Wireless (and Wired) Minneapolis

Institute for Local Self-Reliance

1313 Fifth Street SE, Suite 303, Minneapolis, MN 55414

www.newrules.org

CONTACT:      Becca Vargo Daggett, 612-379-3815 x209

                        becca@ilsr.org

Minneapolis, February 22, 2006 – The following is the full text of Becca Vargo Daggett’s statement to the Ways & Means Committee of the Minneapolis City Council, February 21, 2006.

Good afternoon. I am Becca Vargo Daggett. I am a Minneapolis resident, and I also work for the Institute for Local Self-Reliance, a 32 year old non-profit organization that helps local and state governments design economic development strategies that maximize the benefit to the local economy.

I appreciate your willingness to hear public testimony today.  However I’m disappointed by the lack of a formal public hearing, the short notice given, and the fact that the time was changed after the agenda was published.

I come before you to urge you to withhold approval of the wildly inadequate business plan before you and to insist that the City staff do what they say they have already done but never have:  provide this legislative body with sufficient information to make the fundamental decision about whether the system should be publicly or privately owned.

I agree with Mr. Adams that there is no conflict between the community benefits his group is seeking and public ownership. The question you should ask is, What is best for the City and all of its residents? That question is not answered here.

The business case you are being asked to approve includes one paragraph that says that members of the working groups and City staff and consultants examined four business models. There is no evidence to support this contention. We have been able to locate no documents that demonstrate that the project team researched and compared models. Nothing in the supporting documents you have been given supports this contention.

This is a process begun with an a priori assumption that the system would be privately owned. That assumption was never examined. Perhaps that is why the business case before you contains a financial analysis that includes only costs and no revenues. A balanced analysis must include both costs and revenues.

ILSR has done an analysis including both costs and revenues. It reveals that the same $27 million investment used by the City staff in their analysis could generate surplus revenues in the first year of operation, and yield $130 million in financial savings for the City and its residents over 15 years.

This business case contains no estimate of the annual service fees the City would pay as an anchor tenant.  Our analysis concludes that the City could cover the entire debt service on the network investment for less than it would have to pay to rent services from a private network.

The business case you are asked to approve today implies, and Mr. Beck has said today, that the City will own the entire fiber optic backbone of the network, including the $3.5 million worth of new fiber installed to support the wireless network. The RFP contains no such provision. Just a month ago, Bill Beck said in a meeting with Councilor Colvin Roy that the City “hopes” to own this new fiber, but there is no guarantee that will happen.

You are being asked to approve a business plan that is misleading. And you are being asked to approve contract negotiations in the hope of obtaining something not contained in the RFP.

Compare the collection of documents you have been given today to this report done for Saint Louis Park. That city held public meetings, analyzed different business models, and presented its findings in a transparent fashion. That City Council was given a comprehensive view of the issue, and they chose public ownership.

This business case refers to a “public/private partnership model” as if that is a clear business model. Quite to the contrary, Saint Louis Park will work with private companies to build and manage their publicly owned network. Chaska has made a point of listing the public/private partnerships that make their publicly owned network possible. Indeed, just this month Corpus Christi received the National Conference of Mayors award for excellence in public private partnerships for its publicly owned broadband network.

The advantage of a publicly owned network is that if the City is displeased with how the network is run, it can renegotiate the management contract or seek other bidders to manage its network. With a privately owned system, the City is locked into a relationship with the network’s owner for the life of the network. In a public-private partnership of this kind, the partner that owns the physical assets has the most leverage.

 There are three precedents from which the Council should learn before making this decision:

First, some of you on this committee were concerned about the decision making process on the Hennepin Historic Theaters. Last year, Chairman Paul Ostrow told MPR: "In terms of being preordained, it was really the fact that you had both staff and a number of Council members that right out of the gate were making a specific recommendation. And I think that really did give it a lot of momentum before it really got to the rest of the Council."
There is no question that in this case, the public had no input, and working groups were brought into the process only after the decision on ownership had been made.

The second precedent is the cable franchise agreement. During this month’s cable franchise violation hearings, statements by the City’s Cable Franchise Officer, Gail Plewaki, made it clear that the City’s reliance on a privately owned network for needed services has been highly damaging to the City.

Third is the contract for information technology with Unisys. Numerous councilors have expressed concern that the City is not getting the best price or the best service under the long-term contract. But there is little that can be done now that the City is tied to Unisys for seven years.

 You could chose to recommend this business plan and contract negotiations to the Council despite the fact that only a small number of people were involved in the process, and then only after the most important decision about ownership had been made.

 But you cannot make an informed decision today without a complete financial analysis and without a clear business plan.

 I urge this committee, and the Council, to withhold approval of this business plan and contract negotiations until the questions raised by Councilor Gordon have been adequately answered.

 

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