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Winthrop Taps Reserves, Cuts Cops and Pothole Repairs to Subsidize Internet Network Debt

Recently American Experiment shared the predicament of ten southern Minnesota cities facing an unexpected property tax hike to subsidize their new high speed internet system. The RS Fiber network was was supposed to pay for itself, but that’s not how it’s working out.

The first phase of construction wrapped up in early 2018, connecting all ten cities to the fiber-to-the-home network and providing wireless service in rural areas. Some 2,000 residents signed on, more than 30 percent of available homes and businesses, yet short of the 3,000 subscriber break-even point.

Then in an August bombshell, RS Fiber announced discontinuation of bond payments for two years, requiring taxpayers to cover an anticipated $1 million shortfall as of February 2019.

Facing the second highest liability of the consortium of cities at $172,586.14 over the next two years, Winthrop provides a typical example of how vulnerable small cities can be to unanticipated financial impacts.

The city council just approved a 6.5 percent tax levy increase, a big improvement over the 18 percent hike first proposed. But to get there, city councilors had to cobble together a lengthy list of budget “adjustments” aka cuts totaling over $37,500. The biggest reductions came at the expense of street/pothole repairs ($19,000) and police services ($5,000).

Cut PD (police dept.) Telephone $600
Cut Streets Structural Repairs $19,000
Cut Snow Temp Employee $500
Cut Library Telephone $400
Cut Fire Prof Svc $1,500
Cut Library Capital Reserves Carpet $500
Cut Library Capital Reserves Computer $500
Cut Municipal Bldg Capital Reserves Windows $5,000

Yet Winthrop also had to raid almost $35,000 from the city’s reserves to make it work. One local taxpayer “voiced his displeasure” at the council meeting according to a  New Ulm Journal report.

“Now you know what the difference between democracy and socialism looks like,” [Mark] Santelman said. “You reach into the pockets of people who don’t want something, for the benefit of a few. I sat here four years ago and I begged you for a public vote. This RS Fiber thing is nothing but a financial disaster.

“You have the elderly and families in this community who now have to reach into their pockets, who didn’t want it and didn’t need it, and now have to bail this thing out,” Santelman said. “All for a few farmers who couldn’t get high-speed Internet. We could have had a vote. I think each of you (councilors) who voted for this should resign. The citizens of Winthrop are your constituency. It’s not the farmers.”

Eventually the city councilor who represents Winthrop on the RS Fiber board tried to put a better spin on the financial fallout.

Later in the meeting, councilor Julie Trebelhorn said the RS Fiber Joint Powers Board is moving forward and is very appreciative and mindful of financial support being shown by project cities.

“Support is still strong. Everybody at the meeting supports it,” Trebelhorn said. “They want people to know the service is here. It’s not going anywhere. It’s a fabulous service. RS Fiber’s rural air service is far better than what anybody else can get.”

This scenario will be played out again next year at the cities responsible for covering the debt payments for RS Fiber in 2019 and 2020. After that? The bond payment schedule runs until February 2037.

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