Director says UTOPIA will be broke within the month

Sep 1 2012 - 10:31pm

UTOPIA, the financially beleaguered Utah Telecommunication Open Infrastructure Agency, will run out of operating revenue by the end of September, according to the group's executive director.

Pressed on the group's financial status during an Orem City Council meeting this week, Todd Marriott said UTOPIA will be out of operating funds by the end of this month. Marriott was unavailable for comment, but Jason Russell, communications manager for the group, confirmed the statement.

The financial shortfall is hardly unexpected or unplanned for, according to a number of officials.

"We'll still be here. We recognize there is a problem," Kurt Sudweeks, chief financial officer for the 11-city fiber-to-the-home network, said of the shortfall.

Sudweeks said the UTOPIA board of directors can decide to draw down more operating funds from an existing $65 million bond. The board is scheduled to meet Sept. 10 and includes representatives from each of the participating municipalities, which include Tremonton, Brigham City, Perry, Layton and Centerville.

All of those communities except Perry also are members of the Utah Infrastructure Agency, which was formed among eight pledging communities to deal with the organization's financial woes.

Layton City Manager Alex Jensen said he wasn't sure when the group would run out of operating revenue, but knew that continued expansion would eventually lead to the need for a draw down from the bond.

"We are in a situation where in order to keep growing and expanding, we have to have money to do that. We need to do additional financing," Jensen said.

No public hearing is required to use funds from the bond, according to Jensen, but he said he would not vote for the additional funding without first consulting with members of the Layton City Council.

An audit released earlier this year stated the group has negative net assets of more than $120 million and has been plagued by poor management and planning.

Even with a shortage of operating revenue, there is money in the bank, according to executive administrator Candace Vigil. She said the funds are from federal stimulus money and are dedicated for construction and cannot be used for operational expenses.

Royce Van Tassell, vice president of the Utah Taxpayers Association, said the group's latest financial shortfall illustrates an ongoing problem with the network. He called the latest financial disclosure about operating revenue "rather astounding."

"One of the basic principles that makes Utah a good place to invest is that, by and large, government doesn't get in the business of business. This is really a blatant violation of that principle. Taxpayers in those member cities are reaping the careful consequences of that," Van Tassell said.

He linked a recent tax increase in Orem to that city's participation in UTOPIA.

Bonds for the fiber network are backed by sales tax revenue pledges from participating municipalities. The plan initially was that as the network expanded and added subscribers, the revenue would offset the need to tap into those pledges.

Local pledge amounts include $2.146 million a year for Layton, $427,697 for Centerville, $324,459 for Tremonton, $430,039 for Brigham City and $104,494 for Perry. That pledge goes up approximately 2 percent a year over the 25-year life span of UTOPIA's existing bonds, according to Blaine Lutz, financial director for Centerville and a member of the UTOPIA board.

Jensen takes exception to Van Tassell's claim that UTOPIA is the reason property taxes were raised in Orem, saying there are hundreds of factors that go into the budget process, and UTOPIA is only one component of that. Orem's yearly sales tax pledge to UTOPIA is currently at $2.8 million.

The Layton official also suggests recent audit findings are not new, and he believes the group is beginning to turn things around.

Van Tassell claims one of the problems with UTOPIA is its operational makeup of people from the public sector, citing Jensen and Lutz.

"Alex Jensen and Blaine Lutz are great people and very good in leading their cities, but they don't know the telecom industry. If you ask Jerry Sloan (former coach of the Utah Jazz) to be the head football coach of Weber State they will lose, guaranteed. It's because he doesn't know football.

"The inevitable challenge of a municipal telecom system like UTOPIA is that none of the people on the board were chosen because they know anything about telecom."

Jensen said the makeup of the board was changed in 2008, and UTOPIA is being run by telecom people, with oversight from representatives of the participating municipalities.

"We went out and hired people who had private sector experience ... Are we perfect? No, but the point is the expertise is very good. Anybody who bothers to look into that would be able to see that," Jensen said. "Alex Jensen isn't making decisions about how the network is getting deployed or where to install that cabinet."

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