Tag: "financing"

Posted November 25, 2014 by Lisa Gonzalez

The City Council of the city of Commerce is considering using its existing fiber resources to offer connectivity to local businesses. At a November 3rd work session, Council members reviewed the plan and, according to the Main Street News, members voiced support for the idea.

“We’ve been actively working on this for months,” [City Manager Pete] Pyrzenski told the council. “We’ve been counseled on, we’ve talked through the options… this is a pretty viable utility for Commerce.” 

“We are ready to pull the fiber,” Pyrzenski declared. “Our role is to supply the fiber. We’re not going to get into cable TV, not going to get into telephone, just high-speed Internet.”

“Businesses have been looking for an alternative,” noted Mayor Clark Hill.

Windstream now serves the community of 6,500 but there have been significant complaints and there are no other options in this north Georgia town.

The city will need to invest $70,000 for equipment and legal fees. The network plan will use an existing line and will run additional fiber to expand the reach to more commercial customers. At this point, the city estimates a 5 - 10 year payback but that period may be reduced if local businesses respond positively. The city will fund the deployment with an interdepartmental loan from their municipal electric utility. Commerce also owns a municipal gas utility.

Posted October 30, 2014 by Lisa Gonzalez

Chanute's City Commission passed a motion this month to fund its planned FTTH project with revenue bonds, bringing the entire community closer to fast, affordable, reliable connectivity, reports the Chanute Tribune

In addition to authorizing a plan to secure $18.9 million in revenue bonds, the motion also included funds for a pre-deployment baseline analysis focused on economic development and funds to hire an attorney. The bonds include debt service reserve funds and additional funding to make early interest payments. The plan determines the city will pay off the investment in a little over 14 years, based on a 45 percent take rate.

The Kansas Corporation Commission (KCC) must approve the plan. The KCC is a state regulatory body with a variety of responsibilities, including regulating telecommunications utility rates. The KCC also handles rates for electricity, natural gas, and liquid pipeline services. They handle safety issues, licensing, energy conservation, etc. If the KCC does approve the plan, the bonds can be secured without a public vote unless the city receives any petitions. Chanute still plans on providing residential gig service for $40 per month.

According to the Tribune, 62 percent of 1,030 returned surveys indicated yes or maybe as to whether or not they would be interested in signing up for high-speed service at home or at work; 38 percent said no. City officials are optimistic that the project will blossom even beyond those figures:

“I think once it starts rolling out, a lot of people will see what type of services they’re getting through the city,” [Mayor Greg] Woodyard said, “and they’ll get those bundle packages and we’ll be able to offer them a better product than they’re currently getting at a cheaper price. I think more people will sign up for it in that point in time.”

Woodyard also noted that Chanute is setting an example for other Kansans suffering from poor connectivity:

“A lot of other communities are looking at starting to do this, possibly,” Woodyard said. “We are the trendsetters for the state of Kansas. Everybody’s looking at us to see how we go through the process of doing the fiber project.”

...
Read more
Posted October 16, 2014 by Tom Anderson

On September 29th, California Governor Jerry Brown signed into law a bill that may make building community networks in his state just a bit easier. The memorably-named “Assembly Bill No. 2292” allows broadband projects to be included among the types of public works that can be financed using Infrastructure Financing Districts (IFDs).

IFDs are entities formed by regional coalitions of city, county, or other governmental units. They are designed to provide upfront funding for infrastructure projects that have broad regional benefits (highways, water systems, etc.), and are paid for by earmarking the increased property or other tax revenue the projects are expected to generate over a specified future period (usually decades). 

The idea behind IFDs - capturing future value to provide upfront funding to the projects that will create that value - is much like Tax Increment Financing (TIF) districts in other states. We have seen communities in other states turn to TIFs for broadband networks build outs, perhaps most notably throughout Indiana

The text of the bill is all of three lines long, and simply amends the existing authorizing law for IFDs to explicitly allow infrastructure financing districts to be used for “public capital facilities or projects that include broadband.” While the old wording of the statute did not explicitly reject using IFDs for broadband projects, it did not explicitly allow it either.

Removing the uncertainty around the issue should help encourage local governments to consider network investments, especially since one of the major unpredictable costs is incumbent lawsuits. This change will slightly reduce the opportunity for incumbents to slow a municipal network with a lawsuit.

The bill was written and sponsored by Representative Rob Bonta, who represents parts of both Oakland and San Leandro in the Bay Area. It is no coincidence that San Leandro is a city seeing the benefits of robust fiber optic infrastructure, and San Leandro mayor reportedly pushed...

Read more
Posted October 15, 2014 by Lisa Gonzalez

Our Community Broadband Map documents over 400 communities where publicly owned infrastructure serves residents, business, or government facilities. We rarely hear of publicly owned systems sold to private providers, but it does happen once in a blue moon.

Accelplus, the fiber optic FTTH network deployed by Crawfordsville Electric Light & Power (CEL&P) in Indiana was sold earlier this year to private provider Metronet.

