The dream of UTOPIA lives. Unfortunately, the cost to finance the dream has indentured Wasatch municipalities for 20 years by holding hostage millions of dollars of pledged sales-tax revenues.
Recently, UTOPIA has asked Centerville to extend the sales-tax pledge to 33 years. Under the new pledge, the city will be liable for a sales-tax pledge ranging from $389,000 to $730,000 a year, for 33 years. Clear language is written into the agreement describing creditor foreclosure procedures — in essence, a mortgage on the city — should the city not meet its sales-tax pledge commitment. The prospects are frightening, and with the new 33-year commitment, it would be impossible to foresee the impact on the quality of city life and the potential for catastrophic circumstances should the city fail to meet its pledge obligations. Sounds like an ARM mortgage doesn't it? Similar pledges are being considered by the other 10 UTOPIA communities.
The dream has also fallen victim to a possible mismanagement of funds of up to $130 million, made available since the 2004 sales-tax pledge agreement. Yes, there have been limited successes, but the lack of responsible corporate governance and the appearance of gross negligence and possible willful misconduct by executives have raised serious questions about its ability to carry out the vision, mission and strategy that initially created it.
City councils are also wrestling with UTOPIA's marketing strategy that requires subscribers to pay an upfront connection fee ranging from $1,200 to $3,500. The plan also requires that 40 percent to 60 percent of neighborhoods sharing the same cable bundle of fiber optics sign up for service. Although UTOPIA officials cite sound business practices, they are referring to European practices that are unproven in the U.S. or more specifically, Utah markets.
According to the UTOPIA marketing strategy, the benefit of the connection fee is reduced prices for services, even when taking into account the home improvement loans required by subscribers to pay for the connection fee. But this is a hard sell to residents already strapped with higher gas prices, increased property taxes and higher food costs. Nevertheless, UTOPIA is counting on subscribers to pay the high connection fees to secure needed capital to complete the fiber-optic network. UTOPIA has also indicated that the marketing strategy is a linchpin to financing the overall venture even with the refinancing. In essence, the success of UTOPIA is based on two assumptions: the support of the 11 municipalities to refinance the venture, and the success of the connection-fee marketing strategy — which by the way, will require 30,000 new subscribers over the next five years to break even. Keep in mind that it took UTOPIA a year to secure just under 1,000 customers from 2007 to March 2008 without the connection fee.
So, where does this leave the residents of Centerville and the other 10 UTOPIA communities? It puts them at odds with the dream that a ubiquitous, high-speed, fiber -optic network will be a reality. It also leaves them seriously in debt for the next 33 years. Unfortunately, this is not the idealistic fantasy we were counting on, nor is it responsible government to indenture communities for a technology that may be outdated in the next three years.
Lawrence Wright is a member of the Centerville City Council.