Utah Constitutional Revision Commission

have questioned whether special districts are proliferating, but even if they are, is that necessarily a problem, especially when special districts provide important services that may not otherwise be provided.

    The second approach raised by the commission, he said, is that even if the constitutional provision is unclear, special districts have been operating for a long time and seem to be functioning, so if a change is made at this time, caution should be taken not to do harm to the existing districts.

    He also explained that other members of the commission have argued that special districts are created to avoid constitutional restraints that apply to cities and counties but do not apply to special districts. This situation makes special districts less accountable to the people than both cities and counties because they maintain a low profile while they spend as many tax dollars as cities, without public awareness. These members of the commission have argued that good government dictates that if debt limits and other constitutional provisions make sense, and if it is determined that there should be special districts, then special districts should also be subject to these constitutional restraints.

    Mr. Howe emphasized that at its last meeting the commission decided to study first the powers of cities and counties. After those relationships are better understood, then the commission will be in a better position to discuss how special districts would best fit into the local government mix.

    Chair McKeachnie stated that the commission will keep its focus on the constitution while the special districts subcommittee will continue its focus on the statutes. He noted that there is a lot of confusion in the statute because of the way special districts have evolved. He specifically mentioned the reference in the constitution to special service districts or special districts, whichever way it is being interpreted. The commission's approach, he said, has been to question whether specific language for special districts is needed in the constitution, and if not, then the legislature could address the issue without a constitutional amendment.

    Rep. Harward noted that it is sometimes appropriate for a constitution to limit legislative action. It is interesting, he said, that the constitution specifically lists the services districts can provide and places limits on those districts. Notwithstanding, he said, there are special districts that have been formed for other purposes which are not subject to the same constitutional restraints. If the constitution is silent concerning special districts, then the legislature can create any limits it wants, but if a special district provision remains in the constitution, then all special districts should be subject to the same limitations, he said.

    Chair McKeachnie referred to a list of policy questions included in the packet. He noted that the commission's study of the local government article includes the role of counties, cities,

and special districts. He explained that an earlier local government proposal failed because it proposed to dramatically alter the relationship between cities and counties. Counties and cities have debt and tax limits, and special districts are a way to circumvent those limits as they provide needed services, he said.

     Rep. Ure said that the Special District Subcommittee would like to create uniform procedures for the creation of special districts.

     Dr. White explained that the commission has been misunderstood if anyone thinks the commission would like to eliminate special districts. Perhaps special district provisions could be articulated more clearly (they do not seem to belong in the debt article), but no one has advocated the removal of special districts, she said. Because the needs of special districts vary so widely, she noted that maybe the statutory limits on special districts should remain as they are so the legislature can continue its control of special districts.
    
     Mr. Jones stated that the commission is anxious to bring understanding to the special district confusion. Although counties currently have the authority to provide identical services, he questioned whether the counties have the expertise to compete with the valuable services special districts provide. He said there should be voter involvement when a special district bonds or raises its fees, but he questioned whether the election process would produce the most qualified board members.

     Sen. Nielson commented on the lack of accountability of special districts stating that special districts should have some restrictions.

     Sen. Blackham explained that many volunteers work for special districts, a practice that should not be discouraged. An issue is raised, however, when a special district can raise taxes without having an elected board. It would be better, he said, if only elected officials could raise taxes or increase fees, or perhaps the county could hire the expertise needed rather than form a special district.

    Rep. Harward clarified that he is not opposed to special districts, explaining that they have at least two values. First, those who pay for the service receive the service. If a geographical area had a special need and the county could tax just that area to provide the service, then there would be no need for a special district. Second, a special district can provide undivided attention to provide a particular service. A city provides many services, whereas a special district usually provides one service. The virtue is the problem, he said, because the expertise of providing just one service also prevents a general purpose government from prioritizing which services deserve funding.

     Rep. Dillree said that the key may be the distinction between independent and dependent

districts. Independent districts ought to be elected, she said, because they are exempt from the constitutional limits that apply to dependent special districts. Alternatively, she said, dependent districts could have appointed boards since county or city officials are directly accountable for them.

    Chair McKeachnie emphasized the point that single-minded dedication to providing a particular service prevents cities and counties from prioritizing which services ought to receive funding. In this sense, he said, special districts function like an earmarked revenue source.

    Mr. Worthen asked whether these problems should be solved in the constitution or in statute. He preferred as little as possible be changed in the constitution, but suggested inserting the details in the statute.

     Mr. Jensen agreed with Mr. Worthen, noting that all board members of a special district need not be elected. Such a practice would be cost prohibitive, he said. It is important, however, that board member appointments be done by elected officials with proper oversight authority. He suggested that the constitution provide for special districts, with some appropriate restrictions, and that the legislature regulate further if needed.

