Broadband to soar $7M over expectations
The price of providing broadband service to the citizens of Truckee has sky rocketed, according to the latest cost estimates prepared by the Truckee Donner Public Utility District.District staff members now say that the utility will have to borrow a total of $24 million – up from $17 million – to build and operate the proposed fiber-to-the-user system until it becomes profitable and self-supporting. The proposed system will provide cable TV, high-speed Internet and telephone service.According to Peter Holzmeister, the utility district’s general manager, the price tag on the broadband system went up for three reasons. First contractors’ bids for projects related to installing the broadband system came in approximately $4 million more than expected. Holzmeister said the high bids were the result of the district modifying the initial construction specifications to handle local weather conditions as well as the district’s vow that only top-quality work would be accepted. Bidders of lesser quality were scared off, Holzmeister said, and good bidders added a little extra into their bids to ensure that they would meet the stringent quality standards for work done constructing the system. Another reason for the cost increase is that the broadband utility was going to pay back loans of approximately $1.5 million provided by the district’s water and electric utilities with revenue from broadband operations over a period of eight years. Recently, however, the decision was made to pay back the other utilities up front with money from the financing package.Lastly, borrowing additional money to meet the updated cost projections means there will be higher fees and interest payments associated with the Certificates of Participation being issued by the district to finance the project.If given the go ahead by the Nevada County Local Agency Formation Commission (LAFCo), the district plans to issue $24 million worth of Certificates of Participation, which are essentially equivalent to issuing a bond to pay for the broadband utility.To offset the impact of the cost increase, the district is looking into the approximately $2 million worth of contingency money built into the financing package. Holzmeister said he isn’t sure whether that might be an excessive safety net, but he said the district doesn’t want to be caught short of funds later, as it’s easier to borrow the money in advance than it is to go back later for more.Even with the increased costs, the district expects the broadband service to start earning more than its cost in three years time. In eight years, district officials said they expect to have paid off the certificates of participation and any other expenses associated with building the system.Members of the district’s board of directors had mixed reactions to the news of the bond increase.Director Pat Sutton, who has opposed the district’s broadband project from the start, was surprised to hear of the increase. She blamed the district’s preliminary bidding process for some of the excess.”The bids may have come in higher than they would have in the usual kind of bidding process because it was all so tentative,” Sutton said of the district’s decision to allow bids before final LAFCo approval and before the district secured financing for the project. “This is one of my concerns about how the whole thing was handled … I can find no record of a call for bids from the board, it was all done by management.”Sutton said she wanted to see the district exercise more patience when it comes to the broadband project, noting that advances in wireless technology might soon make the TDPUD’s proposed fiber-to-the-user system obsolete.”I don’t fully understand all the reasons for [the increase],” she said. “And I think it’s getting more and more expensive. I still believe that maybe we should wait and see what happens with all the wireless technology that’s being developed and could provide the same services.”The other directors were more receptive to the news of the cost increase, noting that the broadband utility is still scheduled to make money in its third year of operation, and continue to do so after that.”I was at first very concerned about it,” said Director Nelson Van Gundy. “But it is really just a reconfiguring of the estimate to be able to pay off some things up front.”What this means is that we’ll be able to do a better job faster by budgeting it this way,” he said. “And I’m ready.”Van Gundy said he sees the district’s broadband project as a vital service to Truckee residents and only wished that the project was farther along at this point. “The fact that we can [install] fiber to the home is a definite technological improvement … so long-term it’s going to be a great thing,” Van Gundy said. “If we can offer it to the public better than anybody else can, then that’s definitely a good thing for our customers.”Members of the public who are interested in the TDPUD’s actions are encouraged to attend the TDPUD board of directors meetings, held the first and third Wednesday of each month at 7 p.m. in the TDPUD building at 11570 Donner Pass Road.SidebarBroadband timeline • Nevada County Local Agency Formation Commission (LAFCo) approval in July• Financing in place by Sept. 15.• Construction to begin by early Oct.• Backbone loops will take approx. 4 months to build done by Feb. 1, 2005.• Neighborhood loops after that over the next months with customers coming online as they are completed.• System complete by April 2006 or sooner depending on weather delays.