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Real Salt Lake's Rio Tinto Stadium in Sandyis pictured on Tuesday, April 7, 2015.

SANDY — When Sandy city officials and Real Salt Lake owners struck a deal 10 years ago, Rio Tinto Stadium and its land were expected to be worth $110 million — the cost of building the venue.

Its tax revenue was supposed to help pay off the $11 million bond Sandy took out for the project.

But just a few years later, after Real Salt Lake provided financial documents to assessors showing the Major League Soccer team had been losing money, the stadium's value was slashed by nearly half.

Joseph Tolman
Rio Tinto Stadium's devaluation: In 2012, Salt Lake County approved Real Salt Lake's property tax appeal on the Rio Tinto Stadium, cutting its value by nearly half

In 2011, Rio Tinto Stadium's building and land property tax bill was $1.45 million, according to Salt Lake County records. This year, its tax bill was $688,283 — a difference of roughly $768,000.

Estimating that RSL saved about $768,000 per year for the past seven years, that equates to nearly $5.4 million in savings.

The tax devaluation, approved by Salt Lake County, went widely unnoticed until it caught the eye of a curious commercial real estate agent with clients in Sandy.

Joe Scovel, whose clients have had legal disputes with Real Salt Lake and Sandy, said he noticed the drastic devaluation when valuing nearby properties — a finding that he said left him “shocked.”

“They got half off, just like that,” Scovel said.

So he started digging to find out why. What he found, he said, didn’t “smell right.”

“Utah soccer was handed a gold mine by the taxpayers, and they couldn't even keep their bargain,” Scovel said.

The stadium, he pointed out, received $35 million in state funding and $11 million in bonding from Sandy.

Over the past eight months, Scovel filed open records requests with Salt Lake County and Sandy for documents related to the RSL tax deal, which he eventually provided to the Deseret News and the Salt Lake Tribune. The Deseret News obtained additional information from interviews and documents from the county auditor's and treasurer's offices.

Though Scovel and others have raised questions about the tax cut's propriety, Real Salt Lake, Sandy city officials and leaders from multiple independent Salt Lake County offices — including council members, auditors and assessors — say the tax appeal followed all appropriate channels.

At the same time, the appeal flowed through both the county assessor's office and the County Council without catching public attention, despite public interest in the stadium when negotiations were happening on state and city levels years ago.

That's why Scovel and a Utah lawmaker who helped move negotiations at the state level to make the stadium a reality are questioning why taxpayers weren't aware of such a major cut that would result in a tax shift onto other homeowners and businesses in the area involving a project that cost millions in public funds.

'Smell test'

"Maybe it's an absolutely legitimate reduction in value, but it doesn't pass the smell test at this point," said Sen. Curt Bramble, R-Provo, who was majority leader in the Senate in 2007 at the time of the stadium's negotiations.

Bramble, a certified public accountant, said he didn't do the due diligence on the tax appeal so he can't know exactly what justified it (under state law, assessors cannot release financial information they use to determine valuations), but "it seems extraordinary that an asset would be worth less than half of the cost to build it."

"Do I think it's reasonable? I don't know. But I was surprised to see such a dramatic (decrease) and surprised to see that it was done without the public's knowledge," he said.

In 2007, the Utah Legislature passed a bill that invested $35 million in public funds toward the project, and Sandy issued $11 million in bonds to help with construction.

"It was a very hard-fought negotiation to get all the parties to the table to approve that stadium to begin with," Bramble said. "So, yes, it's a surprise a few years later there was a dramatic shift without much fanfare or transparency."

He also noted, however, that the stadium has been an asset to the community, adding that "none of what we're talking about is intended to be misconstrued as a slam against (RSL owner) Dell Loy Hansen."

RSL, Sandy and Salt Lake County officials all say the tax appeal's approval followed an appropriate process — though assessors acknowledge valuing the stadium proved to be a challenge because of a lack of market comparables.

RSL officials also say nothing "nefarious" led to the approval of the tax appeal.

