For anyone that does not get these messages, I thought it would be
interesting to get the opinions of the group. I am still waiting
after several years for UTOPIA to pull into my neighborhood. My
opinion is, pull the plug and sell the existing service off to a
private company. I will not support a raise in tax for UTOPIA.
Begin forwarded message:
From: "The Utah Taxpayers Association" <[EMAIL PROTECTED]>
Date: 14 April 2008 11:21:08 MDT
Subject: Tax Alert : Stop 150% tax pledge increase
Experiment with socialized telecom has failed, yet member cities are
considering 150% increase in their tax pledges.
UTOPIA: Utah’s $504 million boondoggle
Utah’s experiment in socialized telecom has failed. After 4 years,
operating revenues are 3% of projections and like the subprime
mortgage fiasco, UTOPIA wants City Councils to keep them afloat on
the taxpayers’ credit card by increasing their debt by 150% and
extending their payments to 33 years.
The Utah Open Infrastructure Association (UTOPIA) began constructing
its network in 2004. Promising a “future-proof” fiber-optic network
offering super-high speed internet, the UTOPIA propagandists
promised city council members “ubiquitous” coverage. In return, the
city councils agreed to collectively guarantee hundreds of millions
of dollars in UTOPIA bonds with sales tax revenues normally used for
essential services like police and fire protection. (A clearer
example of Marx’s infamous dictum, “From each according to his
ability, to each according to his need,” couldn’t be found.)
Your Utah Taxpayers Association urged Utah cities not to join
UTOPIA. We told them that cities shouldn’t compete with the private
sector, that they shouldn’t wager millions of taxpayer dollars in a
risky scheme.
We succeeded in keeping most Utah cities out, but 11 joined, and
they pledged up to $202 million in sales taxes to pay off UTOPIA’s
bonds. Of course, no one ever thought that might be necessary.
Today, things look a little different.
UTOPIA’s next bond payment is due in just weeks, and they don’t have
the money. Instead, they want member cities to adopt a new pledge
agreement that increases each city’s annual payment, and stretches
the pay-off time from 20 to 33 years. These changes increase
taxpayer exposure from $202 million to $504 million. Call the City
Council members in these cities, and tell them “No!” Tell them you
have better things to do with the $504 million subsidy UTOPIA wants.
HOW MUCH WILL UTOPIA’S NEW AGREEMENT COST?
UTOPIA is asking for a massive 150% increase in sales tax pledges.
If UTOPIA fails to meet their bond obligations, taxpayers could end
up paying up to $504 million.
SHOULD YOUR GRANDCHILDREN PAY FOR UTOPIA’S MESS?
Unfortunately these city councils imagined that they’d do a
municipal telecom project better with taxpayer dollars than the
private sector with private investment. After all, the capital
markets let them repay this debt over first 20, and now 33 years.
And the capital markets let them put 4 years of payments on their
credit card. If the private sector is so good at this, why do the
capital markets require them to repay their debt in just 5 years?
The problem with that analysis is that capital markets don’t care
whether a city can run a telecom system. To repay its debts, UTOPIA
and other municipal providers can simply increase taxes. For private
providers to repay their debts, they have to actually succeed, and
make enough money to cover their debt service, interest payments and
operating costs.
The question these City Councils have to ask is, do they really want
their grandchildren and great grand children to pay for UTOPIA’s
mess? With a 33 year term, that’s exactly what will happen.
WHY HAS UTOPIA FAILED TO MEET ANY OF ITS FINANCIAL GOALS?
As the next chart shows, UTOPIA painted a very rosy picture about
their operating revenue. The reality has been very different.
The huge gap between their projected and actual revenues is hardly
surprising, when you look at how many customers UTOPIA thought would
buy their service and how many actually did, and at how much the
average customer would pay for UTOPIA.
Projected
Minimum
Actual
Take Rate
55%
20%
17%
Average Revenue per User
$58
n/a
$28
Difficult as it may be to believe, UTOPIA actually expected they
would grab more than half the market. But to be conservative, they
noted that a take rate of just 20% would allow them to pay their
bills. Just 17% have actually signed up. And instead of paying an
average of $58/month, they are paying less than half that, just $28/
month. In other words, the average customer isn’t buying anywhere
near as many services as UTOPIA expected them to.
HOW WELL DO UTOPIA CITIES UNDERSTAND THE TELECOM INDUSTRY?
How could UTOPIA’s board and management have been so wrong about
these basic financial projections? They don’t know the telecom
industry. Their experience is in building and maintaining parks,
sewers and roads. Those are critical infrastructure systems, but
vastly different from the highly competitive telecom industry.
In light of their failure, at least one UTOPIA city is finally
willing to admit that they don’t understand the industry.
Centerville Mayor Ron Russell recently told the Davis County
Clipper, “I don’t think we have the expertise to do
telecommunications analysis in-house.” That’s a rather astounding
statement: Centerville is the only UTOPIA city with a city council
member who works in the telecom industry.
STOP UTOPIA NOW
Given the utopian promises of “ubiquitous” build out, revenues
streaming into the city coffers from new economic development, and
the 2-year delay in making its first bond payment, UTOPIA and
backers never believed the day of reckoning would come. But come it
has.
UTOPIA’s sheer cheek is utterly astounding. They have failed to
achieve a single goal, but now they want a massive 150% increase in
sales tax pledges. Now is the time for the 11 city councils to stand
up and say NO! UTOPIA was a bad idea to begin with, but the new
pledge agreement throws good money after bad. Instead of using the
taxpayers’ credit card to pay for UTOPIA’s mortgage, the Mayors and
City Councils in these cities should cut their losses by paying
their bills, and salvaging what value they can by selling the
network to private providers.
IF YOU LIVE IN A UTOPIA CITY, CALL YOUR MAYOR AND CITY COUNCIL, AND
TELL THEM TO VOTE “NO!” ON THE NEW PLEDGE AGREEMENT.
You can find the email addresses of the Mayors and city councils in
UTOPIA cities on our website, www.utahtaxpayers.org.
Utah Taxpayers Association
1578 West 1700 South, #201
Salt Lake City, Utah 8410
801-972-8814 -- www.utahtaxpayers.org -- utahtaxpayer.blogspot.com
Regards,
Jonathan
/*
PLUG: http://plug.org, #utah on irc.freenode.net
Unsubscribe: http://plug.org/mailman/options/plug
Don't fear the penguin.
*/
