A couple hours ago, I received an e-mail from Sara-Lynne Levine, communications director for the Town of Davidson. She said the three people who are holding individual conferences with the press today and tomorrow could accommodate a meeting with me today (as opposed to tomorrow), after all.
At first, I agreed, as long as the officials could meet a little later in the afternoon than the 3 p.m. time they proposed for my conference. But after further consideration and discussion, I've decided that I can't go to the meeting because I cannot justify attending a meeting that the public is not allowed to attend.
I sent an e-mail to Levine, thanking her for trying to accommodate my schedule. However, I explained that I am very uncomfortable with the format of the meetings. Various media outlets will be meeting individually to discuss MI-Connection with Mooresville Finance Director Maia Setzer, Davidson Town Manager Leamon Brice and Bristol Virginia Utilities Chief Finance Officer Stacey Bright.
The people of Mooresville and Davidson - who are ultimately responsible for the MI-Connection system - are not invited.
I let Levine know when the three folks holding the individual conferences decide to present themselves publicly and field questions from the public, I will make any necessary adjustments to my schedule to attend that meeting.
Monday, August 31, 2009
Sunday, August 30, 2009
Town commissioner on MI-Connection: 'There's a storm brewing'
Mooresville and Davidson: Get ready to dig deep – again – for MI-Connection.
Town officials predict the cable system might need at least $19 million more in the next five years.
Officials contacted by the Report last week did not want to discuss specifics, citing “proprietary information” – specifically, information that could be damaging once in the hands of MI-Connection’s competitors.
Town commissioners say they’re reluctant to elaborate because they haven’t been given “hard numbers.” Commissioner Chris Carney, in fact, said figures being used in discussions are “speculative” at best, because no one has yet seen MI-Connection’s audited year-end financial statements. Those aren’t expected to be released until October.
Town Manager Steve Husemann received MI-Connection’s unaudited year-end financial report last Wednesday. He did not release a copy to the Report, however, before beginning an eight-week leave of absence on Friday.
“I know there have been discussions that money is going to be needed if we’re able to accomplish all the things we’ve talked about,” Carney said last week. But when asked how much money is being discussed, he said: “So much of what we’re talking about is speculation. The numbers are unaudited. They’re good to use as a tool to start coming up with a strategy, but you don’t base your entire business plan around them because they’re not accurate yet.”
Once the numbers are given to commissioners, Carney said, “We are going to be honest. If we have something that says the sky is black, then the sky is black. We can be honest, but we need to be factually correct when we’re honest.”
Commissioners might not know just how black the sky is right now. But in the words of Commissioner Mac Herring in an e-mail obtained by the Report in a recent public-records request, they do know “there’s a storm brewing.” And in fact, town officials confirm they’ve been told to anticipate at least $19 million more in five years.
“Not sure if our local fiber optic venture will be successful,” Herring wrote in the e-mail. “The financial model is flawed, the Chair has apparently been withholding information, and the confidence in BVU (Bristol Virginia Utilities) at running the system is faltering. Their operations seem to be sound, but there has been little success at marketing the business applications. Perhaps we just kept our eye off the ball for too long.”
The towns of Mooresville and Davidson purchased the cable system for $80 million in December 2007. Last summer, the two towns coughed up another $12.5 million because, without it, MI-Connection wouldn’t be able to complete upgrades, including extending fiber to local businesses, which would be a significant money-maker for the system. (For detailed information, visit http://thegattonreport.blogspot.com/2008/05/cable-cash-cow-turned-catastrophe.html)
Four seats are open on Mooresville’s town board this November – the mayor’s seat and those of Commissioners Herring, Carney and Frank Rader. All four voted for the original $80 million financing for MI-Connection; Carney voted against the second $12.5 million request. Rader and Thunberg - two of the staunchest town-board supporters of MI-Connection - did not respond to Report questions this week. They are both running challenged races this year. Carney and Herring are running unopposed.
Mooresville Finance Director Maia Setzer said last week that the original $80 million for the cable system was “a Certificate of Participation borrowing,” while the “secondary ($12.5 million) was an installment loan.” This fiscal year, she said, $4.7 million is due in debt payments – half next month, and the other half in February.
Herring said: “I am of the opinion through our discussions (with no ‘real’ numbers in front of us), that MI-Connection can make its payments but will have no capital to make the taps into the business market. It’s kind of like having a wonderful 6-lane highway with no exit ramps.
“My understanding,” he added, “is that in order to reach the potential business customers … additional capital will be needed.”
