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Utah Inland Port Authority needs clear plan for future before spending $150M bond, auditors say

The area at I-80 near 7200 West where the Utah Inland Port is planned to be built in Salt Lake City is pictured on Jan. 27, 2020. The Utah Inland Port Authority needs to outline clear goals for the future — which it hasn't yet done — before starting to spend some of the $150 million in bonds approved last year, according to a new report.

The area at I-80 near 7200 West where the Utah Inland Port is planned to be built in Salt Lake City is pictured on Jan. 27, 2020. The Utah Inland Port Authority needs to outline clear goals for the future — which it hasn't yet done — before starting to spend some of the $150 million in bonds approved last year, according to a new report. (Steve Griffin, Deseret News)



Estimated read time: 5-6 minutes

SALT LAKE CITY — The Utah Inland Port Authority needs to outline clear goals for the future — which it hasn't yet done — before starting to spend some of the $150 million in bonds approved last year, according to a new report.

The limited review by the state Legislative Auditor General's Office began in spring this year after the Utah Legislature changed the Utah Inland Port Authority Board's makeup, and the new board was sworn in, in May. Auditors noted in the report the board asked them to perform the review to "provide direction and potential risk areas as quick as possible."

Auditors say they found a few "concerns," including "financial commitment without adequate planning, gaps in organizational structure that reduce internal controls, and the need for stronger procurement and contract management."

The report also notes contractors are largely "sole sourced" by the Inland Port Authority, meaning it solicits contract proposals from only one business at a time rather than going through the typical, competitive request for proposal process.

The previous board gave former executive director Jack Hedge "sole discretion" to make contracting decisions "unilaterally," said Brian Dean, audit manager, during an Economic Development and Workforce Services Interim Committee on Wednesday.

Hedge previously worked at the same place with the founder and CEO of Keychain, a vendor that received a contract with the Utah Inland Port Authority, according to Dean.

"It creates some red flags and some concerns, just on the appearance of it," Dean said.

The Inland Port Authority said in some cases, the vendors it chose were the only ones that provide a certain service. But Dean said in many cases, the contracts could have still "been put out to bid."

The sole-sourcing method "reduces transparency and can foster an environment where public resources are not adequately safeguarded," auditors wrote in the report.

But as a separate entity from the state, the Utah Inland Port Authority is exempt from the procurement rules that state agencies are required to follow, according to the audit. The review did not look into whether the authority should be subject to the same procurement and transparency requirements, but auditors suggested it as an issue for the Legislature to look at moving forward.

The auditors say the Inland Port Authority needs to lay out a long-term plan, called a master development plan, to outline its goals and objectives and guide development decisions. That needs to happen before the authority spends the "sizable bond" it took out, with the exception of funding that gets approved by the Inland Port Authority Board, according to the report.

The Inland Port Authority plans to issue a request for proposal seeking a consultant to help create a master development plan, which auditors called a "positive step." But auditors noted they are "concerned this has not been a higher priority at the port" — and the board should make sure a master development plan is in place before using the bond issued last winter.

The port authority marked a large increase in spending from 2021 to 2022 due largely to $8.02 million for an up-front lease-to-own payment for the Stadler Rail test track, and $6.31 million set aside for security of the port's $150 million bond security, auditors said.

Port authority staff members told auditors the Stadler Rail project was "previously identified" as a state priority, but auditors say the board should still "carefully weigh" whether such projects are a good idea for the port.

The Stadler Rail manufacturing plant in the area of 5600 West and 150 South is one of the projects the port authority has looked at to improve Utah's importing and manufacturing logistics. The building is close to where a proposed rail spur test track is being considered — using the bonds, officials said last year.

Auditors said the inland port is also spending a large amount of money on rental and lease costs for buildings and land. For example, the Inland Port Authority spent about $2.4 million from 2020 to 2022 on land set aside for a transload facility. A large jump in this year's spending is "mainly from about $4.6 million for the construction of a road in the Northwest Quadrant of the port," according to the review.

"Again, while these decisions may prove to be prudent, we are concerned about significant financial commitments being made with public funds before a master development plan is developed and all options are considered," auditors wrote.

Auditors also encouraged more involvement from the board to "hold staff accountable" for results. The audit recommended an audit committee and treasurer be put in place to strengthen the program's internal controls.

"The budget review process is another area that deserves more attention. Staff should make more information publicly available for board members and the public to understand (Utah Inland Port Authority's) budget," the report states.

Auditors said they found that in working with contractors, the port authority "did not have adequate measurable metrics and timelines in contracts to provide structure and accountability with contractors," pointing to another reason for more board member involvement.

"We are encouraged to see that the port has been responsive to this and is working on improvements to their process," auditors wrote.

In a letter responding to the audit, the Utah Inland Port Authority board members and Executive Director Ben Hart said they "wholeheartedly agree with all recommendations in the audit and have directed UIPA management, including new UIPA executive director Ben Hart, to move forward with implementing them along with other best practices."

The letter states that the Inland Port Authority has had independent financial auditors review its financial statements every year, and they found that all expenditures were made "in accordance with the board approved budgets and policies and legislative statute."

The board members and executive director also noted that the Inland Port Authority is "a learning and growing organization," and thanked auditors for the suggestions.

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Ashley Imlay covers state politics and breaking news for KSL.com. A lifelong Utahn, Ashley has also worked as a reporter for the Deseret News and is a graduate of Dixie State University.

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