Those who questioned the ability of Lake County to construct and financially manage something as complex as a proposed $70 million telecommunications network were quickly dismissed nine years ago by the project's proponents. In early August, Lake County taxpayers learned from an article in the Lake County News Chronicle that they now are on the hook for nearly $25 million for the county-owned broadband network Lake Connections.

Annette Meeks
Annette Meeks
With a "fire sale" of the network now underway, this appears to be a good time to revisit the project and learn what went terribly wrong and how others can avoid the same mistakes.

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The Lake County News Chronicle reported that the project faced "countless delays," starting with "a contentious leadership change in the early days (that) continued through lawsuits, federal inquiries, utility pole ownership questions ... and fierce opposition from local service providers."

Yet from the very beginning, county officials were adamant Lake Connections would not be a burden on local taxpayers. Elected officials made bold statements about not needing Lake County taxpayer support. They boasted about the eventual profitability of a county-owned network. Examples:

A "Lake County Fiber Network Project" question-and-answer document that was removed from the county website several years ago stated: "The fiber network will be financed by the operations revenue of the network. Lake County is acting as the conduit to receive federal financing to build out the network. The taxpayers will not be responsible for any debt. This was one of the major reasons for the county moving forward on this."

The document further stated: "National Public Broadband is developing financing applications for federal stimulus funding as well as other sources. No taxpayer funds will be pledged to fund the network."

In a Sept. 17, 2010, news release announcing the awarding of $66.4 million in federal funding, then-Lake County Commissioner Paul Bergman said, "It will be entirely built and supported by the users of the network, with no local taxpayer pledges or funds."

In addition to not needing Lake County taxpayer support, proponents touted the notion that Lake County would see profits from the broadband network in just five years.

The Lake County News Chronicle reported in June 2015 that the county website said the project was "unequivocally" not a burden to local taxpayers. The article added that the tax levy the previous year increased 9 percent and that "commissioners admitted that there would be a budget surplus if it weren't for the broadband project."

Unfortunately, Lake County's promise to not impact taxpayers was broken in February 2011 when the Lake County Board voted to contribute $3.5 million of county funds to supplement the $66.5 million in federal grants and loans. This was the first step in accumulating $25 million in local debt. Since that time, the county has "borrowed" $14 million from the county general fund, $3.3 million from the Health and Human Services fund, and $7.24 million in bonds to settle debts from contractors.

Lake Connections has been a financial albatross to the taxpayers of Lake County, and even when Lake Connections eventually is sold there won't be any good news for local taxpayers except that the county budget will no longer have to support the failed endeavor.

Yet, sadly, some on the County Board have said they would do it all over again if given the chance.

Today, five years after construction was complete, the broadband network isn't profitable. While the county can point to a handful of new jobs, we know now that local taxpayers subsidized the failed broadband project to the tune of $25 million - nearly $2,400 for each resident of the county. This is hardly the kind of economic development project proponents suggested when rushing forward to build a complicated telecommunications network.

The sad lessons learned from Lake County's attempt to construct a municipal broadband system will continue to roll out as the county conducts its fire sale. The federal government has agreed to forgive whatever debt remains to be paid from federal government loans once a private purchaser is found for the system. But the pain here in Minnesota will be felt for quite some time as local taxpayers are forced to absorb $25 million in debt for a project that was never subject to a vote of the people of Lake County.

The broader lesson to be gleaned from Lake County's disaster is the most important one: Providing high speed broadband service in large, rural areas is complicated, costly, and, ultimately, highly competitive. And it's not something local governments should be doing.

 

Annette Meeks is CEO of the Minneapolis-based Freedom Foundation of Minnesota (freedomfoundation.publishpath.com).