“We have a high quality telecommunications product but need to market it (and) find some additional capital to get it to market,” Herring added. “We have a Cadillac of a system, now we need to start utilizing it.”
But if MI-Connection overextends itself in infrastructure costs, trying to reach more lucrative commercial accounts that will foot the repayment bill – and if that puts MI-Connection in a position where it can’t repay the towns’ debt in the meantime – does the burden of repayment fall back on the town?
“It would,” said Setzer, “but there has been no indication that MI-Connection would not be making those payments this year.”
But if Herring’s understanding is accurate, then MI-Connection may be able to pay its debt payments, but that will leave the system with not enough money for capital improvements to be able to lure in more lucrative accounts.
So what happens if the town continues subsidizing MI-Connection’s capital costs? Will town commissioners have to raise taxes? Setzer responded simply: “I do not know.”
While official figures have not been released, officials in recent e-mails make repeated references to the pending projections and the “bad news” that will accompany their release.
One e-mail in particular may provide more questions than answers, but it points to a looming problem for MI-Connection. In the June 5 e-mail, Wes Rosenbalm – president and CEO of BVU (MI-Connection operators) – stated to Davidson Commissioner and former MI-Connection Board Chairman Evan Webster: “We do not want to be alarmist but we think the situation with MIC is very serious.”
Rosenbalm points to two attachments (removed before the e-mail chain was sent to Mooresville commissioners): “a memo from (BVU Chief Financial Officer) Stacey (Bright) to me on the situation,” Rosenbalm wrote, “and then a memo from me to you on what options we have at this point.
“I apologize for sending this to you before I leave on vacation,” Rosenbalm said to Webster, “but we thought it was serious enough that we need to get it to you this week. We request that you share this with the remainder of the (MI-Connection) Board so they are aware of the situation.”
But Webster did not pass the information along until July 10 — five weeks later. “Wes sent this email approximately 5 weeks ago,” Webster said in an e-mail to other MI-Connection board members. “I did not forward it at that time because I did not agree with the tone or the approach. Wes left for a two week vacation after sending this, and I wanted to talk with him before pushing this along. In addition, we were still working on the budget.”
Webster stated that “the outlying situation” documented in the memos “has been discussed among ourselves, so the subject matter should not come as a surprise.” He also indicated that Bright’s memo included a financial analysis that “does highlight the slope against which we must climb.” However, Webster stated, “her initial analysis assumes that we will climb the slope in one year. I think that this is a multiple year project.”
As for the options that Rosenbalm proposed, Webster stated to the MI-Connection board members: “Even if we concede that there are two options, prudence would dictate that we take the time necessary for adequate consideration. We know that we are good for at least 12 months.”
When word reached Mooresville that Webster did not share for five weeks the information provided to him by Rosenbalm, at least two town commissioners – Carney and Atkins – moved quickly to try to have Webster unseated as the MI-Connection board chairman.
With a resolution in hand at the beginning of the Aug. 3 town board meeting, Atkins intended to make a motion asking that a letter be sent to Davidson’s mayor and town board, on behalf of Mooresville’s town board, “informing them that we have lost confidence in the ability of Mr. Webster to lead MI-Connection in a direction that will benefit our Town and its citizens and asking that Mr. Webster be immediately removed from the MI-Connection Board of Directors.”
The resolution also stated: “It is imperative, both for the benefit of MI-Connection, and certainly for the citizens of the Town of Mooresville and our Board, that each member of the MI-Connection Board of Directors and most certainly its chairman, strive to make MI-Connection a successful business and service venture.
“Of equal importance,” the resolution added, “it is imperative that the person serving as chairman of MI-Connection keep our Town Board updated about the strengths and weaknesses of anything that might impact on the operation of the MI-Connection system.”
Commissioners found out just before the start of the Aug. 3 town board meeting that Webster’s term would expire Aug. 13. Assurances that Davidson would not reappoint him to the MI-Connection board mitigated the need for the resolution and motion at Mooresville’s Aug. 3 town board meeting.
Carney – who, along with Atkins, voted against the additional $12.5 million for MI-Connection last summer because he disagreed that elected officials should be able to serve on the MI-Connection board – said last week: “I very publicly had asked for a change in the board chairmanship for the last 12 to 18 months because the person in charge was not in a position to be unbiased.
“We have a system with the opportunity to break based on that. And – guess what? – it broke,” Carney added.
Webster also chose not to seek re-election this year to his seat on Davidson’s town board.
Carney said he hopes that new leadership on the MI-Connection board will “provide a different philosophy based on our original goals and objectives.”
