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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 01/30/2018 - BROADBAND UPDATE AND GOVERNANCEDATE: STAFF: January 30, 2018 Mike Beckstead, Chief Financial Officer WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION Broadband Update and Governance. EXECUTIVE SUMMARY The purpose of this item is to provide City Council a broadband implementation update and governance recommendations. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. What questions does Council have regarding the Council governance and the City Manager operational authority recommendation? BACKGROUND / DISCUSSION In 2016 the City identified access to broadband as a strategic objective. Broadband is defined by the FCC as internet download speed of 25 megabits per second (“Mbps”) and upload of 3 Mbps or faster. The 2016 Strategic Plan Objective 3.9 states - “Encourage the development of reliable high-speed internet services throughout the community.” Additional benefits sought through the broadband plan include: • Competitive pricing (residential market pricing at $70/month or less for 1 Gbps and an affordable internet tier); • Universal coverage across the Growth Management Area; • Underground service for improved reliability; and • Timely implementation to providing services within a reasonable timeframe (less than five years). The City has been engaged in a multi-year process of research, due diligence, and community engagement that resulted in two successful ballot measures. The first in November 2015 gave the City the authority to provide high-speed broadband services to the community, the second, in November 2017 added telecom activity to the City Charter and demonstrated support for borrowing up to $150 million to provide fiber to the premise infrastructure. The November 2017 vote passed 57.15 percent. Staff has begun the preparatory work to launch the broadband enterprise. Current activity includes: • Preliminary work on the bond issuance o Request for Proposal (RFP) for bond underwriter was released on December 29, 2017; underwriter interviews are anticipated January 26, 2018 o Work on a draft Preliminary Offering Statement for bond council, including additional financial modeling o First reading of the broadband bond issuance is expected on March 20, 2018 o Bond proceeds are projected to be received April 26, 2018 • Recruitment of key broadband positions o RFP for recruitment process is underway January 30, 2018 Page 2 o Recruiter will be working with City staff to hire the executive director, marketing manager, outside plant manager and the network engineer; additional staff will be brought on shortly thereafter • Code updates- working with the City Attorney’s Office • Additional RFPs are anticipated to be negotiated and ready for execution in May 2018 o Broadband Branding RFP was released on January 2018 ▪ Anticipating a brand launch to coincide with the bond proceeds in April 2018 o Additional RFPs to be released by February 2018 include: ▪ Billing system ▪ Construction design and build ▪ Premise Installation ▪ Communication huts ▪ Electronics and equipment • Governance discussions and research Debt Issuance At the November 28, 2017 work session, Council discussed the funding needed to begin the implementation of municipal broadband services and asked staff to bring forward a request in January 2018. Initial start-up costs, estimated at $1.8 million, will be appropriated from the General Fund and ultimately reimbursed from the bond proceeds. Debt issuance will be backed by revenue bonds issued by Utilities Light and Power (L&P). Revenue bonds are municipal bonds that are secured by L&P revenue and rate-making capacity. Currently, staff anticipates the issuance of two series of bonds: Series A, which have a three-year expenditure requirement and are tax-exempt; Series B can be carried forward for a longer period of time and are taxable. Governance In fall 2016, the City Manager, Deputy City Manager and Chief Financial Officer visited with several municipal-run broadband communities, both successful and struggling. A primary lesson learned from the site visits is that governance and operational authority is important to the success of a broadband enterprise. Role clarity is essential. In the proposed model, based on best practices, governance is set by City Council who provide direction, develops policies, and oversight. Operational authority provides the City Manager, or their delegate(s), decision- making capabilities that are responsive and reactive to the dynamic, competitive market opportunities and challenges. In addition to the management of the enterprise, this allows the City Manager to retain confidentiality about competitive, strategic information to the broadband enterprise. Figure 1 Critical Decision Factors