File No. 32932
This rule was published in the September 15, 2009, issue (Vol. 2009, No. 18) of the Utah State Bulletin.
School and Institutional Trust Lands, Administration
Rule R850-140
Development Property
Notice of Proposed Rule
(Amendment)
DAR File No.: 32932
Filed: 09/01/2009 05:44:50 PM
RULE ANALYSIS
Purpose of the rule or reason for the change:
The proposed changes are being made to this rule in order to incorporate various provisions contained in Board Policy 2008-01, enacted following suggestions made to the agency in a legislative audit.
Summary of the rule or change:
Definitions for "Joint Venture," "Other Business Arrangement," and "Supporting Transactions" were added in Section R850-140-250. Clarification is being made to the process of designating property for development purposes in Section R850-140-300. Section R850-140-350 is a new section on planning. Section R850-140-400 outlines General Provisions for processing Development Transactions and removes outdated procedures. Sections R850-140-500 and R850-140-600 are new sections that outline the processes for approval of "Minor" and "Major" Development Transactions, respectively. Section R850-140-800 is a new section added to address the issues of "Supporting Transactions" and Section R850-140-900 is new to address situations where a need exists to deviate from the transaction approval processes set forth in rule. Changes to Section R850-140-1000 are for clarification purposes. In order to accommodate these changes, many of the sections have been renumbered.
State statutory or constitutional authorization for this rule:
- Section 53C-2-201
- Subsection 53C-4-101(1)
- Section 53C-4-103
Anticipated cost or savings to:
the state budget:
There is no anticipated cost or savings to the state budget as a result of this rule amendment. The changes are largely for clarification purposes and greater structure of existing processes.
local governments:
There is no anticipated cost or savings to local government as a result of this rule amendment. The changes address more of the internal agency actions and procedures rather than changes to compliance issues directed at those with whom we do business.
small businesses:
It is not anticipated that there will be any additional cost or savings to small businesses because of these rule amendments. The requirements that must be met by any business desiring to enter into a development transaction with the agency have not been changed.
persons other than small businesses, businesses, or local governmental entities:
There is no anticipated cost or savings to persons other than small businesses, businesses, or local government entities as a result of the amendments to this rule. The amendments are directed at giving greater guidance and clarification to agency staff in processing development transactions.
Compliance costs for affected persons:
It is not anticipated that there will be any costs for compliance for affected persons. The requirements have not been modified; only the manner in which the agency performs existing processes.
Comments by the department head on the fiscal impact the rule may have on businesses:
This rule modification provides a more detailed definition of terms, and imposes upon the Administration a greater due-diligence obligation prior to presenting proposals for real estate transactions to the Board of Trustees. Consequently, the impact will primarily be upon the Administration rather than upon business. The greater degree of evaluation prior to entering into transactions may require prospective partners (businesses) to provide more detailed information, but it is not anticipated that the additional information will be in excess of what would be required for any private transaction.
Kevin S. Carter, Director
The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:
School and Institutional Trust LandsAdministration
675 E 500 S
SALT LAKE CITY, UT 84102-2818
Direct questions regarding this rule to:
- John Andrews at the above address, by phone at 801-538-5180, by FAX at 801-538-5118, or by Internet E-mail at jandrews@utah.gov
Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:
10/15/2009
This rule may become effective on:
10/22/2009
Authorized by:
Kevin Carter, Director
RULE TEXT
R850. School and Institutional Trust Lands, Administration.
R850-140. Development Property.
R850-140-200. Purpose of Development Property Rules.
This rule permits the agency to designate
trust land as development property and thereby[(i)]
1. subject agency activities in connection with such
properties to this rule; and[(ii)]
2. exempt agency activities in connection with such
properties from the rules listed in R850-140-[600]1000.
R850-140-250. Definitions.
For the purposes of this rule:
1. Development [p]Property: a parcel of trust land that has been
designated a development property pursuant to the director's
determination that the parcel meets the criteria established in
R850-140-300(1).
2. Development [t]Transaction: a transaction entered into by the agency
for the purpose of generating financial returns to the trust [on]from real estate development of a particular development
property. Development transactions include sales, exchanges, ground
leases, development leases, build-to-suit leases, joint ventures,
and [o]Other [b]Business [a]Arrangements
with respect to development properties.
