Transcript: Community Broadband Bits Episode 482

This is the transcript for episode 482 of the Community Broadband Bits podcast. On this episode, Sean Gonsalves joins regular host Christopher Mitchell in a conversation with Michael Maloney, a public finance banker and the Managing Director at D.A. Davidson based in Iowa. Maloney has spent his career working on public financing projects to hope to spur economic development, including broadband. Listen to the podcast here or read the transcript below.

Michael Maloney: These projects need to stand on their own, solely secured by the telecommunications revenue. And that startup mechanism is apples and oranges to what Muni Finance is typically about.

Christopher Mitchell: Welcome to another episode of the Community Broadband Bits Podcast. This is Christopher Mitchell at the Institute for Local Self-reliance in St. Paul, Minnesota. And today I'm back with occasional co-host Sean Gonsalves from Cape Cod, welcome.

Sean Gonsalves: Top of the morning. Thank you.

Christopher Mitchell: Great to have you back, Sean, we're going to be talking about Fort Dodge, a town that you recently wrote about and Fort Dodge is actually going to be building its own municipal fiber network that will be operated by the city. And we'll talk a lot about the financing around that. We're going to be talking with Michael Maloney, who is the managing director at D.A Davidson, which works on fixed income capital markets, and he's a public finance banker. Welcome, Michael.

Michael Maloney: Thank you very much. I appreciate being on here with you, Chris and Sean.

Christopher Mitchell: And we're going to have a quick disclosure, maybe less than quick, but there's a disclosure that we are required to run, which should help people understand how to take your comments.

Michael Maloney: Hey, thanks a lot for that, Chris. Yes. The material I'm providing is strictly for informational educational purposes only. Nothing stated here in is an offer of solicitation to buy or sell any securities or services. I'm not acting as a municipal or financial advisor, nor am I providing advice or acting as a fiduciary. The views opinions forecast and estimates expressed here in are being provided by me and are not necessarily the views or opinions of D.A Davidson and are subject to change at any time due to market economic or other conditions.

Michael Maloney: D.A Davidson and its representatives may have the conflict of interest in the products or services mentioned in this material, because they have a financial interest in them and may receive compensation directly or indirectly in connection with the distribution and or servicing of these products or services. Past performance of any sector or securities reference in this discussion is not a guarantee of future results. Certain information discussed may be based on data obtained from third party sources believed to be reliable. However, we have not verified this information, we make no representations whatsoever as towards accuracy or completeness. This communication is not a product of D.A Davidson's research department and should not be regarded as a research recommendation. Thanks Chris.

Christopher Mitchell: Absolutely. Whenever I hear anything along those lines, it reminds me of when I was probably either a pre-teen or a teenager and I first heard money Python. It was a cassette tape and it was a recording from New York, a live show that they had done there. And in the show, it starts off with a voice that says "Video and photography are strictly prohibited". And immediately after that, John [inaudible 00:02:39] says, "But encouraged, nevertheless".


Michael Maloney: That's great.

Christopher Mitchell: So, Michael, I feel like it's worth noting that this is not your first rodeo. Why don't you give us just a little bit of a background in terms of how you've been involved with municipal broadband and perhaps other broadband projects?

Michael Maloney: Yeah, my background is really working on public finance products with a economic development focus, and in reflection of my work over the last seven or eight years, it's really been clear that broadband deployment is a major factor in economic development. And I know you and Sean obviously echo that in your material as well. I'd worked on refinancing a number of copper coaxial systems that had started up in the late 90's and early 2000's. And the fiber overbuild trend was there often on a pay as you go basis with a couple of those legacy providers as they'd matured. But really there was a start with Waverley utilities down here in Iowa in 2014. And that was an opportunity for a system to really do a startup deployment of a fiber system. And it was an excellent experience working with, not just the engineers and consultants, but a GM that had been on both sides of the table at both a private provider and a couple other municipal providers, who'd been challenged by the board when hired to make this startup a reality.

