Willmar City Council learns more about broadband project

Jan. 31—WILLMAR

— The

Willmar City Council

during a work session last week received more information about the open-access

broadband

network the city is planning to install throughout the city.

The project is now being called the Connect Willmar Initiative, according to Marlena Pfeiffer, principal consultant with

Hometown Fiber.

The city is partnering with Hometown Fiber to build and manage the network in the city. A fiber-optic network will be installed throughout the city on which multiple service providers can operate, giving residents and businesses a choice in their internet service providers.

"Tonight is really meant to be an informative meeting for the council to ask questions of us — our consultants and our staff — to get a better understanding and get more comfortable with this project," said City Operations Director Kyle Box, noting there would be four primary areas of discussion — the

preliminary survey results,

a proposal for continued outreach and education, financing for the project and a draft contract with Hometown Fiber.

"Overall, the city staff is making progress on this project and are committed to ensuring the responsible, successful project for Willmar," Box told the council during the Jan. 22 work session.

The city has been

conducting a survey

since Dec. 18, 2023, to gauge the community's interest and readiness for a project of this sort in the city. As of Jan. 12 when the preliminary results were tabulated, approximately 10% of the households and businesses in Willmar had responded to the survey, according to Pfeiffer.

In order to get a "healthy sample of the community," the goal is to have a response rate of at least 15%, she said.

"In order to get there, we are going to need some personal engagement with the community," Pfeifer told the council, noting the city is planning different ways for community members to become further educated about the project.

Preliminary survey results show that 73% of the respondents strongly agree that fast, reliable internet service is as important as any other utility provided by municipalities, and 78% of respondents strongly agree that affordable, reliable, fast internet is important for Willmar's future.

Access to fast, reliable and affordable internet service will improve their quality of life, according to 78% of the respondents, and 47% of respondents agree that it will improve their earning potential.

The majority of the respondents, approximately 85%, use Spectrum for their internet services. Average download speed reported by respondents was 200-500 megabytes per second and the majority of the respondents are paying $80 to $100 per month for their internet service.

When asked if they were ready to switch internet service, 43% of respondents said they will sign up no matter what, 51% would switch if it is faster, 52% would switch if more reliable and 78% would switch if less expensive. Only 9% of respondents stated that their current internet service was fine.

Kyle Moorhead, president of

Hometown Fiber

, noted that the open-access fiber network that Willmar will be installing has the ability to meet the future needs for speed and reliability.

"The technology that we had 10 years ago was fine for that era, but it would be woefully underserviced today," Moorhead said. "When we put this infrastructure together, one of the aspects that we are looking for is speed and the ability to easily and affordably upgrade it as needed."

He noted that people are paying about five times more for speeds of one gigabit per second and 10 times more for two gigabytes per second.

"One of the beautiful things that I've learned about fiber is that in order to increase speed, you don't have to change the fiber," said Laura Lewis, principal of LRB Public Finance Advisors, noting that fiber is "the best of the best" and has at least a 50- to 100-year lifespan.

"In order to increase capacity, you just change your electronics on the end," she continued, adding that the average American household has about 22 devices in their home that access the internet.

Moorhead assured the City Council that fiber will meet the needs of the residents of Willmar by being fast, reliable and affordable.

Lewis explained that the city of Willmar broadband committee was originally planning to finance the installation of the open-access fiber network with revenue bonds, which would be secured by the net revenues generated by the user of the fiber network.

However, the city would have to provide 30% of the funding as equity to facilitate the financing. The project is expected to cost around $25 million, so the city would need to provide approximately $7.5 million.

After reviewing and discussing the various ways the city could provide the 30% equity, the broadband committee ultimately modified its recommendation to instead support the issuance of general obligation bonds to complete the project, according to Lewis.

Using general obligation bonds provides the lowest rates of interest for the project and the most cost savings for the city, Lewis explained, noting that it is still the intention to use the broadband revenues to pay the debt service on the bonds.

Lewis also pointed out some of the drawbacks to using general obligation bonds for the project, one of which is the city would be assuming greater risk in relying on the broadband revenues paying the debt service on the bonds.

Another drawback is that it could potentially impact the funding of other city projects. It may also raise concern among constituents.

Financial adviser Doug Green of Baker Tilly informed the council that the type of bond to fund this type of project would be general obligation abatement bonds.

General obligation abatement bonds have an annual statutory limit of 10% of a city's tax capacity, which means that the annual principal payment of all abatement bond issues cannot exceed that amount, Green explained.

The city of Willmar currently has a tax capacity of $19 million, meaning the annual payments for all abatement bonds cannot exceed $1.9 million, he added.

Another project the city is planning is a new

community center,

which would also potentially be funded using general obligation abatement bonds.

Green noted that if the city uses the abatement bonds to fund the $25 million broadband project, that would statutorily allow the city approximately $16 million for the community center project.

This would also mean that the city would not have the authority to issue general obligation abatement bonds for any other projects until its tax capacity increases or the bonds are paid off, according to Green.

Box briefly went over a draft contract between the city and Hometown Fiber to complete the broadband project, which the council will review and consider for approval at a meeting in February.

As the project moves forward, the city will engage in further educating the community about the project and its benefits, as well as marketing to get households and businesses signed up to use the open-access fiber network.

The city plans to begin the first phase of the project this year at a cost of approximately $8 million.