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Home My WebLink AboutBoard of Commissioners – Supporting Documents Compiled – 04/24/20182.1 Draft CB Minutes for 04.10.2018 2.2 County Bills~Warrants 2.4 West Central Air-Ag Inc Letter 2.5-2.8 Auditor-Treasurer Consent 2.9 Final Payment SAP 056-606-012 & Etc. 3.0 Ad for Appointment to BRRWD 02212018 6.0 Medicare Resolution 2018 7.0 Broadband OTC Report Final 7.0 Broadband Presentation - Finley and CCG 7.0 Centers for Rural Policy and Development Chapter 7.0 Draft PACE Joint Powers Agreement 7.0 Property Assessed Clean Energy Factsheet_Fall2015 8.0 HS Contract - Good Life Services 8.0 Human Services 2017 Annual Report 9.0 Planning Commission Recommendations 9.0 AIS Minutes 4-9-18 10.0 Auditor-Treasurer Agenda Items 10.0 DNR Game and Fish Terminals 11.0 Highway Agenda Items BOARD OF COMMISSIONERS MEETING AGENDA PACKET April 24, 2018 MINUTES OF THE OTTER TAIL COUNTY BOARD OF COMMISSIONERS Government Services Center, Commissioners’ Room 515 W. Fir Avenue, Fergus Falls, MN April 10, 2018 9:30 a.m. Call to Order The Otter Tail County Board of Commissioners convened at 9:30 a.m. Tuesday, April 10, 2018, at the Government Services Center in Fergus Falls, MN, with Commissioners Wayne Johnson, Chair; Roger Froemming, Vice-Chair; John Lindquist, Lee Rogness and Doug Huebsch present. Approval of Agenda Chairman Johnson called for approval of the Board Agenda. Motion by Rogness, second by Lindquist and unanimously carried to approve the Board of Commissioners Agenda of April 10, 2018, as presented. Consent Agenda Motion by Froemming, second by Lindquist and unanimously carried to approve Consent Agenda items as follows: 1. March 27, 2018 Board of Commissioners’ Meeting Minutes 2. Warrants/Bills for April 10, 2018 (Exhibit A) 3. Human Services Bills & Claims 4. On-Sale Seasonal Liquor License for Elks Point Bar and Grill, Inc. 5. Issue County Credit Card to Cristi Field & Mark Ellenson from the Highway Department 6. Approve Application for Exempt Permit for MN Finnish American Historical Society for Event on August 26, 2018 Sheriff’s Department Transport Costs Sheriff Schlueter and Detention Center Administrator Jim Stewart reported on transportation costs to pick up individuals on warrants, commitments, and to attend court hearings. In 2016, the Sheriff’s Department did 509 transports. In 2017, the transports increased to 757, which resulted in a $38,000 increase over the budgeted amount. Discussion followed regarding the reason for increased transports and how this could be mitigated in the future. The Sheriff indicated that, on a case by case basis, the Department may decide not to transport from other states for minor crimes where the individual does not appear for court. If they get picked up at a later time, a warrant will show up for that person. Attorney Michelle Eldien indicated that more hearings could be accomplished through ITV and offered to meet with stakeholders to further discuss challenges and solutions in using appropriate technology. Commissioners requested a report on transport costs and continued research in six months. Tobacco Ordinance Revisions Update Public Health Director Diane Thorson and staff from Partnership4Health updated the Board regarding potential revisions to the Otter Tail County Tobacco Ordinance. Staff from the Partnership4Health will be contacting cities within the County to facilitate coordination between city and county ordinances. Tobacco licensees also must be informed of proposed revisions prior to a required Public Hearing. Motion by Huebsch, second by Rogness and unanimously carried to authorize technical assistance for the Public Health Department and County Attorney from the Minnesota Public Health Law Center to develop a draft Tobacco Ordinance. Waiver Request The Underwood Lions Club submitted a request for a waiver of the number of events they can hold