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<br />the information partnerships. Re-
<br />quests for Proposals (RFPs) will be dis-
<br />tributed to qualified providers who will
<br />respond with the technical solutions
<br />and revenue potential the city is seek-
<br />ing.
<br />
<br />Utility Precedent
<br />While city-led telecommunications
<br />utilities may be new, city-delivered
<br />utility services certainly are not. Many
<br />cities in the United States provide elec-
<br />tricity, water, natural gas and/or
<br />sewage-treatment utilities to citizens
<br />in their communities. Nebraska, fDr
<br />example, is a public power state. All
<br />electricity provided in Nebraska is pro-
<br />duced by public entities, which supply
<br />lower cost electricity than convention-
<br />al for-profit electricity providers.
<br />Jurisdiction over utilities is often
<br />granted in state constitutions. The
<br />Colorado Constitution, for example,
<br />gives cities the power to "construct. . .
<br />purchase, acquire, lease. . . operate
<br />water works, light plants, power
<br />plants, transportation systems, heat-
<br />ing plants and any other public utili-
<br />ties or works." Most state constitutions
<br />also give cities the right of eminent do-
<br />main to provide such utilities,
<br />Cities governed under home rule
<br />status acquire many of the same rights
<br />as the parent state, including the pow-
<br />er to provide, regulate, conduct and
<br />control utìlity systems. It is clear that
<br />states want to bestow on cities that
<br />provide utilities the full right of self
<br />government in both local and'lJ!.unici-
<br />pal matters. This is the same frame-
<br />work in which businesses operate.
<br />Both incorporated cities and incor-
<br />porated businesses 'operate within spe-
<br />cific boundaries, yet only the city, on
<br />behalf of its citizens, has the power of
<br />eminent domain. This power can be
<br />exercised when other entities conduct
<br />their business in such manner as to in-
<br />fringe on the equal rights of individu-
<br />als or the general well-being of the
<br />state. The Colorado Constitution says
<br />that the state may use the franchises
<br />of incorporated companies for the pub-
<br />lic good.
<br />States often exercise reguJatoJ}' au-
<br />thority through public utility commis-
<br />sions, but in many cases bow out of the
<br />pic~ure when cities decide to operate
<br />the!r own utilities. Many state consti-
<br />t~tlOns provide for regulatory over-
<br />IlIght of utilities, but give cities rea-
<br />sonable police and licensing powers to
<br />f~r~ municipally-owned utilities.
<br />Cltles can specifically declare their
<br />tf'lecomrnunications services to be a
<br />munici~ally-owned utility, ending the
<br />state's Jurisdiction over those services
<br />through its public utilities commission.
<br />Even Federal Communications
<br />~mmission (FCC) rulings have recog-
<br />nìzed the ability ofbusinessBS to resell
<br />~Iecommunications services. If a' city
<br />
<br />AMIRICAN CITY' COUNTY July 1994
<br />
<br />is classified as the reseller of such ser-
<br />vices, it is clearly stated in FCC rules
<br />that the city is the business "own-
<br />e~" or "provider" of those ser- f'
<br />VIces.
<br />Many Colorado ..Pi'
<br />cities are looking at
<br />starting their own informa-
<br />tion partnerships. "We have a
<br />fiduciary responsibility to re-
<br />view anything that can do what
<br />
<br />
<br />"We have a fiduciary
<br />responsibility to
<br />review anything
<br />that can do what
<br />it appears these
<br />telephone
<br />systems can."
<br />
<br />Mayor Rol Hudler
<br />Burlington. Colo.
<br />
<br />it appears these telephone systems
<br />can," says RoI Hudler, mayor of
<br />Burlington, Colo.
<br />When cities undertake the role of
<br />telecommunications provider to their
<br />citizens, some envision city workers
<br />climbing up poles in residents' back
<br />yards; phalanxes of customer service
<br />representatives answering angry cus-
<br />tomer complaints; and, in general, a
<br />whole new level of city bureaucracy.
<br />Information partnerships are, in
<br />essence, private telecommunications
<br />networks organized under the public
<br />entity structure of a city. The city as-
<br />sumes the public role of network own- :
<br />er-administrator, while private I
<br />telecommunications providers join
<br />with the city to provide private-sector
<br />financing, network engineering, in-
<br />stallation, management, marketing
<br />subscription and maintenance ser-
<br />vices. The city is the landlord and fa-
<br />cilitator, not the supervisor who sends I
<br />a lineman up the pole to change an in-
<br />tegrated circuit.
<br />In an information partnership, the
<br />city provides the "open network," al-
<br />lowing competitive companies to oper-
<br />ate within that network. In return, the
<br />city generates non-tax revenues which
<br />are used to pay the costs of the net-
<br />work and other municipal services.
<br />Cities might begin by cDntracting or i
<br />Wring Ii telecommunications network :
<br />integrator, who specializes in helping
<br />cities form information partnerships.
<br />
<br />Financing Options
<br />
<br />A variety of financing options ín-
<br />
<br />volving various degrees of risk exíst for
<br />cities planning to undertake an infor-
<br />mation partnership.
<br />· Certificates of participation
<br />(COPs) can help cities capitalize on
<br />a large array of equipment. The city
<br />may enter into a lease-purchase
<br />agreement with a private leasing com-
<br />pany whereby the private company
<br />purchases the network and leases it
<br />back to the city. An investment bank-
<br />ing firm markets COPs in the lease to
<br />private investors, and the investors
<br />provide funds equal to the principal
<br />and interest on the certificates. COPs
<br />do not constitute a debt to the city un·
<br />der current law.
<br />In most states, COPs do not require
<br />voter. authorization to pay annual debt
<br />service and allow the city to reap the
<br />benefits of the information partnership
<br />earlier than other options. However,
<br />they do require annual allocations
<br />from the city's general fund and re-
<br />quire a credit rating.
<br />· Utility revenue bonds are in wide
<br />use whenever a city or other govern-
<br />ment entity wants to provide capital
<br />for a revenue-generating enterprise.
<br />The city issues tax-exempt utility rev-
<br />enue bonds for the cost of construction,
<br />and an investment banking firm mar·
<br />kets the bonds to private investors,
<br />WhD provide funds equa] to the princi-
<br />pal and interest of the bonds. The rev-
<br />
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<br />1·800·876-6291
<br />701-228-3757
<br />Fax 701-228-2127
<br />
<br />Circle No. 26 on Reader Service Card
<br />
<br />43
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