The federal government stands to lose up to $45 million on Lake County's broadband project, Lake Connections, after the county accepted an initial bid of $3.5 million in its planned sale of the broadband network.
Pinpoint Holdings Inc. of Lincoln, Neb., submitted the bid for the network, which will serve as the minimum purchase price for the network in a sales procedure also approved by the county during its meeting Tuesday, July 24, in Two Harbors.
In 2010, the board received a $56 million loan and $10 million grant from the Department of Agriculture's Rural Utilities Service (RUS) to construct the network and over three years, more than 1,200 miles of a fiber network was built throughout Lake County and parts of eastern St. Louis County. Most of the network was completed in June 2015, and the focus shifted to connecting eligible customers to the network with the county pledging $15 million of its own money to fund "drops," or home connections, that also included a $3.5 million grant from the Federal Communications Commission.
On June 13, 2017, the county entered into a deferral agreement with RUS for principal and interest payments on the condition Lake County sell Lake Connections to provide the federal government with maximum recovery of the loan and grants. When the deferral agreement was executed, the county owed approximately $48.5 million on the RUS loan.
In August 2017, the county executed a memorandum of understanding with RUS in which RUS agreed to accept the sale price of Lake Connections in full satisfaction of the county's debt for the construction of the network, according to documents provided by Lake County Administrator Matt Huddleston. If the Pinpoint bid is the winning bid, RUS will receive $3.5 million to satisfy the $48.5 million debt.
In the sales procedure approved by the board Tuesday, July 24, potential buyers can submit a bid for the broadband network.
Lake County has worked with RUS and its attorneys to create a "reading room," a virtual repository for which information about the network can be stored for bidders' review. Bidders must execute a confidentiality agreement to access the information and provide a $100,000 deposit in the form of a cashier's check or wire transfer. If the company's bid is unsuccessful, the deposit will be returned.
Once the bid deadline passes - a date the county and RUS plans to set in the next month - bids will be analyzed to determine which offers will be treated as "qualified bids."
If more than five qualified bids are submitted, the top three bidders will be asked to submit a "best and final offer" within 10 days. If there are less than five qualified bids, each entity will be asked submit a final offer.
After receipt of the final bids, the county and RUS will evaluate each offer to determine which bid is successful. The county may look past an "apparently higher bid" if the county and RUS "reasonably conclude the higher bidder may not be able to close in a timely basis or for any other reason," according to the documents.