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City manager makes Fibrant presentation to Rotary

SALISBURY — City Manager Lane Bailey laid out the choice city voters will have on the potential lease agreement between Fibrant and Hotwire Communications  at Tuesday’s weekly Rowan Rotary Club meeting.

In turn, Rotary members laid out their questions, concerns and hopes for the deal that would lease the city’s broadband service to a private company.

Bailey started off his presentation by reminding club members that Fibrant “has continued to show a negative cash flow,” despite attempts by Fibrant employees to expand the service’s customer base.

Bailey said the city uses about $3 million a year from the general fund to keep Fibrant afloat.

“This is the headache that I had keeping me up each night trying to figure out how to balance the budget and to look at, long-term, what we could do,” Bailey said.

Bailey said that after months of examining different options, city officials have finally found a way to address those concerns.

Hotwire Communications’ proposal to lease the service long-term was chosen from among 14 respondents to a request for bids the city released last January.

Bailey said the city had looked at several options, including contracting out the operation of the system to a third party and leasing it to a third party.

One reason Hotwire stood out, Bailey said, is because it has the “scale,” or purchasing power, that the city does not have.

“We have about 3,200 customers. Roughly a couple thousand of those are video customers. So we’re trying to buy ESPN, HBO, all of those channels for 2,000 customers,” Bailey said. “We simply don’t have the buying power to do this on our own.”

Bailey said Hotwire has about 200,000 customers.

Bailey said the city and Hotwire have come up with a “tentative” lease that includes a management agreement that would give the operation and maintenance of Fibrant to Hotwire.

“They assume the responsibilities for upgrades to the network and service operations. That’s very important, the upgrades,” Bailey said.

Bailey said the city will still own “the wires that are on the poles and in the ground,” which he said will likely outlive the 20-year initial lease agreement. He said the city also will still be responsible for debt service payments.

But, he said, the computer equipment connected to the system has a “much shorter life.”

“And Hotwire will have responsibility for that,” Baliey said.

Bailey said Hotwire wouldn’t be interested “if we didn’t have a good system.”

“They would not be interested in this utility if it was a coaxial cable system or if it wasn’t built for very high speeds. It’s a very strong system,” Bailey said. “I think that’s one thing the city did that’s very positive.”

Bailey told Rotary members about the May 8 referendum the city is legally required to have for the lease to be put into effect.

Rotary member Windsor Eagle asked if Salisbury residents had voted for Fibrant when it was created.

When Bailey said “no,” Eagle asked, “If we didn’t vote on it first, why do we have to vote on it now?”

Bailey said it has to do with a change in law by the North Carolina General Assembly.

State law says a city “is authorized to sell or lease” an owned enterprise only after the proposal is submitted to “a vote of the people and approved by a majority of those who vote therein.”

One Rotary member asked what would happen to individual subscriber rates if Hotwire leases the system.

Bailey said, “They will stay the same or close to it.”

Rotary member Carl Repsher said he didn’t have a question but did have a comment.

“I have been a Fibrant customer since the very beginning. And the service is excellent,” Repsher said. “This proposal — and I kind of hate the term — this gets as close to a no-brainer as you can get. A larger base upon which to purchase programming and you’re going to get a chunk of revenue. I mean, this is pretty straightforward, folks. We’ve got to do this.”

City staff members and elected officials are not allowed to use public funds to push for a certain referendum result. However, Bailey said he would be willing to speak before any church, civic or neighborhood group to help inform the public about the facts of the lease and the referendum.

There is also a city telephone number — 704-638-5321 — for residents to call if they have questions. City Communications Director Linda McElroy said an email address dedicated to the same purpose — Fibrantvote@salisburync.gov — would be available starting sometime next week.

Contact reporter Jessica Coates at 704-797-4222.

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