The mission of the Redevelopment Agency of Salt Lake City (RDA) is to improve areas of Salt Lake City, encourage economic development of Salt Lake City, encourage the development of housing for low and moderate income households within Salt Lake City, and encourage compliance with and implementation of the Salt Lake City Master Plan. The RDA will participate with Salt Lake City, Salt Lake County, the State of Utah, and other public entities, to stimulate redevelopment.
Redevelopment agencies are a tool used by local governments to implement development goals of a community.
As a city grows older, certain parts of it can deteriorate with buildings and core public infrastructure that are in disrepair. In other parts of a city that were once focused on industrial uses, basic infrastructure is inadequate to attract and support new investment and development. This results in a decrease in the assessed valuation of the property, which reduces property tax collections for all taxing entities, leading to further disinvestment and continuation of the cycle of urban degeneration.
Redevelopment agencies bring life back to underutilized urban areas by:
As an area’s social value and economic potential increase, other businesses and private investors are encouraged to respond with additional development and improvements. Redevelopment projects are designed to spur additional growth, allowing depressed areas to be reestablished as economically productive centers for business and social activity.
The RDA Board of Directors (Board) is comprised of the seven members of the City Council of Salt Lake City. The Board is given policy-making authority for the RDA, while the Mayor serves as the Executive Director. The Redevelopment Advisory Committee (RAC) advises the Board on RDA policy.
Mayor Jackie Biskupski
Derek Kitchen, Chair
Amy Fowler, Vice Chair
Claudia O’Grady, Chair
Dale Christiansen, Vice Chair
The financial engine that drives an RDA’s urban renewal efforts is tax increment financing. Tax increment is the increase (or “increment”) in the property taxes generated within a project area, over and above property taxes generated in that same area prior to the establishment of the RDA project area. The establishment of a project area and the collection of tax increment funds must be approved by the RDA Board of Directors and the local taxing entities (school district, library, water districts, county, etc.).
The tax increment generated in a project area is reinvested into that same project area, thus recycling the funds for a specified period of time, usually 20-25 years, after which the tax increment will again be available to the local taxing entities. During the life of the project area, the taxing entities continue to receive the same amount of property taxes that they received prior to the establishment of the project area, along with any share of the increment they may have negotiated with the RDA.
Improved redevelopment project areas contribute to the overall health and vitality of the city by reversing the negative effects of blight, while increasing the tax base from which the taxing entities draw their funds. In Salt Lake City, Redevelopment Project Areas’ tax bases have historically grown at twice the rate of surrounding areas that are not designated as RDA project areas.
The RDA is required by Utah Code Section 17C-1-604 to conduct, approve, and publish an independent audit of its financial condition. The primary purpose of this audit is to report the amount of tax increment collected by the RDA for each project area; the amount of tax increment paid to each taxing entity; the outstanding principal amount of bonds or loans; the amount expended for acquisition of property, site improvements, public utilities, or other public improvements; and the RDA’s administrative costs. While the last few pages of the audit provide some information on a project area basis, the majority of the audit combines revenues and expenses from all RDA activities.
While the audit serves these functions well, the final report does not reflect many of the nuances of the RDA’s finances. In the past, this has caused confusion among those reading the audit without a full understanding of other RDA-related obligations and requirements.
In particular, the audit’s reference to “unrestricted cash,” without explanation, can be misleading. The term “unrestricted,” while having a very specific meaning in accounting parlance, carries an unfortunate implication that the funds are completely available for any purpose, which is not the case. There are three primary limitations on the use of “unrestricted cash” by the RDA:
Some of the funds included in the total dollar figure represented as “unrestricted cash” are already committed through various contracts and agreements the RDA has executed. For example, the RDA periodically enters tax-increment reimbursement agreements with private developers, whereby a portion of the increased property taxes associated with a particular development will be refunded to that developer, in exchange for the developer’s provision of some public benefit, such as structured public parking, restoration of an historic building, or creation of public spaces or plazas. The funds for payment of this obligation must be budgeted each year, and, until the payment is made, those funds remain in our accounts as “unrestricted cash.” Technically, the RDA Board could elect to spend those funds for some other purpose, but doing so would entail defaulting on the RDA’s agreement with that developer. Likewise, the RDA sometimes enters Interlocal Agreements with other agencies, such as Salt Lake City, that obligate it to make ongoing payments totaling a certain amount. The funds for those payments remain as “unrestricted cash” until the payment is made.
The annual audit treats all of the RDA’s funds as a single account. But state law requires that funds generated in an RDA project area be spent within the boundaries of that area, subject to a few narrow exceptions. Therefore, while the total pooled cash of the RDA is characterized by the audit as “unrestricted,” it is, in fact, available only to be spent in the project area where it was generated. The RDA carefully tracks the funds collected by the project area of origin, and treats each project area as a separate and distinct account, ensuring that funds generated from a particular area are expended only within that area. While the RDA’s budget process described above clearly allocates expenditures by project area, the annual audit does not make this distinction, sometimes creating the inaccurate impression that the full cash balances of the RDA could be spent on a single project in a single project area.
Another detail that is not articulated in the annual audit is the RDA’s practice of budgeting funds for large projects over time, and then paying cash for the projects when sufficient funds are accumulated to proceed. This savings-based, or cash-based approach is very conservative, and enables the RDA to tackle large infrastructure projects without having to assume debt. Because tax increment proceeds are often viewed by banks as unpredictable, borrowing against future revenues is often not possible, and, even if possible, loans are not offered on favorable terms. Therefore, the RDA’s established practice and policy is to allocate funds as available a little at a time.
This process of accumulating funds for a project often leads to large cash balances in RDA accounts. A good example is the repair and renovation of the Gallivan Utah Center. Beginning in the early 2000s, the RDA anticipated that in approximately 2008-2010, the RDA would need to undertake significant repairs and renovations to the Gallivan Utah Center. Beginning in 2006, the RDA Board allocated funds each year to be saved for that renovation project, ultimately accumulating the more than $7 million needed to complete the design and construction. Those funds were always characterized by the audit as “unrestricted cash.” Again, the saved amounts could technically be allocated by the Board for some other use, but doing so would reduce or eliminate the funds needed for the renovation and repair project.