under their special event license category. The Public Health Director will meet with the Environmental Health Staff to determine options available to an organization that is doing more than 10 events annually. OTC Board of Commissioners’ Minutes April 10, 2018 Page 2 ACCEPTING DEDICATED DONATION TO SUPPORT VETERANS VAN FUND Otter Tail County Resolution No. 2018 - 30 WHEREAS, VFW Post 5252 Pelican Rapids has offered to donate funds in the amount of $500.00 to the County of Otter Tail on behalf of the Otter Tail County Veterans Service Office to assist in the Veterans Transportation program. WHEREAS, Minnesota Statute 465.03 requires a county to accept the gift by resolution expressed in terms prescribed by the donor in full; and, WHEREAS, the donation from VFW Post 5252 will be for the purpose of assisting in the cost of veterans’ van replacement. WHEREAS, acceptance of the funds in accordance with the donor’s terms is in the best interest of the County of Otter Tail. NOW, THEREFORE, BE IT RESOLVED that the Otter Tail County Board of Commissioners does accept the above-described funds from VFW Post 5252, Pelican Rapids and extends its grateful appreciation. The motion for the adoption of the foregoing resolution was introduced by Commissioner Froemming, duly seconded by Commissioner Lindquist and, after discussion thereof and upon vote being taken thereon, the following voted in favor: Commissioners Huebsch, Johnson, Lindquist, Froemming, and Rogness and the following voted against the same: None Adopted at Fergus Falls, Minnesota this 10th day of April 2018 OTTER TAIL COUNTY BOARD OF COMMISSIONERS Dated: By: Wayne Johnson, Board Chair Attest: John Dinsmore, Clerk ACCEPTING DEDICATED DONATION TO SUPPORT VETERANS VAN FUND Otter Tail County Resolution No. 2018 - 31 WHEREAS, American Legion Post 148, Dent has offered to donate funds in the amount of $200.00 to the County of Otter Tail on behalf of Otter Tail County Veterans Services to assist in the Veterans Transportation program. WHEREAS, Minnesota Statute 465.03 requires a county to accept the gift by resolution expressed in terms prescribed by the donor in full; and, WHEREAS, the donation from American Legion Post 148 will be for the purpose of assisting in the cost of veterans’ van replacement. OTC Board of Commissioners’ Minutes April 10, 2018 Page 3 WHEREAS, acceptance of the funds in accordance with the donor’s terms is in the best interest of the County of Otter Tail. NOW, THEREFORE, BE IT RESOLVED that the Otter Tail County Board of Commissioners does accept the above-described funds from American Legion Post 148, Dent, MN. and extends its grateful appreciation. The motion for the adoption of the foregoing resolution was introduced by Commissioner Froemming, duly seconded by Commissioner Lindquist and, after discussion thereof and upon vote being taken thereon, the following voted in favor: Commissioners Huebsch, Johnson, Lindquist, Froemming and Rogness and the following voted against the same: None Adopted at Fergus Falls, Minnesota this 10th day of April 2018 OTTER TAIL COUNTY BOARD OF COMMISSIONERS Dated: By: Wayne Johnson, Board Chair Attest: John Dinsmore, Clerk ACCEPTING DEDICATED DONATION TO SUPPORT VETERANS VAN PROGRAM Otter Tail County Resolution No. 2018 - 32 WHEREAS, VFW Post 612 Fergus Falls has offered to donate funds in the amount of $2000.00 to the County of Otter Tail on behalf of the Otter Tail County Veterans Services to assist in the Veterans Transportation program. WHEREAS, Minnesota Statute 465.03 requires a county to accept the gift by resolution expressed in terms prescribed by the donor in full; and, WHEREAS, the donation from VFW Post 612 will be for the purpose of assisting in the cost of veteran’s van replacement, WHEREAS, acceptance of the funds in accordance with the donor’s terms is in the best interest of the County of Otter Tail. NOW, THEREFORE, BE IT