Brigham City
UTOPIA Community Outreach
May 14, 2014
UTOPIA is formed; feasibility studies performed
$30 million bond issued
200820072006200420032002 2005
Project Timeline: 2004-2008
$66.2 million loan closed with RUS
$85 million bond issued; construction starts
RUS provided $21 million of loan and reneged on the rest
Legislature passes HB 149 restricting municipal telecommunications and establishing wholesale model
Legislature passes SB 66 restricting financing mechanism available
Original UTOPIA Goals
• Build Advanced Fiber-Optics to each home & business• Allow competition between multiple service providers• Decrease user fees through competition
UTOPIA is formed; feasibility studies performed
$30 million bond issued
200820072006200420032002 2005
Project Timeline: 2004-2008
$66.2 million loan closed with RUS
$85 million bond issued; construction starts
RUS provided $21 million of loan and reneged on the rest
Legislature passes HB 149 restricting municipal telecommunications and establishing wholesale model
Legislature passes SB 66 restricting financing mechanism available
$185 million refinancing occurs
Utah Infrastructure Agency (UIA) created
201420132012201020092008 2011
Project Timeline: 2008-2014
UIA issues $11.2 million bond
Construction continues
$16 million federal stimulus grant received
Brigham City forms Special Assessment Area (SAA)
UIA issues $29.5 million bond; construction continues
UTOPIA sues RUS
Discussions began with Macquarie Capital
Legislature restricts ability to bond for operational expenses
UTOPIA & UIA Bonds
Bonds Total System Brigham City
Portion
UTOPIA ** 185,000,000 6,179,000
UIA 2011 29,500,000 182,900
UIA 2013 11,205,000 69,471
Total Bonds(Does not include Brigham City bond) 225,705,000 6,431,371
** Note – In order to refinance this bond, the City would need to pay a premium of approximately 40%. This would equal approximately $8,650,000 ($2,471,000) above the debt amount.
$185 million refinancing occurs
Utah Infrastructure Agency (UIA) created
201420132012201020092008 2011
Project Timeline: 2008-2014
UIA issues $11.2 million bond
Construction continues
$16 million federal stimulus grant received
Brigham City forms Special Assessment Area (SAA)
UIA issues $29.5 million bond; construction continues
UTOPIA sues RUS
Discussions began with Macquarie Capital
Legislature restricts ability to bond for operational expenses
Brigham City Special Assessment Area• Allowed Property Owners to Voluntarily be Connected
to Network at Their Own Expense• Connection Fee for a “Normal Residence” was $2,760
Cash Up Front or $3,000 Financed• Approximately 1,600 Properties Signed Up in Area• Approximately 1,300 Active Customers Currently in
Brigham City
Current UTOPIA Operations
• Building out system with UIA bonds• Build out is focused on best returns• Losing about $2m annually – excluding litigation costs
UTOPIA Go-Forward Options
1. Let the system go dark2. Sell the system3. Slowly Grow the System to Profitability (Current Plan)4. Public/Private partnership for complete build out and operation
Go – Dark Scenario
Pros• No service related
UTOPIA Issues• Operations are not the
responsibility of the City
Cons• City would still pay UTOPIA
bond payments for 27 years• City would begin to pay UIA
bond payments• 1,300+ Brigham residents
with connections would not receive service
• Possible litigation related to broken contractual obligations (Could be many $thousands/millions)
• City would lose any upside related to the system
Sell the System
Pros• Service provided to
residents• Operations are not the
responsibility of the city
Cons• 11 cities need to agree
on sales price• City would (probably)
still need to pay all bond payments• Service provider issues
may arise• Possible monopoly
Why Don’t We Just Sell to Google?
Grow the System to Profitability
Pros• Operational Cost Would
Eventually be Paid by Revenues• City Bond Payments
Would Eventually be Lowered/Repaid• Control of Network• Multiple Service
Providers
Cons• Operational Shortfalls
Take Time to Reduce• City Bond Payments
Would Take Much Longer to Reduce/Repay• Operational Risk is the
Responsibility of UTOPIA/City• Cities are Reluctant to
Issue More Debt
UTOPIA OPEX Shortfall (Excludes Litigation)
25,000
75,000
125,000
175,000
225,000
275,000
UIA Monthly Recurring Revenue
Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-140
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Recurring Revenue UIA Monthly Debt Payment ($40.7M Bonds)
Public Private Partnership (PPP) / Macquarie Proposal• Maquarie would build out the network to every city in
UTOPIA• Maquarie would operate the system• Users would be required to pay a utility fee for access to
the network and a basic level of service• A Wholesaler would manage relationships with Internet
Service Providers (ISPs) – not sale services to the public• ISPs would provide services to the public – basic level of
service would be provided at no additional cost• Cities, PPP and Wholesaler all participate in network
upside through sharing of transport fee revenue
Competitiveness of the Basic Service
Provider Intro Price Standard Price Speeds (MB) Data Cap
Internet Only Basic Service $18-20/month $18-20/month 3 / 3 20 GB
CenturyLink$30/month plus one time charges of $120 One year contract
$42/month 1.5 / 0.9 to 40 / 5 150 GB
Comcast$30/month 1st year $8/month modem One year contract
$50/month $8/month modem 25 / n/a 300 GB
Internet + Phone Basic Service $25/month* $25/month* 3 / 3 20 GB
CenturyLink Double Play
$55/month phone One year contract $70/month 1.5 / 0.9
to 40 / 5 150 GB
Comcast Double Play
$40/month 1st year $60/month 2nd year $8/month modem Two Year Contract
$83/month 3rd year $8/month modem 25 / n/a 300 GB
* Based on Indicative third party VoIP service pricing of $5 - $8 per month
Public Private Partnership (PPP) / Macquarie Proposal
Pros• 1 GB fiber optic connections
available at all buildings• All UTOPIA debt is projected to be
repaid under the plan• City retains network ownership• Operations are not the
responsibility of the city• Multiple service providers –
causing competition• Utility fee is lower than many
users currently pay• $300 million funding obtained by
Maquarie• SAA Customers will be treated
equitably
Cons• All residents required to
pay utility fee• Many details need to be
worked out• Cost associated with
exploring the plan• Opt out provision could
be very costly
Comparison
Slowly Grow System• Every resident continue
to pay $5.32 per month for current service to be available to a limited number of residents by issuing more debt
Macquarie Proposed PPP• Required utility fee to all
residents with a basic level of service that in most cases will cost less than comparable services already being purchased by most residents
www.gofiberutah.org
Questions?