3. Joint Venture: a transaction in which the agency contributes trust assets to a joint undertaking in which such assets may be subject to risk of loss, including without limitation a transaction in which the agency becomes a member of a limited liability company in exchange for the commitment of trust assets.
4. Other Business Arrangement: a transaction other than a joint venture which involves similar risk of loss of trust assets as a joint venture and which involves material reliance on the economic performance of a third party or other contingent events to generate expected returns. The non-subordinated lease of trust property for development purposes, with the trust's returns based upon a percentage of final property sales, is not an Other Business Arrangement.
5. Supporting Transaction: a transaction entered into by the agency for the purpose of preparing for or supporting real estate development on trust lands, but not directly conveying trust lands for real estate development purposes. Supporting transactions include without limitation: exchange, acquisition or conveyance of lands for assemblage or configuration of development projects; agreements with local government entities with respect to development entitlements and provision of infrastructure; rights-of-entry, dedications and easements for development improvements and amenities on trust lands; and leasing or conveyance of trust lands for necessary development infrastructure and amenities.
R850-140-300. Designation of Development Property.
1. The director may designate a property as a development property upon the director's determination that the following criteria are met:
(a) The property is located in or near [to either a high growth or]an urban area of the State or, in more rural [settings]locations, the property is of a character suitable for
current or future commercial, industrial, resort,
residential or other real estate development activities; [and]or
(b) The agency has received inquiry from
private parties concerning the potential for development of the
property or the agency, after preliminary analysis, has determined
that the probable highest and best use for the property is for
development purposes[; and].
[(c) The agency believes that it is timely and in the best
interests of the trust to consider a development transaction
involving the property.
]2. The director shall maintain a [listing]database of each property designated as a development
property. [The listing shall be available to the public and shall include
the date of designation, together with a written finding
designating the property to be a development property.]The director may remove property from development designation
in his discretion as deemed appropriate for the best interests of
the trust beneficiaries.[If the agency fails to achieve a transaction involving a
property designated as development property within a period of
three (3) years following such property's designation, the
property shall cease to be a development property and shall be
removed from the development listing. Properties may be
redesignated as a development property at a later time if the
director finds it to be in the best interests of the
trust.]
R850-140-350. Planning.
1. Prior to designating a property as a development property, the agency shall submit the proposed designation to the Resource Development Coordinating Committee (RDCC), and evaluate and respond to comments received through the RDCC process. Participation in the RDCC process shall constitute compliance with Subsection 53C-2-201(1).
2. If the agency chooses to participate in local government planning and entitlement processes, such participation constitutes an additional degree of planning supplemental to the RDCC process, but is not required under Subsection 53C-2-201(1).
R850-140-400. Development [
Property
]Transactions
- General Provisions
.
1.
Subject to the board notice and approval provisions contained
in R850-140-500 and R850-140-600, [T]the agency may solicit and reject proposals, make
offers, counter offers and otherwise negotiate freely with
interested parties in its efforts to arrange development
transactions that are in the best interests of the trust.
Development transactions will be structured according to the
circumstances of the market and the attributes of the particular
development property.
2. Prior to entering a development transaction, the agency shall initiate an appropriate advertising program designed to effectively solicit interested parties. Advertising may be implemented through print media, internet, signage, direct mail or other appropriate marketing methods.
3. In [undertaking such efforts,]negotiating development transactions, the agency shall [consider]undertake appropriate due diligence with respect to the
proposed transaction, including consideration of the
following criteria[with regard to a proposed development transaction]:
(a) The ownership, character, reputation, financial status, credit and litigation history and prior real estate development experience of the party with whom the development transaction is proposed.
(b) The financial attributes of the proposed development transaction.
(c) The legal structure of the proposed development transaction.
(d) The potential effects of the proposed
development transaction upon nearby trust lands[.]; and
(e) Whether the proposed transaction will bring the highest long-term return to the trust compared to other reasonably foreseeable alternatives.
4. Development transactions shall result in the trust receiving not less than fair market value for the sale, use or exchange of the development property in question.
5. The purchase, sale or exchange of land in connection with a development transaction shall be supported by either an appraisal or a detailed internal analysis of value.[
2. At such time as the agency determines that it is
appropriate to seek a development transaction, the agency shall
initiate an advertising program designed to effectively solicit
interested parties. Advertising may be implemented through print
media, signage, direct mail or other appropriate marketing
methods.
3. After the agency has identified an interested party with
whom to seek a development transaction and negotiated core
business terms with the interested party, the director will
deliver a summary description of the proposed development
transaction to the board.
