David Rodeback's Blog

Wednesday, May 28, 2008

American Fork Sells AFCNet

The deed is almost done. The buyer is Surpha. The vote was unanimous. The price is $500,000.

Tonight's American Fork City Council meeting featured a rather full agenda, much of which I missed by arriving well after 9 p.m. I was in time to hear some local equestrians promise not to sue the City if they are killed or maimed by golf balls while riding horses on the track near the Fox Hollow Golf Course, which track the City is now closing to prevent being sued by equestrians who are, or whose horses are, killed or maimed by flying golf balls. (I hate to say it, but the discussion itself was both much longer and somewhat less interesting than that sentence.)

At about 10:35 p.m., the Council adjourned to an executive session "to discuss the sale of real property," meaning the sale of AFCNet, American Fork's municipal broadband system, to Surpha, Inc. This means that the Council, some staff, and two guys I recognized from Surpha went to a conference room downstairs to discuss the matter privately. When they did so, everyone else who was not City staff left the Council chamber, except for one reporter (the ubiquitous Barbara Christiansen) and your humble blogger (the less-than-ubiquitous me).

Someone did the math, so when the executive session was adjourned 40 minutes later, we two stragglers were invited to join the Council in the smaller room downstairs, instead of the Council and staff going back upstairs to rejoin us.

At 11:17 p.m. Councilman Dale Gunther began a long motion, which was interrupted a couple of times for discussion. By 11:23 p.m. the motion had been adopted unanimously. By 11:25 p.m. I had fetched the things I had left upstairs and was heading for the main door of the building, just as the door to the conference room closed and the next executive session began. (This one was about a personnel matter, on which I will not comment, and was the last agendum before adjournment.) By 11:48 p.m. I was home, had put the sheets on the toddler bed and the toddler in the bed, and was typing away at this blog post.

By 12:48 a.m., MFCC still wasn't home from the meeting. Fortunately, they're not all this long.

In any case, documents must be proofread, some other paperwork completed, and another Council ordinance adopted to finish the sale. The ordinance will likely be adopted at the June 5 work session, and closing seems to be expected on June 6.

A quick survey of the purchase agreements and attachments -- about 60 pages in all -- reveals the following:

• The agreement is for the sale of the network inside the city, not fiber optic lines leading to other cities (some of which are leased to Surpha as part of the agreement).
• Surpha will make interest-only payments at first, with the purchase price of $500,000 paid in full by December 31, 2012.
• The City will continue to receive revenues for service to schools until Surpha has finished paying for the system, and Surpha will maintain that service in the meantime.
• Surpha does not assume the City's debt already incurred in connection with AFCNet and the (presumably) increasingly valuable fiber lines to other cities.
• Payment is secured by assets of Newco, a Surpha subsidiary being created for this deal. (In other words, the City would get the assets back if Surpha defaulted, not that it would want them back.)
• Surpha will attempt to collect money owed to the City -- I assume this is from ISPs who are behind in their payments -- and will pay half of what they collect to the City. These payments count against the purchase price.
• The agreement includes the lease of two fiber-optic strands between American Fork and Orem, and it sets forth terms for Surpha's possible lease of other fiber routes.
• The City retains some of the fiber optic strands inside the city between City buildings and facilities.
• As far as I can tell, ISP agreements still in force and current are assigned to Newco and remain in force.

I also learned from the documents that American Fork has had a four percent gross receipts tax on telecommunications service providers in the city since 2004.

This sale is a good thing. It keeps the system running, provides for its improvement and modernization, and should preserve some of the benefits of municipal broadband. It's also something of a relief, since the alternative at this point was for the City to shut down the system and for me to stop turning up my nose at Comcast's and Qwest's inferior services.

Mostly for my own sake, but partly for my city's sake, I wish Surpha all possible success. I expect success; they seem to be the real thing.

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Copyright 2008 by David Rodeback.
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