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Rock Falls building up to a fiber optic buildout

Council OKs continued pursuit of broadband financing

ROCK FALLS – The city took another small step Tuesday toward expanding its fledgling broadband business.

The Rock Falls City Council gave its permission to gather more information on options for funding a fiber buildout that could service business and residential customers.

The city has been working with Denver-based Magellan Advisors for nearly 3 years on business plans, and in September recommended that the city pursue a fiberhood option. The city would be divided into 20 fiberhoods, and the plan is based on the premise that only 14 would be built.

Fiberhoods would allow the city to do its infrastructure buildout gradually, instead of spending the total of about $13 million up front. Because a fiber backbone has already been laid, the business corridors would be the first priority, and they could be done quickly.

After receiving counsel from bonding professionals, City Administrator Robbin Blackert laid out some obstacles for the council to consider before casting their votes to continue the process.

One hurdle is backing up alternate revenue bonds, which would be the funding source for the buildout.

“We need either a feasibility study or our most recent audit that includes revenues from the broadband business to show we can make our bond payments,” Blackert said. “But a new feasibility study would cost us between $60,000 and $80,000, and we have no past revenue history with the new utility.”

Blackert said it was previously thought that the new fiber utility could be the primary alternate revenue source, and the electric department, which has been handling the broadband operations to this point, could be the backup source.

“Now we’ve found out that we need to use the general fund as the backup source,” Blackert said. “They would still be alternate revenue, and not general obligation bonds.”

The financing would include about a $2.3 million, 5-year cushion for operating expenses, which would make the bond taxable – another consideration the council discussed.

“We could be looking at quite a bit of extra money with taxable bonds,” Alderman Rod Kleckler said.

Kleckler also voiced concerns about using the general fund as a backup source.

Finance Committee Chairman Glen Kuhlemier said that all of the city’s bonds are technically backed up by the general fund.

Blackert said no one wants to put the general fund in jeopardy, and she pointed out that interfund transfers from the electric utility fund could be made if needed. She said the city would be taking an additional step to mitigate risk.

“The fiberhoods business plan is based on 45 percent penetration, and it would be structured so we would need 45 percent to actually sign up before the buildout of each fiberhood would be done,” Blackert said.

The council granted permission for Blackert to continue pursuing funding options by a 6-to-1 vote, with Klecker the only dissenter.

Electric Committee Chairman Jim Schuneman said the bonding process would be set up to protect utility ratepayers and taxpayers. He said now is the time to take action.

“After several years, we’ve come up with a business plan we like, and we have an opportunity to set up a new enterprise that can positively affect the quality of life of our citizens and bring businesses to town,” Schuneman said.

If funding could be obtained in the next few months, the city could be looking at a plan rollout in the first quarter of 2018.

NEXT MEETING

The Rock Falls City Council next meets at 6:30 p.m. Dec. 20 at City Hall, 603 W. 10th St. 

The agendas will be posted at rockfalls61071.net and at City Hall. Call 815-622-1100 for more information.

The council meeting also airs live on Channel 5.