4. Prior to completing a development transaction, the agency
shall conduct a financial analysis of the transaction. The
financial analysis shall examine whether the development
transaction provides for the return to the trust of at least fair
market value for the sale, use or exchange of the property in
question. Analysis of fair market value shall be based upon
market research, staff experience or outside appraisals, or a
combination of these factors as the agency determines necessary
based on the particular circumstances of each development
transaction.
5. Upon completion of the requirements set forth in
R850-140-400(1)-(4), a development transaction shall be presented
to the director or the board, as required by law, for final
approval. The board or the director, as appropriate, may approve or
reject a proposed transaction consistent with their fiduciary
obligations.]
6. Formal contract documentation of any
development transaction shall be subject to approval by a
representative of the attorney general's office. [The]No party [with whom the trust is negotiating]to a
proposed development transaction shall have [no]any vested rights in [and to the development property in question]the transaction until the formal contract documents have
been approved by the
agency representative of the attorney general's
office, approved by the board [as appropriate,]if required by rule or statute, approved and executed by
the director
, and delivered.[
7. If, as a result of a development transaction, a property is
improved and/or subdivided, such property shall be conveyed or
leased for consideration no less than the fair market value of such
property as improved and subdivided. The consideration resulting
from the transaction on such improved and/or subdivided property
shall be allocated between the trust and the developing entity as
provided for in the development transaction.]
R850-140-500. Development Transactions -- Approval of Minor Development Transactions.
1. For purposes of this rule, a minor development transaction is a proposed development transaction that:
(a) involves a projected commitment of trust lands or assets of less than $5 million; or
(b) if the proposed development transaction is a joint venture or Other Business Arrangement, involves a projected commitment of trust lands or assets of less than $2 million.
2. The agency shall provide the board with the following information with respect to a proposed minor development transaction:
(a) a description of the parties to and terms of the proposed transaction;
(b) an economic analysis of the proposed transaction;
(c) a description of the competitive/advertising process used in soliciting offers for the transaction;
(d) a declaration of staff conflicts of interest, if any;
(e) if the transaction will involve the subordination of trust assets in connection with a joint venture or Other Business Arrangement, a description of the assets and an analysis of relevant risks to those assets; and
(f) other relevant information derived from the agency's due diligence activities.
3. The board must approve any proposed minor development transaction that is a joint venture or Other Business Arrangement in accordance with Subsection 53C-1-303(4)(e).
4. The director may approve any proposed minor development transaction that is not a joint venture or Other Business Arrangement after compliance with R850-140-500(2).
5. The board or director, as appropriate, may approve, conditionally approve, or reject any proposed minor development transaction consistent with their fiduciary obligations.
R850-140-600. Development Transactions -- Approval of Major Development Transactions.
1. For purposes of this rule, a major development transaction is a proposed development transaction that:
(a) involves a projected commitment of trust lands or assets of $5 million or more; or
(b) involves a projected commitment of trust lands or assets of $2 million or more if the proposed development transaction is a joint venture or Other Business Arrangement.
2. Prior to entering negotiations for a major development transaction, the agency shall provide the board with the following information:
(a) relevant information concerning the property and the financial aspects of a possible transaction, including:
(i) property value;
(ii) financial goals for a proposed transaction;
(iii) timeliness of a proposed transaction; and
(iv) type of transaction contemplated;
(b) a summary of the anticipated competitive process and advertising program to be utilized in soliciting proposals; and
(c) other information requested by the board to assist it in evaluating the proposed transaction.
3. Prior to seeking final board approval of a major development transaction, the agency shall provide the board with the following information:
(a) a statement of the key terms of the transaction;
(b) the results of the agency's due diligence activities under R850-140-400(3)(a);
(c) a projected financial pro forma for the transaction;
(d) the results of the competitive process and advertising process utilized to select the proposed transaction; and
(e) a declaration of staff conflicts of interest, if any;
(f) a description of legal risks assumed by the trust;
(g) an analysis of the financial strength and commitment of the parties to the transaction; and
(h) if the transactions will involve the subordination of trust assets in connection with a joint venture or Other Business Arrangement, a description of the assets and an analysis of relevant risks to those assets.
4. The board must approve any proposed major development transaction prior to the director's execution of the transaction.
