March 6, 2006

Council to weigh host of options for AFN debt payment

By Vickie Aldous
Ashland Daily Tidings

The Ashland City Council will examine a number of options for dealing with the Ashland Fiber Network's $15.5 million debt, none of which come without sacrifice.

The council meets at 7 p.m. on Tuesday in the Ashland Civic Center Council Chambers, 1175 E. Main St.

Although the council also is examining whether to keep AFN, sell it or spin it off as a nonprofit, a sizable portion of the debt is likely to remain under any of those options.

At the council's request, Ashland Finance Director Lee Tuneberg prepared a list detailing ways to help cover the payments on AFN's 20-year bonds taken out in 2004.

Annual debt payments will rise to $1.43 million by 2009 and stabilize at about that amount for subsequent years.

In 2005, the city council adopted a $7.50 monthly fee on all electric customers, but then repealed the fee before it took effect in the face of concerns over the fee's impact on low-income residents.

“A surcharge would need to grow to $12 per account per month to pay annual debt service when it levels off, and possibly more if other expenses are to be subsidized or if some accounts are exempted from paying a part of the surcharge,” Tuneberg wrote in a memo to councilors in advance of Tuesday's meeting.

As an alternative, the council could take money directly from other city departments, but that could result in increased water, sewage or electric bills, he said.

AFN could be excused from paying some or all of the payments all city departments make to cover shared city administration costs, but that could lead to possible cutbacks in city services, according to Tuneberg.

City programs could be eliminated, vacant city positions could remain unfilled, city property could be sold or property taxes could be raised, he said.

For example, the council could impose a property tax of 37 cents on each $1,000 of assessed value to cover a portion of AFN's debt, the memo states.

The owner of a house assessed at $200,000 would pay $74 a year.

Instead of funding economic development and cultural projects with city hotel/motel taxes, the council could divert that existing tax to AFN.

Money from the meals tax could be used for AFN, but that would eliminate money for the purchase of parks and/or increase sewer rates.

“Sewer rates could increase 50 percent if the tax revenue was eliminated,” Tuneberg wrote in the memo.

Other options include adopting a gas tax, sales tax, income tax or $1 tax on tickets sold for entertainment in Ashland, according to Tuneberg.

Capping city expenditures and diverting gradually rising revenues for AFN is another alternative, he said.

Staff writer Vickie Aldous can be reached at 479-8199 or vlaldous@yahoo.com.