In response to a request for an interview with Hansen, Real Salt Lake Chief Business Officer Andy Carroll sent an emailed statement, saying the tax appeal was for "good, sound business" and meant to ensure the soccer team was "paying our fair share of property taxes (and) not overpaying due to improper or outdated valuations."

“In 2012, we were one of more than 700 entities to contest valuation estimates; this is simply a good, sound business principle," Carroll wrote.

There was nothing "clandestine or nefarious regarding how we handled the property tax reduction. … There is no story there," he said.


Bramble, however, took a shot at Salt Lake County, saying county leaders should be more "consistent" on tax appeal issues, pointing out that the county (among others) is suing the state, contending that a law he helped pass is forcing homeowners and business owners to unfairly pay higher property taxes to compensate for tax discounts the state is giving to airline companies.

Under Utah code, local governments can raise rates when overall valuations go down to produce the same revenue as the previous year, meaning when large appeals are won, other taxpayers must offset the reduced payments, resulting in a tax shift.

In the stadium's case, involved taxing districts that experienced that shift included not just Sandy and Salt Lake County, but also the Canyons and Jordan school districts, and other water and sewer districts.

If Salt Lake County officials truly care about those tax shifts, Bramble wonders, where were they when RSL requested such a large discount?

"I would think the same public officials that are arguing tax shifts in one case ought to be as concerned about tax shifts in every case," he said, specifically calling out Salt Lake County District Attorney Sim Gill because of his involvement in the lawsuit.

"That inconsistency is troubling to me," Bramble said.

But Gill said the county's lawsuit with the state over aircraft valuations is "two fundamentally different issues," adding that the stadium tax matter is under the county assessor's and County Council's purview as the independent bodies that determine and approve valuations.

"Our citizens deserve transparency, fairness and the application of our constitutional requirement when it comes to taxes," he said. "When the state passes tax laws that shift the burden unfairly to the average citizen, then government fails them. Our lawsuit is actually fighting for and standing up for the citizens when our Legislature will not."

The stadium's tax appeal was approved by the Salt Lake County Council acting as the board of equalization in a public meeting. County minutes show no records that the stadium appeal was specifically discussed, as it was lumped in among more than 700 other evaluations proposed by the county assessor's office.

The stadium appeal was, however, on a list of 29 parcels showing changes valued at more than $250,000 for council members. Its $41 million reduction was by far the largest devaluation on the list. The next largest decrease was for $5.4 million.

Billy Hesterman, of the business-backed Utah Taxpayers Association, said without knowing all the details that factored into the stadium's appeal, "it's hard to know if they're paying their fair share or not."

But, Hesterman added, "what we can learn from this is major changes like this probably need a separate agenda item or need to be highlighted in some way so it's not hidden in more than 700 appeals."

"All taxpayers should be aware of what's going on, and it's worth having an extra set of eyes to make sure everybody's treated fairly," he said.

Where the 'buck stops'

County Councilman Steve DeBry, who was on the council at the time of the stadium's appeal, said he didn't "have any recollection of it at all," but he wished it had been more on the radar of board members for discussion.

"We want to do what's best for the taxpayers of this county, to make sure everything is above board," he said, acknowledging the "buck stops" at the County Council.

But DeBry also said the council relies on the board of equalization staff to highlight "red flags" or issues that might need to be discussed, as well as the expertise of the assessor's office.

"I'm all for transparency and openness, and the bottom line is I don't know what that soccer stadium and that ground is worth," he said. "Goodness gracious, I'm not an assessor."

DeBry added: "There was no intent by anyone that I'm aware of to do anything underhanded or anything like that," but he's already asked his senior policy adviser to look into the situation and see if there's any way to improve the process so such a large devaluation doesn't go virtually unnoticed again.

"I would have no problem whatsoever to do a review and help us evaluate what happened or what should have happened that didn't that might give us information to help us do better in the future," he said.

Salt Lake County Auditor Scott Tingley said from his review of the stadium appeal, all parties involved followed the appropriate process.

Joseph Tolman
Rio Tinto Stadium land and building tax bills

"It went through the proper channels," he said. "Every taxpayer has the right to appeal their assessed property value, and owners of Rio Tinto went through the proper process."

