Coronavirus, Featured, Municipal Broadband, Original Report, Sherrie Peif

COVID-19 economic fallout may have long term impact on municipal broadband plans

DENVER — Communities across Colorado are facing a long road to economic recovery due to state and local lockdown orders forcing the closure of many businesses, resulting in massive layoffs.

The need to get economies up and running sooner rather than later, may put the already questionable trend of municipalities entering into the broadband business on the back-burner for the foreseeable future.

“I don’t see anyone wanting to put more onto their plate than is already there,” said Johnstown Councilman Troy Mellon.

Mellon’s remarks came just two days after his Northern Colorado community voted to opt out of a statewide preemption under Senate Bill 05-152, which allows local municipalities to create their own broadband enterprise if they choose.

Passed in 2005, SB 152 was initially designed to allow rural communities to offer their residents options for high-speed internet because many traditional private companies didn’t see value in the investment.

It required local communities to ask voters first, however, if they would support the municipality investigating the option. A successful 152 vote does not commit a community to offering its own broadband as a utility, which Mellon reiterated.

“We have no plans to implement anything,” Mellon added. “We just wanted to take back our local control that we should have never lost.”

That hasn’t been the case for many communities. For the past several years, an unproven public perception that municipalities can supply a superior broadband service at a lesser cost has led to the trend to do just that, with cities and towns usually citing the need to promote competition, ensure all residents have access to broadband, and to close the digital divide among low income residents.

They’ve used other city-run utilities, such as electricity, to back the multi-million-dollar investments. The municipal broadband bonds are guaranteed against those other enterprise revenues. If the broadband venture fails, electric customers will see their rates increase.

Longmont and Fort Morgan continue to boast success with their own systems; however, both of those communities got into the venture under much different circumstances than other municipalities. The two vastly different communities — one mid-sized city located on the outskirts of the tech-rich community of Boulder, with several large national players offering gigabyte internet service already, and one small rural town in eastern Colorado that had little to no competition and many of its residents unable to get broadband — got into the industry when construction costs were much lower. Longmont had a relatively minimal amount of infrastructure costs because most of the conduit and fiber had been put in place over several years prior, keeping the initial need for bonding ($45 million) much lower than those who have followed in its footsteps.

Fort Morgan not only had much of its infrastructure already in place because it owned all its own utilities but was also able to pay 100 percent of the remaining needed infrastructure ($6 million) with cash reserves from its electric enterprise fund.

Also, because Fort Morgan owned its utility poles, it saved on the costs associated with acquiring the use of those poles.

It leased its infrastructure back to a mid-sized broadband company based out of Nebraska.

Fort Collins, which bonded $145 million, and Loveland, which took on $100 million in debt, may not be as lucky, however. The two Larimer County communities came into their ventures nearly seven years after Longmont.

Fort Collins Connexion is just now beginning to roll out its services — amid much controversy — while Loveland Pulse is just beginning to start laying the groundwork, and with the economic shutdown around Covid-19 putting nearly every government entity in the state in a budget crunch, some are wondering if taxpayers are going to be left holding the bag if the economic fallout causes the broadband experiments to lose steam.

In a recent story by the Fort Collins Coloradoan, even those who initially supported Connexion — the name given to the city’s new broadband enterprise — are questioning the lack of transparency surrounding timeline, costs, and whether the city is behind schedule and budget. Complete Colorado has filed an open records request with the city for further investigation into Connexion as well. Those concerns are compounded by a report released Friday on Connexion’s first quarter of operation in 2020. The report covers the first three months of operation, which encompassed almost entirely all three months prior to Gov. Jared Polis’s stay-at-home order on March 26.

Connexion q1 2020 Quarterly Report by Sherrie A Peif on Scribd

According to the report, the originally projected operating revenues of $387,600, fell short by $376,248, generating only slightly more than $11,000 in its first three months of rollouts.

The report claims the city “intentionally used a controlled release approach for launch to ensure processes and procedures were in place before full ramp up.”

It says there were also delays with a billing system and a difficult winter for Fort Collins.

Yet, cash-strapped residents out of work from the Covid-19 layoffs are likely unwilling to sign up for another expense or even shift broadband providers in an uncertain economy.

Greeley Mayor John Gates said although he believes Greeley made the right choice to say no to broadband investment before coronavirus was even a thought, he also believes those communities that are in the middle of buildout and sales could be facing major complications.

“Covid is going to affect everyone’s budget whether it’s a personal or municipal budget,” Gates said. “It could end tomorrow, and we’ve already had massive effect on Greeley’s budget. We’ve had a hit.”

Mellon agreed, saying his board is more concerned how it can help Johnstown businesses impacted by coronavirus rather than try and fire up municipal broadband. The last thing it needs is more expenses, he said.

“There is going to be significant budgetary issues just to maintain essential services,” Mellon said.

It remains unclear exactly how Longmont is fairing, as well. Complete Colorado has filed several open records requests for updated balance sheets for 2018 and 2019. In 2018, Longmont stopped separating its broadband enterprise liabilities, assets, revenue and expenses from its electric enterprise liabilities, assets, revenue and expenses. Full financials will be reported when that process is complete.

Fort Collins and Loveland officials were not immediately available for comment. Complete Colorado will continue to follow their progress.

Gates said he’s optimistic Greeley’s budget will be OK because of years of smart, conservative budgeting, but he’s extra happy council gave the thumbs down to broadband, adding he would not want to be in the same position as either Fort Collins or Loveland right now.

“Had we decided to go forward with it, we would not have been far enough in, but we would have remained committed to do it,” Gates said. “The budgetary implications are simply massive. We don’t know what the shelf life of this thing (Covid-19) is going to be, and it’s already large.”

Editors Note: Complete Colorado has been investigating municipal broadband isssues for the past 18 months. All those stories can be found by clicking here

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