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Ashland's fiber optic network will borrow to save city funds By TONY BOOM Mail Tribune ASHLAND - The city's fiber optic television and high-speed Internet connection service will explore refinancing its debt with lenders to decrease the amount it borrows from other city departments. Ashland Fiber Network has projected annual internal borrowing as much as $8.9 million through 2008. The money is repaid at the end of each fiscal year, then borrowed again in the next year. But sources for internal loans, such as the city's water and sewer funds, will decrease as that money is used for water and sewer system improvements. "If the (network) has a life of 15 to 20 years it makes sense to finance that over the life of the construction," said Lee Tuneberg, city finance director. "Refinancing will minimize what we have to borrow from other funds for operational needs." Even with refinancing, the city would still borrow about $5 million per year through 2011. After that, the network's business plan shows a rapid decline in internal borrowing, said Tuneberg. "Our intent is to refinance this thing," said Dick Wanderscheid, city electric and telecommunication director. Refinancing could come in the next two to four months, he said. A new AFN business plan was developed last year after budget committee members became alarmed at the size of internal borrowing. Next fiscal year's proposed budget calls for $6,625,000 in internal loans. The current budget called for $4,500,000 in interfund loans, but the City Council OK'd an increase to $5,225,000 at its March 19 meeting. The increase allows speedier completion of the network. A break-even point at which the network has enough income to offset all its previous losses won't come until 2012, according to the plan. Net income is projected to exceed operating expenses, depreciation and loan interest in 2006-07. AFN competes with Charter Communication for hookups in town. The city has several options for refinancing. A current loan from U.S. Bank for capital expenses might be expanded, said Tuneberg. The city could go to other banks, or revenues bonds could be issued. Voter approval would probably not be required for bonds. AFN would probably pay higher rates to borrow the money. Presently it pays interest to the other departments at the same low rate they would receive if their money were in a state pool the city utilizes. "You can't just build a $7 million utility, " said Wanderscheid. "It's going to take some time before you get into positive cash flow." "I don't think we are at the point where we are throwing good money after bad," said Councilman John Morrison. "I'm told we have a system that's better, faster and cheaper. I want to see that turned into hookups." Charter recently announced it would delete two movie channels from its basic cable package. Morrison says this is the kind of marketing opportunity that should lead to an increase in hookups to AFN. Precedent exits for city investments in utilities, said Morrison. "It was wise to invest in the (city's) electric system. That has paid off. If we have a revenue stream it can benefit the city." Reach Ashland bureau reporter Tony Boom at 482-4651, or e-mail [email protected] Mail Tribune Home | Ottaway Newspapers, Inc. | Dow Jones & Co., Inc. | Privacy | Contact Us Copyright � 2001 Mail Tribune, Inc.