Mayor John Woods (third from right) and Town Board members at Tuesday meeting. (David Boraks/DavidsonNews.net)

Davidson will need to raise taxes, cut expenses further, dip into its reserves or come up with some other way of raising the $2 million it needs to subsidize the MI-Connection communications system in the coming fiscal year. Town officials talked about their options at a meeting with citizens Tuesday night, but said they won’t divulge their plans until the town manager formally presents his budget on Tuesday, May 18.

Resident John Kennedy asks a question while looking at MI-Connection General Manager Alan Hall (right). (Bill Giduz/DavidsonNews.net)

The discussion came Tuesday night at Town Hall, during the last in an unprecedented series of informal chats that commissioners have been holding in recent weeks. The 1 hour and 40 minute session, attended by about 85 citizens, businesspeople and town employees, touched on a variety of topics, from leaf pickup and traffic signage to economic development and the night’s big issue: the town-owned cable, internet and phone system.

Town officials said they are studying how to fund the $2 million subsidy. But they also were optimistic about the cable system and its prospects and, as they have at previous chats in recent weeks, urged those at the meeting to consider using MI-Connection’s services.

“Frankly, we need people to adopt and realize that this is a community asset that can serve us very well,” Mayor John Woods said.

HOW TO PAY FOR IT

Last Friday, the board of the MI-Connection system, which is owned by Davidson and Mooresville, agreed to ask the two towns for up to $6.4 million in the budget year beginning July 1. The money is needed in part because the system is not generating enough revenue to cover debt payments, which will rise next year to about $7.3 million, from this year’s $4.5 million.

Mooresville, which owns 68.75 percent of the system, would owe up to $4.4 million and Davidson up to $2 million.

One resident on Tuesday asked if Davidson planned to use its reserves to cover the $2 million. Davidson currently has $3,829,000 in its fund balance, as the reserve is known.

Mayor Woods replied: “I think you will get a detailed description of that at next Tuesday’s meeting (May 18). … Stay tuned. In this very room, next Tuesday night, we will disclose a lot of really interesting information on that.”

Commissioner Laurie Venzon said the system is beginning to show signs of promise, but the towns may have to subsidize it for the next three years or so.

“The first year (2010-11) might be quite large, and then it’s going to go down, should everything happen the way it’s planned,” she said.

RESIDENTS URGED TO SUBSCRIBE

Elsewhere during the meeting, Ms. Venzon joined Mayor Woods in urging residents to use the system, saying that upgrades over the past two years make it worth a look. She compared MI-Connection to a racing car that has just come out of the shop.

“We are seeing something that we took that was a jalopy and have turned into a race car, and it is now starting to take the laps around the track and it’s picking up momentum,” Ms. Venzon said. “The drivers are learning how handle the car well. And we really think it’s got a lot of potential.”

MI-Connection General Manager Alan Hall answers a question. (Bill Giduz/DavidsonNews.net)

Much of that potential may lie in the system’s ability to win new business customers, she said.

In response to several questions, town officials and MI-Connection general manager Alan Hall said the system is in discussions with a variety of major institutions in the region. They include Davidson College, The Pines at Davidson, town governments, large corporations and medium-sized businesses. Mr. Hall said the company has landed more than 50 new business customers in the most recent quarter.

But the difference between success or more pain at Town Hall also lies with whether residents decide to subscribe, Ms. Venzon said. She hinted that tax increases may be needed if the system doesn’t grow more quickly.

“All we’re saying is support your local business. We’re not asking you to sign up for a crappy service. We’re not asking you to sign up for something that’s astronomically priced. I’m asking you to support it so that the revenue will be there, so we don’t have to increase taxes or make any more cuts,” Ms. Venzon said.

Ron Charbonneau, a former president of the River Run Property Owners Association, told commissioners that MI-Connection must work harder to grab residents’ attention.

“This was something I didn’t support, but we’re there. And being a subscriber, I have to tell you, the system is not bad. And somehow that word’s gotta get out there, because the reputation is horrible,” Mr. Charbonneau said.

Town Board member Connie Wessner agreed. “That’s one of the things we’ve learned in these (commissioner chat) meetings, is that we have to do now is get out and market the heck out of it.”

REFINANCE OR SELL?

Other questioners wanted specifics about the system’s financing.

