Click funding plans dip into city coffers, give Tacoma council deadline to act

The Tacoma Public Utilities board is weighing two options to expand Click Cable TV into internet service, and both rely on the city’s general fund to subsidize the system.

They share another significant element: A late-November deadline for the City Council to agree to help cover the system’s costs or risk having the utility outsource its operations to a private company.

The take-it-or-leave-it approach might not sit well with members of the council, especially Mayor Marilyn Strickland, who has said she is opposed to shifting Click’s costs onto the general fund.

“My preferred model isn’t even in here, but as we go through the process I’m hopeful we will look at how this can be done fairly,” Strickland said. “When the utility built this system, they did not ask for a general government subsidy at the time.”

The proposals are still weeks of public comment and debate away from a vote by the utility board, and at least one utility board member already plans to propose amendments. On Wednesday, the board will discuss the two financing options and hear public feedback.

Both plans call for Click to borrow $12 million to $14 million from the city to upgrade Click to gigabit internet service speeds. They are similar to funding models that emerged from work of the Click Engagement Committee, formed to vet an “all-in” business model in which Click would start offering phone service and compete alongside the private internet service providers that use its system to provide broadband.

The first option would have TPU subsidizing Click to the tune of $6.1 million in 2017, a figure that would drop to $2.4 million by 2025. In that scenario, the city would be asked to gradually ramp up its funding of Click, from nearly $2.8 million in 2017 to $7.5 million in 2025.

The second option would see TPU boosting its contribution to Click over time, from $6.1 million in 2017 to $7.5 million in 2025, while the city would contribute much less, starting at $1.7 million in 2017 and working up to about $2.1 million in 2025.

The first option “leads to sort of a phase-out of electric ratepayer funding and a phase-in of greater city funding,” said utility board chairman Mark Patterson, who was on the engagement committee.

“Another view of some of the board members appears to be that (Click) is sufficiently related to the supply of electricity functions for them, and at least for the period that we’re talking about ... they would only ask for a little bit of city funding,” Patterson said.

Not all utility board members agree that the city should have to front up to $14 million for Click upgrades. Board member Bryan Flint said the city’s general fund, which is facing a projected $6.7 million shortfall in the next budget biennium, doesn’t have the money.

“We have a healthy reserve, we’ve got the cash, we can pay for it, and I believe we’re going to be successful in the marketplace, in that Click over time will be able to begin to pay back that money,” Flint said.

Flint and board member Karen Larkin, who served on the engagement committee, said they favor the scenario in which TPU and its ratepayers take more responsibility for funding Click.

“We can’t operate the electric system without the fiber optics,” Larkin said. “It ties all of our substations together, it’s how we manage our power grid, so it’s an important asset to Tacoma Power.”

Under both proposals, the council would have until Nov. 30 to bless the funding model the utility board chooses. If the council doesn’t act, utility officials could search for an outside firm to lease Click. Utility board members Patterson and Monique Trudnowski have said they favor a public-private option, which would allow private investment to pay for infrastructure upgrades and take the burden of funding off public entities.

The City Council in December voted to reject a proposed 40-year lease of Click’s infrastructure to private internet provider Wave, of Kirkland, and many council members have been vocal about wanting a publicly funded, publicly operated municipal internet service that would compete with the likes of Comcast and CenturyLink to provide affordable internet to low-income Tacoma residents.

City Councilman Marty Campbell said trying to force the council’s hand would be unwise.

“I’m not a fan of poison pill legislation,” he said. “Language like that is trying to dictate to the council what they shall do, and I think that it’s dangerous to put things like that in legislation.”

Strickland said it’s “debatable” whether the TPU board has the authority to impose that kind of deadline on the council. But she said it’s “not unreasonable” that the council would vote by Nov. 30.

“The utility board will have a chance to make adjustments as they see fit, and we’ll see how this plays out. But ideally the utility board will select a finance model that will allow us to put forth the best possible mix of products and services so we can be successful with an all-in model,” Strickland said.

The mayor, who was on the Click committee, noted that neither of the proposals before the utility board reflects her plan to leave Click’s costs in the Tacoma Power budget, where utility officials say electric ratepayers are helping cover them.

TPU Director Bill Gaines has said Click is losing $5.5 million to $7.5 million per year, but that has been difficult to determine exactly because its finances are intermingled with Tacoma Power’s. The Click funding proposals would create a separate fund in the Tacoma Power budget to account for Click’s revenues and expenses in an attempt to make Click’s financial position more clear.

“It’s just so hard, the way the financials have worked, to understand the numbers, and so after the fact it always looks like we’re making up the numbers, which TPU is not, of course,” Patterson said.

The utility board will discuss the Click proposals at its study session Wednesday at 4:15 p.m. and again at its regular meeting Wednesday at 6:30 p.m. in the TPU auditorium, 3628 S. 35th St.

This story was originally published September 12, 2016 at 6:58 PM with the headline "Click funding plans dip into city coffers, give Tacoma council deadline to act."