As county executives from around the nation gather in Las Vegas this week, they might take heed of what is happening in Utah, 125 miles to the northeast.
Double-digit economic growth in southern Utah is causing heartburn in counties such as Washington, where officials are struggling to keep up with the demands occasioned by growth. And in northeast Utah, Summit County, home of two ski resorts, is also suffering from growing pains.
"I don't know what's worse, depression or growth," said Glenn Thompson, Summit County's treasurer and the president of the Utah Association of County Treasurers.
Thompson estimates that 10% of the state's 29 counties cannot fund the demands placed upon them.
"We can see several that will be in trouble," Thompson said. "Some are right on the edge, and we know in the next several years there will be more."
As an example, Thompson cited Garfield County in southern Utah, where the sawmill business is dwindling and only 3% of the county's land is taxable because most of it is owned by the federal government. Wasatch, a mountain county south of Summit, has "no tax base," he said, although there is a possibility of a ski area being built there. Thompson's own Summit County has lost $2 million in taxable income during the past seven years because of declining oil and gas activity.
Where the money isn't
Utah is attracting a lot of people, but not so many of the commercial and industrial types who help swell a county's property tax coffers.
"A house provides nothing. A county spends $347 providing services for the $200 it gets back in taxes. Bedrooms don't pay their way," Thompson said.
Most of Utah's population is strung along the Wasatch mountain front. Many people who live in bedroom communities in the Jordan River valley go shopping in Salt Lake City and Provo, leaving less retail tax revenues for the counties.
Mark Walsh, associate director of the Utah Association of Counties, points to the situation of Washington, the state's southwestern-most county. St. George and other small resort cities are located there, but 70% of the county land is owned by the federal government. In fact, 70% of Utah land is in the hands of two federal agencies: the Bureau of Land Management and the Department of the Interior. Though the latter pays some money for county services, the land management bureau pays nothing for road and sewer maintenance or for law enforcement.
"Within the last 10 years, infrastructure has become a major problem" for many counties, Walsh said.
"In Utah, you've got a fairly unique situation because the federal government owns 70% of the land. Eight percent is state-owned, used for schools and prisons. You have no tax base," Walsh said.
Add to that the reluctance that conservative rural citizens of Utah feel about paying high taxes and you've got a weak funding formula for some counties. Luckily, for other counties, mineral and natural resource extraction taxes bolster county taxes.
Others, such as Daggett County, in the northeast part of Utah, are struggling, Walsh said. Daggett County is home to the Flaming Gorge dam and reservoir. Because of the project, 90% of the county's land is owned by the federal government.
Daggett County's permanent population is about 700, but 2.5 million people a year visit the area to play in the reservoir's water and view the dam. The county receives just $36,000 a year from the federal government instead of paying taxes to the county. However, the county must provide law enforcement and road maintenance for all the visitors.
"Most of the land in Utah is [Bureau of Land Management] land, which doesn't pay taxes. Who's going to pick up the garbage? Who does the service on sewers?" Walsh said.
The way Walsh sees it, if the counties are the brick and mortar of local government, there's been a little less brick and a little less mortar these days, and it's showing.
"You can tell because roads aren't being maintained. In some instances, they're not being built. There are some counties where you have thousands of miles of roads, maybe over half of that mileage on dirt," Walsh said.
One answer for some counties is to encourage cities to annex county developments. That doesn't work for all.
"Annexation doesn't solve the problem when you have home owners who require services 30 miles out of town who need their garbage picked up. How are you going to annex? Rural is truly rural," Walsh said.
Thompson believes that most Utah counties have the ability to finance jails, maintain roads, and carry out law enforcement, but face a crisis in two areas as the result of growth: providing enough water for everybody and dealing with the nettlesome problem of county dumps. Environmental concerns are growing to the point where counties don't have the money to run dump sites, he said.
The scarcest resource
"Washington County's in a crisis situation with clean water," Thompson said. "Summit's in the same boat. We don't believe we have enough water to provide for growth.
"Clean water is probably the most expensive and difficult issue because everybody wants to move here, but there's only so much water in the ground. Remember, this is desert country." Summit County, though mountainous, is dry. On several occasions during the last few years, the local water district had to ask the Army Corp of Engineers to truck in water.
The high cost of providing water and garbage facilities hasn't been lost on investment bankers. Kemper Securities Inc.'s Laura Lewis has been trying to drum up business, but said that Utah county administrators are leery of creative financing.
For example, Utah allows special improvement districts and special service districts. They are chartered and administered by cities and counties. When Lewis talks to people about special improvement districts as a way to pay for growth, she confronts skepticism.
"No special improvement districts have been rated or insured," Lewis said. "When you say special improvement districts, people start talking roads to nowhere in Colorado."
Kemper spent millions on legal fees and settlements in Colorado's infamous dirt bond defaults of the 1980s. Colorado has no general obligation requirements on special district defaults; the districts are independent entities without supervision from cities and counties.
Lewis said that counties and cities in Utah also are reluctant to administer the districts and collect taxes.
"It becomes an administrative headache," she said.
Blaine Carlton, a bond attorney with Ballard Spahr Andrews & Ingersoll in Salt Lake City, said he has been involved with most of the estimated 100 special districts. The state doesn't count the number of districts. About 10 to 12 are created each year, and most improvement districts expire after 10 years, Carlton said.
Counties receive a portion of the state gas tax for roads, but it is the new developments that present the most problems, a common occurrence in undeveloped parts of the western United States.
"I think special improvement districts are used more so now than 10 years ago," Carlton said.
"A lot of times what happens in these counties is you get a developer coming in and he contacts a county about a special improvement district. That's something counties have to be very careful of."
Utah has no debt-to-assessment ratio requirements for the districts. So far, however, the state hasn't needed them because bankers have been conservative in using the districts, Carlton said. In his 18 years of practice, he said, he does not know of one improvement district default.
