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PolarNet: More risk than reward? And should government even be involved?

On Tuesday, North St. Paul voters will decide if they want to ante up $18.5 million to build a citywide telecommunications and high-speed Internet network.

On Tuesday, North St. Paul voters will decide if they want to ante up $18.5 million to build a citywide telecommunications and high-speed Internet network.

The referendum may have ramifications well beyond the suburb’s borders in a number of Minnesota communities that are laying the groundwork for similar telecom and Internet projects.

While no city should be at a digital disadvantage in the information age, the North St. Paul referendum raises a number of concerns that taxpayers should weigh before handing over the remote control to local government.

North St. Paul’s government-run fiber-optic system, called “PolarNet,” would provide residents with phone, cable TV and high-speed Internet services, all of which are currently available from existing providers. In other words, there are companies in the Yellow Pages that already provide largely the same services! Residents can currently surf the web at home or local library, while the mayor can log on to a high-speed Internet line at city hall. 

It seems prudent to consider whether government has any business being in this business, even in rural areas where there’s a problem with lack of high-speed Internet services.  A city-by-city approach arguably will only burden existing taxpayers, who can’t afford this additional hardship.

Focus on essential services
Now more than ever, cities should focus on providing essential services, rather than risking valuable tax dollars on speculative projects. There’ a lot on the line for taxpayers with cities statewide facing record budget shortfalls — a $750,000 budget deficit in the case of North St. Paul.

To put the financial risk in context, PolarNet’s price tag is three times the city’s annual budget, or $4,000 for each of North St. Paul’s 4,700 households.  In fact, while PolarNet is billed as an $18.5 million project, city taxpayers will actually pay out closer to $35 million over the life of the bond when interest is included.

Simply stated, PolarNet’s success hinges on the city’s ability to convince a huge number of residents to cancel their existing services with their private provider and sign up for a government-run enterprise. Should PolarNet fail to attract enough customers, every single city taxpayer is on the hook.
If the performance of other government-run networks across Minnesota is any indication, North St. Paul residents should be very concerned that PolarNet may leave them PolarFleeced.

Other cities’ problems
St. Louis Park has abandoned its solar-powered “green” wi-fi network following a string of technical problems, legal battles, and complaints from residents. Minneapolis’ foray into citywide wi-fi has also been a costly mess. While Minneapolis pays well over $1 million to use wireless, only about $50,000 of services will be used this year, according to MPR.  Everything beyond that $50,000 will be subsidized by the taxpayers.  Meanwhile, Moorhead taxpayers have been hit with double-digit electric rate increases to subsidize the city’s “GoMoorhead” broadband service.  While projecting 4,000 customers by 2006, as of late 2008, the service had just 2,800 subscribers, not nearly enough to even break even.

Yet, nowhere on North St. Paul’s website or in their publicly distributed materials do officials acknowledge the true extent of risk to taxpayers, revealing a troubling lack of transparency in the process leading up to Tuesday’s  referendum.

In several memos and emails obtained through public-records requests, top city officials and paid consultants discuss withholding key information from the public about PolarNet’s risks, costs, and viability.

Documents show that city leaders intentionally kept PolarNet “under the radar” and out of public view. There was discussion of withholding from “anybody, including the Council, and definitely the public,” information about the expected rates residents will pay for PolarNet services.

They strategized ways to make documents “hard to decipher” and “nearly unusable” for a public records request.  The city manager explored strategies to build PolarNet without even allowing residents to vote.

The City Council held two off-the-record “workshops” to discuss final plans for PolarNet. No minutes or video of these meetings have been made available, arguably in violation of the spirit, if not the letter, of the open meeting law.

North St. Paul leaders are asking voters to trust them on a proposal that one memo says “means more to [North St. Paul’s] future than any other single project.”  In the project’s planning stages, however, it’s almost as if the city treated PolarNet a matter of classified cyber security and their own residents as security risks. 

The special election in North St. Paul may hinge on questions of open government and transparency, in addition to whether PolarNet poses more of a risk than a reward to taxpayers.
Tom Steward is investigative director for The Freedom Foundation of Minnesota.