CEDAR FALLS -- Existing city-owned cable and Internet providers have taken their lumps in an advertising campaign opposing the formation of new Iowa municipal telecommunication utilities.
This week they're firing back.
The Iowa Association of Municipal Utilities and representatives of three existing city-run utilities are holding a series of news conferences around the state this week to address what one member called "false statements, half truths and scare tactics" being used by Project Taxpayer Protection in print and broadcast advertisements.
Curtis Dean, information director for Spencer Municipal Utilities, and one of several speakers Tuesday in Cedar Falls, said the existing municipal telecommunication utilities are not taking a stance on how residents in 29 Iowa cities, including Waterloo, vote Nov. 8 on whether to authorize their own municipal utility system.
But they are taking exception with statements from PTP, a nonprofit group funded heavily by private telecommunication providers, which is running a costly advertising campaign against the referendums and making claims that existing utilities are struggling financially and costing taxpayer dollars.
"We believe in a way our reputation is at stake," Dean said.
IAMU executive director Bob Haug said Spencer, Cedar Falls Utilities and the municipal utility in Muscatine have been specifically singled out as money losers, which he called "a lie."
"All three utilities earn revenues in excess of operating expenses," Haug said, adding none of them use any property tax dollars to keep the utilities afloat.
Haug said IAMU also takes exception with a quote from a PTP brochure stating Iowa's municipal utilities are "borrowing more money and raising cable TV, electric and water rates to subsidize the unforeseen costs of operating an expensive utility."
"In fact, state law -- passed at the urging of the same corporations that are making these false claims -- prohibits cities from subsidizing their telecom operating costs," Haug said. "There is no truth to the claim that rates of other utilities are being used to subsidize their telecommunication utilities."
Betty Zeman, marketing manager for Cedar Falls Utilities, which started a telecommunications system in 1994 following voter approval, said CFU's cable and Internet service has turned a $1 million profit in each of the last two years, after paying for all expenses, including debt payments.
Zeman said CFU takes statements about the cross-subsidies of telecommunication and electric utilities seriously.
"They're accusing us of breaking the law," she said. "If you're going to make this type of accusation, you'd better have some pretty darn good documentation to verify those claims. But they don't have it."
Former Iowa State Auditor Richard Johnson, who serves as PTP co-chairman, said he was not familiar with the specific brochure cited by IAMU.
"As a general matter, I know the utilities took exception when the Rizzuto report came out, and I generally think we were relying on that report," Johnson said. "I have not examined their (the individual utilities') statements."
The report Johnson cites was conducted by the nonprofit Heartland Institute, which generally promotes privatization of certain government services. And the report said none of the telecommunication utilities in Cedar Falls, Muscatine or Spencer were breaking even.
"Financial statements are very difficult to define when you look at overhead and calculation of costs," Johnson said. "I think it's difficult for people to say one way or another whether there's a direct subsidy."
But municipal telecommunication utility representatives said their financial experience is quite clear and successful.
Dean said SMU's cable operations are earning $1.75 million in profit annual after all expenses are paid. While the utility did raise electric rates recently, it was to finance improvements to the electric utility unrelated to the cable operations.
"We did not raise electric rates to subsidize our telecommunication utility," Dean said. "It doesn't need a subsidy."
Zeman said CFU has been able to provide services faster to its residents that the private provider, noting homeowners had access to high-speed data services four years before the private sector offered the service there. The gap was six years for business data service, she added.
Zeman also said CFU provides a package of cable television and broadband Internet service for $70 a month compared to the $90 monthly average cost in cities without a municipal utility competing with the private sector. That equates to more than $2 million in annual savings for Cedar Falls customers, she said.
Darrel Wenzel, director of Independence Light & Power Telecommunications, a municipal utility, said his rates are 30 percent below those in cities without competition, while the telecommunication utility is doing "quite well" and earning more than the initial feasibility studies indicated.
"Project Taxpayer Protection is more about protecting the private companies' profits than protecting taxpayer dollars," he said.
Contact Tim Jamison at (319) 291-1577 or at email@example.com.