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Orem City Council Raises taxes to pay for Failed UTOPIA GON

August 30, 2012

A blog post from the Free State Foundation highlighted the audit of Utah Telecommunication Open Infrastructure Agency (UTOPIA) we wrote about three weeks ago.

That audit found UTOPIA, which operates an 11-city government-owned broadband network (GON), is currently $120 million in debt. The Foundation said the communities “served” by the network are looking for new revenues to pay for the project. Indeed they are. Late last week the Orem, Utah city council passed a property tax increase to help cover UTOPIA’s deficit. The tax hike, which will total $3.5 million ($2.8 million will go straight into UTOPIA’s pocket), will cost the average taxpayer an additional $50 a year. (Of all the cities participating, Orem is responsible for the largest share of UTOPIA, 21 percent.) The property tax increase is the first in 30 years.

According to the Provo Daily Herald, UTOPIA’s problems are so deep, one-time supporters have changed their minds. Among them are state Rep. Brad Daw, R-Orem. Daw told the Daily Herald, “The audit came back and I was horrified. I knew things were bad but I had no idea they were this bad.” Daw told the paper he believes very few people will ultimately subscribe to the municipal service. Indeed, in the same article Orem administrative services director Richard Manning admitted one of the key reasons UTOPIA has fallen so badly behind is “fierce competition” from the private sector.

Finally, Daw pointed to UTOPIA’s failure to have a clear business plan for his change of heart. Daw said, “When a business of this size starts up what you expect to see is a very detailed proposal and business plan and expectations but all the audit could find is a spread sheet and executive summary that looked like it was backed up by a business plan but it wasn’t found. They don’t have [that].”

While it struggles to fund a service capably provided by the private sector, the city of Orem is cutting back on its public safety spending. According to Salt Lake City’s ABC 4, “The city will fill the rest of its budget deficit by making several cuts including holding off on making an ambulance and police car purchase. It will also wait to buy a new air pack for the fire department.”

From UTOPIA’s example the Free State Foundation concluded that GONs should be limited to areas that are truly unserved by the private market. Foundation president Randolph J. May writes, “[U]TOPIA’s unfortunate experience, along with that of other government-run networks, provides a cautionary tale that such instances should be extremely rare. And a precondition for considering government ownership must be that no private providers are offering service in the area and none have indicated an intention to do so.”

We couldn’t agree more. Cities like Orem shouldn’t have to sacrifice public safety, or take additional funds out of their pockets, to pay for something residents clearly would rather get from the private sector.