RESOLVED that the Otter Tail County Board of Commissioners does accept the above-described funds from VFW Post 612 Fergus Falls, and extends its grateful appreciation. The motion for the adoption of the foregoing resolution was introduced by Commissioner Froemming, duly seconded by Commissioner Lindquist and, after discussion thereof and upon vote being taken thereon, the following voted in favor: Commissioners Huebsch, Johnson, Lindquist, Froemming and Rogness and the following voted against the same: None OTC Board of Commissioners’ Minutes April 10, 2018 Page 4 Adopted at Fergus Falls, Minnesota, this 10th day of April 2018 OTTER TAIL COUNTY BOARD OF COMMISSIONERS Dated: By: Wayne Johnson, Board Chair Attest: John Dinsmore, Clerk Recess & Reconvene At 10:12 a.m., Chairman Johnson declared the meeting of the Otter Tail County Board of Commissioners recessed for a short break. The County Board meeting was reconvened at 10:17 a.m. County Ditch #16 Project SWCD Manager Brad Mergens briefed the Board on a fish spawning project by West Battle Lake in Ditch #16. A Community Partners Grant has been received from the Minnesota Department of Natural Resources (DNR) for this project which is a partnership with the County, West Battle Lake Association, and MnDOT. Joint County Ditch #2 Motion by Huebsch, second by Lindquist and unanimously carried to schedule a Public Information Meeting with property owners at 7:00 p.m. on Monday, June 4, 2018, at the Government Services Center in Fergus Falls, MN, to discuss Joint County Ditch #2 Public Meeting – Feedlot Expansion, Otter Wings, LLP At 10:36 a.m., Chairman Johnson convened a public meeting held for the Otter Wings, LLP feedlot expansion on behalf of the MN Pollution Control Agency (MPCA) under M.S. 116.07, Subd. 7(I). Otter Wings, LLP is proposing to construct two total confinement swine barns with below barn concrete liquid manure storage for 2490 head of swine over 300 pounds with total animal units at 996. The MPCA is responsible for issuing a permit for the proposed feedlot expansion. The County provides a local forum for the public to express their opinions regarding the proposed project. Jeff Bauman from Anez Consulting stated that neighbors within 5,000’ of the project had been notified by certified mail. The location of the feedlot is in the SE¼ and W½ of the NW¼, Section 12, Blowers Township, Otter Tail County. A Construction Short Form Permit Application was submitted. Mr. Bauman and the owners of the project showed where the buildings and the storm water retention ponds will be located. They explained that the project will be to provide small pigs raised in a high health atmosphere for producers. The operation is expected to employ eight employees and purchase local supplies and services with 75% of the feed being corn, supplied by local grain farmers. Commissioner Johnson opened the meeting to public comment summarized as follows: Property Owner Mark Fickes, County Hwy 75: • Expressed concern with odor Mr. Bauman indicated that there will be an odor with any feedlot but there is continual washing and cleaning going on with the operation and until you get quite close to the operation, you will not notice the odor. The owners of the project invited concerned neighbors to view a similar site where they can show what is done in a modern facility to mitigate odor. OTC Board of Commissioners’ Minutes April 10, 2018 Page 5 Property Owner Gene Schwartz, 440th St.: • Concerned with a swine operation next to a creek within 100 yards of the barns and the potential of leaching into the ground water. • Concerned with what could happen if the creek floods. Jeff Bauman responded that the under-barn pits are concrete, reinforced, designed by a professional engineer, and have perimeter tile going around the pits to monitor what is going on to identify a problem before it gets into the ground water or the