Why do you want to sell ATU?'
Yeah, well that's really the question. From my standpoint, I think we look at ATU as our biggest asset. And if somebody has most of their income in stock, most of their income in apartment buildings, or most of their wealth in a car - at some point, they periodically look at it and say, 'Am I better off to sell this car and buy another car, am I better off to sell this house and buy another house, or am I better off to sell this stock and buy another stock.'
I look at ATU as our biggest asset, so it's a very big responsibility that I as the Mayor have. And given the environment that we're in right now, with all the legislative changes in Congress that are clearly going toward more competition; and all the technological changes that require very very quick action; and the fact that we tried the Authority for 5 years (and the general consensus was 3-5 years is the time the authority should be given as sort of a test case). I think it's important we bring it back before the public to ask them whether it is they want to keep this asset in the form of a telephone utility, or in some other form. And I think the best way, I think that that really my fiduciary responsibility, is to get this question before the public.
Because if we take the worst case scenario, and let's say it loses value because of competition or legislative changes over the next 4-5 years, I don't want the people saying, "Why didn't the Mayor tell us? We had an asset that was worth $500 million at one time, and now it's worth $200 million - why didn't somebody tell us that this was happening?" And there's no better way to get all the information out than to have an election. Get it out there and let people know what all the issues are.
So that's really the key issue. The other issue I think is, should the city be in a real competitive business. Years and years ago, ATU was very predictable. You could tell how it was going to grow based on how the city was going to grow. Now things can change dramatically. As far as I know, there's no other phone utility as big as ATU that's owned by a city. I mean, all the other cities have gotten out of the business. And we've got to look at that and say, 'You know, maybe there's a reason that those are all owned privately instead of by cities.'
And I think the reason is that governments by their very nature are not designed to be quick-acting, responsive oraganizational units. They're designed to be as fair as possible and as open as possible, and those actually are contrary to being highly competitive in the sense of secretness and closedness being necessary to be really competitive. You don't want your competitor to know what you're doing. And that's a problem with a publicly owned utility. So there's some inherent dangers in it.
I think that you asked me eariler what I thought the price might be, and I don't know. But let's say it's $100 million less than last time, let's say it's roughly $440 million. If that were the case, and there's a really specific section in the charter that says exactly what we can do with the proceeds, we can't just take the proceeds and spend them. And the first thing we have to do is pay off the revenue bonds that they've debted into the utility. And right now, that's about $140 million. So let's say we take the 440, and pay off the debt. That leaves us with $300 million.
So we have to ask ourselves: "Would we as a city rather have $300 million that was invested in a permanent fund, that was invested in a long-term treasury note, 30-year treasury note, at say 6-7%?" Or would we rather have the $300 million in equity in a telephone compay?
And we'll have to compare... So that $300 million invested in a long-term fund would earn somewhere between $18-$20 million per year. So we've got to ask ourselves, is it better off for the city to have this and earn $18-$20 million, or to have the telephone utility, and to get what we're getting right now.
What about inflation-proofing the fund?
Yeah, that's something that we'd have to do. We'd have to inflation-proof the fund.
By like 3%
Yeah it could be 3%...
So that's 9 million a year.
Yeah, $9 million a year. But the fact is that we're earning... yeah, 3% of 300 is $9 million a year. But that doesn't mean we're not earning $18-$20 million a year. We're earning $18-$21 mil, but we're taking that now and using some to inflation proof and using some for other facilities, or for operation of government, or whatever we can use it for.
So those are some of the issues, you know. With ATU right now, you could argue if any money goes into, well... You've got to say, "Will ATU increase at a rate faster than inflation or less fast than inflation - what's going to happen?"
But that's the information I want to get out to the public, so they can decide for themselves what they'd like to do. And we really need to let people make that decision.
The ITB paints the picture of ATU as being radically successful, on the cusp of a new era in telecommunications
Who paints this picture?
Your own municipal document - the Invitation to Bid
Oh the invitation to bid. Yeah, I think it's a company that is a good healthy buy for a private sector firm. I don't know if you can use one or two words to describe whether it's healthy or not, but I'm not advocating selling it becuase it's not healthy. I'm saying the environment is changing right now, and we've got to ask ourselves if we want to own it during this changing environment. I think it could be a great asset for a private company that could operate quickly, respond quickly, make things happen - it may very well be a good investment for them.
