Comment Re:I wonder why... (Score 1) 289
LUS Fiber (Lafayette), S&P upgraded their bonds from A to A+ based on strong performance this year. They went cash positive in 2012.
Bond ratings don't necessarily tell you anything about the performance of an entity. They tell you about the ability of the parent entity (corporation, municipality, whatever) to make interest payments.
Here's a different take, opinion site (I tried to stink to links from news sites, rather than opinion sites in my original post.):
http://freestatefoundation.blogspot.com/2014/06/the-gift-that-keeps-on-taking-municipal.html
Your second link indicates that MI-Connection is likewise cash positive and beginning to pay down debt.
Not quiet. From the link I cited (which I viewed, overall, as positive): "The towns borrowed $92.5 million to create the company and, while MI-Connection is now in the black operationally, it doesn’t yet generate enough revenue to also cover the towns’ payment on the debt." The chairman of the company estimated that within 3–5 years, MI-Connection would be able to stop receiving further subsidies.
That's a lot of debt. We're not talking millions of potential customers in this area either, the cities are relatively small.
But here's the biggest problem for Davidson and Mooresville. AT&T fiber is coming to the Triad and Google is coming to Charlotte. AT&T and Google cost the cities nothing (or very little), and in fact they probably make money from permitting and taxes. What will happen to these municipal networks when there's competition? Will municipal fiber be competitive with Google or AT&T?
After having read about a lot of these municipal setups, 100 million debt is not uncommon. This is expected to be paid back over decades. I guess we'll see how often they become--or remain--truly profitable over that time period.
So what your links really say is that (SURPRISE), big projects sometimes take longer to pay off than expected and may not pay off if they are sabotaged by people who would rather see their city take a financial bath than have their sacred cow slaughtered.
That's exactly the point. Governments (and corporations, to be fair! any suitably behemoth organization) are terrible at planning for this kind of project and event. It's really hard to predict the future (no shit, huh). A small municipality like Davidson, NC (population 10,000) being saddled with even a portion of 100 million debt, is a big deal. It doesn't take more than a few bad assumptions to seriously and very negatively affect the entire population of the area. Maybe they will be lucky and succeed, maybe not. It's a risk, and in my view, frequently one that is not worth taking when corporate fiber is in the process of exploding across the country.