creek. The elevation of the barns is quite high over the creek and there are retention ponds planned for heavy rains and snow melts. Property Owner Jon Broughton, 450th St.: • Asked if the only entrance into the facility is on the north Mr. Bauman indicated that there is an entrance to the facility from the west side on CR 75; however, the plan is to use the north entrance most of the time. Chairman Johnson closed the Public Meeting at 11:00 a.m. Minutes will be forwarded to the MN Pollution Control Agency in Detroit Lakes. MN Department of Natural Resources (DNR) Surplus Property Members of the Otter Tail Lake Property Owners Association (OTLPOA) requested support for the purchase of 58 acres of land between Blanche and Otter Tail lakes. A proposal regarding the purchase of this land from the DNR dated April 10, 2018, was submitted. The OTLPOA is requesting two years to raise the funds to purchase the property. Otter Tail County would submit a written offer to the DNR Commissioner no later than two weeks after receipt of notice setting forth in detail, its reasons for desiring to acquire the property and its intended use of the land. Upon full payment from the OTLPOA, Otter Tail County would transfer ownership to the OTLPOA. Motion by Rogness, second by Huebsch and unanimously carried to pursue a contract between the County and OTLPOA for acquisition of the 58-acre parcel including a hold harmless agreement for the County. If the OTLPOA is not able to raise the funds, the property will be scheduled for auction by the DNR. Court-Appointed Attorney Contract Motion by Lindquist, second by Huebsch and unanimously carried to authorize the appropriate County Officials’ signatures to execute a Contract for Legal Services between the County of Otter Tail and Attorneys Matthew Jorud and Brian Geis, as submitted. Highway Projects HSIP Projects: Motion by Rogness, second by Lindquist and unanimously carried to award the following Highway Safety Improvement Program (HSIP) projects, which are funded with 90% federal highway safety funds and 10% local match: Project Contractor (low bidder) Bid Award S.P. 056-070-023; MN HSIP 5618(170), Enhanced Edge Line Markings Traffic Marking Service, Inc. Maple Lake, MN $187,033.76 S.P. 056-070-024; MN HSIP 5618(171); Paved Shoulders & Rumble Strips Knife River Materials Bemidji, MN $358,549.96 OTC Board of Commissioners’ Minutes April 10, 2018 Page 6 Phelps Mill Fish Passage: Motion by Rogness, second by Froemming and unanimously carried to authorize the appropriate County Officials’ signatures to execute an Engineering Agreement between the County of Otter Tail and Houston Engineering for the final planning phase for the Phelps Mill Dam Modifications project. The agreement allows Houston Engineering to study the options. Expense for the planning phase is the responsibility of the USFWS and MN DNR. Otter Tail County is the agent on the project and responsible to approve the final plan for the project. Professional Services for Fir Ave. Intersections Study: Motion by Rogness, second by Huebsch and unanimously carried to authorize the appropriate County Officials’ signatures to execute an Agreement between the County of Otter Tail and SRF Consulting Group, Inc. for a feasibility study for Fir and Friberg Avenue Intersections contingent upon the approval of the City of Fergus Falls. Parks & Trails Letter of Support: Motion by Huebsch, second by Froemming and unanimously carried to authorize the Chairman’s signature on a Letter of Support for HF 1270/SF 689, which seeks to add five million dollars in bonding for Local Trails Connection Program and the Outdoor Recreation Grant Program. Little McDonald, Paul, Kerbs and Devils’ Lakes Outlet Project Motion by Huebsch, second by Froemming and unanimously carried to approve payment, in the amount of $372.00 to RD Offutt Companies for additional permanent right-of-way easement