Friday, Feb. 15, 2013
Broadband feasibility still in question
By Bethany Bashioum
The feasibility of the county’s broadband project is getting slimmer by the day.
“The overall problem that we have, and what we’re grappling with, is the further away we get from feasibility and having a good, firmer idea of whether the project is feasible, and the harder numbers, and the further down we get from that process, the more it’s costing us to get there,” Presiding Cass County Commissioner Jeff Cox said.
Completion of the fiber network is estimated to cover 1,286 miles throughout Cass County, and would make high speed internet service available to 11,592 households and 701 businesses.
The overall budget for the project still stands at $26 million and is being financed by the United States Department of Agriculture through a 70 percent grant and 30 percent loan program.
Cox said the county’s loan portion would be paid back over about 20 years once the project is completed using revenues generated from the service.
As of Dec. 31, 2012, Cox said a reported $927,000 has been spent from USDA funding.
However, as the Commission attempts to pick up the pieces of the unfinished project that began two years ago, a field representative from the United States Department of Agriculture informed the Commission that the county’s financial funding stream from the USDA has effectively been frozen due to the 2011 Broadband Single Audit Report not yet completed.
The Commission held an executive session regarding the 2011 audit in early February, but Cox said he couldn’t comment on the specific reasons for the delay, but did state that the county has requested 60 days to finish the single audit as well as for the USDA to release $326,000 to reimburse recent engineering costs.
In relation to the broadband project, Cox said the county is also on the hook for $4.2 million in certificates of participation the previous Commission took out.
“They basically took all the money out at once, and all the interest has been recurring regardless of whether we spend it today or tomorrow,” Cox said. “We have about $2.65 million that is available on those, so I believe that we’re at about $1.5 million on debt that has been occurred.”
Cox said the county has a payment due May 1 to the tune of $500,000 on the COPs, which is not an elgible cost that the USDA would consider covering.
“The assumption was that we were already going to be making money off of (broadband) by now and having revenues coming. Of course, none of that is happening because we haven’t laid a foot of cable in the ground,” Cox said.
Cox said the plan the previous Commission proposed in the current budget is to borrow additional funds out of the COP to pay the $500,000 that’s due.
While Cox has vocally expressed his displeasure in the project, he’s committed to seeing if the project has a chance at being feasible.
In the coming weeks, Commissioners will be reviewing requests for qualifications, requests for propoals from construction engineers and bid specifications from the enginer.
On Thursday, March 14, Commissioners are expected to open the sealed contractor bids.
“Part of the problem is the timeline is very compressed and truncated, and everything is moving very fast,” Cox said. “When the new Commission came on – just to keep this thing going on a long-term schedule to do the buildout by September 2015, there’s just so little time to put these things on hold just to take a general deep breath and look at these types of thing. Once we see the solitation of interests and the bid specifications, that is one thing that will give us an idea on feasibility.”
Cox said that while things are appearing to move very quickly, the county is also aware that they are incurring engineering costs rather fast, in the amount of $20,000-$35,000 a week, but that is moving the county closer to understanding the feasibility of the project.
“On one hand, we want to get as much information as possible, but on the other, we’re spending lots of money to get there,” Cox said. “One of the biggests issues that I have on all of this, when you look at where we’re at now, we at least want to have some idea on liability because if we walk away today, and just don’t do it, the question is what kind of funds are we going to be on the hook for?”
Cox said he thinks that the county should explore all options, including not moving forward with the project.
“We would certainly have to eat those loans and pay those back but the question that comes up is would the county have to pay the grants back? Of course, the USDA is not going to tell us, ‘No, you wouldn’t,” Cox said. “They might just let us walk away from those grants, but that’s not a risk I’m willing to take. I think we need to plan for the worst and wish for the best.”
Cox said he believes that the county needs to operate under the assumption that if they don’t move forward with the project, the county needs to be prepared from a budgetary standpoint for every dollar that it has been drawn through the USDA and that taxpayers would be on the hook for.
“What’s in the back of my mind is the possibly that we don’t move forward,” Cox said.
He’s also worried about the initial build out of the project going over budget.
Cox said there are some other costs that haven’t been budgeted, such as inspections, right-of-way and maintenance costs, as well as the costs that will be incurred to drop lines at residences.
“When you’re talking about $26 million, this has the capacity to theoretically bankrupt the county, based on the money involved,” Cox said. “A screw up on this is much more risky because there is so much more money involved and the taxpayers will end up on the hook.”
Cox summarized the decision of whether or not the Commission will move forward is the battle of the risk versus the reward.
“The reward is making this service available to the 11,000 households where it’s not now,” he said. “The biggest concern that I have right now is protecting the taxpayers in the county. I am much more concerned with risk mitigation than I am with profit generation.”
Cox said a decision of whether the county will move forward will soon be made.
“We are going to come to the decision point very soon because the further down the rabbit hole that you get, the more money it’s costing you to get there,” he said. “You can talk about Universal Asset Management and the mistakes the prior commission did or didn’t make all day long, but I think the new Commission has tried to take a honest look at this and a good look at viability and does it make sense to the taxpayers?”
Note: Due to the Cass County Commissioner’s new meeting time of 2:30 p.m. on Thursdays, the Democrat Missourian’s coverage of the meetings will begin being published online on Fridays, and in print the following week.