Utility district continues search for broadband financing
The Truckee Donner Public Utility District has switched gears a bit in its financing for the broadband business.
After terminating its contract with underwriter Friedman, Luzzatto and Company in mid-August, the utility signed a contract last week with Austin, Texas-based Barton Creek. Barton Creek – a smaller company with experience in stadium bonds, private and start-up businesses – has agreed to locate potential bond buyers for the estimated $15 million project.
However, unlike the district’s contract with underwriter Friedman, Luzzatto and Company, Barton Creek will act as a “placement agent” and has not guaranteed the sale of bonds by agreeing to purchase unsold bonds.
“We felt that Barton Creek has a much clearer understanding of what we’re working toward and a better ability toward locating financing for a start-up business,” said Alan Harry, director of telecommunications services. “Friedman, Luzzatto and Company’s focus was on standard municipal bonds.”
The price of the project, Harry said, is too low to interest most underwriters.
At last Wednesday’s utility district board meeting, the directors voted three to one to approve the agreement with Barton Creek. Director Jim Maass was absent, and, in keeping with her disapproval of entering the broadband business, Director Pat Sutton voted not to sign the agreement, citing that she did not have enough time to view the paperwork.
“This should have had more examination by the board with input from its consultant sooner than this afternoon,” she said.
The final letter of engagement had been two weeks in the making and was placed in final-draft form the day of the meeting.
The agreement with Barton Creek includes a 2 percent of gross proceeds fee – or approximately $300,000 – to be paid by the district, where the contract with Friedman Luzzatto required a 2.25 percent fee.
Much like the agreement with Friedman Luzzatto, the utility district will pay $25,000 if it decides to break up its contract with Barton Creek. However, even though the utility district terminated its contract with Friedman Luzzatto, no such penalty has been charged to the TDPUD, Harry said.
Utility district officials say they intend on providing customers with voice, video and data services by Jan. 1, 2004. The telecommunications unit has encountered some obstacles in reaching that deadline, with a sale of a conduit falling through in the 11th hour and termination of the contract with Friedman, Luzzatto and Company.
However, Harry said the broadband unit is on track to have customers set up by the first of next year. Bids have closed on the electronic and fiber-to-the-user system designs, with Wave 7, Optical Solutions and Alcatel applying for the job. Harry said he will present the board with a recommendation for a system designer in October.
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