The Columbus Light and Water Department is moving forward with plans to issue debt to upgrade its broadband backbone. Fiber accounts for about $3.6 million of the $8.7 million bond issue the city council approved Nov. 16.
CLW has to issue any debt through the city of Columbus. The “revenue bonds” are repaid through rates paid by customers, and a 1.4 percent hike has already gone into effect for the utility’s electric customers to pay them down.
About 30 miles of fiber will eventually be installed, according to an email from CLW General Manager Angela Verdell. The project will supplement the existing system — which is about 15 years old — as well as connect with more devices and facilities within the city.
Part of the project includes connecting to the Columbus Municipal School District and the Columbus Housing Authority to expand access for students who have no or limited internet access now.
The idea has been floating around for a while, but city officials — including Mayor Keith Gaskin — had pushed back, wanting more details on why the debt was needed. Those questions loomed larger in recent months, with the American Rescue Plan Act and the Biden infrastructure bill both setting aside significant funds for broadband expansion.
Gaskin said he was “surprised” by the request.
“I asked them about it when they first came to me with the idea, because it seemed to me with the level of federal support out there that it wasn’t needed,” he said. “They basically said they had talked to state and federal leaders and thought this was a better path.”
CLW Board Attorney Jeff Smith said that, due to the way the ARPA money is coming to municipalities, the utility can’t use it to install broadband. While counties are getting money directly from the federal government, municipalities’ money is going to the state, which then passes it on. That means cities must spend the money in ways that conform to state law.
“In 2019 the Legislature passed legislation allowing rural power co-ops to participate in broadband,” Smith said. “There is no companion legislation for cities.”
State leaders see municipalities installing broadband service as unfair competition against private entities, Smith explained.
“What brought about the legislation in rural areas is that private companies can’t afford to put fiber down out there,” Smith said. “There are companies, like C Spire, who are serving the city already. We connect to between 10,000 and 13,000 homes, but we can’t supply them with internet.”
CLW can connect the CMSD and the housing authority, though, because they are public agencies the city serves, he said.
“Something like 85 percent of the city school district’s students live in public housing,” Smith said. “When the pandemic hit, they were having to come to the school parking lots to connect because they didn’t have service at home.”
Bonds are, therefore, the only way the utility can get the funding for the broadband expansion.
While other sources of money may materialize via new state programs, or from the Build Back Better Act, should it pass, those funds may not be able to be used to pay the bonds down early or to lower the rate increase.
According to Smith, the tax-exempt nature of the bonds limits the ability to pay out early.
“A lot of these tax exempt municipal bonds you can’t pay off for a certain amount of time,” Smith said. “For example, we did some (tax exempt) bonds for the Lowndes County School District (for which Smith also serves as attorney) that couldn’t be paid off for half the lifetime of the bond. In many cases the buyers don’t want them paid off early.
“We would if it were possible,” he added.
Verdell explained, with costs steadily going up due to supply chain disruptions, she didn’t think it would be feasible to let the rate increase roll off even after the bonds are repaid.
“The CLW has several long-range capital improvement projects that have been identified and are waiting in the queue,” she said. “There is a lot of uncertainty in the market now that is impacting us locally. For instance, we are experiencing cost increases for basic supplies such as transformers and chlorine for water treatment. In many cases lead times are averaging 18 months on transformers, coupled with the increased unit cost, and the price of chlorine has increased nearly four times from its pre-COVID cost.”
CLW is preparing for “potential prolonged interruption of the supply chain and associated cost increases,” she said.
The bonds could be issued as early as December. The council passed a resolution of intent to issue the bonds at its last meeting.
A start date for construction has not been set, Verdell said.
“Once the bonds are sold and the funds are received by CLW, we will meet with our contractors to determine a schedule for each project before any work can begin,” Verdell said.
The bond issuance will not affect the city’s borrowing capability.