SOUTHWICK — Select Board members want a better understanding of public opinion before they ask Town Meeting to decide on a $15 million bond to build a town-owned fiber-optic network.
“I’m reluctant to say today that we should put it on the town warrant until I get some survey results,” said board member Diane Gale on Oct. 21 after fellow board member Douglas Moglin, who is also the chair of the High Speed Internet Committee, spent nearly an hour updating the board on why the committee decided to seek the borrowing authorization for the full amount needed for the network’s construction.
Gale proposed surveying town residents to learn what percentage would favor signing up as a customer after they are provided specific information on what the service is, which is only a connection to the internet.
To pay off a 20-year $15 million bond at 4% interest over 20 years, the town would need $1.166 million annually. That would require a “take rate” of at least 50% — 1,843 out of 3,686 potential customers — signing up for internet service on the new fiber network. Gale wanted to make sure that rate, or something near it, is achievable.
“If it’s 40%, plus or minus, we can probably get there. If it’s 30%, I’m struggling,” she said.
Select Board Chair Jason Perron agreed.
“If we don’t get the 50% take rate, then we’re paying 75% of $15 million, and it will be a subsidy,” Perron said meaning every town taxpayer, even those who don’t use the fiber-optic network, would be on the hook for the principal and interest.
Moglin said a survey in 2020 showed widespread support for a fiber-optic network. But Gale said that out of 7,300 registered voters in town, the 2020 survey only recorded 260 responses, equal to just 3.63% of potential customers.
“That’s pretty low,” she said.
She proposed another survey and informational meetings to have residents know exactly what being connected to the service would mean to them. In particular, she wanted to make sure survey-takers knew that the town-owned network would provide only a connection to the internet, not television service.
“If you want the Disney Channel, you’ll have to pay for the service” separately, she said. “A lot of people do not understand that. They think they’re replacing Comcast bundling, and we are not.”
Moglin stressed several times during the discussion that the bonding authorization would “not be at the expense of the taxpayer, it will be paid back with revenues from the service fees. … “It’s almost going to look like an enterprise fund … like the water.”
The proposal from the committee is to have Town Meeting authorize borrowing up to $15 million, but only bond what is needed during the network’s construction, which Moglin said will take between three and five years to complete.
Another factor that will determine the project’s financial needs are the “make-ready costs,” which is the cost to prepare utility poles for hanging the fiber optic cable. The fiber network would use the same utility poles that carry electrical, telephone and cable television lines, and are owned by those companies.
Whip City Fiber, the Westfield Gas & Electric subsidiary tapped to build the network, has estimated the make-ready costs at $4.43 million. However, because the town has yet to complete an inventory of the utility poles and what each will need — moving existing cable or replacing poles — true cost is unknown.
Moglin said the accurate amount of the make-ready cost, like getting to the 50% take rate, will also determine if the project is financially feasible.
“If make-ready is not $4.4 million, [we’ll] be on easy street,” he said, later adding that if the Select Board approves placing the bonding authorization on the May Town Meeting warrant and the make-ready costs reach $6 million, he’ll move to have the article withdrawn and essentially kill the project.
While $1.166 million would be needed annually to pay off the bond, the committee is recommending subscribers pay $89 per month for the service. That would generate annual revenues of $1.968 million to cover the annual bond payment, pay Whip City Fiber $619,000 to cover its annual expenses, and cover annual maintenance cost of $103,000, and insurance of about $25,000.
With annual revenues of $1.968 million and annual expenses of $1.934 million, network would operate at a surplus of about $34,000 annually.
Select Board members agreed that each member would submit survey questions to Chief Administrative Officer Nicole Parker to compile and create a survey, create a page on the town’s website to explain the scope and financing of the project, and host an informational meeting with representatives of Whip City Fiber to answer the public’s questions.
The full cost of the network is estimated at $17.129 million, but the town has already allocated $900,000 from American Rescue Plan Act funds, received $250,000 from the state, and authorized $3 million in bonds at Town Meeting in 2023.
