There's a new trend in housing developments and it's not good for the average consumer.

Basically, if a developer wants to build a new housing development that doesn't yet have infrastructure (roads, water pipes, electricity, gas, etc.) the area government is allowing the developer to borrow the money to create the infrastructure and then pass the debt onto the homebuyer.

It's called a "Public Infrastructure District" and developers love it because it saves them millions of dollars on every project. Meanwhile, home buyers purchase a residence and are immediately on the hook to pay back the loan the developer incurred. The payback term usually lasts decades.

Made possible by a newish Utah code (17D-4 [PID Act] if you want to look it up), the practice is gaining popularity in Utah. It is already prominent in states like Texas, Colorado, Arizona and Florida.

Hurricane city councilman Joseph Prete, on the Andy Griffin Show on Thursday, said the practice hurts the "little guy," while helping the wealthy developers.

"I think we've had a little bit too cavalier an attitude about PIDs in Hurricane."

"Is it fair/right to shift a developer expense to taxpayers within the developing area? No! (It) massively increases developer profit while straddling future Hurricane residents (who aren’t here to voice an opposition) with a double tax."

Prete voted against allowing the practice in his city, but right now he is in the minority among politicians in Southern Utah.

The other states using PIDs have reported some problems with PIDs. From a report prepared by Prete, who is an attorney by vocation:

Report card for PIDs in other states

  • C-minus, at best
  • Problems reported at many levels (TX, AZ, CO, FL)
  • Residents losing homes.
  • Fights about “disclosures.”
  • Huge headache for states to manage.
  • Backdoor corruption with PID boards, lenders, double dipping, etc.
  • Cities lose control of infrastructure roll-out processes
  • Terrible problems and abuses in Colorado - Developers won’t build unless granted a PID.

Prete also said PIDs are rife with future issues:

"Bad policy!!

  1. Significantly less risk and greater profit for developers while burdening taxpayer with the cost.
  2. Developers dramatically increase property value without investing one red cent. Speeds up growth when majority want slower/measured growth
  3. Loss of small-town charm; rapid transformation into a large city
  4. Unfairness – people across the street paying less tax while enjoying same utilities; can’t point to meaningful benefit to those paying more; creates discord and division within the city
  5. Jeopardizing ability to effectuate future tax increases/bonds – Future PID participants will resist
  6. Irresponsible ceding of control to a self-interested developer board
  7. Control over process, rollout, payment of loan, contractors doing the work, tax levy, etc.; likely abuses and double dipping; annexation issues?

Prete said cities are starting to realize the problems with granting PIDs to developers.

"Most Other Cities are saying NO – and for good reason. (For instance) Saratoga Springs rejected all requests so far; generally against exploiting taxpayers to subsidize developer cost (and augment develop profit).

Ultimately, Prete warns all who will listen to beware of the PID.

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