Another delay for fiber-optics Another delay for fiber-optics (April 21, 2004)

Besieged by supporters, council considers new financing options

by Bill D'Aogstino

Bringing hyper-fast Internet access to Palo Alto residents will require even greater consideration by the local government than originally anticipated.

With new options on the table for financing the project, the City Council delayed moving forward on an expensive proposal to build a citywide fiber-optic network on Monday night -- but not before hearing from interested residents who packed the council's chambers.

An estimated $40 million is needed for the city to build the series of glass lines that would bring hyper-fast Internet access, cable television and telephone service to all residents courtesy of the local government.

On Monday night, the City Council heard new ideas for ways to fund it, as well as thoughts from nearly 30 residents. Many were hollering for the city to enter the telecommunications business.

Todd Stangel, 19, said he supported the fiber-optics project because it would help him videoconference with his girlfriend in New York.

"I would just like to see an Internet connection that would not make her look like a Picasso painting," Stangel said, garnering laughter from the tech-savvy crowd.

The teen spoke to the council while referring to notes scrawled on his left hand.

Most of those speaking in support of the project lived in the 66 homes that have been testing the fiber-optics technology for the city since 2001. They hyped the project, saying it would lower costs for cable TV and Internet access, while giving the city a leg-up in attracting new businesses and jobs.

A small minority of speakers criticized the venture, including a few residents who worried about the financial risks. The success of the new venture would depend heavily on what percentage of residents signed on and how it would be financed.

The city's initial proposal for paying for the system -- floating revenue bonds backed by the city's electricity company -- was reconsidered after closer scrutiny. Of particular concern were the ramifications of California-specific laws, but unspecified political considerations also played a role, officials said.

Four new financing options were presented to the council Monday night. One would rely on private investors to spend big bucks; another would directly assess property owners, including those who would not be customers, for the cost; a third would utilize debt backed by a special tax; and the final would back the costs with an unspecified city asset that could potentially be handed over if revenues didn't meet expectations.

Each option has new political, financial, practical and legal issues that will be explored further by the city in the coming weeks. Notably, each would have different interest rates attached. The rate the city receives in the endeavor would considerably change the financial picture.

Some of the new options would not necessarily have to be placed on a ballot, while others would require a two-thirds approval. Until this week, the city had been moving toward a November election on the issue.

As a result of all the new information, the council asked its Utilities Advisory Committee to re-look at the issue on May 5.

Armed with new data and the committee's recommendation, the council itself will hold a new public hearing on Monday, May 24, and is hoping to make a decision that night.

Bill D'Agostino can be e-mailed at bdagostino@paweekly.com

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