Tingley also noted that perhaps a "communication breakdown" occurred with the council because while the stadium devaluation did appear on the list of value changes of more than $250,000, it was not highlighted by staff as a possible discussion item.

Councilwoman Aimee Winder Newton also said when she first heard about the stadium appeal she started researching it because she had some "questions of my own," but what she found was a fair appeal backed up by the assessor's analysis.

"After doing my own reserach on this, I feel confident in the ability of the assessor's office and the market valuation process they followed," Newton said.

Appeal won

Back when RSL and Sandy officials reached a deal on the stadium in 2007, they signed a "master development agreement" stating that Sandy's ability to issue its bond would be dependent on a "taxable value of the assessed property in the tax increment district of approximately $110 million," according to the agreement.

But in the stadium's third year of operation, RSL challenged that value.

"(Hansen) came into our office and wanted to discuss it," County Assessor Kevin Jacobs said. "He said he thought it was not worth what we were assessing it for, and he was willing to provide their internal documents that would give us a reason or evidence to review our evaluation."

That 2011 appeal later took the stadium's building and land property value down from $98.1 million to $57 million.

Sandy initially protested the devaluation in an Oct. 7, 2011, letter written by Nick Duerksen, the city's economic development director.

"If the taxable value of the stadium is substantially reduced, as requested in these appeals, the city's share of the property tax revenue generated by the stadium will be far less than the debt service obligations on the stadium bonds, and the city will be required to pay the shortfall from other city funds," Duerksen wrote.

"Such a result is inconsistent with the intentions of the city and the stadium owner when the stadium bonds were issued," the letter continued.

But a few months later, in February 2012, the city withdrew its protest following a meeting with Hansen and Sandy Mayor Tom Dolan, who asked for the City Council's support to figure out a new deal, according to Sandy City Council meeting minutes from Oct. 25, 2011.

At the meeting, Dolan said he met with Hansen and other RSL officials who stated "they are concerned because they are at a competitive disadvantage with the taxing going on with the county," according to the minutes.

"(Hansen) would like us to go with him to the county and help support his appeal," Dolan told the council, the minutes state.

Council members agreed, with Councilman Steve Fairbanks saying the city should proceed with a deal with RSL because "the soccer team is making money," according to the minutes.

But that wasn't the case, according to the assessor's office, and Real Salt Lake's declining revenue would be a sticking point on the soccer team's tax appeal.

Losing money

In an email unearthed by Scovel, the county official assigned to the stadium appraisal, Steve Anderson wrote, "while I have worked on sports venues in the past, this is different from other venues … because it is losing money and has been from the start."

In the email, Anderson said he needs to do research to determine how to appraise the property, though "my experience tells me that we should be looking at some sort of discounted cash flow analysis."

According to assessor documents, that's what assessors eventually went with, though Jacobs noted valuing the stadium ended up being quite challenging because it didn't have any close market comparables.

"We looked everywhere," he said, noting that most stadiums outside Utah are publicly owned. "It was a huge challenge."

Jacobs said county assessors normally determine value based on cost. In the stadium's case, it cost $110 million to build, and because there were no revenue numbers to also consider in the stadium's first year of operation, a cost analysis was the only assessment tool available, he said.

However, in the stadium's third year of operation, RSL officials were able to provide financial information that assessors could use in an "income-based analysis," Jacobs said.

"We did look at the financial information they gave us, and we were able to come up with a value we felt comfortable with," said Matthew Smith, commercial division director in the assessor's office.

"After three years of operation, the team furnished financial information to determine an income approach to value — as has been done with other sports venues — instead of a cost approach to value," stated a Salt Lake County Board of Equalization document regarding the appeal.

Assessors used a 10-year "discounted cash flow analysis" due to "the team's current negative cash flow in order to arrive at a value that was justifiable," the document stated.

Smith also pointed out that when the stadium was first constructed, it was proposed to be a multiuse facility for concerts and other events, but in 2011, it had only been used as a soccer stadium. "That limited the usability of it as well" and factored into the devaluation, he said.

"We assess properties based on the facts known to us, and Rio Tinto is no different than anyone else in that regard," Jacobs said.

