Tonka Disconnect: Shorewood Pulls Plug on Joining Costly Taxpayer-Funded Telecom Network

Sets stage for critical August decision on $81 million fiber project in western suburbs 
 

SHOREWOOD, MN- Tonkaconnect, an $81 million proposal to provide taxpayer-funded internet, phone and cable fiber optic services to communities in the Twin Cities western suburbs appeared to be gaining momentum—until the city of Shorewood recently started asking questions.
 
In a June meeting, the Shorewood City Council stunned Tonkaconnect supporters by dismissing the need for the proposed network and voting 4-1 to reject participating in it. Concerns about cost, the proper role of government, long-term risk to taxpayers and the project’s viability dominated the discussion recorded in meeting minutes. Shorewood comprises about ten percent of the 25,000 households in the proposed coverage area.
 
Until this stunning reversal, Tonkaconnect appeared to be on the fast-track for approval.
 
spring survey released by the Lake Minnetonka Communications Commission (LMCC) revealed that most residents were satisfied with the existing private providers serving broadband needs in the 17 participating communities. However, Tonkaconnect supporters also said that the results indicated openness to a government-funded competitor, but only if prices were the same or lower.
 
“We truly have un-served and underserved pockets throughout the coverage area,” said Dick Woodruff, longtime proponent and Shorewood city councilor. ”So what we feel is that we’ve been asked by the constituency to go off and see if it makes sense. And the only option we see in front of us is to do it ourselves.”
 
Nothing seemed to be standing in the way of taking the next step, a $60,000 contract for a business plan that’s coming up for an August LMCC vote—nothing, that is, until the mayor of Shorewood put her foot down.
 
“I don’t think any other city has brought this question back to their city council and the thing is, they have this plan that I believe would cost over $80 million!” said Shorewood Mayor Christine Lizee.
 
“This is a want, it’s not a need,” said Mayor Lizee. “Is this the role of your local government to provide this service? The majority of our city council says no.”
 
Every Shorewood City Council member voted to reject the project except for Dick Woodruff, who also chairs Tonkaconnect’s working group.
 
“I think it was a very ill-advised decision and that at least a couple of the people on the council had no idea of what they were voting on,” Woodruff told FFM. 
 
In effect, the LMCC would be proposing to launch a competitive broadband alternative, while at the same time have regulatory authority over existing providers.  Interestingly,, the LMCC has been financing its efforts with franchise fees paid by Mediacom and collected from Mediacom’s customers, spending about $64,000 thus far.
 
“I’d like to have higher download speeds and all that but I think it should come from private enterprise,” said Scott Zerby, a software programmer and Shorewood city councilor. “I think they’ll continue to expand their systems and I’m sure they’ll continue to upgrade to fiber as it’s economically viable.”
 
Tonkaconnect would be governed by a separate entity outside LMCC and its 17 member cities. Supporters say the estimated $81 million cost of the fiber to the premise (FTTP) system would be financed by issuing revenue bonds to be paid back from revenue received from subscribers to the new system. Skeptics say a likelier outcome is that Lake Minnetonka area taxpayers will ultimately foot the bill or guarantee the bonds, an outcome based upon previous experience with municipal broadband service.
 
A key question involves a nearly century old state law that requires local governments to receive 65 percent of votes cast in a referendum in order to own and operate a telephone exchange.  LMCC officials acknowledged putting the issue to voters in a referendum could be risky.
 
“Other government entities, municipalities and counties, are looking at this 1915 legislation,” Woodruff said. “It’s one of the things that has to be dealt with along the way.”
 
Yet another vote that’s already scheduled may determine Tonkaconnect’s fate even sooner. On August 16th LMCC representatives from each of the 17 member cities will vote on whether to proceed with the business plan and financial model that would lay the groundwork for financing the project.
 
“It really does hinge on this vote,” said Sally Koenecke, LMCC executive director. “There’s no way we can get the information we need other than to do this. Unless this is funded, I don’t think the project will move forward.”
 
Will Shorewood’s decision to pull back from Tonkaconnect result in a domino effect and lead other cities in the LMCC consortium to follow suit?  Stay tuned. 
 
 
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