Cost Overruns Plague Taxpayer-Funded Broadband in Fort Dodge

The Fort Dodge City Council recently approved an additional $365,910 for broadband engineering services. This shows that cost overruns have plagued yet another taxpayer-funded broadband network.

The Council agreed at its April 22 meeting to pay that amount to engineering 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.

The additional money will be “payable solely and only from the Net Revenues of the Municipal Telecommunications Utility of the City,” according to the note.

But, as the Taxpayers Protection Alliance (TPA) has noted in previous reporting on this issue, cities often have to develop a Plan B when their broadband networks don’t attract enough customers to pay back the upfront costs of building the infrastructure. The 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.

Former TPA senior fellow Chip Baltimore (an eight-year lawmaker in Iowa) warned in 2019 before a referendum in Fort Dodge, that voters would be giving city leaders “a blank check to borrow unknown amounts to build a system that no one knows where it will be successful.”

Baltimore pointed out that at a public forum on the topic that August, consultant Curtis Dean of SmartSource Consulting couldn’t give a definitive answer on what the network would cost, eventually settling on “tens of millions.” Even though bonds were sold to fund the system, local taxpayers tend to be on the hook for costs if low revenues lead to missed bond payments.

Despite the warning, 72 percent of voters said “yes” in the referendum vote.

In 2021, the Fort Dodge City Council borrowed $33.4 million to pay for the network’s construction and $3.5 million to pay for initial operating expenses.

It’s been a slow go for Fort Dodge Fiber since voters gave their approval. The local newspaper, The Messenger, reported in January that just 450 customers had been connected with broadband out of 11,000 residences and businesses in the city. That is a laughable 4 percent take rate.

Fort Dodge residents have seen very little return after giving city leaders their approval five years ago. Hopefully, the taxpayers of Fort Dodge don’t take a financial bath as so many others have done in other municipalities where elected officials decided to build their own broadband networks.

Johnny Kampis is director of telecom policy for the Taxpayers Protection Alliance