Senate should hold firm against KyWired bailout

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For Immediate Release: Tuesday, March 27, 2018

(FRANKFORT, Ky.) –– The Bluegrass Institute for Public Policy Solutions, Kentucky’s first and only free-market think tank, commends the state Senate for doing its part to pull the plug on KentuckyWired, the creation of former Democratic Gov. Steve Beshear and big-spending Republican 5th District Congressman Hal Rogers.

“We urge the Senate to hold firm on this position throughout the budget negotiations,” Bluegrass Institute president and CEO Jim Waters said today. “Right now, this project is a huge waste; pushing it forward by the proposed $182 million will qualify KentuckyWired as an unmitigated economic disaster with an ultimate price tag approaching $1 billion.”

The Bluegrass Institute joins with nationally recognized experts in municipal broadband networks in condemning this big-government project, especially considering the expected austerity of this year’s budget, which will represent deep spending cuts in education, health care and public safety, in order to pour more than $3 billion into the state’s retirement systems.

Calling KentuckyWired one of a growing list of “spectacular financial failures” that describe government-owned broadband networks, George Ford, Ph.D., chief economist of the Phoenix Center for Advanced Legal and Economic Public Policy Studies, released an analysis of KentuckyWired on Monday noting that the project’s construction is “woefully behind” and revenues “insufficient to cover the payments.”

Ford also overtly supports state senators’ decision in “refusing to pump more money into the failed venture.”

He also addresses concerns about the commonwealth’s bond rating should it decide to end KentuckyWired by noting that since the bonds issued were revenue bonds rather than general obligation notes, the state would do more harm by using General Fund dollars to prop it up.

Since revenue bonds are repaid out of funded project’s profit, and since KentuckyWired not only has not produced profits but has lost money, Ford points to other government-owned networks in advising the commonwealth to “allow the revenue bonds to default – and do so now, not later.”

Investors know that revenue bonds are riskier, require higher interest rates than general obligation bonds and that “the telecommunications debt would be paid (or not) from the revenues of the telecommunications system, not the General Fund,” Ford writes.

He points to the experience of Monticello, Minnesota, in warning Kentucky to resist the temptation to pull money out of the General Fund to grant KentuckyWired’s request for direct taxpayer dollars.

“Unwisely, the city of Monticello supported the failing telecommunications system with payments from its General Fund, which put stress on the city’s finances,” Ford continues. “As a result, Moody’s downgraded the city’s general obligation debt … .”

"The only dollars from Kentucky's state budget that should be expended toward this fat-laden pork project should be used for terminating it," Waters said. "Using taxpayer dollars to try and bail out this boondoggle will indeed, based on other similarly disastrous projects, further threaten our state’s economy and its credit rating. Let's end it now."

For more information or comment, contact Bluegrass Institute president and CEO Jim Waters @ 270.320.4376 or jwaters@freedomkentucky.com.