But the question is not, "Is it a healthy company?" but instead, "What's the environment, what's the future going to be, and can it be run successfully by government or should we sell it, are we better off selling it?"
And I think the other question that we should be asking ourselves is, "If we had $300 million in a permanent fund, and we were earning $18-$21 million a year, would there be a movement to take that money and buy a telephone utility?" I don't think so. So that's sort of the balance.
The real important thing from my standpoint is that we give people a chance to make their views known. I mean, if there's anyone out there arguing that we shouldn't let people have the right to make their own decisions, I don't know, I think they're wrong. I think it's really the right of the people out there to be able to make those decisions periodically on their assets - to decide if they want to sell it or keep it.
ATU raised their annual dividend. They now provide $8.1 million annually to city coffers and cite steady growth as a sign of future increases. What sort of difference to you think the heightened dividend is going to make in this issue?
Certainly the heightened dividend is something that's more appealing to the public, and I think that adds appeal to the public. And I think ATU knows that. But if they want to increase their dividends, that's fine. If they can operate better and increase it, that's fine. And I think that's a factor in the decision-making process.
So you think it's largely a political move?
I find it's tough for me to speculate as to what people's intents were - you'd have to get inside their mind... Maye they're just generous - maybe they're just all of a sudden hit with a spark of generosity.
What what the process to arrive at the specifications in the ITB - that they can't ener the NECA Pool or the long distance market.
I think you have to sit down and say, "Okay, what are we going to do - under what conditions can it possibly be sold." If there were no conditions attached to it - not in the NECA pool, be able to be sold to a long distance carrier, there's no way in the world that it would have passed - it would have been a non-sale issue. I think there are too many groups who would have opposed it. When you're looking at having to get 60% [of the vote], you can't have... you don't want to generate too much opposition. It's tough to get 60%.
I think it's one of practicality - how much difference will these make? Who knows on the bid. But the basic question is, whatever the bid is, I think there's an argument that says if we had not had those conditions on there, our bid would not have been nearly as high, because people wouldn't have bid, because they would have known nobody's gonna buy it, 'cause it's not going to sell - why even worry about it.
But it's better for the buyer to not have the conditions
Probably...
Cause then they could jump into the long distance market and have the local exchange carrier.
Except I think there's an argument that says the buyer would have been smart enough to realize that the sale would never go through.So the buyer would say, "Why bid on this? It's just a futile exercise."
What makes you think that's not going to happen this time, after two failed elections?
Well, I dont' know. Maybe we'll find out we're not getting any bids. But I guess that I have confidence in our ability to present the issue fairly, and a resonable amount of confidence in being able to give the sale a fair chance. And I think that we'll get bids. I think people will look at it and say "It's worth it, there's a reasonable chance that this might work." This is the first time I've ever tried it really as Mayor.
If it gets sold, what do you think the implications will be. Is there a chance of a rate hike, diversion of employees?
You know, I think it's too early to speculate. We'll have to see who buys it and what their plans are. There will be about a three month, four month window for them to communicate to the people of Anchorage, to let the people know what their plans are - what they think will work and what they think won't work. There was a big rate hike soon after the Authority took place...
But again, I think it's too early to tell, it's really too speculative. I have no idea who the bidders are right now. That'll be done by the investment bankers and we'll probably get a report. All we can really find out is who picked up the bid packets, and I don't know - I've never asked. I know we had at least one bid packet taken - there was a question about what sort of information we should give out. I have a hunch that there's bid packets out there.
I heard there had been a couple companies in town talking to people.
I'm alwasy the last one to find out these rumors - nobody ever tells the mayor rumors.
That's probably a good thing
Anyways, does that help?
Well yeah, I guess I'm also wondering...
Where are you from?
Anchorage Press
Yeah, but where did you come from?
Bay Area
I was just down there. The most intriguing town...
