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CO: State Internet agency with no oversight spends millions

By   /   September 21, 2012  /   11 Comments

By Dan Njegomir | Colorado Watchdog

Financial records obtained from rural Colorado broadband project EAGLE-Net Alliance depict a government program that spares no expense on its well-paid executives, staff and consultants in its increasingly controversial bid to provide high-speed Internet access throughout the state.

EAGLE-Net — launched in 2007 with the modest mission of extending broadband to rural schools — was beefed up in 2010 with a $100 million federal stimulus grant.

Now it has come under intense fire from longtime local telecommunications providers who say EAGLE-Net is using its federal windfall to poach their customers and is wastefully duplicating their own broadband networks already in place.

In response, members of Colorado’s congressional delegation have called on the federal government to put a hold on the project pending a reassessment of its impact on the private sector.

The small-town telecoms — mostly private businesses and co-ops — say they fear being driven out of business by the federally backed behemoth. As the newly disclosed financial data make clear, they are up against some pretty deep pockets.

EAGLE-Net, an independent state agency answerable neither to the executive branch nor to the Legislature, spends more than $1.2 million annually on pay and benefits on a six-person executive team, records show. The executives include a quarter-million-dollar-a-year CEO and three other top officers who make more than $200,000 each.

EAGLE-Net Chief Executive Officer Randy Zila, a retired school superintendent who draws $255,188 a year in salary and benefits, including a $10,000 vehicle allowance, presides over 30 employees and a $4 million payroll from the project’s Broomfield office. That averages out to just under $130,000 a year for each EAGLE-Net employee.

EAGLE-Net is a state agency that spends millions without any oversight

The documents, released to the Colorado Watchdog under the state’s Open Records Act, also reveal a high-powered public relations campaign waged by EAGLE-Net, including more than $100,000 spent in consulting fees since last December on two politically connected Colorado public affairs and government relations firms, Evergreen-based Communication Infrastructure Group and Denver’s GBSM. That’s in addition to EAGLE-Net’s own PR staff, which includes a $125,000-a-year vice president for public relations and communications.

And the top executives’ expense reports confirm concerns expressed by the small-town telecoms that EAGLE-Net brass are constantly crisscrossing the state and staging what one report refers to as a “road show” to market their federally subsidized network to wide-ranging local public agencies and services such as hospitals, libraries and city and county governments.

Such so-called “anchor institutions” not only lie far beyond what the rural telecoms understood to be EAGLE-Net’s original mission, but they also are the bread-and-butter customers that the small providers say they need to stay afloat.

Learning the details of EAGLE-Net’s spending on its staff, travel and consultants has further rankled the rural telecom operators, who say they’re outgunned.

“You have to ask why such a big marketing and PR budget if you look at their mission as being serving the schools of Colorado,” said Vince Kropp, general manager of Holyoke-based co-op PC Telecom, which provides phone and high-speed Net access to northeastern Colorado’s Phillips, Sedgwick and Yuma counties.

“I guess, realizing what we’re dealing with, I probably shouldn’t be surprised,” he said.

Accountability watchdogs in the nation’s capital contend the Colorado program is emblematic of the kind of shortsighted strategy and fiscal overkill that can emerge from an unprecedented spending effort like the American Recovery and Reinvestment Act. Passed by Congress in 2009 and championed by the Obama administration, the ARRA included $4.7 billion for broadband programs like Colorado’s.

“It’s a perfect example of what’s wrong with this kind of government spending,” said Patrick Louis Knudsen, a senior budget fellow with the Heritage Foundation in Washington, D.C. “The market already was addressing (rural communities’) needs. The government is crowding out entrepreneurship.”

Noting an old gripe among budget hawks about government subsidies “picking winners in the marketplace,” Knudsen, a former congressional budget staffer, quipped that the recipe behind EAGLE-Net seems to have evolved to, “picking winners and creating losers.”

Knudsen said sweeping federal projects like EAGLE-Net inevitably dole out high pay, benefits and lucrative consulting contracts because there is no incentive for efficiency. By contrast, he said, the small telecoms, “don’t spend money they can’t afford to spend. The boss might also be the one sweeping the floors at the end of the day.”

Critics say that’s also why a program like EAGLE-Net can serve as a comfortable perch for its own bureaucracy.

EAGLE-Net CEO Zila, for example, retired in 2009 as superintendent of the St. Vrain Valley School District in Longmont and then hired on as executive director of the Centennial Board of Cooperative Educational Services (BOCES) — a position he still holds alongside his duties at EAGLE-Net. His current consulting contract with Centennial, obtained through a Colorado Open Records Act request, notes that Zila “desires post-retirement employment with the BOCES on terms that will not result in a reduction of (Public Employees’ Retirement Association) retirement benefits” from his first career as a school district administrator.

