It’s no secret that real estate developers dominate the Utah Legislature.
The House speaker, Senate president, House majority leader and nearly one out of every five lawmakers in the body are, in one way or another, involved in real estate development. So when developers want something from the Legislature, they get it.
Even with that context, though, a bill that popped out Friday evening — SB295, sponsored by Sen. Dan McCay, a real estate lawyer in his daily life — is a true jaw-dropper.
In essence, the bill would let a developer or group of developers become their own government, issuing bonds to pay for infrastructure projects — like sewer lines or roads — and then levying taxes on residents to pay them off.
Furthermore, it would give developers the power of eminent domain — letting them force property owners to relinquish land in exchange for compensation.
The developers like it, obviously, because it would be far, far cheaper way to finance their projects than getting more traditional financing from a bank.
Initially, these new entities were referred to as “Developer-led Infrastructure Districts,” but apparently putting “Developer” in the name was a little too on-the-nose, so they have been rebranded as Dedicated Infrastructure Districts.
What’s missing, though, is any form of oversight by elected officials and accountability to the taxpayers who would be on the hook for repaying the debt. These developers would be able to call their own shots.
It’s never been done before — not just in Utah, we’re talking anywhere in the United States, and it poses real problems.
Cameron Diehl, executive director of the Utah League of Cities and Towns, told senators Monday morning that Utah has never given taxing authority to unelected individuals or entities because, at the end of the day, elected officials — like them or not — have to answer to voters.
“It really comes down to this fundamental question: Do you, as a state, want to allow the creation of a political subdivision without elected officials that will have control over property tax?” he said.
Naturally, the developers want to allow that creation.
“It’s absolutely critical to do this,” said Chris Gamvroulas, president of Ivory Development, who was among the developers who spoke in favor of the bill as it received committee approval Monday morning. His proof that developers need this new taxing power was that they brought a bill to the Legislature.
While these DIDs are being sold to lawmakers as a means of increasing housing affordability, nothing in the bill requires the homes built to be affordable.
Giving developers the power to condemn property would be a radical delegation of power — although McCay told me the inclusion of that provision was an oversight and he plans to remove the language that grants that authority.
That aside, there are already other, similar financing tools available to developers. The Legislature created similar infrastructure financing programs in the past. Public Infrastructure Districts, or PIDs, for example, are special service districts used by communities to finance parks and roads in a new community.
But the key distinction is that PIDs are overseen by boards made up of individuals elected by the taxpayers in the districts where the projects are built. These DIDS do not.
There’s also a legitimate question as to whether the DIDs are even allowed under Utah’s Constitution. A provision known as The Ripper Clause prohibits the Legislature from delegating the power to levy taxes or to perform municipal functions to any private corporation or association.
Generally speaking, these provisions, which are in numerous state constitutions, are intended to ensure that the power to tax or run public functions like police or fire services is not simply handed over to unaccountable private interests. It goes to the heart of the notion of “No taxation without representation.”
But, assuming for the time being that it is legal, SB295 is still a major change and an unprecedented delegation of power that has been rolled out on a Friday and rushed through the Legislature at breakneck speed.
Why? I suppose the answer to that is because it’s something developers want.
And as we’ve seen over and over, what developers want, developers get — even if it isn’t necessarily in the best interest of cities, counties or even taxpayers.
Editor’s Note: Feb. 28, 3 p.m. • This story has been updated to show that SB295, as it is currently written, would also give developers eminent domain powers.
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