"We've crossed that magic threshold," LUS Director Terry Huval says.
Google "William Theriot sinking ship," and the first page of results will spill over into the following page. "We're putting money in a sinking ship," The Advertiser quoted the city-parish councilman saying just a year ago. "We need to have a valid discussion now about LUS Fiber, and we need to make a decision as to whether this is something we need to continue funding."
Released Monday, an audit of Lafayette Consolidated Government's 2012 finances by Kolder, Champagne, Slaven & Company answered that question with a resounding "yes."
The independent audit revealed that Theriot's "sinking ship" - LUS Fiber - increased its revenues 41 percent from 2011 to 2012, experienced only a 6.5 percent increase in expenses and was cash flow positive to the tune of $1.5 million when depreciation and amortization were not factored in. In 2012, the municipally owned fiber optic business offering phone, Internet and cable services had $24 million in operating revenue, which means it is now generating enough money to pay off the $125 million it borrowed for the build-out as well as its operating expenses. That news comes four years after the launch - and after millions in legal fees was spent fighting competitors who didn't want to see the project get off the ground.
The audit shows that in only a year's time, the operating loss was cut in half, sinking from $10.5 million to $5.3 million. By the end of this year, that number could be down to zero, and possibly even enter positive territory, according to LUS Director Terry Huval.
"We've crossed that magic threshold," Huval says.
The system is not yet generating enough funds to fully cover depreciation costs, an accelerated write-off of equipment that comes early in the cycle of the project despite that much of the equipment has a long life cycle. The $1.5 million is being applied against depreciation and amortization, and Huval believes the system is on track to fully cover those expenses by 2015.
That's also when LUS Fiber will begin paying off loans to LUS and sending in lieu of tax dollars into the city's general fund.
Whether the success of the project will finally silence its critics remains to be seen, but Huval is looking ahead.
"What we're looking at going forward is this: we've done a number of surveys, actually from guys in politics, to help us. [We said] don't just tell me what I want to hear but tell me what I need to hear," Huval says. "And what we've learned is that of the people who have not bought our services yet, about half of those probably aren't going to buy our services because they're against the idea of the government providing these types of services. But the other half that do intend to buy our services just haven't gotten around to doing it. And if we end up with a big percentage of those who just haven't gotten around to hooking up, we think the numbers that we have now will probably increase those by 60 to 90 percent in revenues, so it's pretty significant."
The biggest potential is on the Internet side, which drives most of the business to LUS Fiber because it has an advantage over its competitors and does not have the programming and equipment costs associated with cable.
"In terms of national trends, there's a lot of talk around pushing cities to develop ultra-fast networks and gigabit networks; that's what we have, and that's what we've had since we launched," says Amy Broussard, LUS' sales and marketing analyst. "That's not what the competition has. We have the next-generation network; it's here in Lafayette. And because of our peer-to-peer Intranet [100 Mbps] and things like that, we're poised to be a leader in the next-generation applications in the push for developers - that's what Cajun Code Fest is all about - to really find those next-generation applications that will move us forward as a nation, not just a community."
Says Huval, "We've gotten past that dark hour, but we knew it was going to be this way, if you look back at our feasibility study. We did the whole city. From the beginning, we didn't discriminate. The poorest parts were hooked up just as fast as the wealthy. We promised that."