Broadband/Best Practice Single-Source Utility/Current Practice* Commercial Objective(s) Social/Political Objective(s) Timeliness - market-based decisions Slower decision timeliness Strategic Confidentiality Public Discussion(s) Business/competitive expertise Business expertise * Municipal-owned electricity, water, waste water, stormwater After the November 2017 Work Session, Council asked that staff research and provide additional information for consideration on the concepts of governance and operational authority. Figure 2 provides the analysis. Figure 2 Roles and Responsibilities - Benchmark and Recommendation January 30, 2018 Page 3 Longmont, CO Wilson, NC Cedar Falls, IA Chattanooga, TN Proposed Fort Collins Governance City Council or Board of Trustees Budget / Financial Approval Debt authorization IGA / Sale or lease assets Power eminent domain Rules & Regs enforceable as code violations Policy decisions- i.e. low income, net neutrality Executive session - review plans & progress Approves Board of Trustees (if implemented in Fort Collins) Mayor appoints board members, confirmed by Council City Council Board of Trustee Delgation of Authority City Manager / GM / Utility / Broadband Director Council/Board updates on progress & decisions Executive oversight on the project Operate within the frameworkof authority delegated Establish pricing & fees for services, rate cards, etc Promotional programs and campaigns Marketing plan and materials Branding & logos Construction design & build out Strategic plan development Financial plan & reporting Policy decision - low income, net neutrality, etc Significant decisions - self-regulating memo to Council January 30, 2018 Page 4 The governance and operational authority outline below has taken Council oversite and staff decision timeliness, agility, and expertise, as well as best practices from other communities into consideration. Governance - City Council Operational Authority - City Manager/Delegate Strategic oversight Executive oversight Budget and financial approval Pricing & fees for service Debt authorization Financial plans and financial performance Rules and regulations enforceable by Code Council updates - plans and progress IGA/sale or lease of assets Construction design and build out Power of eminent domain Branding and logos Policies - i.e., low income, privacy, net neutrality Marketing plans and materials Executive Sessions - review plans Promotional programs and campaigns Next Steps • Finalization of the governance model • Issuance of RFPs, CAO code modifications and bond issuances • Develop detailed 2018 - 2020 Financial Plan • Council Finance Committee, February 27, 2018 • Bond Ordinance - first reading, March 20, 2018 • Bond proceeds and brand launch - April 26, 2018 ATTACHMENTS 1. PowerPoint Presentation (PDF) BROADBAND January 30 2018 ATTACHMENT 1 2 Discussion Topics • Status Update on Implementation Activities • Governance & Operational Authority ATTACHMENT 1 3 Macro Timeline gg Objective: Align key hires, vendors and contracts while working on bond issuance to support aggressive timeline after bonds close Current Activities Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Q1 Q2 Q3 Q4 Go Decision & Appropriation Preparatory Work Governance/Operational Authority Issue RFPs & Negotiate Contracts Recruitment for Key Position CAO Code Updates Bond Issuance Close on Bonds & Sign Contracts Business Launch Begin Staffing, Office, Policies, Operations Begin Design work Begin Billing/CRM system implementation Begin mobilizing construction Marketing & Sales plan development First Customer Live 2018 2019 ATTACHMENT 1 Broadband Core Team Core & Support Teams Deliverables Darin Atteberry Mike Beckstead Dan Coldiron Lisa Rosintoski SeonAh Kendall Amanda King Colman Keane Brad Ward Broadband Core Team & Deliverables 4 • Billing Sys RFP • CSR integration • CS Policies • Communication & Branding • Initial Marketing • Project Coordination • Design & Construction RFP • Facility & equipment RFP(s) • Outside plant costs • Core Ring layout & Node Site select • Support Others • Electronics RFP(s) • GIS RFP • Network Standards • NOC Location/Design • Council Updates • Exec Oversite • Governance & Operational Authority • Bond Issuance & Financial Forecast • Recruiting • Legal / Code coordination • PRPA fiber • Phone/Video decision ATTACHMENT 1 5 Debt Issuance • Planning $132M Revenue Bonds issued by L&P • Backed by revenue & rate making of L&P & current debt coverage capability • Series A – Tax Exempt – 3 year spend requirement, Series B - Taxable • Structured to support reimbursement of $1.8M GF appropriation • Will require prepayment of 2010 L&P Revenue Bonds from reserves • No impact on L&P needs - budgeted debt service used for needs instead of reserves • Exploring portion as mini-bond offering – local investors • Timeline: • Underwriter interview & selection - January 26th • Council Finance Review – special meeting February 27th • First reading Bond Ordinance scheduled March 20th • Anticipate proceeds on April 26th ATTACHMENT 1 6 RFP Activity • RFPs to be issued Jan and early Feb • Branding – Issued • Billing System • Design / Construction • Electronics • Premise Install • Goal – evaluate proposals, negotiate contracts, be ready to sign early May ATTACHMENT 1 Recruiting / Hiring 7 • Recruiter selection and launch by Jan 26th • Four Positions • Broadband Director • Network Manager • Marketing Manager • Outside Plant Supervisor • Additional hiring over next few months • Network Engineers, Designer, QC/Maintenance Technicians ATTACHMENT 1 8 Governance & Operational Authority ATTACHMENT 1 9 Objectives Governance Operational Authority • Oversight and policy decisions by elected officials for broadband efforts • Balance social/political factors with commercial/business factors • Keep elected officials informed and knowledgeable of progress • Review & oversight of strategic & financial plans in executive session • Decision making ability to be responsive and reactive to a commercial market place and competitive factors • Retain confidential strategic information to minimize competitive response • Inform elected officials of progress ATTACHMENT 1 10 Critical Decision Factors Commercial / Competitive Single Source Utility Commercial Objectives Social / Political Objectives Market-Based Decision Timeliness Slower Decision Timeliness Strategic Confidentiality Material Public Discussion all Material Business/Competitive Expertise Business Expertise Broadband Requires Different Approach Than Single Source Utilities ATTACHMENT 1 Examples Governance 11 Longmont, CO Wilson, NC Cedar Falls, IA Chattanooga, TN City Council or Board of Trustees Budget / Financial Approval Debt authorization IGA / Sale or lease assets Power eminent domain Rules & Regs enforceable as code violations Policy decisions‐ i.e. low income, net neutrality Executive session ‐ review plans & progress Approves Board of Trustees Mayor appoints board members, confirmed by Council City Council Board of Trustee ATTACHMENT 1 Examples Operational Authority 12 Longmont, CO Wilson, NC Cedar Falls, IA Chattanooga, TN City Manager / GM / Utility / Broadband Director Council/Board updates on progress & decisions Executive oversight on the project Operate within the frameworkof authority delegated Establish pricing & fees for services, rate cards, etc Promotional programs and campaigns Marketing plan and materials Branding & logos Construction design & build out Strategic plan development Financial plan & reporting Policy decision ‐ low income, net neutrality, etc. Significant decision ‐ self‐regulating memo to council ATTACHMENT 1 13 Governance & Operational Authority Governance Operational Authority Budget & Financial Approval Council Review – plans & progress Debt Authorization Executive Oversight IGA / Sale or Lease of Assets Pricing & Fees for Service Power Eminent Domain Promotional Programs & Campaigns Rules & Regs Enforceable by Code Marketing Plans & Materials Policy – i.e. low income, net neutrality Branding & Logos Executive Sessions – approve plans & review progress Construction Design & Build Out Financial Plans & Financial Performance ATTACHMENT 1 14 Current Thinking City Council Budget / Financial Approval Debt authorization IGA / Sale or lease assets Power eminent domain Rules & Regs enforceable as code violations Policy decisions‐ i.e. low income, net neutrality Executive session ‐ review plans & progress Appoints/Approves Board if Implemented City Manager / Broadband Director Council/Board updates on progress & decisions Executive oversight on the project Operate within the frameworkof authority delegated Establish pricing & fees for services, rate cards, etc Promotional programs and campaigns Marketing plan and materials Branding & logos Construction design & build out Strategic plan development Financial plan & reporting Governance Operational Authority ATTACHMENT 1 15 Rationale Governance Operational Authority • Provides elected official oversight & policy direction • Provides executive session review & approval of plans and progress • Will keep Council informed and knowledgeable • Provides necessary decision authority and responsiveness to dynamic market conditions and competition • Maintains strategic information confidentiality ATTACHMENT 1 16 Governance Due Diligence • Staff has identified two national experts on governance • Planned discussion on appropriate governance and operational authority • Richard LeBlanc – author of The Handbook of Board Governance • Ryan Goodrich ATTACHMENT 1 17 Council Questions What questions does Council have regarding the Council governance and the City Manager operational authority? ATTACHMENT 1