The fifth anniversary of the announcement of the KentuckyWired project is approaching later this year. As voters start to assess their candidates’ job performance, the unfinished and over budget middle mile public-private partnership (P3) has become an albatross that incumbents aren’t able to easily cast off. When we last discussed the project in 2017, we shared our observations and misgivings. Not much has changed, except some of our concerns have played out and the project has become troubled by new problems.
In Case You’re Just Arriving to the Party…
The statewide, massive middle mile project officially began when Kentucky announced in late 2014 that they would build a fiber optic network in order to bring better connectivity to rural areas. They planned to find a private sector partner and sought bids. In the fall of 2015, Australian firm Macquarie won the contract for what soon became an even larger endeavor — a fiber optic network that would enter every county in the state at a minimum of one location. The network would consist of approximately 3,200 miles of fiber and connect about 1,000 public facilities. At the time the project was developed, the state estimated that deployment would cost approximately $300 million.
With early bipartisan support, the state allocated $30 million from their budget, which they expected to combine with $23.5 million in federal grants. When the Kentucky Economic Development Finance Authority issued $232 million in tax-exempt revenue bonds and $58 million in taxable revenue bonds to complete financing, Bond Buyer named the issue the “Deal of the Year” for 2015. Macquarie’s timeline estimated an optimistic one-year completion for the entire statewide project.
Macquarie Capital, as the entity managing the project, included in the agreement with the state a requirement that they and their partners, including Black & Veatch from Kansas and Ledcor of Canada, would build, operate, and maintain the network for 30 years. During the course of those three decades, the state would pay them approximately $1.2 billion and when the term was over, Kentucky would own the infrastructure free and clear. During the contract period, Kentucky would make “...Read more