A new law in Utah will allow the state to keep an eye on debt issuance by newer development authorities and a transit agency, as well as approve public-private partnerships involving state funds.
House Bill 82, which Gov. Spencer Cox signed into law last week, creates the State Finance Review Commission, giving it oversight of bond issues by the Utah Inland Port Authority, the Point of the Mountain State Land Authority, and the Military Installation Development Authority.
State Representative Jeff Stenquist, R-Draper, the bill’s sponsor, said these relatively new authorities have the potential to issue billions of dollars of bonds.
“We want to make sure that there aren’t any deals happening that could reflect poorly back on our bond rating,” he said, referring to Utah’s triple-A credit standing.
Prior to the bill’s introduction, the port authority’s Crossroads Public Infrastructure District sold $150 million of unrated revenue bonds in December to finance an intermodal transportation center in Salt Lake City despite environmental protests and an ongoing lawsuit by the city that raised constitutional concerns related to the authority’s use of tax increment financing.
The law only allows the commission of seven state officials and public finance experts to review the authorities’ debt issues, although it empowers it to approve bond issues by the Utah Transit Authority in place of the three-member State Bonding Commission, which previously had that role.
Utah Treasurer
Stenquist said P3s could be risky, expensive, and complex, underscoring the need for a higher level of oversight.
The commission will help the state understand what kind of debt activity is happening in the state and will stay “on top of that so we can make the proper disclosures and provide input as needed, and educate the legislature through the debt affordability study,” according to Oaks, whose office is tasked with compiling the annual study under the new law.
David Hitchcock, a S&P Global Ratings analyst, said it’s good for “a state to have a handle on what their true obligations are,” but the law would be “a very minor positive” in terms of Utah's credit rating.
Karen Krop, a Fitch Ratings analyst, said “these kinds of commissions that provide parameters for debt issuance are generally positive and it’s in line with Utah’s AAA issuer default rating and strong management.“
Calling the law “a good step in the right direction,” Stenquist said it might be tweaked over the coming years to add universities or other types of local entities that may get involved in large bonding projects.
