RUFFIN PREVOST Billings Gazette | Posted: Monday, October 1, 2007 12:00 am
POWELL - After missing the chance to start construction this summer on a municipally owned fiber-optic telecommunications network, backers of the plan say they are optimistic they can strike a deal to finance the project by next spring.
With winter approaching, work on the project will not start until at least March, assuming financing is found in the meantime, said Powell City Administrator Zane Logan.
Logan and others met last week to discuss possibilities for jump-starting the financing of the $5.5 million deal, which had been described as "very close" to done in June, but has yet to close.
Among those meeting with Logan in the closed-door session were Mayor Scott Mangold, U.S. MetroNets founder Ernie Bray and TCT General Manager Chris Davidson.
Utah-based U.S. MetroNets has been working to facilitate the project, which would see TCT serve for six years as the network's anchor service provider.
The privately funded network would offer residents Internet data speeds up to 30 times faster than the fastest speeds currently available, and would be owned by the city after 20 years.
It would also offer phone and television over a single connection at rates competitive with current providers, backers have said.
Under publicly disclosed terms of the deal, TCT would provide a secondary guarantee for a portion of the financing during the first six years.
Private investors would guarantee the majority of the financing. The city would not have any financial obligation under the deal other than a $125,000 payment made in February 2006 to U.S. MetroNets.
That payment will be recouped if the system is built.
Logan said last week's meeting helped identify sticking points that have kept the deal from moving forward, including one that involved restrictions on long-term financing by private investors.
"The investment portfolio they're working with has a six-year window," Logan said of Seattle-Northwest Securities, the investment firm lining up backers for the project.
"So, the problem is, after six years, who takes on the risk?" he said.
Seattle-Northwest Securities has discussed the possibility of committing a portion of a future six-year portfolio to the project, but that would still leave a window of eight years on the 20-year project without guaranteed backing.
Davidson said TCT has been studying options that would allow the deal to move forward.
Bray said U.S. MetroNets was considering giving up a portion of its back-end revenue on the deal in an effort to make it more attractive to TCT, private investors and the city.
Logan said backers were considering a form of bond insurance that might guarantee the full term of the project's financing, but that option and any other new ideas would have to be approved by the city's attorneys and the city council.
Mangold said all the players in the deal remain committed, including the city, investors, TCT and U.S. MetroNets.
"The people with the financing company love this area. They thought Powell and the Big Horn Basin are great," he said.