CLW: Borrowing is the best option for broadband projects

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The Columbus Light and Water Department is moving forward with debt issuance plans to upgrade its broadband backbone. Fiber represents approximately $ 3.6 million of the $ 8.7 million bond issue approved by city council on November 16.

CLW must issue all debt through the City of Columbus. “Bond income” is reimbursed through tariffs paid by customers, and a 1.4% increase has already taken effect for utility electricity customers to reimburse.

About 30 miles of fiber will eventually be installed, according to an email from CLW CEO Angela Verdell. The project will complement the existing system – which is around 15 years old – and connect to more devices and facilities in the city.

Part of the project includes connecting to the Columbus Municipal School District and the Columbus Housing Authority to expand access to students who currently have no or limited internet access.

The idea had been floating around for some time, but city officials – including Mayor Keith Gaskin – had backed down, wanting more details on why the debt was needed. These questions have grown in recent months, with the American Rescue Plan Act and Biden’s Infrastructure Bill both setting aside significant funds for broadband expansion.

Gaskin said he was “surprised” by the request.

“I asked them about it when they first came up with the idea, because it seemed to me that with the level of federal support there, it wasn’t necessary,” he said. he declared. “They basically said that they had spoken to the leaders of the states and the federal government and thought it was a better way.”

CLW board attorney Jeff Smith said that because of the way ARPA money gets to municipalities, the utility cannot use it to install broadband. While the counties receive money directly from the federal government, the money from the municipalities goes to the state, which then passes it on. This means that cities must spend the money in accordance with state law.

“In 2019, the Legislature passed a law allowing rural electricity co-ops to participate in broadband,” Smith said. “There is no accompanying legislation for cities. “

State leaders view municipalities installing broadband service as unfair competition against private entities, Smith said.

“What brought the legislation to rural areas is that private companies cannot afford to put fiber there,” Smith said. “There are companies, like C Spire, that already serve the city. We connect to between 10,000 and 13,000 homes, but we cannot provide them with the Internet.

However, CLW can connect the CMSD and the housing authority, as they are public agencies served by the city, he said.

“Something like 85 percent of the students in the city’s school district live in public housing,” Smith said. “When the pandemic struck, they had to go to the school car parks to connect because they did not have home service.”

Bonds are therefore the only means for the utility to obtain the financing necessary for the expansion of broadband.

While other sources of money may materialize through new state programs or the Build Back Better Act, if passed, these funds may not be able to be used to pay down bonds by anticipation or to reduce the rate increase.

According to Smith, the tax-exempt nature of bonds limits the ability to prepay.

“A lot of these tax-exempt municipal bonds cannot be repaid for a period of time,” Smith said. “For example, we created (tax-exempt) bonds for the Lowndes County School District (for which Smith is also an attorney) that could not be repaid for half of the life of the bond. In many cases, buyers don’t want them refunded sooner.

“We would do it if it was possible,” he added.

Verdell explained that with constantly rising costs due to supply chain disruptions, she didn’t think it would be possible to let the rate hike apply even after the obligations were paid off.

“The CLW has several long-term capital improvement projects that have been identified that are waiting in the queue,” she said. “There is now a lot of uncertainty in the market that affects us locally. For example, we are experiencing cost increases for basic supplies such as transformers and chlorine for water treatment. In many cases, delivery times are on average 18 months on transformers, coupled with the increased unit cost, and the price of chlorine has increased nearly four times its pre-COVID cost.

CLW is bracing for “a potential prolonged supply chain disruption and associated cost increases,” she said.

The bonds could be issued as early as December. The board adopted a resolution of intention to issue the bonds at its last meeting.

A start date for construction has not been set, Verdell said.

“Once the bonds have been sold and the funds received by CLW, we will meet with our contractors to determine a timeline for each project before work can begin,” Verdell said.

The issuance of bonds will not affect the city’s borrowing capacity.


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