City Council takes step to resolve municipal net's financial woes.
Monticello City Council voted 5-0 Monday evening to hire telecommunications consultant Gigabit Squared to run its municipal broadband service on an interim basis.
The six-month contract approved by the council requires the Ohio-based firm to spend about 90 days examining the system and recommending ways to cut costs and raise revenues. After that, the city will have the option of retaining Gigabit Squared to manage the system for another 90 days, and possibly longer.
The system, FiberNet Monticello, offers high-speed Internet bundled with phone and cable TV as a municipal service that competes with private companies.
The city announced last week that the fiber optic system that it built in 2009 is not raising enough money to pay bondholders. And three weeks ago, Hiawatha Broadband Communications, which manages the system, give the city 90-day notice that it intends to end its contract at the end of August.
The city contract pays Gigabit Squared $20,000 a month plus up to $3,000 in expenses, similar to terms of its current contract with Hiawatha.
Monticello City Administrator Jeff O'Neill said the new consultant will take over management while city officials are talking with bond holders about refinancing the debt. "We need to define what FiberNet will look like in six months, in terms of its organization framework and basically its new business plan," O'Neill said. "It's like a resetting of the system."
The city sold $26 million in revenue bonds to pay for the network, which has about 1,700 customers, including nearly 130 businesses.
The city's taxpayers are not on the hook to make debt service payments if expenses exceed revenues, but a default could affect the city's credit rating.
Critics have said that Monticello should never have gotten into the telecommunications business, but city business leaders said private service was costly and inadequate. City residents agreed, and 74 percent approved a city-owned system in a 2007 referendum.
Gigabit Squared helps communities with broadband programs and other public-private investments. It has designed, built, operated or managed broadband networks for cities or businesses in several states, including Ohio, Colorado, Kansas, Illinois, Michigan, Nebraska, Mississippi, and also in the Virgin Islands.
Tom Meersman • 612-673-7388