According to a July Journal Review article, the transition for customers began this summer with completion expected by the end of 2014. Metronet invested approximately $2 million in upgrades. Metronet will also offer voice services via the network; Accelplus offered only Internet and video.

In the past, we have found that networks that offer triple-play can attract more customers, increasing revenues. In states where munis cannot offer triple-play or administrative requirements are so onerous they discourage it, municipalities that would like to deploy fiber networks sometimes decide to abandon their vision due to the added risk. 

A November 2013 Journal Review article reported that the network, launched in 2005, faced an expensive lawsuit commenced by US Bank. Apparently the network could not keep up with the repayment schedule for Certificates of Participation, backed by network revenue, that financed the investment.

Metronet purchased Accelplus and its assets for $5.2 million. The City also provided some economic development incentives. When all is said and done, investors are settling for a total of $5.6 million and the City avoids a $19.6 million lawsuit.

A February Journal Review article reported:

Metronet will receive a 10-year, $24,000 per year lease from CEL&P on property currently used by Accelplus. Metronet can purchase that property for $1 after the lease expires. Accelplus manager John Douglas has segregated those areas and provided AutoCAD drawings to Metronet.

Furthermore, CEL&P will lease 72 strands of fiber to Metronet at the rate of $24,000 per year for...

Read more
Posted October 8, 2014 by Tom Anderson

Of the more than 400 communities around the country that have built and benefitted from community networks, the town of The Dalles in Oregon may have a case for the title of “most bang for the buck.” Their commitment of $10,000 12 years ago to leverage a $1.8 million “QLife” fiber optic network has lead to a massive, $1.2 billion dollar investment from Google in the form of a huge data center, employing nearly 200 people and generating millions in tax revenues for the local community. And at the end of September, the QLife board of directors announced that they had paid off the loans used for network construction more than three years ahead of schedule. 

We covered part of The Dalles’ network story two years ago: a small city of just 13,000 was told by Sprint in 2000 that it would have to wait 5 to 10 years for broadband Internet access. Meanwhile, local manufacturing was declining and employers were overlooking the town due to its outdated infrastructure. Before building the QLife network, The Dalles had no access to the major long haul fiber pathway that happened to run right through town. As city manager Nolan Young told Andrew Blum in an interview for his book “Tubes,” it was like “being a town that sits next to a freeway but has no on ramp.” 

The city decided enough was enough, and partnered with the county and the local public utility district on a plan for a $1.8 million, 17 mile fiber optic loop through the community that would connect anchor institutions and offer middle mile access to private providers. 

The nascent network faced opposition from a local telecom in the form of a lawsuit, which scared the public utility district away from the partnership. It had another setback when a private partner declared bankruptcy, saddling the public agency with an $800,000 loan. The city and Wasco County pressed forward with their partnership, however, and secured half of the needed $1.8 million in state and federal grants while covering the rest with loans. The city made a one-time contribution of $10,000. QLife pursued a cautious strategy, building in successive phases only after enough subscriber revenue commitments were in place to cover the requisite loan payments.  

...

Read more
Posted August 26, 2014 by Christopher Mitchell

Though much of western Massachusetts has poor access to the Internet, the town of Leverett is in the midst of fiber build that will offer a gigabit to anyone who wants it. Peter d'Errico, on the town Select Board, has been part of the project from the start and Chairs the Broadband Committee. He joins us for Episode 113 of the Community Broadband Bits podcast.

He and I discuss the great need for the project and inaccurate broadband maps that overstate availablility in the region. We discuss the role of the "municipal light plant" law that gave them the necessary authority to invest in the fiber.

But more interestingly, we talk about how they have structured the financing and prices for subscribers. The network will be repaid both with the revenues from subscribers and a modest bump in the property tax. The kicker is that many households will see their taxes increase a little but the amount they spend on telecom will decrease substantially, resulting in more money in their pockets each month.

We have written about Leverett often over the years, the archive is here. Read the Leverett FAQ here.

You can read a transcript of this discussion here, courtesy of Jeff Hoel.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.

This show is 18 minutes long and can be played below on this page or via iTunes or via the tool of your choice using this feed.

Listen to previous episodes here. You can can download this Mp3 file directly from here.

Find more episodes in our podcast index.

Thanks to...

Read more
Posted July 30, 2014 by Tom Anderson

Wabash County, Indiana wants to expand its access to high speed internet through a fiber optic network build out, and is planning to use a distinctive financial tool to do so. The Wabash County Redevelopment Commission has begun the process of assigning a special Economic Development Area designation for the purpose of helping to finance new fiber deployment through parts of the mostly rural county of 33,000 people.

Tax Increment Financing (TIF) is a method of public financing that uses future gains in property or sales taxes within a defined area to subsidize a redevelopment or infrastructure project. A local jurisdiction can borrow money up front, build the project, and then use the increased tax receipts it generates to pay off the debt over a period of years. The concept is actually pretty simple: capture the value that something will have in the future to build it now.

TIF  has been a popular approach among local politicians around the country for decades as a way to work around tight budgets and finance improvements in blighted areas, often in the form of public infrastructure. It has sometimes drawn criticism, especially in cities like Chicago where it is very heavily used. One downside is that it effectively takes properties off the general tax rolls. 

