clock menu more-arrow no yes

Filed under:

Op-ed: Stop investing taxpayer dollars on a failed project

Optic cable connected to a single patch panel.
Optic cable connected to a single patch panel.

A longstanding principle of the Utah Taxpayers Association is if a service can be found in the yellow pages, then government shouldn’t be providing it. We have seen far too many times where government attempts to compete with the private sector and ends up wasting taxpayer money. One prime example of this is the failed UTOPIA boondoggle that continues to plague the 11 cities that created the entity.

On Aug. 14, the Utah Infrastructure Agency, which was created in 2011 to give UTOPIA more borrowing capacity, will vote on taking out a $13 million bond to further build out the UTOPIA network in hopes of making the whole effort profitable. The vote will likely pass but the effort to make UTOPIA and UIA a success for taxpayers will never be realized.

This attempt to continue to send money after a bad idea has to stop. The private sector is already providing the same service that can be obtained through UTOPIA and it is past time that the local governments that created this mess find a way out.

Recently, the University of Pennsylvania released a study that examined 20 municipally owned fiber networks from across the nation; UTOPIA was included in the study. The report found that a majority of these networks struggle to recover the costs that were incurred to build them. It went on to show that of the 20 projects, only nine have had a positive revenue stream but that of those nine, five are generating returns so small that it would take more than 100 years for the project costs to be recovered. Only two of the 20 networks are expected to earn enough to cover their project costs during the useful life of the networks.

The Penn report went on to state that these government-owned ventures struggle to ever make a profit and put taxpayers in danger of seeing their local government increase debt, lose bond rating status and elected officials becoming distracted from other important issues because they are solely focused on the government’s fiber business. The report found that if UTOPIA continues in its current state, that the project will likely never turn a profit. It observed in a five-year span from 2010-2014 that the network only obtained 11,000 subscribers and that with a low subscription take the network was realizing less than $30 in revenue per household in the cities that make up UTOPIA. That is well below the $446 per household benchmark achieved by other projects that the report looked at.

I am often asked why the Utah Taxpayers Association cares so deeply about the UTOPIA issue. One statement from the Penn report sums up why we have taken the position we have as the report states, “Many cities managing these projects have faced defaults, reductions in bond ratings, and ongoing liability, not to mention the toll that troubled municipal broadband ventures can take on city leaders in terms of personal turmoil and distraction from other matters important to citizens. City leaders should carefully assess all of these costs and risks before permitting a municipal fiber program to go forward.”

The risks and consequences are too much for taxpayers to shoulder. UTOPIA and UIA officials should vote against the upcoming $13 million bond and start looking for new directions to take the network that will be beneficial for taxpayers instead of continually investing money into a sinking ship that will never be sea-worthy.

Billy Hesterman is the vice president of the Utah Taxpayers Association.