City Council goes “all-in” with other people’s money

Though Tuesday’s Tacoma City Council agenda pretty much hides it, the council is poised to make a costly and reckless move at Tuesday afternoon’s regular meeting.

The agenda blandly notes the council will consider its capital and biennial operating budgets. Embedded in both, however, is the assumption that the city is going into the business of providing broadband internet service. The budget also assumes Tacoma Public Utilities ratepayers will pay for the move.

The council plans to spend $20 million in capital from TPU ratepayers to upgrade the Click fiber optic system in various ways, including moving to gigabit speed to try to attract more internet users. It also will spend potentially millions more to cover any operating losses, which we can expect to go on for years into the future. That’s what the city calls its “all-in” plan, championed by Mayor Marilyn Strickland.

The idea behind the move has a kernel of merit — preserve a city asset (Click’s fiber optic network) and help more low-income people obtain internet service, something seen by many as essential for economic survival in the 21st century.

The safest way to do that is to let the city contract with a company already in the internet business to take over the Click network — on terms set by the city — and compete with Comcast. But the city council majority backing the more risky venture ignored every entreaty and seems bent on going it alone. That’s the worst way to proceed.

It’s illegal under the city charter and state law for Tacoma Public Utilities to charge electric ratepayers for anything not directly related to supplying electricity to consumers.

The city attorney made that clear in a memo on the status of the law. Her report concluded “electrical utility revenue may not be used to pay for the costs directly associated . . . with providing commercial telecommunications services . . . to the public.”

Proponents say they think there’s wiggle room there, but any plain reading of that legal memo would stop a reasonable person from proceeding.

Several other expert attorneys — including TPU’s former attorney and a respected law professor — warned the council the city likely will be sued if it goes ahead. Assuming the city loses in court, it would use taxpayer funds to pay its own lawyers, the plaintiff’s lawyers and any revenue it illegally took from TPU.

But they ignored all that advice.

Then several city council members, led by Conor McCarthy, proposed the city hire a consultant to determine whether it might legally use any TPU ratepayer funds to subsidize even a smaller portion of Click’s telecommunications businesses. He also proposed the consultant evaluate whether the whole Click expansion into broadband sales was a good idea.

The majority accepted his proposal, sort of. They voted to hire the consultant at some later date, but to go ahead with the all-in model. What might be critical advice can wait, apparently.

The city also declined to seek proposals from businesses that specialize in telecommunications as a way of accomplishing its ends and reducing risk.

Rainier Connect, which already operates successful broadband and cable businesses in Pierce County, offered to work with the city to upgrade service, make broadband available to low-income residents and operate the system without asking for taxpayer or ratepayer subsidies.

The city ignored that idea, too. And it won’t solicit proposals from others.

No reasonable person or business would operate this way.

So why are they moving forward?

The only reason we can come up with is that they’re playing with other people’s money.

The capital upgrades and covering the operating losses? The city will charge that to TPU electric ratepayers, even those who live outside Tacoma and can never log into that fancy new broadband.

The legal bills? Both the city’s and the plaintiffs? And any funds it might have to pay back to TPU? Apparently a council majority thinks that’s chump change out of a nearly $2 billion general-government biennial budget.

Twenty-first century internet businesses may be the most costly and risky bets around, even for businesses with expertise and hefty financing. Trusting a city bureaucracy to get it right — against all legal advice, before getting any expert advice and willfully rejecting any experienced business partners — seems reckless, irresponsible and arrogant.

That’s tacitly acknowledged by burying the matter in a budget ordinance rather than taking a separate up-or-down roll-call vote.

But, hey, it’s not their money. It’s yours.

This story was originally published November 20, 2016 at 6:30 PM with the headline "City Council goes “all-in” with other people’s money."