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Faltering Minnesota muni telecom dips into $210k of city streetlight funds

By   /   February 19, 2013  /   News  /   No Comments

By Tom Steward | Watchdog.org Minnesota Bureau

MONTICELLO — First, the troubled FiberNet telecom network tapped nearly $4 million of city liquor funds to cover annual operating losses and debt service before suspending further bond payments last year.

Now Monticello officials are drawing down $210,000 from the city’s streetlight fund in an urgent attempt to upgrade the city-run fiber optic system once considered a national model.

While the viability of FIbernet remains on the line, there’s no danger of the lights in the Twin Cities bedroom community going out any time soon.

Thanks in part to FiberNet’s private competition, the streetlight fund currently runs a $739,000 balance on the strength of a 5 percent cable franchise fee paid by subscribers to Charter and TDS, as well as FiberNet.  The funds generally go to streetlight maintenance and some utility-related capital improvements.

“They may call it a streetlight fund, but it is not exclusively used for streetlights. It’s not like the money that’s going into FiberNet is at the expense of streetlights. It’s not happening that way,” said Mark Pultusker, FiberNet’s new general manager.

The funds will kick-start FiberNet 2.0, an overhaul of equipment and services designed to boost the city’s competitive footing by June in a cut-throat battle for Internet, telephone and video triple-play subscribers. If he makes inroads, Pultusker plans to ask for $100,000 more from the streetlight fund later this year.

A summer shake-up resulted in the hiring of the Ohio-based Pultusker to oversee the home-grown telecom network for a $20,000 monthly contract, $5,000 per month more than his predecessor. Pultusker says efficiencies and staff reductions that he has  implemented have more than offset the increase in his compensation.

Newly released statistics for bondholders show that the number of FiberNet subscribers remained flat through the end of 2012, with no indication of a turnaround.  The municipal network continues run in the red, though Pultusker says a $400,000 annual operating debt has been halved and may be eliminated by the end of 2013.

At the same time, promotions from private providers undercut FiberNet’s prices by up to $400 a year, further complicating prospects for a rebound. Yet officials insist FiberNet pays off — even if city residents defect to the competition.

“I look at that $400 as insurance. If Charter or TDS succeed in making FiberNet go away, do you really think you’re going to get that same promotion three years from now?” Pultusker asked. “That’s what I think the residents don’t understand. The reason why they’re getting these promotions is because FiberNet exists.”

For now, however, there’s no return for the holders of $26.4 million in revenue bonds, which are only obligated to be paid back with profits generated by FiberNet.

Monticello was making supplemental debt service payments out of the city liquor fund but opted to stop last year. The city’s move prompted the trustee to announce a suspension of “interest and principal payments on the bonds from funds in the trust estate pending resolution of the current uncertainty.”

“The city is negotiating with the bondholders and I can’t give you any public information about them other than that they’re negotiating to see what can be done,” said Pultusker.

Beyond the potential implications for Monticello’s credit rating, the suspension of FiberNet’s bond payments has had a chilling effect on other local governments seeking financing in Minnesota.

 Contact Tom Steward at [email protected]


Tom formerly served as staff reporter for Watchdog.org.