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UTOPIA bailout proposal hits roadblock; Lindon rejects deal

Published June 18, 2014 6:42 pm

Opposition • Member city, taxpayer advocates question investment company's plan for the high-speed network.
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An Australian company's bid to turn around Utah's troubled experiment with publicly run high-speed Internet access has run into opposition in recent days.

Critics of the deal sought Wednesday to sow doubt among state lawmakers on the legality of a plan by Macquarie Capital Group to take over, finish and run the UTOPIA network. And on Tuesday, Lindon became the first city to reject the Sydney-based investment company's proposal.

In both cases, the focus was on a proposed $20-a-month utility fee Macquarie wants participating cities to levy on all households and businesses to help pay to finish the broadband fiber-optic grid.

"When you start to scratch the surface, the utility fee looks a lot like a tax under Utah law," said Raymond Gifford, a telecommunications lawyer enlisted by the business-backed Utah Taxpayers Association, which opposes the Macquarie deal.

"If it is a tax," the Colorado-based attorney told lawmakers Wednesday on Utah's Capitol Hill, "then there is not authority for the cities to impose it."

But supporters of Macquarie's initial plan urged legislators to stay out of a decision they contend should be up to city officials.

"In their due diligence, the cities certainly feel comfortable with where they are going," said Lincoln Shurtz, lobbyist for the Utah League of Cities and Towns. "We hope you will allow the cities to take their own course."

Added West Valley City mayor and former state Sen. Ron Bigelow: "Unless you see some major problem we've missed, we're certainly going to continue on the path of investigation."

UTOPIA is a consortium of Wasatch Front cities formed in 2004 to build a futuristic network offering residents and business owners Internet speeds hundreds of times faster than commercially available connections, largely in hopes of spurring economic development.

Ten years on, the municipal system remains incomplete, with a relatively small customer base and heavy debt.

Leaders in Midvale, West Valley City and Layton have voted to proceed with an in-depth study by Macquarie on how to finish building the network and fiber-optic connections to all the cities' combined 160,000 potential users, then operate the grid for 30 years under city supervision.

Seven other UTOPIA members ­– Tremonton, Brigham City, Perry, Centerville, Murray, Orem and Payson – have until June 27 to either pull out or proceed with Macquairie's further exploration, for a final decision on the deal later this year.

Macquarie is a global firm specializing in large infrastructure projects run in public-private partnerships. In UTOPIA's case, its plan calls for a utility fee of between $18 and $20 to be charged to all potential customers, whether or not they avail themselves of UTOPIA access.

The fee is essential, Macquarie executives say, to securing affordable financing from lenders in order to pay to finish and upgrade UTOPIA's fragmented network and make it commercially viable.

The company predicts the resulting network will be profitable and ultimately generate enough money to pay off nearly $500 million in existing bond debt already owed by member cities.

But in light of opposition aired at several public hearings and in an online survey of residents, Lindon City Council members said they felt an obligation to vote against proceeding with Macquarie.

In a nearly three-hour hearing Tuesday, Lindon residents and elected leaders voiced concern over the affordability and fairness of the fee.

Many also questioned the original notion of UTOPIA, saying its founding cities had veered away from the proper role of government a decade ago by seeking to offer services available from companies in the private sector.

Several Lindon officials said their rejection of Macquarie should not be viewed as a repudiation of the fiber-optic network.

"We consider UTOPIA to be an asset to the city," Lindon City Councilman Jake Hoyt said. "This proposal took us in the right direction but it isn't the answer."

tsemerad@sltrib.com Twitter: @Tony_Semerad