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.”

  • NPeterson

    I have been following the whole city fiber optic thing for some time now. I also watch and read the city council meetings and agendas posted on the city’s website. To date I have not noticed any budget items showing fibernet getting over $3 million dollars and the council has never approved such large sums of money on any agenda items to keep the fiber business afloat. How is it that this much money can be used without prior council approval at a public meeting? Did the city administrator just do it without approval? Can the mayor or any council persons respond to this question, maybe I am missing something here I don’t know about procedure wise.

  • Chris

    I remember the city claiming they would not use taxpayer dollars for their fiber optics business when they gained voter approval by referendum. $322,528 transferred from the general fund is no doubt taxpayer money. Even the liquor store reserves at $3.12 million is in a roundabout way money that could be used for keeping taxes low. That money that could have been used otherwise for city related expenses. Here are the exact words by Mayor Herbst in his mayor candidate interview in Monticello Times newspaper article dated Oct. 25, 2012 – “Dollars were used that could have been spent on other needed city projects and now that money will have to be levied for…I propose to wait and see the effects of the new management. If things aren’t improving after their first three months, I will ask to end the draining of other city funds into the Fibernet account.”

    The new management or consultant according to council agenda item dated 10/8/12 states that the contract began on October 1. According to the mayor’s comments above those months equal Oct.-Nov.-Dec. 2012. Will the mayor provide the general public with a report in January as follow up to his promise to “end draining of city funds?” Why isn’t the public made aware of these reports and numbers as to how Fibernet is doing financially? Why isn’t the council making this information available by discussing it as agenda items at meetings?

    It appears much spending is going on behind closed doors until the end of year operating transfers get approved and then we find out it’s over $4 million dollars spent and gone! I commend council person Perrault for pulling this item off the consent agenda or it would never have been discussed for the general public’s ear. The bigger question now is what will the general public do to hold the mayor and council accountable to fiscal responsibility of the taxpayer dollars and ongoing spending for Fibernet in 2013?

  • Chris

    CORRECTION to my previously posted comment. It was candidate for Mayor Brad Fyle who said in the 10/8/12 news article no more draining of Fibernet funds after 3 months of new management. Too bad the voters didn’t elect Fyle instead of re-electing Mayor Herbst who has approved continued draining of city funds, the transfer of $445 million and an additional proposed $220,000 in the 2013 budget.

    Herbst comments in the same news article were, “In the coming months we will be working side-by-side with the investors that own the system to work out a model that will keep fibernet in place…” As a citizen, my concern is that since the city has quit paying on the bonds but continue to susidize the fibernet business with funding from city sources that legal action could be just around the corner to put pressure on the city to pay up. You thought the TDS lawsuit was bad, watch out!

  • Monticello resident

    Mayor Clint Herbst says in the article, “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.

    Who exactly is on the hook for the bond debt? Is the city required to pay the bonds back or can they walk away from it and not have to use city funds because the $26 million are revenue bonds and not general obligation? What is the city really committed to, the bond payments (hard to believe since they quit paying the debt service) or their ego and pride unable to admit that fibernet is a financial failure and needs to be discontinued.

  • Monticello Taxpayer

    Again, a perfect example why Government should NOT be in business. Clint keeps saying that TDS slowed them up?? How long is that excuse going to stand, If i recall, Fibernet was rewarded over a million dollars after that was settled. Our taxes are going up and house values are going down.. I would challenge our residents to walk through our public works building and Fire Department and you tell me where you think they should have but shuffled 4 million dollars to benefit a department. I’m certain that Fibernet is the last place they should be moving money around to fund when they have been opperational for years now and have never opperated in the green YET….. Public works keeps our town updated and nice and our Fire Department only SAVES OUR LIVES!!!!!!!

  • Kevin Boynton

    All of this would be funny in a Keystone Cops sort of way but it is so sad. Any private company would have known better than to pursue this very bad path. That is how they stay in business. On the other hand there are the taxpayers!
    This should have been stopped as soon as it became known that TDS had agreed to enter the market.
    Be careful what you wish for. This is what you got. Is it what you thought you would get?
    There is a lesson here, government isn’t the solution, rather it is a huge part of the problem.
    Government is not able to compete with private business because they are unable to think smart. Reagan was right.

  • Robb

    Where are all the cheerleaders now?? Long ago and many times I posted a prediction in these comments that Fiberbet would either start using taxpayer money and/or sell out the infrastructure to a private company for pennies on the dollar. Us naysayers were few and far between and heavily ridiculed, but now it seems the tide has turned – sooner than I expected. I really hate to rub your guys’ nose in it… well actually… *rub* *rub* *rub*. :-)

    By the way Clint: Saying that it was “too late to turn back” is like me driving my car off of a cliff and just before hitting the bottom of the canyon, saying “geez, I guess it’s too late to turn back.” What I’m saying is that you guys KNEW that was a distinct possibility – if not an EXPECTATION. I have documents and emails from the Fiber Task force that proves that. This was also brought up as one of about 10 concerns by a citizen at a City Council meeting in the later part of 2006 – long before any bonds were issued. So, yeah… it was too late, but you had to know it would be coming.

  • Monticello resident

    A note of thanks to newspaper editor Tim Hennagir for reporting the fibernet facts and financial figures in this article for the public to read. Often times these numbers are buried in paperwork, presented at special city council workshops or buried in consent agenda items that are not discussed or televised like the regular meetings are. He did a nice job of reporting the information the public needed to know about.

  • NPeterson

    I agree about the newspaper article being spot on for sharing real numbers with its readers. The general public is finally hearing the truth.

    This could be the start of more community news sharing as time goes on. Online comments with the newspaper articles are a great place to do that. I see there’s also a new facebook page up titled “Monticello Community Forum.” Do a search for these words at the top of your facebook page, get connected and “like” this page for ongoing community news and tidbits. And keep reading the Monticello Times. Looks like this news editor is hitting the stories hard with both the hospital and now the city and fibernet.

  • NPeterson