IE 11 Not Supported

For optimal browsing, we recommend Chrome, Firefox or Safari browsers.

Westminster, Md., Partners with Private Sector to Broaden Fiber-Optic Network

The city has entered into an agreement with an Internet service provider to get high-speed connectivity to more than 2,000 homes.

(TNS) -- Westminster, Md., has begun the engineering of the second phase of its fiber optic network, expecting to provide high-speed Internet capabilities to 2,000 additional homes west of Md. 31.

According to a map created by Ting, the Internet service provider that has partnered with Westminster to lease the fiber network, the neighborhoods that will be able to receive service as a result of this second phase include Bolton Hill, Cliveden Reach, Village of Meadow Creek, Whispering Meadows, Furnace Hills, Eagle View Estates, Fenby Farm, Avondale Run, Wakefield Valley and closely surrounding neighborhoods.

The city has issued bonds held by SunTrust Bank in the amount of $21 million to fund the expansion of its fiber optic network. Wack said the city closed the deal Sept. 30.

"All along, our plan was to borrow the money necessary to continue the build out," Common Council President Robert Wack said. "We are getting ready to take down the first draw that will be spent on engineering the next phase."

A bond is a debt security — similar to a loan — under which the issuer owes the holder a debt and, depending on the terms of the bond, is obliged to pay them interest and/or to repay the principal at a later date, according to Tammy Palmer, director of the city's Department of Finance.

Palmer said the city completed its first draw against the bond Wednesday for $180,686.24.

Valerie Bortz — the former assistant principal of the Career and Tech Center who Ting hired in June to facilitate the expansion of its customer base in Westminster — said that to ensure businesses and residents in these areas have access to Ting's fiber optic Internet service, they must first sign an access agreement.

This gives the city and its contractor permission to run a fiber coil to a person's property, Bortz said. Once this is complete, residents and businesses would sign up separately for service, she said. However, signing the access agreement does not obligate someone to sign up for service, Bortz said.

"Fiber Internet is just like electricity, to some extent," Bortz said. "It's an essential utility that homes and businesses rely on. We get that it needs to be a great service that's both quick and reliable."

The city has made the commitment to its residents and businesses that whoever wants a fiber drop to their property will receive one, Wack said, regardless of if they request it during construction or after.

"If construction moves away from the neighborhood it might take a little bit longer, but it will get done," Wack said.

Wack said there is no definite timetable to extend the network to the entirety of the city, as this depends on how quickly people sign up for service and potential construction delays.

"Ideally, we'd like to be done in three to four years, but it could easily go five to six," he said.

Bortz said that because Ting is a publicly traded firm it is the company's policy not to disclose exact figures regarding those who have signed up for service.

"I can tell you that we are super busy and happy with our progress," she wrote in an email.

The decision to build out the network based on demand was one reason SunTrust was interested in buying the bonds, Wack said.

"We don't want to spend money unless there is revenue from the payments to support the debt payments," he said. "The bank liked the fact we were being cautious about this. I'd like to go full steam ahead but we need people to sign up."

Palmer said the city's request for proposals went out in July and specifically solicited banks and other lending institutions. Westminster received two responses — the other being BB&T Bank — but because of a number of loan options SunTrust offered, the city chose to award the bond sale to them, she said.

"[SunTrust] provided a lot of forks in the road to prepare for flexibility in the financing," Palmer said.

The basics of the loan includes two separate bonds — one for $14 million and another for $7 million — that would be paid off in a 30-year amortization schedule with a variable interest rate.

However, SunTrust allowed for the possibility the city could convert the amount drawn down over to a 15-year loan to lock in a fixed rate.

Palmer said the loans have a variable rate based on the London Interbank Offered Rate, or LIBOR, which is the average interest rate estimated by leading banks in London that the average bank would be charged if borrowing from other financial institutions, according to BankRate, a financial publication. It is also the most common worldwide benchmark for interest rate indexes.

"These rates could get out of control, so within two years we could lock in the current rate and that becomes a 15-year amortization schedule," she said.

The deal also includes a pre-payment clause that allows the city to make payments ahead of schedule to protect against rising interest rates, Palmer said.

SunTrust included a bit of flexibility for themselves, such as the option to demand full payment of the loan within 12 years, she said. They also have the option to extend the loan payback period.

Regardless of which payback plan the bank or the city chooses, Westminster has five years to draw against the two loans, Palmer said. The city will only have to pay back what it draws down against the loan, she said.

©2015 the Carroll County Times (Westminster, Md.) Distributed by Tribune Content Agency, LLC.