At the June 13th Board Meeting, there were some interesting public comments from citizens. That's always a good thing to see. One comment from Joe Seferyn of Davidson regarding Mi-Connection has been getting some traction on social media. Seferyn asked a number of questions about plans for the system in light of the ongoing losses. aShortChronicle has obtained a written copy of Mr Seferyn's comments in their entirety for your reading pleasure.
Mr. Mayor, Members of the Board:
On behalf of the tax payers in Davidson, I would like to offer comments on the situation regarding MI-Connection and its effect on the town budget and the tax payers. (By way of background, I worked for 35 years in leadership positions in the voice, data, video and cell phone industry, so I have some knowledge about these issues.)
In the budget review presented by Pieter a few weeks ago, sadly the issue of MI-Connection got no attention. It is shocking that a million dollar line item in the budget received no discussion at all.
Since Mooresville and Davidson purchased the company about 10 years ago, the cost of the losses to the Davidson tax payers is over $10 million dollars. Also, Mooresville has probably lost another $30 million dollars. Let’s call it what it is--a financial disaster that has a huge negative impact on the town budget.
Based on my experience, these losses are likely to increase over time, and perhaps escalate due to current negative trends in the industry and intense competition.
The company keeps touting their growth in customers. I have been trying for months to find out how many more customers they would need to achieve profitability. The company has said it’s too complicated to determine, but I know that is just not true.
Without a plan to break even, what is the point of continuing to waste a million dollars a year on a company that has little hope of achieving profitability or even surviving!
Also, tax revenues are increasing due to continuing new construction as well as rising home values. But, there doesn’t appear to be any effort on the part of the Town Board or the Town Manager to reduce or eliminate the trash fee that was imposed to cover the losses.
The attitude of acceptance of these losses is quite troubling!
The tax payers in Davidson deserve prompt answers from the Board and the Town Manager to the following questions:
1. Are you going to do a detailed review of the MI-Connection status, develop a plan of action and share the results with the tax payers.
2. Are you going to ask MI-Connection for a written documented plan to achieve profitability?
3. How can you consider raising taxes to pay for a new town hall or going further into debt on a new bond issue, while wasting a million dollars a year on a company which may not be financially viable nor has a plan to succeed?
4. Why can’t you reduce or eliminate the trash fee that was imposed to pay for the losses? This would give the tax payers a small return on their $10 million dollar lost investment.
5. How many more years are you going to spend over a million dollars a year to keep this company afloat without a clear path to profitability? Some might say continuing on this path would be reckless and financially irresponsible!
6. Should the taxpayers of Davidson expect to lose another $10 to $20 million dollars of their hard earned money on this company? This eventuality is very concerning!
It would seem this is exactly the outcome we will get without a major change in direction. Wouldn’t those millions of dollars be better spent improving Davidson? Perhaps the time has come to shut this company down, cut our losses and stop the bleeding.
There are other sophisticated voice, internet and video providers in the local market today, so the existing customers would not be left without service and would very likely have lower monthly bills.
The tax payers of Davidson urge you to take decisive action and do this quickly so as to eliminate further losses to be passed on to the tax payers.
Thank you for the opportunity to offer comments
Clearly, after 35 years in the business Mr Seferyn has the background to make informed comments. That's 35 years more industry experience than any of the Town's elected officials possess. So, what were the responses from elected officials?
Near the end of the meeting, Commissioner Anderson, seemingly exasperated at having to even mention Mi-Connection, responded that taking Mr Seferyn's advice of shutting down the system by saying "we can't just dump it now because we'd go bankrupt".
That would seem to be quite the exaggeration based on at least one faulty assumption. That assumption would be that shutting down the system would mean simply closing the doors and walking away. Obviously that's not true. Instead, shutting down the system would obviously involve selling off the assets. With the towns owing roughly $65 million as Commissioner Anderson stated, even if selling those assets only brought in 50% of that total it would leave Davidson owing $9.75 million to cover the shortfall based on its 30% responsibility for the company. That's less than the $11.5 million Davidson will have paid in subsidies through FY2018 since buying the company.
All that taken together makes the claim of bankruptcy because of a Mi-Connection liquidation seem highly unlikely.
On the other hand, Commissioner Anderson did allude to something that probably is accurate which should disturb taxpayers more than the false threat of bankruptcy. Anderson said Mi-Connection had taken "a couple of hits this year with competitors coming in". This is the spectre that has been out there since the beginning and was even mentioned in Mr Seferyn's comments that Anderson seemed to be trying to refute. Competition has always been the main concern from the towns' decision to enter the cutthroat telecom industry.
aShortChronicle recently raised questions in this post regarding the stall in the decline of Mi-Connection subsidies in the FY2018 budget. If competition is heating up and the company is taking hits, there is absolutely no reason to think that will slow in coming years. If the subsidy required stays at $1 million per year (or possibly more), Davidson may have little to lose by liquidating the company now.
Commissioner Graham followed Anderson by saying he agreed with Anderson's comments and added that "the questions that were asked are the questions we do ask of Mi-Connection", but because they are in a competitive situation the Board doesn't always ask them in public.
Mayor Woods, the only elected who actually voted for Mi-Connection back in 2007, chimed in with "our method is to encourage citizens to use the service."
None of the electeds answered Mr Seferyn's questions, and therefore it looks like the public still gets to know very, very little about one of its largest expenses.
Commissioner comments start at minute 87:15 of this video.