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Gainesville City Commission votes to spend $8 million in ARPA funds on housing instead of municipal broadband

BY JENNIFER CABRERA

Bottom line: The Gainesville City Commission voted to set aside $8 million in American Rescue Plan Act funds for affordable housing instead of proceeding with a proposed municipal broadband pilot project that would have cost $9.6 million.


Today the Gainesville City Commission heard a consultant’s report on a proposed municipal broadband pilot project that would use $9.6 million of the City’s American Rescue Plan Act (ARPA) funds. The commission had previously voted to set that money aside for broadband at their March 3 meeting.

“Reduced pilot project” to cover 2400 residences

Courtney Violette from Magellan presented a “reduced pilot project” for fiber-to-home deployment. He mentioned that Cox already has “fairly well-universal connectivity across the city,” but the presentation’s comparison of plans from AT&T, Cox, and GRUCom made no mention of Cox’s free broadband program for low-income residents.

The pilot program would cover portions of east Gainesville, including 2400 residential units and 550 businesses of various sizes, and the fiber deployment would cost an estimated $5.5 million. The total required startup capital was estimated at $8.7 million, with annual operating costs of $563k plus 3 new full-time positions.

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The projected pricing ranged from $30/month to $79.95/month for residential service, depending on the desired speed. The federal government offers a $30/month subsidy under the Affordable Connectivity Program.

The project is projected to break even financially if 25% of the residential units and 15% of the businesses opt for the municipal broadband service.

Violette told the commission that risks of the project include lawsuits; local marketing campaigns to influence public opinion; lobbying the legislature to limit municipal providers; public relations campaigns against City-provided services; other market factors including price cuts, increased speeds, and/or network upgrades from competitors; not meeting the break-even take-up rates; and cost increases. Violette projected that the project could be up and running in about 12 months.

The commission had also requested an overlay of wireless service in the area, but the consultant recommended against that because of the cost and the fact that availability of free wireless internet could reduce up-take of the municipal broadband service.

The consultant recommended that the City communicate with its residents about existing broadband programs, deploy WiFi in public spaces, and build fiber where needed. Violette pointed out that a number of funding sources for broadband are ramping up from both the state and federal governments, but details are not yet available.

Charter officers recommend against the plan

Gainesville Regional Utilities (GRU) Interim General Manager Tony Cunningham said that GRU’s staff concluded that the business plan presented by Magellan is sound, but they saw competition as a “very big risk, as well as cost escalations, “especially in the environment we’re in now.” He pointed out that GRUCom, GRU’s internet division, “can’t have losses; we can’t subsidize GRUCom” from the other divisions. He said GRU’s recommendation is that “this can’t be a business that GRUCom can take on.”

Interim City Attorney Daniel Nee told the commission he is concerned that the City would be entering a marketplace rather than providing a service. He said that deploying municipal broadband could open the City to attacks in the areas of unfair pricing and unfair competition: “Win or lose, fighting the challenges that might come from competitors… is an expensive proposition.”

Senior Assistant City Attorney Lisa Bennett told the commission that there are no legal prohibitions to using ARPA funds for the project, but her concerns were about “how you operate once you’re in the market.” She said that antitrust litigation heavily favors plaintiffs and that even if the City won, they would probably not recover attorneys’ fees. She also said that using City funds to subsidize or expand broadband could violate the law.

Interim City Manager Cynthia Curry also did not support the project, saying that the General Government side has “no resources to drive this.” She also said they had “probably exhausted the consulting services into this project” and added, “We have no expertise on the General Government side to actually push this project forward.”

City commission divided on whether to proceed

Commissioner Adrian Hayes-Santos, who attended the meeting remotely “out of an abundance of caution” and has championed the municipal broadband program for years, said that “hundreds of cities have done municipal broadband.” He asked Bennett if she was aware of a lawsuit against any of those cities, and Bennett simply responded, “No.” Hayes-Santos said the City should be fine if they don’t “do predatory pricing, you don’t do deceptive practices… [The legal risk] is a little overblown, in my opinion.”

Hayes-Santos asked Violette if the City was in a position to be successful, and Violette said he didn’t have a crystal ball: “If you can’t finance or fund the project, that’s a hurdle” that each community has to figure out. Violette said Magellan has “a lot of belief that GRUCom could be successful.”

