BluegrassBeacon 01 300KENTUCKY (4/20/17) — The city of Pikeville recently raised its restaurant tax by a full percentage point just to finance a government-owned broadband network.

If history is any guide – and it usually is – this tax increase won’t be the only one city officials will claim they need to keep a municipal broadband network functioning.

While local politicians keep trying to find ways to add to taxpayers’ tabs, they will never be able to raise taxes fast – or high – enough – to pay for such pork-laden boondoggles.

Just ask taxpayers in the 11 cities in Utah which in 2002 got together to build a $500 million regional broadband system called (no joke) UTOPIA.

Here we are, 15 years later and the network still isn’t complete, has barely a quarter of the subscribers it promised to attract and runs a multimillion-dollar deficit annually.

UTOPIA cities trying to make government-owned broadband work have tried more tricks than Houdini attempting an underwater escape, including raising property taxes and increasing utility fees to cover yearly shortfalls.

It hasn’t worked.

Now, local officials are stuck with the failing network after unsuccessful attempts to sell it.

Other cities, including Marietta, Georgia, Provo, Utah, and Groton, Connecticut, managed to shimmy their way out of failing municipal-network deals but lost millions of dollars in the process.

Still, getting out was a wise move – even at a loss.

If you remember the 1986 movie “The Money Pit,” you know what I’m talking about when I claim that government-owned broadband networks would make Tom Hanks and Shelley Long cry, too.

Revenues are rarely enough to cover these projects’ operating costs; fiber networks require constant upkeep and upgrades to stay on the cutting edge and attractive to subscribers.

Like Pikeville, the cities of Marietta, Provo, and Groton counted on municipal broadband to bring new jobs and investment to town.

However, studies from New York Law School’s Advanced Communications Law and Policy Institute, George Mason University’s Mercatus Center and Phoenix Center for Advanced Legal and Economic Public Policy Studies all conclude: at best, these networks are a wash economically.

Not only is there no conclusive evidence that such municipal networks reduce unemployment rates or attract new business, but they actually deter investment by telecommunications companies forced to compete on such an unlevel – and thus unfair – playing field.

No firm in its right mind wants to compete with a municipal network with government benefactors standing by to raise taxes to bail it out during tough times, which is what Pikeville residents will be asked to do when this project can’t make ends meet.

The bills will keep increasing; a higher restaurant tax now, increased utility fees – like what was proposed to pay for Utah’s UTOPIA – later.

Advocates who want this municipal system cite Chattanooga, Tennessee’s government network as an example Pikeville should emulate.

Experts cited above from the New York law school took an in-depth look at Chattanooga’s network and admitted the system is making some money but only because of a unique set of factors that cities like Pikeville can’t even come close to replicating.

Chief among them is that the federal government supplied more than $100 million from the 2009 stimulus law to finance that city’s system, which was more than twice the city’s entire fiscal 2016 budget.

And $100 million was just the federal government’s share of the network’s $390 million price tag.

There’s no question Pikeville and all of eastern Kentucky struggle to attract new businesses and investment.

But success in these endeavors will require innovative leadership and approaches – not shiny new toys.

There are no easy answers with this exception: municipal broadband isn’t a silver bullet.

Jim Waters is president of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Read previous columns at www.bipps.org. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. and @bipps on Twitter.

Disclaimer: The content supplied by columnists and letters to the Editor on this site does not in any way, shape or form, implied or otherwise, necessarily express or suggest endorsement or support of any of such content, statement, or opinions therein. SurfKY News does not necessarily adhere to or endorse content provided by outside non-staff sources.

sitelogosm© Copyright 2008 - 2017 SurfKY News Group, Inc. All rights reserved.
This material may not be published, broadcast, or rewritten without permission.

Click here to subscribe to receive daily updates by email.

Most Read This Week

Jul 16, 2017 8830

Home Visit Leads to Meth Possession Arrests

by Rita Dukes Smith, SurfKY News Director
Jul 17, 2017 8596

Man’s Alleged Attempt to Outrun Cops on Scooter Ends in Arrest

by Doreen Dennis, SurfKY News
Jul 19, 2017 8432

Pickup Truck Strikes Pedestrian on South Main Crosswalk

by Doreen Dennis, SurfKY News
Jul 16, 2017 7373

UPDATE: 33-Year-Old Man Victim of Fiery Crash into Building

by Rita Dukes Smith, SurfKY News Director

Most Read This Month

Jul 09, 2017 33447

UPDATE: CCPD Releases Fatal Motorcycle Accident Information

by Rita Dukes Smith, SurfKY News Director
Jul 14, 2017 29074

UPDATE 3: 5 Names Released from 6-Person Fatality

by SurfKY News Staff Report

Weather brought to you by

85°
29°
°F | °C
Partly Cloudy
Humidity: 79%
Fri
Partly Cloudy
76 | 99
24 | 37
Sat
Mostly Sunny
78 | 97
25 | 36
Sun
Thunderstorms
79 | 92
26 | 33
Mon
Thunderstorms
75 | 92
23 | 33

Stories Trending Today

KY603CloseHaydenRdOboro0717
Jul 16, 2017 11603

Closure on Ky. 603 in Daviess Co. Starts July 17

by SurfKY News
arrest2 green 300
Jul 16, 2017 8830

Home Visit Leads to Meth Possession Arrests

by Rita Dukes Smith, SurfKY News Director
MPD Ross 7 17
Jul 17, 2017 8596

Man’s Alleged Attempt to Outrun Cops on Scooter Ends in Arrest

by Doreen Dennis, SurfKY News
pedestrian hit red 300
Jul 19, 2017 8432

Pickup Truck Strikes Pedestrian on South Main Crosswalk

by Doreen Dennis, SurfKY News
fatal collision 3 300
Jul 17, 2017 7373

UPDATE: 33-Year-Old Man Victim of Fiery Crash into Building

by Rita Dukes Smith, SurfKY News Director

Market Report

Market Report brought to you by