City of Arlington’s Likely Rejection of Broadband Plan a Big Blow to Proposed $70M Network

City council majority signals opposition amid concern over taxpayer risk and role of government
 
The city with the greatest number of potential subscribers for the proposed $70 million public broadband network in Renville and Sibley counties is poised to pull out of the project, taking 12 percent of the system’s population base with them. The Arlington City Council is expected to vote today against paying a second $10,710 installment to the fiber project, due to a range of concerns over the network’s viability.
 
“It’s a great idea with a bad plan,” said Jim Kreft, mayor of Arlington.  “I am proud of our council and our staff for examining the project at face value and examining the numbers. No one can refute the advantages of technology, but the numbers just don’t work.”
 
The timing couldn’t be worse for the RS Fiber network, which hopes to provide high speed internet, video and phone service to some 8,300 homes, farms, businesses and government entities in Sibley and Renville Counties.  In the next few weeks, Arlington and ten other communities, along with both county boards, will be voting on whether to move forward with $70 million in bonding to build the network.  The loss of Arlington’s 1,000 potential subscribers could significantly affect RS Fiber’s financial projections.
 
An apparent consensus on the Arlington city council developed at a March 6th public workshop. At the session, city officials reviewed a 9-page document listing the proposal’s pros and cons. “I think the question of whether or not we can do this project has been answered. However, I’m not sure if the question on whether or not we should be doing this project has,” wrote city administrator Matt Jaunich in an accompanying memo.
 
The city analysis included a list of potential education, medical, entertainment, governmental, public safety and economic development benefits. The list of concerns was equally lengthy, however, citing taxpayer risk, construction costs, budget implications, pricing wars with private providers, and the proper role of government.
 
City officials also expressed concerns over Arlington’s financial obligations to a $4.5 million backup fund in case of cashflow problems. “It is our belief that the risk to city residents is twice that of non-city/township residents. We have also yet to receive what the City’s proportion of the $4.5 million debt service fund will be,” according to the city analysis.
 
Another key question involves which areas will be connected first to the network. The $70 million bond issue will leave about 30 percent of the coverage area without service, also raising questions about how much it will cost to complete RS Fiber. The analysis also cited a 2011 report by the Governor’s Task Force on Broadband, which stated that 39 percent of rural households do not subscribe to broadband when given the opportunity. “If tax dollars are put into the project, there is the possibility that property owners who do not have access must still pay for the system in the form of higher taxes,” the city analysis said.
 
RS Fiber proponents did not respond to inquiries from the Freedom Foundation of Minnesota. The RS Fiber website maintains that tax dollars will not be used to build the system or to guarantee the bonds that will be purchased to finance it.  Arlington’s analysis, however, cited millions of dollars in red ink being run up currently by the city network in nearby Monticello, Minnesota. “Research shows that municipalities would rather not see a failed system and continue to support the system, generally with taxpayer dollars…If the project was to fail and we let it go back to the bond holders, it would likely negatively affect our taxpayers by resulting in increased borrowing costs (interest rates) for future bonding projects.”
 
The Arlington Enterprise’s coverage of the workshop indicated that at least three out of five council members opposed RS Fiber at the public forum. “Nobody from the city tells me that they want it,” said city council member Jim Pederson, according to the paper.

City of Arlington Memo RE: RS Fiber Project
                                                                                             
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