    Chair McKeachnie summarized the committee's position on the following issues:
*     Should special districts be provided for in the state constitution? From the tone of the discussion, the chair said that it seems as though the committee would like something concerning special districts in the constitution. The committee agreed.
.     Should that provision contain a general grant of authority to the legislature or a specific delineation of special districts' purposes and authority? He said that the committee seems to be leaning toward a general grant of legislative authority to provide for special districts. The committee agreed.
.     Should the constitution list the types of services that special districts may provide? He said that he thought the committee preferred that the legislature, not the constitution, should decide the kinds of service special districts may provide.
.     Should the constitution contain limitations on the authority of special districts? The committee agreed that perhaps debt limits should be applied to special districts.
        
     Ms. Allison referred to a motion made at the last meeting by Vice Chair Sullivan to draft language relating to special districts. She expressed the need to simplify the constitutional language and assign responsibility for oversight of special districts.
    
     Sen. Evans stated that he is not comfortable with the loose definitions of special districts. He said that special districts provide a great deal for the state, but the legislature should make sure they are accountable.
    
    Rep. Dillree mentioned that a tax ceiling could be established that would trigger whether or not a special district's board could be appointed or elected. Provided that a district's taxes and debts are below the limit, she said, it could have an appointed board, but if taxes or debts breach the limit, it could be required to have an elected board. She then emphasized the need for accountability of taxes and debts of special districts.

    Sen. Nielson noted that the state should be able to have access to the number of special districts and what types of services they provide.

     Rep. Gladwell suggested that a county could provide for services without creating a special district. He stated that the uniform and equal problem is one that needs to be addressed or the special district concern will never be resolved.
                
    Chair McKeachnie posed the question of whether debt and taxing limits for special districts should be in the constitution or statutorily established by the legislature.

    Mr. Jensen cited an example of a water conservancy district which the legislature determined to have such a unique situation that it decided to handle it differently than other water conservancy districts, which argues for not having the limitations in the constitution.
    
    Chair McKeachnie asked whether special districts should have police power. Is the commission comfortable with special districts passing ordinances that create crimes, such as when the federal government loans money contingent upon a fine or penalty for certain violations?

    Mr. Worthen stated that is why police power should not be spelled out in the constitution. It is conceivable that some special districts would need this flexibility, he said.

    Sen. Blackham concurred. The legislature should have the authority to determine the scope of special district power and authority. In no case should special districts have the ability to establish the scope of its powers, but if the legislature determines broader powers are needed for a certain district, then the legislature should have the ability to broaden the district's powers, he said.

    Mr. Rees said that in discussing special districts, the commission and subcommittee members may want to keep in mind the difference between general purpose governments and limited purpose governments. He explained that counties, cities, and towns are general purpose governmental entities, while special districts are limited purpose entities. One of the main roles of general purpose entities is to govern. With their general welfare and police powers, they govern generally over their citizens and can impose punishment on those who disobey the law. General purpose entities also fill the role of being a service provider and can provide essential

governmental services. In contrast, limited purpose entities such as special districts do not typically have general welfare and police powers but are simply service providers, he said.

     Mr. Rees explained that the original 1896 constitution contained provisions relating to counties, cities, and towns but made no mention of special districts, which were essentially unknown in Utah at that time. He said that special districts began coming into existence statutorily in the early 1900s and popped up periodically over the years to provide a particular service or limited set of services. They were given status as a separate legal and political entity partly to enable them to levy taxes and to do bonding to pay for the services, although the services they provide, for the most part, could conceivably be provided by a private company, he said. He emphasized that there was really nothing in the constitution dealing with special districts until 1975 when Article XIV, section 8 went into effect.

     Sen. Dmitrich said that the special district provision is in the debt limit article, from which special districts are exempt. He stated that special district debt limits ought to be provided in statute. Because of the bonding capabilities, he explained that the commission needs to proceed cautiously.

     Rep. Swallow stated that one key issue is to determine whether special districts should be permitted to become general purpose governmental entities, or if they should be restricted to special purpose functions. If the constitution does not establish a policy for special districts, he said, then they may become more like general purpose governmental entities. It would be wise to create a clear constitutional provision so that special districts do not become general purpose governments.
    
    Chair McKeachnie asked whether it would be wise to trust the legislature to determine if a particular special district should have the power of eminent domain? Furthermore, should the legislature be trusted to establish the limits of police power for special districts, he asked?

    Rep. Swallow said that the police power should be reserved for general purpose governments and should not be granted to special districts.

    Mr. Worthen explained that it may be wise to adopt a Dillon's Rule approach for special districts and a Hutchinson approach for cities and counties.

    Rep. Harward stated that would be an excellent approach. He asked if any special districts provide more than a single service? Chair McKeachnie responded that some provide multiple services.

     Rep. Jones noted that there is some ambiguity as to the services some districts provide, such as districts that promote business.

    Rep. Gladwell noted that dependent districts are provided for in Article XIV. Independent districts, he stated, are not referred to in the constitution. Because the state is a sovereign entity, the legislature is only limited in its authority to act by constitutional prohibition. He questioned whether anything would be accomplished by referring to independent special districts in the constitution. He suggested that the legislature clean up the statutory mess.

