Citizens wonder: How much money, how long, what if?
By DAVID BORAKS
DavidsonNews.net
How much will the town’s ownership of the local cable system cost in the coming years? Will the town ever get its money back? Isn’t the trash collection fee being added this year just a “cable tax”? What if the system’s aggressive growth projections don’t pan out?
Residents pressed Town Board members and the Town Manager on those and other questions Tuesday night during a public hearing on the proposed $8.4 million town budget for 2010-11. The hearing came during the board’s three-hour monthly work session at Town Hall that included a detailed presentation on the budget to the two dozen or so residents in attendance.
Town Manager Leamon Brice and Finance Director Eric Hardy repeated what they told commissioners a week earlier: That the coming year’s budget was built around a need to come up with a $2 million subsidy for MI-Connection, the local communications network owned by Davidson and Mooresville. The $2 million is Davidson’s 31.25 percent share of a $6.5 million shortfall that MI-Connection faces – mainly because of an increase in debt payments – in the fiscal year beginning July 1. (Mooresville will pay the other $4.5 million.)
To come up with the cash – which is a big chunk of the town’s typical $7.5 million budget – the town manager and finance chief took a three-point approach. They cut town spending and restructured Town Hall (19 people got layoff notices, but the town staff will actually only shrink by a net two full-time-equivalent positions, or FTEs). The budget proposes a new residential trash collection fee, currently envisioned as $206 per single-family home and $104 per multi-family unit. And it draws $804,179 from the town’s savings – known as its fund balance.
[For a more detailed review of the proposed budget, and to download a copy, see DavidsonNews.net’s report from the Tuesday, May 18, Town Board meeting, “Town budget has no tax hike, but adds trash pickup fee.”]
THE CABLE ISSUE
While some residents came to lobby on behalf of local nonprofits that get town funding – Davidson Housing Coalition, Davidson Lands Conservancy and the Arts & Science Council – 9 of the 12 speakers at Tuesday’s 1-hour public hearing asked questions or commented about MI-Connection.
Since 2007, Davidson and Mooresville have borrowed and spent $92.5 million to buy and upgrade the former Adelphia Communications network. An upgrade completed in 2009 vastly improved the aging network that once offered only TV. MI-Connection (pronounced “MY” connection) now offers digital and high-definition channels, the fastest internet connections available in the area and local digital phone service.
MI-Connection now serves about 15,300 customers in the two towns, plus Cornelius and parts of north Mecklenburg and south Iredell.
But that’s fewer than in 2007. And the system’s failure to meet growth projections in the towns’ original business plan has meant they are unable to pay off the big debt they took on.
After Mr. Brice and Mr. Hardy reviewed the budget Tuesday night, Mayor John Woods paused to acknowledge the town’s difficult situation.
“I want to take just a moment to acknowledge the significant challenge that MI-Connection … presents to us this year. It is a matter of great focus and great energy of this board and around the staff. We have accomplished in our couple of years of ownership some of our goals, ” he said – notably the upgrade and improvements in customer service.
“We have not accomplished the financial stability that we desire and obviously need to operate the system productively. That is a function of a lot of things. We’re all familiar with the world we live in and we don’t need to beat that to death, other than to say it is a It is an issue of great focus and great emphasis of this board,” Mayor Woods said.
“I want to assure you there is nothing higher on my list and this board’s list than the financial stability of MI-Connection,” he added.
QUESTIONS
The big question facing Mayor Woods, the town and MI-Connection, is how to get there. Some residents who spoke Tuesday offered their ideas.
Chuck Renwick, of the Spinnaker Point neighborhood, asked if Davidson College – one of the largest institutions in MI-Connection’s territory is a customer. No, town officials said, but MI-Connection is “in disussions” with the college. He later suggested the town consider bringing on the college as a business partner.
Richard Matthews, also of Spinnaker Point, wanted to know if the town would ever get the $2 million – and future subsidies – back. Is it a loan? Commissioner and Mayor Pro Tem Laurie Venzon replied: “The $2 million is not a loan.” When the company begins making money, the towns will have the option of reinvesting the profits or taking money back out. She noted that the way MI-Connection is structured, the town is required to provide a subsidy if needed.
Mr. Matthews said he thinks the cable system’s drag on the town finances will hurt property values.
Other speakers wanted to know if MI-Connection and the towns had considered all their options. Earlier in the meeting, Mr. Brice had outlined seven scenarios the town considered, including selling, refinancing, or taking on investors. None are viable, Mr. Brice said, because of restrictions on the debt, or because they would wind up being more costly than simply trying to grow the system. Refinancing the debt would cost an extra $13 million, for example, Mr. Brice said. And the town can’t sell because the system likely is not worth anywhere near what the towns have invested in it. A sale would require the towns to repay the debt, and they wouldn’t have the cash to do so, he said.
