Boon for growth or ‘double tax’ on residents? Hurricane council divided on public infrastructure districts

Stock image, St. George News

HURRICANE —The Hurricane City Council is divided over its approach to a new funding mechanism aimed at easing infrastructure costs for builders known as a public infrastructure district – or PID. 

L-R: Hurricane City Council members Dave Sanders, Nanette Billings and Joseph Prete at their December 2019 swearing-in ceremony, Hurricane, Utah, Dec. 19, 2019 | Photo by Chris Reed, St. George News

Four PIDs have already been approved in Hurricane. Five more are waiting in the wings for City Council approval, and members Nanette Billings and Joseph Prete are sounding the alarm. Billings and Prete told St. George News they believe PIDs are unfair and rife for abuse, and it’s their hope that city government will take a deep breath and inform themselves on how PIDs are working – or not working – locally and in other states before approving more. 

A public infrastructure district is a designated area of a city where a landowner undertaking development can obtain what in essence is a low-interest bank loan to defray infrastructure costs, such as for the creation of streets and sidewalks and providing access to water, electricity and sewage systems. The creation of a PID must be authorized by the area’s city council. Once a council approves a PID, it retains the status into perpetuity.

After approval, a PID board is formed to oversee the district, generally consisting of the developers and local business owners with an interest in the completion of a project, be it residential, commercial or mixed-use. The PID board reaches out to a special district group, a subsidiary of a lending or investment firm, with a request for money to cover a portion or all of the infrastructure the project demands.

That money, often in the millions of dollars, comes in the form of bonds issued to the city to be used exclusively for the creation of infrastructure within the PID. The bond money is not repaid by the developer or the city but instead by eventual homebuyers.

If a housing development falls into a PID, future residents will repay the bond money via installments over the course of as much as 30-40 years, depending on the size of the bonds involved. The amount paid is calculated based on a percentage of a home’s value and collected as an annual assessment in conjunction with property taxes.

Every project is different, but roughly speaking it’s possible for someone who pays $2,000 in property taxes to be assessed an extra $1,000 per year. If a homeowner in a PID fails to pay, the special interest district can foreclose on their home.

The creation of public infrastructure districts in Utah was made possible by the passage of SB 228 in the 2019 state Legislature. The bill was authored by Sen. Dan McKay and championed by proponents like investment bank Piper Sandler. Piper Sandler announced in November that its subsidiary special district group has secured $331 million in financing for new public infrastructure districts in the state. 

Recently, the Southern Utah community of Ivins narrowly approved a PID to help fund the construction of the Black Desert Resort at Entrada.

Hurricane’s four PIDs were approved this past spring by a 3-2 vote, with Billings and Prete voting no. 

While PIDs are new, Billings told St. George News she has done her due diligence. After four hours of city meetings on PIDS, four hours of independent research on the subject and a two-hour phone call with McKay, she feels she understands them. And she doesn’t like them. 

“If developers want to develop, they may the traditional way, with them having skin in the game – not at the expense of future unbeknownst homeowners,” she said. “The PID process eliminates developer’s risk. All the costs are passed to the consumers.” 

The Gateway at Sand Hollow 

At its April 15 meeting, the Hurricane City Council was asked to approve the creation of a bundle of three PIDs, each relating to a largely residential project called the Gateway at Sand Hollow. Combined, the three districts represent 2,300 acres of land south of state Route 9 and extending to the northern border of the Dixie Springs housing development. 

This map shows public infrastructure districts 1 (green), 2 (red) and 3 (blue) for Gateway at Sand Hollow | Image by St. George News | Click to enlarge

Proponents of PIDs say the Gateway PID is a boon to the city. Bond money will allow for large-scale infrastructure projects to be undertaken expeditiously, rather than piecemeal infrastructure being put here and there throughout an undeveloped part of the city, and developers have expressed their intent to put in amenities that can be enjoyed by all city residents like parks and hiking trails.  

At the April 15 meeting, Gateway spokesperson Brent Mosey, co-owner of The Beach at Sand Hollow, spoke in favor of the PIDs. Billings and Prete, in turn, voiced their concerns about PIDs. Discussion was followed by a public hearing at which no one spoke.

Council held three separate votes and ultimately approved The Gateway at Sand Hollow Public Infrastructure Districts 1, 2 and 3. In each case, Billings and Prete cast dissenting votes.

Residents of The Gateway will have their property tax increased by 4.5 mills, which is the equivalent of $4.50 for every $1,000 of their homes’ assessed values.

The Coral Junction Public Infrastructure District 

At the May 20 City Council meeting, members were again asked to approve a PID, in this case the creation of the Coral Junction Public Infrastructure District. The PID differs from those at the Gateway at Sand Hollow in that it will be used to fund infrastructure for a site that is solely commercial: a 38-acre parcel located between Foothills Canyon Drive and Interstate 15.