Michael Maloney: And that really built this momentum in Iowa, where we hadn't seen a new startup telecom system on the municipal side in over a decade. The math changed fiber became a more beneficial system as we see the gray of the usage of fiber infrastructure and what Waverley really started a cascade of other municipal projects in the state. So since working on Waverley, that's been followed by Indianola utilities, just south of the Des Moines metro, Vinton utilities between Cedar Rapids and Cedar Falls. New Hampton, light and power, which is just north of the Cedar Falls area, and Pella utilities Southeast of the Des Moines metro, as well as the recent Fort Dodge project that I know we're going to be discussing in a little bit more detail today. While Iowa doesn't have the types of legal restrictions on municipal broadband that we see in some of the other states, the real limitation is on the financing of these.


Michael Maloney: So these projects need to stand on their own, solely secured by the telecommunications revenue, and that startup mechanism is apples and oranges to what Muni Finance is typically about. So that's helped a guy in Des Moines, Iowa have some relevance working on these projects elsewhere in the country, because there's no safety net here in Iowa. We really have to have good plans because we don't have other funding sources to roll back on. You can't just click a switch and have 60% of the community signed up the next year. It doesn't work like that. So we need more of a typical runway we'd see from a startup project in the commercial space than a true municipal project. And beyond those Iowa startups also done a number of fiber overbuilds, there's true value in that even for legacy systems to take their business to the next step.

Christopher Mitchell: Right, and Sean's going to dig us into Fort Dodge in a second. But before then, one of the things that Iowa does require, because this was an issue that came up in Iowa did pass some laws in 1998 to set the framework. And so if I understand correctly, cities do have to pass a referendum in order to establish a telecommunications utility. And so that's a bare minimum. And then if they also want to issue public debt to support that, I believe they have to have a 60% vote. Is that right?

Michael Maloney: Yeah. The 60% vote for public debt is if there's any property tax backing. So we've seen a couple of those instances on the legacy systems, but that's not been a mechanism that's been evaluated here recently. So that's have been all standalone revenue secured debt instead because of that 60% threshold.

Christopher Mitchell: Great, thanks.

Sean Gonsalves: So whenever I write about a community, I always learn something. And even if it's something that's trivial, I'm always fascinated and something that I didn't know about Fort Dodge, is it being called or used to having been called little Chicago, not because of any sort of similarities, as far as Deep Dish Pizza, [crosstalk 00:07:01]. Right, right, right, right. But because of the architecture of the buildings downtown, but I only bring that up because I'd like for you to tell us a little bit about what is Fort Dodge like? What kind of community is it? And then if you could use that to also lead us into setting us up and understanding what kind of Internet services were or are currently available in Fort Dodge?


Michael Maloney: Fort Dodge is probably a little bit larger than your traditional county seat town. And it is located in the near Northwest quadrant of the state of Iowa. You put Des Moines and Ames in the middle. It is north Northwest of there. I think the biggest town where people would maybe go for recreational sporting events and things like that would be Ames. And [crosstalk 00:07:46], because the... Yeah, fair enough. That Fort Dodge location geographically is such where it's the biggest city along highway 20 with Sioux City, a couple hours to the west and, and Waterloo Cedar falls area about an hour, hour 20 minutes to the east. So it's really kind of on an island there from a scale standpoint and its own sort of mini regional hub. And that's both for the economy with jobs and in terms of both commercial, industrial endeavors, there is a community college, Iowa Central that's located there as well, but it does have that historic framework that you mentioned, especially in the downtown space.

Michael Maloney: So you've got some of that aging infrastructure that's around the city, but you've also had some really good development in the industrial park. So they've had some larger [ag 00:08:37] and ethanol operations move out there. The city's worked hard to foster the development throughout that. So you've got this really interesting mix in the population there, not just from a demographic standpoint, but you've got the senior leadership of some of these companies that want a house on the golf course, right. And then you've got other folks that are still really looking to revitalize some of the historic neighborhoods in the town. So it's a really mixed setup there, and the city staff has worked very hard over the last 12 or 15 years to maybe mitigate some of the challenges there and really dig out by making an investment in infrastructure, which is where this ties in.

