The county board is pursuing a possible federal Stimulus Grant for $33,000,000, which if received, will partially fund a proposed $50,900,000 project. This project proposes that the county build a fiber optic broadband system to serve the entire county. The county will issue $18,000,000 in bonds to match the federal grant, and plans to cover the interest, bonding costs and repayment with operating income and from the 1% sales tax being considered.
The reasons presented in support of this system appear to be:
1. The federal grant will fund 65% of the
project cost. 2. It will provide access to high speed broadband
Internet, television and telephone
service to the entire county. 3. It will add 11 – 13 employees to the county
payroll to manage, operate and maintain
the system. 4. It will encourage individuals and possibly
businesses to relocate in Cook County if
they can telecommute. 5. The system owned and operated by the
county will provide better service at 10%
lower fees than users are now paying.
6. We must do this to stay competitive.
Theproject timeline is driven by the federal grant. If approval were received in November 2009, the project would have to start in 2009. To proceed the county must pass a 65% referendum authorizing it to operate a telephone system; put the 1 % sales tax in place to provide the funding to carry and retire $8,000,000 in bonding; build a business plan and sell an $18,000,000 bond issue as a requirement of the federal grant. Assuming these are revenue bonds, the plan will have to project income at a minimum to cover $10,000,000 in bonding.
Has the county done a business plan to support a $50,900,000 project that will put them in uncharted territory operating, maintaining and upgrading a Broadband fiber optic system that will compete with, and in order to be viable, displace the companies (and employees) that presently provide telephone, television and internet services to the county?
Thefederal grant is like the “gift horse” that is free when you get it. The grant’s purpose is to assist in building a system that would not be feasible or affordable without it. What will happen if the system needs to be replaced to stay abreast of technology and there is no federal money available?
Nearly everyone in the county that wants it, has telephone and television service. They will not necessarily change to what the county offers. Grand Marais and Grand Portage have broadband service, Arrowhead Electric and others offer satellite Internet service, and wireless Internet is also available.
Thecounty would be responsible for bonding costs on $18,000,000 in bonds, which, if issued at 5% will require $900,000 in year one for interest alone. $400,000 of this is projected to come from the 1% sales tax. If the bonds require a sinking fund or annual payments and are 20 year bonds that means another $900,000 per year.
By using 1% sales tax revenue to fund and retire $8,000,000 debt over 20 years at 5% interest will require approximately $12,000,000 that could go to other purposes in the county.
I question if this would even be considered if the grant were not in the picture. Most of the services proposed are already being offered.
I know it’s hard to look a gift horse in the mouth, but considering the financial risk and cost for what appears to be a nominal incremental benefit, I hope the county board will look long and hard before they bring this horse home.
John Lindell Grand Marais
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