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Utah Taxpayers Association questions legality of UTOPIA deal

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Posted at 9:41 PM, Jun 18, 2014
and last updated 2014-06-18 23:41:57-04

SALT LAKE CITY -- Is an Australian company's bid to bailout UTOPIA and charge thousands of Utah residents a flat fee every month even legal? That’s what the Utah Taxpayers Association wants to know. They took their concerns to Capitol Hill Wednesday.

The committee hearing comes just one day after a landmark decision by Lindon to reject a proposal to charge its residents for Internet. They are one of 11 cities tied to the UTOPIA deal, a deal the Utah Taxpayers Association says is a financial failure.

"This is another attempt by cities to get and spend more money without voter approval," said concerned citizen George Chapman, who was among some Utah residents at Wednesday's committee hearing on Capitol Hill.

Perhaps the 11 cities who bought into the idea of UTOPIA thought it would be the perfect plan to provide its residents with high speed internet, but nearly ten years after a deal was brokered some towns like Lindon are backing out. Why? The futuristic network would rack up millions in construction fees, a cost these cities didn't expect.

Payson pulled out in 2007, but it was too late for others, who now have to pay back a $185 million bond and an additional $500 million in interest over the next 30 years.

That's where Macquarie, an Australian investment firm comes into the picture. They offered to bailout everyone. The only problem? They want residents to pay for the mess left behind.

"Every taxpayer is going to be part of this 1.8 billion dollar tax, everybody should be very concerned," says Royce Van Tassel of the Utah Taxpayers Association.

Right now, the fiber optic network is designed to reach 160,000 residents. Macquarie's new proposal would impose a mandatory utility fee of about $20 a month. It's something some Utahns are strongly opposed to.

"What you're really doing is mandating that everyone take or pay a service, even if they don't get high speed internet," said Claire Geddes to a room full of lawmakers.

Wayne Pyle, city manager for West Valley City and board chairman of UTOPIA, said each city has the option to say no to Macquarie's proposal.

"We've had public discussion and certainly we want every city to make the correct decision for them," Pyle said.

Still, some question if the deal is even legal.

"I think there's a serious question about whether the deal structured is legal," Van Tassel said. "We're concerned that the city shouldn't be in the telecommunication business in the first place. We're concerned that the billions of dollars tax that's being proposed will cost Utah taxpayers."

The Utah Taxpayers Association is asking state lawmakers to step in, and so are some Utah residents.

"Utilities are regulated,” Tim Funk said during the hearing. “This is not regulated in the same sense. If you're going to let them charge $20 to every household whether they take this service or not, that is patently unfair.”

"You need as a legislature to close this loophole, this is wrong," Chapman said.

Out of the 11 cities, Lindon and Payson are now out. Murray, Centerville and Orem are next in line to decide whether they want to back out of the deal. The bottom line is the cities agreed to create UTOPIA, so they will still be financially responsible for the more than half a billion dollar bond debt.

It's still unclear what the Utah Legislature will or can do about the UTOPIA deal.