KentuckyWired is no Field of Dreams
This article originally appeared in USA Today on December 16, 2016
In the 1990 Oscar nominated film “Field of Dreams,” Kevin Costner’s character hears a promise from above: “If you build it, he will come.” Viewers, and Costner, aren’t sure who “he” is, but it’s one of the most memorable movie lines of all time and is enough to get Costner to level his cornfield and build a ball field.
That faith is enchanting in the movies, but in real life can be problematic.
KentuckyWired, the Bluegrass State’s government-owned broadband network, is a great example of real life being out of tune with fantasy. Upon taking office, Gov. Matt Bevin seemed to -- wisely -- be pulling back from this project, which is now more than a year behind schedule. Now he has reversed that position and basically told taxpayers in a press conference earlier this year, “If the state builds it, we’ll find a way to pay for it.”
Don’t worry? Right.
Here is how KentuckyWired was supposed to be financed: the state would spend at least $23.5 million in federal taxpayer funds and $30 million in state taxpayer funds to build the network with private sector partners contributing an additional $280 million issued in bonds for which Kentucky taxpayers will be on the hook. It sounds like an advantageous partnership for taxpayers, but it wasn’t altruism that was driving Kentucky’s partners, Black & Veatch, First Solutions, Fujitsu, Ledacor, and Macquarie Capital. These firms will “own” the network and charge Kentucky government agencies and institutions, including schools and colleges, fees to use the network. The private sector “partners” will get their money back from taxpayers.
That was what was supposed to happen, but then the state ran into a snag.
Policymakers had planned to use federal dollars directed to schools to help pay for internet connectivity through KentuckyWired, but now it appears they cannot do so. That leaves a $13 million annual gap in funding that is necessary to pay the rapidly accumulating debt.
In his press conference, Gov. Bevin said the funding gap had been rectified, but he didn’t give any more details.
Taxpayers shouldn’t have much faith that whatever mechanism the state and its partners have found will not cost them millions of dollars. That’s because this isn’t the first time Macquarie Capital has been involved in a controversial government-owned broadband deal. A year ago the Taxpayers Protection Alliance noted that the firm, which is based in Australia, is the same one that discussed taking over a failing 11-city network in Utah. As part of that deal, Macquarie wanted all of the residents of those 11 cities to pay a $20 monthly fee on their regular utility bills regardless of whether they got service from the government ISP.
Will state taxpayers face a similar fee to make up for the $13 million KentuckyWired gap? We just don’t know what the terms are. TPA also has argued that the financing plan for this network is akin to buying a house without knowing the details of the mortgage, without doing a home inspection, or without looking for a better deal on interest rates.
Taxpayers shouldn’t have to take the governor’s word on faith. Or Macquarie Capital’s. Before Kentuckians are asked to get on board with this deal, they deserve to know how they will be asked to pay for this expensive field of dreams.