The outcome of the case will determine who maintains tax and land use authority over about 19,000 acres — and city officials say it could also set precedent for the division of state and municipal powers that echoes beyond Salt Lake City Hall.
The outcome “is important for any city in the state of Utah,” Mayor Jackie Biskupski said in an interview Friday ahead of Monday’s court hearing.
That’s because if it “doesn’t go our way,” she argued, “the state would have the ability to just go into any community and decide to draw lines around a certain territory of that city, whether it’s developed or not developed.”
During the 2½-hour hearing Monday in 3rd District Court, the city argued that the state’s takeover of its land through legislation last year represents an illegal land and tax grab — an argument it’s hinging on one sentence in the Utah Constitution known as the “Ripper Clause.”
That section, Article VI, Section 28, prohibits the Legislature from delegating “to any special commission, private corporation or association” the power to “make, supervise or interfere with municipal improvement, money, property or effects,” to levy taxes or to “perform any municipal functions.”
That’s exactly what the city argues the state has done in this case, naming as defendants the Utah Inland Port Authority, Gov. Gary Herbert and Attorney General Sean Reyes.
The state, in turn, pushed back on claims that the Utah Inland Port Authority Board — created to oversee development in the project area — is a special commission and that it interferes with municipal funds or land to conduct city functions under the meaning of that clause.
Additionally, attorneys for the state contend that the port authority does not fulfill a municipal purpose because the project will have statewide benefits. The Governor’s Office of Economic Development, for example, is currently involved in negotiations “with a number of very prominent companies that are interested in making substantial investments” within the area, according to court documents.
Those investments could exceed $100 million and would create more than 3,000 jobs with annual salaries likely to be $100,000 or more, the state contends.
Where there is a statewide purpose — in this case the creation of jobs and cultivation of economic development — “there’s no Ripper Clause violation,” concluded Lance Sorenson, an attorney with the Utah attorney general’s office who represented the state during oral arguments. If there is a doubt, he argued, the court should err on the side of deference to the decisions of the state Legislature.
But city attorney Samantha Slark questioned whether the port has a statewide purpose, arguing that the promotion of economic development doesn’t give the state “carte blanche” to take over municipal functions. If there really is a statewide purpose, she said, legislators could levy a statewide tax rather than forcing city residents to bear the brunt of the port’s creation.
“That would be OK,” she said, “but that’s not what’s going on here.”
After the state and city had a chance to lay out their arguments, Judge James Blanch praised both sides for their “outstanding legal work” and promised a written decision would be forthcoming.
“These are complicated issues,” he said, “and I’ll try to get a decision as soon as I can.”
It’s unclear when that will be, but the lawsuit has been put on an expedited timeline, since both the state and the city want it to be resolved sooner rather than later. For the city, that’s because it is expecting to lose tax differential dollars early next year; for the state, that’s so it can move forward with anticipated projects with “legal certainty.”
As part of its lawsuit, amended this summer, the city is seeking an injunction that would keep the port authority from spending or committing any of its property tax increment or sales tax to the project, as well as prohibit it from any planning, design or construction until the lawsuit is settled.
The city is also seeking an award of attorney fees and legal costs and a judgment that the power given to the authority to reverse municipal land-use decisions and to take up to 100% of the tax increment violates the state constitution.
Monday’s arguments did not broach the subject of the injunction but Salt Lake City — which could ultimately lose hundreds of millions in future tax growth dollars, according to Slark’s estimation — asserted in briefs that pumping the brakes would not harm the authority and would instead preserve the status quo for the city pending resolution of the case.
The state doesn’t see it that way, noting that an injunction would effectively bring the Inland Port Authority Board’s work “to a standstill.”
“Ordering the UIPA to halt these efforts, to not conditionally commit any tax differential and to not engage in any planning activities pending the resolution of this lawsuit would be manifestly adverse to the public interest by needlessly depriving Utah’s citizens of the myriad benefits the UIPA will create,” the state declared in its briefings.
It’s likely that whichever side is unsuccessful will appeal to the state Supreme Court. Port opponents have also pledged to wage other legal battles against the project if this case is not successful.
“I fully anticipate that this will fall our way, but if it does not, the timing of that decision [of whether to appeal] will matter and then we’ll see what happens,” Biskupski said in an interview after the court hearing, noting that she may be gone by the time the court’s opinion comes through.
That decision would then fall to Salt Lake City’s next mayor, Erin Mendenhall.
A representative with the Utah attorney general’s office declined to offer comments to the news media about the case after the hearing beyond providing clarifying information about the state’s argument.
Jack Hedge, executive director of the Utah Inland Port Authority, reiterated his dedication in a statement Monday to “making Utah a sustainable piece of the global supply chain.”
“I will let the attorneys and politicians focus on the lawsuit,” he said.