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DavidsonNews.net: MI-Connection To Restate Budget, Needs More Cash From Towns

031312MI-ConnectionBudget.jpg
Chart shows MI-Connection budget trends. The 2012 budget is to be restated lower at Thursday's board meeting, resulting in an

Chart shows MI-Connection budget trends. The 2012 budget is to be restated lower at Thursday's board meeting, resulting in an increase in the towns' subsidies. Click to download a copy of the proposed 2013 budget. (SOURCE: MI-Connection financial statements, interviews with company officials) MI-Connection Communications System plans to re-state its budget for the fiscal year ending June 30 to account for lower-than-expected income that company officials are blaming on delays in the takeover of key business functions from an outside operator. The system's chief executive said Tuesday the shortfall means MI-Connection will have to ask its owners, the towns of Davidson and Mooresville, for an additional $1.1 million to balance its budget this fiscal year. CEO David Auger said Tuesday MI-Connection expects to report encouraging growth in the final months of this fiscal year, gains from a planned price increase, and savings from the towns' December takeover of day-to-day operations from Bristol Virginia Utilities. BVU has run the system for the towns since they bought it in 2007. Revenues in recent months have been running ahead of last year, Mr. Auger said. But the revenue growth and savings aren't enough. "Unfortunately, it's a little too late for 2012," he said. "But it's going to have some good implications for future revenue growth." He plans to ask MI-Connection's board on Thursday to approve a restated 2012 budget that calls for the larger-than-expected subsidies from the towns. The shortfall means Davidson will have to come up with an extra $370,000 or so by June 30, while Mooresville will have to find another $750,000 in this year's budget. The ownership is split under a formula that currently gives 67 percent to Mooresville and 33 percent to Davidson. MI-Connection will hold a public hearing on the Fiscal 2013 budget on Thursday at 6:30 p.m. at Davidson Town Hall, 216 S. Main St. That will be followed by the board's regular monthly meeting, where Mr. Auger will present both the restated 2012 budget and the new 2013 budget for board approval. The meetings are open to the public. The re-cast budget will revise the towns' total subsidy to the system this year to $7,014,000, Mr. Auger said. That's $2.3 million from Davidson and $4.7 million from Mooresville. The budget approved last year required $5.9 million from the towns - $1.9 million from Davidson and $3.9 million from Mooresville. Meanwhile, the 2013 budget envisions a cash infusion of $6.3 million from the towns, split about $2.1 million from Davidson and $4.2 million from Mooresville using 2012 ownership shares. The split would change if the system revises the ownership shares this year. Mr. Auger said he has briefed officials in the two towns about the situation in recent days. On Tuesday, Davidson Town Manager Leamon Brice said he is devising a plan to come up with the extra money. "We'll obviously see what we can save till the end of the year," Mr. Brice said. If no savings can be found, "The only fallback this close to end of year is fund balance," the town's reserves, though that's not an ideal situation, he said. Mooresville Town Manager Erskine Smith said Wednesday no decision has been made, but the town likely would tap its unappropriated general fund balance for the extra cash. REVENUE GROWTH AHEAD? The proposed 2013 budget projects revenue growth of 7.5 percent in Fiscal Year 2013, to $17.1 million, compared with a restated 2012 budget. Mr. Auger said the growth would come from expected gains in customers and a price increase that is scheduled to take effect April 1. The company will begin to see the full effects of price increases in May and into the new fiscal year, he said. At MI-Connection's February board meeting, Mr. Auger said he plans to seek price increases along with a variety of service improvements: Internet customers will get faster internet upload speeds at no extra charge. The company also will fold some formerly premium-level video channels into its expanded basic digital programming package - giving customers more channels in their existing plans, Mr. Auger said. He said the higher prices are needed to pay for rising programming costs, including a nearly 39 percent jump in the fees over-the-air broadcasters charge for their signals. The company has not announced the price increases yet. The full list is expected to be announced on inserts in customers' March bills, Mr. Auger said. Despite the price increases, Mr. Auger said MI-Connection would still cost less for most services than other cable and telephone-company competitors. In the fiscal year beginning July 1, Mr. Auger projects big growth in voice (20 percent) and data services (11 percent), and slight gains in video customers (2.9 percent). He said MI-Connection is targeting 7.9 percent growth in customer relationships, continuing a trend that began this fiscal year. We'll have more about the restatement and the 2013 budget Thursday. RELATED COVERAGE AND DOCUMENTS Proposed Fiscal 2013 budget for MI-Connection (PDF) Download a copy of the FY2012 budget as approved in mid-2011 (PDF) - As Mr. Auger said above, this budget will be restated. Feb. 27, 2012, "MI-Connection reports revenue up, but loss in 2Q; board discusses cable cut" - Our most recent story about the system also broke the news about a proposed price increase coming April 1. June 7, 2011, "MI-Connection board passes $15.5M budget" See all DavidsonNews.net coverage of MI-Connection under the MI-Connection tag This article has been updated to correct estimates of town contributions for 2013.