Don't enable UTOPIA

Perhaps the cities of Midvale, Layton, Orem, Lindon and West Valley City are weathering the economic downturn better than others in Utah.

Elsewhere, cities are contemplating the elimination of services, hiring freezes and even layoffs to balance their budgets. But these five cities, which are part of UTOPIA, have entered an interlocal agreement as the Utah Infrastructure Agency with designs on borrowing between $60 million and $65 million to pay for getting municipal fiber-optic cable directly to homes and businesses.

Although none of the participant cities has yet decided to bond for more money, this agreement potentially means at least $60 million in debt on top of $500 million in total obligations. UTOPIA, the Utah Telecommunications Open Infrastructure Agency, has operated in the red its first eight years. City councils should think long and hard before approving more bonds for this venture.

Given its substantial debt and plans through the UIA to secure tens of millions more, it is increasingly unclear how revenues will ever cover operating expenses.

In May, state lawmakers harshly criticized UTOPIA officials' plans to ask taxpayers for $60 million more in financing.

Sen. John Valentine, R-Orem, who is a tax attorney trained as an accountant and economist, asked point-blank, "How can we ever expect UTOPIA to break even?"

UTOPIA's reply was a little fuzzy. Specifics were not offered because of proprietary concerns. A member of UTOPIA's 11-city board explained to lawmakers that the agency has a news business model moving forward that requires a lot of cash upfront but will pay off in the long run.

Without concrete details, it is difficult to assess the possible success of the plan. But other financial arrangements that involve a good deal of upfront cash, say, taking a second mortgage on one's home, are often rife with challenges. After the housing market crashed, many homeowners discovered they were upside down in their mortgage obligations.

The city councils of Midvale, Layton, Orem, Lindon and West Valley City can ill-afford to put taxpayers in a similar position, particularly when there are private companies putting their own revenue at risk to expand high-speed Internet service along the Wasatch Front. In this economic climate, that seems a better option than to pledge even more taxpayer funds on a venture that has consistently fallen below its own projections.