More important for our purposes, however, is that the use of TIF for next generation fiber optic networks is a fairly new phenomenon. While municipal networks around the country have used a wide range of financing approaches to cover upfront costs, most have revolved in some way around bonds that are repaid from network revenue. Using TIF to capture the increased property value that a fiber optic network would create is an interesting approach.

In the case of Wabash County, it’s not yet clear exactly how the funds would be used. There is a local private incumbent provider, Metronet, which received $100,000 last year to match its own $1 million investment to bring fiber to a town on the north edge of the county. The county also has a cooperative utility (Wabash County REMC) that provides power and telephone services in rural areas and has expressed interest in using TIF to build out a fiber network. Whichever entity ultimately receives TIF money, it does not appear that...

Read more
Posted July 23, 2014 by Tom Anderson

This is the final installment of a three part series, in which we examine the current state of the UTOPIA network, how it got there, and the choices it faces going forward. Part I can be read here and Part II here

In Part I of this story, we laid out the difficult situation the open access UTOPIA network finds itself in and how it got there. Part II gave the broad outlines of Macquarie’s preliminary proposal for a public-private partnership to complete and operate the network. The numbers we deal with here are mostly from the Milestone One report, and assumed the participation of all 11 cities. It should be noted that since five of eleven UTOPIA cities opted out of proceeding to Milestone Two negotiations, the scope and scale of the project is subject to change. The basic structure of the potential deal is mostly set, however, allowing us to draw some reasonable conclusions about whether or not this deal is good for the citizens of the UTOPIA cities.

Let’s first turn to why Macquarie wants to make this investment.  This would be the firm’s first large scale broadband network investment in the U.S., allowing it to get a foothold in a massive market that has a relatively underdeveloped fiber infrastructure. To offset network build and operation costs, it will also be guaranteed the revenue from the monthly utility fee, which my very rough calculations put between $18 and $20 million for the six cities opting in to Milestone Two (or between $30 and $33 million per year for all 11 cities) depending on whether the final fee ends up closer to $18 or $20 per month.

Jesse Harris of FreeUTOPIA puts Macquarie’s base rate of return between 3.7% and 4.7%, which is slim enough that they should have...

Read more
Posted July 17, 2014 by Tom Anderson

This is the second of a three part series, in which we examine the current state of the UTOPIA network, how it got there, and the choices it faces going forward. Part I can be read here and Part III here.

With the status quo untenable, no easy exit strategy, and political opposition mounting, UTOPIA appeared besieged in early 2013. Then along came Macquarie, which started studying the network and putting together a proposal for a partnership. The full Milestone 1 report from Macquarie is here,  but in case you aren’t prepared to read 100 pages the broad outlines are as follows:

  • Macquarie will invest $300 million of its own capital to aggressively finish the network build out in 30 months, finally reaching every address in every participating city without a connection fee (UTOPIA had been charging residents in some areas who wanted service around $3,000 to make the expensive last mile connections to individual addresses).
  • Macquarie would be responsible for network maintenance and periodic upgrades, as well as meeting performance benchmarks. Cost overruns in any of these areas would be paid by Macquarie.
  • Sharing of network revenue (from charging ISPs for transport) between Macquarie and UTOPIA, which could be used to pay down the existing bond debt.
  • At the end of a 30 year period of operations run by the public-private partnership, the network would revert fully to public ownership.
  • All homes would be eligible to receive "free" basic service, with 3 mbps download/upload speeds and a 20GB monthly data cap. For all other services, businesses and homes could choose from any of the 8 ISPs currently operating on UTOPIA, all of which offer affordable gigabit speeds. With a larger, complete network, it is likely that UTOPIA would attract new service providers as well.
  • Imposition of a monthly $18-20 utility fee, assessed to every address in the UTOPIA area over the next 30 years, regardless of whether or not they are network customers. This is why we put the "free" basic service in quotations. The utility fee would be structured with a 50% discount for apartments or other multiple-unit addresses, a 100% premium for businesses, and an...
Read more
Posted June 20, 2014 by Lisa Gonzalez

Chanute City Commission decided on June 9th to take the next step to bring ftth to the community; Commissioners voted unanimously to pursue and finalize funding to deploy a municipal network.

The City's current fiber network provides connectivity to schools, hospitals, electric utility and municipal facilities, the local college, and several businesses. Chanute has worked since 1984 to incrementally grow its network with no borrowing or bonding. Plans to expand the publicly owned infrastructure to every property on the electric grid began to take shape last year.

At a work session in May, Director of Utilities Larry Gates presented several possible scenarios, associated costs, and a variety of payback periods. The favored scenario includes Internet only from the City, with video and voice to be offered by a third party via the network. Residential symmetrical gigabit service will range from $40 - $50 depending on whether or not the subscriber lives in the city limits. Commercial service will be $75 per month. Advanced metering infrastructure will also be an integral part of the network.

The Commission authorized the pursuit of up to $14 million to get the project rolling.

Pages

Subscribe to financing