Salisbury residents weigh in on Fibrant lease at City Council meeting

Published 12:00 am Wednesday, March 21, 2018

SALISBURY — Salisbury residents were given their first chance to publicly question the potential lease between Fibrant and Hotwire Communications at Tuesday night’s City Council meeting.

And, for the most part, they seemed satisfied with what they heard.

Eight people spoke during the public hearing on the lease. With the exception of Rowan County Chamber of Commerce President Elaine Spalding, everyone had at least one question.

Spalding used her comment period to say that the chamber board met Monday to review the “concept of the lease.”

“We just wanted to let you know that our board of directors does support this. On behalf of our 824 members, we will be encouraging everyone to vote yes on May 8 on this ballot measure,” Spalding said.

State law requires that if a deal is reached, the public must vote in a referendum to approve the lease agreement.

The other seven public hearing participants asked an array of questions, from whether current Fibrant employees will keep their jobs to whether the broadband service will now be able to extend beyond Salisbury city limits.

City Manager Lane Bailey said the city has asked employees to stay with Fibrant during the process, and “they’ve done that.”

“Those that do not have a place to land in Hotwire, if there’s not a place for them and if they’re performing at expectations, we will find a job for them within the city of Salisbury and do something for them,” Bailey said.

Geoffrey Hoy and DeeDee Wright asked if the statute that requires Fibrant to stay within the city limits would still apply to the service is Hotwire were running it.

Bailey said that according to “the terms of the lease as it now stands,” the service will still be confined inside the city.

“If we’re not expanding, how hot will Hotwire be for us?” Wright asked.

Peter Buck, the lawyer who has been helping negotiate the lease between the city and Hotwire, said both Hotwire and the city feel Hotwire can manage the service better “even without the growth.”

Buck; Tom Asp, CTC principal engineer and analyst; Jonathan Bullock, Hotwire vice president for corporate development; and Hotwire Executive Vice President Max Kipfer made presentations about where the deal has been and where it is going before the public hearing opened.

Asp, who has been with the city for much of the time that it’s been looking at Fibrant options, gave his presentation on how the city got to where it is.

“There’s been several attempts over the years to grow the customer base, reduce costs and try to turn the system around. But they haven’t had much luck in doing that,” Asp said.

Asp said that difficulty producing revenue is what led the city to pursue other options, like restructuring Fibrant or turning over operations to a third party.

Asp said the agreement the city has almost reached with Hotwire should be a “win-win for both parties.”

“It’s not just turning the cash flow around. We’re doing some pretty substantial cost avoidance down the road, too,” Asp said. “So I think all in all, … we really get a nice package. We bring in their scale, their expertise and resources. We’re going to be able to draw down the cash it’s costing us.”

Councilman David Post made a point after all the presentations had been made to emphasize that defaulting on the Fibrant debt is not an option.

“If we default, for whatever reason, the state would take over the city. They would eliminate our city manager, eliminate our City Council. They would raise taxes to whatever was necessary, and the very first bill they would pay would not be to the Police Department or the Fire Department, it would be the bondholders,” Post said.

During his presentation, Buck said the city’s goal is to improve the city’s finances without compromising quality.

“And the lease focuses on those two points,” Buck said.

Buck said the lease would ensure that the city gets a percentage of Hotwire’s revenue rather than Hotwire’s profits.

“So as long as they’re getting any revenue at all, even if they’re losing money, the city will get some rent,” Buck said.

Buck said there is no minimum rent that Hotwire must pay the city but that there are minimum targets.

“And if they miss those targets for two years out of a three-year period, basically the city will have the right to terminate the lease and take it back,” Buck said. “That would be a hard thing to do, but the city does have that termination right.”

Buck said the lease is about 100 pages long and that it is “one of the most complicated transactions” he’s ever worked on.

Bullock and Kipfer made their presentation together on behalf of Hotwire Communications.

Bullock said that when Netflix named Hotwire its No. 1 internet service provider last November, Hotwire was ranked significantly higher than other internet and cable providers offered locally.

“Charter, you actually had to go pretty far down the list to get to,” Bullock said. “So I think we provide a competitive service that will sell well in the city and will be able to go up against Charter. And I’m sure the revenues we bring into the city are greater than they are today.”

As part of the lease agreement, Hotwire will manage the infrastructure and day-to-day operation of the city’s broadband network as well as pay for capital improvements the system might need in the future.

Bailey told the Post Friday that he hoped a final lease agreement would be reached this week. He also said that residents would have other chances to voice their opinions before the May 8 referendum.

Contact reporter Jessica Coates at 704-797-4222.