City will try to borrow $35 million for fiber optic system

By Mark Wineka

mwineka@salisburypost.com

The city of Salisbury will try to secure about $35 million in financing today — the money needed to build a fiber-optic cable utility that eventually will offer telephone, television and Internet services.

Salisbury officials are hoping to be offered a debt package with an interest rate of 5.85 percent or less to make their business model work.

Management Service Director John Sofley spent much of Wednesday afternoon on the telephone with underwriters and financial advisers looking at the bond markets to determine whether Salisbury will find the right financing package.

Earlier this week, the Salisbury City Council authorized the issuance of certificates of participation with insurance, if it is still economically feasible, with a 100 percent funded debt service reserve at an interest rate not to exceed 5.85 percent.

City officials also revealed plans to buy 4.5 acres of land off South Martin Luther King Jr. Avenue and use that property for a new fiber-optic cable operations facility and customer service center for the city.

Late Wednesday afternoon in a pre-pricing call, Sofley and advisers were going to look at what the market was doing and decide whether it made economic sense to insure the issue or go with the underwriters' ratings.

"Does it add economic value?" Sofley said of paying a premium for bond insurance from a third party.

The bond insurance would improve the city's credit rating and lower the interest rate on the debt, but would it be enough to offset the added cost of the insurance?

"That's the key," Sofley said.

Whether it is insured or uninsured debt, underwriters will make an offer to purchase debt for the city. Sofley said the interest rate will have to be 5.85 percent or lower for the city to accept an offer.

Interest rates were in the "low 5s" Wednesday, Sofley noted.

Sofley said the 100 percent cash-funded reserve takes the place of a surety bond.

The debt package Salisbury is considering would be spread over 20 years. It also would finance several capital projects, such as parking lot repairs and City Park tennis courts.

The city plans to buy the land on South Martin Luther King Jr. Avenue (across from Abundant Living Adult Day Services in the 1400 block) for $395,000.

The city's Technology Services Division would move to the new cable operations center, which would be about a 10,000-square-foot building.

Sofley said having the city's customer service center at the new location would provide the public with better ingress and egress than is currently available for people who pay their water-sewer bills and conduct other business at the old City Hall building on North Main Street.

Sofley is working on a schedule for getting the new cable utility started. Contracts will be issued to build both the fiber-optic network and the operations center.

The projects will provide the community with some opportunities in the slow economy, Sofley said.