Michael Maloney: So that basic infrastructure, the bread and butter for a city we know is roads, bridges, water, sewer. And while broadband was a priority, I think city staff would even say, "Hey, that's probably not something we're going to handle on our own, we'll have someone come them in, we're Fort Dodge, we got 20, 25,000 population". That's enough density to get this to happen. And frankly, most of the consultants and engineers on this project, we all felt like, well, once there was a little bit noise with Fort Dodge, private providers would come to the table. There'd be a partnership. It felt like a great fit for that.


Christopher Mitchell: And if I could jump in, just so people have a sense as is common in Iowa. Mediacom is the dominant cable company. Although unlike a lot of Iowa, Century Link is not there. You actually have Frontier. Frontier, a company that has been sued by almost all the states it's worked in for various reasons, both Frontier and Mediacom considered at the bottom of consumer reports. And so this is a worst case scenario in some cases for the existing ISPs in a city.

Michael Maloney: I think the city felt like it was just a matter of time before things improved and changed. And we had this generation of legacy systems from the 90's and early 2000's, that are not going to be able to keep up regardless of provider without investment in additional infrastructure. So where was that investment going to be coming from? I think was the key consideration there because like many communities, Fort Dodge didn't lack provider options, but there were demands from the population from businesses for better speeds and more reliability. So that was really the framework there.

Michael Maloney: And I think what was unique about Fort Dodge versus some of the other projects I've worked on, is staff and the council truly did not have an agenda. They only focused on the endpoint, Sean. So to your point, it was, we want fast, reliable Internet service for the long term for our community. And we really don't care how we get to that endpoint. We're going to evaluate the multiple options in tandem and work to get a solution as efficiently as possible from both a time and money standpoint. And they were very effective in doing so.

Christopher Mitchell: So I think just to reiterate most of the cities in Iowa that have done their own broadband network have a municipal electric utility. That is not the case here. You mentioned the population it's about 10,000 households. And one other detail that I'd picked up at the broadband conference that Curtis Dean and Todd Kielkopf put together, was that they did a survey. And I wrote down the quote that Todd had because they've surveyed a lot of people in Iowa that are frustrated with broadband service. And the survey in Fort Dodge was particularly vociferous in terms of the takeaway. And Todd came back and said, "Holy cow, is this town mad?" It wasn't just your typical kind of frustration, I'd like that better Internet access. People were livid and it wasn't even about the prices, it wasn't necessarily about reliability or the speeds.


Christopher Mitchell: It ultimately came back to how they felt they'd been treated by these companies. And I feel like what we're about to talk about here, I think sets the table, because this is not an average scenario where a city council is presented with, we're kind of on high happy. We know that we can do better, but at the same time they're competing with companies that haven't lost the public in the way that they had in Fort Dodge. So anyway, you're talking about this and I want to reiterate something you said as you go into this, which is that the local leaders did not have a predetermined outcome in mind. They went through process, not knowing where they were going to end up.

Michael Maloney: Yeah. I thought that was something where, not to be cynical, but even if we try to go into something that way there's maybe some leaning towards one direction or another, unless something surprising happened. And the city was just very clear throughout the process. And I think that's made for a better project because what they did is they did not put all their eggs in one basket. They didn't devote a ton of energy to one path and then need to make a pivot. They really ran side by side, down the highway in terms of exploring those options and just knew this was going to take time. This was going to take a little bit of money to explore, but they were going to get to a better place overall. And that took some confidence.

Michael Maloney: But I also think that had to do a little bit with staff successfully executing previous utility transactions on their water and sewer utilities, and frankly, successfully executing the number of economic development projects over the last decade. What that means is you can go in with the understanding, look, the city's going to make a good deal and do right by its citizens. And we'll let the data and the math take us to the right place.

Christopher Mitchell: It is the case that most of the cities around the country, I already mentioned Iowa, but it is rare for a community to go into this without that mind being made up. Because usually there's some people who might say, well, we want to do this publicly, but more often in it's a group of people who are saying under no circumstances, are we going to build our own network. We are going to, come hell or high water, we will find someone to partner with. And I feel like a lot of people were kind of thinking that was what was happening here, but it wasn't.


