Lake County network – might cost locals money but it has opened economic opportunity

Earlier this week, I posted about Lake County receiving the first bid for their network. (Quick recap – Lake County got federal funding in 2010 to build the network; it is for sale.) Now the Lake County News Chronicle reports…

While getting out from under a $48.5 million debt for less than $5 million seems like a sweetheart deal for Lake County and the winning bidder, local property taxpayers are still on the hook for more than $25 million.

When the Lake County Board of Commissioners voted last week to approve a $3.5 million purchase agreement for Lake Connections, the county’s municipal broadband internet project, there were some gasps that the federal government and taxpayers could lose up to $45 million in the deal.

And there’s more owed by locals…

However, $45 million spread over the entire nation could be just the beginning of the pain for local taxpayers. According to the county’s 2016 financial statement prepared by the Minnesota Auditor’s Office — the latest statement available — the county’s broadband enterprise fund owes more than $14.3 million to the general fund and $3.3 million to the Health and Human Services fund.

In addition, the county bonded for $7.24 million in April to settle its debts with Rohl Networks and MP Nexlevel, the two main contractors on the Lake Connections project. The 15-year bond’s 3.17 percent interest rate means the county will owe an additional $2 million in interest and will owe an average annual payment of $610,000 — roughly the same amount the county has dedicated to supporting the broadband network over the past few years.

The broadband project encountered numerous hiccups and cost overruns during and after construction, forcing the county to dip into its general and health and human services funds to make up the difference in its broadband fund.

But if the county’s funds dedicated to the network remain at current levels, the county will still be more than $17 million in the hole when the bond is paid off.

All things being equal of course it would be nice to see the network more solvent for the ones who built it. And there’s a lot of math going on in the equation so I’ll go with the largest number, which was quoted in the headline – $25 million. The county taxpayers may still owe $25 million for the network.

I mentioned in my last post that I happened to look at Lake County last year for a research report. We found that the increased economic benefit to the county was $13,695,550 annually – that comes to $1,850 per household connected. As more people get connected the annual community economic benefit will increase. So within two years, the economic benefits for the community members (taxpayers) will surpass the amount owed.

That doesn’t mean the community/taxpayers will be cutting a big check at the end of each year. I assume there will be longer terms with which to work. But as a taxpayer, I’d be happy to pay back a portion each year for the increased economic benefit. Also – with broadband my house value increases 3 percent. In Lake County (tallying all of the houses with fiber) that total increased value is $38.5 million.

Again, we’d like to see everything succeed – but when the community members benefit, it’s difficult to see this as a loss.

This entry was posted in Funding, MN, Research, Vendors by Ann Treacy. Bookmark the permalink.

About Ann Treacy

I have a Master’s Degree in Library and Information Science. I have been interested or involved in providing access to information through the Internet since 1994, when I worked for Minnesota’s first Internet service provider. I am pleased to be a part of the Blandin on Broadband Team. I also work with MN Coalition on Government Information, Minnesota Rural Partners, and the American Society for Information Science and Technology.

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