He compared what happened to Rio Tinto Stadium to the situation with The Gateway shopping center in downtown Salt Lake City. When The Gateway was built, it was supposed to be "the greatest mall ever," Jacobs said, and it was popular for a while, but "now it's completely different" and values plummeted.

"The same story was told out here with Rio Tinto, that it would be the greatest thing ever and it was going to pull up property values around there," he said. "Sometimes that happens, but a lot of times that's not what occurs."

Making up lost revenue

Sandy employees were directed to work with RSL to come to a solution while the appeal was in the works, Duerksen said, but city officials didn't officially agree to a new deal until after Salt Lake County officials approved the tax appeal — something Sandy had no influence over because the assessor is an independent office.

At stake was a loss of city tax revenue because Sandy was relying on the stadium's taxes to repay the $11 million bond.

The deal was later formalized in a June 2013 "forbearance agreement," requiring Real Salt Lake to pay $75,000 to compensate the city for 1,000 stadium parking spaces that the team promised to build but never did.

The agreement also says that the $75,000 payments would terminate either when the stadium reaches a minimum value of $110 million or if RSL meets the parking space requirement.

Duerksen said the forbearance agreement was drafted at the advice of "bond counsel," who said the agreement would be the best "tool" to secure the funds to make up the lost property taxes.

But Scovel sees the agreement as a "cover" for the lost taxes issue while allowing RSL to get away with not building the promised parking spaces.

"It's smoke," he said. "Not only was it done to cover up the tax issue, it also lets the stadium off for the parking."

Duerkson disagrees, saying the "requirements are still there."

"They don't go away," he said. "(Bond counsel) felt this was the best way to secure the funds and give us good standing."

However, the $75,000 agreement hasn't always covered the bond payments.

In a 2015 Sandy Redevelopment Agency annual report, city officials discussed a shortfall in funding for the stadium's project area.

"Mostly due to insufficient property tax increment revenues, the 9400 South Project Area will not be able to assume servicing of all of the debt related to the soccer stadium bonds," the report stated. "The 9400 South Project Area will be relying on other (redevelopment agency) project areas for help in servicing the debt for the soccer stadium bonds, but the city and RDA are currently exploring options and will be taking steps to ensure the project area will be self-sufficient in the future."

Those shortfalls only happened for a few years, Duerkson said, and now the $75,000 agreement covers the bond payments.

Community investment

Given the amount of taxpayer investment, combined with the stadium's complicated valuation history, has it been worth it? Sandy city officials say yes.

"It's been very successful," Duerkson said. "If you go to a game, it's full of great family entertainment and we get nothing at the city but positive reports. … It's been a very good enhancement to the city, there's no doubt."

In his written statement, Carroll, RSL's chief business officer, pointed out that RSL has "directly contributed more than $10 million to local, county and state economies through sales and property tax alone."

But to Scovel, RSL got a sweetheart deal that got even sweeter when their appeal was approved, shifting the burden onto other taxpayers.

"This is the rich getting richer, you know? This is robbing Peter to pay Paul," he said.

Dolan did not return a request for comment for this story through his staff, but Kurt Bradburn, who will take Dolan's place in January, said without knowing all the details of the tax appeal and the city's subsequent agreements with RSL, he's hesitant to say whether he believes the stadium has been a worthwhile investment of taxpayer money.

"I'm just hearing about this now like everyone else, so I don't know all of the details because so much of this hasn't been transparent," Sandy's mayor-elect said. "So I don't know if we've seen a return on investment, but at the same time, anytime you have a professional sports team in your city, it's seen as a good thing."

Bradburn said had he been in office, he would have wanted the issue to be more on the radar of Sandy residents, but he also understands assessors' responsibilities and that every business has the right to appeal its property taxes.

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Bradburn said he intends to review the appeal, its impact on the city, and whether the forbearance agreement is adequately addressing both parking issues and the tax revenue needed to repay the bond.

"My main issue is I just want to make sure nobody is getting cheated through these deals," he said. "I don't like favoring one business over another or one taxpayer over another. I just want to make sure everybody is being treated fairly and that the public has an opportunity to understand what's going on."