Michael Maloney: Yeah. I think that's the case and it's really easy looking back and saying, "Wow", that they just threaded the needle, this was a perfect circumstance. But I think it was a matter of really going through the work, trusting the professionals, working as a team, it was a collaborative approach. And that's the biggest thing I would suggest to other communities that I work with. I'm not going to be someone that says, "Well, it's got to be muni owned and operated, that's the only way to work". It's a way to work for some communities, but for others, the partnership will be better. For others, it's going to be some incentive structures there. I think the biggest thing that I try to communicate to communities that are interested, that I either have worked with or contact me is the focus needs to be on ubiquitous coverage.

Michael Maloney: That's the difference on a municipal model is that municipal utilities typically serve everyone in the community. And when you do that on the broadband space with the fiber deployment as well, that's going to be where the long term benefits come because the city has to operate in perpetuity and other entities are going to be looking for near term profit motive. So when we're making those long term investments, we're going to do a good job making sure technology's up to date. Everyone is well served because we've got the long term view built in just by being a municipal entity. So that's the difference, and I think that was a big decision point for the city council ultimately was we want to have control long term to ensure that reinvestment happens, that we don't feel it happened over this last generation of legacy technology.

Sean Gonsalves: Michael, I'm interested to get your sense of in some communities that there's, well, in many communities, there's this gap between what the city leaders and people who are really engaged know, and have a pretty good sense of what are good solutions to a challenge. And then there's some folks, who in the public who may, it takes some education and getting up to speed. And it sounds like in Fort Dodge people, by and large, the population, the citizenry had a deep frustration with the existing service. So there wasn't necessarily a need to do this robust education campaign, but I'm interested to get your sense of how on board people were as the city move forward with the planning.

Sean Gonsalves: And even when they started to talk about how this would be financed, because recently we've seen some communities, if you make an analogy to... Okay, we need to get the roof fixed, but the water's not leaking into the bedroom or on my head. So we'll fix it later or just hope that it doesn't rain that hard. And then there's some folks who, where you have to do the work and say no, we need to get this fixed. And we need to think about 10, 20, 30 years down the line. So I'm just looking to get an idea of the relationship between what the city leaders were thinking and the citizenry in terms of going forward with this project.


Michael Maloney: I'll be honest with you, Sean. I think there were a few really fortunate things that happened during the process that you can't just bake into the regular proceedings, but I don't think it would've changed where things ended up overall. So specifically the city got from referendum to create the utility in November of 19 to closing on the financing in September of 21 in just under two years. And what they did was they were really consistent with the messaging. Like I said, had the endpoint in play, but we're going to review things throughout the process. And they kept the momentum moving forward, which meant, Hey, this is good. We passed the referendum, now let's do our due diligence. And they had off ramps along the way. So primarily what I'm talking about on the engineering and consulting, they'd done some pre-feasibility work, the survey results that you'd mentioned, and they said, let's do some high level design so that we can come back and just give a idea of where the numbers might be, and then go out and see if there's some private partners that we can work with.

Michael Maloney: And then if that's good, then we'll go to mid level design. So we kept building throughout the couple year process and really over a year and a half, we got to a point where this is what we want to do. This is how much it's going to cost. Now we just need financing to take the next step and spend, the serious engineering and bid dollars to go get this thing built. And I think that was a really good process because there were no big jumps from tree to tree in terms of "We're going to do a thing and here's the sticker price". It was, "We're doing this now and here's the initial results, and now we're going to do this". So it was just really modest steps along the way, and that helped keep people informed while there was momentum. Now I think one of the things the staff will joke about is the day after the referendum in November of 19, we had constituents call and say, "I would like my Internet this week".

Michael Maloney: And I think that's... We know that in our space because we're around the projects, but you can't just flick a switch. And rather than promising, this is a long term goal and their messaging was very, very strong. What is it going to cost? Or when is it going to be here? We're going to build a citywide system. The cost is going to be competitive and the system is going to be reliable. And they focused on those three things until they got to the finish line. And I think that really helped, but in terms of some favorable bounces, hard to not mention COVID in that. And we all recognize the need for connectivity, especially working from home or having four or five, six users at home with the wife and kids around. Where you've got so many people using bandwidth for different purposes, that it was just untenable in a lot of residential settings, so that was sort of bounce one.


