HomeMy WebLinkAboutMinutes-08_27_2001 (2)COUNCIL WORK SESSION
August 27, 2001
4:30 p.m.
Council Chambers
Members present: Mayor Rooff, Anders, Jordan, Krizek, Murphy, Gronen, Getty, Berry.
Moved by Jordan, seconded by Gronen that the Agenda, as proposed, be approved. Ayes:
Seven. Motion carried.
Dan Mills, consultant from SFT, Inc., and Gary Chambers, Chairperson of the
Telecommunications Task Force, made a presentation to the council on the city's proposed fiber
optic backbone network project. The city will design, build, own and operate the fiber optic
backbone network. The network will include multiple loops and span approximately 40 miles
through the city. The network will include 144 fiber with 36 to be used by the city, 12 to be used
by the schools and 96 to be leased to external telecommunications service providers and other
users. The project will be financed with GO bonds. The project will be funded through the sale
and leasing of fiber capacity to external users. Lease and sale revenues will off -set project
operating expenses and debt service. The project will be self -funded, no tax or general funds will
be used to fund the project. The City will establish a Municipal Communications Utility to
manage and operate the network.
The objectives of the project include making advanced telecommunication services available to
Waterloo businesses. The project will enhance the city's competitiveness, attract and retain
high-tech industries, and encourage competitive market conditions. The project will retain a
greater portion of telecommunications revenue in the local economy, drive economic
development and help manage the city's telecommunications future.
Benefits include: expanded city operations, increased operational efficiencies, enhanced
educational services, and new job opportunities. The project will improve quality, lower costs,
and expand product offerings. The project will expand the tax revenue base and enhance overall
quality of life for all residents.
Cedar Falls Utilities will lease 48 of the 96 available fibers. Cedar Falls Utilities will provide
telecommunications services to commercial and industrial customers. They will provide
operating support and maintenance for the entire network. Cedar Falls will share net profits
generated in the city. Cedar Falls will support the city in attracting a provider to offer residential
services.
MidAmerican Energy will purchase fiber with an up -front capital contribution and additional
consideration for facilities access fees. The city will issue Memorandums of Understanding to
Cedar Falls Utilities and MidAmerican Energy. The Memorandums of Understanding are
strictly preliminary at this time. No binding agreements can be completed until after the
referendum and the establishment of a Municipal Utility.
Mr. Mills reviewed the cash flow for a 20 year bond and the following financial evaluation:
•
Required Capital $1,990,220
Debt Service $3,500,184
Operating Expenses $2,242,021
Revenue $6,600,000
Ending Cash $ 857,795
Councilperson Jordan stated he was concerned that Cedar Falls Utilities would "cherry pick" the
customers. Mr. Mills responded that Cedar Falls Utilities is going to push their network as deep
into the city as possible. Cedar Falls Utilities as a municipal utility is not driven by high returns,
and in addition to the $330,000 per year lease payment, they will profit share with the city any
revenue after expenses.
Councilperson Murphy stated he heard that Cedar Falls Utilities will need to upgrade their head -
end. Mr. Mills responded he is not aware that Cedar Falls needs to upgrade their head -end, but
Council Work Session
August 27, 2001
Page 2
he has heard Cedar Falls Utilities plans to upgrade digital services. Gary Chambers, Chairperson
of Telecommunications Task Force, stated that it is his understanding that Cedar Falls Utilities is
only using one-half of their head -end capacity.
Councilperson Anders stated that he believes the partnership between the City, Cedar Falls
Utilities and MidAmerican Energy will control any cherry picking. Mr. Mills answered that is
correct as the Task Force has developed a conceptual design for the fiber optic backbone.
Councilperson Jordan asked if the new board will set the rates. Councilperson Murphy asked
what happens to excess funds and if the city will share in the revenue. Mayor Rooff responded
that if approved by the referendum, the newly created Board will be in charge, and he will ask
the Assistant City Attorney to have language in the contracts regarding revenue.
Mr. Mills stated that additional financial impact from owning the fiber optic backbone includes
illumination of existing telecom expenses for the city, schools and county. The city will have
profit sharing with Cedar Falls Utilities and should realize an increase in the commercial tax
base. The city will still have 42 fibers (44 percent) available to generate additional revenues.
This project will bring the city closer to attracting a competitive provider for residential services.
Councilpersons Berry and Jordan questioned if they can provide service to residential customers.
Mr. Chambers responded that the charge of the Telecommunications Task Force was to bring
high speed communications to businesses, and the Task Force felt the best way to do that was
through a fiber optic backbone. Mr. Chambers stated it was never the charge of the Task Force
to provide services to residential customers, but 42 fibers remain that could be used by any
company willing to provide service to residential customers. Mr. Chambers reported that the
Task Force sent a survey to 1,120 business owners and received a 17.8 percent response rate.
Mr. Chambers reported that he believes this project will provide a tremendous savings to
businesses.
Mayor Rooff stated that the council can either approve moving forward with a referendum or go
back to Mediacom or McLeod to see if they are interested in providing this service. Mr. Mills
explained that the Task Force worked hard to bring a proposal to the council that projects a
positive cash flow. Mayor Rooff commented that the city wants our industrial parks to have
access to high speed communications.
Mr. Mills outlined the following steps that must be followed for the fiber optic backbone project.
The city council must approve proceeding with the project with approval of the Memorandums
of Understanding and notifying the County Elections to schedule a special referendum on
October 2, 2001. In response to a question from Councilperson Berry, Mr. Mills stated that
statistically speaking a 17.8 percent response rate from businesses is a pretty high response.
The referendum on October 2, 2001 will ask the voters to approve establishing a
Telecommunications Utility, establish a Municipal Utility Board and approve a $2 million bond
issuance for the project. Mr. Mills explained that once voters approve the referendum, the
timeline for the city to establish the Municipal Utility and negotiate and execute contracts with
Cedar Falls Utilities and MidAmerican Energy is by October 31, 2001, with construction to
begin January 1, 2002.
Councilperson Jordan asked if the Task Force is saying it is better to go with 40 miles of fiber for
businesses and not do the residential areas. Mr. Mills responded that even if funds were
available to go ahead with residential, he would recommend implementation of Phase I
(businesses) and then the residential customers.
With no further business before the council, it was moved by Krizek, seconded by Gronen that
the meeting be adjourned at 5:25 p.m. Ayes: Seven. Motion carried.
Nancy Eckert
City Clerk