Mooresville will also be gaining a representative to the MI-Connection board. While Mooresville guaranteed the large majority of the $92.5 million for the cable system, until recently it had only two representatives, as opposed to Davidson’s three, on the MI-Connection board. But Mooresville is looking now to appoint a third representative, which will decrease Davidson’s representation to two.
Atkins said that he has “complete confidence in, and admiration for,” the Town of Mooresville’s two current appointed MI-Connection board members, John Kasberger and David Pendleton. “They have been very open and transparent with the information that has been made available to them,” Atkins said, “and for that I am truly grateful to have them represent Mooresville’s interest in MI-Connection.”
In addition to changing the structure of the MI-Connection board, Atkins said the Town of Mooresville “has been assured MI-Connection will be much more aggressive in its sales, marketing and business development initiatives to meet the growth/revenue projections required to achieve the financial goals and obligations of the organization.”
MI-Connection itself is also undergoing an organizational restructuring. And town officials say they have identified a flaw in MI-Connection’s agreement with BVU that needs to be corrected: the agreement is not performance-based. In other words, it does not include a specific mechanism to hold BVU accountable for the performance of the cable system from a sales and marketing standpoint.
While these plans have not been announced publicly, Mooresville’s Husemann has tried relentlessly to get in front of the story at least since the beginning of August. In e-mails to town and MI-Connection officials, Husemann repeatedly stressed his uneasiness with unaudited figures – that could turn out to be wrong – being reported by the media. He is also adamant about the need for an action plan and to be open and honest with the public. On Aug. 12, he stated in an e-mail to the MI-Connection task force, including Atkins, Carney and Herring: “We would be wise to package the bad news with a statement about what is being done to address the situation.
“When we have official projection numbers, bad news could have a negative effect on marketing,” he added. “Any type of governance restructuring, changes in personnel, changes from engineering to sales/marketing all need to be announced soon as well as a statement about the financial situation.
“The message,” continued Husemann, “needs to be ‘Yes – we have a problem, but here is how we hope to address.’ Open, honest …”
In an Aug. 21 e-mail about a pending press release, Husemann stressed: “This needs to happen ASAP. We need to announce it early next week and be very open and honest.”
Obviously, no one moved on Husemann’s pleadings until last week, when pressure mounted from the press.
On Friday, meetings were being scheduled for tomorrow and Tuesday with various media outlets. The Report was contacted by Sara-Lynne Levine, Davidson’s communications director, requesting to meet Tuesday “to discuss MI-Connection” with Mooresville’s Setzer, BVU’s Bright and Davidson Town Manager Leamon Brice.
I will not meet on Tuesday. Therefore, once news from the meetings begins to be posted online – possibly on newspapers’ online sites tomorrow since that’s apparently when their individual Q-and-A sessions were scheduled – those articles will be linked here. Online-only news sources were apparently scheduled to meet for their individual conferences the following day. As soon as those stories are posted, they will also be linked here. If you find them first, please feel free to post the link in the Comments section.
Town officials predict the cable system might need at least $19 million more in the next five years.
Officials contacted by the Report last week did not want to discuss specifics, citing “proprietary information” – specifically, information that could be damaging once in the hands of MI-Connection’s competitors.
Town commissioners say they’re reluctant to elaborate because they haven’t been given “hard numbers.” Commissioner Chris Carney, in fact, said figures being used in discussions are “speculative” at best, because no one has yet seen MI-Connection’s audited year-end financial statements. Those aren’t expected to be released until October.
Town Manager Steve Husemann received MI-Connection’s unaudited year-end financial report last Wednesday. He did not release a copy to the Report, however, before beginning an eight-week leave of absence on Friday.
“I know there have been discussions that money is going to be needed if we’re able to accomplish all the things we’ve talked about,” Carney said last week. But when asked how much money is being discussed, he said: “So much of what we’re talking about is speculation. The numbers are unaudited. They’re good to use as a tool to start coming up with a strategy, but you don’t base your entire business plan around them because they’re not accurate yet.”
Once the numbers are given to commissioners, Carney said, “We are going to be honest. If we have something that says the sky is black, then the sky is black. We can be honest, but we need to be factually correct when we’re honest.”
Commissioners might not know just how black the sky is right now. But in the words of Commissioner Mac Herring in an e-mail obtained by the Report in a recent public-records request, they do know “there’s a storm brewing.” And in fact, town officials confirm they’ve been told to anticipate at least $19 million more in five years.
