Kentucky House Leader Calls For Investigation Into State Broadband Project

Apr 30, 2018

Credit wkms.org

The leader of the Kentucky House of Representatives is calling for an investigation into the deal that created the Kentucky Wired high-speed internet project, a public-private partnership that has cost the state tens of millions of dollars in delays in recent years.

Kentucky Wired was first approved at the end of Gov. Steve Beshear’s administration and is supposed to result in a 3,000-mile fiber optic cable network that stretches to all of Kentucky’s 120 counties.

The initiative was supposed to be completed in 2016, but has been delayed because the state hasn’t secured agreements with companies that own telephone poles that the fiber optic wire is supposed to hang from as quickly as predicted.

On Monday, House Speaker Pro Tem David Osborne called for an investigation into the contract between the state and private partners.

“The state, specifically taxpayers, need to know the details behind the contract for Kentucky Wired and the specifics concerning delays and additional costs to date, in an impartial and unbiased manner,” Osborne wrote in a statement.

“Allegations and innuendo have swirled concerning the contract and the intentions behind it. I expect this investigation to confirm the grounds for drafting the contract in the manner it was, and to discover any mistakes that were made to ensure the state does not commit the same errors, if any, ever again.”

The network is now slated to go live in 2020.

roject Could Fall Apart Without Funding

The $300 million project is financed by a loan taken out by private companies led by Australian firm Macquarie Capital and is backed by Kentucky’s credit.

As part of the agreement, the state is required to pay the private partners escalating “availability payments” every year — they amount to $33.4 million in the upcoming fiscal year and $34.2 million in the 2020 fiscal year.

Those payments were supposed to be offset by redirecting about $11 million a year in federal funds that school districts use to pay for internet, having them pay for service through Kentucky Wired instead.

But after the state attempted to rebid the school district’s internet contract in 2015, AT&T protested, saying that Kentucky Wired had an unfair advantage in the bidding process.

After threatening to not fund the project, on the final day of this year’s legislative session lawmakers passed a bill funding the availability payments and authorizing the state to borrow $110 million to compensate private investors for expenses associated with delays.

Republican leaders of the legislature have floated the idea of canceling the project, but officials estimate that doing so would cost about $500 million and severely ding the state’s credit rating.

Osborne said that the legislature needs to investigate the arrangement to prevent similar problems in the future.

“[I]t has become apparent that there is little choice for Kentucky but to move forward with the Kentucky Wired project,” Osborne wrote. “However, I urge the committee to act swiftly to produce a report on the contract to ensure taxpayers are entered into positive contract agreements in the future.”

Rep. Lynn Bechler, the Republican chair of the House Program Review and Investigations Committee, said his committee would head up the investigation.

“Kentucky taxpayers deserve to get what they pay for,” Bechler said in a statement.