Steve Garbacz, Commercial Review County Reporter

A rural Internet provider that owes Jay County more than $300,000 has announced expansion plans in southern Indiana, raising questions from local officials.

Omnicity Corp., a wireless broadband company that provides high-speed connections to rural areas, announced a $2.5 million project in Rush County.

The company was also awarded a $25,000 training grant by the Indiana Economic Development Corp., which also funded $110,000 to Rushville to install infrastructure improvements to their industrial park, which will house Omnicity's new headquarters.

The broadband provider, however, still owes a substantial sum of money to the county for loans issued during the company's setup here in 2004. Jay County isn't the only one owed money by Omnicity. The company reportedly owes Muncie about $280,000, and also reportedly owes a substantial amount to Wabash County REMC.

"It's raised some questions about what's going on at this point," said Jay County Development Corp. director Bill Bradley, of the expansion and state grants.

The news of expansion by the company has the Jay County Development Corp. watching, considering the history between the county and Omnicity.

Omnicity received two separate loan packages from Jay County EDIT funds - $380,000 in Oct. 2004 and an additional $114,500 in June 2006. After making a one-time payment of $150,000, the company owes more than $300,000.

Larry Morningstar, investor relations for Omnicity, acknowledged that the company is indebted to different areas, but regarded its continuing expansion and growth despite it, attributing the news to a "spend money to make money" mentality.

"Yes, there is an outstanding loan, that is still being acknowledged," he said, noting that Omnicity is abiding by its agreement. "There's no question that we would like to, I guess, to firm up the details as well in our obligations."

Morningstar said he couldn't comment on "the company's status financially and it's capacity to pay off it's debts," but said recent growth is moving Omnicity toward a more financially stable position.

"There are some issues with cash flow and being able to meet all obligations as well as continuing to grow," he said. "The CEO has expressed there are a lot of recent developments and initiatives that ... will enable the company to be in a stronger financial foothold.

"So it's managing that fine line and getting that support locally and regionally, continuing to carve its niche in that market," Morningstar said.

The county, however, is looking to recover what it can quickly and cut loose from financial dealings with the company.

"We're continuing to monitor the situation," Bradley said. "We've had conversations about 'If you offered us a certain amount of money below what you owe us, we would consider it.'

"Take what you can get and run," he added. "It's one of these situations."

JCDC announced in November 2007 that Omnicity had effectively defaulted on the loans.

The original contract listed Omnicity's equipment as collateral and as of December 2007, the company had a remaining balance of about $450,000.

Omnicity struck a settlement with Jay County in February 2008 on the loans, removing the liens on their property by paying $150,000 up front and retooling its monthly payment schedule. The county agreed to take deal, which offered $2.50 per month per subscriber for the first 300 customers. Omnicity had at that point and currently has less than 300 subscribers.

Omnicity is current with the renegotiated agreement.

"There's still dollars out there in limbo," Bradley said, noting that through the $150,000 settlement, the county has probably "got more money than anyone else."

Bradley questioned the state's economic development corporation's decision to grant the company money considering the financial issues between Omnicity and Jay County.

"There probably wasn't good communication on that from several sources," he said. "We've got some phone calls in right now to state officials to ascertain where that is at."

Blair West, media relations director for the Indiana Economic Development Corp., said IEDC wasn't aware of issues between Jay County and the company.

"We rely on local communities to uncover local issues," she said. "The issue (with Jay County) was outside of the county (Rush) we were originally dealing with. Unfortunately it would be word of mouth and again, anything on the local side, we rely heavily on the local officials we deal with."

After learning of the conflict, however, West said one point of focus is that the company is abiding by its current repayment agreement.

"No, the state was not aware of the local issues with this company," she said. "However, we have been informed they are current in all of their obligations to Jay County."

West said it's not procedure to obtain or check a list of a company's creditors due to the volume and scope of the grant applications received by IEDC. She noted, however, that the grant package will be beneficial to workers within the state and will allow for improvements to the Rushville industrial park, which could bring further economic development in that area of the state.
-30-