The towns of Mooresville and Davidson operate the system jointly through an interlocal agreement – a contract between the two municipalities – though Mooresville is actually the borrower. Davidson is obligated to contribute to the system through that contract.

The towns borrowed an initial $80 million, in a type of bond called Certificates of Participation (COPs), to buy and pay for upgrades. They later added another $12.5 million through a standard bank loan.

Former Commissioner Bruce McMillen, who was on the board that approved the deal in 2007, asked if the town has done all it can to try and refinance the COPs. Town Manager Leamon Brice said it would be difficult, for a couple of reasons:

1. Because the towns do not know who the investors are and it might be impossible to negotiate a deal among a large group
2. Because a clause in the bond agreement does not allow prepayment for the first seven years. There might be a way around that, he said, but it would cost the towns another $13 million.

Someone else asked if the towns could simply stop paying and default on the debt. Mr. Brice said the town considered that option.

“The consequences are very severe,” he said. The Local Government Commission in Raleigh, which reviews all local borrowing, could come in and take over local government in the event of a default. “If we don’t pay it, they have the authority to come to town hall and tell us what our tax rate will be and tell us how to pay this debt.”

About 85 people were at the session Tuesday. (David Boraks/DavidsonNews.net)

He also said the town has looked at selling the system, but so far, the price would not be high enough to cover the debt. “We’ve talked to some folks about trying to sell it. The return is not there. We would end up with a huge debt and no asset,” Mr. Brice said.

The towns also have looked into taking on additional private investors. But because the system is publicly owned and tax exempt, there’s no way to bring in a private investor. “You can’t have private partnerships participating in tax-exempt investments,” he said.

Mr. Brice and Town Board members repeated several times that the best option for the towns is to promote and grow the system until it reaches a point where it can be sold for a reasonable price.

Next Tuesday’s Town Board meeting, where Mr. Brice and finance director Eric Hardy will present their budget, begins at 6 p.m. at Town Hall, 216 S. Main St.

Also, MI-Connection will hold a public hearing on its own budget on Thursday, May 27, at 7:30 a.m. at its headquarters, 420 S. Academy St., Mooresville.

EAST SIDE FIRE STATION

Another multi-million-dollar expense the town is facing in the next year is the need to build a new fire station on the east side of town. That issue also came up Tuesday.

The state Insurance Services Office (ISO) has told Davidson it needs to make progress on building a new station to ensure that it can provide adequate fire and emergency response to all parts of town.

Given the town’s financial troubles, Rodney Graham, a home builder who lives in the St. Alban’s neighborhood, wanted to know what would happen if the town chose not to build a new fire station.

Town Manager Leamon Brice said the town currently has a 6 rating from the ISO, and a 9 in outlying parts of town. (Lower is better.) Most parts of town can be served from the lone fire station downtown. Davidson has addressed concerns about the east side of town in part by contracting with other fire departments – including Odell Volunteer Fire Department in Cabarrus County.

But 80 homes are still not adequately served, he said. (They are farther than 5 road miles from a fire station, which is the ISO’s benchmark.) Those homes are at risk of being slapped with a rating of 10, which will mean that homeowners won’t be able to buy fire insurance, Mr. Brice said. If the town resolves the issue, its overall town rating would go to a 5.

“So,” Mr. Brice said. “We’ve been in the process of trying to identify the needs for a station (and) where it should be located.”

The town has identified four potential sites and has begun negotiations about buying two of those, he said. The town also has an architect and has drawn up a budget. The station would cost $4.5 million, not including land, as well as $200,000 to $500,000 per year for staffing.

Mr. Graham asked whether funds collected from developers under the town’s adequate public facilities ordinance (APFO) might be used. (The APFO requires developers of new residential projects to help pay for additional services required – from parks to fire to police – because of the growth their projects create.)

Some, but not all of the cost of the station could be paid for with APFO funds, Mr. Brice said. That’s because some new homes that fall into the under-served zone were approved before the town adopted its APFO. It would be applicable to the Summer’s Walk project, off Davidson-Concord Road. However the developer, FC Summers Walk, has sued the town to stop enforcement of the rules for its project. That lawsuit is continuing, but if it were to be settled, and the developer paid, then some of that money could go toward the new station, Mr. Brice said.

The town board last October gave Mr. Brice the go-ahead to seek land for a new fire station.