John Valentine's SB 190 targeting UTOPIA, could scuttle Macquarie deal

Sen. John Valentine is running SB190 which has been very specifically crafted to prevent any UTOPIA city from using the same utility fee that Provo has to pay down the bonds. Moving to a utility fee to provide transparency on the cost of the UTOPIA bonds has been a key part of the Macquarie discussions so far, so it could very well put the deal in jeopardy.

Note this story appeared in the Standard-Examiner on February 21, 2014

UTOPIA deal with Australian company threatened by Valentine's bill

SALT LAKE CITY-- A Utah County lawmaker's legislation limiting the ability of UTOPIA cities to cross-subsidize the costs of a public communications service  has thrown a wrench into negotiations between the fiber-to-home network and an Australian company trying to buy the network.

Sen. John Valentine, R-Orem, is running SB 190, which will clarify when a public telecom company can cross-subsidize its services.  

At the heart of the issue is the ability of cities to impose a utility franchise fee on the bills of all residents, whether or not they get the service. A similar arrangement is in place in Provo, where the city sold its telecommunications company to Google and now bills every household for the debt of that sale monthly in utility bills.

As it is currently written, the provision would put a damper on negotiations between the Utah Telecommunications Open Infrastructure Agency and Macquarie Capital Group. Macquarie reportedly has expressed interest in taking over control of the company, but not taking on existing debt incurred by the network to date. The fee would allow UTOPIA cities the ability to help address existing debt, beyond existing means.  

Valentine met with mayors from UTOPIA cities on Thursday and is still working on language that would allow the Macquarie deal to move forward, and still protect potential ratepayers.

"Those negotiations are ongoing. I'm looking for a way to allow providers to go forward and to allow Macquarie to go forward," Valentine said Friday afternoon.

Valentine claims existing state statute prevents cross-subsidizing but includes a clause by "another means." He said he and attorneys disagree on whether that excludes a utility a franchise fee.

Pressed on whether the impasse was something that can be worked out, Valentine was cautiously optimistic. He said he can come up with language that is legally sound, but said he can't make any promises of how the measure might do when subjected to legislative review.

Valentine said he initiated his bill last year based on input from several mayors.  He said it's difficult to impose a charge on people for a service they've never used. He wants discussion of how UTOPIA will be financed to be out in the open.

"Is it fair that someone should have to subsidize something in the future for which you get no benefit?" Valentine asked.

Any move to finance UTOPIA would be wrong, according to Royce Van Tassell, vice president of the Utah Taxpayers Association.

"They probably shouldn't have gotten into this in the first place. This was a mistake, plain and simple," Van Tassell said of UTOPIA.

Anton Clark Standard Examiner