LUS Fiber agreement amended to stop double tax payment to city-parish _lowres

Advocate staff file photo by BRAD BOWIE -- Seth Dahlen, with Ontrac and LUS Fiber, installs components of a fiber optic wifi network in Park Sans Souci in 2014 in downtown Lafayette. The network provides free high-speed internet to attendees of the Downtown Alive series.

City-parish government revised an agreement governing Lafayette’s city-owned fiber Internet system, excusing it from a provision that would have had it pay additional money to the city on top of existing taxes it’s already paid for several years.

Both the Lafayette City-Parish Council and Lafayette Public Utilities Authority unanimously approved the revision at each body’s Tuesday meeting.

“The bottom line is it keeps us on a level playing field with our competitors,” allowing the service to expand without imposing increased rates on its customers, Lafayette Utilities System Director Terry Huval told the Lafayette City-Parish Council on Tuesday.

Now that LUS Fiber’s revenues have begun exceeding its expenses, a provision of its bond agreement — which was removed on Tuesday — would have imposed in the coming fiscal year an additional payment of up to 12 percent of its revenues to go toward the city’s general fund, Huval said.

“We’d rather keep those dollars and invest in our system and provide new services to our customers,” Huval said.

LUS Fiber — a subsidiary of the city-owned utilities service, Lafayette Utilities System — already pays the city an average of $1.2 million each year in state-required Louisiana Local Government Fair Competition Act taxes.

Private telecommunication companies in 2004 lobbied for state legislation that resulted in the Fair Competition Act, which requires a percentage of revenues be paid by municipal telecom providers. The taxes are in line with those paid to local governments by the private companies.

Property that Lafayette Consolidated Government owns is free of property or sales taxes, which prompted LUS Fiber’s competitors to push for the legislation when Lafayette announced plans to develop the fiber-optic system, Chief Financial Officer Lorrie Toups said.

Should LUS Fiber have begun making the additional payments, it would have been making a second payment to the city that its privately owned competitors don’t, Toups said.

“Why pay extra money that our competitors don’t have to pay when we can use it for expansion?” Toups said.

However, once LUS Fiber begins making more money than it needs to continue expanding, it could be asked to make those additional payments to the city, Toups said.

With some 16,000 customers, LUS Fiber provides about a third of the city’s telecom services and earned about $32 million in revenues in 2014, Huval said.

“We’re in a good position. We’re just trying to be prudent,” he said.

Follow Lanie Lee Cook on Twitter, @lanieleecook, or contact her by phone at (337) 534-0825.