The best of intentions; the worst of plans
The stimulus package that Congress and President Obama passed in 2009 was supposed to be the gift that kept on giving, but too often it has proved to the gift that keeps on taking.
That is the conclusion, at least, of a recent Politico investigation into stimulus money that was intended to expand broadband coverage to America’s rural communities, which sorely lack quality Internet access. The story goes back to the creation of the Rural Utilities Service during the Great Depression. Originally the agency was tasked with bringing electricity to rural areas that weren’t being serviced by private companies. Through the stimulus package and in response to the “Great Recession,” the agency has attempted to pull off a similar feat in the digital age by bringing the modern advances of high-speed Internet access to America’s countryside.
A key part of President Barack Obama’s blueprint of recovery involved bringing quality broadband to farmers and remote businesses so that they could compete in a global, digital economy. In 2011 RUS was awarded $3.5 billion in aid to service sparsely populated, hard-to-reach areas.
Four years and four directors later, however, Politico concluded that “RUS never found its footing in the digital age.” The report points to misfires and cronyism at every turn: the agency funded networks in well-wired population centers, poor management led to project stumbles and failures, borrowers defaulted on loans, and all along lawmakers suppressed their doubts and gave the agency political cover.
The agency initially projected in 2011 that its “investments in broadband will connect nearly 7 million rural Americans.” It boasted of accomplishing this through nearly 300 projects that it approved through the stimulus package.
Many of those projects, however, have not come to fruition. RUS has quietly killed 42 of them, and with the agency required to “substantially complete” construction on the remaining projects before the end of September, 2015, it finds itself in a race against the clock. Politico found that about half of the infrastructure projects given the green light by RUS have not drawn their full funding. As a result, $277 million in potential investments could end up being returned to the Treasury, representing at best a huge waste of time for the stimulus funds. RUS gradually lowered its original estimate of how many homes will benefit from its projects from 7 million down to 728,000 in March of 2014, and now won’t even list a figure. Even worse, it is unclear how many people have received improved Internet access, because the agency can’t tell exactly who its stimulus dollars have served.
In short, the government’s attempts to invest in services in places neglected by private companies have been nothing short of a boondoggle.
Problems in the Land of 10,000 Lakes
To drive this point home, the Politico report highlights the plight of Lake County, Minnesota, a story that had been covered by Minnesota Watchdog several months earlier. RUS’ attempts to bring greater broadband coverage to the rural county have turned out to be one of the most egregious examples of how federally-backed loans and grants, with inept management and all of their red tape, can suck the vitality out of a community rather than invigorating it.
As Minnesota Watchdog reported late last year, Lake County officials promised at the beginning of the project that it would not cost local taxpayers anything.
“Lake County is acting as a conduit to receive federal financing to build out the network. The taxpayers will not be responsible for any debt,” the county website said in a blurb that has since been scrubbed. An FAQ on the website was updated to say that the county has invested $3.5 million to bring greater broadband access, “a remarkably small amount given the scope of the project and benefits to the area.”
That $3.5 million represents the unexpected cost of RUS rejecting the project’s bond financing. Before the agency sent a single check to Lake County, it forced the county to pony up its own funds to keep the project on track.
But that was just the beginning. Minnesota Watchdog found that that figure soon ballooned to $6 million. And after RUS suspended payments amid concerns that the county could not pull off the project on time and on budget, local officials decided to authorize another $15 million in funding from local taxpayers to get the project back on track.
Just like that, the “remarkably small” amount covered by local taxpayers has become remarkably large for the sparsely populated county. It has left county officials feeling betrayed by the federal program, which originally approved and said it would fund Lake County’s proposal of $66 million for an ambitious plan to cover an area with about 16,000 residents.
Now time is running out. The broadband network is still under construction and behind schedule. At this point, Politico notes, the county probably won’t be able to draw all of its federal funding by the end of September and will thus end up losing another $6 million from RUS.
Perhaps the Lake County should have taken a cue from the private sector before throwing its hat in with the federal government and putting every resident on the hook for $1,400 (the per-person cost of $15 million).
Kirk Lehman, a manager for a competing broadband provider, can’t see how the government intends to make the Lake Communications broadband economically viable.
“A lot of folks have looked at the numbers, and there’s not enough customer base to support the Lake County debt,” he told Minnesota Watchdog. “I don’t care how you slice and dice it, there’s just not enough of a customer base there.”