Hayes-Santos said the commission talks a lot about how to save residents money, including by cutting utility bills and property taxes, but this project would save money for the people in the pilot project area. He also said that Ocala is seeing 45% uptake rates for their municipal broadband initiative. “I believe this is low-hanging fruit; it’s a pilot project” that could turn GRUCom around. Hayes-Santos also argued that ARPA funds should be used for “transformational projects” like this: “If we don’t do this, it would be an incredible detrimental mistake on the part of the commission.”

Commissioner Cynthia Chestnut pointed out that their charter officers recommended not proceeding with the project and that the City has already spent $20,000 researching antitrust implications with an outside law firm. She said the project would be “costly to the City, costly to our taxpayers, and after much research… will not work.” She said the City has a once-in-a-lifetime opportunity to invest in housing with the ARPA money.

Commissioner Harvey Ward said that both Hayes-Santos and Chestnut were right, but it is a mistake to look at whether the project would turn a profit: “Cities provide services to the people who live there. We’re not here to make a profit; we’re here to make life better for people in the community.”

With that said, Ward said the plan didn’t make sense to him because it would only serve 4% of the City’s residents for almost $10 million. He said they should put a bond issue on the ballot so voters could make the decision on whether to spend that money and then provide broadband as a service, “like the streets.”

Ward also pointed out that “we don’t have any staff champions for this – none… We don’t have the people to get it done.” He said $10 million gets a lot of housing done.

Commissioner Reina Saco said, “I very much want GRUCom to offer internet services, but… I’m not 100% convinced that $9.6 million will do a lot… I want it done right.” She also supported putting it out to voters as a bond issue.

Commissioner David Arreola said they didn’t have to make a final decision today and added, “GRUCom is already subsidized by the other utilities.” He said that federal infrastructure funds could be used in the future and that the City could build around 125 housing units with the money. However, he was “still in support of our municipal broadband… This is the only project that’s been presented that could turn [GRUCom] around.”

Mayor Lauren Poe tried to stop the other commissioners from bringing housing into the discussion, saying, “This discussion is specifically about broadband,” although he acknowledged it was appropriate for commissioners to discuss their priorities for their remaining ARPA funds (estimated at close to $13 million by Curry). He said the proposed broadband program isn’t really a pilot because “once we make this investment, we can’t just end it, undo it.”

However, Poe said the services are needed: “We’re one of the most advanced economies the world has ever seen, and we’ve got kids sitting outside Taco Bell to do their homework. That’s not acceptable.” He said broadband would “remain something that is important to me… It just needs to be with the right funding, in the right time.”

Hayes-Santos made a motion to move forward with the pilot program as presented, and Arreola seconded the motion.

During public comment, Aimee Pfannenstiel from Cox Communications told the commission, “The areas you’re highlighting are already 100% covered. They have access.” She also said the Cox packages described in the Magellan report “lack accuracy” because some residents qualify for free internet through Cox programs. She pointed out the ongoing costs of technology upgrades and said that in the seven years the commission has been discussing this, Cox has invested $160 million in technology upgrades. She asked, “Is the City ready for this type of ongoing investment?”

Pfannenstiel said that the City of Tucson spent federal funds during the pandemic to create its own internet network, and it was used by fewer than 1,000 households at a rate of nearly $7,000 in costs for each family served.

Votes favor spending ARPA funds on housing, seeking other funds for broadband

Hayes-Santos’ motion failed, with only Hayes-Santos and Arreola voting in favor of moving forward with the pilot project as presented.

Chestnut made a motion to use $8 million of the City’s remaining ARPA funds to address affordable housing. Commissioner Desmon Duncan-Walker seconded the motion.

Poe said he wasn’t prepared to talk about housing at today’s meeting and favored asking Curry to bring a proposal to a July meeting.

Chestnut objected, saying they had deferred decisions on spending ARPA funds until they had the Magellan report: “I think we’re at a decision point… We can’t keep kicking this ball down the read.”

Saco also objected, saying that the topic of housing had not been noticed for that meeting: “I’m not going to make a decision blind… [This vote] is an insult to our neighbors… I’m going to vote no on this out of common decency.”

Ward said that supporting Chestnut’s motion would give City staff an opportunity to come back with specific proposals for how to use the funds for housing, which the commission would discuss with public input at a future meeting.

Arreola asked Chestnut to amend the motion to ask staff to seek out other funding options for broadband, including state and federal funds, and she agreed.

The commission voted 5-2 to set aside $8 million in ARPA funds for affordable housing, with Poe and Saco in dissent. They voted separately on the motion to ask staff to find other funding options for broadband, and that passed unanimously.

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