SOUTHWICK — At the last meeting of the High Speed Internet Committee, its members agreed the decision to embark on the five-year project will be made by Town Meeting next May if the Select Board agrees to put forth an article to authorize borrowing of $15 million to cover the cost of the complete build.
“This is for borrowing as we need it, and at some point in the future, it would total that amount,” Moglin said of the $15 million after the meeting.
For the past several months, when Select Board member and committee member Doug Moglin updated the public on the status of the project, he has emphasized that once the decision is made there is no turning back with the amount of dollars involved.
“This is for borrowing as we need it, and at some point in the future, it would total that amount,” Moglin said after the meeting.
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.
However, Moglin said if the Select Board approves the article and Town Meeting approves it, only the money needed for the five years the network is under construction would be borrowed.
This was what was recommended by a representative from Whip City Fiber, the Westfield Gas & Electric subsidiary tapped to build the network, during a meeting with the committee in July.
“Match bonding to what you need that year so you’re not taking on unnecessary debt before you need to, and before expenses come in,” WG&E’s Keziah Bednarsky said at the July meeting.
While acknowledging it is a “huge cost” up front, Moglin stressed that the plan all along has been for the town to borrow money to finance construction, and for subscriber revenue to eventually retire the bonds. Once the bonds are retired, those revenues would become profits that could be sunk back into the network or finance other town projects.
The committee has been discussing revenue projections based on different monthly user fees to generate the revenue it needs. It recently floated the idea of seeking Town Meeting approval to borrow $3 million for each of the next five years.
However, during its meeting on Oct. 9, members expressed concern that if Town Meeting on any of those five years voted down the authorization, the buildout could grind to a halt.
“You’d have an infrastructure built to handle thousands of businesses and residents, and you’re only serving hundreds,” Moglin said.
Moglin reminded the committee members about how Town Meeting approved $600,000 for design and engineering for Phase II of the town’s sewer project and then voted down the bonding authorization for the project’s construction. There has been no new sewer line construction since.
With that history, the committee unanimously approved sending a recommendation to the Select Board to authorize bonding for $15.85 million all at once.
Moglin said that by waiting until May to learn if residents will approve the total borrowing, the committee will have more time to determine exactly how much it will cost to prepare the utility poles for hanging the fiber cable, an expense referred to as “make-ready costs.”
Right now, the estimate is $4.43 million, but Moglin said that because the town has yet to complete an inventory of the utility poles and what each will need — moving existing cable or replacing poles — the true cost is unknown.
When Whip City Fiber met with the committee in July, it provided three options for paying off bonds needed for construction.
Each was based on needing to generate approximately $1.166 million annually to pay off a 20-year bond at 4% interest over 20 years.
In the first, a monthly subscriber rate of $85 with an estimated customer base of 1,843 would generate annual revenues of about $1.879 million. Of that $1.879 million, about $619,000 would be paid to Whip City Fiber to cover its annual expenses, or $28 per customer per month, which is included in the proposed $85 monthly subscription.
The estimated annual data cost would be $20,400, with annual maintenance cost of about $103,000, and insurance cost of about $25,000 annually. Subtracting revenues from expenses, would mean the network would operate at a deficit of about $55,000 annually.
In the second scenario, subscribers would pay $89 per month for the service. That would increase annual revenue to $1.968 million. Total expected expenses would remain at $1.934 million, so the network would operate at a surplus of about $34,000 annually.
In the final scenario, instead of Whip City Fiber receiving $28 per customer per month, it would take only $25 for the first 1,000 customers and increase to $27 per customer per month after reaching that 1,000-customer threshold.
That would decrease Whip City Fiber’s annual expense by about $46,000, which, using the second scenario, would have the town’s network operating with an annual surplus of about $80,000 per year.
Other one-time costs to get the project started including $302,000 in “up-front” funds for make-ready work and $75,485 for the installation of the “fiber hut,” which is the secure facility that will house the network’s servers and equipment.
Whip City Fiber has determined that to serve every potential customer in Southwick, it needs to hang 104 miles of cable on utility poles and about 16 miles of underground cable. Whip City Fiber cable already touches Southwick in several areas, including on Tannery Road and Sunnyside Drive, and there is an installed but dormant fiber optic line that runs along the length of the Southwick Rail Trail.
The goal of the project, since Moglin proposed it, is to provide broadband access to the entire town. To manage the buildout, the town has been divided into 19 fiber service areas. The areas that will get service first will be those along the rail trail. The construction plan is to build the network in four service areas per year.
