AFN revenue growth will likely slow

The Ashland Fiber Network will be able to contribute more money than projected toward its debt despite the slowing economy.

For the current and next fiscal years, AFN's business plan called on it to contribute $200,000 each year toward payments on $15.5 million worth of debt that built up during previous years of losses.

AFN contributed $356,000 toward the debt this fiscal year and will contribute another $356,000 during the fiscal year that starts July 1, Information Technology Department Director Joe Franell told Ashland Citizens Budget Committee members Thursday night.

But he warned that AFN might not be able to exceed expectations for a third year due to the economic slowdown. Franell also said he will have to adjust AFN's business plan.

"I think revenue will flatten out," he said.

AFN's total debt payment for the current fiscal year is $1,056,000, with property taxes and other city departments making up for what AFN can't cover. Next fiscal year's payments will total $1,298,000.

Launched in the late 1990s to provide high-speed Internet and cable television service, AFN consistently lost money as it battled with Charter Communications for customers. The Ashland City Council privatized the money-losing television side of AFN and hired Franell from the private sector in 2006, leading to a reversal in AFN's fortunes.

While AFN is contributing more toward its debt, it is also providing more money in the coming fiscal year for city of Ashland departments such as administration, finance and legal. Those departments provide services to all other city departments, but they lack revenue streams and are facing rising costs.

To pay more to those "central services" departments, AFN will delay its launch of a WiMax system that would have blanketed the city and surrounding area with high-speed wireless Internet service. AFN currently provides wireless service to some areas of town and reaches most of the city through cables.

The WiMax system would have cost about $125,000 to $175,000, Franell estimated.

"It doesn't make sense to spend money on WiMax if we can't fund things that make the city run day to day," he said.

Franell said he believes WiMax could have generated enough money to pay for its construction in about two years.

He said AFN cannot reach 1,367 households in Ashland through cables because of location and other factors.

If 10 percent of those households became AFN WiMax customers, that would generate $50,000. Where AFN can reach customers, it has 40 percent of the market.

The city could also save the $10,000 it spends each year to give emergency workers wireless communications in the field, Franell said.

Ashland City Councilor Cate Hartzell asked him if he had sought any partnerships with private companies to team up on a WiMax system, thus lowering costs for the city.

Franell said he has been aggressively seeking out partners.

"I haven't had any takers," he said, adding that the slowing economy and the fact that Ashland is such a small market probably have been factors.

The Citizens' Budget Committee is made up of councilors, Mayor John Morrison and residents.

Resident committee member Allen Douma said the payback time for WiMax could end up being eight or nine years — or never.

But Councilor David Chapman said he was disappointed that the system would not be built because of lost revenues and because homes that aren't reached with regular AFN service would continue to be left out.

"It troubles me a lot, actually, that you're delaying this," he told Franell.

A budget committee majority voted to tentatively accept the Information Technology Department budget, which includes AFN. Hartzell voted against acceptance.

The budget committee will decide whether to give its approval to the city budget as a whole later this month.

City staff have proposed increasing this year's $91.86 million budget to $95.17 million for the coming fiscal year.

To pay for that, property taxes and utility rates would have to increase, costing the average homeowner an extra $86 in the next fiscal year.

City Administrator Martha Bennett has recommended the budget committee consider an even larger property tax increase, which would cause the city to hit its maximum allowable property tax ceiling. That would cost the average homeowner another $10.65.

Bennett said without a change in financial forecasts, the city will need to raise property taxes to their maximum limit for the fiscal year that starts on July 1, 2009. She recommended the budget committee consider raising the property tax rate to its limit for this coming fiscal year and then set the money aside in a reserve fund.

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

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