OREM The cities that bet on the success of the Utah Telecommunications Open Infrastructure Agency (UTOPIA) are being asked to ante up more money to fund construction of the fiber-optic network.
Initially, 11 cities pledged $202 million in sales-tax revenue to back the bonds issued to build a network that would bring cutting-edge, high-speed Internet right to the doors of their businesses and homes.
Now those cities and others that have joined UTOPIA are considering refinancing the bonds. The move would provide millions more for network construction, but it also would require the cities to pledge more tax revenue to back the bonds.
The Lindon and Centerville city councils are holding public hearings on the matter tonight. If they approve the change, each would see their pledges increase by $50,000 a year.
Centerville has been a member of UTOPIA since 2004. It pledged $4.8 million over 20 years, said Blaine Lutz, the city’s financial director. The new pledge amount would be $7.7 million over 32 years.
Payson will consider the subject in its City Council meeting on Wednesday, and UTOPIA is on the agenda in Brigham City and Layton on Thursday. The other UTOPIA cities are expected to discuss the proposal to issue new bonds within the next three weeks.
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The Utah Taxpayers Association criticized the plan, which would extend the time to repay the bonds from 20 years to 33 years, association spokesman Royce Van Tassell said.
“The first bonding put $202 million at risk in sales-tax pledges,” Van Tassell said. “The new bond structure increases the risk to $351 million.”
UTOPIA spokeswoman Maura Carabello said the extended life of the new bonds does raise the pledge amounts but also makes them more secure. The new bonds will be structured with lower payments in the first few years, graduating to much higher payments at the end of the 33-year term. That would decrease the pressure on the system to generate revenue right away.
“It’s a rather common finance structure and a proven finance structure,” Carabello said.
UTOPIA’s board of directors voted earlier this month to issue $189 million in new bonds. Some of that money would retire $135 million of the initial bonds issued by the project. About $20 million would be created to fund more construction, Carabello said.
Brigham City Mayor LouAnn Christensen said the new bonds will bridge a gap in funding.
“There have been a number of challenges come our way,” she said, “but we believe this addresses those challenges and gives us the best opportunity to succeed.”
Christensen, who is a member of the UTOPIA board, said more than $50 million in expected outside funding has been delayed, but the refinancing would allow construction to move ahead in her city, where 34 percent of the build-out is complete but no homes or businesses are hooked up to the network.
Brigham City is considering adding $25,000 to its initial pledge of $333,000, Christensen said, but she believed the money would be included in the refinancing.
Centerville’s Lutz is confident the refinanced bonds decrease the chance the consortium would ever have to call on its member cities to use the pledged tax dollars to repay the bonds.
No tax dollars have been used to build the network.
This is the first time UTOPIA has asked for an increase in pledge amounts, Lutz said.
UTOPIA officials initially expected to be profitable by 2006. Last fall they adjusted their projection and predicted the network would break even this year.
UTOPIA officials recently made a presentation to Centerville officials during a work meeting and said they plan to revise the consortium’s marketing plan, Centerville Mayor Ron Russell said.
Russell said his council is concerned about the request for more money and must figure out if it’s worth it for UTOPIA to default on its bonds or if it’s better to pledge more money so that the consortium might turn things around.
Russell, who doesn’t vote with the City Council, said he doesn’t envy the council for the decision it has to make.
Lutz said the council may not vote on the issue tonight. UTOPIA would like to have an answer by May 1, he said.
Centerville’s public hearing is set for 8 p.m. during the council’s regular meeting at City Hall, 230 N. Main.
E-mail: jdougherty@desnews.com, twalch@desnews.com
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