When Alpine School District proposed a $595 million bond in November 2022, voters resoundingly told them, “no”. The school district ignored them and issued $82 million in lease revenue bonds in a transparent effort to do (part of) what they planned anyway.
When the Utah State Legislature passed SB 86 to tell taxing entities “no” to the excessive use of lease revenue bonds by limiting the total issuance to $200 million over three years, the Alpine School District ignored that too, and are now attempting to issue $175 million in lease revenue bonds before the bill’s effective date on May 1.
The intent of the taxpayers was clear in November 2022, and the intent of the Legislature is clear now. So, too, is the intent of the Alpine School District. They intend to issue debt whether their voters want it or not and in blatant defiance of the Legislature which governs them.
How is Alpine School District issuing debt if voters have voted against it?
The Utah State Constitution requires that General Obligation bonds backed by property taxes be voted on by taxpayers. In the 1980s, Iron County proposed a bond to build a new jail; voters rejected this bond. Faced with liability and safety concerns, Iron County orchestrated a voter workaround to fund the jail construction: lease revenue bonds. A Local Building Authority would be formed – technically separate to the county council, but comprised of all the same members – and it would issue the bonds. The county would then lease the facility from the Authority and make those lease payments from their general fund. Although controversial, this move was given the green light by the Utah Supreme Court in 1985 and has been widely used – and abused – by taxing entities ever since.
After the failure of the $595 million bond proposal in November 2022, Alpine School District issued $82 million in lease revenue bonds. In August 2023, it approved a 7.8% property tax hike.
The bonds shown in the table below, taken from the Alpine School District’s 2023 Annual Financial Report were all issued without voter approval.
How is Alpine School District defying the Legislature?
SB 86, passed by the Legislature in the 2024 General Session, limits the total amount of lease revenue bonds issued by a taxing entity’s local building authority to $200 million over three years. It also requires the relevant taxpayers to be properly noticed, and for the taxing entity to hold a Truth in Taxation-like hearing. This bill will come into effect on May 1, 2024 and was an explicit effort to curtail the abuse of lease revenue bonds.
SB 86 was listed as an “Alpine School District Priority Bill” on the school district’s website; however, no Alpine School District representative spoke in opposition to the bill in any of its committee hearings. Instead, on March 5th, 2024, the school district issued notice that it intended to issue $175 million in lease revenue bonds through its Local Building Authority on March 19th, 43 days before the bill’s effective date. Combined with the $165 million issued over the last few years, the total far exceeds the new $200 million limit. Rather than engage in the proper process to dispute or amend the bill, the Alpine School District decided to defy it and saddle taxpayers with unwanted additional debt. In the coming months taxpayers will see exactly what effect this decision has on tax rates since the revenue needed to cover this massive amount of new debt will need to be pulled from their pockets.
What can be done?
First, the Alpine School District will hold a hearing for its $175 million bond on March 19th at 6pm in American Fork. Public comment will be permitted, and we encourage voters to speak in opposition to the debt.
Second, SB 86 will come into effect on May 1st, which should put an end to this abuse. The school district will have no choice but to adhere to the law.
Third, we encourage Alpine School District voters to hold the board to account. Three of the six current board members’ terms expire at the end of this year. In November, voters will have the opportunity to replace or reinstate them. Voters’ decisions in November will directly affect the board’s decisions over the next few years.