The battle between Salt Lake City and the state of Utah for control over a large swath of land on the city’s northwest side made its way to the state’s highest court on Wednesday.
With the site slated to become a lucrative international trading hub, the case asks, who has the power to decide how tax revenues raised there are spent, and who sets the rules for how the land is used?
A district court judge ruled in favor of the state early last year, affirming the power of the Utah Inland Port Authority Board over an area that makes up roughly one-fifth of the capital city’s land. The city appealed that decision to the Utah Supreme Court, and used the 90-minute virtual hearing on Wednesday to make its case again that the state violated the Utah Constitution when it created the inland port through legislation in 2018.
Salt Lake City’s legal argument hinges largely on a one-sentence provision in the state constitution known as the Ripper Clause.
That section, Article VI, Section 28, prohibits the Legislature from delegating “to any special commission, private corporation or association” the power to “make, supervise or interfere with municipal improvement, money, property or effects,” to levy taxes or to “perform any municipal functions.”
That’s exactly what the state has done here, senior Salt Lake City attorney Samantha Slark said during the arguments Wednesday.
The bill creating the inland port “delegates the power to spend the city’s municipal moneys to an unelected and unaccountable board,” Slark said. “And it directs the city what zoning it must adopt and what land uses it must permit for one-fifth of its geographic area.”
The port authority board has 11 members who are appointed by other groups, from Salt Lake County to the Utah Senate and House.
The state pushed back on claims that the port authority board, created to oversee development of private land in the project area, is a special commission and that it interferes with municipal funds or land to conduct city functions.
“The authority is primarily a coordinator, a planner, a developer, getting stakeholders to work together; it doesn’t have sort of raw legislative power to impose its will on the city,” said Stanford Purser, deputy solicitor general, on behalf of the state, governor’s office and attorney general’s office. “On city lands and on private property, they’re all still subject to city ordinances.”
One of the major lines of questioning among the justices on Wednesday came as Evan Strassberg, an attorney for the inland port, questioned whether the state was interfering with municipal money under the Ripper Clause.
He argued that the city didn’t have any claim to the richer flow of tax dollars that will be raised from the site once it’s developed, and that the state has the power to “redirect” those funds before they reach the city. Through legislation, the inland port claims 75% of future property tax dollars.
Slark pushed back, contending that such a reading of municipal funds would “eviscerate” the protections in the Ripper Clause.
“You have to look at the character of the fund as who gets to raise them,” she argued. “And who is the only person that’s allowed to do that here? The Utah Constitution says the only person that can raise these property and sales and use tax moneys that are being delegated is the municipality.”
Chief Justice Matthew Durrant also questioned the state’s argument, saying that it seemed to be contending “that there’s no such thing as municipal funds.”
Justice Paige Petersen noted that the city had levied and raised the tax and would have received those tax dollars if not for the legislation creating the inland port.
“The act says, you know, we know this is going to be developed,” she said. “The tax money, the property tax value, is going to increase dramatically and that increase, you don’t get to keep it. It’s going to the authority. How is that not municipal money?”
“Your argument has to be more than well, it’s not their money anymore because we took it from them,” she added. “Because that’s the whole question before us, is can you do that?”
Strassberg told the justices that his stance relies on past rulings, though he conceded that it was unclear when money would cross the line into becoming “municipal funds.”
“I don’t think there’s been a case where this court has held that the state is not empowered to redirect funds raised by taxation for some other purpose,” he said. “I can’t necessarily say at what point it becomes their money. But it’s not simply by levying, collecting, assessing the tax.”
Local losses fuel a statewide benefit
Attorneys for the state also contend that the port authority does not fulfill a municipal purpose because the project will have statewide benefits.
But that point put them on the defensive as justices asked them to explain why city residents were being forced to bear the brunt of the port’s creation.
“There is a fair part of this that feels like there is now an entity that is not directly accountable to the electorate that is spending tax money that is only raised from the electorate in a particular area,” said Justice Constandinos Himonas. “And I will tell you that is perhaps the most troubling aspect of all of this to me.”
If there’s a statewide benefit, he asked, why not make the whole state pay for it?
Justices also questioned why Salt Lake City residents had no choice about whether to participate in an inland port, while elected officials who represent future, yet-to-be-selected locations for satellite ports would have the option to opt in. Because of that difference, Salt Lake City argues it is not being treated equally to other municipalities.
The land in Salt Lake City “is really a unique strategic location that has long been identified as a prime spot for the inland port and it’s the city’s proximity to this that creates the classification,” Purser responded.
“But there is no disparate treatment,” Purser added. “All cities that are part of the area jurisdictional land are treated the same and cities that are not part of that land are treated the same.”
It’s unclear when the justices will rule, though both sides have expressed hope in the past for a speedy conclusion to the consequential questions raised in the lawsuit.
Port leaders continue to work to get the distribution hub project off the ground. But Inland Port Executive Director Jack Hedge noted in an interview last year that legal challenges generally pose an obstacle for development.
“Uncertainty is always a bad thing and I think uncertainty creates issues, creates questions, and capital and investment and expansion like to go where the more certainty the better,” he said.
City leaders remain concerned about the loss of tax revenue. And they also worry that another judgment against them could set a dangerous precedent not only for Salt Lake City but for municipalities across the state.
Salt Lake City Mayor Erin Mendenhall, who took office shortly before the district court judge ruled against the city and who chose to appeal the decision to the Supreme Court, has said the case could have “a permanent impact on our city, and on cities throughout Utah.”
Her predecessor, former Salt Lake City Mayor Jackie Biskupski, who brought the lawsuit, put it more bluntly. An unfavorable ruling, she has said, could empower the state to “go into any community and decide to draw lines around a certain territory of that city, whether it’s developed or not developed.”