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Bill would halt further bonding for UTOPIA operations

Published February 8, 2013 6:34 pm

Debt • Sponsor says he wants to prevent network from financing operations by borrowing.
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Utah lawmakers will consider a bill that would make it impossible for the financially troubled UTOPIA fiber-optic network to use money from the future sale of bonds to fund its day-to-day operations.

SB 172 would prohibit cities and counties from selling bonds after May 14 to build projects and then use any of that money to operate them more than one year after the debt was issued.

It also would prevent money from the bonds to be used to pay off interest more than five years after the bonds are issued. UTOPIA, a consortium of 11 cities from Brigham City to Payson that are building the high-speed Internet network, has been doing just that.

The bill's provisions would not affect the bond money UTOPIA is using at present.

"Basically, I don't want government financing its operations through borrowing money," said sponsor Sen. John Valentine, R-Orem. "That's what they do in California. We don't want to do that in Utah."

The bill, introduced earlier this week, was assigned to the Senate Government Operations and Political Subdivisions Committee.

UTOPIA Executive Director Todd Marriott said he agreed with the bill's principles and didn't think it would affect the network's operations either way.

"What he [Valentine] is proposing is wise, and we support it," Marriott said, stressing that cities involved in UTOPIA aren't looking to sell more bonds for future revenue.

"Many of the stakeholders with the cities have been looking for ways to go forward without having to look to additional incumberances that [issuing bonds] creates."

In fiscal 2012, UTOPIA lost $12.5 million, while a newly created sister agency shed an additional $8,292. As of June, UTOPIA had a negative net worth of $132 million, which means that if all of its assets were sold off it would still be $132 million in the hole.

Originally conceived by 16 Utah cities but ultimately funded by only 11, UTOPIA was among America's first open-access, fiber-to-the-home networks. The project was intended to be a money-making venture but it also was promoted as a necessary Internet network for government, education and businesses that would be ready for future technologies.

But poor choice of contractors, business-model flaws and poor strategic planning slowed the project almost from the start. According to the most recent UTOPIA figures, the network only has about 10,000 Utahns getting services over its fiber-optic lines, or about a tenth to a quarter of its potential customer base.

Legislators have said they don't want the state to be in the position of bailing out UTOPIA and its sponsoring cities. "We are not assuming responsibility for the debts of UTOPIA," Valentine said. "So we're saying that in the future, if you've got a project you want to finance then you better pencil in that the operations will break even by year one."

Tribune reporter Steven Oberbeck contributed to this story.





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