DALLAS — The Dallas City Council approved the sale of revenue bonds and a franchise agreement with Monmouth-Independence Network Monday as part of a project to build and operate a fiber network in Dallas.
The network would be built and owned by American Fiber Optics LLC, of Arizona. The company would contract with Minet to operate the network. The city held a public hearing on the sale Monday night.
“You’re asked to adopt this resolution to approve the bonds not because the city is the borrower or obligated in any way on the bonds, but because the proceeds of the bonds are going to be spent here in Dallas,” said City Attorney Lane Shetterly.
He said that is a requirement of the Internal Revenue Code that the jurisdiction where the money is spent approves the sale.
Bond issuance is through The Industrial Development Authority of the County of La Paz, Arizona in the amount of $23.5 million. Those bonds will be loaned to AFO and its sole member, Community Finance Corporation, an Arizona nonprofit. Because CFC is a nonprofit charity, the bonds will be tax-exempt, said bond sale counsel Tanya Barton, of Kutak Rock. She said public hearings were held in Dallas and Arizona.
Gary Molenda, of CFC, said the charity focuses on government projects.
“There’s lots of different kinds of charities and this specific one is focused on assisting government,” Molenda said. “This translates to owning buildings, assets, systems and transferring some of the costs, risks from the government to ourselves as the borrower.”
He said CFC is involved in projects in six states, with this being the first project in Oregon.
Mike Nearman, a state representative and Independence resident, said that he’s concerned about customers in Dallas helping pay off debt Minet owes to the cities of Monmouth and Independence. He also objects to allowing Minet, a government entity, provide services that a private company could provide.
Robin Smith, the senior manager of government affairs for Charter, said her company will offer the same service Minet and AFO want to provide before the end of the year.
“In 2018, we are continuing to roll out gigabit service throughout our footprint,” she said. “We will have gig in this community and throughout the nation by the end of the year.”
Charter has a non-exclusive franchise agreement with the city.
Councilors asked for assurance that the city wouldn’t have responsibility for the bonds or Minet’s current debt to the cities of Monmouth and Independence, which sits near $27 million.
“I know several people in the audience talked about Minet’s financial history,” said Councilor Kelly Gabliks. “If something goes south on this and they are not able to pay for stuff on the bond, we have no liability whatsoever? I just want to make sure on that.”
Shetterly said that is the case and added none of the bond proceeds would go to pay off existing debt.
Minet’s General Manager Don Patton confirmed that and said the bonds would be enough to finance the construction of 65 miles of fiber cable and start-up costs for the network.
“We are anticipating now that we will be turning up our first customers in November,” Patton said. “We have segmented the city into 22 segments. As those segments are completed they will be handing them over to us two at a time, the construction company. We will be right behind them turning up customers that are signed up for service.”
The council approved the franchise agreement with an emergency clause because the bonds will go on sale Wednesday (today) and the agreement needs to be in place before that.
He said the agreement is for the use of the public right-of-way. One difference is that the agreement recognizes AFO as a third-party beneficiary because it will own the network. Minet will collect and pay the fees required in the franchise agreement, Shetterly said.
The franchise agreement is for 10 years and is non-exclusive. It charges 5 percent gross revenue for cable services and 7 percent for internet and telephone services. It also requires Minet to provide a $1 per customer PEG fee to provide for government broadcasting channel and internet services to the city.
Minet’s operations in Dallas will be based out of an office located in the former RadioShack building at the corner of Washington and Jefferson streets. The city, which owns the building, is in the process of establishing a lease for the property with Minet.
In Dallas, the company will be called Willamette Valley Fiber.