Rebecca Palmer
May 20, 2010

Just weeks after asking taxpayers for $60 million more in financing, UTOPIA officials were harshly criticized by key state lawmakers Wednesday morning.

Sen. Howard Stephenson, president of the Utah Taxpayers Association, told Layton city manager Alex Jensen that his presentation was filled with “hyperbole” and “inaccuracy.”

“The model simply does not work, no matter how optimistic we are,” said Stephenson, R-Draper. “Hope is not sufficient to cure this problem.”

Founded in 2002, UTOPIA officials have always said they are trying to build information infrastructure in the same way municipalities build streets, sewers and airports. However, the quasi-governmental body has not picked up subscribers as quickly as planned and has been held up by industry giants such as Qwest and Comcast, which maintain the private sector is already doing the job.

UTOPIA officials were asked point-blank Wednesday whether revenues will ever cover operating expenses. In its first eight years, the Utah Telecommunications Open Infrastructure Agency has been operating in the red.

“How can we ever possibly expect UTOPIA to break even?,” asked Sen. John Valentine, R-Orem.

Jensen, who sits on the board of the 11-city broadband network, told Valentine and the rest of the Senate Revenue and Taxation Subcommittee that UTOPIA has a new business model moving forward that will require a lot of cash now but will pay off in the long run.

However, Jensen would not give specifics about the model, citing proprietary reasons and the need for nondisclosure agreements. Senators who would sign such agreements were invited to one-on-one meetings with UTOPIA officials.

Before the meeting, UTOPIA Chief Executive Officer Todd Marriott said the new plan has been under way since his arrival in 2008 and will be performance-based so money is spent only in profitable areas.

Before Marriott, UTOPIA built several rings of fiber that remain unconnected either to homes or to the rest of the network. The expensive effort has since been blamed on bad management.

A tussle erupted at the end of the meeting over UTOPIA’s budget. Longtime critic and Utah Taxpayers Association Vice President Royce Van Tassell passed out graphs showing an ever-wider separation of revenue and cost for the company, with cost trending upward.

To that, Marriott said, “He’s a liar,” and told the subcommittee about credit swaps and purchases included in the taxpayers’ reports that are not accurate reflections of the company’s numbers.

Later, Stephenson characterized Marriott’s presentation as that of an ever-optimistic football coach whose team has lost every game for eight seasons. The senator asked for UTOPIA’s complete liquidation.

In 2008, UTOPIA borrowed a second round of cash that brought its total obligation to $500 million. By June, it hopes to get approval from its member cities’ elected officials to borrow $60 million more.

There is no legislation pending to stop such a move, several officials said, but state lawmakers could take steps to halt the interlocal company. UTOPIA’s bonding rate could harm Utah’s high credit rating, Stephenson said.