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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 12/14/2021 - FORT COLLINS CONNEXION UPDATE (2)DATE: STAFF: December 14, 2021 Ginny Sawyer, Policy and Project Manager Chad Crager, Outside Plant Director WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION Fort Collins Connexion Update. EXECUTIVE SUMMARY The purpose of this item is to provide Council and the public an overview and update of the Connexion municipal fiber buildout. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. What questions does Council have for the Connexion team? BACKGROUND / DISCUSSION Build and Take Rate The Connexion team, along with Atlantic Engineering Group (AEG), and On Trac, continue to build and install Connexion fiber throughout the community. With initial construction starting in 2019, it is anticipated that AEG will be complete with construction by summer 2022 and that the project will remain on target with fiber available to all premises by the end of 2022. New neighborhoods continue to be offered Connexion service on a weekly basis. To date, Connexion is seeing a 31% residential take rate (measured in neighborhoods with service available for at least 90 -days.) This penetration is above the 28% previously noted to achieve timely bond payback. While build progress and residential take rate are at or above target, previous financial modeling was overly aggressive on multiple dwelling unit (MDU) build-out and commercial availability. Connexion has steady interest from these business types, and each brings a challenge for implementation. For 2022, Connexion has secured Colorado Boring as a dedicated resource to provide fiber to MDUs. Fort Collins has over 500 MDUs and Connexion has set a target of installing at least 150 in 2022. Completing the fiber buildout and achieving MDU and commercial goals will require additional capital funding. Capital Project and Funding Update As stated above, the original business plan assumptions were more aggressive on the commercial side and the updated financial modeling is utilizing assumptions based on market learnings to date. The modeling includes additional boring costs on the fiber network, the dedicated costs for MDU buildouts, additional premises to be served in the market and updated operating and installation costs reflecting actual results to date. The table below highlights these primary assumption changes. December 14, 2021 Page 2 In September 2021, Council appropriated an additional $8.2 million of project contingency funds, bringing the total appropriated capital project budget to $117 million. AEG and On Trac have continued the fiber network buildout and installation of Connexion customers. The table below includes the original Business Plan assumptions, project spending to date and the Current Project Estimate that includes the assumption changes noted above. The current project estimate is $143 million. The Connexion project currently has $123 million available ($117 million appropriated plus a re-deployment of operating budget funds of approximately $6 million). T he resulting funding need is estimated at approximately $20 million. Staff are currently evaluating funding alternatives, structure and timing. Connexion currently has in excess of $20M available remaining capacity under the original voter approved initiative. The initial need for these additional project funds is anticipated in early 2022. It is anticipated that these options will be discussed at the Council Finance Committee Meeting scheduled for February 2022. December 14, 2021 Page 3 Billing Update Connexion and Utilities customer service staff have been working with vendors and a consultant team to implement a new billing system (GLDS.) Loveland and Longmont both utilize this system for their telecom billing. The system has been thoroughly tested and is going live by Dec ember 14. GLDS is not only a functioning billing system, but it also has a self -service sales portal and online billing and payment capabilities, and it offers the desired and needed reporting for FCC compliance and marketing. The implementation of this system eliminates a previous hurdle to sales ramp-up. Possible Federal Grant Funding The recently signed Federal Infrastructure Investment and Jobs Act includes $65B for Broadband. Federal funds have typically been available for areas with internet speed s under 25 Mbps download speeds and 3 Mbps upload speeds. As a comparison, Connexion has symmetrical 1,000 Mbps download speeds and 1,000 Mbps upload speeds. These traditional federal speed requirements make it difficult for urbanized areas to apply for gr ant funding as urban areas have higher speeds due to competition. Hopefully these speed requirements will be updated as the federal funds become available. While Connexion will be completed when grants are available from this federal funding, we are worki ng closely with Larimer County to determine if other opportunities are available outside of City limits for future grant funding. ATTACHMENTS 1. Powerpoint Presentation (PDF) City Council Work SessionDecember 14, 2021ATTACHMENT 1 Purpose21. Progress and Take Rate2. Updated Construction Schedule3. Capital Project and Funding Update4. New website and billing system Progress and Take Rate3 Updated ScheduleService Available to all premises Business Plan vs. Current Project Estimates5Description Business Plan Assumptions Current Project EstimatePremises 70k 78kConduit Availability 72% 48%Installation Cost $592 per install $705 per installPremise Boring $0 $8.5MFull absorption 100% by Q4 2022 100% by Q4 2024Residential Take Rate 28% by end of 2022 35% by end of 2022Commercial Take Rate 45% by end of 2022 28% by end of 2024 Financial Summary – Project Life to Date6Bond Proceeds 142.2$ Debt/Interest Pymts (16.5)$ Operating Revenue 6.9$ Cost of Sales (0.8)$ Interest 7.3$ Operating Expenses (12.3)$ Total Revenue 14.2$ Total Expense (13.1)$ Total Inflows 156.4$ Capital Project (111.4)$ Total Outflows (141.0)$ 15.4$ Inflows: Outflows:Connexion - as of November 30, 2021 ($M) - UnauditedCurrent Balance Capital Project Spending UpdateDescriptionBusiness Plan Assumptions11/30/2021LTD SpentCurrent Project Estimate thruDec 2024Network Build (Primarily AEG ) $84M $95M $102MInstallations (On Trac, boring) $13M $7M $30MEquipment & All Other $12M $9M $11MContingency Appropriation – Sept. 2021 $8MTotal Capital Budget $117M $111M $143M7 Capital Project Funding UpdateDescription TotalCurrent Project Estimate $143MTotal Capital Budget $117MRe-Deployed Operating Budget $6MTotal Currently Available $123MFunding Need $20M8Connexion has $20M available remaining capacity under the original voter approved initiative. Financing Need and Next Steps• Financing Alternatives• Estimated Timing Requirement - Draws as needed• Next Steps:• Council Finance Committee – February 6, 2022Discuss/Decide Funding Options• Council – February/March 2022Appropriation/Ordinance approval sought9 New Connexion Website and Billing SystemPhased Rollout1. Website Core - November 232. GLDS Portal Launch – Mid December3. Support Hub – Mid January10 QUESTIONS?