EDITORIAL Powellink investment: A rerouted course

Posted 6/15/10

News of the city of Powell's decision to purchase the $6.5 million Powellink bond was met with mixed reactions last week.

Some are critical of the city's choice to invest its enterprise reserves in the bond, while others applaud city leaders for …

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EDITORIAL Powellink investment: A rerouted course

Posted

News of the city of Powell's decision to purchase the $6.5 million Powellink bond was met with mixed reactions last week.Some are critical of the city's choice to invest its enterprise reserves in the bond, while others applaud city leaders for what they see as a fiscally responsible action.Part of the skepticism comes from the city's change in course. Originally, the bond was to be held by a private investor, and the city was to obtain ownership in about 20 years. During development plans several years ago, Powell citizens also were assured that no public money would go toward the fiber-optic network.In an agreement expected to be finalized this week, the city will invest $6.5 million from its enterprise reserves toward the Powellink bond — owning the network early, opening it to other service providers sooner and, yes, using public money toward the investment.The recent development certainly is a change of course, but by the numbers, it will provide more money for the city of Powell. As more subscribers sign up for Powellink, the city's rate of return will increase. Even if Powellink subscriptions stay at around 450 — the number TCT currently has — the city of Powell still will receive more than $11,000 per month on its investment. The $6.5 million in reserves formerly was invested in the local government investment pool WYO-STAR, where in recent months, it drew an interest rate of only 0.8 percent or less. In May, the investment provided just $4,000 back to the city — about a third of what will be earned through the Powellink investment.It's understandable that citizens are surprised and even upset by the recent decision, especially given that public funding will go toward what was marketed as a private venture.Yet, strictly looking at the numbers, we also understand why the city decided to invest its enterprise reserve funds in Powellink rather than WYO-STAR or another investment with dismal rates of return. As one of the few municipalities with a citywide fiber-optic network, use of the reserves in the bond is a unique investment option for Powell — and one that could help the city persevere financially in difficult economic times.

News of the city of Powell's decision to purchase the $6.5 million Powellink bond was met with mixed reactions last week.

Some are critical of the city's choice to invest its enterprise reserves in the bond, while others applaud city leaders for what they see as a fiscally responsible action.

Part of the skepticism comes from the city's change in course. Originally, the bond was to be held by a private investor, and the city was to obtain ownership in about 20 years. During development plans several years ago, Powell citizens also were assured that no public money would go toward the fiber-optic network.

In an agreement expected to be finalized this week, the city will invest $6.5 million from its enterprise reserves toward the Powellink bond — owning the network early, opening it to other service providers sooner and, yes, using public money toward the investment.

The recent development certainly is a change of course, but by the numbers, it will provide more money for the city of Powell. As more subscribers sign up for Powellink, the city's rate of return will increase. Even if Powellink subscriptions stay at around 450 — the number TCT currently has — the city of Powell still will receive more than $11,000 per month on its investment.

The $6.5 million in reserves formerly was invested in the local government investment pool WYO-STAR, where in recent months, it drew an interest rate of only 0.8 percent or less. In May, the investment provided just $4,000 back to the city — about a third of what will be earned through the Powellink investment.

It's understandable that citizens are surprised and even upset by the recent decision, especially given that public funding will go toward what was marketed as a private venture.

Yet, strictly looking at the numbers, we also understand why the city decided to invest its enterprise reserve funds in Powellink rather than WYO-STAR or another investment with dismal rates of return.

As one of the few municipalities with a citywide fiber-optic network, use of the reserves in the bond is a unique investment option for Powell — and one that could help the city persevere financially in difficult economic times.

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