Featured, Fort Collins, Larimer County, Municipal Broadband, Original Report, Sherrie Peif

Fort Collins Connexion losses grow in third quarter; mirrors national municipal broadband trend

FORT COLLINS — For the third straight quarter Fort Collins continues to show slow progress in getting its municipal broadband effort — Connexion — up and running. In fact, the numbers continue to get worse toward years end, with operating revenues nearly $3 million below budget, almost double the loss the self-supporting enterprise venture saw in the second quarter and seven times worse than first quarter.

Connexion officials blame the slow start up on delays with the setup of a billing system, a difficult 2019 winter and COVID-19. However, officials also cite vague and inconsistent reasoning for what they say is an intentional slowdown of the launch.

“While the Connexion Budget included an aggressive launch schedule, the Connexion team intentionally chose to take a controlled release approach for launch to ensure processes and procedures were in place before full ramp up,” the third-quarter report says.

Complete Colorado has been following issues with municipal broadband ventures across Colorado for the past two years, including in Fort Collins, Greeley, Loveland and Longmont, as well as reporting on how municipal broadband systems are failing nationwide.   A University of Pennsylvania Law School study looked at five years of official data, finding that “11 out of the 20 fiber networks assessed do not generate enough cash to cover their current operating costs and only two out of the 20 are on track to recover their total project costs during their 30-40 years of expected useful life.”

To date, in its first year of operation, Connexion’s financials have shown a grim picture. It has yet to hit budget on its operating revenues with a $376,000 shortfall in the first quarter and a $1.6 million shortfall in the second quarter.

Although the slow start up has lowered the budgeted operating expenses too, investment income — which helped maintain a positive cash flow — also continues to decline. The result is net operations projections, which were already budgeted to lose money the first year, are performing worse than projected. Third quarter, which was budgeted for a $1.3 million loss, came in at a $1.77 million loss, instead.

Connexion officials continue to say construction is on time and within budget, however, they also admit that costs increased because of unforeseen issues.

“We are approximately 49% spent on Construction Budget which is on target,” the report reads in one spot, but continues with “construction in the initial areas required a significant amount of new boring, which incurs a higher cost.”

Officials say that they anticipate using more existing infrastructure resulting in a lower cost in the future, but with under 50 percent of the project completed, any additional problems could spiral into much larger expenses as construction costs continue to increase in general.

Sarah Hunt, of Hunt Public Policy in Fort Collins, said this project is not sustainable.

“With every new quarterly report, we see their construction fall further behind schedule, with no sign of catching up,” Hunt said.

Despite Connexion officials claims that “all construction work occurs in public right of way,” and “our crews do the best to minimize damage to landscaping and irrigation systems,” Complete Colorado is also looking into reports that Fort Collins has had to repair damages to numerous private properties, causing bigger budget implications of those problems, including more than $25,000 paid to one outside contractor on Aug. 14 for sprinkler and sewer line damages.

Connexion will need to pay back about $245 million in debt, including interest, amounting to about 30 percent of the Fort Collins residents needing to subscribe to break even.

If Connexion fails — or even slows considerably so that payback cannot be made through subscriber revenue — electricity consumers will be forced to pay back the debt via increased electric rates, regardless of whether they were broadband subscribers.

“City Council and (Fort Collins City Manager) Darin Atteberry need to stop discussing Connexion in executive session, behind closed doors, and instead have honest and hard conversations with the citizens who are on the hook if their rosy projections fail to materialize,” Hunt said.

The number of signups continues to be held in secret, as the city claims much of its information to be proprietary and a just cause to hold executive sessions.

Complete Colorado has previously reported on issues with Fort Collins and its lack of transparency with Connexion.

“Perhaps the most troubling aspect is the lack of transparency,” Hunt said. “The city claims not to be tacking how many subscribers they have, yet professes the project is going as planned. How can they know the project is on schedule if they don’t know how many customers they have?”

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