Quantcast

Wyoming shows how cities can make UTOPIA internet model profitable

Published: Thursday, March 15 2012 3:47 p.m. MDT

Phyllis Preator, an organizer of Powell's Centennial Celebration, reacts to a friendly joke made by Gov. Dave Freudenthal about Powell Mayor Scott Mangold's "hairstyle."

Yellowstone Gate via Flickr

Enlarge photo»

UTOPIA and iProvo, two public groups that provide high-speed Internet and voice connections, are sore subjects for many cities in Utah after saddling them with more than $220 million in debt. But one Wyoming town is showing how some locally sponsored options are turning a profit.

Powelllink, the government-owned fiber optic network of Powell, Wyo., has found success in financing its projects.

The city of Powell started its program in 2006 when it issued a $6 million bond with an 8 percent interest rate, which it sold to a New York-based investment firm, Global Leveraged Capital.

Unlike iProvo and UTOPIA, the revenue from the Internet service providers would act as collateral for the bond instead of sales or property taxes.

“When we started out, no one had really successfully done this before,” Kirt Sudweeks, chief financial officer of UTOPIA, said in an interview with the Deseret News. “There wasn’t a financial model to try and copy.”

TCT, formerly Tri County Telephone Association Inc., based in Basin, Wyo., was the only ISP, but it was enough to back the bond.

Eventually after 40 percent of about 2,400 households signed up for service with TCT, the city decided to use reserve funds to purchase back the bond at a 2.75 percent interest rate in 2010.

“We’re not out here with any sort of bonds that are iffy,” Zane Logan, city manager of Powell, said. “It’s got to be a solid, collateralized investment or we’re not going to get involved in it.”

Provo-based U.S. Metronets helped the city of Powell, which has a little more than 6,300 residents, fund, build and manage Powelllink.

Ernie Bray founded Lindon-based project management firm DynamicCity, which was a consultant for UTOPIA. Bray is now the chief technology officer and owner of MetroNets.

“There were clearly mistakes made, in my opinion,” said Bray. “I think I’ve been proven right.”

Bray said he used lessons learned from his former project to help make Powelllink a success.

Avoiding tax-backed bonds was a lesson learned from the UTOPIA and what made Powelllink successful, Bray said.

“We created it like an economic development initiative,” Bray said.

Bray said having a strong ISP that was a good match for the city was another key to Powell’s fiber network success, which is another lesson he learned from UTOPIA and iProvo’s example.

The Utah Telecommunication Open Infrastructure Agency, or UTOPIA, along with 16 cities in Utah, has been trying to get every home and business connected to fiber optics since 2002, but it ran into financial troubles in 2007, which halted new construction.

UTOPIA has $185 million in outstanding debt. With interest, the organization is looking to pay $428 million, which will come out of the 11 cities that are signed on to the program.

Executives and public officials in Utah say they are looking back and learning from past mistakes.

Provo is also learning in retrospect.

“One of the things that I’m committed to do is create a document called ‘lessons learned,’ and that public officials learn from that document,” John Curtis, Provo mayor, said in an iProvo public hearing in August 2011.

The mistakes are now being felt in the pockets of taxpayers.

Provo has resorted to charging its residents, regardless of their service provider, with a “telecom debt charge” of $5.95 per household.

EMAIL: jferguson@desnews.com

TWITTER: @joeyferguson

Get The Deseret News Everywhere

Subscribe

Mobile

RSS