By Brett Healy, The MacIver Institute
Have you ever noticed how a government bad idea never seems to die? Doesn’t matter how bad the idea is or how much the bad idea will cost taxpayers or that there is always a private, common-sense alternative to the bad idea, it just seems like a government bad idea is never completely dead or done with.
This frustrating phenomenon is playing out again in Superior with the relentless push by some local politicians to build an unnecessary broadband government-owned network (GON) paid for by taxpayers.
We first wrote about this back in November of 2019 to warn local taxpayers what a terrible idea this is. Now, nearly three years later, this boondoggle still has life despite the long list of problems it suffers from.
The Mayor of Superior and a special interest group, Entry Point Networks, are pushing the City Council to build a government-owned broadband network paid for by taxpayers, instead of the private sector. In the vast majority of communities across the state and the country, broadband infrastructure and networks are paid for by a private business(es) looking to provide a service to paying customers who want that service and are willing to pay for that service with their own money.
Superior taxpayers need to take note because this government-owned project is likely to fail and when it does, local politicians will force you to pay for their quixotic attempt to prove to themselves just how important they are.
First, the project is not needed. According to the federal government, over 99% of Superior residents have access to broadband right now. Almost 60% of residents have access to at least two private wired broadband providers and almost all have access to private three wireless broadband providers. Broadband is already widely available and more than half of residents like their current provider.
This is important as well because Federal American Rescue Plan Act (ARPA) funding is supposed to go to broadband infrastructure projects that help areas that are unserved or underserved. With 99% of Superior residents having access to broadband and almost all having multiple broadband providers to choose from, it is hard to see how Superior’s $31 million project will be eligible for ARPA funding. In fact, the Public Service Commission late last year rejected five municipal broadband projects because each did not meet the Treasury Department guidelines on targeting underserved areas.
Second, this is a massive project with an astonishing price tag. $31 million to be exact. While $31 million may not seem like a lot of money for the federal government or even state government, $31 million is a huge undertaking for Superior city government. The city has less than 30,000 residents and it is going to undertake a $31 million infrastructure project?
To give this price tag some perspective, the City of Superior’s entire budget spends right around $32 million each year. This one government project alone will cost to build what the city spends on all of its needs – police, fire, parks, snow plowing, road work, debt and everything else you count on government to provide.
Speaking of debt, Superior taxpayers should be nervous about taking on so much more debt to pay for the $31million project. Right now, even before this government-owned broadband network is completely approved, Superior taxpayers pay $3 million a year for debt service, the amount of taxpayer money spent on the city’s debt principal and interest on that debt loan in a year. Debt service is the fourth largest expenditure in the Superior city budget. When the full weight and cost of this project comes online, think what will happen to your debt service payment.
This broadband network will also roughly double the City’s long term debt obligations. According to the 2021 General Fund Budget document, total outstanding general obligation debt on December 31st, 2019 was $39,286,078. When you take a broader look at the city’s finances, the debt hole gets even bigger. Note 9 of the City’s basic financial statements (found on the city’s website labeled Annual Audit 2020), details that long term debt obligations total approximately $50 million for the taxpayers of Superior. While some will try to split hairs by saying general obligation debt is different than long term debt obligations, debt is debt. There is a reason why the audit refers to it as an obligation and not a debt dispensation or consideration. The City of Superior is already spending significant taxpayer resources each year to borrow money and pay off the interest on that debt. Is it really a good idea to double that debt for an unnecessary project whose price tag will undoubtedly spiral out of control once the government actually tries to run it.
This push by Superior to build its own municipal broadband infrastructure comes despite plenty of recent examples of local governments wasting hundreds of thousands of dollars or more on similar projects all across the country – like the City of Madison.
Madison began its push for a city-wide government-owned fiber network by starting with a small pilot program in 2015. The pilot program was supposed to bring broadband to four low-income neighborhoods and in the process, demonstrate the overwhelming demand for government-provided high-speed internet. Problem is, the pilot project failed miserably.
Even though Madison spent close to $900,000 on the pilot project and put on a full court press to convince people to purchase “bargain” broadband, just 19 customers out of a total of 979 potential subscribers signed up for the service. That is less than a 2% take rate. A horrible return on investment for the $900,000 spent but that is peanuts compared to the potential loss for Superior’s $31 million project.
There are many other cautionary tales around the country.
Read more at The MacIver Institute