From Carolina Journal today:

One North Carolina city borrowed millions from its water and sewer fund to support its municipal broadband service and paid the price with a downgraded bond rating. This spring, Moody’s downgraded Salisbury’s bond rating, citing debts by its Fibrant broadband service.

Moody’s notes that Salisbury borrowed $7.6 million from its water and sewer fund to support the Fibrant fiberoptic network, resulting in “a narrowed but still acceptable cash position for the water and sewer fund.” …

“The city reports no plans for principal repayment and does not include repayment in their pro-forma calculations,” Moody’s report says.

Salisbury city clerk Myra Heard confirms that the city has no current plan to pay back money borrowed from the water and sewer reserves.

“The Broadband Communications Fund will start paying back the loan at the point when the fund is making a profit and is fiscally sustainable,” Heard said in a statement. …

From Michael Sanera in 2009:

Although city officials intend for subscribers to pay for the system, the reality is city taxpayers are ultimately responsible for paying back the debt. According to the feasibility study conducted by Uptown Services, LLC., the same consultant used by the City of Wilson for its fiber-optic cable feasibility study, the system would need to attract 28 percent of Salisbury households to raise the revenue needed for it to be self-supporting. If the system could not attract that market share, however, city officials would have to turn to the taxpayers to pay back the $30 million loan. …

In other words, if the system failed to attract enough subscribers to reach the critical 28 percent subscription threshold, all Salisbury residents would end up paying for the network whether they use it or not. What is worse, lower-income residents who could not afford to subscribe to the system would be subsidizing the higher-income residents who do use the system.

There are three good reasons to believe that the city has been overly optimistic about the system achieving the 28 percent subscriber level. …