Estimated read time: 6-7 minutes
SALT LAKE CITY — The taxing mechanisms set up to pay for projects around Utah, including a place for Utah's new National Hockey League team to play as well as a possible Major League Baseball stadium, risks eroding the state's tax base, according to the chairman of the Utah State Tax Commission — but Gov. Spencer Cox and others don't agree.
"I disagree. We've been, in fact, very careful as we've gone through this with the Legislature and with experts to make sure that we're not doing that," the governor said Thursday during his monthly PBS Utah news conference, adding that the state's finances came "through with flying colors" in recent annual review with national rating agencies.
"We feel great about the fiscal health of Utah right now and the decisions we've made to make sure that we stay fiscally healthy, that we have a AAA bond rating as we move forward," Cox said. Others also tout the benefits of the funding, including Utah Senate President Stuart Adams, R-Layton, who described the economic impact as "astronomical."
Another supporter of the arena project, Sen. Dan McCay, R-Riverton, the sponsor of legislation that set up funding for accommodating a new National Hockey League team, said it was because the state moved quickly that "we were able to attract a team."
"Do I wish we had more time? Absolutely. Why not? If I had more time to make a decision, could I craft it differently? Absolutely," McCay said, adding "it's kind of something I think about all the time. But when these opportunities come up, you don't blink."
The state's tax commission chairman, John Valentine, raised his concerns at the Utah Taxpayers Association's annual "Taxes Now" conference held earlier this month, saying there's been "an explosion" in sales tax development zones, with 23 designated in just the past six months without legislative action. Some of the newer zones are just a single building, he said, while others have sprung up to fund the development of the Inland Port, Point of the Mountain, hotels that serve convention-goers and housing and transit.
Some have the authority to divert property taxes through tax increment financing, like the new first home investment zones approved last session that cities can use to lower developer costs in the hopes of expanding affordable housing options. Valentine noted there may be overlap with other property tax increment financing zones.
Do I wish we had more time? Absolutely. Why not? If I had more time to make a decision, could I craft it differently? Absolutely. ... It's kind of something I think about all the time. But when these opportunities come up, you don't blink.
–Sen. Dan McCay
Also during the 2024 Legislature, a pair of bills surfaced to attract big league teams to Utah: HB562, that created the Utah Fairpark Area Investment and Restoration District the site of a Major League Baseball stadium if the state's efforts to attract a team are successful, and SB272, a downtown Salt Lake City revitalization plan built around the NHL team acquired post-session.
Valentine, who served in the state Legislature for 26 years, said he's concerned that directing taxes from designated areas for specific projects impacts the tax dollars available for other purposes and can create complexity for individuals and businesses, especially when the areas overlap or are broken up by "islands" that are exempt. He also raised concern about oversight of tax district governing boards.
He told the Deseret News he isn't calling for a repeal of the districts, but rather for a review.
Valentine was followed at the taxpayers association conference by a presentation on the Larry H. Miller Company's plans for the baseball Fairpark project. The company's chief corporate affairs director, Amanda Covington, said some of the company's intended $3.5 billion total investment in the "vibrant and beautiful" west side community has nothing to do with baseball.
A baseball stadium would be built in addition to commercial, residential, dining, retail and open space projects on approximately 100 acres if Utah can secure a Major League Baseball team. Getting a franchise would trigger a 1.5% increase in car rental taxes statewide plus other revenue sources on top of the sales tax diversion, Valentine said.
Covington said the company "would repay every dollar that is ever publicly invested in that ballpark," making $150,000 lease payments to the state over 30 years.
'Astronomical' economic impact must be weighed, legislative leader says
Adams, the state Senate president, said he wasn't surprised at Valentine's concerns, "just interested to know he felt that way."
He said the original model for this type of financing, the Military Installation Development Authority known as MIDA that started in 2007 to attract defense industry jobs near Hill Air Force Base, now spans two counties and four cities and recently added some 4,000 jobs at Northrop Grumman.
"I think that's worth any sales tax modification. The MIDA contracts are with the cities. No cities have objected to it," Adams said, adding he'd "be happy to talk" with Valentine about his concerns. "But I think the better spot is probably to bring it up during the legislative session and let's walk to the process."
He said lawmakers have a "great relationship with Commissioner Valentine. We'll continue to have it. We'll take any advice he gives us and we'll adjust and make our decisions accordingly. I think if he shows concerns, we'll always look at them."
But, Adams pointed out, "the economic impact from these things is astronomical. Four thousand new jobs at $150,000 and more? So we need to make sure we weigh that against some of his comments. We'll weigh both."
McCay said while he's willing to sit down with Valentine, "we think over the last few years as we've looked at financing projects, we've done it the right way."
Still, McCay said, there could be room for improvement next session in his "Capital City Revitalization Zone" plan that raises more than $1.6 billion through a sales tax increase in Salt Lake City to remodel the Delta Center for the former Arizona Coyotes hockey team purchased last month by Utah Jazz basketball team owner Ryan Smith and develop a downtown entertainment district.
"With something like that, do you ever have enough time? When we met with the NHL during the session and we met with Smith Entertainment Group, they made it very clear that there was an option and if didn't act quickly, we could miss out on the opportunity," he said.
