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?