You can get an ISDN line there for $25/mo. In Anchorage, it's $1200 a month. It's that low-bandwidth cable - our one lifeline to the rest of the world... I'm also wondering, what if ATU did enter the NECA pool? What would that do? 'Cause if it didn't sell, and ATU went ahead...
I haven't thought about that issue for months. On the NECA pool, I kind-of need to reacquaint myself with it every time to see what the implications are. It's a complicated issue.
As I understand it, it'd be 4 cents per minute versus 1 cent per minute to GCI, which translates out to about $9 million a year. As I understand, it was a strictly competitive move - no benefit to ATU except their potential future competitors would be harmed.
I think one of the things - and again this is something I haven't even thought about for a month - one of the negatives, I think it's roughly $59 million dollars over a three-year time period taken out of Anchorage. It's money from AT&T and GCI that goes right out of the Anchorage economy. That goes to the pool and gets passed right through ATU. From ATU's standpoint, it makes it tough on their competitors. But from the standpoint of the Alaskan economy, I look at it as a real negative thing for $59 million to suddenly fall out of the Alaska economy.
I've also been wondering about new Sports Facility - how's that going?
So far, there's been about 45 letters to the editor, all against. So I think we're in pretty good shape. [laughs]
We really haven't started getting our information out yet. Our plan was to start getting the information put out in December for the April election. We've been working over the past year having public hearings and taking input from citizens about what type of facilities they want. Most people misunderstand - they think the decision's already been made. But actually there's a bond election in April which is the decision point. I've seen people in the paper saying, "They went and did this, they didn't ask us." You know, nothing's been done but lay the groundwork to put the issue on the ballot. So they'll be a lot of chance to discuss it
Are you worried that you haven't been pro-active enough?
I think we're okay. We're in good shape. We need to be smart, and make sure we communicate well with the public, but we'll do that. We've got a lot of work ahead of us, but I've never shied away from hard work.
I went to the kickoff for the beautification committee. What's been happenng since then?
Well, I hope when you're driving around, you see lots of lights. It's just really kind of neat, it makes me feel good. Especially if you've lived here through the darknes and midwinter, and you start saying, "Oh gosh, it's dark. I don't know about this." About the second month or so, you start feeling a little bit down. But I think the lights just add a little, you know, spark to it. And as you walk downtown, it really is nice.
Sometimes when I talk to people about ATU, they say, "The mayor got a lot of money from GCI..." "Powerful organizations are pushing for a sale..." What do you say to all that?
You know I've heard that. I don't know that GCI has donated - maybe they have - I should look through [the records].
Well, they've donated to you and everybody else...
Yeah, they probably have. What, is it, a thousand dollars out of $500,000? I don't know... My total conversations with GCI since I've been in office have probably been 15 or 20 minutes.
I heard they helped construct the ITB and sat in, or were highly involved, with the language.
I know when the Assembly was thinking about this, GCI talked with the Assembly about their concerns. But you know, one of the things we did when we got ready to sell ATU is, I talked with different groups around town. I talked with Alascom, I talked with GCI, I talked with IBEW, I talked with ATU and other people involved in the telecommunications business. Just talked with them and said, "What do you guys think and what are your concerns, do you think the sale has a chance?" And I think that's just smart to get an understanding. I talked to the chamber of commerce, too, and just wanted to get a sense of what people thought about it.
What do you think about GCI's political activism in general. It's kind-of rare to see a company speaking at assembly meetings like that.
Yeah, but because there's the Assembly, because it's a government entity that competes with them, I think they have to be. Any time that you're trying to compete with the government... The situation we have now is going to engender lots of political involvement with competing businesses with the Assembly. I think they'll be lots and lots of pressure. And when ATU was going to go into long distance, GCI came to the Assembly, and I think they had it stopped. That was before I was Mayor
Yeah, when you hear GCI tell it, they say their position is in fact a competitive one, because, you know, they'd be crushed.
Yeah, they're a competitor, they have to do what they can to keep their competitor off-balance, or small, or whatever. And ATU is competing with GCI and AT&T and Cellular One, and they've got all the cards that are government. Government can just run over private busineses. It's not a very balanced field to have the government competing with private business.