CEDAR CITY — Cedar City is negotiating a housing development agreement that’s the first of its kind for the city.
In December, the Cedar City Council voted to begin negotiations with Chelsey Partners LLC. If an agreement is forged, the city will create its first two public infrastructure districts.
However, Councilmember Terri Hartley told Cedar City News that the process will likely take another 30 days or more.
Public infrastructure districts are a relatively new concept in Utah as the state Legislature passed SB 228 in 2019, which allowed for their use. Hartley said that while other Utah municipalities have created such districts, the agreement would be a first for Cedar City.
Hartley described the districts as “public/private partnerships,” which “gives them the legal authority to impose taxes,” as it is a “quasi-government entity.”
While the total amount of taxes imposed will be determined in the final agreement, a fact sheet provided by Chelsey Partners estimated that a home valued at approximately $450,000 would see a tax increase of about $1,485 at a rate of 6 mills. A mill is the amount of tax payable per dollar of a property’s assessed value, and the city can control the maximum mill rate applied to a particular district.
These property taxes can then be used as collateral to issue bonds which can be used to finance large public infrastructure projects, according to information provided in the Dec. 7 council packet. For instance, roads, recreational facilities or wastewater systems can be funded this way.
Funds cannot be used for private ventures, Hartley added.
The district could be used as an economic development tool to “build better public infrastructure” that would benefit citizens beyond the subdivision’s boundaries. Once the infrastructure is completed, it becomes the city’s property to maintain, Hartley said, adding that because of this, the construction must meet municipal standards.
Cedar City manager Paul Bittmenn said at the Dec. 14 meeting that the city will “have some say in” several factors of the agreement, including the overall amount of funding, the highest tax levy that can be imposed and what kind of public infrastructure would be built.
In this instance, the city may require the developers to build a gravity-fed sewer system and a looped water system that would support other nearby neighborhoods before approving the district, Hartley said.
Cedar City has been “working really hard” to phase out sewer lift stations and instead install gravity-fed lines, Hartley said. With gravity flow, wastewater moves on its own to the treatment plant, whereas lift stations must pump it into the gravity-fed lines. If the pump is down or its lines are clogged, it can create a backup and flood basements, among other risks.
The developers would likely build a lift station in the subdivision unless a district is approved to provide funding for a gravity-fed system, Hartley said.
The proposed looped water loop system would provide water to nearby neighborhoods if the main water line goes down, Hartley said, adding that without additional funding, the developers would likely only provide this redundancy to their proposed subdivision.
The city is considering the agreement because it “doesn’t cost us anything,” Hartley said. City staff would monitor the process more closely and the county would need to bill and collect the new tax to pay the district but would receive an administration fee for doing so.
“New growth pays for that new growth instead of it being shared completely across the board,” she said. “New growth pays a little bit more of that, and I know that always makes our current residents feel a lot better about the whole thing.”
Public infrastructure districts are typically structured to a 30-year maturity, so if lots are unsold and the debt remains unpaid, it “goes away,” Hartley said. The city and residents would not be “on the hook for any of it.” In some cases, the bondholders could repossess unsold lots from the developers.
Buyers in the proposed subdivision could benefit from lower-priced land, but the market will likely determine costs, Hartley said, adding that they will be required to pay an additional tax for 15 to 30 years.
“(The developers) would have to sell either at a lower cost or convince them that they have better infrastructure in their subdivision,” she said.
Additionally, Hartley said her biggest “lingering concern” is ensuring that potential buyers are aware they are purchasing property in a public infrastructure district. At multiple points in the home-buying process, purchasers will be notified that they will buy into a district.
However, suppose a person enters a private sale without requesting a title report. In that case, there is a possibility that they wouldn’t know, and Hartley suggested that homebuyers be diligent in collecting information concerning potential properties.
The city’s legal staff and the city manager will continue advising the council members about potential concerns or “stumbling blocks” as they work to fully understand how public infrastructure districts work and come to an agreement both sides can agree on, Hartley said.
Jim Rushton, the president of the Iron County Board of Realtors, said on Dec. 14 that the board is for public infrastructure districts as a tool for development but shared that some are concerned that “every developer” will want to enter similar agreements. But Hartley told Cedar City News the districts will likely not meet the needs of every developer.
Councilmember Tyler Melling abstained from discussions and voting, citing a potential impact on the value of the Melling family farm property. He said he does not own said property and did not consider it a legal issue.
Councilmember Craig Isom said he liked the “concept and would love to have us explore it.” Isom made a motion, and the council members, sans Melling, unanimously voted to move forward with negotiations.
Chelsey Partners and the Cedar City Council are expected to continue discussing the proposal later this month. To watch the discussion from Dec. 7 on the council’s YouTube channel, click here. To view the Dec. 14 meeting, click here.
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