5. The board or director, as appropriate, may approve, conditionally approve, or reject proposed major development transactions consistent with their fiduciary obligations.
R850-140-[
500
]
700
. Amendments to Development Transactions.
[When promoting, negotiating, approving and documenting
amendments to a development transaction, the agency shall adhere to
the following conditions:]1. The agency may amend development transactions subject to
the conditions contained in Subsections R850-140-700(2)
through(4).
[(a)]2. No amendment
to a development transaction shall [be entered into which ]result[s] in the trust receiving less than fair market value
for the sale, use or exchange of the property in question.[
(b) In connection with any amendment that materially modifies
the financial terms of a development transaction,]
3. [t]The director shall deliver a summary description of the
terms of [the ]proposed
material amendment
s to
minor or major development transactions to the [members of the ]board
with sufficient detail to permit the board to review the
proposed amendment consistent with its statutory duties.
[(c) Upon completion of the requirements set forth in paragraph
(b) above, the proposed amendment shall be presented to the
director for final approval. Amendments to joint ventures and other
business arrangements shall require approval by the board. The
board or the director as appropriate may approve or reject a
proposed amendment to a development transaction consistent with
their fiduciary obligations.]4. All amendments that will materially modify the financial
terms of a joint venture, Other Business Arrangement, or major
development transaction must be approved by the board.[
(d) Formal contract documentation of any amendment to a
development transaction shall be subject to approval by a
representative of the attorney general's office. The party with
whom the trust is negotiating the amendment shall have no vested
rights in and to the terms of the proposed amendment until the
formal contract documents are approved by the representative of the
attorney general's office, approved by the board as
appropriate, executed by the director, and delivered.]
R850-140-800. Supporting Transactions.
1. The agency may enter into supporting transactions as necessary to promote prudent and profitable development of trust lands designated as development properties.
2. The purchase, sale or exchange of land in connection with a supporting transaction shall be supported by either an appraisal or a detailed internal analysis of value.
3. The board must approve any proposed supporting transaction that involves the purchase, sale or exchange of land having a value in excess of $500,000.00.
R850-140-900. Deviation from Rules.
In situations where the board determines that an economic opportunity favorable to the trust beneficiaries may otherwise be lost, or other good cause exists that is in furtherance of the statutory obligations of the board, the board may authorize the agency to deviate from the transactional approval processes set forth in this rule, so long as the board and agency's actions are otherwise in compliance with law.
R850-140-[
600
]
1000
. Exemption From Rules.
The agency, in connection with its
activities in [promoting, negotiating, approving and documenting development
transactions,]managing and conveying development property, shall be
subject to all rules [and board policies ]applicable to the agency, except the
following, which shall not be applicable:
(a) [Rule 850-3. Applicant Qualifications and Application
Forms.]R850-3-300. Application Forms.
(b) R850-3-400. Application Processing.
(c) [Rule ]
R850-4. Application Fees and Assessments.[
(c) Rule 850-5. Payments, Royalties, Audits and
Assessments.]
(d) [Rule ]
R850-30. Special Use Leases.
(e) [Rule ]
R850-40. Easements.
(f) R850-41. Rights-of-Entry.
(g) [Rule ]
R850-80. Sale of Trust Lands.
(Except R850-80-250.)[
(g) Rule 850-81. Right of Noncompetitive Purchase.]
(h) [Rule 850-82. Preference Right Sales.
(i) Rule ]
R850-90. Land Exchanges.
KEY: development, land sale, real estate
Date of Enactment or Last Substantive Amendment: [September 16, 1996]October 22, 2009
Notice of Continuation: September 14, 2006
Authorizing, and Implemented or Interpreted Law: 53C-2-201; 53C-4-101(1); 53C-4-103
Additional Information
The Portable Document Format (PDF) version of the Bulletin is the official version. The PDF version of this issue is available at https://rules.utah.gov/publicat/bull-pdf/2009/b20090915.pdf. The HTML edition of the Bulletin is a convenience copy. Any discrepancy between the PDF version and HTML version is resolved in favor of the PDF version.
Text to be deleted is struck through and surrounded by brackets (e.g., [example]). Text to be added is underlined (e.g., example). Older browsers may not depict some or any of these attributes on the screen or when the document is printed.
For questions regarding the content or application of this rule, please contact John Andrews at the above address, by phone at 801-538-5180, by FAX at 801-538-5118, or by Internet E-mail at jandrews@utah.gov.