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Michigan City Utility to Borrow $18M for Fiber-Optic Network

Borrowing up to $18.2 million will give Traverse City Light and Power what it needs to expand its fiber-optic network throughout city limits after city commissioners unanimously agreed to authorize the borrowing.

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(TNS) — Borrowing up to $18.2 million will give Traverse City Light and Power what it needs to expand its fiber-optic network throughout city limits.

City commissioners unanimously agreed to authorize borrowing up to that much at their meeting Monday, the latest move toward finishing a project the city-owned utility has contemplated for several years and completed in part of the city. Karla Myers-Beman, the utility’s controller, said the utility will pay it all back and most of it actually represents a $14,699,000 loan from the U.S. Department of Agriculture.

That’ll build not only the infrastructure for Smart Grid technology to the electric utility’s footprint, but allow TCL&P to provide what it considers an essential utility: high-speed internet access, documents show.

City Manager Marty Colburn told commissioners about the need for better upload and download speeds when the utility first began discussing the idea. He recalled stories of businesses physically moving stored digital data from one building to another because their connection speed was so slow.

“One of the things we’re also noting with COVID is, we’re finding there seems to be even more interest and there’s certainly a discussion nationwide in regards to availability and basically how you build a world-class city,” he said. “That is the ability to flow information.”

Smart-grid applications could, for example, better track usage and outages, and participating users could agree to let the power company throttle their air conditioning on hot days in exchange for better rates, as previously reported.

While the USDA approved the nearly $14.7 million loan to build the fiber-optic network, that money wouldn’t cover the cost of connecting homes to the network, Colburn said. So there’s an extra $3,501,000 to cover those costs, documents show.

Myers-Beman said the utility so far has about a 20 percent take rate for the first phase of its network, which includes most of the downtown and nearby neighborhoods. It’s lower than the 40 percent that operator Fujitsu Network Communications figured in its cost-benefit analysis as the break-even point.

Plus, new sign-ups have slowed among the roughly 3,200 homes and businesses passed by the network so far, documents show.

Critics of the idea include Gerald DeGrazia, a telecommunications industry veteran who has frequently criticized Fujitsu Network Communications’ cost-benefit analysis as flawed and overly optimistic. He told city commissioners in a letter that the USDA loan amounted to a “bailout” of a first phase that hasn’t attracted enough customers.

Barb Willing also criticized commissioners for agreeing to borrow money and put the utility in debt. She pointed to other municipal utilities that tried and failed to get into the broadband business and noted it’s another company, not the utility, that runs a network with plenty of local competition.

Mayor Pro Tem Amy Shamroe, long an advocate for the project and a TCL&P board member, said the utility has its own chief information officer, and Fujitsu Network Communications is a contractor that essentially works for him.

Mayor Richard Lewis agreed, adding it’s the same arrangement with Jacobs, for which the city at the same meeting renewed its operating agreement for the Traverse City Regional Wastewater Treatment Plant for another 10 years.

“They all work for us and there is checks and balances,” he said.

Next, TCL&P’s board must adopt another motion clarifying its original approval to make clear what the USDA financing pays for and state the utility’s intent to apply for additional financing to cover a 25-percent cost increase over previous estimates. That increase is included in the $14,699,000 figure.

City voters have 45 days from the resolution’s publishing in the Record-Eagle’s legal notice section to gather enough signatures to put the loan to a referendum, documents show — petitioners would need signatures from at least 10 percent of the city’s registered voters, according to state law.

© 2022 The Record-Eagle (Traverse City, Mich.). Distributed by Tribune Content Agency, LLC.