Bobby Cashion of Pine Road pressed Mr. Brice on the question of refinancing. About $80 million of the borrowing is through a type of bond known as Certificates of Participation, or COPs. He disagreed with Mr. Brice’s argument that refinancing wouldn’t work. The town should negotiate with the bond holders,” he said.
Mr. Cashion also worried that the system faces continued shortfalls for five years or more, possibly similar to what’s projected for 2010-11. He suggested it could cost $30 million over the next five years. “You’re gonna take the town’s money and gut the coffers,” he said.
Ms. Venzon disagreed, telling Mr. Cashion he was working with “old numbers” for the system’s financial projections.
Later in the meeting, after most resident had left, she said if current projections hold true, the system’s need could be closer to $12 million over the next few years, not $30 million.
But Mayor Woods quickly added, “That’s not even a number we want to discuss because it all depends upon the current year’s operations. Projections mean nothing past this first this year. … We can’t project what next year’s gonna look like until we see how we respond to this year’s challenge.”
SUBSCRIBER GROWTH THE KEY
How long the towns will have to subsidize MI-Connection depends entirely on how fast it can add subscribers and sell additional services to existing customers. The system’s own budget for 2010-11, which is up for a public hearing Thursday, envisions 19.9 percent growth in revenues.
Mr. Cashion and others said they don’t think that number is realistic. “Companies don’t grow revenues 20 percent,” he said.
John Kennedy of Magnolia Street said, “It’s going to be a very aggressive stretch to hit that target. … We can wish all we want that we’re going to hit it, but if we don’t, how prepared are we?”
Mr. Kennedy previously asked a similar question at a “commissioner chat” two weeks ago. Does the town have a contingency plan for if MI-Connection doesn’t grow 19.9 percent next year? Mr. Brice didn’t have an answer, but said town officials are working on responses to all the issues raised during the “commissioner chats.”
The system has been growing recently – at least in the sales of additional services such as telephone and internet to existing TV customers. Kathy Cockrill of the St. Alban’s neighborhood stood up Tuesday night and began by noting that she is a MI-Connection “triple play” customer – subscribing to TV, phone and internet.
In other discussion Tuesday night, it was suggested that the proposed trash fee is really a cable tax, since it’s helping the town create a budget that includes the $2 million subsidy to MI-Connection.
Ms. Cockrill said the new trash fee makes it feel like she’s paying twice for her communications services. She wondered if the town could offer a discount on the trash fee to people who do their duty by subscribing to MI-Connection.
Later in the meeting, Commissioner Brian Jenest asked Mr. Brice, “Is there any way to reward the people that are signed on?”
Mr. Brice said, “We’re still investigating that … We can’t do it this year, but we’re going to investigate some of these suggestions we’ve had, next year.”
Pat Stinson of Westside Terrace complained to commissioners that communication is poor with residents on the West Side and that she only learned by accident that the town board was holding Tuesday night’s hearing.
That communications gap also extends to MI-Connection, she suggested. In a sign of how much work the cable system still has ahead, she said she and her neighbors had never heard of MI-Connection. “I have Dish Network,” she said.
RESTORE ARTS FUNDING?
Bruce McMillen, a former town commissioner who lives on Pine Road, came to the meeting Tuesday to speak on behalf of the Arts & Science Council. Mr. Brice initially had proposed eliminating the town’s $15,000 contribution to the regional arts funding appeal. But some commissioners and Mr. McMillen had been arguing that the town and the area gets a big return in terms of grants and funding from the ASC. On Tuesday night Mr. Hardy showed new figures that cut the ASC funding only by one-half, to $7,500. Mr. McMillen asked if the town would restore a bit more so that the cut was equal to that announced for other nonprofits – 25 percent. That would boost the ASC donation to $11,250.
Late in the meeting, after most citizens had left, commissioners reached a consensus on an idea raised earlier in the meeting by resident Rodney Graham: cutting their own annual stipends. The board agreed to reduce the stipend by 25 percent to generate a bit of extra funding for the ASC and other needs.
Commissioners receive $2,500 a year stipend plus $1,000 for phone, internet, and computer expenses. Altogether, the 25 percent cut would free up $6,625.
CABLE BUDGET HEARING
MI-Connection will holda public hearing Thursday on its 2010-11 budget.
CLARIFICATION: The original version of this article failed to say that it was Chuck Renwick who suggested approaching Davidson College to be a business partner of MI-Connection.
PREVIOUS COVERAGE
See all our previous coverage of the MI-Connection budget under the “cable TV” category,http://davidsonnews.net/category/news/cable-tv/
DOCUMENTS
2010-11 budget summary for MI-Connection – 1 page PDF.