“Not sure if our local fiber optic venture will be successful,” Herring wrote in the e-mail. “The financial model is flawed, the Chair has apparently been withholding information, and the confidence in BVU (Bristol Virginia Utilities) at running the system is faltering. Their operations seem to be sound, but there has been little success at marketing the business applications. Perhaps we just kept our eye off the ball for too long.”
The towns of Mooresville and Davidson purchased the cable system for $80 million in December 2007. Last summer, the two towns coughed up another $12.5 million because, without it, MI-Connection wouldn’t be able to complete upgrades, including extending fiber to local businesses, which would be a significant money-maker for the system. (For detailed information, visit http://thegattonreport.blogspot.com/2008/05/cable-cash-cow-turned-catastrophe.html)
Four seats are open on Mooresville’s town board this November – the mayor’s seat and those of Commissioners Herring, Carney and Frank Rader. All four voted for the original $80 million financing for MI-Connection; Carney voted against the second $12.5 million request. Rader and Thunberg - two of the staunchest town-board supporters of MI-Connection - did not respond to Report questions this week. They are both running challenged races this year. Carney and Herring are running unopposed.
Mooresville Finance Director Maia Setzer said last week that the original $80 million for the cable system was “a Certificate of Participation borrowing,” while the “secondary ($12.5 million) was an installment loan.” This fiscal year, she said, $4.7 million is due in debt payments – half next month, and the other half in February.
Herring said: “I am of the opinion through our discussions (with no ‘real’ numbers in front of us), that MI-Connection can make its payments but will have no capital to make the taps into the business market. It’s kind of like having a wonderful 6-lane highway with no exit ramps.
“My understanding,” he added, “is that in order to reach the potential business customers … additional capital will be needed.”
“We have a high quality telecommunications product but need to market it (and) find some additional capital to get it to market,” Herring added. “We have a Cadillac of a system, now we need to start utilizing it.”
But if MI-Connection overextends itself in infrastructure costs, trying to reach more lucrative commercial accounts that will foot the repayment bill – and if that puts MI-Connection in a position where it can’t repay the towns’ debt in the meantime – does the burden of repayment fall back on the town?
“It would,” said Setzer, “but there has been no indication that MI-Connection would not be making those payments this year.”
But if Herring’s understanding is accurate, then MI-Connection may be able to pay its debt payments, but that will leave the system with not enough money for capital improvements to be able to lure in more lucrative accounts.
So what happens if the town continues subsidizing MI-Connection’s capital costs? Will town commissioners have to raise taxes? Setzer responded simply: “I do not know.”
While official figures have not been released, officials in recent e-mails make repeated references to the pending projections and the “bad news” that will accompany their release.
One e-mail in particular may provide more questions than answers, but it points to a looming problem for MI-Connection. In the June 5 e-mail, Wes Rosenbalm – president and CEO of BVU (MI-Connection operators) – stated to Davidson Commissioner and former MI-Connection Board Chairman Evan Webster: “We do not want to be alarmist but we think the situation with MIC is very serious.”
Rosenbalm points to two attachments (removed before the e-mail chain was sent to Mooresville commissioners): “a memo from (BVU Chief Financial Officer) Stacey (Bright) to me on the situation,” Rosenbalm wrote, “and then a memo from me to you on what options we have at this point.
“I apologize for sending this to you before I leave on vacation,” Rosenbalm said to Webster, “but we thought it was serious enough that we need to get it to you this week. We request that you share this with the remainder of the (MI-Connection) Board so they are aware of the situation.”
But Webster did not pass the information along until July 10 — five weeks later. “Wes sent this email approximately 5 weeks ago,” Webster said in an e-mail to other MI-Connection board members. “I did not forward it at that time because I did not agree with the tone or the approach. Wes left for a two week vacation after sending this, and I wanted to talk with him before pushing this along. In addition, we were still working on the budget.”
Webster stated that “the outlying situation” documented in the memos “has been discussed among ourselves, so the subject matter should not come as a surprise.” He also indicated that Bright’s memo included a financial analysis that “does highlight the slope against which we must climb.” However, Webster stated, “her initial analysis assumes that we will climb the slope in one year. I think that this is a multiple year project.”
As for the options that Rosenbalm proposed, Webster stated to the MI-Connection board members: “Even if we concede that there are two options, prudence would dictate that we take the time necessary for adequate consideration. We know that we are good for at least 12 months.”
When word reached Mooresville that Webster did not share for five weeks the information provided to him by Rosenbalm, at least two town commissioners – Carney and Atkins – moved quickly to try to have Webster unseated as the MI-Connection board chairman.
