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Duluth sets aside funds for potential fiber optics system

The city now has placed more than $1.9 million in a "Broadband Enterprise Fund."

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DULUTH — While the City Council has yet to authorize staff to proceed with efforts to construct a municipally owned fiber optic network in Lincoln Park, it has already begun to move money around in anticipation of the proposed pilot project.

Last week, councilors unanimously voted in favor of a resolution to transfer $936,397 from decertified tax-increment financing districts into a newly established “Broadband Enterprise Fund.”

When questioned about the fund, Noah Schuchman, the city’s chief administrative officer, assured councilors the funds could be put to use only with their express approval.

Schuchman noted that the council had established the fund in early December and described its action Dec. 19 as “a companion item” that “simply moves money into that fund, so we are able to put that money together to bring a proposal to the council for the broadband project.”

He went on to say: “This action does not commit the council or the city to moving the pilot forward. It does not commit the council or the city to approve that pilot. But we can’t bring you a funding package if we don’t have a place to put the funding.”

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Yet another $1 million in federal pandemic-relief funding from the America Rescue Plan Act had already been funneled into the broadband fund, as the result of a Dec. 5 council resolution.

Schuchman stressed that the decision to earmark funds for a broadband project could easily be reversed later, if needed.

“If there is no pilot program — if it is not approved to move forward — this money can be reallocated at a later date,” he said.

If approved, a proposed $5.5 million pilot project in Lincoln Park could lead to the installation of a city-owned high-speed fiber optic network that would provide access to multiple internet service providers. The open-access system is intended to foster competition, delivering faster, more reliable service at a more affordable cost to consumers.

The city continues to pursue state and federal assistance, as it prepares for a possible foray into the internet business.

If the pilot project in Duluth’s underserved Lincoln Park neighborhood proves successful, Mayor Emily Larson has suggested the city could consider building out the network to reach all interested residents.

Schuchman assured councilors that moving the tax-increment financing dollars in question would have no impact on other projects.

“This is excess TIF money that we have targeted for potential use on this pilot,” he said.

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Jennifer Carlson, Duluth’s finance director, explained that a tax-increment financing district is decertified when enough taxes have been collected to fulfill all the stated financial obligations that accompanied the creation of that district. Tax-increment financing is a form of business subsidy that uses new taxes generated by redevelopment in an area to cover certain qualified development costs for a defined period of time, after which the district is dissolved and all future property taxes flow in full to local units of government: primarily, the county, school district and city.

“So, we have enough tax increment set aside for these two districts. Therefore, we return the excess to the county to be distributed to the taxing authorities. So, the county, in turn, sent us our portion, and this is our portion of that decertification. They are one-time funds that came back to us,” Carlson said.

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Peter Passi covers city government for the Duluth News Tribune. He joined the paper in April 2000, initially as a business reporter but has worked a number of beats through the years.
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