Approximately 15.7 acres of the land is the future site of the Coral Junction motor coach and RV lodge. It will feature 120 oversized pads and 40 units in an associated airstream park. A hotel, retail shop and a multipurpose venue are being discussed for the remaining portion of the land. Much of the infrastructure costs stem from mass grading and a storm drain plan required for the project.

Following discussion, City  Council approved the institution of the Coral Junction Public Infrastructure District. Billings and Prete cast “nay” votes.

A fast-moving trend

A bundle of three PIDs is currently undergoing review by city staff and legal council. Billings said staff has been asked to look into a funding method for the PIDs in question – and others in process – that is similar to a PID but has a larger measure of transparency. Billings said she prefers the alternative mechanism, as it mandates that each homeowner pay their portion of infrastructure bond debt all at once.

She said when facing an immediate lump sum, say of $25,000, in bond money at closing, it’s more likely potential homeowners will expect a break in the price of their home reflecting the developers’ savings.

If the three potential PIDs in question – Sand Hollow Mesa Public Infrastructure Districts 1, 2 and 3 – are approved, Prete said it would “potentially put most of the development on the south end of town under PIDs.”

Other pending bids include the creation of the Bench Lake Public Infrastructure District and the Kaachina Ridge Public Infrastructure District.

After the passage of the city’s first four PIDs, Prete decided it was time to put his reservations on paper. After significant research, he put together a three-page document titled “Concerned About PIDs,” which he submitted for discussion during a previous council meeting.

“Historically, cities generate taxes and roll out public improvements in a slow and steady manner,” Prete wrote. “Developers pay for extra improvements needed to develop. Is it fair/right to shift a developer expense to taxpayers within the developing area? No!”

Prete said the PID process “massively increases developer profit while straddling future Hurricane residents (who aren’t here to voice an opposition) with a double tax.”

Prete also wrote that the demand for homes in Hurricane should be weighed against the wishes of current residents. He said PIDs tend to speed growth at a time when constituents are asking the city government to take it slow in order to avoid the “loss of small-town charm (and) rapid transformation into a large city.”

Prete says in other states where public infrastructure districts have been used, like Texas, Arizona, Colorado and Florida, the mechanism has proved to be disastrous. He pointed to news stories of homeowners having their properties foreclosed on because they can’t afford the PID assessment. In some cases, according to complaints and lawsuits, second- and third-generation buyers say they haven’t been advised that they were buying a home in a PID, or of its accompanying costs.

Prete said there has been a lot of allegations of corruption on the part of PID boards, especially in Colorado. And yet, he wrote, the method has become so entrenched there that developers in the state won’t even build unless they’re granted a PID. 

Prete wrote that he foresees numerous problems Hurricane might face as a consequence of what on its face appears to be a risk-free proposition. He says residents burdened with PIDs will be less likely to vote for city taxes and bond measures for community improvements because they’ll already be feeling nickel-and-dimed. Prete also wrote that having a particular group foot the bill for infrastructure other residents use can sow the seeds of dissension.

He wrote that when you have “people across the street paying less tax while enjoying the same utilities, you can’t point to meaningful benefit to those paying more.”

For Billings, it comes down to fairness. She is skeptical that any homebuilders will pass their huge savings on infrastructure onto residents, for instance in the form of a lower price tag on homes within a PID.

“The real issue is that developers will sell at market value and then the consumer will pay a levying tax on the back end for 30-40 years as well, so the consumers are hit twice,” Billings said. 

In his document, Prete wrote that by approving four PIDs in a matter of two months, Hurricane’s council has been “more cavalier” about a new and potentially risky process than any other city in the state.

“We have already approved multiple residential and commercial PIDs … and we should wait and see how they pan out before approving more,” Prete wrote in his appeal to council. 

The next chance for a PID to make it onto the agenda is at the council’s January meeting, at which point Billings will be sworn in as Hurricane’s first female mayor and two new members will take a seat on the council.

St. George News reached out to the three other council members regarding PIDs, but as of publication of this article, there has been no response. 

Ed. note: On original publish, this report stated that Hurricane City Manager Kaden C. DeMille spoke in favor of PIDs. DeMille later contacted St. George News to clarify his stance on the issue, stating, “I have long been weary of the PID financing tool and have expressed that many times to our council.  In certain circumstances can a PID option be favorable? I think there are certain occasions; however, my concerns have aligned with our councils the entire time.”

Copyright St. George News, LLC, 2021, all rights reserved.

Free News Delivery by Email

Would you like to have the day's news stories delivered right to your inbox every evening? Enter your email below to start!