SALT LAKE CITY — The financial status of the Utah Telecommunication Open Infrastructure Agency is hardly a picture of Shangri-la, a state financial audit suggests.
An audit of the 11-city fiber-to-the-home network, released Wednesday by the office of the Auditor General of the state of Utah, revealed the group shows negative net assets of more $120 million and has been plagued by poor management and planning.
The audit suggests the fiber-optic network needs to increase financial controls and accountability if it is to ever be viable. The findings were released for review by an audit subcommittee of the Legislative Management Committee.
Subscription rates in communities offering the high-speed Internet service are only at 16 percent in the residential community, where a 30 percent participation level is needed to be self-sustaining, the audit revealed.
UTOPIA officials don’t dispute some of the general findings in the 78-page document, but they suggest many of the problems outlined in the audit are old news and things the group is working aggressively to put behind it.
UTOPIA members include Tremonton, Brigham City, Perry, Layton and Centerville. All of those communities, except Perry, are also members of the Utah Infrastructure Agency, which was formed among eight pledging communities to deal with the organization’s financial woes.
“We’ve talked about these problems openly and what we have done to rectify the problems. The question is often asked, ‘Would your city be involved in this effort if these things were known today?’ My answer is yes. Would we do things differently? Yes,” Kane Loader, city manager of UTOPIA member Midvale, told the legislative committee.
“We have learned from our mistakes and done things to correct those mistakes, and we think we’re on the right track.”
Layton City Manager Alex Jensen said board members recognize they had poor oversight of some of the group’s methods in the early years, but believes those days are behind them.
He said the group has created a large financial hole for itself but is now headed in the right direction.
Jensen said there is still a great demand for the benefits better broadband and capacity can bring.
A portion of the audit focused on the ongoing buildout in Centerville and what auditors described as difficult-to-prove take rates among residents who have opted to buy into the services offered on the community network.
Centerville Mayor Ron Russell said the current subscription rate is about 20 percent in his community, but as buildout continues, he anticipates it will go above 30 percent.
He touted the benefits the faster broadband has brought to the business community, as well as participating residents. He said better broadband will be an economic development tool for the city and will attract even more business.
Layton Mayor Steve Curtis is still waiting for an expanded buildout in his city, but said what fiber is in place for the network has made a difference.
He noted Janicki, a company based in the East Gate area, has benefited substantially from the fiber-based infrastructure.
House Speaker Becky Lockhart, R-Provo, worried that UTOPIA could end up like iProvo, which was sold in 2008 and whose financial troubles had led that community to bill each residence every month for the service with every utility bill.
Most of the pledges from UTOPIA members are backed by sales tax, but Jensen did not discount the possibility that residents could be asked to help pay more directly for the network.
“Citizens in our communities pay for infrastructure now. ... Will the day come in Layton where this infrastructure will be viewed as essential? If the answer is yes, I can see the day that may happen on an individual basis,” he said.
“I’m not aware of any cities that are currently doing that, but certainly the day may come where individual cities may do that.”
Loader suggested UTOPIA officials plan to build their way out of trouble. He projected the network could be financially viable within 10 years.
UTOPIA CEO Todd Marriott disputed whether the subscription rates in the audit are accurate. He suggested the take rates are closer to 30 percent and going up in areas where the service is available.
State Auditor General John Schaff disputed Marriott’s rosy picture of take rates in areas where the service is available and said auditors were unable to find reliable data to back those claims.