Taxpayers asked to pony up for RS Fiber shortfall
Deficit estimated at $1.07 million
WINTHROP — With a projected financial shortfall of slightly more than $1 million, the RS Fiber Cooperative project is asking nine cities in the project to cover an estimated $1,073,639.50 needed over two years to fund economic development loan bond payments.
At a recent RS Fiber Joint Powers Board meeting, Shannon Sweeney of Minneapolis-based David Drown Associates said that the subordinated debt payments will not be made by the cooperative for the next two years.
In addition, he said cities in the project (Gaylord, Green Isle, New Auburn, Winthrop, Gibbon, Fairfax, Lafayette, Stewart and Brownton), will need to make payments for the 2015A General Obligation Tax Abatement Bonds issued to fund an economic development loan to the RS Fiber Cooperative. Bond payments are due Feb. 1 and Aug. 1 in 2019 and 2020.
Gaylord has the biggest payment to make, $268,572.72 over two years. Other two-year payment amounts are:
Green Isle $ 64,693.46;
New Auburn $55,632.17.
Sweeney said network subscriber growth will be determine when FS Fiber will be able to take back the payments from cities, which he said will be considered annually.
At the Joint Powers Board meeting, RS Fiber Board Chairman Kevin Lauwagie of rural Winthrop talked about why the cooperative was created.
“RS Fiber was founded due to the lack of interest by existing companies to serve the towns and townships in our area,” Lauwagie said. “Now that the first phase is complete and more than 2,000 residents have benefitted by the service, we know we’re doing the right thing and look forward to continuing the expansion of service across our region.”
The cooperative said the fiber optic cable project is financed from multiple sources. Cities and townships were asked to back a $13.7 million bond and make an economic development loan to the cooperative that will borrow another $42 million from banks to build and operate the network.
In addition, the cities and townships were asked to agree to raise taxes to make the loan payments if the cooperative does not make them on their behalf.
The cooperative advertises itself as enabling more than 6,200 potential customers to connect to the Internet and each other with a fiber-optic line.
Gaylord City Administrator Lory Young said Gaylord taxpayers will pay $268,572.72 over two years with the city’s cash reserves.
Winthrop City Administrator/EDA Director Jenny Hazelton said the city included $74,533.99 in its 2019 tax levy to pay for the project.
“We made up the difference by cutting $37,631 from the budget and using $34,854 in cash reserves,” Hazelton said.
The Winthrop City Council reviewed the proposed 2019 budget on Oct. 23 and recommended 2019 cuts of $4,631 in legal costs, $5,000 part-time police salaries, $600 police phone costs, $19,000 street structural repairs, $500 temporary snow employee, $400 library phone, $1,500 professional fire service, $500 library carpet capital reserves, $500 library computer capital reserves, and $5,000 municipal building windows capital reserves.
In addition, money will be moved from reserves to the general fund for expenses including $15,000 from the Small Cities Assistance fund, $15,000 from the RS Fiber Reserve fund, and $4,854 from fines and forfeitures.
Final action on the adjustments will be taken at the Monday, Dec. 3 city council meeting. The 2019 city tax levy is projected to climb 6.48 percent.
Gibbon City Administrator Dana Lietzau said the city council levied for the 2019 bond payment of $45,912.57 without budget cuts.
Fairfax City Administrator Nicholas Johnson said the city reworked future capital equipment purchase plans and projects to accommodate the RS Fiber payment of $67,208.01 due in 2019.
“Equipment and projects we hoped to do in the next year or two will be pushed back another year or two,” Johnson said.
Brownton City Clerk Ella Kruse said she kept a $30k contingency account in the budget from last year plus a $10k levy increase to make up the difference to pay the $40k RS Fiber expenses. Kruse said the final budget will be presented to the Brownton City Council for approval on Tuesday, Dec. 4.
“I’m anticipating next year will be more difficult as our street/utility project gets completed,” Kruse said. “As we generate new bonds for the street/utility project, the RS Fiber shortfall, deemed a self-generating revenue bond, will ge more difficult for us to fund.”
Lafayette City Clerk Sandy Burger said a 12 percent levy increase rises the general fund levy from $114,104 last year to $128,000 in 2019. The Lafayette City Council meets at 7 p.m., Monday, Dec. 10 in the city building.
The City of Green Isle will hold a special meeting on the 2019 tax levy at 7 p.m., Tuesday, Dec. 11 at City Hall. The city council discussed the RS Fiber shortfall notice on Aug. 14, noting that grants have dried up that were earlier relied upon for funding, but that the cooperative continues to hook up customers.
For more information, visit https:www.rsfiber.coop