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Minnesota Counties Help Fund Cooperative Broadband Projects for Economic Development
Even if a local government isn’t ready or able to build its own broadband network, there are still ways they can help bring the benefits of better connectivity to their community. Over the past few years, several counties in Minnesota have partnered with local electric and telephone cooperatives to expand high-quality Internet access as an economic development strategy. In many instances, county governments have offered financial support to the local co-ops, in the form of grants and loans, to connect their rural residents with high-quality fiber networks, often supplementing federal subsidies or statewide Minnesota Border-to-Border Broadband Development grants.
Projects Across the State
Minnesota counties have taken a variety of approaches when it comes to helping cooperatives finance broadband deployment projects.
Some, such as Cook County in the far northeastern corner of the state, provided grants to local co-ops. Cook County began its partnership with Arrowhead Electric Cooperative back in 2008 when both entities contributed to a broadband feasibility study. At the time, the county suffered from the worst connectivity in the state, and many people still relied on dial-up. In 2010, Arrowhead was awarded a $16.1 million combined grant and loan from the stimulus-funded Broadband Initiatives Program (BIP) to build a fiber network in Cook County. The county government offered Arrowhead a $4 million grant for the project, funded by the voters’ reauthorization of a 1 percent sales tax that was due to expire. In return, Arrowhead agreed to provide services such as Internet access to county buildings at no cost.
Yet more local governments have opted to loan money to co-ops to expand broadband access in their county. Both Big Stone County and Swift County chose this route after Federated Telephone Cooperative received a $3.92 million grant and a $4.95 million grant from the Border-to-Border program to build fiber networks in each county. To help the co-op finance the local matches, the counties issued bonds and loaned the proceeds to Federated. In 2015, Big Stone County loaned the cooperative approximately $4 million, funded by tax abatement bonds, which Federated will repay over 20 years at roughly 3.8 percent interest. A year later, the co-op accepted a $7.8 million loan from nearby Swift County, which the county financed with general obligation bonds.
County governments don’t necessarily have to make large financial commitments to have an impact. After establishing a revolving Broadband Development Fund in June 2017, Fillmore County loaned a total of $150,000 to telephone cooperative AcenTek for two fiber deployment projects in the county. These loans will supplement the almost $4 million of grant funding that AcenTeak was awarded by the Border-to-Border program. The co-op will pay back the loans over the next three years at zero percent interest, with payments returning to the Broadband Development Fund.
In some cases, counties choose to work with cooperatives after other providers turn them away. The Lac qui Parle County Economic Development Authority established a partnership with Farmers Mutual Telephone Company to build a fiber network after Frontier Communications ignored the county’s outreach attempts. EDA director Pamela Lehmann explained:
“[Frontier] said they didn’t have the funds available for a project like this. When they are looking at the big picture a small county in west-central Minnesota was not their priority at that time.”
In 2010, the partners were awarded a $9.6 million combined BIP loan and grant to construct a Fiber-to-the-Premises network in Lac qui Parle County. The network would be owned and operated by Farmers, but both the county and the co-op would be jointly responsible to repay the federal loan. To finance the remaining costs of the fiber project, Lac qui Parle County chipped in an additional $1.5 million and loaned Farmers $1.5 million at zero percent interest for the first ten years.
Counties, Co-ops, and Communities Benefit
These kinds of partnerships offer perks for both counties and the cooperatives. By leaving ownership of the broadband infrastructure to the co-op, county government can rely on cooperatives to handle the operation or maintenance of a network. Telephone and electric cooperatives often already have access to utility poles, trained staff, and equipment that facilitate operation and deployment of a broadband network. For local governments with no experience developing or operating a broadband network, cooperative partners fill a void and have the tools and knowledge to get high-quality Internet access up and running posthaste.
County governments have access to low interest financing and can issue bonds or leverage tax revenue to help cooperatives finance broadband projects that wouldn’t have been feasible otherwise. Keven Beyer, general manager of Farmers Mutual Telephone Company and Federated Telephone Cooperative, told the West Central Tribune that the low-interest loans provided by the counties were essential to expand high-quality Internet access to rural households. In addition, the promise of county financing can make grant applications stronger. For instance, the Minnesota Border-to-Border Broadband Development grant program prioritizes applicants that can show community support and provide a greater local match.
Despite their different approaches to financing cooperative broadband projects, all of the counties hope to reap the economic development benefits of improved Internet access. Across the state, county officials recognize that better connectivity can help attract new residents and businesses. When explaining his support for extending the loan to Federated Telephone Cooperative, Swift County Commissioner Eric Rudningen said, “It will be great to be able to look at my constituents and know that we provided the opportunity to be competitive in the world.”
Image of the Gunflint Lodge in Cook County by Tony Webster from Minneapolis, Minnesota, United States [CC BY-SA 2.0], via Wikimedia Commons.