Audit: LUS making progress
LAFAYETTE — The city-owned telecommunications service is still operating at a loss after an unexpectedly slow start, but an outside auditor and LUS Fiber officials said this week that the service is on track to be self-sufficient by 2015.
LUS Fiber, which provides fiber-optic based television, telephone and Internet service, was launched in 2009.
Some City-Parish Council members questioned the service’s viability on Tuesday when Burton Kolder presented the results of his accounting firm’s annual audit of city-parish government.
The audit stated that LUS Fiber ended 2011 with a $28.8 million deficit and advised that the service should work “to operate within the revenues available.”
Kolder said in an interview Thursday that despite his note of caution, he did not intend to present a “doom-and-gloom” scenario.
He said that based on his review of LUS Fiber’s finances, he agrees with City-Parish Chief Financial Officer Lorrie Toups that the service could break even by late 2014 or early 2015.
“Normally, most start-up businesses lose money the first three to five years,” Kolder said. “... It would be expected.”
But Kolder emphasized that the projection of self-sufficiency for LUS Fiber is contingent on the service continuing to expand its customer base and to grow as it has in the first few years.
LUS Director Terry Huval has declined to give the number of fiber customers, maintaining that the information is commercially sensitive, but he said the customer base has grown steadily since Day One.
“As long as we continue to get new customers every day, there is no reason for us to change course,” he said.
Toups noted that the $28.8 million deficit cited in the audit for LUS Fiber at year-end 2011 includes about $21 million in accumulated depreciation since 2009.
Depreciation is not the loss of actual cash but rather writing off the value of equipment and infrastructure as it ages.
Huval said that when the depreciation expense is factored out, LUS Fiber, as of April, was making enough money to cover all operating expenses and to set money aside to help repay the more than $100 million borrowed to start the enterprise.
“We are now at a point of getting close to self-sufficiency,” Huval said.
Huval maintains the fiber service is now on track after some early equipment problems, contentious legal battles with the private telecommunications industry and difficulty in securing favorable contracts for cable television programming.
Theriot has remained skeptical, in part because the telecommunications service has significant debt, not all of which was anticipated.
Lafayette voters in 2005 approved a plan to allow LUS to borrow up to $125 million for the fiber-optic system.
LUS Fiber initially borrowed $110 million and then returned to the City-Parish Council last year for approval to borrow the remaining $15 million in voter-approved debt.
LUS Fiber also owes about $25 million to the city-owned Lafayette Utilities System, which provides water, sewer and electric service.
That $25 million includes early start-up expenses that the utility system paid for LUS Fiber, the purchase of a small fiber optic network that the utility system had set up prior to the launch of LUS Fiber and tax-like fees that LUS Fiber is required to pay to the utility system.
The tax-like fees are required under a state law that aims to keep a government-owned utility service from having too great a price advantage over private telecommunication companies, which must pay taxes.
LUS Fiber has been keeping those fees for the time being but must eventually pay them to the utility system with interest, Toups said.
LUS Fiber also took a $5.6 million loan last year from the city’s utility system.
Huval said he anticipates no future loans and that the LUS Fiber’s debt, to be paid back over the next two decades, is part of building a major telecommunications business.
“This is a long-term investment,” he said.