Do two 'no' votes to fund UTOPIA signal trouble for agency?

Published: Saturday, Feb. 23 2013 7:00 p.m. MST

Manager Troy Thompson, left, talks with technician Josh Kester in the UTOPIA network operations center Aug. 1, 2012. (Scott G Winterton, Deseret News) Manager Troy Thompson, left, talks with technician Josh Kester in the UTOPIA network operations center Aug. 1, 2012. (Scott G Winterton, Deseret News)

MURRAY — Recent decisions from city councils in Murray and Tremonton denying more funds for the UTOPIA fiber-optic network is leading some to question the willingness of member cities to bankroll the company's operations.

"The right decision was to reject their request for funding, because we have money that has to be spent in other places," Murray City Councilman Dave Nicponski said. "We've got road needs, public safety needs. We've got demands on parks and recreation, and the money has to go elsewhere. … I'm not going to throw good money after bad so far as UTOPIA goes."

The Murray City Council voted 4-1 this past week against allotting $168,000 to fund operating costs for UTOPIA — the Utah Telecommunication Open Infrastructure Agency. A similar vote took place in Tremonton on Feb. 5, when the City Council also opted against providing operation funding, said Shawn Warnke, city manager.

Warnke, a UTOPIA board member, said the network is built into 95 percent of Tremonton and has a 15 percent "take rate." He said those who have the service seem to be happy with it and that he doesn't see the council's vote as a shift in sentiment.

"I try not to read too much into it," Warnke said. "I just try to take things at face value."

But Royce Van Tassell, vice president of the Utah Taxpayers Association and a longtime critic of UTOPIA, disagrees. As one of 11 UTOPIA member municipalities, Murray's vote declining to provide UTOPIA with funds is particularly significant, he said.

"Murray has been a longtime, outspoken supporter of UTOPIA," Van Tassell said. "For Murray to vote the way it did … was indicative of a sea change. … I think that public sentiment, and it appears support from the elected officials, is flagging and this is just the latest indication of that."

The other nine UTOPIA member cities are Perry, Brigham City, Layton, Centerville, West Valley City, Midvale, Lindon, Orem and Payson.

Wayne Pyle, West Valley City manager and chairman of the UTOPIA board of directors, said the Murray and Tremonton votes don't signal any cause for concern for the company. Rather, he believes the decisions are indications that UTOPIA needs to sit down with the elected officials and explain why the funding is necessary.

"I don't see this as a sea change at all," Pyle said Friday. "I think that once we get to them and talk to them about the advantages and disadvantages … they will see the wisdom and make that contribution."

An audit conducted by the Office of the Utah Legislative Auditor General at the request of state lawmakers and released in August found that UTOPIA has spent nearly all of its $185 million in bond proceeds, though only 59 percent of that has gone toward building infrastructure for the municipal fiber-optics network.

The audit accused the company of poor construction planning, costly mismanagement and unwise use of bond funds. UTOPIA responded by saying that the audit focused on prior mistakes and failed to mention the steps the company had taken to address issues raised in the report.

Pyle said that while dealing with the fallout from the legislative audit has slowed its headway, UTOPIA is making "good, solid measurable progress" in West Valley City.

"The revenues are up and expenses are down," he said. "We've been able to cover the debt, and while we're not quite meeting the operational expenditures, that gap between our revenues and our expenditures is narrowing."

Pyle noted that going to the cities for additional funding is a temporary solution to sustain the network until it becomes self-sufficient, which he said is the "best way forward."

While the company is hoping to have the network sustain itself in member cities in the next few years, Pyle said the "revenue picture" is actually improving faster than predicted.

"I'm hoping that we'll actually be out of that operational expenditure gap faster than we had planned on," he said.

Sen. John Valentine, R-Orem, cited UTOPIA's use of bond proceeds to fund operations as one of the reasons he is sponsoring SB172. The bill, which received unanimous support last week from the Senate Government Operations and Political Subdivisions Committee, would prevent municipalities and quasi-government agencies such as UTOPIA from using bond money for operations and maintenance for more than one year after being issued.

"The problem is some of our instrumentalities of government will often start projects that are not really well-thought out and have an open-ended time period in which they can borrow money to operate," Valentine told the committee.

"We saw that, for example, with UTOPIA. In my area, the city of Orem, we've gone almost 10 years now borrowing money for operations with bond proceeds," he said.

Jason Russell, UTOPIA communications manager, said the cities making up the Utah Infrastructure Agency, which includes Murray, bonded the company another $65 million, and $29.5 million of that was allotted to pay for operation costs between May 2011 and June 2012.

"We were able to operate beyond that point through prudent management and cost-monitoring," Russell said. "Now we are awaiting final go-ahead on the next (installment) of the bond. I believe we were aiming for $12 million, so in terms of Murray's vote, as we wait for the next bond amount to come through, we were looking for some additional ways to manage the costs."

The Murray City Council meeting was packed, with attendees even standing in the halls, and all 14 residents who spoke on the issue voiced their opposition to funding UTOPIA, Nicponski said, adding that no one from the agency attended the meeting.

"I don't wish ill on UTOPIA," he said. "I want them to succeed. It's an excellent service that they provide. I would recommend it. For high-speed Internet, they are second to none. But we can't continue to fund, underwrite and bail out a system that isn't paying its way."

Nicponski said the city has too many other needs and demands that must be addressed, from city employees who haven't received a pay raise in five years to the repaving of 5900 South.  

"The dollars have to go in a lot of different places, and it's just irresponsible to continue to take the taxpayers' dollars for something where apparently the business model isn't working," he said. "I feel like we made the right decision."

It's Pyle's belief, however, that each member city's UTOPIA costs are a city responsibility just like any other. Coordinating, meeting, discussing and coming to a consensus on the project and its future with elected officials in the 11 member cities, though, is no easy task.

"It's enough to do that in one city," Pyle said. "When you've got 60 to 70 elected officials who have all been around various amount of times, some like the idea and some don't. Some people like the Internet and use it all the time, and others never touch a computer. It's just hard to get everybody on the same page."

Van Tassell doesn't believe the cities should have become involved in UTOPIA in the first place and said that while UTOPIA cities are on the hook for the money they originally bonded, its member cities should seek to find an exit strategy.

"I think it's incumbent upon Utah and UTOPIA to figure out how to untangle this as best as possible," he said. "I just don't see an appetite among elected officials or the public to continue to subsidize UTOPIA beyond the hundreds of millions they've already committed."

Pyle disagrees and said West Valley City and its City Council are committed to the project.

"It's not so much that we're satisfied that UTOPIA is in great shape and where it needs to be, but we recognize the importance of the infrastructure to our city," he said. "I would generally say that we're supportive. We want to move onward, and we have a good plan."

Layton City Councilman Barry Flitton, another UTOPIA board member, said 80 percent of the phone calls he has received from constituents about UTOPIA are those wanting the service. He said the Legislature-requested audit has cast the agency in a negative light, but those in Layton who have the service are "amazed" by it.

"I get a lot more calls saying, 'When do we get it?' rather than, 'We don't want it,'" Flitton said. "I have to represent the public, and the public in Layton seems to be in favor of UTOPIA."

Russell said UTOPIA will only approach member cities that are part of the Utah Infrastructure Agency about helping fund operating costs because those cities have already pledged future funding.

While those at the agency are "disappointed" in the Murray City Council vote, he said there are ongoing discussions with all UTOPIA cities about how to cover operational expenses.

"I can say that no one here is walking around and waiting for the sky to fall in," Russell said.

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