General Manager Alan Hall’s overview statement about the budget – 1 page PDF.
I appreciated the opportunity to participate in Tuesday’s public hearing regarding the town’s proposed budget. The staff obviously has spent a great deal of time preparing a response to the budgetary challenges that are faced by Davidson. It is surely not an easy task.
There seems to be a sentiment amongst staff and elected officials that subscription to MI-Connection should be a consideration in determining how much citizens pay for basic services. As the article states, one audience member asked if she could get a break on the new solid-waste fee because she was “already doing her part” by being a “triple-play” customer. Surprisingly, the board seemed to embrace that idea when presented, and then did so again later in the meeting.
So, we’re going to base our tax rates on whether you subscribe to MI-Connection? Really? The slippery slope analogy is overused, but it is apt in this case. How about I get a break on my taxes since I don’t have the police or fire departments coming to my house? Why don’t we charge citizens if the police or fire departments do come to their house?
Some think that “connectivity” (i.e. cable and internet) is essential infrastructure that can only be provided by government. I agree with the first part of that thought, but strongly disagree with the second part. But, let’s run with that line of thinking. The government rightly provides water and sewer service, and they can track how much of this service is consumed by each user. But, if someone has a well or a septic system, they don’t get a bill from Charlotte Mecklenburg Utilities. If you don’t use it, you don’t pay. If connectivity can only be provided by the government, then let the users of the service pay for it and – just as is the case with water and sewer. If the government is not covering its costs then raise the rates. (This is what is presently happening with the water and sewer departments of both Mooresville and Troutman). That way, only those who choose to use the service pay for the service. I think that is fair.
For the record, my family uses one of the three MI-Connection services (and may go to two).
There also seems to be a growing sentiment that it is “our duty” as citizens of Davidson to subscribe to MI-Connection. Many times either the staff or an elected official said things like “doing your part” last evening. There are many people who have decided that it makes sense to be a MI-Connection subscriber; many others have made a different decision. Whether one subscribes to MI-Connection does not determine the level of one’s “patriotism” towards Davidson.
Service to one’s town comes in many forms. In many cases, dissent is the strongest form of service. The majority of citizens choose not to get involved in their town government, so anyone who takes the time to get involved and speak up should be thanked, whether you agree with them or not. There are many examples throughout history of what happens when everyone just goes along with the government instead of speaking out.
I normally would not single out a private citizen by name in a public forum, but last night Bobby Cashion spoke so that he could get his thoughts on the record, so I think it is OK that I mention him by name. Back in 2007 Bobby and many others, myself included, spoke out strongly against the purchase of MI-Connection. We pointed out the many flaws in the various consultants’ reports, and the great risk that Davidson was needlessly taking on to buy a cable company. To me, this is service to one’s community.
So, it is a bit troublesome to me that when Bobby spoke up last night and offered his recommendations, and a less optimistic view of MI-Connection’s finances, his viewpoint was met with less than welcoming ears. The truth is that Bobby Cashion specializes in finance and has been pretty accurate in his forecasts of MI-Connection. MI-Connection does not have a similar track record of putting out accurate numbers. I hope Bobby is wrong, but our town leadership should take his opinions more seriously and prepare accordingly. We can’t put numbers out there that are flat-out wrong. If MI-Connection misses its numbers this fiscal year there is going to be a large confidence gap next year.
I’ll close on a more positive note. Last night a resident of Davidson’s West Side spoke up, and in her comments stated that not only did many of her neighbors not use MI-Connection, they did not have internet access at all. If there are residents in our town who do not have broadband connectivity run to their house, then it should be run there. Every house in our town should have basic infrastructure, including not only water, power and sewer, but also broadband connectivity. It strikes me as odd that in the wealthiest town in Mecklenburg County there is a significant population that cannot access the internet. If the West Side does not have connectivity; bring it to them. If they cannot afford it, provide it for free. Jobs are a big issue on the west side of Davidson, and having broadband is essential these days for education and jobs.
We’ve talked a lot about using MI-Connection for economic development. Economic development is not only luring companies to our town. It is also using MI-Connection to help ensure that everyone has an opportunity to participate in the workforce of the 21st century. I think it would be a great story if MI-Connection provided broadband access to the poorer sections of our town. It makes the annual subsidies easier to stomach if we are putting the system to good use.
Rodney Graham is a business owner who lives in the St. Alban’s neighborhood.
I understand that if the town defaulted on the loan, residents and businesses would be required to pay back as much as $60 million. That would cost about $500 per home per year for a decade or more. The simple remedy is for most residents to sign-up for MI’s services. Formerly just an MI cable subscriber, I added Internet and Phone. The price was good, and service has been great. I don’t expect a reward for that, I just hope others will come together for a common cause; that’s maybe the only way to avoid a tax increase, property devaluation, and reduced town services. So sign up now and support your town.
