There's no going back on KentuckyWired.
This is our opinion. For the record, this KentuckyWired project appears to be a boondoggle for the taxpayer and those responsible for setting up such a failed approach to the money side of this otherwise noble endeavor should be held accountable wherever possible. But it is our view that, despite all its very serious flaws, delays and expenses, the state of Kentucky still needs to follow through to the end with the very logical, sensible goal of bringing high-speed internet to rural Kentucky.
Last week we received a press release from the state of Kentucky saying Gov. Matt Bevin and Congressman Hal Rogers announced a major milestone achievement for the Commonwealth’s high-speed fiber optic network – KentuckyWired. The press release states:
The first portion of the network, known as Ring 1A, is now complete and includes Louisville, Lexington and Cincinnati/Northern Kentucky. Additionally, a key backbone segment from Lexington to Somerset has also been completed, allowing for expansion of the network into Eastern Kentucky as the project moves into the next phase.
“This vital infrastructure will create powerful opportunities for Kentuckians through enhanced job creation, economic investment, education, health care, and countless other public and private sector services," Bevin said.
The state said completion of the Ring 1A "provides the foundation for the KentuckyWired network to begin expansion into Eastern and Western Kentucky. The ring includes major uplinks to the global internet in Louisville and Cincinnati as well as state facilities in Frankfort."
“This means one great thing for southern and eastern Kentucky – we are closing the digital divide,” said Congressman Rogers. “This first link to Somerset opens a brand new corridor of connectivity that includes countless opportunities for jobs, telemedicine, advancements in education, and much more. The Super I-Way, as I like to call it, drives directly into every county so providers can extend this high performing broadband interstate to more people and more businesses.”
For the record and beyond the press release this project has been very, very ugly for the taxpayer. State Auditor Mike Harmon said last year Kentuckians were told they would only be responsible for a $30 million investment approved by the General Assembly in 2014, and that the majority of funding would come from private investment. This representation —made in order to sell this project — proved totally false.
The project began after Rogers secured a $23.5 million appropriation to extend broadband services in eastern Kentucky which includes his district. Good for him. He is to be commended for this work.
But then-Gov. Steve Beshear sought to piggyback onto the project in order to extend broadband to the entire state through a public-private partnership in which the Australian contractor, Macquarie Capital, would assume most of the financial risk for the $324 million cost. But, as we wrote last Fall, Harmon said between what the state has already paid out, including settlements for construction and operational delays, and the bonds the state has issued and future obligations, the state is responsible for 93 percent of the total cost. Harmon said after the deal was reached the state almost immediately altered the agreement, creating a non-profit agency to issue bonds. Then, during a procurement process in 2014 and 2015, most of the project’s costs and risks were shifted to the state instead of Macquarie. The altered agreement was signed off on by Beshear’s Finance and Administration Cabinet. Harmon said the question remains of why the contract terms were changed in ways “that placed responsibility of almost $1.5 billion on the commonwealth."
This project has teetered on life support at times in Frankfort since then It is good news that the project continues to move forward. We believe that the end result of this holds great potential if the state can get to the finish line.
With that said, is there any wonder why cynicism over public-private partnerships is so pervasive?