Tax or fee? Cities face key decisions on future of UTOPIA

Published: Saturday, June 14 2014 6:20 p.m. MDT

Network Operations Center Technicians Brian Merell, front, and Donald Seher, back, work in the NOC, Network Operations Center at Utopia, a fiber optic company Thursday, Oct. 20, 2011.

Scott G Winterton, Deseret News Archives

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WEST VALLEY CITY — Officials in 11 Utah cities will decide this month whether to explore handing over the embattled fiber-optic network UTOPIA to an Australian investment group.

The proposal by Sydney-based Macquarie Capital Group would see construction completed on the 12-year-old network, realizing the initial promise of ubiquitous access to high-speed data, voice and video, by turning UTOPIA into a utility that homeowners support with a monthly fee, whether they use it or not.

"This is a really important decision to the future of West Valley," West Valley City Manager and UTOPIA board Chairman Wayne Pyle said. "I hope the residents do take notice of it and dig deep into the possibilities and the advantages the fiber network can bring them."

The city councils of West Valley City, Layton and Midvale have already voted to move forward to "Milestone 2" of the Macquarie plan by allowing the investment group to conduct a study of UTOPIA and begin drafting a formal 30-year agreement.

The remaining eight cities — Brigham City, Centerville, Lindon, Murray, Orem, Payson, Perry and Tremonton — have until June 27 to decide whether to reject or explore the potential deal.

A vote in favor would not yet bind the cities to the 30-year deal but would allow Macquarie to take steps toward assuming control of UTOPIA.

Tax or fee?

The Utah Telecommunications Open Infrastructure Agency began 12 years ago as a means to bring high-speed Internet, phone and television services to individuals and businesses along the Wasatch Front. But low signups and stalled construction have left the network incomplete, serving a small base of customers and languishing in debt.

Macquarie would partner with UTOPIA cities to complete construction and manage services for 30 years, in exchange for payment in the form of a monthly $18 to $20 utility fee from residents.

Murray officials have launched an online survey, encouraging residents to weigh in on the proposal, and votes are scheduled for the remaining city councils over the next two weeks.

One group vocally opposed to the partnership with Macquarie is the Utah Taxpayers Association, which launched a petition and website at uNOpia.org that describes the mandatory utility fee as a $1.5 billion bailout of Utopia and "one of the worst boondoggles in Utah history."

Royce Van Tassell, vice president of the Utah Taxpayers Association, said his organization is concerned with taxpayers being asked to shoulder an ongoing cost for a service they may or may not use. He also said the proposed deal potentially violates both state and federal law.

"What we want to help do is bring some of these legal questions into the conversation, because there are real risks," Van Tassell said.

Raymond Gifford, an attorney working with the association, said the $20 homeowners would pay each month to support UTOPIA "looks a lot like a tax, not a fee." He said a fee is a charge for real services that residents receive, like electricity or water, whereas a tax is a generally imposed obligation.

The distinction is important, Gifford said, because Utah law maintains regulations on levying taxes that profit a public-private partnership.

"If it's a tax, (the cities) don't have the authority," Gifford said. "It's a compulsory tax being called a fee."

Gifford also questioned whether turning broadband Internet access into a city utility is wise, saying that it limits competition in a service that continues to evolve.

"I love what electric utilities do, but hotbeds of innovation they are not," he said.

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