Answers uncertain on whether taxpayers bail out BrightRidge (Part 2)


August 15, 2018 11:10AM

(This is the second of a three-part series about a proposed government owned Internet network in Johnson City)

Depending upon whom you ask, BrightRidge’s proposed Internet venture for Johnson City is risky business.

Depending upon whom you ask, BrightRidge is either a private company or it is an official component of Johnson City’s municipal government.

Also, depending upon whom you ask, if this Internet venture loses money, city officials will call upon taxpayers to make up that shortfall.

There are seemingly no clear answers.

Experts who have studied the matter say BrightRidge is backed by the full faith and credit of the taxpayers. Amy Martin of the Tennessee Telecommunications Association is one of them.

People affiliated with the utility, however, insist Martin is wrong.

Members of the Tennessee Valley Authority, they say, already have ironclad rules in place for BrightRidge’s electrical division.

“TVA is a tough regulator,” said Johnson City’s Vice Mayor Jenny Brock, who also sits on the BrightRidge Board of Directors.

TVA officials will govern the utility’s broadband project in the same stern manner, she added.

The TVA has approved the financing, she said.

“That is all ratepayer money,” Brock said.

“That is not tax dollars. You need to make sure you specify that in your article.”

Is BrightRidge a municipality or not?

BrightRidge spokesman Tim Whaley repeated what Brock said.

“BrightRidge receives zero taxpayer dollars and has received zero taxpayer dollars since its inception in 1945,” he said.

“As an Energy Authority, BrightRidge receives zero taxpayer backing in any scenario.”

In a phone call, a member of BrightRidge’s customer service division also referred to the entity as an Energy Authority and not a municipality.

A recent article in the Johnson City Press, however, refers to BrightRidge as a “70-year-old municipal electric company.”

A public municipality is an official part of a city government. An Energy Authority, though, is not connected to a government and is possibly a private company, said TVA spokesman Scott Brooks.

When asked whether BrightRidge is an Energy Authority or a public municipality, Brooks said this:
“I believe they are a municipality.”

If BrightRidge is a public municipality, then it can receive taxpayer backing, said another TVA spokesman, Jim Hopson.

“That is the nature of the municipal,” Hopson said.

If it is an energy authority, however, then the rules are different, according to Brooks.

“All we would have to do is give them the right to make up their losses by [increasing electricity] rates,” Brooks said.

“We would have no authority to do anything with taxing or with bonds. They could come to us if they wanted to do a rate increase or to recover something through rates, but they could not do that to cover broadband. All we can do with them and for them is for their electricity.”

Brooks said he did not know what options BrightRidge officials have if their proposed broadband division loses money.

“That would be under whatever authority they have set up for themselves,” was all Brooks said.

Hopson, meanwhile, said power companies under the TVA’s authority are free to engage in other business models, if there is a clear division between the two things.

Broadband failures in Tennessee

BrightRidge’s current service area includes all of Washington County and parts of nearby Sullivan and Carter counties, about 78,000 electric customers in all, Brock said.

BrightRidge officials are still trying to determine exact service areas for its broadband division, if it gets approved, Whaley added.

“In concept, broadband fiber optic to the premises will be offered in dense urban areas with wireless high-speed broadband offered in less populous areas,” Whaley said.

Tennessee Watchdog has previously documented many instances of municipal broadband projects gone wrong throughout the state.

Among them:

  • More than 200 municipal broadband networks around the nation have placed taxpayer money in jeopardy all while competing against private Internet Service Providers. Eleven of those networks were in Tennessee, per findings by the Taxpayers Protection Alliance.
  • Tullahoma Mayor Lane Curlee said the Tullahoma Utilities Authority did a poor job attracting customers to its municipal broadband service.
  • Memphis officials invested $32 million in their Memphis Networx project and lost $20.5 million.
  • Taxpayers in Clarksville still owe $17 million of a $55 million bond for their Lightband service. City officials borrowed an additional $20 million to cover cost overruns and operational expenses. The municipal broadband has had countless outages that have cost several Clarksville business owners thousands of dollars in lost revenue.
  • Energize out of Pulaski only serves 2,415 customers and has a current debt of $15.8 million. University of Pennsylvania Law School professor Christopher Yoo said it will take the broadband service 108 years to go cash flow positive.
  • Morristown Utility Systems only has 4,165 customers and has had more than $11.6 million in debt since 2006.

University of Colorado Professor Ronald Rizutto told Tennessee Watchdog last year that most municipal broadband networks lose money.

As reported, Brock and officials in other cities that have or are considering municipal broadband said it does wonders for an area’s economic development.

The nonpartisan Public Policy Institute of California, meanwhile, released research in 2010 reporting that government investment in broadband only has limited benefits.

“The economic benefits to residents appear to be limited. Our analysis indicates that broadband expansion is also associated with population growth and that both the average wage and the employment rate—the share of working-age adults that is employed—are unaffected by broadband expansion,” according to the report.

“We also found that expanding broadband availability does not change the prevalence of telecommuting or other home-based work. Of course, local employment growth might still raise property values and the local tax base, but in the absence of more direct benefits for residents in the form of higher wages or improved access to jobs, we can only say that the local economic development benefits of broadband are mixed.”

(Writer’s note: The third and final article will explore the motives of the consulting firm who may build the new network and what Tennessee Comptrollers say about its feasibility)

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