for the Lake Improvement District Drainage project. Motion by Froemming, second by Lindquist and unanimously carried to approve payment, in the amount of $4,921.34 to Lake Region Electric Cooperative for providing an electrical service point to the Devils and Little Devils (DLD) lakes pump station. Fund Transfer Motion by Froemming, second by Lindquist and unanimously carried to approve a transfer from the Capital Improvement Fund to the Road and Bridge Fund for the following: Two-2018 Diamond All American Shoulder Disc CIC201816 $12,576.00 One-2018 12 Tire Pull Type Roller CIC201815 $18,968.00 Board of Adjustment Motion by Froemming, second by Lindquist and unanimously carried to appoint Kenneth Vorerbugen, Henning, MN, to serve on the Board of Adjustment replacing the term of Paul Larson. Application for Exempt Permit Motion by Lindquist, second by Froemming and unanimously carried to approve the LG220 Application for Exempt Permit as submitted by the Pheasants Forever Otter Tail County Chapter 10 for an event scheduled Tuesday, May 29, 2018, at Dalton Outdoors located at 14732 Gun Club Road, Dalton, MN. Election Equipment Motion by Lindquist, second by Froemming and unanimously carried to authorize Wayne Stein, Auditor-Treasurer, to sign the Master Software License and Services Agreement and the Nondisclosure and Confidentiality Agreement with KNOWiNK for the acquisition of 69 Poll Pad Units at a cost of $109,335.50 as stated in the proposal, subject to the approval of the County Attorney. OTC Board of Commissioners’ Minutes April 10, 2018 Page 7 Cost Allocation Plan Motion by Froemming, second by Lindquist and unanimously carried to authorize the Auditor-Treasurer to sign the letter of engagement with Government Management Group for the preparation of Otter Tail County’s Central Services Cost Allocation Plans for fiscal years ending December 31, 2018, 2019, 2020, 2021 and 2022 in conformance with Title 2 CRF Part 200 requirements, at an annual fixed fee of $6,500. Recess & Reconvene At 11:45 a.m., Chairman Johnson declared the meeting of the Otter Tail County Board of Commissioners recessed for a short break. The County Board meeting was reconvened at 11:50 a.m. Purchase of Service Agreement Motion by Lindquist, second by Rogness and unanimously carried to authorize the appropriate County Officials’ signatures to execute an Agreement between the County of Otter Tail and Solutions Agency for an Adolescent Cognitive Skills Program for the period of April 1, 2018 through January 10, 2019. This is a twelve-week course with total cost for 2018 not to exceed $19,725.00. Groundbreaking Ceremony Motion by Huebsch, second by Froemming and unanimously carried to authorize Commissioners’ attendance at the Battle Lake Area Child Care Center Groudbreaking Ceremony at 1:30 p.m. on Saturday, April 21, 2018. Recess & Reconvene At 12:00 p.m., Chairman Johnson declared the meeting of the Otter Tail County Board of Commissioners recessed for a “Years of Service” recognition luncheon for County employees. Broadband Discussion At 1:30 p.m., the Board of Commissioners met with CCG Consulting, Finley Engineering and local vendors to discuss a Broadband Feasibility Study. CCG President Doug Dawson and Finley Project Engineer Chris Konechne reported that, within the next 4 – 5 years, the local vendors will have provided about 75% of Otter Tail County land mass with fiber to the curb. Discussion took place regarding why broadband is important, varying data speeds that are expected by consumers, grants to help with the remaining 25% of the land mass that will still need service, and cost for the remaining areas. Estimated cost for the remaining areas without fiber is 44.46 million dollars. At this point, it is not economically feasible to provide fiber to all parts of the County. Next steps include 1) talking to prospective partners; 2) educating the public; 