FiberNet operating transfers pass Monticello City Council vote

There was something missing last week when Monticello City Council members removed and later discussed a consent agenda item involving FiberNet.
Councilmember Tom Perrault was concerned about $4.45 million in 2012 proposed operating transfers to the city-owned telecommunications and broadband provider.“It seems like a lot of money,” he said. “I’m kind of concerned about how much is being transferred. I think we should discuss that more before approving it.”
After the item was pulled from the consent agenda, the 15-minute discussion that followed lacked depth when it came to mentioning many six-figure or higher numbers.
Eventually, city leaders approved an interfund transfer of $322,527 from the general fund to FiberNet and a $3.12 million interfund transfer from the liquor fund.
The following FiberNet fund additions were also approved: a $377,473 transfer from the city’s street reconstruction fund, a $300,000 transfer from the DMV fund, a $200,000 transfer from the street light improvement fund and another $125,789 transfer from the liquor fund.
According to Finance Director Wayne Oberg, the Nov. 26 transfers approved by council were used to retire an interfund loan as well as provide additional, temporary financial resources for FiberNet.
“Roughly $3.4 million of that occurred last year,” Oberg said in a later interview. “Those interfund loans were set up at the end of fiscal year 2011,” he added.
Interfund loans typically are used to offset negative year-end cash balances, Oberg said. In most cases, interfund loans are temporary. “We had an overall $43 million budget last year and $6.5 million of it was transfers. Roughly, that’s 15 percent.” Oberg also addressed possible public concern about transferring taxpayer-collected general fund dollars to FiberNet, namely the movement of nearly the entire remaining liquor cash balance as transfer to the FiberNet fund.
“What I said at the [Nov. 26] meeting was pick a fund,” Oberg said. “We wanted to leave some money in our capital project funds to help keep the process of various public facility construction and reconstruction projects going. “Eighty percent of our general fund comes from property taxes, and the other 20 percent comes from various revenue sources,” he said. “You can say general fund money is tax dollars, but 20 percent of it is revenue from other sources. It could be building permits, franchise fees or a whole list of things. All your money goes into one account. The general fund covers the general operations of the city.”
City Administrator Jeff O’Neill said earlier this week the city will no longer use liquor store or other funds to supplement the FiberNet debt service reserve fund.
Wells Fargo notified bondholders in October it had commenced trust proceedings in Hennepin County District Court because the city had stopped supplemental debt service payments on $26.4 million in FiberNet 2008 bonds. According to O’Neill, recent court actions indicate Wells Fargo will continue to hold back its payments. “That’s their prerogative,” he said. “Our goal is making the FiberNet system work. The city has made a commitment to that, and we’ve used liquor store funds to keep it going. We have $220,000 in our 2013 budget to continue to operate FiberNet. Everybody is trying to make the best of the situation”
The Monticello Times asked Mayor Clint Herbst to comment directly on the operating transfers, specifically the use of what many consider taxpayer dollars.
“TDS held up the FiberNet project for over a year with a lawsuit that resulted in about a million dollars in interest on money we could not touch and possibly millions more in revenue as they moved forward to install and capture the market as we sat in limbo,” Herbst said via email. “Some question why we would move forward. We had already committed to the bond sale and had we walked away, we would have been on the hook for the entire $26 million,” he added.
According to Herbst, Monticello’s FiberNet business plan showed the city would be able to operate and provide services for 15 percent less than the provider (TDS) at the time that the city was working towards implementing the system. Herbst said residents are paying much less than 15 percent than they were before FiberNet came to town.  In some cases residents are saving between 50 to 60 percent, he said.
“We’re in negotiations with investors to try to recapture the dollars the city borrowed FiberNet to bridge the operating fund,” Herbst stated. “We are hopeful that we can work out a win-win with those investors.”