Two pieces of legislation have an important bearing on the sale. The first says that it requires 60% of the vote to sell a municipal entity - a very difficult number to get on any proposal. Second, The proceeds of the sale of any municipal utility must be put into a fund. The interest can be spent by the municipality as they see fit, but using the principal for anything again requires 60% of the vote. As a result, it's pretty hard to get the voters to authorize the sale, as happened in the last two elections when Mayor Fink introduced the possibility of a sale.In 1989, Mayor Fink tried to sell ATU to Pacific Telecommunications, Inc. (PTI), which owned Alascom at the time. They were offering $450 million for a virtual lock on the Alaskan phone industry. Obviously, PTI put a good deal of resources into the effort, though the IBEW and GCI opposed it. The measure got a little over 50%, but fell way short of the mark.
In 1991, Fink proposed to sell the utility again. This time the bids came in higher. PTI again saw a golden opportunity and bid $500 million. Citizens' also saw an opportunity and, though they bid $50 million lower than PTI, the voters said if it were sold, they'd like it to go to Citizens - to discourage a monopoly. The numbers came in a shade worse than in '89 at 49%.
One major factor that probably served to dilute the "sell" vote in the 1991 election was another proposal, mutually exclusive of the sale, presenting the idea of turning ATU into an independent authority run by a board of directors but still owned by the Municipality. This would, went the logic, give ATU some distance from the political scene, and make the organization function more efficiently.
The authority has been functioning for a couple of years now, and opinions differ widely on how successful they've been. Most interviewed for this article believed the Authority was more independent and efficient than when the utility had been run as a branch of municipal government. But I got the predictable wide range of opinions on the Authority's abilities in comparison to private sector status.
The Mayor introduced the sale before the assembly in July, and a formal request for bids was released in August. The timeline for the future looks like this: September through December of '95, the city will conduct a bidder's conference and provide bidders due diligence. Final bids will be submitted in December, and the "highest responsive bid" will be determined by January. In February, the Assembly will be asked to place the buyer on the ballot. The election, of course, is in April of '96.
Financial Implications of the Sale
According to Tim Rogers in the municipal manager's office, it's easy to calculate the economic effects of the ATU sale by just plugging any bid amount into a simple formula.
Former Assembly member Bill Faulkner paints a different picture. He says you should figure it this way:
- Take the sale price as your base: $???.??
- Subtract: $140 million to take care of ATU's debt
- Subtract: $100 million to reduce the bonded indebtedness of the city (which saves some money in the future, so you really can't count the whole amount.)
- Put the remainder into a fund. We're estimating we can get 8% interest on the fund, and it'll take 3% to inflation-proof it. A 5% return...
- Take the sale price as your base: $???.??
- Subtract: $140 million to take care of ATU's debt
- Put the remainder into a fund
- Faulkner estimates a 6% return on the fund, and 4% to inflation-proof it. That's a measly 2% return.
Keeping ATU, he says, also involves hidden benefits. With some of the lowest rates in the nation, Faulkner estimates that $5-$7 million of "revenue distribution" is generated by ATU's public ownership, and that money flows into the Anchorage economy.
Furthermore, in correspondence with the mayor Aug. 15th, he mentions a test case from the late seventies, when PTI purchased Alascom from RCA and consolidated operations with the Washington headquarters. Over time, about 40% of the workforce, 700 jobs, moved out of state. The job loss could be considerable.
The final icing on the cake: According to Assemblymember Mark Begich, this year's dividend from ATU will reach 8.1 million. Last year's was 5.2 million. He attributed the gain to the unexpected phenomenal growth in extra services, like call waiting and caller ID.
I think Rogers was being a little optimistic (or heading down the Orange County road to financial success) when he projected 8% interest on our hypothetical fund. Faulkner was probably overdoing it with a 4% inflation adjustment. Either way, it seems like you can kind-of do with the numbers what you like, mix and match, include or exclude, things that cost or make money willy-nilly to support your position, whatever it is. What else is new?
Nonetheless, ATU has consistently been on the cutting edge of technology, and has competed effectively in every market they've entered. ATU was the first phone company in the country to install fully digital switching. Furthermore, when they bought McCaw cellular, the division skyrocketed - it currently has 58% of the market share against national AT&T behemoth Cellular One.