Public infrastructure districts (PIDs) operate as independent, “limited purpose local government entities” created under Title 17D of the state code. Their primary function is to provide a mechanism for raising the funds to carry out public infrastructure development projects within their boundaries; the state code makes specific provisions for certain types of PIDs to work with privately owned properties under limited circumstances.
While PIDs are formed principally to benefit those who live or own property within their bounds, the nature of public infrastructure projects means that the success of public infrastructure districts often has “spillover” benefits for their surrounding communities. At Snow Jensen & Reece, P.C., we assist property owners and developers with navigating the technical and legal requirements necessary to take advantage of the improvement opportunities offered by PIDs, among a variety of other real estate and public infrastructure needs. Call our office at (435) 628-3688 to schedule a consultation with a member of our team.
Summary of Utah’s Public Infrastructure District Act
Public infrastructure districts under Utah’s Public Infrastructure District Act provide a statutory framework for financing public infrastructure projects through independent local entities.
- Public infrastructure districts operate as limited-purpose local government entities under Title 17D, with authority to issue bonds and levy property taxes within statutory limits to fund infrastructure improvements.
- Utah law separates public infrastructure districts from the cities, counties, or development authorities that form them, ensuring that the creating entity is not liable for district debts or bond obligations.
- Formation of a public infrastructure district generally requires unanimous consent from affected property owners and registered voters, reflecting a consensus-based approach to taxation and development.
Snow Jensen & Reece, P.C. works with property owners, developers, and public entities on matters involving real estate development and public infrastructure projects throughout Utah.
How Do PIDs Work?
The multiple sets of “moving parts,” along with the numerous highly specified categories and exceptions, can make the structure and operational parameters of PIDs somewhat cumbersome to follow, even for commercial real estate professionals with extensive development experience. One of the most concise guides available is provided by the state of Utah itself; this resource helps to answer some of the most common questions among individuals not directly involved in the process of initial PID formation. Perhaps the foremost of these concerns is how, in practical terms, PIDs raise revenue and repay debts.
Issuing Bonds To Raise Funds
Public infrastructure districts raise revenue for the projects they are created to fund primarily by issuing bonds under the broad legal conditions of Utah § 11-14-103; the 17D-4-203(2)(a) provision establishing a public infrastructure district’s authority to issue bonds refers to “negotiable” bonds specifically, but mentions elsewhere in the chapter omit this qualifier. A major reason for the formation of public infrastructure districts is to create a separation between the local government entity (e.g., city or county) within which they are created for the purposes of assessing liabilities, so PIDs are solely liable for the repayment of their respective bonds issued under Utah § 17D-4-301. PIDs then use the income from these bonds to fund infrastructure development projects, the precise nature and scope of which can vary according to the specific type of PID formed.
Collecting Property Taxes
The infrastructure improvements made with the funds PIDs raise through bonds generally have the effect of increasing the value of properties within the PID’s boundaries. Districts, importantly, have the authority to set and levy taxes on the real property located within their own boundaries, up to statutory limits set in Utah § 17D-4-303, as well as legal obligations regarding notice. Each district collects these property taxes and uses the revenue to repay the issued bonds, while the public infrastructure projects they have funded continue to provide increased economic and often quality of life gains.
Long-Term Outcomes
In theory, the benefits of these improvements should continue to foster prosperity within each district long after all the bonds have been repaid and the districts themselves, having fulfilled their purchase and satisfied all their outstanding debts, have been dissolved. In practice, the longevity of the benefits remains a projection because the Public Infrastructure District Act (PIDA) was passed by the Utah legislature only in 2019. Developments to date look very promising, and certainly many state and local officials have been enthusiastic about the possibilities, but (as with any recently implemented strategy) long-term data from the first infrastructure development projects funded by PIDs will not be available for a few more years.
Setting Expectations
Any financial investment entails some degree of risk. In that respect, the negotiable bonds issued by public infrastructure districts are no different from any others. Given the relative newness of the PID system in Utah, the currently established districts cannot reasonably be expected to boast a lengthy history of bond repayment. With those caveats in mind, however, investors can usually approach PID bonds with measured optimism.
Factors To Consider
Provided the infrastructure development projects themselves serve their intended functions, then, absent truly extraordinary adverse events (e.g., natural disasters), the increase in property values associated with their completion is fairly predictable. The specific property tax rate imposed by each PID will affect the rapidity with which those taxes collect revenue sufficient to repay bonds, but over time, the collection itself can also be assumed with a high degree of confidence relative to other investments.
Certainly, consulting with financial advisers is recommended, but in general terms, betting on the benefits of infrastructure is usually considered a “safer,” although not risk-free, investment decision. In any given instance, of course, it makes sense to review the PID’s governing documents and the specifics of its infrastructure development plan. These governing documents, in particular, are subject to strict requirements under Utah § 17D-4-202. The taxes imposed by public infrastructure districts are subject to specific public notice requirements under Utah § 17D-4-303.
How Do PIDs Benefit Local Governments?
Local government entities such as counties and cities, and even development authorities created under Title 17D, can form public infrastructure districts. However, these PIDs, once formed, are independent political subdivisions of the state of Utah, with the caveat that a development authority may create a PID as a subsidiary under Utah § 17D-4-201(1)(b)(iv). This separation between the PID and the forming entity creates the conditions necessary for the provisions of Utah § 17D-4-201(6)(c), which specify that the entity that creates a public infrastructure district is not liable for the debts taken on by the PID, nor by any judgments against it.
