Charles City Fiber continues search for financing options

By Bob Steenson, bsteenson@charlescitypress.com

The Charles City Telecommunications Utility Board continues to look for funding for a proposed fiber broadband network to serve the community, and has begun to look more closely at choices that may be necessary to make that possible.

Among those options is phasing in the system throughout the city, potentially over a period of time that could run into years from the time the first customer lines are installed until the final ones have service.

Another option is looking for a public-private partnership, where a private company would have some involvement in the system — and possibly some say in how it is operated.

At the utility board’s previous meeting earlier this month, it talked about possible partnerships to share the cost of building the underground fiber line that would run from Mason City to Charles City, with the idea that if the board could reduce some of those transport leg costs, it would be easier to get financing for the rest of the project.

The idea at that time was to come up with a group of equity partners that would pay to install the fiber and lease most of the fiber strands to other businesses and groups to earn a return on their investment.

The Charles City utility would trade the engineering design work for the route that it has already paid for, in exchange for dedicated access to some of the fiber strands for the utility’s own use.

But Todd Kielkopf, president of Kielkopf Advisory Services of Des Moines, the board consultant who had envisioned the idea, said at a utility board meeting Wednesday that he has found fewer willing partners than he had hoped for to be part of the equity group.

The problem, he said, is there is apparently more transport fiber in and around Charles City already than previously thought.

“The assumption was that it was going to be relatively easy to find, let’s say, two or three partners that would want to buy 30-year strands on that transport fiber,” Kielkopf said. “To date I have one person that’s interested in a multi-pair arrangement for ownership. I do not have a second or a third.”

There’s a deadline coming up to create this equity group, because another company already plans to install a fiber conduit between Mason City and Charles City for its own use, and it is willing to install a second conduit in the trench for the equity partners and share the installation cost.

That company has already received bids on the project and is ready to start work this spring. Kielkopf said the utility board has three weeks to a month to make a commitment to that company to share costs before it does its own design work.

There are three parts to the fiber network — the west leg between Mason City and Charles City, and the east leg to New Hampton, down through Waverly to Cedar Falls. The third part is the lines that must be installed within the city of Charles City to feed the network of individual homes and businesses.

Kielkopf said some savings could come from phasing in the community system, using a direct loan instead of bonding, so the funding could be drawn down as needed and would not require bonding to cover the entire interest and reserves cost of the project up front.

He said he doesn’t currently have the numbers for potential customers in each part of town to be able to see how that phasing might work, and suggested the city contact the engineering firm, NewCom Technology, that had done much of the initial design work as a subcontractor to Lookout Point Communications of St. Paul, Minnesota, another consultant.

Kielkopf said NewCom might be willing to do the work on a contingency basis, waiting to be paid if and when the telecom utility gets funding, just as Kielkopf is currently doing. But he wants the city to make that contact.

Mayor Dean Andrews asked what kind of timeframe was being considered for phasing in the project.

“I don’t know. That’s why I want you to engage an engineer to try to get an estimate on that,” Kielkopf said.

Andrews said, “I understand the phasing that it cuts back on your initial cost. I just think if it’s going to be five years from when one person on one side of town has it before the person on the other side of town has it, we’re going to catch a lot of flack.”

“Yeah,” Kielkopf agreed.

City Administrator Steve Diers responded, “It might be, ‘It is what it is,’” implying a phased project might be preferable to no project.

The utility board had originally planned to wrap up funding by late last summer, using revenue bonds that would be repaid from the revenue that would come from selling the internet, television and phone services that would be available on the network.

After months of delays, the board “hit pause” in November after being unable to find the $22 million in financing the project needed up front, at terms that were financially feasible.

Andrews said he had listened to a webinar that Kielkopf had done recently with two other consultants who also had worked for Charles City, and they talked about public-private partnerships as a way to make community broadband systems work.

“Are we at the point where we need to consider a public-private partnership with somebody?” Andrews asked.

Kielkopf said his inclination is to continue working on interest in partnerships for the transport fiber first, but there are businesses that have shown interest in a partnership with the city already for the community service, and he could contact them and start discussions.

Danny Wilson Jr. and Jeff Marty, utility board directors who work in the industry, both cautioned that any partnership would have to be careful not to give up control over the system.

“Whenever we integrate with a partner, then for good and bad, both, we give up some form of control on that,” said Wilson.

He said if the city did look for a partner, “We’d want to pursue a solid entity that’s done this type of thing before, and not just something new, fresh out of the gate.”

Diers agreed with Kielkopf that there has already been potential interest expressed by other businesses in a public-private partnership.

“I think there might be some opportunities out there to at least look at, certainly, keeping in mind just what you guys said. If that’s the route we go we want to be able to keep that local control to the degree we can. So we don’t end up in the same boat we’re in now,” Diers said, referring to private businesses that control internet access in the city.