Archive for Thursday, November 7, 2013

Few new details emerge during Baldwin City Council’s first hearing on bonds

Baldwin City Hall

Baldwin City Hall

November 7, 2013

With many of the details still not in place, there was little new revealed Monday during a Baldwin City Council public hearing on the issuance of bonds to bring high-speed fiber optic cable to the city and even a note of controversy was rehashed.

Last month, the city council approved a resolution authorizing the city to issue up to $5 million in industrial revenue bonds to help finance Dawn Fiber LLC.’s plan to bring gigabit capacity fiber optic cable to the city, establish a connective network in the community and construct operational headquarters.

That vote did not commit the city to issue the bonds. Should the council agree to do so, Baldwin City would own the assets created from bond revenue and would lease it back to the company, with the lease payments going to pay off the bonds. Baldwin City Administrator Chris Lowe said state statute prohibits the city from using any tax revenue to retire the bonds and the city would have no liability should Dawn Fiber default.

The bonds would make Dawn Fiber eligible for a 10-year property tax abatement and sales tax exemption on construction materials.

The abatements require a public hearing. Lowe explained, however, that Dawn Fiber’s owners and lawyers are still working on the details of the bonding and the project. Therefore, the amount of the abatement was not yet known.

Because legal notification in The Signal stated the public hearing would be Monday, it was started and then adjourned until those details could be shared at either the council’s Nov. 18 or Dec. 2 meeting, Lowe said.

Nonetheless, two people joined applicant Mike Bosch in commenting on the proposal. Bosch founded Dawn Fiber in June with his two fellow owners of the Baldwin City technology company Reflective Group with the goal of bringing gigabit Internet to Baldwin City, Lawrence and other Kansas communities.

Joshua Montgomery, of Lawrence, owner of Lawrence Internet provider Wicked Broadband, voiced the same concern as he made Oct. 30 to the Douglas County Commission when that body gave its blessing to the industrial revenue bond proposal the city approved.

Montgomery praised Dawn Fiber’s proposal but urged the city to become financially involved in the project so that the network could be a “common carrier.” That would allow other providers access to the network for a fee, which would encourage lower prices and innovation through competition, he said.

Without that step, the city would be making the same mistake cities made 40 years ago when they approved cable TV leasing agreements that created monopolies, Montgomery said.

In response, Bosch said he didn’t want the city to invest in the network. He was seeking industrial revenue bonds for the project because that would allow Dawn Fiber to borrow money at a cheaper rate than through a bank. But he added he started work on the proposal “adamant” that he wouldn’t ask his Baldwin City neighbors to help pay for the gigabit network his business needed to stay in the community.

The final speaker, Nathaniel Johnson, of Baldwin City, said he thought it was appropriate to use industrial revenue bonds for the project. Johnson, who said he had an extensive background in technology, said he would like to see the resumes of those involved in the project, particularly to see if there was someone with a telecommunications background, and see the Dawn Fiber’s revenue projections.

More documentation will be provided as the public hearing continues, Lowe said.

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