MINET Expansion Spells Relief, Dallas to the Rescue?
By Anne Scheck
Around Independence, a common adage goes that one source of the city’s estimated $38 million debt -- the municipal broadband MINET -- can’t possibly prove adequately profitable until someone pulls a rabbit out of a hat.
Say hello to MINET’s new long-eared furry friend, American Fiber Optics (AFO).
MINET and AFO have formed a partnership that will expand the fiber optic provider into Dallas, the county seat. And all costs will be borne by AFO, according to Don Patten, general manager of MINET, who made the announcement shortly before it was approved by resolution at a recent Independence City Council meeting.
"It's the best possible thing that could happen to these cities," Mr. Patten said. The expansion, titled Willamette Valley Fiber, will mean a share of profits to MINET, once the operational and infrastructure expenses are paid. The percentage return to the co-founding cities of Monmouth and Independence -- estimated at 15% -- eventually will be more lucrative than that, he affirmed, although he declined to put a specific percentage on the return.
Two years ago, MINET’s debt, which was $27 million for the two cities, was listed as a doubtful account.
The share of that debt to Independence, which remains less than half of that sum, meant anywhere from $10 to nearly $15 of most water bills were earmarked to subsidize MINET’s debt repayment, according to the city’s utility consultant, Steve Donovan. Also, according to Mr. Donovan’s calculations, another $6.50 of an average bill was going to pay on another debt: the Independence Civic Center. It was built to replace the former, undersized city hall next to the post office.
Now, with MINET’s expansion, the portion of the water-and-sewer bill allocated for MINET debt may one day be reduced. However, payments for the Civic Center debt, along with nearly $10 million in needed upgrades to the water and sewer system, seem to make it unlikely the water-and-sewer billing will drop for residents any time soon.
Additionally, a street census undertaken by Independence a few years ago concluded that the city would need to spend $2 million per year to keep pace with necessary maintenance for its streets – or face millions more in expenses for re-paving and refurbishing in the next five years. Those steps largely haven’t been undertaken, due to financial expenditures, in part, for infrastructure to make “shovel-ready” the riverside acreage for Independence Landing.
Plans for Independence Landing include apartments and townhomes. A hotel there currently is under construction. However, returns to the city on that investment are expected to pay for the redevelopment costs incurred – and more, according to David Clyne, city manager, who has referred to the revenue from the additional tax earnings as key to future financial gains for the city.
“I wouldn’t say that the street report won’t be acted on,” stated Shawn Irvine, the city’s economic development director. “We’ll still use it to target the annual overlays that are done, and if council chooses to explore the issue more deeply, the report will be a good basis for discussion,” he added.
When discussing the city debt, "it is what it is," said Ken Day, who left the Independence City Council last year and since has relocated to Arizona. Hand-wringing over the debt level isn’t productive -- but city spending does require "watchdog" oversight, he noted. It’s appropriate to ask where specific revenue streams are going, for example, he urged. Yet the Independence City Council seems to defer to the city manager's and mayor's point-of-view on many issues, he said.
This isn't necessarily a disadvantage for the city, but if the councilors would recognize that some of the plans "require more analysis and critical thought" that would be beneficial for the public, he said.
Mr. Patten and Mr. Day, who served as liaison to MINET for the city council, consider it important for some public officials to have business expertise. Mr. Patten would like to add some MINET board members with business backgrounds; Mr. Day said he believes current or former business owners or executives who are elected to the city council would help, as well.
Both he and Mr. Patten said they think the debt will be serviced fully or near fully in two-to-three years' time, based on projections. Additionally,
costs to the city will go down too -- due to payments by AFO for shared services.
MINET’s internet speed is going to be so much higher for Dallas subscribers that Mr. Day thinks it’s a pretty sure bet. And Dallas is growing, so the city offers an increased opportunity for expansion on that basis, too, he said. But, MINET itself was founded after a similarly upbeat forecast, past city records show.
One of Mr. Patten's associates in the telecommunications industry, Doug Dawson of CCG Consulting, assisted in attracting investors and solidifying the deal for Willamette Valley Fiber. The investment group has a history of financing schools and prisons, then leasing them back for public use.
So far, this private investment group has funded more than a dozen such projects over the past decade. However, this is the group's inaugural foray into municipal broadband -- and it's also the first one in the state to be structured this way, Mr. Patten said. Mr. Dawson’s CCG was the consulting firm hired to evaluate MINET – twice. In 2013, the firm identified weak areas in the communications carrier. In 2016, it found MINET had addressed many of the shortfalls.
MINET, which was co-founded a dozen years ago by Monmouth and Independence, has had declining cable-television subscription and land-phone lines. However, "this is a great little company. It is a diamond," Mr. Patten said. Some of the challenges he faced when he came aboard five years ago -- cost over-runs, marketing difficulties -- have been resolved, he noted.