With a resolution in hand at the beginning of the Aug. 3 town board meeting, Atkins intended to make a motion asking that a letter be sent to Davidson’s mayor and town board, on behalf of Mooresville’s town board, “informing them that we have lost confidence in the ability of Mr. Webster to lead MI-Connection in a direction that will benefit our Town and its citizens and asking that Mr. Webster be immediately removed from the MI-Connection Board of Directors.”
The resolution also stated: “It is imperative, both for the benefit of MI-Connection, and certainly for the citizens of the Town of Mooresville and our Board, that each member of the MI-Connection Board of Directors and most certainly its chairman, strive to make MI-Connection a successful business and service venture.
“Of equal importance,” the resolution added, “it is imperative that the person serving as chairman of MI-Connection keep our Town Board updated about the strengths and weaknesses of anything that might impact on the operation of the MI-Connection system.”
Commissioners found out just before the start of the Aug. 3 town board meeting that Webster’s term would expire Aug. 13. Assurances that Davidson would not reappoint him to the MI-Connection board mitigated the need for the resolution and motion at Mooresville’s Aug. 3 town board meeting.
Carney – who, along with Atkins, voted against the additional $12.5 million for MI-Connection last summer because he disagreed that elected officials should be able to serve on the MI-Connection board – said last week: “I very publicly had asked for a change in the board chairmanship for the last 12 to 18 months because the person in charge was not in a position to be unbiased.
“We have a system with the opportunity to break based on that. And – guess what? – it broke,” Carney added.
Webster also chose not to seek re-election this year to his seat on Davidson’s town board.
Carney said he hopes that new leadership on the MI-Connection board will “provide a different philosophy based on our original goals and objectives.”
Mooresville will also be gaining a representative to the MI-Connection board. While Mooresville guaranteed the large majority of the $92.5 million for the cable system, until recently it had only two representatives, as opposed to Davidson’s three, on the MI-Connection board. But Mooresville is looking now to appoint a third representative, which will decrease Davidson’s representation to two.
Atkins said that he has “complete confidence in, and admiration for,” the Town of Mooresville’s two current appointed MI-Connection board members, John Kasberger and David Pendleton. “They have been very open and transparent with the information that has been made available to them,” Atkins said, “and for that I am truly grateful to have them represent Mooresville’s interest in MI-Connection.”
In addition to changing the structure of the MI-Connection board, Atkins said the Town of Mooresville “has been assured MI-Connection will be much more aggressive in its sales, marketing and business development initiatives to meet the growth/revenue projections required to achieve the financial goals and obligations of the organization.”
MI-Connection itself is also undergoing an organizational restructuring. And town officials say they have identified a flaw in MI-Connection’s agreement with BVU that needs to be corrected: the agreement is not performance-based. In other words, it does not include a specific mechanism to hold BVU accountable for the performance of the cable system from a sales and marketing standpoint.
While these plans have not been announced publicly, Mooresville’s Husemann has tried relentlessly to get in front of the story at least since the beginning of August. In e-mails to town and MI-Connection officials, Husemann repeatedly stressed his uneasiness with unaudited figures – that could turn out to be wrong – being reported by the media. He is also adamant about the need for an action plan and to be open and honest with the public. On Aug. 12, he stated in an e-mail to the MI-Connection task force, including Atkins, Carney and Herring: “We would be wise to package the bad news with a statement about what is being done to address the situation.
“When we have official projection numbers, bad news could have a negative effect on marketing,” he added. “Any type of governance restructuring, changes in personnel, changes from engineering to sales/marketing all need to be announced soon as well as a statement about the financial situation.
“The message,” continued Husemann, “needs to be ‘Yes – we have a problem, but here is how we hope to address.’ Open, honest …”
In an Aug. 21 e-mail about a pending press release, Husemann stressed: “This needs to happen ASAP. We need to announce it early next week and be very open and honest.”
Obviously, no one moved on Husemann’s pleadings until last week, when pressure mounted from the press.
On Friday, meetings were being scheduled for tomorrow and Tuesday with various media outlets. The Report was contacted by Sara-Lynne Levine, Davidson’s communications director, requesting to meet Tuesday “to discuss MI-Connection” with Mooresville’s Setzer, BVU’s Bright and Davidson Town Manager Leamon Brice.
I will not meet on Tuesday. Therefore, once news from the meetings begins to be posted online – possibly on newspapers’ online sites tomorrow since that’s apparently when their individual Q-and-A sessions were scheduled – those articles will be linked here. Online-only news sources were apparently scheduled to meet for their individual conferences the following day. As soon as those stories are posted, they will also be linked here. If you find them first, please feel free to post the link in the Comments section.
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