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Political Subdivisions Interim Committee

MINUTES OF THE

POLITICAL SUBDIVISIONS INTERIM COMMITTEE

Wednesday, July 16, 1997 - 9:00 a.m. - Room 414 State Capitol



Members Present:
    Sen. R. Mont Evans, Senate Chair
    Rep. David Ure, House Chair
    Sen. Leonard M. Blackham
    Sen. George Mantes
    Rep. Brian R. Allen
    Rep. John B. Arrington
    Rep. DeMar "Bud" Bowman
    Rep. Craig W. Buttars
    Rep. Blake D. Chard
    Rep. Marda Dillree
    Rep. David L. Gladwell
    Rep. James R. Gowans
    Rep. John E. Swallow
    Rep. Richard L. Walsh

Members Absent:
    Rep. Greg J. Curtis

Staff Present:
    Mr. Joseph Wade,
        Research Analyst
    Mr. Robert H. Rees,
        Associate General Counsel
    Ms. Joy L. Miller,
        Secretary





     Note:    A list of others present and a copy of the materials distributed in the meeting are on file in the Office of Legislative Research and General Counsel.

1.    Call to Order and Committee Business - Chairman Evans called the meeting to order at 9:55 a.m. He stated that the committee's request to create a subcommittee to review special districts was approved by the Legislative Management Committee.

2.    Follow up - Special District Recodification - Mr. Rees distributed a handout on special districts which was distributed last year to the State and Local Affairs Interim Committee. Also distributed was a summary of services that Utah law authorizes independent special districts to provide and the types of independent special districts that may provide those services. Mr. Rees reviewed information concerning property taxes charged in Utah. In 1995, 10.6% of the total property tax went to special districts. Mr. Rees discussed statutory provisions relating to taxing and bonding authority of the independent special districts.

    Rep. Chard said that a letter was received from Salt Lake City which indicated that the Airport Authority was not organized under the statute as cited. He asked by what authority Salt Lake City has to organize and operate an airport if it is not authorized under the statute.

    Mr. Rees stated the ordinance cited in the letter fits within the statutory framework. Under Dillon's Rule, previous law was interpreted to mean that cities only had the authority which was specifically and explicitly given them by the Legislature. Case law has changed to a broader interpretation that cities have the authority to provide for the health, safety, and welfare of its citizens unless the Legislature indicates otherwise.

    Rep. Dillree said special districts can generate revenue by raising fees rather than taxes. She asked if there were any controls on how high fees can be raised. Mr. Rees said there are provisions dealing with fees and specifically authorizing some of the districts to impose fees. He said he would further research that particular issue. Rep. Dillree requested that the Tax Commission provide the committee with information on special districts regarding their tax rate and how close they are to their taxing limit.

3.    Tax Increment Finance and RDA's - Sen. Craig Taylor explained that RDA's can provide significant benefits to the community as far as revitalization. However, critics maintain that in the past there has been an abuse of the eminent domain power and that taxes are used unfairly through increment financing. The tax increment is the difference between the base valuation of a blighted area and the value of the property after it is redeveloped. The argument has been made that the Legislature cleared up the problems in 1993 when revisions were made to the RDA laws. He pointed out that the tax increment for the entire state at that time was approximately $28 million. The tax increment for Salt Lake City alone now is approximately $28 million. He also pointed out that the property is taken off the tax rolls for many years, sometimes forever. Sen. Taylor referred to Second Substitute S.B. 53, Redevelopment Agency Amendments, which was proposed during the 1997 General Session. The legislation substantially scales back the amount of tax increment that the RDA can use and scales back the length of time the tax increment is off the tax roles.

    Mr. Dave Spatafore, Utah League of Cities and Towns, explained that in 1993 the Legislature tightened up the use of eminent domain. Since 1993 the league has asked for specific instances of abuse of eminent domain but they have not yet received any. He said local property taxing entities now control the amount of property tax going to RDA's in post 1993 project areas. Only local taxes generated by the development itself are used to encourage economic development, yet the state reaps the benefit of increased increment sales taxes. Since 1993 no RDA has actually exercised the power of eminent domain. With the changes made in 1993, Utah's local redevelopment and economic law is the most restrictive in the United States. Tax increment may only be used if approved by a majority vote of a committee appointed by the effected taxing agencies. Mr. Spatafore noted that since 1993, agencies are now permitted to use up to 20% of the tax increment generated in a redevelopment or economic development project area for affordable housing anywhere within the city or county. He said if the increments are reduced there are other entities that will be negatively impacted. He encouraged the committee not to endorse the bill.