It remains to be seen what the public turnout will be at MI-Connection’s Budget meeting tomorrow. It was rather disappointing at the last meeting, where only one member of the public, one reporter, and two representatives (1 each from Davidson and Mooresville) attended. More importantly, NOT ONE elected official of either town (who say they are on top of the situation) were in attendance. Tomorrow is the day to ask the tough questions of MI-Connections’ management and Board. Question is, who will be there to ask the tough questions?
MI-Connection’s proposed pair of budgets are, at face value, inaccurate and ill-prepared. There are no downside contingencies for failure to meet the growth projections….or for summer or winter storms, for that matter. There is a real prospect that MI-Connection will be coming back to the two towns, “hats in hand,” asking for yet more money before next year’s budget is final.
MI-Connection is putting the onus on “the people” or the citizens of Davidson and Mooresville. They have virtually no marketing built into this year’s budget, instead relying upon a “grassroots, guerrilla marketing strategy that will blame “the people” for not supporting its business.
The use of elected officials to “market” this private business enterprise borders on the illegal and I am of the opinion that lawsuits, costly to defend (if even defensible) will be waged against the towns in the coming year as they attempt to “favor” MI-Connection over the likes of Dish, DirecTV, AT&T, Verizon, TWC and all the others providing competing products in the marketplace.
I, for one, will be in attendance, even though it is costing me a half-day’s work to do so. If given the opportunity, I will ask the questions that MI-Connection and the Elected Officials of Davidson and Mooresville prefer not be asked. Please join me in this effort.
OK so now the elected officials have again avoided the issue of an exit strategy by simply saying “I want to take just a moment to acknowledge the significant challenge that MI-Connection … presents to us this year. It is a matter of great focus and great energy of this board and around the staff. We have accomplished in our couple of years of ownership some of our goals.” Instead of telling us that there is concern, tell us what is being done to remedy an untenable situation. To simply increase taxes (waste fee), to fire a whole department that provided to one practical service left in the Town, and not make monetary administrative changes is comparable to putting a Band-Aid on a bullet hole.
I have said in the past and will say again, we have resources in this town that can give us good, competent advice (i.e. Bobby Cashion) why not use it instead of our high priced consultants. The seriousness of this matter seems to be falling on some deaf ears at Town Hall.
It is not a great relief to be told that it is “only” going to cost us $12 million instead of $30 million over the next 5 years. Ignoring the historical data of the cable industry as well as the current economic condition (requiring 20% growth a year!)only causes great uncertainty about our town’s financial condition. I did drop my long-term service with another carrier for phone and internet service with MI, maybe it will help.
All I would like is for the citizens to be provided substantive answers, not “we’re working on it”
On a side note, thank you to Rodney and Andy for asking the hard questions. I hope real answers will follow.
Thank you Rodney, Bobby Cashion, and other voices challenging our condition with MI-Connection. It’s not pleasant to have to remind the emperor about his clothes, but here we are.
After Mr. Cashion stated our financial predicament a commissioner challenged his numbers stating he was using old numbers. I challenged the new numbers, which are based on 20 percent growth which is unrealistic.
The commissioner challenged me and stated it’s not 20 percent, then asked Davidson finance director if the number was 20 percent. He responded “just under 20 percent” and I stated “it’s 19.9%”. My perception is that most of our current town leadership believe we can WILL ourselves to 19.9% growth. If we don’t have 19.9 percent growth with MI-Connection our debt will be higher than $2 million. This is why I pressed 2 weeks ago for contingency plans from the town on what we’re going to do when we don’t hit these unattainable numbers. We need a plan.
The other question I asked during this meeting is transparency and oversight. The only numbers we see from MI-Conn are very high level; facility based expenses=$4.5 million, marketing expenses=$2.7 million, administration expenses=$2.1 million. What is inside these big buckets of dollars? What are we paying in salaries? What are we paying in entertainment, travel, promotions, other areas that need oversight?
The point is this is our money. Our community is on the hook for $2 million and we’re told that we can’t audit the books of our investment? We deserve to know; we are paying dearly for it. We also need a plan on what we’re going to do under different scenarios this year and into next year. Give us real dollars, not RGUs or triple-plays or slithery double-talk. As others have said, Davidson is blessed with many creative and intelligent doers who will jump in and get us through this. Our current leadership should recognize this and leverage these resources. What we’ve tried up to now isn’t working. It feels like we’re doing the same thing over and over and expecting a different result. That is frightening.
John Kennedy
Davidson
The Miller Family of River Run had this visual commentary on the town’s proposed trash collection fee. (Thanks to A.C. Banez for the photo)