Council votes to sell off assets of CNS

The city of Cairo is planning to sell the assets of its share of CNS cable and internet in a deal expected to close by the end of the year.
Although the proposal has been in the works for more than a year, Monday night was the first time a public discussion of the agreement has been held and at least one councilman had many questions he wanted answers for before he approved the deal.
Cairo city manager Chris Addleton gave an overview of the plan to sell the city’s CNS assets to the South Georgia Governmental Services Authority (SGGSA). The authority was created in 2000 by the cities of Cairo, Camilla, Thomasville and Moultrie with the stated purpose of eventually owning and operating the four city cable and internet services.
According to city officials, the selling of assets by the four cities to the SGGSA is a culmination of that original vision.
“We’ve been working on this for over a year. The change will be seamless to our subscribers. Nothing is really changing as far as the subscribers are concerned,” Addleton said.
The governing bodies of all four cities took action Monday to clear the way for the sale of their CNS assets to the SGGSA, which is operated by a board consisting of the city managers of each city and one councilman/mayor from each community.
“We are selling the assets, but we will continue to own 13 percent of the system,” Addleton noted.
The SGGSA is proceeding with the issuance of $40 million in revenue bonds, which will finance the purchase of the CNS assets from the four cities. According to Addleton, based on Cairo’s subscriber list, which is 13 percent of the total CNS system, the city is expected to be paid approximately $4.5 million.
That will allow CNS to pay back the city’s general fund, which is owed $4,690,000. That debt to the general fund has helped keep CNS afloat since it was launched here on June 27, 2001.
The city’s final bond payment for the bonds issued to create CNS will be made this year. “We need about $850,000 to make that final payment in December and we have almost that much banked now,” Addleton said.
If the bond issuance goes through and is funded, the city’s only day-to-day involvement in CNS will be the billing of monthly services and the collection of those fees.
The city will remit to the SGGSA a check for the monthly CNS accounts receivables, and it would be the city’s responsibility to collect any bad debt accruing on those accounts.
Addleton also explained that if the plan goes through, the city will also receive dividend payments from CNS operations, which are projected to total $400,000 annually.
The SGGSA contracted with Community Broadband Services, LLC, of Midway, Ga., to develop a pro forma cash flow and income statement for the consolidated CNS to take to the bond market.
Addleton pointed out to the mayor and council Monday night that the bonds to be issued by the SGGSA would not require the full faith and credit of the four member cities.
“We have no liability. The numbers look good. It’s almost too good to be true,” Addleton said.
The city manager said it would immediately be a better financial arrangement for Cairo since it owns only 13 percent of the system, but has been paying for 25 percent of the capital cost of the system.
That arrangement put into place from the beginning has mostly benefited the City of Thomasville, which makes up 53 percent of the system, followed by Moultrie with 22 percent and Camilla at 12 percent.
According to Addleton, the SGGSA will contract with the City of Thomasville to manage the consolidated system. Technicians who work out of the Cairo office will continue to do so and all billing for Cairo subscribers will be processed here.
Councilman Jerry Cox had many questions for the city manager about the proposal including what would be done with the $4.5 million proceeds from the sale of CNS assets.
“Don’t start spending the money,” Councilman James H. (Jimmy) Douglas, chairman of the council finance committee, joked.
Addleton and Douglas said the money would go to repay the general fund. The city manager said Tuesday that the money would be like a “windfall” to the city and could be used for capital projects such as Phase II of the downtown streetscape.
“It sounds like a good deal, particularly if the city has no risk anytime in the future,” Cox said.
City attorney Thomas L. Lehman said SGGSA would be pledging the assets and equipment as collateral and if that was ever repossessed then CNS would be in “sorry shape.”
“We would have already been paid if that did happen,” Councilman Douglas noted and Cox commented, “If we have any risk, it is very low risk then.”
Cox questioned Thomasville being paid $5 million annually for the management of the system, but Addleton said the City of Thomasville was already serving as the manager of the four city service, but was charging the three other cities more than that now.
“Based on what I’ve read, it seems like a good deal. We’re getting out of this business by selling the assets and paying off debt to the general fund,” Cox summarized.
Councilman Douglas noted that the city would no longer be writing checks for CNS capital projects.
However, when asked if the city would have to pony up if and when major investments to the system were required and the system revenues were not sufficient to cover all of the investment, Addleton said by vote of a super majority the city could be required to invest more money in the system.
“It is possible, but it would take an overwhelming business case to get seven of eight votes to do that,” Addleton said.
The Cairo city manager said the future of cable television is uncertain and he predicts that the internet is the wave of the future for CNS as more people cut the cord for satellite or streaming services.
A consolidated CNS system covers seven counties and approximately 100 miles with over 400 miles of fiber optic cable and 850 miles of coaxial plant.
Cairo currently has 2,160 cable subscribers, 1,960 internet subscribers, 726 telephone subscribers, 123 commercial telephone subscribers and 200 commercial internet subscribers.
The city launched its residential telephone service in 2008 and followed up with commercial telephone service in 2010.
“The equipment that is necessary to operate an expansive network such as ours is also quite costly. How we share in meeting those expenses will change, which, in turn, will make each city’s operations stronger and more efficient. We entered this partnership together many years ago because we recognized we were stronger together. That hasn’t changed and this consolidation will continue to provide the cooperation and synergies that also make us more efficient at meeting the needs of our communities,” Addleton said.
The council voted unanimously to authorize Cairo Mayor Bobby Burns to execute the SGGSA resolution and the intergovernmental agreement for the sale of Cairo’s CNS assets.
Addleton said changes to the management of the SGGSA were also forthcoming. Currently, the day-to-day is overseen by Authority Executive Director and former Cairo mayor Frank Cannon. According to Addleton, the authority will likely hire a full-time director and a finance officer.