A flat management fee will be returned to MINET's general fund. That’s why, over time, Mr. Patten expects MINET to be able to service the current debt load, making payments that no longer require subsidy from either city. However, the final fiscal relief associated with the addition of Dallas subscribers to MINET has yet to be determined.
Mr. Patten will serve as manager of the expanded portion, as well; His salary and those in other leadership positions will be divided between AFO's needs and MINET – a savings to cities due to the shared salaries.
The realized profit will assist in bringing employee salaries in line with many others in this business, he said. MINET, with Willamette Valley Fiber, will have 21 employees and 19 full-time equivalents, he added.
The expansion is expected to go forward this fall. Dallas City Manager Greg Ellis, who was the Independence city manager at the time MINET was founded, was instrumental in supporting the expansion. "He has been a prince to work with," said Mr. Patten.
Additionally, costs to the city will go down due to payments by AFO for shared services, he said. "With an 85% penetration rate, we needed to do this (find a new customer base). And now MINET's problems will be solved -- by MINET," Mr. Patten said.
The savings can’t come soon enough for city coffers, as the roll of city retirees begins to swell. Oregon guarantees a rate of return for public employees who draw a pension, and, for longtime employees, it’s one of the most generous pension plans in the nation.
A fairly recently retired employee, the former public works director, had been at the city since young adulthood. Similar retirements are expected in the next few years. The city is obligated to ensure these pensions are appropriately funded, according to state law.
Around Independence, a common adage goes that one source of the city’s estimated $38 million debt -- the municipal broadband MINET -- can’t possibly prove adequately profitable until someone pulls a rabbit out of a hat.
Say hello to MINET’s new long-eared furry friend, American Fiber Optics (AFO).
MINET and AFO have formed a partnership that will expand the fiber optic provider into Dallas, the county seat. And all costs will be borne by AFO, according to Don Patten, general manager of MINET, who made the announcement shortly before it was approved by resolution at a recent Independence City Council meeting.
"It's the best possible thing that could happen to these cities," Mr. Patten said. The expansion, titled Willamette Valley Fiber, will mean a share of profits to MINET, once the operational and infrastructure expenses are paid. The percentage return to the co-founding cities of Monmouth and Independence -- estimated at 15% -- eventually will be more lucrative than that, he affirmed, although he declined to put a specific percentage on the return.
Two years ago, MINET’s debt, which was $27 million for the two cities, was listed as a doubtful account.
The share of that debt to Independence, which remains less than half of that sum, meant anywhere from $10 to nearly $15 of most water bills were earmarked to subsidize MINET’s debt repayment, according to the city’s utility consultant, Steve Donovan. Also, according to Mr. Donovan’s calculations, another $6.50 of an average bill was going to pay on another debt: the Independence Civic Center. It was built to replace the former, undersized city hall next to the post office.
Now, with MINET’s expansion, the portion of the water-and-sewer bill allocated for MINET debt may one day be reduced. However, payments for the Civic Center debt, along with nearly $10 million in needed upgrades to the water and sewer system, seem to make it unlikely the water-and-sewer billing will drop for residents any time soon.
Additionally, a street census undertaken by Independence a few years ago concluded that the city would need to spend $2 million per year to keep pace with necessary maintenance for its streets – or face millions more in expenses for re-paving and refurbishing in the next five years. Those steps largely haven’t been undertaken, due to financial expenditures, in part, for infrastructure to make “shovel-ready” the riverside acreage for Independence Landing.
Plans for Independence Landing include apartments and townhomes. A hotel there currently is under construction. However, returns to the city on that investment are expected to pay for the redevelopment costs incurred – and more, according to David Clyne, city manager, who has referred to the revenue from the additional tax earnings as key to future financial gains for the city.
“I wouldn’t say that the street report won’t be acted on,” stated Shawn Irvine, the city’s economic development director. “We’ll still use it to target the annual overlays that are done, and if council chooses to explore the issue more deeply, the report will be a good basis for discussion,” he added.
When discussing the city debt, "it is what it is," said Ken Day, who left the Independence City Council last year and since has relocated to Arizona. Hand-wringing over the debt level isn’t productive -- but city spending does require "watchdog" oversight, he noted. It’s appropriate to ask where specific revenue streams are going, for example, he urged. Yet the Independence City Council seems to defer to the city manager's and mayor's point-of-view on many issues, he said.
This isn't necessarily a disadvantage for the city, but if the councilors would recognize that some of the plans "require more analysis and critical thought" that would be beneficial for the public, he said.
