Analysis» There is no other viable plan to meet financial demands of running trust
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Saddled with debt and mired in lawsuits, a property trust once controlled by a controversial polygamous sect increasingly looks like a boondoggle.
After four years, the state is more entangled than ever with the United Effort Plan Trust and there is no concrete proposal to end -- or pay for -- its court-ordered management.
The situation is a "mess," Utah Attorney General Mark Shurtleff admits.
In 2005 when he pushed for the state takeover, Shurtleff envisioned a fiduciary would secure the property, protect its assets, get it operating properly and step aside.
"It always had to go back" to the community, Shurtleff said, a majority of which is made up of members of the Fundamentalist Church of Jesus Christ of Latter Day Saints. "It's in a position now I don't know how that happens."
The communal property trust was created in 1942 to safeguard homes, businesses and land of a polygamous group then called "The Work" who were striving to achieve a "Holy United Effort." The trust holds virtually all property, valued at more than $100 million, in Hildale, Utah; Colorado City, Ariz.; and Bountiful, British Columbia.
With no built-in funding mechanism, it relied on donations -- considered consecrations -- of land, labor and money from residents to function.
Unable to tap that communal effort, 3rd District Judge Denise Lindberg has yet to come up with a viable mechanism to fund the trust's ongoing costs or projects short of selling its assets and charging fees to residents.
Lindberg has attributed the need to sell property to the FLDS' failure to pay a $100 monthly fee she instituted in January 2008, charged for the right to occupy a trust home.
When first approved, the fee was aimed at generating money to improve the community's water system --improvements he estimated would cost at least $1 million -- as part of court-appointed fiduciary Bruce R. Wisan's plan to break up the communal holdings, subdivide Hildale and Colorado City and turn residents into private landowners.
With 700 homes in the community, and assuming every household paid up and the money was used for no other expenses, it would take 15 months to cover the cost of the water system upgrades.
Last August Wisan recognized the growing gap. In a report to the court, he said the occupancy fee was "wholly inadequate to meet all of the ongoing expenses of the trust," which at that point was $1 million in debt.
Last week, Wisan said the occupancy fee payments would now be used to "start paying the ongoing expenses.
"That just keeps things current," he said. "That wouldn't pay off past debt, but that would at least stop the bleeding."
That debt currently stands at $2.5 million to $3 million -- a sum owed primarily to Wisan and his attorneys. The figure is an estimate provided by Wisan, who has not submitted an accounting since last August.
Meantime, the bills continue to pile up.
With that debt in mind, Wisan has proposed selling 438 acres of Berry Knoll Farm, located at the Utah-Arizona state line. The FLDS oppose the sale, which they argue benefits only Wisan and his attorneys and reduces the trust's holdings. The farm has economic, historic and religious significance, the FLDS say.
Wisan and his attorneys are still working on a revised purchase offer from Berry Knoll Farms LLC, a development company put together by Kenneth Knudson. Knudson is a resident of Centennial Park, a separate polygamous community adjacent to Berry Knoll Farm.
Knudson told The Salt Lake Tribune he will proceed only with assurances the property is clear and not vulnerable to additional lawsuits.
"I am not buying their fight," he said. "If the court does not settle that dispute, we will not be concluding that contract."
Knudson said he has no interest in entering "the war being engaged between the UEP and the FLDS or the Attorney General's Office. That was not my intention in making a contract."
While details of the new offer are not available, the $3 million deal put together last October is no quick fix for the trust's "dire straits."
The transaction would, if it proceeds, bring in $1.8 million over eight months or more, with the balance paid over a five-year period.
"The sale of this property will not pay, at one time, all of the debts of the trust," Wisan conceded last week after a court hearing on the proposed sale.
The deal, though, may be moot. At the hearing, Lindberg said she was leaning toward putting the property up for sale to the highest bidder.
As for that idea, Knudson said it's a "hypothetical" and premature to comment on -- though he predicted any bids would be substantially lower than his offer.
But Wisan's attorneys said they "love" the bid option, though they continue to work with Knudson.
"It takes [the judge] out of the 'you're more important, you're less important'" equation, attorney Jeff Shields said.
It is anybody's guess what kinds of offers would result -- if there are, in fact, bidders.
For one thing, the real estate market is in shambles.
More specifically, the prospect of having to take on the trust's fight with the FLDS may spook would-be buyers.
Another obstacle may be getting zoning approval to change the land use from agricultural to residential from Colorado City town officials, who claim the sale threatens the community's water supply.
"From the city standpoint, you have to remember we have the power of eminent domain," said Peter Stirba, an attorney representing the town. "Ultimately, if there is a serious problem such that we are going to lose our water resource, we'll file a condemnation proceeding."
Meantime, Wisan is banking on another potential source of funds: a plan to charge transaction fees to residents who want deeds to their homes once he is able to subdivide the property.
"We're very close on Hildale getting a default certificate turned into a judgment there and if that were to happen the subdivision would be recorded in Hildale and I could start selling and distributing property to beneficiaries with the transfer fee and that would generate considerable income for the trust," he said. Wisan has previously proposed charging a $5,000 transfer fee and $500 to $700 in closing costs on each property deed issued; he proposed selling vacant lots for $20,000.
How much money that would raise is a question because the FLDS oppose subdividing land consecrated to the trust.
Of the community's 700 households, about 670 are occupied by FLDS members who are unlikely to seek property deeds.
Short of that, Wisan acknowledges that more property sales will "very possibly" be necessary.
"I haven't looked at it very closely but there aren't a lot of options," he said.