayers millions of dollars a year — and leave the state on the hook for any UTA default.

“With that single issue, I think [UTA] is not something we can move into a state agency,” said Sen. Gregg Buxton, R-Roy.

Rep. Raymond Ward, R-Bountiful, added that UTA “has taken on debt in a way that’s different than the remainder of the state … in a way that investors regard as more risky,” so the state should not rush to absorb it.

UTA Board Chair Carlton Christensen said his agency’s bond rating is a AA-minus, which he said is similar to some counties and cities in the state. He said the agency is in a stable situation to make payments on its $2 billion in debt, now scheduled to be paid off in 2042.

UTA plans to spend $143.8 million on debt payments next year, compared to $326.5 million for transit operations. That means $1 of every $3 that UTA will spend in those areas goes to cover debt.

The study also found myriad other obstacles to a state takeover.

“The current UTA capital improvement program anticipates the need for $71 million dollars in new debt through fiscal year 2024,” McMillan said, adding the state would need to handle that with a takeover, complicating plans for other state projects.

He said volatility in UTA ridership — it dropped 60% when the pandemic hit — also creates financial risks for the state.

McMillan added that a takeover could complicate federal grants, thousands of contracts, collective bargaining with UTA’s labor unions and other issues.

Sen. Wayne Harper, R-Taylorsville, also a co-chair of the legislative committee, said with the issues found by the study, it would be wise to allow the restructured UTA to continue operating independently.

That earlier overhaul disbanded a part-time, 16-member board that had overseen UTA and replaced it with a full-time, three-member commission appointed by the governor. It eliminated UTA’s legal department, and ordered representation by the Utah Attorney General’s Office. And the past high-salary CEO position was eliminated and replaced by a new executive director slot at much lower pay and without exorbitant bonuses.

" I am very pleased with the changes that I am seeing," Harper said.

Christensen, who became the UTA Board chairman amid restructuring two years ago, said, “We feel like we’re in a good place and the negatives don’t outweigh the positives of staying the course. We’d request that you continue to give us the opportunity to continue to improve our organization.”

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