3) assist partners with 2018 grant filings; 4) recognize that this is a long-term project; and 5) consider contributing by way of a County grant/loan. Adjournment At 3:00 p.m., Chair Johnson declared the meeting of the Otter Tail County Board of Commissioners adjourned until 9:30 a.m. on Tuesday, April 24, 2018. OTTER TAIL COUNTY BOARD OF COMMISSIONERS Dated: By: Attest: Wayne Johnson, Chair John Dinsmore, Clerk CB/kd OTC Board of Commissioners’ Minutes April 10, 2018 Exhibit A, Page 1 WARRANTS APPROVED ON 4/10/2018 OTC Board of Commissioners’ Minutes April 10, 2018 Exhibit A, Page 2 OTC Board of Commissioners’ Minutes April 10, 2018 Exhibit A, Page 3 OTC Board of Commissioners’ Minutes April 10, 2018 Exhibit A, Page 4 OTC Board of Commissioners’ Minutes April 10, 2018 Exhibit A, Page 5 csteinba COMMISSIONER'S VOUCHERS ENTRIES Paid on Behalf Of Name Explode Dist. Formulas?: 4/19/18 Otter Tail County Auditor Audit List for Board Page 1 Print List in Order By: Save Report Options?: Type of Audit List: on Audit List?: N Y D 4 N D - Detailed Audit List S - Condensed Audit List 1 - Fund (Page Break by Fund) 2 - Department (Totals by Dept) 3 - Vendor Number 4 - Vendor Name 1:42PM csteinba COMMISSIONER'S VOUCHERS ENTRIESSolid Waste Fund Account/Formula - 147W-9YWN-736P Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 262.77 4,301.22 599.73 2,552.36 8,184.17 388.97 96.67 46.50 46.14 27.32 46.14 1,830.43 1,822.79 648.00 599.73 1,098.89 199.75 49.96 99.90 261.00 1,242.36 8,184.17 340.00 48.97 Page 2Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 14522 A-OX WELDING SUPPLY CO INC. 50-399-000-0000-6565 ACCT 22038 PROPANE 00197262 Fuels 50-399-000-0000-6565 ACCT 22038 PROPANE 01017451 Fuels 50-399-000-0000-6565 ACCT 22038 PROPANE 01017507 Fuels 50-399-000-0000-6565 ACCT 22038 PROPANE 01018261 Fuels 50-399-000-0000-6565 ACCT 22038 PROPANE 01018586 Fuels 5 Transactions14522 14813 ALBANY RECYCLING CENTER 50-000-000-0130-6859 MISC RECYCLING 13030 Electronic Disposal 50-000-000-0120-6859 MISC RECYCLING 13031 Electronic Disposal 50-000-000-0130-6859 MISC RECYCLING 13032 Electronic Disposal 3 Transactions14813 7588 ALEX RUBBISH & RECYCLING 50-000-000-0140-6291 ACCT 1478400 2087820 Contract Transportation 1 Transactions7588 14386 AMAZON CAPITAL SERVICES, INC 01-061-000-0000-6680 A2RJVV5AA0WI1P SRT 3000VA 120V 1TP1-MVJL-J4FP Computer Hardware 01-061-000-0000-6680 A2RJVV5AA0WI1P ELITEBOOK ADAPT 1YJP-R4G3-1V19 Computer Hardware 01-061-000-0000-6680 A2RJVV5AA0WI1P DVD DRIVE 1YJP-R4G3-K9D9 Computer Hardware 01-061-000-0000-6406 A2RJVV5AA0WI1P HDMI ADAPTERS 1YXL-7Q3H-J67Q Office Supplies 02-612-000-0000-6369 AXRJVV5AA0WI1P TABLET CASES Miscellaneous Charges 02-612-000-0000-6369 A2RJVV5AA0WI1P ASUS TABLETS 1YXL-7Q3H-D177 Miscellaneous Charges 6 Transactions14386 12018 AMERICAN SOLUTIONS FOR BUSINESS 01-043-000-0000-6406 ACCT 98746 TAX STMT SUPPLIES 03425988 Office Supplies 1 Transactions12018 765 AMERICAN WELDING & GAS INC 10-304-000-0000-6306 SUPPLIES Repair/Maint. Equip 10-304-000-0000-6572 SUPPLIES Repair And Maintenance Supplies 2 Transactions765 9741 AMERICINN OF MOUNDSVIEW Otter Tail County Auditor A-OX WELDING SUPPLY CO INC. ALBANY RECYCLING CENTER ALEX RUBBISH & RECYCLING AMAZON CAPITAL SERVICES, INC AMERICAN SOLUTIONS FOR BUSINESS AMERICAN WELDING & GAS INC csteinba COMMISSIONER'S VOUCHERS ENTRIESRoad And Bridge Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 261.60 907.08 3,915.00 175.85 460.76 283.53 60.00 1,126.00 261.60 857.12 10.48 9.38 30.10 3,915.00 175.85 460.76 150.00 133.53 60.00 1,126.00 39.94 Page 3Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 10-303-000-0000-6331 LODGING Meals And Lodging 1 Transactions9741 13620 AMERIPRIDE SERVICES INC 10-304-000-0000-6526 CLOTHES Uniforms 50-000-000-0000-6290 ACCT 160002035 1601609171 Contracted Services 50-390-000-0000-6290 ACCT 160002035 1601609171 Contracted Services. 