Lake Connections is looking for a buyer

Minnesota Watchdog reports on the status of the Lake County community broadband network… (The Watchdog looks at public funding for projects to “expose the facts about government mismanagement and overreach.”)

 Lake County is trying to find a private provider to buy its taxpayer-funded Lake Connections network in part because the county doesn’t want to sink any more money into the business and also in part because – irony alert – county leaders believe a private provider will better be able to quickly connect eager customers.

The project received $66 million in grants and loans through the U.S. Department of Agriculture’s Rural Utilities Service (RUS) as part of President Barack Obama’s stimulus legislation. In total, more than $80 million has been sunk into Lake Connections, including federal and local tax money.

And here are some of the most recent numbers…

After seven years of operations, Lake Connections has 2,500 customers, with 750 more interested parties waiting for service. In addition to owing the federal government (taxpayers) $48.5 million, Lake County has put $17 million of local taxpayer money into the project.

Despite those heavy costs, the county is trying to sell Lake Connections for around $20 million. To get that value, bureaucrats assume $180 in revenue per month for each customer and a cash earnings margin of 50 percent.

But they recently announced the highest bid for the network was $3.5 million from Pinpoint Holdings, Inc. of Lincoln, Nebraska. Lake County will continue to accept bids, hoping to get a higher price. If $3.5 million is the final sale price, then federal taxpayers get to eat the $45 million difference between what’s still owed to RUS due to an agreement that the sale price will fulfill the balance of the loan.

The Lake County Board of Commissioners voted in April to approve a $7.24 million general obligation judgment bond to pay off contractors it still owed for the construction of Lake Connections.

We looked at Lake County as part of the case studies we did last year on the community return on public investment. We found that in seven years, the increase in household economic benefit would surpass the debt. That doesn’t necessarily mean the households pool that money to pay off the debt but there have been economic benefits.


This entry was posted in Community Networks, Funding, MN 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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