The Gallatin County Commission on Tuesday backed a local expansive broadband project, which plans to increase broadband access first in the city, and then to rural, underserved parts of the county.
The commission unanimously approved the issue of $65 million of bonds for Bozeman Fiber, allowing the nonprofit company to move forward with plans to expanding its fiber optic cable network. The plan is to get roughly 8,500 homes in Bozeman connected to high-speed internet within the next few years.
The main purpose of the county’s decision on Tuesday was to determine whether supporting Bozeman Fiber’s project, and the bonds that will fund it, would provide a significant public benefit.
“There’s really no downside here to the taxpayers, there’s no liability,” said Commissioner Zach Brown. “As our society invested in an interstate highway system 70 years ago, certainly today we understand that broadband is basic infrastructure.”
Some members of the public questioned how there would be no financial responsibility to the county and taxpayers, particularly in a scenario where Bozeman Fiber defaults on paying back the bonds.
“This is essentially very simply asking the county’s endorsement for this business to access the national credit market,” said Commissioner Scott MacFarlane.
Nathan Bilyeu, who acted as bond counsel for the county, said the bonds act as a mechanism for small businesses that are not publicly traded to enter into the national bond market, giving them more options for investors than on the local level.
Bilyeu described the county as a “conduit,” or route, for Bozeman Fiber to reach the national market. And “conduits” are protected by state law, so in the event that Bozeman Fiber defaults, the county faces no liability, Bilyeu said.
“It’s not a favor being done to Bozeman Fiber in particular, any other business could have done this,” Bilyeu said. “You guys are just simply a conduit for access to the market.”
Patrick Hedger, vice president of the Washington, D.C.-based Taxpayer Protection Alliance, spoke at the meeting and likened the deal to a failed fiber optic cable venture in Burlington, Vt.
The city of Burlington ran Burlington Telecom. Officials dumped $17 million in taxpayer money to keep the company afloat without permission from the city council. Then the company, and city, were sued by CitiBank for $33 million for failing to repay loans on the city’s fiber optic cable project.
But a main difference between the Burlington Telecom debacle and the project that Bozeman Fiber proposed is that the company in Vermont was owned, operated and fully funded by the city of Burlington. Bozeman Fiber is a nonprofit business that does not rely on funding from Bozeman or the county.
However, Bozeman Fiber has not paid back about $4.2 million in loans from eight banks — U.S. Bank, First Interstate Bank, Opportunity Bank, American Bank, Rocky Mountain Bank, Bank of Bozeman, First Montana Bank, and First Security Bank — in the city.
The company has operated at a loss every year, according to tax documents. Last year, the company generated more revenue from subscribers, but still lost about $58,000.
That is where UTOPIA Fiber, a Utah-based open network company similar to Bozeman Fiber, could come in to help in repaying the bond money. Bozeman Fiber CEO Greg Metzger said that UTOPIA will be a management partner in the project, helping to engineer the additions to the fiber optic network.