By Johnny Kampis
The government-owned broadband network (GON) in Fort Dodge, Iowa, continues to siphon money from local taxpayers after the City Council voted in September to borrow more than $3.2 million from the city’s sewer fund to pay for higher-than-expected construction costs.
The Council borrowed $33.35 million in 2021 to fund construction of Fort Dodge Fiber, but City Manager David Fierke told councilmembers that more money was needed due to increased material and contractor costs, The Messenger reported.
This loan follows an agreement by the Council to approve an additional $365,910 for broadband engineering services at its April meeting for the firm HR Green, which is building the network for the Iowa city of about 25,000 residents.
A note from Fort Dodge Fiber Director Jeremy Pearson to Mayor Matt Bemrich and the Council said that “several issues” have led to delays and cost overruns for the project.
“Utility locate issues, quality with completed work and additional inspections and re-inspections are the primary reasons for this additional overage,” he wrote.
Fort Dodge Fiber will borrow the sewer fund money at a 5.25 percent interest rate and is supposed to pay back the loan by 2026 or 2027.
The city continues to say, and The Messenger continues to parrot the line, that the additional money siphoned to Fort Dodge Fiber will be paid back by revenue generated by subscribers and not from taxpayer funds. However, anemic take rates throw the ability to pay back the money into question. As of July, Fort Dodge Fiber had just 1,300 subscribers, after city leaders anticipated the GON would have 2,700 by that point in the network’s life. That is less than 50 percent of the anticipated number of customers, not a good sign for the feasibility of Fort Dodge Fiber. The revenue numbers for Fort Dodge Fiber are not publicly available.
Pearson did not return a call from TPA seeking comment on the network’s troubles.
The Taxpayers Protection Alliance (TPA) report “GON with the Wind: The Failed Promise of Government Owned Networks” is littered with examples in which taxpayers or electric ratepayers took a financial hit due to GON failures.
In Muscatine, Iowa, $25 million that the broadband division of the city’s utility borrowed for construction from the electric division was forgiven when that network failed. That meant that electric customers had to make up the shortfall in the form of higher power bills.
Although city leaders say the loan for Fort Dodge Fiber is being funded by a surplus in the sewer fund, that overage comes shortly after the city raised sewer and water rates. Water rates increased 8 percent and sewer rates 6 percent on January 1. This occurred after the city previously implemented a sewer initiative fee to fund improvements to the sewer system infrastructure.
A financial audit of Fort Dodge in 2023 showed that the city sewer utility had a net asset position of $12.1 million. A loan of $3.2 million represents about a quarter of the utility’s net current assets, not an insignificant percentage.
Although Fort Dodge leaders continue to tout confidence in the city’s GON, their financial decisions are starting to look eerily similar to other municipalities who saw their broadband networks fail, leaving taxpayers to take the financial hit.
Johnny Kampis is director of telecom policy for the Taxpayers Protection Alliance
