RS Fiber (in Renville and Sibley Counties) moves forward with Private Coop

More than a year ago we reported on the RS Fiber Joint Powers Meeting in Winthrop, MN. The project had just suffered some major setbacks the morning prior when Sibley County dropped out of the region-wide plan to pursue fiber to the home/farm. But things were looking up when at the Join Powers Meeting, Jeff Nielsen from United Farmers Union announced that they were working on a rural telephone cooperative. It was clearly news in the making but folks were enthusiastic.

MPR’s Ground Level recently posted an update to the RS Fiber saga…

But now, the players behind the original proposal have come up with a new plan to move the fiber project forward. Rather than building a publicly owned network, they would build one owned by a private cooperative, but with approximately $15 million in public investment. That might seem like a fine hair to split, but structuring the project this way would both limit taxpayer exposure and diffuse some of the criticism from the private sector.

“It’s the same project, just different,” said cooperative board chair Mark Brandt, a corn farmer in Sibley Township, who is also a lead operator at a local ethanol plant. The network would cover hundreds of square miles and deliver internet speeds of up to a gigabit per second, along with phone and cable television. The monthly bill, yet to be determined, would be the same for rural customers as it would be for those in the city. The cooperative, called RS Fiber Cooperative, has been created, and those who sign up for service would become its shareholders.

The project isn’t a done deal – but folks are optimistic…

If the project flies, the $15 million startup loan would be used to draw additional funding of up to $40 million from banks and government agencies to complete the project. Because the cooperative wouldn’t need all the money at once, it would save on interest. It also wouldn’t have to set aside millions for a debt service reserve fund, necessary under the original bonding scenario.

“What this new financing scheme does to the business plan is remarkable,” said Mark Erickson, the city administrator for Winthrop who has been the leading advocate of the fiber project. He thinks the network would cost around $55 million all told, significantly less than the original $70 million price tag, meaning it would need fewer subscribers to break even. “Under the revenue bond scenario, we had to borrow $70 million dollars,” he said. “We had to borrow $15 million beyond construction, $5 million for the reserve fund and $10 million for interest payments and we had to borrow it all at once.”

“Under this scenario, the risk drops,” he said.

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