Complicated Financing Limits Town’S Liability

Mayor reveals intricate details of the layers of districts that would build and run the college while insulating Payson taxpayers

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The hat trick just got more complicated.

The money issue has always represented the most confusing topic when it comes to building a university campus in Payson that could charge half as much tuition as ASU’s campuses in the Valley.

Lots of people have been scratching their heads trying to figure out Payson’s plan to create a Community Facilities District to buy the land, build a campus, hotel and research industrial/office park — then lease the facilities to ASU and assorted private partners.

Payson Mayor Kenny Evans and other backers seized on the obscure law concerning Community Facilities Districts as a way to build the campus without putting Payson taxpayers on the hook in case it all falls apart.

Well, if you think that was confusing — wait until we start talking about Special Purpose Districts and Master Educational Special Purpose Districts.

Evans unveiled the new layer of complexity last week, in a detailed summary of plans for a 1,000 to 6,000 student campus on a 300-acre parcel now owned by the Forest Service off Highway 260 in the border between Payson and Star Valley.

So here’s more or less how it would work, according to Evans.

Payson would build the campus and related facilities with a combination of $100 million in promised donations and $400 million in promised loans.

Payson would then repay those loans with lease payments made by ASU and the other private businesses, which means the town’s taxpayers wouldn’t have to put out a dime for the construction and land purchase — although the project would likely increase both overall sales tax revenues and police and fire costs.

Now, Payson could have accepted the donations, signed up for the loans and then used that money to buy the land from the Forest Service and build all the facilities. Simple. Straightforward (kind of). Easy to explain.

One problem. Let’s say that halfway through the project, the state Legislature shuts down the state university system or cuts off all money for enrollment growth. Or let’s say that the hotel chain goes under in mid construction, leaving an unfinished shell. If the town of Payson had bought the land and entered into the assorted contracts, then it would be liable for the costs of such a meltdown.

Town officials wanted to avoid that potential liability.

So they hit upon the idea of setting up a Community Facilities District to cover the 300 acres. Usually, government entities use Community Facilities Districts to build things like a sewer system. But Payson hit upon the idea of adapting the long-standing legal structure to the much more complicated task of building a campus, hotel and industrial park and then entering into long-term leases.

Payson’s insistence that ASU contract with a not-yet-created facilities district reportedly held up the recent signing of a memorandum of understanding between Payson and ASU by several months.

Now, the addition of a flurry of proposed Special Purpose Districts has further complicated the picture.

Basically, those Special Purpose Districts (SPD) would each take on a different task. For instance, one might build the hotel. Another might build the research park. A third might build the solar and geothermal facilities, which would make the campus a net-energy producer. Each of those smaller districts would contract with a Master Educational SPD.

Evans said this proliferation of districts within districts, like so many Russian nested puzzle dolls, would serve the primary purpose of insulating Payson taxpayers from liability. But they would also allow the town to easily contract with private groups with specialized expertise — like in building and maintaining solar arrays.

“At the end of the leaseback period (with the SPDs), ownership would revert to the CFD (Community Facility District) or to the Master SPD, which will receive revenues from up to seven specialized SPDs,” explained Evans helpfully, to the shell-shocked crowd.

“If those properties don’t generate enough revenue and there’s a foreclosure,” said Jim Hinkle, an accountant, “there’s no liability?”

“The town is not responsible,” said Evans.

The complicated ownership and financing of the project has spurred persistent confusion, from residents who keep wondering who’s making money here.

“I get criticized because this mechanism will not generate any money to the town of Payson,” said Evans, since all the lease payments will go to the district, which will essentially use any profit to keep tuition low on the campus.

“We could do that and funnel any profit to Payson. But that means we take the risk along with the profit,” he said. “Now if there is a profit, that profit will go to building structures on land occupied by that third party.”

He might have added, however, that the town will likely reap substantial additional revenue from the sales taxes paid any time the thousands of students and hundreds of employees make a purchase in town. Sales taxes currently account for the bulk of town revenues.

So then, that should clear it all up.

It’s all perfectly clear — just so long as you keep your CDFs and SPDs and MSPDs straight. Oh, and mind your Ps and Qs.

Comments

Dan Varnes 4 years, 1 month ago

Yep. Just as I predicted: The ASU / Payson / Evans pipe dream is already starting to crumble.

Pie in the sky, folks. Nothing but lots of hot air and bits of paper blowing around.

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