By Steven Oberbeck
October 18, 2010
The Centerville City Council is about to decide whether it wants to risk additional millions of its residents’ tax money on a new bailout plan for the struggling Utopia fiber-optic network.
There is a problem, though.
A summary of a crucial feasibility study wasn’t posted on Centerville’s website until late Monday evening. And that summary lacked 32 pages of spreadsheets and technical definitions that Utopia earlier had made available to city officials — documents that may help residents draw their own conclusions about the validity of the study.
Centerville’s City Council will meet Tuesday to consider the report.
“Obviously, it is important for our residents to have an opportunity to review the study to be able to make meaningful comments at our public hearings,” Centerville Mayor Ronald G. Russell said.
Utopia, short for Utah Telecommunication Open Infrastructure Agency, was organized in 2002 by community leaders who believed the state’s private telecommunications providers were unwilling to bring high-speed Internet and other broadband services to their cities.
Buying into promoters’ promises that the system would be a big success, 11 Utah cities pledged more than $500 million over 32 years to back bonds to finance network construction. Years of missed projections and mounting losses followed as the original feasibility study used to sell the project proved unfeasible.
Although the system has earned praise from users for its speed, despite eight years of effort only about 7,600 homes and businesses currently receive service over the Utopia network.
Under new management for the past two years, Utopia called on its member cities in January to begin covering the network’s bond payments, something the åoriginal promoters vowed would never happen.
Utopia now wants its member cities to commit $62 million more in debt over the next five years, with the money going to fund a new entity — the Utah Infrastructure Agency (UIA). It would be put in charge of marketing and completing development of the network.
Russell said the study shows the five-year plan for the new UIA financing is feasible. “It shows the plan would generate operating income sufficient to cover the new [UIA] debt and decrease the cities’ liability.”
Yet spreadsheet data that wasn’t included in the report posted on Centerville’s website also indicates UIA would lose nearly $65 million over the next seven years before turning a $348,567 profit in 2018.
In 2019, though, the spreadsheets project the UIA would earn nearly $22 mil-
lion, money that could then be used to reduce the debt cities owe on Utopia’s bonds.
“We’ve known all along that it will take us a number of years to get ourselves out of this hole,” West Valley City Mayor Mike Winder said Monday.
The West Valley City Council is expected to discuss the matter at its meeting Tuesday evening, but it won’t be voting on bonding, Winder said. He wants to see the feasibility study made available to the public, if not on Utopia’s website, then on the city’s.
Royce Van Tassell of the Utah Taxpayers Association said he found it “outrageous” that taxpayers didn’t have access to the feasibility study earlier.
“It is one of the key documents they need to evaluate the whole UIA proposal,” he said. “And with hearings scheduled to be held in several cities this week, this is a report that Utopia should have already made available to the public instead of playing hide the ball.”
Utopia Executive Director Todd Marriott said the agency was working on the final draft Monday. The study was conducted by Design Nine, a Blacksburg, Va.-based company whose website boasts that, “We build networks that perform.”
“This is a plan that is going to work,” Marriott said. “We will only be building out the network in areas where we know there is the demand. So, under this plan, the cities won’t be spending any additional money until they are assured of a return on their [UIA] investment.”
Eleven Utah cities have pledged more than $500 million over 32 years to back bonds to finance fiber-optic network construction. They are Brigham City, Centerville, Layton, Lindon, Midvale, Murray, Orem, Payson, Perry, Tremonton and West Valley City.