Luring development with tax incentives is a tactic coming under the microscope of the state's auditor general.
At the request of 14 legislators, a statewide audit of redevelopment agencies is set to start in June at the same time a Tax Reform Task Force tries to tackle potential abuses of RDAs.
"Some of the issues with redevelopment agencies are raised as apocryphal stories; some are issues that I've seen firsthand of abuse," said Senate President John Valentine, R-Orem. "And some are situations where the municipalities have really done some good things. I thought it was best to have the actual facts before us."
RDAs, which funnel property taxes from new developments back into those projects and away from taxing entities like school districts, have remained in the legislative spotlight after a new law put a one-year suspension on any RDAs used for retail development.
The bill also eliminated the use of RDA dollars for recreational uses like soccer stadiums.
According to estimates by the Utah Taxpayers Association, more than $90 million in property tax was kicked back to developments this year via RDAs. Nearly half of that figure would have gone directly to school districts.
Sen. Curt Bramble, R-Provo, who pushed the RDA reform measure this year, said the in-depth look at the approximately 80 RDAs throughout the state is long overdue. The last such audit was done in 1991, and many cities have been allowed to get away with misusing and misdirecting public tax money, he said.
"We would really like to get some credible, verifiable data on how RDAs are managed," Bramble said. "We need to get a solid baseline. It's saying OK, there was an audit 14 years ago, how have we done between then and now?"
Although the scope of the audit has not yet been defined, the legislators' petition for the audit requested an examination of RDAs to weed out ones that may not be in compliance with state statutes and those that are not operating at the least cost to taxpayers.
Both of the issues are at the heart of RDA abuse, said Robyn Bagley, who formed a grassroots RDA reform group in Sandy that pushed for the audit.
Other central problems with RDAs that will likely be addressed by the audit are whether diverting property taxes forces an increase in tax rates and if there is adequate legislative oversight of RDAs.
"All the cities have cued into this tool, and they're stretching it as much as they can," Bagley said. "They've discovered this is a way not to be accountable. If you've got that much in millions of dollars of diversions, that warrants an audit."
Originally intended to encourage development in rundown areas, RDAs have been manipulated to recruit retail developers on prime real estate, said Mike Jerman, vice president of the Utah Taxpayers Association. That misuse, he said, allows cities to steal retail from each other instead of bringing any new economic growth to the state.
"We've been documenting blight or pretend blight, but having an official audit will hopefully strengthen our case for RDA reform," Jerman said.Other central issues will include how cities give notice to stake holders, how they establish RDA boundaries and whether taxes are funneled back to school districts when RDA bonds expire.