EDITOR'S NOTE: This is the second in a two-part series exploring the state of the publicly-owned telecommunications company Monmouth-Independence Network (MINET). Part one focused on MINET's efforts to compete and grow in the local market and offer new services statewide and beyond. This story focuses on the state of MINET's finances.
MONMOUTH/INDEPENDENCE -- Peel back the layers of one of the many bright yellow wires in the back room of Monmouth-Independence Network (MINET) and you will eventually find a tiny glass fiber.
No wider than a needle, a $27 million investment by the cities of Independence and Monmouth depends on technology the microscopic fiber provides.
MINET is in the process of repositioning itself to better compete with similar companies through a new local marketing strategy and more openly offering data storage and Internet telephone services outside the area. It's been having an encouraging amount of success in that area.
Even before that, however, MINET restructured its debt, with the help of the cities of Monmouth and Independence, to make its financial obligations more manageable.
MINET had to make several requests for loans to cover operating expenses in its first years of business.
"There were multiple borrowings that were (needed) over the years that didn't have the most desirable terms," said Phil Garrett, MINET's general manager.
In 2010 a refinancing plan backed by both cities gave MINET $17.8 million to pay off debts and for working capital. The refinancing package consolidated the company's debt into a 30-year loan, with the exception of a $10 million Oregon Business Development Department loan.
Garrett said the package significantly lowered MINET's interest rates.
"You are looking at some of the (loans) with a 7 percent interest rate that now are at 4 percent," Garrett said.
To date, MINET is current on it loan payments, said Marketing Director Scott Fowler.
In addition, the company has seen a 3- to 4-percent increase in sales starting in September and running through the end of 2011. If growth maintains its current course, MINET will be financially secure for the foreseeable future, Fowler said.
The table seems to be set for more success, but much depends on MINET's ability to espouse long-term support from the community.
"The goal is to keep that rate (3- to 4-percent) going," Fowler said. "This is the kind of growth that fuels a profitable and healthy business."
MINET's unique position as a publicly-owned communications entity has garnered attention from other municipalities because of its advanced technology and service potential.
However, its position creates other challenges.
It's audits and financial reports are public record, leading to more transparency. But that also allows competitors to have a unique window into its operations.
"It makes it more challenging for MINET to compete," said David Clyne, Independence's city manager and MINET board member.
Open financial records also have made curious residents question MINET's profit claims after looking at annual audits.
The most recent audit listed operating losses for the last three fiscal years, including a loss of $613,258 for 2010-11.
That isn't the whole story, Garrett said. Operating expenses include a line item for depreciation in the amount of $983,951. Garrett said it's a non-cash expense and doesn't require an immediate expenditure of money.
"It's paying down the cost of replacement of equipment in the field," Garrett said. "It's a number that is calculated by accountants based on the usable life of equipment and assets."
Without figuring in depreciation, MINET's 2010-11 operating profit is $370,693, he said.
Spurred by the renewed marketing efforts and new services offered to a wider market, MINET's profits could prove to be beginning an upward trend.
Whether long-term growth is possible remains to be seen, but Clyne said he's encouraged by MINET's capacity for expansion and economic benefit to the region.
"Every business goes through its ups and downs, but at the end of the day, Monmouth and Independence is as well positioned as any community in the state and the country to take advantage of the opportunities this technology can provide for business attraction and community development," Clyne said.