S.L. opts not to enter UTOPIA

0 Comments | Deseret News (Salt Lake City), Apr 14, 2004 | by Brady Snyder Deseret Morning News

The connection is dead in Salt Lake City.

A bid to make Utah's capital a participating member of the Utah Telecommunications Open Infrastructure Agency, which seeks to bring high-speed fiber-optic Internet connections to every address in member cities, died with a 4-2 vote from the City Council Tuesday.

The vote came as UTOPIA leaders asked Salt Lake City to pledge sales-tax revenues to back UTOPIA's $540 million construction bonds.

For Salt Lake City, that pledge would be $4.1 million yearly for 17 years, which would be spent only if subscription rates onto the network were less than UTOPIA's estimates. If subscription rates met expectations, the city would keep its money and also turn profits that could reach millions annually.

Four council members said the request for sales-tax revenue was too risky, while two said it was too risky not to remain part of UTOPIA.

While not backing the bonds, the council did decide to remain a member of UTOPIA in an effort to regain the $180,000 it spent on a feasibility study last year. But Tuesday's vote means UTOPIA's fiber lines will not be coming to Salt Lake City unless citywide voters choose to back UTOPIA's construction bonds sometime in the future.

Those council members in favor of backing UTOPIA's bonds noted Salt Lake City needs a niche to keep residents living in Utah's capital and to attract businesses. The city is losing residents, according to latest census figures, and is witnessing declining sales- tax revenues.

The lure of fiber lines would cause residents to locate in Salt Lake City and bring more business, said Carlton Christensen and Nancy Saxton.

"For me, as I looked at it the risk for not doing it becomes greater than the risk for doing it," Christensen said.

Saxton said she goes to Las Vegas often but never gambles. That said, she was willing to take a financial risk on UTOPIA because of the potential economic benefits. The city, after all, has a highly educated population and has a high per capita ownership of computers, she said.

"Salt Lake City needs to carve out a special niche for itself," she said. "I'm convinced that if we use fiber optics for our vision for the future we will have a . . . cutting edge that will allow us to be marketable to the rest of the nation."

But council members Van Turner, Eric Jergensen, Jill Remington Love and Dave Buhler were not convinced.

"I do not believe this is a worthwhile risk for the taxpayers for our city," Jergensen said.

Buhler said UTOPIA is unfair government competition with private business and punishes companies that have invested in the city's broadband infrastructure.

Following the vote, at Jergensen's urging, the city did form a telecom task force, which will look at ways the city can encourage private companies like Quest and Comcast to provide more broadband options for Salt Lake City.

Qwest already suggested to the council last week that if it voted against UTOPIA the company would provide speedy DSL lines to 90 percent of the city's residents by year end.

Qwest for Utah president Jerry Fenn reiterated that commitment Tuesday if the city relaxes some of its conditional-use processes.

UTOPIA could have been a little bit less risky for Salt Lake City than it was for other member cities.

Wexford Capital LLC, a private Connecticut-based venture capital firm that already has ties to UTOPIA, offered to cut the city's potential initial costs for the publicly owned fiber optic network.

Wexford's offer to cover 75 to 85 percent of the city's costs the first 10 years would come in exchange for at least 75 percent of the city's UTOPIA profits for 25 years. That plan would've slashed the city's potential costs to $7.7 million from $28.7 million in the first decade of UTOPIA's operation.

Wexford's deal would have still required the city to pay the first $1.1 million of any UTOPIA losses, with Wexford picking up the rest of the city's financial commitment during UTOPIA's first 10 years.

The deal was only offered to Salt Lake City and not to any of the other 18 original UTOPIA members.

Saxton wanted the council to vote to back the bonds only if a private insurance company would then back the bonds for Salt Lake City. That way the city could have its bonds backed but only pay the insurance premium.

Salt Lake Mayor Rocky Anderson first urged the City Council to join UTOPIA last year and spend some $180,000 for a feasibility study, which showed UTOPIA had a good business model.

But Anderson later said UTOPIA is a bad idea after UTOPIA discovered it would need member cities to back its $540 million construction bonds.

E-mail: bsnyder@desnews.com