In April 2008, West Valley City Councilman Mike Winder was faced with a vote that almost a dozen Utah city councils were likewise deciding: should they saddle residents of their city with more of a financial burden to give money to the publicly-financed company UTOPIA? The vote in question was a proposal to commit taxpayers to 33-year bonds in order to raise funds for another phase of building out their fiber network.
Councilman Winder voted against the proposal, though it passed in his city on a narrow, 4-3 vote. Since that time, Winder became mayor of West Valley City, and in April of this year penned an op-ed expressing firm support of the company. Mayor Winder’s about face (and then some) is a microcosm of the situation scores of municipal officials find themselves trapped in.
UTOPIA stands for the Utah Telecommunication Open Infrastructure Agency, a consortium of 16 Utah cities—11 of which are “pledging cities”, joined together in their common cause of burdening citizens with bonds to lay down an infrastructure of fiber-optic cables in order to provide speed-of-light solutions for internet, television, and phone services. Barred by law from providing retail services themselves, they partner with other companies who use the network to offer these services to residences and businesses. This introduction of competition, we’re told, is an opportunity for the free market to function within the socialist-at-first-glance tax-funded system.
UTOPIA has been successful in getting its member cities to twice pledge sales tax revenue for bonds in order to fund its operations. The second round of funding became necessary after company officials sought cash from the Department of Agriculture’s Rural Utility Service—a federal program which hands out billions of dollars in stimulus fashion and whose ancestor is FDR’s 1935 Rural Electrification Administration—but met with resistance and then outright rejection. Their failure to secure “free” federal money sent them back to their member cities with empty pockets and cupped hands extended, begging for more bonds.
Despite Winder’s “nay” vote, West Valley City and almost every other member city agreed to more cash—after all, UTOPIA was seen as “too big (or important or vital or whatever) to fail”. $181 million was secured and promised to be repaid over 33 years in a balloon payment plan. That money is now gone (with fingers pointed by UTOPIA leaders at the poor economy) and they’re asking for more.
The executives profiting from taxpayer money have a new plan, though. This one, they say, will work (unlike the promises previously made with past business models). “We believe in it fervently,” said Layton City Manager Alex Jensen—one of scores of other city administrators and officials whose political futures may very well rest on this issue alone, given the magnitude of the financial commitment they’ve increasingly made in the name of each resident. He also smugly suggested that he and other city officials “are not embarrassed or ashamed” about asking for more money—this after twice burdening residents with bonds to support a company who can’t even cover operating expenses at the moment, let alone the bond payments themselves.
Mayor Winder, once-opponent-turned-propagandist for UTOPIA, has declared that “there is light at the end of the Utopia tunnel.” He states that all that is needed is more subscribers to make the business viable. Winder’s cheerleading is reminiscent of similar platitudes spewed from executives of all sorts of failing companies who turn to the government for financial aid. Whether we’re talking about Fannie Mae and Freddie Mac, General Motors, Amtrak, or UTOPIA, red flags and warning bells should appear in full force when modern-day Wimpys offer promises in pursuit of your money.
But unlike private businesses who later turn to government for taxpayer-guaranteed loans and “free” money, UTOPIA exists only because some municipalities embraced the democratic process to override the objections of those who disagreed and voted to commit everybody to millions of dollars of bonds to fund an experimental infrastructure project. Some opponents throw out the “socialism” label at UTOPIA, and rightly so, but fail to extend their scorn to other government-run infrastructure projects such as UTA, airports, convention centers, etc.—no surprise here, as conservatives are rarely consistent.
Those defending UTOPIA point to infrastructure projects traditionally implemented by municipal governments—power grids, sewage systems, water access, etc.—and attempt to tie internet access to these other “public works” required for a non-agrarian standard of living. In the eyes of such, Finland must be a pioneer, where broadband internet access is a guaranteed legal right. While libertarians may quibble about government-funded and -owned infrastructure projects, one can at least make the case for water, electricity, and sewage being provided by local governments or some form of cooperative overseeing the services. But to argue that internet access is a “human right”, a “basic need”, or in any way equivalent to traditional “public works”, and thus deserving of government bonds to fund its implementation, is an expensive exercise in increased intervention. What’s next? Should a home itself be a legal right, in a “war on homelessness”? Or automobile ownership, access to a gym, or government-provided gardens for growing your own produce?
In his op-ed, Mayor Winder stated that the question at hand is not “Was UTOPIA a good idea or bad idea?” but rather “Looking at our hand today, what is our best way forward?” This attitude of dismissing the historical context and stifling any discussion around the principles involved in the original decision is a popular one we also see in regards to the military conflict in the Middle East, TARP, and other instances in which the government has improperly intervened and yielded, unsurprisingly, negative results. Winder is wrong to cast this aside.
But what of his question? What is “our best way forward”? It’s a question that’s also been asked in regards to Amtrak, for example: should the significant investment of taxpayer money simply be sold off for pennies on the dollar, or should more money be committed in an attempt to make the business venture profitable? The Salt Lake Tribune’s editorial board recently called for a “cut and run” from UTOPIA, suggesting that member cities not dig deeper into the money pit in which they’ve cast the financial future of their citizens. There is common sense wisdom in such advice.
At its core, UTOPIA is founded on amazing technology: fiber-optic cables capable of transferring massive amounts of information. It’s a proven technology that in many ways is the future of our communications infrastructure. But taxpayers should never have been the financiers of this project, nor should they continue to be; if projects like UTOPIA are to be successful, they must rely on private funding and risk-taking.
Governor Herbert praises UTOPIA as having a “sustainable and reliable model”, but one wonders what evidence he is looking at. The model pursued until now, and any future models conjured up, all rely upon a burden of debt placed upon tax-paying residents of each pledged member city. When the subscription projections fall short, as they have, and as they very well could far into the future, the company must beg for more bonds; this is hardly a “sustainable and reliable model”, the Governor’s cheerleading notwithstanding.
It is time for member cities throughout Utah to have the tenacity to chalk up their losses and swallow the debt burden they were previously committed to. Sell off the existing network to an interested buyer, allow future entrepreneurs the ability to further develop the infrastructure themselves where the market demands it, eliminate regulatory burdens and other government interference that favors the existing duopoly of Comcast/Qwest, and let consumers demand the services they desire.
City officials were not elected to be fortune tellers; buying into the pie-in-the-sky promises of UTOPIA officials and other fiber-loving fanatics is no excuse for putting taxpayers on the hook for hundreds of millions of dollars.
Sometimes, the best way forward is to reverse course and return to safer ground. Municipal governments throughout Utah should resist the urge to make such commitments to experimental projects, and where such burdens already exist, those who would layer more debt onto city residents should be removed from office—just as those with an addiction to spending should have their line of credit terminated and their credit cards shredded.
UTOPIA is not too big, too important, or too integrated to fail. If it cannot operate with existing capital already provided to it by two rounds of bonds, then it should be sold off to the highest bidder. The “best way forward” is painstakingly clear: do what is right, let the consequences follow. Even if that means not having any fiber access for the foreseeable future.
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