Letter to the Editor: Questions funding for fiber project

By Chip Baltimore, Senior Fellow, Taxpayers Protection Alliance

At their meeting on Sept. 9, the Charles City City Council will consider a request from the Charles City Telecommunications Utility to expand the city’s loan of funds to the Telecommunications Utility from $1 million to $1.2 million, purportedly to allow the Telecommunications Utility to complete its financing. I urge the council to reject this request at this time.

Since this fiber-to-the-home project is so close to becoming a reality, why should the council put on the brakes now? For the simple reason that nothing it or the public were initially sold on this project has turned out to be true. And it’s time that someone took a truly independent look at this project to determine whether it is honestly economically feasible.

The city’s highly-paid consultants initially told the public that the cost of this project would be $11-11.5 million, would require borrowing of $12 million, would require the city to advance $400,000 to the telecom utility for startup costs, and required only 44% of the market to break even.

Now, only two years later, the costs have risen to $18 million, will require borrowing of “up to” $22 million, and will require the city to loan the telecom utility $1.2 million for startup costs. Yet these same consultants are still claiming that the telecom utility only needs 40% of the market to break even – a claim that defies simple economic logic.

When asked repeatedly for the business plan that shows this, the telecom utility hides behind “confidentiality” to keep anyone in the public from overseeing or second-guessing what the consultants are claiming.

No one is claiming that the City Council or the Telecommunications Utility Board members are not trying their best to make this project happen or that they are acting with any improper motives. However, when over three times more of the taxpayers’ funds are being advanced than initially projected, the numbers have changed by more than 50%, and financing is still not in place, but the required market share is arguably still the same, the public deserves more of an answer than “trust us and our consultants.”

Using $1.2 million of local taxpayer funds to fund a “never been done before without a municipal electric utility” project requires transparency, something this council and utility board refuses to provide.

The time has come to seek a feasibility study from an independent source, one that does not have a financially-vested interest in getting this project started. Once it starts, the consultants will take their money and run, leaving the city, its citizens, and the local banks and bond buyers holding the “never been done before without a municipal utility” bag. The substantial discrepancies between the initial plan and the final product make an independent feasibility study only prudent.