Michael Maloney: Bounce two was we had a severe weather event here in Iowa, a derecho last August. And when working with one of the private providers, that was a potential partner, the discussion was, can we save some cost. Your roof scenario, can we save some cost by going above ground? And the derecho just devastated... A lot of parts of the state Fort Dodge was relatively favorable, but those winds and the destruction that it had on the telephone poles and things like that made it very clear that, no, we can't cut corners. This needs to be an underground system predominantly from a reliability standpoint.

Michael Maloney: And then I think the third part is really when the city was going, "Hey, are we doing this or not?" There were some major long-term outages for Internet service. And that coupled with the pandemic and some of the stay at home elements really made it clear, this is just not tenable anymore and the city needs to act. So I'm not saying that those three were necessary to move the needle, but they were so timely that it kept reinforcing that we've got to take some control here and make this happen on our end.

Christopher Mitchell: It seemed like from what I've learned about Fort Dodge, whereas in many communities, it might be local businesses who are really pushing the process. It seemed like local banks were very much involved in ways that we haven't seen them as ambitious in other places and since you've worked in other places, I'm sure you can explain the difference.

Michael Maloney: Yeah. I think there are two factors. One, on the banking side it's necessary to be skeptical of projections and what we think demand is because there's asymmetric risk involved. If it's a lot better than the projections, no one comes back and says, "Oh, you messed up. It's just way better now, what were you doing?" But if the projections fall short, it's really tough to defend well, what were you thinking at that time? So to the extent we were talking about city leadership engaging the community from an education perspective. There was a real education perspective in talking with bank and other investors, and that's a path I've been on for about seven years here, since the Waverley project flipped the switch from, "Hey, refinancing legacy systems to the startup elements" and getting a real education talking to those folks myself.


Michael Maloney: And I think there's two hurdles to climb for most finance years on these. Number one, startup is a challenging endeavor overall, because you don't know when you're going to get your money back out. So how do you structure the debt in a way where you can have some return, but also understand that you are going to need to be patient while things evolve, and you need to have a good plan. That startup element is really reminiscent of actually rural electrification 80, 90 years ago, where the town goes and says, "Let's start our own generation so that we can have electricity throughout the community and we'll pull money, local investment, et cetera". Things have obviously changed since then, but the model's not all that different. There was a question of at once upon a time of whether electricity was essential? And that essentiality is a real sticking point with a lot of state laws or even federal considerations.

Michael Maloney: And then investment considerations, people are going to pay their water and sewer bills, but water and sewer entities often have a monopoly. We don't enjoy that here on the telecom space, despite it being a municipal project. So there's a gap to bridge between the municipal space, the startup space, and something that looks a little more like a commercial loan. So that is a heavy lift for lenders to really wrap their heads around and what it takes is people doing the work. And I think the piece that I would commend is that this group of eight institutions, most of which were local in the Fort Dodge or surrounding area that came together on this, one were willing to work together. And two did the work. There were a couple just individuals that frankly knew this was an important community project, and they really need to understand, and they do the due diligence.


Michael Maloney: I'm hired to be a resource. The engineers, the consultants are hired to be a resource because we're seeing these on a regular basis, but they reached out to other utilities that had done this successfully. They had reached out to friends and colleagues that had financed successfully to just grasp what the city was doing and why. And I think the other part that was important for Fort Dodge was we were not going to take the next step on writing big cheques here until we had financing lined up. So we really want to have our cake and eat it too. This isn't some type of just interim financing that will hope gets taken out some day. It's a interim financing that has a long-term repayment structure. So we've got the ability to draw on that loan in the near term, saving millions of dollars in interest cost and have a long term amateurization that this can get paid down over time once customers get on.

Michael Maloney: That's a unique structure and we spent months of time, this was a four month endeavor, at least on my part, just getting in people's face and educating. So again, the timing came out well. I know we're dealing with some subsequent waves of COVID, but it was right after generally the first wave of vaccination and we were able to go and sit down with people because that's the kind of time and resources it takes, because this is a lot for someone to get their head around.

Christopher Mitchell: We should have been clear at the start that Fort Dodge is moving ahead with building a fiber to the home network, to touch everyone that's financed locally and will be a breaking ground, hopefully next year and beginning service the year after that. So that is what we've all been talking about.

