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Too Risky: Co-op Turns Down $4.9 Million State Broadband Grant

For years we’ve been told the state needs to throw tens of millions of taxpayer dollars at providing high-speed internet access to rural areas. Along the way, private providers have often taken heat for not investing as quickly as politicians would like in sparsely populated rural pockets of the state, due to the lag time in recovering their costs in the marketplace. 

DFL lawmakers in particular have advocated for additional state broadband funding on steroids as a feel-good cornerstone of the party’s strategy to reconnect with rural Minnesotans disaffected with the party’s radical policies. True to form, legislators appropriated an additional $20 million to bolster the Border-to-Border broadband subsidy program earlier this year.

But now an unexpected twist involving the recipient of the biggest 2016 state broadband grant may raise questions about the program’s viability.  A $10 million Kandiyohi County project appears to be over before even getting off the ground, according to local media reports.  It turns out to be too financially risky for the Brainerd telecom cooperative behind the high speed upgrade–despite a $4.9 million state subsidy.

In the months since a state grant was awarded to help with construction of a fiber line, the project incurred $1.2 million of additional costs due to higher interest rates and construction costs, the company said in its statement.

“After months of working on gathering interest on the project, CTC was only able to obtain a financial commitment from 41 percent of the homes and businesses in the area and will not be able to proceed with the fiber build,” the statement said.

“We did have interest from the community. However, not everyone expressing interest was willing to make a financial commitment to take services,” Kevin Larson, the company’s chief executive, said in a statement.

“Without the needed financial commitment from customers and overall funding not covering the $1.2 million in increased costs, CTC and our board of directors need to be financially responsible to all entities involved and not proceed with the fiber build,” Larson said.

The cooperative worked for months to convince about half of the 1,600 residences, businesses and other rural residents to sign up, spending more than $70,000 in the campaign. Customers were required to put down a $25 deposit, but CTC fell short of the number needed to move forward. The economics didn’t add up.

“Even to the 12th hour we were trying to make things work,” said Larry Kleindl, county administrator.

He and the County Commissioners conceded, however, that the prospects were bleak. By then, Kandiyohi County had nothing further to offer that might have put the project back on track.

“There’s no way” the county could come up with $1.2 million to cover increased costs, Kleindl said. “We have to be financially responsible to our citizens as well.”

The 700 or so individuals who put down a deposit for the ill-fated project will get their $25 back.  But supporters  of the state subsidy should be concerned about what could be the long-term cost to the Border-to-Border program’s credibility.

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