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Though the general sentiment was that Provo isn't getting a bad deal out of the sale of its fiber-optic network, iProvo committee and Municipal Council members asked tough questions during meetings Tuesday about the pending $40.5 million deal.
Provo Mayor Lewis Billings announced last week that the city was planning to sell the 5-year-old fiber-optic network, which provides Internet, TV and phone service to Provo residents, to Broadweave. Provo will front almost $2.6 million to close out the deal, but it will be paid back over time via the money made from the sale. The sale will be final at the end of June, if the Municipal Council approves it.
Whether selling the fiber-optic communication system is a good idea or not, state Sen. Curt Bramble, R-Provo, wanted to understand one thing clearly: "So it's owner-financed, no money down, the buyer takes cash out of the deal?" he asked as a member of the iProvo Review Committee.
Councilman George Stewart noted that the deal pays off the system and keeps the city from having to continue financing debt. Without the sale, it's likely that the city would have to pump millions into iProvo over the next five years.
However, the sentiment that buyer Broadweave didn't have any "skin in the game," pervaded for much of the two-hour morning meeting of the iProvo Review Committee.
Of particular interest was the concern that Broadweave is merely assuming the iProvo bonds and that if the company fails, the city will have to once again figure out what to do with the system. Broadweave CEO Steve Christensen said the company will make $6 million available in the event his company collapses in the first two years and $3 million after that. The money is guaranteed by Sorenson Capital, which was founded by former Olympic COO and Mitt Romney confidante Fraser Bullock.
Some members of the review committee said they didn't think that would cover it.
"Let's just say things go south," said Stan Lockhart, who works at tech giant IM Flash. "I don't think $6 million is enough."
Christensen also tackled financing concerns from the Municipal Council Tuesday night, as many council members have concerns about the financial responsibility if Broadweave fails. Council member Sherrie Hall Everett questioned the amount of money being put forth by the city and whether the risk was worth it.
Relying on the company's big-name investors, Christensen assured the council that Broadweave has worked into the contract strict financial goals for the company, with certain investor money if those goals are not met.
"Smart people with smart money have looked at our money, have looked deep into our business model and have looked deep into us," he said.
Rep. Steve Clark, R-Provo, said the $6 million amounted to peanuts and that the amount in reserve should be $40 million. That wasn't his only concern.
"The question I have is why have we not allowed others to bid on this project?" Clark said regarding the way Broadweave's bid came about.
Questions have been raised as to whether the city put out an appropriate request for proposal for the system. An RFP was sent out in April 2007 for potential retailers and other business proposals though not specifically offers for purchase.
"No, there wasn't flashing lights and a 'for sale' sign out there," said City Attorney Robert West. "Let's be clear that the word 'proposal' has some vagueness to it."
But West also reiterated his belief that an RFP isn't necessary to sell city property. Instead, the mayor only needs to entertain an offer, explore options then present it to the Municipal Council. From there, the public must be allowed a hearing to comment. That meeting will be May 27 at 7 p.m. at the council chambers.
As has been the trend at several meetings since the sale was announced, it became more clear that Broadweave intends to be the only service provider on the network. There are currently three others: Mstar, Nuvont and Veracity. Broadweave plans to announce news concerning the three on Thursday. More announcements are expected to follow, including a new pricing structure for services as well as how much capital the company plans to invest in the network.
At the city council work session Tuesday night, Christensen assured the council that the network would be successful based on its experience as a service provider. iProvo is well-built, but much of its failing stems from the fact that Provo is not the service provider. When a customer has a problem, the service provider and the network have to determine who is responsible for that problem, instead of one entity handling everything.
Many of the council's questions concerning the specifics of Broadweave's employees and customers could not be answered Tuesday, as Christensen deferred to an announcement to be made Thursday. Christensen said the announcement would help the city to understand more of what the company can offer, and the time and place of the announcement will be made available Wednesday.
Council Chairwoman Cindy Richards said she is excited for Thursday's announcement, as it will further convince her the move is a good deal for the city.
"For me, I just can't imagine why not to go forward," she said. |
