A bill aimed at stopping the financially troubled network known as UTOPIA from issuing bonds to pay for its operations has passed the Legislature.
The measure that passed Thursday on the last day of the session would prohibit cities and counties from selling bonds after May 14 to build projects and then use any of that money to cover operations. It also prohibits using the bonds to pay off interest payments more than five years after bonds were issued.
After breezing through the Senate, the Use of Bond Proceeds by Political Subdivisions passed the House on a 68-2 vote and is to Gov. Gary Herbert for consideration.
The legislation is intended to make it impossible for the Utah Telecommunication Open Infrastructure Agency (UTOPIA) to issue additional bonds to finance its operations beyond the original $185 million that was used to build its fiber-optic network.
“I’m very glad to give direction on the use of bond proceeds,” said the bill’s sponsor, Sen. John Valentine, R-Orem. “We really should not be borrowing any money just to operate government enterprises.”
Originally conceived by 16 Utah cities but ultimately funded by 11, UTOPIA was among America’s first open-access, fiber-to-the-home networks. The project is funded by cities from Tremonton to Payson and includes West Valley City and Orem. Salt Lake City is not a part of UTOPIA.
UTOPIA’s executive director, Todd Marriott, agrees with the intent of the bill and said his agency had not planned to ask its member cities to issue more bonds for operational costs. He’s instead hoping that the cities can alter their annual budgets to come up with more money for the agency.
“We’re much like any other department in the cities,” he said. “Our percentage is running at a deficit currently, but we are making up that deficit. It is narrowing on a monthly basis. Our current plans put us at a break-even status in a couple of years.”
UTOPIA is still mired in debt. In fiscal 2012, the agency lost $12.5 million, while a newly-created sister entity called the Utah Infrastructure Agency (UIA) shed an additional $8,292. As of June, UTOPIA had a negative net worth of $132 million, which means that if all of its assets were sold off it would still be $132 million in debt.
Last month, Orem officials voted to continue to support plans by the UIA to sell an additional $24 million in bonds to support the UTOPIA network. The sale of those bonds will represent the final portion of a $65 million bond offering that many of UTOPIA’s member cities pledged to back in 2010 for the UIA.
At the same time, Tremonton and Murray officials have rejected funneling any additional money from their city budgets to fund Utopia’s operations, and Brigham City may decide the same.
UTOPIA executives have said in recent months that 10,000 subscribers receive services over its fiber-optic lines, or about a tenth to a quarter of its potential customer base.
Since it was started 10 years ago, UTOPIA has been plagued by a poor choice of contractors, business-model flaws and poor strategic planning, according to a state audit that was conducted last year.