ABCs of MI-Connection debt, Davidson
by Staff Writer
DAVIDSON – Here are the basic facts about MI Connection, the cable TV-broadband company Davidson and Mooresville purchased in the fall of 2007.
The towns have issued a total of $92.5 million in debt, $80 million initially in certificates of participation and an additional $12.5 million loan from Wachovia/Wells Fargo. MI Connection had to take out the additional loan because the company ended up purchasing a higher number of customers from bankrupt Adelphia than originally projected.
The two towns share in any operational shortages or profits, based on the relative percentage of MI Connection customers in the two towns, which comes out to about a third for Davidson. If MI-Connection cannot make its debt payments, Davidson would be responsible for a little more than $30 million and interest.
The first three years after the towns bought bankrupt Adelphia, MI-Connection only had to pay interest on the debt. MI-Connection covered the interest payments in the first two years, meaning the towns paid nothing in 2007-08 and 2008-09.
Problems for the towns began in 2009-10, the first year MI-Connection could not cover the entire interest payment. Davidson had to find $180,000 in the middle of the budget year.
The problem grew in 2010-11, when MI-Connection had to begin paying on the $92.5-million principal as well.
In 2010-11, the budget year that ended June 30, Davidson had to provide $2.02 million as its share of MI-Connection’s shortfall.
In the current 2011-12 budget year, Davidson is providing $1.94 million, or about 21 percent of its entire budget.
At this point, MI-Connection has paid $2.6 million in principal, leaving about $89.9 million in debt.
But contrary to assertions by some speakers at recent meetings, the annual payment schedule on principal and interest will not increase any more from year to year, town and MI-Connection officials said. If MI-Connection maintains its current revenue and operating expenses, the towns will not have to contribute a larger amount each year.