Sean Gonsalves: We're talking about a citywide fiber to the home network and the rough estimate, which I know was also related to the take rate, because I think the loan amount, what you'll actually need to spend will depend on how many folks sign up for service.

Michael Maloney: That's right. So I think there's really three main components of any of these financings, especially in the startup mechanism. So the first part is just the main fiber distribution network. That's the actual fiber ring, as we think about it, that's going to go in the nodes in the neighborhoods and business districts, et cetera, outside plant is pretty the common engineering term. That's the biggest ticket item in this, and that's about half of the capital cost, the estimates about $17 million. And to your point, that has to go in the variability here is going to be the number of connections. So we've got to have it sized in a way that we can get to this magic point where you're not using financing dollars to help pay for each next connection. You're using existing connections of the system to pay for each new subscriber.


Michael Maloney: And it's about, I'm going to say roughly a year can be a little bit less, a little bit more depending on internals for recovering that cost for each install, once you get rolling. So we want to make sure we have enough access to get to that tipping point, and then we'll do another pay as you go basis for future installs. So it's electronics, equipment, drop costs, materials and labor are really the rest of that package. So we're just shy of $30 million on hard capital costs. The capital financing's about $33 million because we have to bake in some capitalized interests. There's no revenue generated in the first couple years. We'll need to pay for that from the financing proceeds that's somewhat typical in the muni space on a development project, and we've got that incorporated here. Now, the other piece of this, and it's a real unique element for the municipal space is some working capital.

Michael Maloney: The city utility board typically has staff on hand and is going to be able to handle their day to day endeavors from revenues of the assist system. In this case, we won't have those cash registers of the system working until we have customers online in two years. So we need to have that true runway there from working capital. And we just shade under three and a half million there. So all told just under $37 million for the full fiber build here. And there'll be some additional capital costs as those new customers come online. But that get us to our tipping point based on the estimates we have from the engineers today.

Christopher Mitchell: Now when our loyal opponents, let's call them, people who go from down to town in Iowa, opposing every project like this, see a number like that. They'll say, "This is crazy. You can't possibly spend this much money in Fort Dodge. This is a great risk. It's going to be a disaster". And in the event that we were at together, you put it in context with the kind of infrastructure spending that cities are often doing. And so I'm hoping you can do that again for us.

Michael Maloney: I think something that was really interesting was that might seem like a big number to folks, but for city infrastructure, tens of millions of dollars, even a hundred million dollars is just not that substantial anymore. So something the staff echoed and I've mentioned is between the water and sewer utilities in Fort Dodge, they currently have over a $110 million of outstanding debt. It's just all through the state revolving fund here in Iowa. We're blessed with some great water quality initiatives. The state supported in part by the federal government, through some of the water quality standards. And most of these water sewer projects in Iowa get financed through the state fund, or even the USDA. What that means is those infrastructure projects, while the city is handling them and they're in public meetings, et cetera, lenders aren't seeing them the public isn't seeing that sticker shock on some of these projects because they're absorbed there.


Michael Maloney: For Fort Dodge it means that this broadband deployment is not going to be the largest capital project in the city's history. They've done bigger projects. So some of that, "Oh, can we handle the project of this size risk", that's mitigated, but I think it also sheds some light on the fact that the water quality initiatives for federal government and state government exist, because if a town like Fort Dodge or another community does not have good water quality, it affects the rest of the communities in the state. If a Fort Dodge or a similar community doesn't have good Internet, it only affects the residents in that community. And that's another important point for why this needs to be taken into their own hands, but it gave some confidence that, "Hey, this is not a scale of project that's really all that large for a community this size".

Sean Gonsalves: So I'm fascinated to learn that you are able to put together essentially a consortium of banks to finance, to get loans from various banks into a package. And a lot of communities are actually looking for American rescue plan money, federal and state grant money. Fort Dodge took a different route, and so I'm interested to know why not go after those federal grants and state grants to finance the construction.

