Utah governor completes action on bond-related bills

Bonds

Stadium financing, a cap on local lease revenue bonds, and an effort to preserve the state’s largest coal-fired power plant were some of the measures signed last week by Utah Gov. Spencer Cox.

The Republican-controlled legislature ended its session March 1, passing a $29.4 billion budget for the fiscal year that begins July 1, as well as a deluge of bills, with Cox signing 555 into law by a Thursday deadline.

Utah Gov. Spencer Cox takes action Thursday on bills. The Republican signed into law a total of 555 measures, including bond-financing for major league sports stadiums and a cap on lease revenue bond issuance by local governments and school districts.

Utah Governor’s Office

“I’m very pleased with the outcomes of this session, especially around my top priorities,” the governor told reporters on Thursday. 

Cox signed legislation that aims to keep the state’s largest coal-fired power plant located near Delta, Utah, in operation beyond its July 1, 2025, shutdown deadline, despite concerns raised by the Intermountain Power Agency (IPA). The governor told reporters prior to the signing there is “a strong possibility” of a special legislative session that could take place before July to make some “tweaks” to the measure.

IPA General Manager Cameron Cowan said Friday the agency’s March 8 letter to the governor requesting a veto “clearly spelled out” issues presented by the bill. 

“The governor indicated that he would like to resolve these issues before July 1,” Cowan said in an email. “IPA will not be commenting on those discussions.”

IPA’s letter said the legislation puts at risk bonds the agency sold in 2022 and 2023 to finance the replacement of coal-fueled generation with a new facility run on natural gas or hydrogen. 

Analysts at Moody’s Ratings, which rates the $1.6 billion of power supply revenue bonds Aa3 and Fitch Ratings, which rates them AA-minus, declined to comment on the law, which takes effect May 1.

Cowan said the last tranche of bonds for the project will be issued in the fall or next winter. 

The state is putting a chunk of bonding authority behind efforts to entice professional hockey and baseball teams to make their home in Salt Lake City.

Cox last week signed House Bill 562, which allows up to $900 million in financing to cover half the cost of a Major League Baseball stadium within a Fairpark Area Investment and Restoration District if a franchise is secured by 2032.

Senate Bill 272, also enacted into law, creates a Capital City Revitalization Zone in the downtown area and authorizes bond issuance for arena construction or remodeling to accommodate a National Hockey League team.

The state is currently home to the National Basketball Association’s Utah Jazz and Major League Soccer’s Real Salt Lake. 

Senate Bill 241, which was enacted into law, includes a provision increasing increase the amount of revenue bonds for a University of Utah Health medical center campus to $800 million from $400 million.

Starting May 1, lease revenue bond issuance by local governments and school districts cannot exceed $200 million over a three-year period. The bill signed by Cox last Wednesday also requires a public hearing prior on the bonds.

Ahead of the bill’s enactment, Alpine School District, the state’s largest public school system, scheduled and subsequently canceled a March 19 public hearing on $175 million of lease revenue bonds to be issued through its local building authority. 

“After reviewing multiple options and possible funding sources required to build a new high school, the Alpine School District Board of Education has determined that taking action on a lease revenue bond is not necessary at this time,” the district said in a statement. “The district’s capital needs remain, and the school board will continue to study available funding options to meet those needs, including a possible lease revenue bond in the future.”

The law would limit that issuance to $86 million this year, according to Alpine, which sold nearly $165.2 million of lease revenue bonds between March 2018 and March 2023. At the end of fiscal 2023, it had $158.8 million of lease revenue and $380 million of general obligation bonds outstanding. Voters in November 2022 turned down $595 million of general obligation bonds to build and renovate schools to accommodate growing enrollment.

Another bill enacted by Cox that could impact Alpine sets procedures for creating a new district from an existing one, including the allocation of assets and indebtedness.

Alpine, which serves several communities in the Salt Lake City area with 92 schools, is examining the potential of splitting into two or more districts. Voters in Orem rejected a measure on the November 2022 ballot to leave Alpine and create its own school system.

Utah lawmakers continued a string of personal income tax cuts, lowering the rate to 4.55% at an estimated ongoing cost of $167.7 million annually.

The flat personal income tax rate, which was 4.95% in 2021, was lowered to 4.85% for 2022 and to 4.65% for 2023.   

A change in how income tax revenue is spent is the target of a constitutional amendment on the November ballot that would end its use for education.

“Taking that income tax fund and using it exclusively for public education does create budgeting issues when there are large surpluses and other needs where we have deficiencies,” Republican State Sen. Daniel McCay, the measure’s sponsor, said on the Senate floor when it received final passage in March 2023. 

He added the amendment continues constitutional protections for education funding, but allows the revenue to be used for other state purposes “once we’ve fulfilled our responsibilities for growth and for student enrollment and for long-term inflation.” 

In fiscal 2023, nearly $8.95 billion in revenue flowed into the income tax fund, which had an ending balance of $2.44 billion.

The constitutional amendment’s passage by voters would trigger the elimination of the state sales tax on food, which passed the legislature last year in House Bill 54.

Cox urged voters to adopt the amendment, saying it would not make a difference as to how schools are funded.

“We will continue to fund education,” he told reporters last week. “(State lawmakers) found a way around the earmark every single year I’ve been involved in the legislative process. This is a great opportunity to get some things in the constitution that will help us better manage our state.”

The ballot measure faces opposition from the Utah Education Association, the state’s largest teachers union, which contends the state has yet to “fully fund” the public education system.

Cox made housing the centerpiece of his proposed fiscal 2025 budget, contending that high costs threaten the state’s future prosperity.

House Bill 572, which he signed Thursday, creates a Utah Homes Investment Program with up to $300 million transferred from the state’s Transportation Investment Fund to subsidize loans for affordable housing.

“We’ll have new tools to help first-time home buyers buy a home and incentives for municipalities and developers to build more starter homes, which is part of our goal to build 35,000 starter homes over the next five years in our state,” Cox said.

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