| Background: |
In September of 2001, the AFN Advisory Committee, presented a revised
AFN Business Plan and a Quarterly Reporting format for tracking AFN's progress
in meeting plan targets. Reports were submitted to the Council for each quarter,
with the latest report delivered in September, 2003 covering the period of
April - June, 2003.
Plan targets were continually being met for all services early on, but during
the last few quarters, High Speed Data began lagging behind the Business
Plan targets.
During the Budget process last spring, the Budget Committee expressed interest
in having the staff revise the Business Plan, reflecting 2 additional years
of data. This was done by staff and presented to the Budget Committee on
September 18, 2003. There were concerns raised about the revised plan and
it was determined an outside consultant should be brought in to provide input
on all facets of AFN.
Through a Request for Qualifications process, Navigant Consulting was hired
to complete these tasks. Their report to the City will produce the following
deliverables:
1) Review AFN Business Plan assumptions, products penetration numbers and
provide revised numbers if warranted.
2) Develop new or revised product offerings, pricing and packages that will
ensure AFN's long term survivability, along with customer delivery strategies
that meet revised business plan targets for all AFN offerings.
3) Review staffing levels in AFN
4) Review AFN's current customer service procedures and requirements to see
if they are an impediment to greater sales and suggest improvements if
warranted
5) Determine necessary marketing resources (staffing, budgets, methods, etc.)
needed to achieve Business Plan goals and also meet the future needs and
wants of AFN's customers
6) Evaluate AFN's wholesale partnerships (Hunter & ISP's) with an eye
toward improving wholesale revenue.
Navigant has made one trip to Ashland early in November, 2003. At that time,
they met with City staff and the AFN Advisory Committee. The current Committee
members are: Russ Silbiger, Jim Teece, Richard Barth, Marty Levine, Alan
Douma, Mayor DeBoer and City staff. Navigant also commissioned a phone survey
to gather data from Ashland citizens and businesses, on marketing, consumer
preferences, potential new products and to gather other data that would be
useful in revising the Business Plan.
Navigant is scheduled to provide their preliminary written report to the
Advisory Committee in early February and a meeting with that committee soon
thereafter. Navigant will then revise their work based upon Staff and Advisory
Committee input with the goal of presenting the completed report to the Budget
Committee in mid-March. The Proposed 2004-05 budget will reflect the applicable
elements of the report and the input received from those meetings.
AFN NUMBERS
Attached are charts similar to those presented in the past except that no
business plan targets are included because the plan is in the process of
being revised. As before, the charts include an overview analysis.
AFN numbers are presented consistent with the business model. This differs
from budgetary reporting in that the plan recognizes depreciation whereas
the budget does not. For ease of comparison we are providing a table on the
next page that reflects both the business plan and the adopted budget.
It is important to point out that we have scheduled an increase in AFN rates
for this spring. This would result in additional revenue beyond the projection
we have made. This increase will be based on information forthcoming from
the consultant on the size and makeup of the increase. Also, at least one
new internet product that staff has already identified will be added.
10/2001 Business
Plan FY 2003-04
| . |
FY 03-04 Estimate |
12/03 YTD |
Budget |
12/03/YTD |
| Revenue: |
. |
. |
. |
. |
| Charges & Other |
$ 2,669,806 |
$ 1,177,114 |
$ 2,275,000 |
$ 1,177,114 |
| Interfund Loan |
.
|
- |
6,950,000 |
6,800,000 |
| . |
$2,669,806 |
$ 1,177,114 |
$ 9,225,000 |
$7,977,114 |
| Expense: |
. |
. |
. |
. |
| Personal Services |
580,000 |
413,664 |
633,050 |
413,664 |
| Materials & Services |
1,718,542 |
792,287 |
1,706,040 |
792,287 |
| Capital Outlay |
. |
- |
200,000 |
102,362 |
| Debt Service |
. |
- |
568,000 |
568,000 |
| Interfund Loan |
. |
. |
5,900,000 |
5,900,000 |
| Interest Expense |
545,462 |
272,731 |
734,000 |
186,000 |
| Depreciation |
602,866 |
301,433 |
. |
- |
| Contingency |
. |
. |
75,000 |
. |
| . |
$3,446,870 |
$ 1,780,115 |
$ 9,816,090 |
$7,962,743 |
| Gain/(Loss) |
$(777,064) |
$ (603,001) |
$ (591,090) |
$ 14,371 |
This table presents estimated, budgeted and actual numbers year-to-date for
FY 2003-04. The Business Plan accepted by the Ad hoc Committee in October
2001 is used for presenting the numbers in a business format that includes
depreciation. The budget format does not include depreciation but does show
principal for debt service and internal borrowing.
As part of the budget process for this year estimated revenues were reduced,
primarily due to recognizing a lower performance in High Speed customer counts
than projected in October 2001. Thus, based upon the performance of the first
six months, we know the Business Plan loss of $603,001 will exceed the estimated
annual loss of $777,064 by June 30. The FY 2003-04 budgeted loss of $591,090
does not include the additional internal borrowing of $1,050,000 however
the department projects it will stay within appropriation levels.
The $1,177,114 revenues includes $50,000 in grant monies received during
October and November from the Cow Creek Tribe. Staff is projecting $2.25
million in sales by June 30 and the grant puts AFN over anticipated revenues
by about $15,000 for the budget. This is still $300,000 less than the 2001
Business Plan for this year. Expenditures are close to the total appropriated
amount of $9.8 million given that budgeted internal borrowing is near complete.
Staff expects to stay under budget for the year with fewer expenses being
required in the last half of the year.
The provided information demonstrates that AFN is close to the budget and
has attracted customers in cable and internet categories beyond predictions.
However, this still doesn't solve the larger issue, of the continuing deficit
faced by AFN and how to fund this shortfall over the next couple of years.
The report forthcoming from Navigant should shed some light on these important
issues in time to give us direction on preparing this year's budget for AFN. |
