Orem’s city council on Thursday night voted 6–1 against moving forward with a partnership with Australian company MacQuarie Capital over the city’s fiber-optic network, UTOPIA, that would have added $18 to $20 to everyone’s utility fees per month — no matter if they used the service — but would have meant build-out of the network and no additional debt. Only Councilwoman Margaret Black voted to go forward with negotiations.
The council voted against going ahead with the so-called Milestone 2 of the negotiations into the deal (there are four milestones involved in the negotiations and analysis.) What happens now is that the city can look into other proposals, but city officials said MacQuarie has said the current service level for UTOPIA customers in Orem will remain the same. The city will continue to pay on already-incurred UTOPIA debt — about $40 million — though only about a third of the city has access to the fiber network.
Every seat in the city council chamber was filled on Thursday night, and people were standing out in the lobby. The sign-up sheet to speak was full, filling nearly two hours with public comment, both for and against the plan.
Of the 11 UTOPIA cities, Orem, Lindon, Payson, Murray and Centerville have now voted against proceeding with the deal. Midvale, West Valley, Layton, Tremonton and Brigham City voted to go ahead. Perry also voted Thursday night.
When Orem signed on to be part of UTOPIA more than a decade ago, the city council “made a moral failure and made a business failure, and we were asleep at the wheel when it happened,” said Councilman Hans Andersen, referring to Orem residents.
One factor in the city’s decision was the legality of the deal. State Sen. John Valentine, R-Orem, said his opinion is that cities can’t move forward with the MacQuarie deal as-is because it violates state law. There’s an issue with cross-subsidy, meaning the city can’t cross-subsidize a cable or telecommunications with tax dollars or fees, like the utility fee; another problem is unauthorized tax authority, meaning the city can’t charge the universal utility fee; there’s an issue with giving preferential treatment to one telecommunications provider over another; and a fourth issue is having a private company step in and collect fees — the job of the city.
Provo does charge a universal utility fee to pay past debt on the iProvo network; however, that fee is allowed under state law because it pays debt incurred before Jan. 1, 2014.
UTOPIA started building a fiber-optic network in 11 cities more than a decade ago and was the subject of a 2012 Utah legislative audit. The audit found that the agency was the victim of poor planning, mismanagement, unreliable business partners and lack of subscribers. It also found that UTOPIA hadn’t wisely used bond proceeds or met goals.
Other major factors in the city council’s vote were resident opposition, problems with the utility fee and the 30-year term of the deal.
“I think it’s hard to go forward with the proposal when there is so much divisiveness,” said Orem Councilman Mark Seastrand — a recent city survey showed 71 percent of respondents were against the MacQuarie deal. He wondered if the city could change the proposal to remove the universal utility fee and alter the 30-year term to 20 years.
Councilman Tom Macdonald said MacQuarie representatives told him if Orem doesn’t agree with the mandatory utility fee, it should not go ahead with the next phase of negotiations.