Next week Medina County will cut a half-million-dollar check to the county Fiber Network. The loan is required because the network has failed — at least up to now — to attract enough customers to be financially self-sufficient.
The subsidy was triggered in June when the network’s cash reserves dropped below $1.2 million after making a scheduled $600,000 payment on $14.4 million in bonds used to construct the network.
Medina County isn’t the only local government on the hook for backing the bonds, issued in 2010 by the county Port Authority. The cities of Medina, Brunswick and Wadsworth and the villages of Seville and Westfield Center also agreed to provide the financial safety net for the network.
The county is responsible for $242,916 of the total $523,802 loan needed to shore up the reserve fund.
The county has agreed to pay the full amount on Oct. 31 and will send invoices to the municipalities — ranging from $5,238 for Seville to $66,174 for Brunswick — during the first week of November.
The remaining $110,212 will be paid by Cascade Capital, an Akron-based private development corporation that also agreed to guarantee the bonds.
More money likely will be needed next year. That’s because the Fiber Network’s reserves are expected again to dip below the $1.2 million threshold in December, when another $600,000 installment on the bonds is due.
It wasn’t supposed to go this way. When the idea of using bonds to finance the Fiber Network was proposed in 2010, public officials downplayed the need for public subsidies.
“The financial plan for the project is conservative, and it shows the fiber ring can pay for itself based on initial customers,” County Commissioner Steve Hambley wrote in a letter-to-the-editor, published by The Gazette in June 2010.
In explaining his support for the network, Hambley predicted the project would generate jobs and tax revenue.
“This project is the best hope for job creation, business growth and retention, as well as meeting the communications infrastructure needs of our business and public agencies,” he wrote.
Hambley did acknowledge the possibility that some government subsidies might be needed in the first five years, but promised that any money would be treated as loans to be paid back with interest.
In interviews earlier this week, Hambley placed much of the blame for the Fiber Network’s financial shortfalls on ONECommunity, the Cleveland nonprofit corporation hired in 2010 to install and lease the 151 miles of 144-strand fiber optic lines designed to provide businesses and local governments with high-speed Internet service.
Hambley said ONECommunity was marketing its own $44 million network, which runs throughout Northeast Ohio, and didn’t do enough to promote the Medina County Fiber Network.
“ONECommunity was selling their fibers first, and Medina County’s second,” Hambley said. “They were getting the bigger contracts and they were underselling our assets.”
County Commissioner Adam Friedrick, who serves as the county’s liaison to the network, said David Corrado was hired by the Port Authority in January to market the network.
Corrado is the former director of ONECommunity’s program management office.
“Dave has the knowledge and the contacts, he’s absolutely the guy to be handling this,” Friedrick said.
Corrado said sales of leases on the network have increased by “500 percent” since he took over in January. But he declined to provide revenue figures.
“I don’t give out those numbers because the network is made up of commercial and public entities,” he said.
“The private entities aren’t really willing to share their statements publicly.”
Corrado did say the network had four Internet service providers leasing the network and expects three more to sign on by the end of the year.
Although Corrado said future sales are looking better, he doubted the new revenue will be enough to eliminate the need for more loans from the county, cities and villages.
“December is probably going to require us to utilize the bond reserve fund also,” Corrado said.
Seville Mayor Gene Sulzener wasn’t mayor when the fiber optic network was approved and isn’t happy his village is being billed $5,238 as its share of the loan.
“I wasn’t really convinced this was something we wanted to be obligated to,” he said. “Five-thousand dollars isn’t a lot of money, but it does distract from other things we could be doing.”
The loan money is coming from a variety of sources because the agreement requires that only nontax dollars be used.
Sulzener said Seville will tap income from a community reinvestment area agreement.
“If we need more money, we can look at using the fees we collect from zoning,” he said.
Medina County Administrator Chris Jakab said the county will use grant money from First Energy for the electric aggregation program and casino revenue from the general fund.
Brunswick Finance Director Todd Fischer said the city agreed in 2010 to use video service provider fees to pay its $66,174 share of the loan.
But Fischer said he wants additional documentation on the finances of the Fiber Network before asking city council to appropriate the money.
“We will review the documents and compare it to the agreement council passed,” he said.
Medina City Finance Director Keith Dirham said his city also has enough non-tax money in the general fund to pay the city’s share of $57,903.
“Our permits, licenses, fines — all those are non-tax dollars,” Dirham said. “I was advised that as long as our non-tax expenditures don’t exceed our non-tax revenue we’re okay.”
Wadsworth’s share of the loan is $20,679. City officials referred questions about financing of the loan to Services Director Robert Patrick, who did not return calls seeking comment.
Westfield Center established a fund to back up the Fiber Network with a loan in 2010 when village officials agreed to back the bonds.
Village Fiscal Officer Debbie Runser said the village will pay its $20,679 share of the loan with money from the water plant sold to Medina County in 2007.
“After we sold the water plant to Medina County, we set money aside,” she said. “It’s in our general fund and it’s set aside for this purpose.”
Contact reporter Loren Genson at (330) 721-4063 or lgenson@medina-gazette.com. Follow her on Twitter @lorengenson.
How the $523,803 loan to the Medina County Fiber Network is shared
• Medina County — $242,916
• Brunswick — $66,174
• Medina — $57,903
• Wadsworth — $20,679
• Westfield Center — $20,679
• Seville — $5,238
The remaining $110,212 will be paid by Cascade Capital, an Akron-based private development corporation that also agreed to guarantee the bonds.
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