Access to Broadband is very important to most Marathon County residents. My concerns regarding the proposed Bug Tussel loan guarantees have primarily related to the terms of the proposed loan and the somewhat misleading approach of the attempt to get approval. I am offering an alternate proposal for the Board’s consideration.
Background
The request for $12,000,000 in loan guarantees includes $5,000,000 to finish the towers and middle mile fiber loop through the County; $3,000,000 matching funds for the Leathercamp last mile project; and $4,000,000 to cover interest and payments during the construction and startup time period.
The County has made no financial commitment to the towers and middle mile fiber project beyond the $25 million conduit bond issue in November 2021. Despite this, finishing the project will provide value to County residents relative to broadband access and public safety.
For the Leathercamp project, the County made a commitment in March 15, 2021 to make low interest loans available to PSC grant applicants. Bug Tussel applied for and received a PSC grant for the Leathercamp project. These low interest loans are subject to the County Board’s approval of the terms.
The County Board is currently debating and considering whether to approve the terms of the loan. In my opinion, it would be fiscally irresponsible to approve a loan guarantee for a 30 year term and for an additional 50% in accrued interest and reserves. The 30 year term certainly violates the spirit of the County’s debt policy. I believe the County Board has the right and the responsibility to interpret the County debt policy in a fiscally conservative manner.
Alternate Broadband Loan Proposal
The County Board should consider providing Bug Tussel/Hilbert Communications with a 7 year, $8,000,000 loan with a single balloon payment at the end of the 7 years. Interest would be accrued and payable as part of the balloon payment. The loan would be made from the County’s reserves and would be secured by the appropriate Tower/Fiber loop/Leathercamp assets.
This approach would benefit both the County and Bug Tussel, It is not in the interest of either Bug Tussel or the County to delay or leave the projects unfinished.
The structure of the loan would provide the “runway” needed for Bug Tussel to get the projects finished and build revenue. Much of the risk would be either eliminated or revealed during the first seven years of the project. If the project goes well, it should be much easier for Bug Tussel to secure refinancing for the final years of the project. If the project doesn’t go well, the County can take ownership of the secured assets and determine the best path forward at that time.
I would suggest setting the interest rate at the same rate as that obtained in Bug Tussel’s 2024 conduit bond financing. This would provide the same interest cost to Bug Tussel as in their requested terms and would provide the County with (deferred) income.
The 7 year term gives Bug Tussel the time and funding that they need to finish the projects, but also provides the incentive for them to focus on the projects and make the promised progress.
This project should be completed with our County funds, not by shifting the financial responsibility to our children and grandchildren.
Recommended Action
I am recommending that Supervisors vote no on R-37-24, “Consideration of Final Resolution Regarding Unconditional County Guaranty …”, but make a statement during the discussion and prior to the vote that you would support a 7 year, $8,000,000 loan from County Fund Balance reserves.
County Fund Balance Reserves
At the end of 2023, the County had $38,741,677 in unassigned fund balance in the General Fund. The County has additional fund balance in various other funds.
The following table is from page 44 of the attached 20240807 HRFC packet.
To be fiscally responsible, the County needs to maintain a minimum balance in the unassigned fund balance for working capital.
The following chart shows the additional County Fund Balance reserves (the red line) above the minimum recommended by GEOA (the cyan line at 16.7%).
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Thank you for your consideration of this recommendation.
This post is the opinion of David Baker
