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Fiber-optic network: Four communities endorse UTOPIA refinancing plan
This is an archived article that was published on sltrib.com in 2008, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Four down, six to go.

The UTOPIA fiber-optic system, a consortium of 11 Utah cities that pledged $202 million in taxpayer money over 20 years to build a high-speed broadband network, moved several steps closer Tuesday evening to gaining approval for a desperately needed refinancing of its debt.

Four of its seven member communities set to decide on whether to support the refinancing effort - Midvale, Lindon, Tremonton and West Valley City - voted in favor of refinancing and increasing their pledges to prop up the struggling network and fund its new marketing plans.

Payson City Council members, however, voted 4-1 against the refinancing. Orem and Centerville postponed their decisions.

"The one thing that is disturbing to me is the vagueness of the marketing plan and the vagueness of the refinancing plan," said Payson Councilman Brad Daley. He and council members Scott Phillips, Brent Grotegut and Jolynn Ford voted against the measure. Councilman H. Kim Hancock, a UTOPIA subscriber, voted in favor of the plan.

"How much money did we put down to put in the sewers?" Hancock asked, noting that most city improvements happen because people move forward in spite of the risk.

While Payson community leaders were voting against the refinancing effort, West Valley City was only narrowly approving increasing its pledge by a 4-3 vote. Mayor Dennis Nordfelt cast the tie-breaking ballot.

"It makes me sick to my stomach," Nordfelt said of the need to refinance UTOPIA's bonds. He added later, "I really don't think we have a choice. If we tried to sell the network now it would be a fire sale, and we wouldn't get 10 cents on the dollar."

The Utah Telecommunications Open Infrastructure Agency, or UTOPIA for short, is hoping the six remaining cities that have yet to vote will fall in line and increase their combined pledge of sales tax support for the project from $202 million over 20 years to nearly a half billion dollars over a 33-year period.

"I'm afraid of what is going to happen if we increase our pledge" to back UTOPIA, Eugene Sorenson told the West Valley City Council. "We're going to have to ask ourselves what we're willing to give up if we do - road maintenance, garbage pickup. Are we going to have to sell the golf course, the E Center?"

To date, four years after the city councils of 11 Utah cities pledged the money for the system, UTOPIA has avoided the need to call upon the taxpayers of those communities to make good on their promises to cover the network's debts.

Yet UTOPIA's financial adviser, Laura Lewis, said if the network is unable to refinance its debt, those pledges will be called upon. UTOPIA, though, would have no additional cash left to operate - other than to shut out the lights.

"I wish I could stand up here and tell you there was some other option" besides refinancing, Lewis told the West Valley City Council. "And believe me I've looked. If there was, I would have found it."

Using its cities' pledges to guarantee repayment of its debt, UTOPIA hopes to place $189 million in bonds with investors within the next several months. It intends to use the proceeds from the sale of those bonds to retire earlier debt it took on carrying higher interest rates. Once all its debts and expenses are taken care of, UTOPIA expects to have about $11 million left over to complete the construction of its network.

Payson's refusal to participate in the refinancing means it likely will have to soon begin paying UTOPIA about $260,000 annually for the next 20 years - or a total of $5.2 million - to satisfy its initial pledge to the network. If it had agreed to participate in the refinancing of UTOPIA's bonds, it would have been required to pay around $12 million over 33 years.

Centerville, whose City Council decided to postpone its decision, will take up the matter again on Tuesday. Orem will meet on May 2 to consider the matter once more.

Of the remaining UTOPIA cities, Brigham City, Layton and Perry will consider increasing their pledges and supporting the refinancing effort today. Murray City Council will consider the matter on Monday.

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* DONALD W. MEYERS and MARĂȘA VILLASE OR contributed to this story.

Payson has already voted 'no'; 6 other cities will tackle decisions within the next 8 days
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