By Mayor Gary Fuller
Special to the Opelika Observer
The City of Opelika and Point Broadband have announced the signing of a definitive agreement where we’ll sell our fiber telecommunication assets and operations to Point Broadband. The transaction is expected to close Nov. 8.
We built a state-of-the-art fiber network in 2012 to provide businesses and residences in our city limits with competitive internet, voice and video services and became Alabama’s first “GIG City.” The city council and I agreed that the time had come to divest these assets. The fiber network we built and operated has allowed us to achieve our goal of bringing much needed and effective competitive telecom services to our community. The fiber project also facilitated the deployment of a smart electrical grid to provide more efficient power services to businesses and homes in Opelika. We believe now is the right time to transition the telecommunication assets away from the city and into the hands of an experienced, local company with a long history of providing these important services to cities like Opelika. This transaction allows us to maintain the electrical smart grid assets and divest the telecom assets, all while being made whole financially on the city’s investment.
In 2011, Opelika Power Services borrowed $28 million to build a new facility and deploy smart-grid technology through the sale of bonds. The electric fund issued the 2011 bonds to pay for several electric capital projects. The bond trustee approved each of those purchases and agreed that they were spent in accordance with the bond agreement. Our auditors, (Himmelwright, Huguley & Boles, LLP) did the same.
The decision was made to enter the Telecom business because of poor customer service and lack of competition. In 2011, Telecom borrowed $13.5 million to deploy the telecom business which includes video, internet and phone. During the last five years, the telecom business exceeded the $13.5 million line of credit and borrowed an additional $7.6 million from the Electric fund.
The total Telecom debt is the $13.5 million plus the $7.6 million, approximately equaling $21.1 million.
The telecommunications fund is selling certain assets and liabilities to Point Broadband. The upfront proceeds of the agreement total $14.175 million. Those proceeds will be used to repay the $13.5 million that the Telecommunications fund borrowed from Regions bank. Additional proceeds will be used to pay off other debt.
Further, as part of the Point Broadband agreement, the City will receive 3.5 percent of Point Broadband’s gross revenue during a 10-year period projected to be $7.5 million. Those funds will be used to repay the electric funds that the Telecommunications fund has borrowed. The city anticipates that the loan from the electric fund to the telecommunications fund will be repaid in full.
Regarding electric rate increases, rates are adjusted periodically by all electric companies as needed to cover fixed costs, continue maintenance, repairs and expansion of electric service to new homes and businesses, and the 2016 rate adjustment was one of those increases. Our city council considers a rate increase very carefully and is proud of the fact that residential electric rates have remained the same for almost three years.