Mr. Patten and Mr. Day, who served as liaison to MINET for the city council, consider it important for some public officials to have business expertise. Mr. Patten would like to add some MINET board members with business backgrounds; Mr. Day said he believes current or former business owners or executives who are elected to the city council would help, as well.
Both he and Mr. Patten said they think the debt will be serviced fully or near fully in two-to-three years' time, based on projections. Additionally,
costs to the city will go down too -- due to payments by AFO for shared services.
MINET’s internet speed is going to be so much higher for Dallas subscribers that Mr. Day thinks it’s a pretty sure bet. And Dallas is growing, so the city offers an increased opportunity for expansion on that basis, too, he said. But, MINET itself was founded after a similarly upbeat forecast, past city records show.
One of Mr. Patten's associates in the telecommunications industry, Doug Dawson of CCG Consulting, assisted in attracting investors and solidifying the deal for Willamette Valley Fiber. The investment group has a history of financing schools and prisons, then leasing them back for public use.
So far, this private investment group has funded more than a dozen such projects over the past decade. However, this is the group's inaugural foray into municipal broadband -- and it's also the first one in the state to be structured this way, Mr. Patten said. Mr. Dawson’s CCG was the consulting firm hired to evaluate MINET – twice. In 2013, the firm identified weak areas in the communications carrier. In 2016, it found MINET had addressed many of the shortfalls.
MINET, which was co-founded a dozen years ago by Monmouth and Independence, has had declining cable-television subscription and land-phone lines. However, "this is a great little company. It is a diamond," Mr. Patten said. Some of the challenges he faced when he came aboard five years ago -- cost over-runs, marketing difficulties -- have been resolved, he noted.
A flat management fee will be returned to MINET's general fund. That’s why, over time, Mr. Patten expects MINET to be able to service the current debt load, making payments that no longer require subsidy from either city. However, the final fiscal relief associated with the addition of Dallas subscribers to MINET has yet to be determined.
Mr. Patten will serve as manager of the expanded portion, as well; His salary and those in other leadership positions will be divided between AFO's needs and MINET – a savings to cities due to the shared salaries.
The realized profit will assist in bringing employee salaries in line with many others in this business, he said. MINET, with Willamette Valley Fiber, will have 21 employees and 19 full-time equivalents, he added.
The expansion is expected to go forward this fall. Dallas City Manager Greg Ellis, who was the Independence city manager at the time MINET was founded, was instrumental in supporting the expansion. "He has been a prince to work with," said Mr. Patten.
Additionally, costs to the city will go down due to payments by AFO for shared services, he said. "With an 85% penetration rate, we needed to do this (find a new customer base). And now MINET's problems will be solved -- by MINET," Mr. Patten said.
The savings can’t come soon enough for city coffers, as the roll of city retirees begins to swell. Oregon guarantees a rate of return for public employees who draw a pension, and, for longtime employees, it’s one of the most generous pension plans in the nation.
A fairly recently retired employee, the former public works director, had been at the city since young adulthood. Similar retirements are expected in the next few years. The city is obligated to ensure these pensions are appropriately funded, according to state law.
The CIVICS LESSON: Broadband Named Top Priority to LOC
This fall, city councilors from across the state will converge in an annual conference for the League of Oregon Cities (LOC). What’s the LOC? A membership organization of most of the state’s municipalities that serves as the legislative lobbyist for Oregon cities. In that capacity, the LOC often surveys cities to set priorities. At the last Independence City Council meeting, councilors were asked to choose their top 2018 priority for the LOC. Most councilors, along with the city manager, voted to assign the most importance to broadband infrastructure, in apparent support of homegrown MINET.
The INDY HOP: Strength in Numbers for Independence Name
If you think Independence is a singular city, a town like no other … well, think again. It’s actually one of two dozen municipalities just like it. No, really. Beginning with Alabama and ending with Wisconsin, half of all states in the continental USA have a town named Independence. In fact, Minnesota has two: One west of Duluth, the other west of St. Paul. The one in Kansas is the setting for the famous play “Picnic” by William Inge. The one in Missouri was the boyhood home of Harry Truman, 33rd president of the United States. In fact, the Independence here, in Oregon, is named after the one in Missouri. The earliest towns founded as “Independence” were – no surprise – back east, in New York and New Jersey. However, neither is actually called a city. The one in New York is referred to as a “hamlet” and historians reportedly can find no good reason it was given that name. The one in New Jersey is listed as a “township” and it’s suspected that this one is named after the one in New York, even though the reason the one in New York is called Independence remains something of a mystery. It isn’t known how many different towns called Independence are named after one another, but the others are in California, Indiana, Illinois, Iowa, Kentucky, Louisiana, Michigan, Mississippi, Ohio, Oklahoma, Pennsylvania, Tennessee, Virginia, West Virginia and Texas.
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