What is Going On In Wasatch County?

Early on in Shakespeare’s Hamlet, Horatio and Marcellus lament with Prince Hamlet the sad state of Denmark’s body politic. Marcellus observes that “Something is rotten in the state of Denmark.”

To read the news coming out of Wasatch County, it’s difficult not to wonder if something is rotten in Wasatch County. The FBI is interviewing witnesses, the Utah Legislature is putting involved parties under oath to explain the fiasco and the state auditor is conducting an audit, the results of which are expected out in weeks.

The issues are complex, difficult, and, frankly, boring. Mention “water rights” and “sewage treatment facilities” and you can clear a room in seconds. But the costs of the scandal are in the tens of millions, and the accusations of corruption have started an investigations the likes of which Utah hasn’t seen at least since…well, since the fall of John Swallow and Mark Shurtleff.

What is going on in Wasatch County?

Millions of Dollars, But Nothing to Show

On November 30, 2014, Robert Gehrke reported that landowners were losing their property because they were “unable or unwilling to make payments on $40 million in a sewage-treatment system that has never operated and won’t be up and running in the foreseeable future.”  Initially, the sewage treatment system was part of a 3,300 home project that failed when the housing market crashed in 2007, but the cost for the project has come down on landowners who had nothing to do with the development.

One sheep farmer in the area were assessed $830,000 in penalties and water, even though they have their own water sources and don’t need or want the water from Jordanelle Special Service District. which is assessing the penalties.

And even those who are paying the fees and penalties aren’t getting any water for the cost. Just the promise of water.

Meanwhile, the sewage treatment plant, a giant state of the art facility, sits empty and silent, too large to handle the few homes that dot the prairie.

Foreclosure, Government Defaults, and the FBI

Facing landowners who refused to pay for water they didn’t need, the Jordanelle Special Service District allegedly began approaching developers to suggest that they use the district “as a hammer” to foreclose on the owners, and then buy the property at a pittance for the original cost. Developers refused to buy foreclosed properties from the district (and fill district insider pockets), and the Jordanelle Special Service District defaulted–the first true government default in Utah history.

It wasn’t long before the FBI begun interviewing individuals regarding “widespread mismanagement, misuse of public money and self-dealing[.]”

Then, a former district employee testified under oath that she was witnessed the district and Wasatch County conducting what she believes were improper dealings. Additionally, she claims that another employee had told her that “a shredder truck had been parked in front of the district offices and many records were gone.”

Attorneys for the district deny the charges and claim that all documents are being saved because of a litigation hold.

2002 Winter Olympics All Over Again

At times, the story seems to echo the 2002 Winter Olympics scandal. Developers new to Utah stated while under oath that they were told they had to buy animals from the children of public officials or help pay for the children to go on rodeo trips. That’s just the way business was done in Wasatch County.

They refused.

“You need to get tens of thousands of dollars cash, because the county fair is coming up and you need to go buy farm animals from the county councilmen’s kids as a way to grease the wheel,” said one developer under oath.

Deal Gone Bad or Inside Dealing?

Admittedly, in addition to being a complicated case, it’s also difficult to find sympathy with any of the parties involved. On one side are wealthy developers. On the other are other wealthy government insiders.

Even so, if government power is being used to place liens, foreclose, and take real property, all Utahns should be concerned. If they can take the land from big guys, why not from little guys, as well?

And what happens to the cost of doing business in Utah when the reputation for corruption begins to set in?

Is Something Rotten In Wasatch County?

As Michael R. Johnson of Ball Ventures and BV Jordanelle put it while testifying before the Utah Legislature last year, government is not supposed to work this way. Special services districts, with the power to assess taxes on real property are not supposed to be able to work hand in hand with developers to foreclose on valuable property and then turn around and sell it at a profit to the public officials and their friends.

No one should be able to use political power as a “hammer” to get sweet-heart land deals.

If you don’t think that this can affect the average Utahn, think again. Regina Shafer, USAA assistant vice president which is the largest purchaser of the bonds, wrote in an op-ed recently that

Just last week, a Utah city was unable to borrow in the public markets because of concerns over this troubled situation. Investors in bonds of Utah public entities provide critical financing for public infrastructure, such as roads, bridges, water facilities and schools. If those investors lose confidence, it will raise borrowing costs for Utah local governments — costs ultimately borne by Utah residents. Utah’s bond lenders are waiting expectantly to see whether the state will allow its local governments to mistreat their investors or whether it will intervene to right a clear wrong.

It may be complicated, but the costs will trickle down to the average citizen with higher taxes to cover higher bond costs. That will impact our ability to finances schools, roads, and bridges. Under one proposal to solve the problem, Wasatch County will take on new bonds to cover the debt, raising the property taxes of residents to between $377 and $686 for homes and businesses.

But what if the landowners are, well, lying? According to the district, the landowners are just looking for a legislative bailout now that they have to pay the costs for improvements they wanted when times were good. I can empathize with that concern–living at the whim of marker forces is risky, and a lot of people lost their shirts when the housing bubble burst.

But suggesting backroom deals for insiders and improperly managing public resources to line ones own pockets is still wrong and should have no place in Utah governments.

David Bryant, an attorney who represents one of the landowners along Jordanelle Reservoir, said in a Salt Lake Tribune piece today that he and his group were prepared to pay the costs and take the risks associated with the property development.

“What we weren’t prepared for was government oversight more motivated by self-interest than anything else, and that is willing to go so far as to destroy records during a state audit to save face,” he said.

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