Michael Maloney: Yeah, that's a really good question, Sean. And it's an effort that we have been working on for a long time with other communities, is there a magic answer and on the municipal side, especially for the county, [inaudible 00:31:49] town that we've been talking about for these startup utilities, a lot of the times they'll fall into what we call the donut hole. And by donut hole, I'm talking about two things. One is just a matter of these communities are not in a situation where they have reliable broadband in their actual city limits, but in many times the surrounding rural areas because of our robust private telephone companies and co-ops in the state may have excellent broadband service. So if you looked at basically a heat map around county sea towns, especially with Fort Dodge, it's the donut hole where there's a lack of that robust connectivity there.


Christopher Mitchell: Yeah. There's a little of a historical context, I think, to just be clear. If you look at Mississippi, for instance, it's like all ATT all the time in the rural areas. Minnesota and Iowa have an abnormally high number of what we call independence, which are local telephone companies that have often a real community focus, not always, but often have a real community focus. That's what you're talking about. Those folks have done a really good job.

Michael Maloney: They have, but it's a pretty big explosion of their customer base to go into a town with 10,000 new connections. That's a leap for them. They're not going to have some of the reimbursement elements they already get for their legacy service or serving those rural areas. And part of that is the density and not qualifying as "Rural" by some of these methodologies. So you mentioned ARP dollars, those are there. The ability to deploy those, especially when you've got them useful telecommunications utility, is a question mark that's out there legally, one. And two just don't provide the kind of funding to really do a whole lot more than consulting, planning, and engineering, even for a size of city of Fort Dodge. Those dollars just don't make sense on the population. We have seen some success on using those to incentivize private partners in smaller communities around the state and around the region.

Michael Maloney: And we think that's a good option that's out there for that deployment. In terms of state funding here in Iowa right now, one of the challenges is qualifying and the maps have improved. They keep coming out with new maps and new funding rounds, but it's really about the outskirts of some of these city communities getting built or smaller communities getting built by those independent telephone companies as Chris had mentioned. And the federal programs, we continue to work through those. There's just not a good fit in terms of eligibility. The eligibility standards that we're going for still have two items that are our challenge. One is equity. So we can't put equity in, in a traditional commercial way, like a business would for a municipality project. And what that ultimately requires is some subordinated debt, which it's tough to find access to that capital for a future loan that may or may not happen going forward from the federal government.


Michael Maloney: And then the second part is some of the valuation metrics. So there's a lot of labor involved in getting the fiber underground. The reason these aren't happening all over the places it's labor intensive and expensive to get to every premise throughout our community. So if we can't capture the value just from what's in the ground and need to think about this on a cashflow basis over 20 or 30 years, that's a different methodology from the federal government scoring on a project like this. It's just not rural enough to go grab some of those other funding sources that I think you and I are thinking about that are out there, and that leads us to this bank investor market. And it's a heavy lift, no matter which way you go, but that bank route has been successful to get these off the ground. Again, that education burden is there, but we'll keep chipping away at both those state and federal dollars as we see those evolve, even just over the last couple years here. This has been

Christopher Mitchell: This has been terrific. Michael, really appreciate your time. Let me ask you, is there anything else that we didn't cover that you'd want to comment on?

Michael Maloney: I think the last thing I'd just like to add, and Sean and Chris, I want to thank you for the opportunity to just share a little bit on this platform about the exciting Fort Dodge project. But I mentioned earlier, there's not a one size fits all approach from municipality or a small community that wants to see something happen. And I know we're talking about an owner operated model here. We've talked a little bit about the partnership model, kind of the traditional public private partnership or P3. And I think there's also, obviously a lot of exploration of the open access networks as well, and where those might be able to be used where a city government does what they do best. Build the roads and bridges and let someone else operate on the highway.

Michael Maloney: So I think those models continue to evolve were around them, and we just want to keep seeing solutions for these communities that give them some stake in the long term future, to make sure that investment doesn't just happen today on these networks, but for the next generations as well. That's something Fort Dodge focused on, and it was very clarifying for me on the banking side to see that as an end goal and want to share that with my clients and your listeners as well.

Christopher Mitchell: Great. Thank you so much, Michael. Thanks for your work in Iowa and Sean, thank you.

Sean Gonsalves: Yeah. Thanks for having me on again.

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