Scott G Winterton, Deseret News
Members of the Political Subdivisions Interim Committee on Wednesday heard testimony on a controversial proposal by Macquarie Capital Group to assume management of the UTOPIA fiber-optic network in exchange for a monthly utility fee from residents.

SALT LAKE CITY — Lawmakers on Wednesday heard testimony regarding a controversial proposal that would see several Utah cities impose a mandatory utility fee on residents to maintain and complete the UTOPIA fiber-optic network.

Members of the Political Subdivisions Interim Committee did not take action on the issue and said there were no current plans for the Legislature to intervene in the ongoing UTOPIA negotiations.

But individual lawmakers also expressed uncertaintly regarding legal issues raised by critics of the proposal and intent to continue monitoring the actions of UTOPIA city leaders.

As of Wednesday, a proposal by Australia-based Macquarie Capital Group to assume control and management of the embattled fiber-optic network in exchange for utility payments over 30 years had been accepted by four UTOPIA member cities and rejected by one member city. The remaining seven cities have until June 27 to either reject the proposal or agree to continue in negotiations with Macquarie.

The Utah Telecommunications Open Infrastructure Agency was created roughly a decade ago to provide ubiquitous digital data connectivity to residents and businesses. But member cities have struggled under ongoing debt obligations, as stalled construction and low customer sign-ups have resulted in ongoing revenue shortages.

"The cities have been mired in this for a long time, and I don’t think it would be productive of your time to take it on as a task," West Valley Mayor Ron Bigelow told committee members. "We want to solve the problem. We don’t want to give it to the state. We want to solve it ourselves."

Royce Van Tassell, vice president of the Utah Taxpayers Association, testified that the unique utility structure of the Macquarie proposal carries novel legal questions that could potentially be challenged in the future.

Van Tassell was joined by attorney Raymond Gifford, who said the utility fee could be viewed as a tax — because residents would be expected to pay it independent of whether they choose to use the fiber-optic network — that city councils would be imposing outside of Utah's truth-in-taxation laws.

Gifford also said the proposal raises issues of cross-subsidization — where residents who subscribe are subsidized by those who do not — and creates an uneven playing field for private Internet service providers.

"The real problem of the Macquarie deal, in my mind, is it imports a monopoly network model into our network competition legal structure," he said.

Van Tassell said it is not necessarily the belief of the Utah Taxpayers Association that the utility fee would be challenged in court, but he said lawmakers should be aware of the legal issues surrounding the Macquarie proposal.

"It’s not yet clear whether a case will be forthcoming," he said. "We wanted to apprise the committee, the Legislature, of potential problems."

But Lincoln Shurtz, director of legal affairs for the Utah League of Cities and Towns, said there is already precedent for the type of utility fee structure proposed by Macquarie. He said many fees have been levied by cities for services that residents may or may not use, such as mandatory recycling.

"It’s mandatory that you take the can, and it’s mandatory that you pay the fee," Shurtz said. "It’s not mandatory that you recycle. That’s the same that would be true here."

He said UTOPIA member cities have held several well-intended public meetings to receive feedback from residents, and that city leaders have done and continue to do due diligence in researching their options regarding the fiber-optic network.

"At this time we feel comfortable as cities that we can move forward with this model," Shurtz said. "We believe that we are on firm ground as to whether or not this could be challenged and as to whether or not we can impose the fee."

Bigelow said that unlike previous attempts at resuscitating the UTOPIA network, investors with Macquarie have the necessary resources to see the project completed and realize the original goal of ubiquitous access to all residents.

"We’re pretty confident that they can do what they say, that they can build the system and they can run it," he said. "If you want to make (UTOPIA) work, this seems to be one of the best options to solve that problem."

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