The City of Salisbury borrowed $30 million in order to get into the broadband cable business. Documents submitted by the city to the Local Government Commission in August 2008 indicate the terms of the financing agreement. The term sheet indicates under section “(4) Security” that “This financing shall be secured by the City’s pledge of the City Hall, multiple fire stations and related collateral.”
The city seems to have several options if the cable system fails. First, city officials could call a press conference and officially turn over the keys to “City Hall, multiple fire stations and related collateral” to the bank so it could recover its $30 million. This would make a great photo opportunity that would leave taxpayers with a lasting memory and send a message to all other North Carolina cities considering entering the cable business. The second option is more likely. The city would raise taxes to cover the losses. Thus, city taxpayers, some of whom cannot afford a computer, would be paying for the broadband service of those receiving the benefits of the system.
A third option has been popular in some cities with failed cable systems. When the system goes bankrupt, the city sells the system to the private sector often at a loss. For example Lebanon, Ohio passed a nearly $59 million loss on to city taxpayers.
