Salt Lake City approved in May a first-of-its kind development incentive to help Stadler Rail, a Swiss rail-car maker, expand its headquarters, redirecting a portion of the company’s taxes to support construction of roads, utilities, a test track for rail cars and a rail spur.
Months later, the area was taken over by the Utah Inland Port Authority Board, which is tasked with overseeing development of the planned 20,000-acre distribution hub in Salt Lake City’s westernmost area — and which has the authority to claim up to 100 percent of the promised tax increment — or void it altogether.
It’s still unclear whether the port board will keep the promises the city made to Stadler Rail. But it took a step in that direction at its Thursday meeting, creating a project area for the property that would make it possible to give the company a tax deal in the future.
“Basically, what the board did was [it] hit the pause button,” said Ben Hart, a board member and the deputy director of the Governor’s Office of Economic Development. “We’re going to wait, we’re going to get some of these processes and then at a future meeting — my hope is in the next four to six months, I would say — we can get the actual incentives and the agreement [in place].”
The creation of the project area helps to keep the board’s options open until it can create and approve a policy governing how to make these deals, Hart said. And the board has plenty of paths forward: It could make an agreement that mirrors the one the city approved, strike a new deal or choose not to give the company a tax differential at all, for example.
While it’s not a done deal, Derek Miller, board chairman, said he expects the authority will honor the incentives that helped to draw Stadler Rail to the city.
“I have a hard time imagining that we would ever do anything that would be less than the deal that they got with Salt Lake City, because that would be putting them at an unfair advantage because of a decision that is not of their making,” Miller told The Salt Lake Tribune after the board’s meeting.
“They came here based on good faith,” he continued. “They’re a great company here. We want them to not just be here, we want them to grow here. We’ll do everything as a board under my direction to make sure that we help that to happen.”
Stadler Rail broke ground last fall on its planned nearly 1 million-square-foot plant, to be built in four phases on a 63-acre site near 5600 West and Interstate 80 in the city’s northwest quadrant.
The company’s financing agreement with Salt Lake City’s Redevelopment Agency (RDA) offered $9.6 million in future city tax increment over 20 years. The money was contingent on the company meeting specific annual benchmarks for hiring and construction and could have been reduced if those goals weren’t met.
Built into the agreement was an understanding that financing for the project could be taken over by the authority board. And it leaves the company, not the city, at a loss if the state claims the increment.
It’s possible that the board could still choose to direct all or a portion of the tax increment to go through the city — a position board member Lara Fritts, the director of the Department of Economic Development for Salt Lake City, advocated as she cast the only vote against the creation of the project area on Thursday.
“The Utah Inland Port legislation states that the authority may receive — they don’t have to receive … making it possible for the authority to not collect differential on the property, if it chooses,” she said. “Therefore, the authority could pass a resolution to acknowledge the city’s agreement with Stadler and allow the RDA to collect 100 percent of the city’s tax increment created by the development. In this way, the city would not be harmed.”
While creating the project area leaves open the possibility the board could allow Salt Lake City to collect the tax differential, Hart said, Fritts also raised concern that moving forward with its creation could open the body up to legal action.
Lawmakers unveiled and passed with little debate the bill creating the port late at night on the eve of the final day of the legislative session. The legislation prompted criticism from Salt Lake City leaders, who viewed it as an inappropriate play for land and tax money. They spent the next several months working to find a compromise with the port’s supporters at the Capitol, which they did in a special session in July without Mayor Jackie Biskupski’s involvement.
Biskupski has said she thinks the legislation creating the inland port is “unconstitutional” and may face litigation.
