Official: Ky. missed chance to end broadband deal

Published 6:30 pm Thursday, September 13, 2018

FRANKFORT, Ky. (AP) — Kentucky’s procurement chief said it would have cost taxpayers about $9 million in 2015 to back out of a statewide broadband network. But he said a misunderstanding of the rules governing federal education money helped convince state officials to OK the deal that has since cost taxpayers at least $88 million in delays.

Finance and Administration Cabinet Secretary William Landrum testified Thursday before the Program Review and Investigations Committee. The panel, made up of state lawmakers from both parties, is investigating the troubled contract.

Landrum became cabinet secretary in December 2015, a few months after the contract had been signed and the state borrowed nearly $300 million to start construction. He said when state officials signed the contract, they planned on using about $11 million in federal money to make payments on the debt. By the time state officials realized they couldn’t do that, it was too late.

He said state officials at the time made a bad decision, despite spending at least $800,000 on consultants to help make that decision. Officials signed the deal in the final months of former Democratic Gov. Steve Beshear’s second term in office.

“I don’t have any evidence, but I believe this was trying to be done by the end of the (Beshear) administration,” Landrum said, indicating a deadline crunch could have played a role in the decision.

Lawmakers on the committee had invited state Beshear administration officials to answer questions about the contract, including former Deputy Budget Director John Hicks, former Executive Cabinet Secretary Mary Lassiter and former Finance and Administration Cabinet Secretary Lori Flanery. But none agreed to testify, according to Republican state Rep. Lynn Bechler, the committee’s co-chairman.

The project is overseen by the Kentucky Communications Network Authority. KCNA Executive Director Phillip Brown said “it’s not settled fact” that the state could not have used the federal education money for the broadband network, but he also said, “I can’t say I don’t support the decision” Landrum made to not use the money.

Kentucky Wired was launched in 2015 as a partnership between Beshear and Republican U.S. Rep. Hal Rogers. It was enthusiastically embraced by politicians from both parties. The network is not designed to compete with private internet service providers. Instead, the goal was to install more than 3,000 miles (4,828 kilometers) of fiber optic cables reaching all of the state’s 120 counties. Those cables would serve as the “highway” for private companies, who could connect to the network and offer high-speed internet in hard-to-reach areas, including the mountains of eastern Kentucky.

The project was supposed to be finished by the fall of 2016. But the state has had trouble securing the agreements necessary to attach the cables to existing utility poles and the easements needed to bury other cables underground on privately-owned land. The delays have cost private contractors millions of dollars, money taxpayers must pay according to the contract.

The state has reached an $88 million settlement with the contractors. Earlier this year, state lawmakers grudgingly agreed to give the KCNA authority to borrow up to $110 million to make those payments. Officials now estimate the earliest they will be able to turn the network on is 2020.

Brown said state officials are trying to negotiate amendments to the contract that would give the state more favorable terms. But he said it’s impossible to predict if there will be other delays and how much they would cost. For example, he noted many of the state’s utility workers are heading to the East Coast to help the area recover from the anticipated destruction of Hurricane Florence. Not having those workers available to work on Kentucky Wired could delay the project and trigger more payments from the state.

“I’m not suggesting those crews need to stay here, but it’s something that I literally cannot predict,” he said.