    Sen. Blackham expressed discomfort with a non-elected body exercising police powers. He suggested that only special districts with elected boards have police powers, and only then if specifically so designated by the legislature.

     Rep. Bradshaw stated that special districts should only have the power of eminent domain if that power has been specifically approved by a vote of the people.

     Sen. Beattie said that county commissioners ought to be concerned if special districts are allowed to increase taxes. Everyone who is taxed ought to have representation, he said. The legislature could correct many of these problems by statute, he said.

    Chair McKeachnie asked if special districts should be constitutionally required to register with the state before the issuance of bonds or collecting taxes or fees?

    Sen. Beattie stated that this could be done in statute. He also stated that an itemized tax statement should be provided to each taxpayer, including special district taxes.

    Chair McKeachnie expressed appreciation for the opportunity to share ideas. He noted the need for each committee to focus on their tasks and keep each other informed.

    The joint meeting adjourned at 10:40 a.m. The Constitutional Revision Commission reconvened in room 405 and the Special Districts Subcommittee reconvened in room 305.

police and welfare powers.

    Rep. Harward asked the commission to seriously consider the tax issue. He expressed concern about a municipality imposing an income tax. He stated that cities should be able to handle finances, but the authority to tax should be established by the legislature.

MOTION:    Rep. Harward moved to accept alternative one with a provision that would limit the cities' ability to tax without state authorization and to insert the words "prohibited by" after "with."

    Rep. Jones asked why a local government should not be permitted to decide what to tax?

    Rep. Harward explained that when individual cities decide whether or not to impose an income tax, for example, a tremendous burden is placed on business when they have to report how many days they worked in one city or another. Additionally, he noted, franchise taxes are an issue of statewide concern.

    Rep. Jones stated that cities have accountable elected officials. He spoke in favor of giving as much authority to locally elected officials as possible to solve their own problems.

    Rep. Harward agreed that local officials need more autonomy to control community services. He explained, however, that when a city can impose an income tax on companies that merely have a relationship to the city, the city has the power to tax businesses and people that do not live in the city. So the state gets many tax codes and it is a real challenge to administer the system. The key concern, he said, is that a single method of taxation should be provided statewide.

    Rep. Jones asked about a community where the citizens would like to have an income tax to support a particular service?

    Rep. Harward questioned whether income taxes should be based on where you live or where you work? Do we want to tax those who live in the city or those who only work there? In order to provide an equitable tax structure, the state must provide a uniform tax structure, he said.

    Mr. Jones noted that state policy often prohibits rural cities from providing financing for local services. Why not give broader taxing authority to local governments; and then let the legislature respond if a problem is created, he asked.     

SUBSTITUTE MOTION:
            Rep. Jones made a substitute motion to grant all powers to local governments unless preempted by the legislature and then withdrew the substitute motion.
SUBSTITUTE MOTION:
    Mr. Worthen moved that the commission consider the following language: "Each city is granted full legislative power to perform any function not denied by the constitution, inconsistent with its charter, or which is not inconsistent with, prohibited by, or preempted by statute." The motion passed unanimously.
                                    
    Sen. Beattie asked about passing a statute that says cites could not do anything but what authority they are given legislatively. He expressed concern that the legislature would spend great amounts of time finding those conflicting statutes so they are not neglected. Mr. Worthen noted that any prohibition on a city would be preserved under this motion.

MOTION:    Rep. Harward moved that staff review statutes to determine whether or not they would need to be changed because of this rule, or whether they already need to be changed because of Hutchinson. The motion passed unanimously.

    Mr. Rees noted that the current statutes should not be effected if the Hutchinson principle were constitutionalized because Hutchinson is already in effect.

    Mr. Rees distributed the local government draft and reviewed the dates the commission moved to approve each section. He explained that the language of some sections differed from the language approved by motion. As an example, Mr. Strong referred to Article XI, Section 3, where the draft actually establishes a different standard than the motion.

    Mr. Rees noted that Article XI, Section 4 provides that the legislature "shall provide for township organizations." He noted that "may" rather than "shall" was approved in November of 1996. He asked the commission's its preference. He also referred to Article XI, Section 5, noting that the language approved in September of 1996 also differs from the 1998FL-0025/004 draft at page 4, lines 11 and 17-19 respectively. Chair McKeachnie expressed the preference that the draft reflect the motion.

MOTION:    Sen. Nielson moved the following language to Article XI, Section 5. The Legislature by statute shall provide for the incorporation, merger, consolidation, and dissolution of cities and towns and for the organization and classification of cities and towns in proportion to population, which laws may be altered, amended or repealed. The motion passed unanimously.

    The commission discussed whether to change the next meeting date because of conflicts.

MOTION:    Mr. Strong moved to adjourn the meeting at 11:40 a.m. The motion passed unanimously.