Serving Gogebic, Iron and Ontonagon Counties
Serving Gogebic, Iron and Ontonagon Counties
By TOM LAVENTURE
Hurley — The Iron County Board of Commissioners will consider joining other rural Wisconsin counties in taking out an approximately $8 million bond that would allow a privately-owned company to provide communication towers and fiber optic lines for rural broadband.
Following a public hearing on Wednesday, the board scheduled the matter for the Oct. 26 meeting, where three-fourths of the 15-member board must support to approve the bond. The board 14-0 supported a tentative approval at the previous meeting to allow for the public hearing.
“We asked for two weeks to absorb the information so we can make an educated decision,” said Joe Pinardi, board chair.
The majority of the concerns presented in community comments had to do with the risk of a long term bond obligation. Several comments were concerned that a lot can happen in a few decades from changes in company ownership, the technology itself that is the driver of the revenue to repay the bonds and unforeseen variables that would be impossible to predict at this time.
Steve Schneider, co-founding director, president and CEO of Hilbert Communications and its Green Bay-based subsidiary, Bug Tussel Wireless LLC, was present at the meeting to field questions about his company that works to develop fiber optic communications technology in rural counties of Wisconsin. He said that municipalities have the ability to issue bonds for long term financing and the company would be repaying the funds through revenue earned from leasing to phone and internet providers that would use the infrastructure put in place by Bugtussel.
Schneider spoke at length about how speed-of-light fiber optic lines would still be necessary to support the limitations of satellite and other alternatives to providing rural broadband service. The company invests to update technology on the towers every seven years, but the fiberoptic is a long-term investment that will work with everything, he said.
Brian Della, a certified financial analyst with PMA Securities in Milwaukee, was present at the meeting in his capacity to provide financial consulting services to Iron County. He described the bond scenario as unique when compared to a typical municipal bond debt issue for an infrastructure project.
Fond du Lac County is acting as the debt issuer for a 30-year bond on behalf of a six-county collective, Della said. Iron County would assume a 40% basis point on the financing, but Bugtussel is paying down the debt in addition to providing the county with an annual 0.004% debt service payment on the remaining balance.
In a worst case scenario where the company was unable to pay its debt, the county’s share would be approximately $440,000 annually, he said. Statutes on levy limits prevent general fund revenue being used on the debt, but the county would have the option of issuing a one-year note for the amount from a state trust fund loan to make the bondholders whole and avoid the full liability, he said.
Schneider said the tradeoff with his plan is that he is providing high speed rural broadband service while companies using the federal grants are running lines to and from areas with high numbers of customers and leaving rural areas out.
Banks will not offer long-term financing for such a project to a private company and the counties are basically guaranteeing the bond financing to allow Bugtussel to make lower payments over time to equate with the earnings they receive from leasing their infrastructure.
In exchange, the company provides more than 800 rural households with the option of broadband service and will attract third- party companies to come in and branch off of the new infrastructure now that it will be cost effective for them to provide service to more rural areas.
Bugtussel will not want to go into default when it stands to lose revenue from providers that have federal contracts, Schneider said. If the company did fail, the county would have an unsecured pledge of general assets and any towers and fiberoptic systems that were installed within the county, he said.
The fiber optic lines in the county alone are a $4.5 million value, Schneider said. The county would also have space on the towers for emergency communications which provides a significant value in and of itself, he said.
Answering questions about his personal risk, Schneider said the estimated business enterprise value of the company is approximately $160 million. The company has used $11 million of its $20 million bank debt limit that Schneider said he personally guarantees.
In other business, the board approved a 4 p.m. Nov. 9 meeting to review and approve the annual budget. Board members Karl Krall, Ken Saari, John Sendra and Brandon Snyder were not present.
The board did not act on a move to conduct a public hearing on the tentative plan for the 2020 Census Supervisory Districts. The board instead approved to maintain the current 2010 district plan and move the matter to the next meeting.
The board approved going out for bids for work on the Senior Center building, the memorial building and blacktopping at the county garage in Mercer.
The board approved three zoning ordinance amendments.