This structure protects local governments and their taxpayers from many of the financial risks associated with issuing bonds and ultimately with funding significant infrastructure projects that can sometimes involve unexpected costs or incur extended delays that might discourage cash-poor governments at the local level from investing in infrastructure improvements. The freedom from a PID’s potential financial liabilities makes it much more feasible for a county or city, or one of the development authorities listed in 17D-4-201, to make effective use of public infrastructure districts to improve local roads, utilities, and other pieces of infrastructure critical to economic growth.
What Economic Benefits Do PIDs Offer Local and Regional Economies?
The language used in 17D-4-203 limits the functions of PIDs to funding projects that expand or enhance infrastructure within the district in ways that confer a clear “public interest” benefit. Besides the obvious examples of roadways and water management, these projects can include public transportation and even improvements related to housing availability. Some of these projects are, of course, also of significant interest to real estate developers. An attorney with Snow Jensen & Reece, P.C. may be able to help you evaluate the fit between public infrastructure projects and local or regional economic conditions.
How Do PIDs Affect Local Property Owners?
The formation requirements for Utah’s public infrastructure districts provide something of a safeguard against the possibility of “taxation without representation” for individuals and business entities whose property falls within the proposed limits of a planned public infrastructure district. Because PID formation scenarios generally require either the petition signatures or the written consent of 100% of property owners who would be affected by district taxes, as well as that of any registered voters residing within a district’s boundaries at the time of its formation, a new PID necessarily takes shape as a consensus operation.
There is always the risk that plans to form a public infrastructure district may be stalled by the resistance of a single property owner. To date, however, efforts to take advantage of PIDA provisions have been generally well-received. Property owners have considerable incentive to sign onto PID petitions and to grant their consent for district formation. Although property taxes are obviously expected to rise, in many cases, the availability of improved local infrastructure offers an increase in their development options and even the logistics of day-to-day activities associated with their properties that far outweigh the projected costs of those property taxes.
How Can Real Estate Developers Take Advantage of Public Infrastructure Opportunities?
The use of PID bond repayments to fund major improvements to public infrastructure alleviates the need for large outlays of upfront capital via private investments. PIDs can often expand infrastructure into areas where a development might otherwise constitute an unattractive economic proposition. Local governments and populations benefit from having real estate developments, whether commercial or residential, come to fruition in their economic radius.
Developers, meanwhile, benefit from a significant expansion in their options for land use, as public infrastructure significantly impacts considerations such as traffic flow, the cost and complexity of utilities, and, in some cases, even local zoning considerations. Depending on the type of project(s) funded, a public infrastructure district can not only improve the profitability of real estate developments within and adjacent to their boundaries, but in some instances also make these developments feasible where access to the property itself might otherwise have been impractical (e.g., when access roads have not been of sufficient scale or quality to handle the kind of equipment and regular traffic that would be needed to fully develop the property).
How Valuable Are PIDs?
One of the more interesting aspects of Utah’s public infrastructure districts is the degree to which they vary in size, whether the metric is acreage covered or property values taxed. Very small PIDs may tax only a handful of properties, with values measured in the thousands of dollars; large districts can encompass areas covering large tracts of land, accounting for several million dollars in total property value. What remains consistent is the tight relationship between area included and area served. That is to say, public infrastructure districts in Utah are created almost exclusively to meet the infrastructure needs of their residents and those of any non-resident property owners whose taxes will fund the eventual repayment of PID bonds. They are, in this sense, “community” efforts organized around the practical needs of the individuals and businesses actually “on the ground” locally.
Speak With a Utah Attorney
Both real estate developers and officials involved in local governance commonly have questions about public infrastructure districts, but the types of questions you may have depend heavily on the perspective from which you are viewing a PID. For this reason, you may find it helpful to discuss your specific concerns and questions with an experienced Utah attorney familiar with navigating the complexities of public infrastructure districts and the projects to which they relate. Call (435) 628-3688 to schedule a private conversation with a Utah lawyer from Snow Jensen & Reece, P.C.
Important FAQs About PIDs in Utah
Read below to find some of the most frequently asked questions about public infrastructure districts in Utah
What Is a Public Infrastructure District Under Utah Law?
A public infrastructure district is an independent political subdivision created under Title 17D of the Utah Code. Its purpose is to finance and construct public infrastructure projects that serve a defined geographic area.
How Do Public Infrastructure Districts Raise Funds?
Public infrastructure districts primarily raise funds by issuing bonds authorized under Utah law. Bond proceeds are used to pay for infrastructure projects, and repayment typically occurs through property taxes levied within the district.
Are Cities or Counties Responsible for PID Debt?
Cities, counties, and other forming entities are not responsible for the debts or judgments of a public infrastructure district. Utah law expressly separates district liabilities from those of the entity that creates the district.
What Types of Projects Can a Public Infrastructure District Fund?
Projects must serve a public interest and generally include roads, utilities, water systems, transportation improvements, and certain housing-related infrastructure. The scope of permissible projects depends on statutory requirements and the district’s governing documents.
How Do Public Infrastructure Districts Affect Property Taxes?
A public infrastructure district may levy property taxes on real property located within its boundaries, subject to statutory caps and notice requirements. These taxes are used to repay bonds issued for infrastructure development.
What Protections Exist for Property Owners During PID Formation?
Formation typically requires written consent from all affected property owners and any registered voters within the proposed district. This process is designed to reduce concerns about taxation without representation.
What Are the Risks Associated With PID Bonds?
Like other financial instruments, PID bonds involve risk, including factors related to project performance and property tax collection. The relative newness of Utah’s PID framework means long-term performance data is still developing.
How Can Snow Jensen & Reece, P.C. Assist With Public Infrastructure District Matters?
Consider visiting with an experienced attorney at Snow Jensen & Reece, P.C. to learn more about legal options related to public infrastructure districts. The team works to ensure property owners, developers, and public entities understand statutory requirements, governance documents, and potential legal paths associated with infrastructure projects.