DULUTH – Three resolutions that could launch a new fiber optic data network are on the agenda for Monday’s City Council meeting, but it’s unclear whether they will go to a vote.
Council President Arik Forsman said he does not want to rush into the decision, which likely would include the proposed $ 5 million expenditure from the Community Investment Trust to fund a pilot project in Duluth’s Lincoln Park neighborhood. A recently released
calls for the city to build out an open-access fiber optic system designed to deliver faster service and promote more competition between internet service providers, theoretically driving down consumer costs.
City administration proposes to draw an additional $ 4 million in funding from portions of the general fund not directly tied to the levy. The combined sum of $ 9 million should be sufficient to cover the anticipated cost of the Lincoln Park pilot project.
“There’s a lot to consider when you’re deciding whether to start a new city utility,” Forsman said.
Forsman pointed to a letter from Charter Communications, dba Spectrum, that councilors received Thursday, raising concerns about the city’s entry into the data services business.
“I’m sure there are questions that councilors would have about our existing providers and what they may or may not be planning on doing within the city, because that could impact whether we should go ahead with this pilot project or what funding would come about through that, “he said.
At large Councilor Noah Hobbs said he personally would feel comfortable voting on funding for the broadband pilot project Monday, having previously studied the issue in detail, but he said: “I have no issue with my colleagues wanting to have more time to deliberate the issue and ask questions and have the public follow along. “
“It’s a big initiative, and it could have a big payoff, as well, if we do it right. And I think that certainly deserves public education and community input, as well,” Hobbs said.
Lincoln Park is located in Duluth’s 4th District, and that Council seat currently sits empty, following the June 3 death of Renee Van Nett. The Council is expected to vote Monday on her replacement, but that new councilor will not be officially appointed until a later meeting. Forsman said he considers it important that 4th District residents have representation when funding for the proposed pilot project goes to a vote.
Any withdrawal of funds from Duluth’s Community Investment Trust requires approval by a supermajority, meaning that at least seven of the city’s nine city councilors must support it. That seven-vote minimum threshold would hold even for an eight-member council.
“I think city staff has done a ton of work, and I really appreciate all that. But it’s still a really big decision, and for sure, waiting to have that seat filled makes a lot of sense to me,” Forsman said.
On that count, Hobbs agreed, saying, “I think having representation is important for that district, with how big of an initiative it is and the importance of getting that councilor up to speed, because they’re going to have to field a lot of questions from constituents about what it is and what it is not. “
At large Councilor Azrin Awal asked if there would be any issue with a delayed vote on funding for the pilot project.
Emily Nygren, an economic developer, said any lengthy delay could hamper the city’s ability to seek $ 4.8 million in state broadband funding, as the grant application is due in August.
“So, in order to meet the match requirement, we would ask that the Council proceed forward, if not at this (Monday’s) meeting, at the very latest by the following (Monday),” she said.
Council Vice President and 5th District Councilor Janet Kennedy questioned whether it was prudent to draw from the Community Investment Trust.
Nygren responded by acknowledging city administration and staff seldom request to tap the trust fund but said, “We felt it was in line with the use of those funds to gather and leverage additional funding.” In addition to better positioning the city to receive a state broadband grant, she said the lack of debt service should make it possible to replenish $ 2.5 million in funding to the Community Investment Trust over the first eight years of operating the fiber optic network.
At large Councilor Terese Tomanek inquired as to the size of the trust fund and how much it has declined in value due to fluctuations in its equity market investments.
Josh Bailey, Duluth’s acting finance director, said the value of the trust peaked in October 2022 at about $ 36.1 million. Since then, $ 4 million has been withdrawn to assist with the development of more affordable housing units, and declining market values have lowered the balance even further to about $ 27 million.
In response to a question from 3rd District Councilor Roz Randorf as to whether other funding mechanisms had been explored, Chris Fleege, director of Duluth’s planning and economic development division, said the city had considered other options before settling on the Community Investment Trust.
“We really felt that with this pilot, we wanted to insulate the city from any risk. So, we do see it as a strategic investment,” he said, noting that this is only the second time Mayor Emily Larson’s administration has proposed using CIT funds.
“We also see broadband access as another seminal type of investment that really this fund was developed for,” Fleege said.
As for timing and the prospect of withdrawing funds during a down market, Fleege said any withdrawal approved by the Council now would not be acted upon until probably December or January, when about one-third of the money would be used to pay for needed project materials.
If the Lincoln Park pilot is approved, city staff say it would be used to evaluate the merits before potentially proceeding with a city-wide system expected to cost between $ 76 million and $ 79 million, presumably with additional assistance from state and federal authorities.
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