Centennial, an independent, public-education agency, obliged with a contract provision that limits Zila to 140 days of work in a calendar year, per the retirement system’s stipulations. His rate: $650 per day, or up to $91,000 annually. That’s atop his $255,000 EAGLE-Net compensation package.

Zila, who holds a PhD. in education, also makes $7,416 under a five-month contract as an adjunct faculty member at the University of Northern Colorado in Greeley, and he serves as a paid consultant who helps conduct school superintendent searches for the Colorado Association of School Boards.

The chairman of EAGLE-Net’s board, John Conley, defends the arrangement.

“We’re in dialog with him about his other activities and feel that they are complementary to one another,” Conley said. He said Zila’s salary and leadership role over a major broadband project make sense even though Zila has no professional background in technology or engineering.

“Not every CEO of a particular business has to have years and years of experience in that particular business,” said Conley, who also serves as executive director of the Statewide Internet Portal Authority. Conley said Zila’s ability to relate to the public-education community, which EAGLE-Net serves, is central to its mission.

“We as an organization felt that bridge was very necessary,” he said. “You cannot replace his ability to empathize with the plight of the education community.”

Meanwhile, Conley stood by the project’s expenditures as well as its overall strategy.

“It’s a statewide initiative, and it’s expensive to get around the state,” he said. “There needs to be a high level of educating people as to what EAGLE-Net is doing.”

Conley reiterated the position of other EAGLE-Net officials that the project has been necessary to bridge broadband gaps around the state and that EAGLE-Net has done its best to reach out to private providers like Kropp but hasn’t gotten any cooperation.

“Not one of those providers ever has come to one of our board meetings,” he said, adding, “I’m not faulting them. I understand and appreciate the consternation that this is causing them. To counterbalance that consternation, we have tried to meet with them.”

PC Telecom’s Kropp says it’s EAGLE-Net that has been giving the rural telecoms the cold shoulder. In any event, he said the bottom line is that the epic-scaled federal project is wreaking havoc in the market.

“I’m not afraid of competition. If some other provider wants to come in and bring their millions of dollars and decide to compete with us, that’s the American way,” Kropp said.

“But that is not what’s happening here. We have artificial competition through a state agency that’s going to be competing with us. It’s not private enterprise that’s making this happen.”

Contact Dan Njegomir at dannjegomir@gmail.com

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  • gregoryvii

    “The government is crowding out entrepreneurship.” Of course! How else can Socialism be established?

  • Nuckin Futs

    $346,000/year for ZILA!!!??? This guys is worthless. Doesn’t engage. He’s not only a crook, but a thief too!! That’s x 3 years = 1,038,000 for a project that has never once hit a performance metric in 10 quarters of reporting.

  • Lacey Underall

    30 jobs? WTF. NTIA awarded this project to create 659 direct jobs and 370 indirect jobs during construction, plus more jobs from the results of economic activity after the network was built. Looks like Solyndra all over again. Who’s accountable?

  • Please hear me

    How corrupt does this sound? A high ranking employee in the Hickenlooper administation is getting kickbacks from a group of currupt grant writers in exhange for getting the Governor to sign on as a supporter? Wonderful, this should help his poll numbers and drag Obama down with him. We’ll see what Hcikenlooper does to remedy this.

  • Outraged

    Superintendent with no background in telecommunications running a 100 million dollar, tax-payer subsidized telecom circus. Surprise, surprise!

  • Todd Akin

    Is this the group where someone named Shorey was giving her friends contracts and shopping her son for a job?

  • Stop the Insanity

    I’m almost speechless! And that’s rare for me. ;) Let’s see … government-funded (our tax dollars) enterprise competing with private industry which will result in layoffs in the private (tax paying) sector and almost always results in less service and efficiency; grossly overpaid, triple-dipping (at least) CEO (he can’t possibly give enough time, attention, or energy to all of them to justify those salaries) with no legitimate background for the position; other staff that is also paid well above private-sector salaries for similar positions; and it’s wrapped up in a package saying that they are helping “poor, rural areas” (we’ve seen THAT before), especially helping “education” (the Left’s favorite “benefactor” – even though the funds designated for education often don’t get to our kids). What could possibly be wrong with this picture?!

  • Monica C.

    Todd, the founder Denise Atkinson-Shorey’s son was given a job with G4S the prime contractor as part of the deal. He’s in the billing department. Pretty sketchy. Conley is walking the plank on this.

  • heidihoneighbor

    It’s easy to spend money when it isn’t yours to spend.
    Get up and get your behinds to work so that these guys can live the life they are accustom to.

  • rconaway

    I write about this kind of government waste in almost every “Tales from the Towers” article. It’s ridiculous.

  • Crook Conley

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