    Ms. Alice Steiner, Salt Lake City Redevelopment Agency, stated the proposed bill essentially takes away the power of the Taxing Agency Committee to negotiate the amount of tax increment appropriate for a given project. With a reduction in tax increment proposed by Sen. Taylor, the affordable housing funds would no longer be available. What the bill proposes under eminent domain would essentially do away with the redevelopment track and alter the definition of blight so that there is no way that any property in the state would qualify.

    Sen. Evans indicated that due to the lack of a Senate quorum, the issue would be placed on a future agenda in order to vote on it.

4.    Legislative Audit Report - Compensation Practices of Quasi-Governmental Organizations - Ms. Janice T. Coleman, Audit Manager, distributed a copy of the performance audit. She explained they were asked to review the executive and board compensation practices for a sample of quasi-governmental organizations and compare their practices with those of similar governmental organizations. They were specifically requested to review Workers Compensation Fund of Utah (WCFU) and the Utah Transit Authority (UTA). They added to their review the Utah Retirement Systems and Utah Housing and Finance Agency. The WCFU has the most liberal compensation policy for board service of the four organizations examined. Ms. Coleman said the Legislative Auditor's Office believes that board member compensation among quasi-government organization should be more similar. She pointed out that the Division of Finance has given exemptions to its established rates. It is not clear to them whether the Legislature intended for the Division of Finance to have the authority to grant exemptions to state board guidelines. The Legislature may want to review the statute and consider whether it is broader than intended.

    Ms. Coleman said they found some WCFU board practices they believe to be inappropriate. They are concerned that WCFU board members are reimbursed for preparation time as well as other board related activities. They also believe that consultants should be chosen outside of board membership to avoid the potential for a conflict of interest. The WCFU board has members from businesses which are service and product providers to WCFU. Legislation prohibiting similar circumstances was passed in the 1997 session with regard to UTA's board. The law disallows board members from having any interest in any contract or in the profits derived from any contract awarded by the board. They recommend the WCFU cease its present practice.

    Ms. Coleman indicated they found significant differences in executive pay practices. They concluded that WCFU executive pay practices are comparatively aggressive and UTA's are somewhat aggressive. Retirement and Utah Housing pay practices are moderate. In WCFU the total compensation of the CEO is high when compared to other workers compensation organizations. When compared to Utah's private market the CEO's compensation does appear more comparable, however, WCFU is not a private organization.

    Ms. Raylene Ireland, Department of Administrative Services, pointed out that the purpose of the fund is to be the insurer of last resort for the state. WCFU is required by state mandate to insure high risk businesses that private industry will not insure. The Legislature established the WCFU as a quasi-public corporation in 1988 and established the opportunity to compare itself to the private industry, operate under the board, and have very few tie-ins to the state. She indicated that only state agencies as mandated by the Legislature must buy their service from the fund. They must compete for other bookings in the private market. She noted that last year the fund paid $7.2 million to the state in premium taxes. The fund does receive a federal tax exemption that was meant

to offset the difficult issue responsibility it carries.

    Mr. Mel Green, Vice Chairman of the WCFU Board, commented that unlike other quasi- organizations, WCFU competes in the open market place. Last year the fund had $168 million in surplus. The Legislature mandated in 1988 that the fund be run like a business. If the fund is to be run like a business, it must obtain and retain individuals who can compete. He said they have reduced administrative expenses and increased investment expenses.

5.    Draft Legislation Regarding Incorporation, Annexation, and Townships - Mr. Rees briefly reviewed the most recent changes to the bill.

    Ms. Deyonne Walker, Utah Township Coalition, thanked the committee for the time it has spent with them on the township issue.

    Ms. Trisha Topham, Cottonwood resident, indicated the bill passed last January remedied many problems. She observed that there has not there has not been one incorporation attempt since the bill was passed due mainly to the problems experienced by those who have tried it.

    Mr. Kent Lewis, Salt Lake County Attorney's Office, stated the county would like to make the entire unincorporated area into five townships. The problem is that they have to be contiguous. He said they would have to keep a countywide planning commission to take care of those areas. He indicated they would like to see "continguous" taken out to allow them some flexibility to place all areas into townships.

    Mr. Sheldon Hansen, township proponent, indicated that although the proposed Herriman township has followed all the legal statutes and adopted the requirements necessary the county has failed to recognize it.

     MOTION: Rep. Gladwell moved that the committee adopt as a committee bill the proposed legislation, "Local Government Law Amendments." The motion passed unanimously. Rep. Gowans was absent during the vote.

     MOTION: Rep. Ure moved to approve the minutes of June 18, 1997. The motion passed unanimously. Rep. Gowans was absent during the vote.

     MOTION: Rep. Ure moved to adjourn the meeting at 11:55 a.m. The motion passed unanimously.

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