50-399-000-0000-6290 ACCT 160002035 1601609171 Contracted Services. 4 Transactions13620 3497 ARNDT/SCOTT 50-000-000-0110-6290 SNOW PLOWING & SALTING 20101053 Contracted Services. 1 Transactions3497 11472 AUTO FIX 10-304-000-0000-6306 SERVICE Repair/Maint. Equip 1 Transactions11472 1711 BACHMAN PRINTING 01-091-000-0000-6369 56-CR-17-2182 PREPARE FILE 70321 Miscellaneous Charges 1 Transactions1711 12931 BAILEY/LOREN K 01-124-000-0000-6140 PER DIEM 4/24/18 Per Diem 01-124-000-0000-6330 MILEAGE 4/24/18 Mileage 2 Transactions12931 11932 BARNESVILLE RECORD REVIEW 01-002-000-0000-6240 APPOINTMENT TO BRRWD BOARD 3/19/18 Publishing & Advertising 1 Transactions11932 5765 BARR ENGINEERING CO 10-303-000-0000-6278 SERVICE Engineering & Hydrological Testing 1 Transactions5765 12185 BARRY/ADAM 01-201-000-0000-6526 WORK PANTS 2/1/18 Uniforms Otter Tail County Auditor AMERICINN OF MOUNDSVIEW AMERIPRIDE SERVICES INC ARNDT/SCOTT AUTO FIX BACHMAN PRINTING BAILEY/LOREN K BARNESVILLE RECORD REVIEW BARR ENGINEERING CO csteinba COMMISSIONER'S VOUCHERS ENTRIESGeneral Revenue Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 39.94 260.57 253.34 1,450.80 184.77 634.42 3,681.56 9,836.65 260.57 200.00 25.00 28.34 1,450.80 184.77 225.00 135.16 150.00 124.26 3,681.56 9,836.65 40.25 Page 4Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 1 Transactions12185 14163 BATTERY JUNCTION 01-201-000-0000-6406 ACCT 551334 BATTERIES 1202888 Office Supplies 1 Transactions14163 11455 BERGQUIST/RICHARD 22-622-000-0000-6369 PER DIEM 4/5/18 Miscellaneous Charges 22-622-000-0000-6369 REGISTRATION 4/5/18 Miscellaneous Charges 22-622-000-0000-6369 MILEAGE 4/5/18 Miscellaneous Charges 3 Transactions11455 31803 BEYER BODY SHOP INC 01-149-000-0000-6354 UNIT 1109 SHERIFF - REPAIR 49F4D1FC Insurance Claims 1 Transactions31803 13535 BHH PARTNERS 14-091-000-0000-6687 PROJECT 41748.0 ATTORNEY 4/10/18 Equipment- Current Year 1 Transactions13535 11652 BOYER/RODNEY 01-123-000-0000-6140 PER DIEM 4/12/18 Per Diem 01-123-000-0000-6330 MILEAGE 4/12/18 Mileage 01-124-000-0000-6140 PER DIEM 4/24/18 Per Diem 01-124-000-0000-6330 MILEAGE 4/24/18 Mileage 4 Transactions11652 24 BRANDON COMMUNICATIONS INC 10-304-000-0000-6315 RADIO & INSTALLATION, UNIT #22 Radio Repair Charges 1 Transactions24 386 BRAUN INTERTEC CORPORATION 10-303-000-0000-6278 SERVICE Engineering & Hydrological Testing 1 Transactions386 3957 BRAUN VENDING INC 10-304-000-0000-6252 DRINKING WATER Water And Sewage Otter Tail County Auditor BARRY/ADAM BATTERY JUNCTION BERGQUIST/RICHARD BEYER BODY SHOP INC BHH PARTNERS BOYER/RODNEY BRANDON COMMUNICATIONS INC BRAUN INTERTEC CORPORATION csteinba COMMISSIONER'S VOUCHERS ENTRIESRoad And Bridge Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 40.25 256.54 10.99 2,785.00 1,963.28 13,319.38 1,136.95 200.00 50.00 6.54 10.99 2,785.00 303.37 786.83 378.86 391.23 102.99 13,319.38 450.00 343.35 343.60 50,667.00 Page 5Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 1 Transactions3957 11453 BRENNAN/KEVIN 22-622-000-0000-6369 PER DIEM 4/5/18 Miscellaneous Charges 22-622-000-0000-6369 DUES & REGISTRATION 4/5/18 Miscellaneous Charges 22-622-000-0000-6369 MILEAGE 4/5/18 Miscellaneous Charges 3 Transactions11453 5908 BROWNELLS INC 01-201-000-0000-6526 ACCT 00903262 PART FOR GUN 15571297.00 Uniforms EIFERT/ZACH11450 1 Transactions5908 1425 BUREAU OF CRIM APPREHENSION 02-225-000-0000-6369 MN0560000 CARRY PERMITS 56-000056 Miscellaneous Charges 1 Transactions1425 3423 BUY-MOR PARTS & SERVICE LLC 50-000-000-0170-6304 ACCT 100331 SERVICE/DOT 048912 Repair And Maintenance 50-399-000-0000-6304 ACCT 100331 TRANNY HARNESS 048869 Repair And Maint-Vehicles 50-399-000-0000-6304 ACCT 100331 AIR FILTER/MAINT 049037 Repair And Maint-Vehicles 50-399-000-0000-6304 ACCT 100331 DUST SHIELD/MAINT 049044 Repair And Maint-Vehicles 50-399-000-0000-6304 ACCT 100331 REPAIR SPRING 049071 Repair And Maint-Vehicles 5 Transactions3423 8027 CARGILL INCORPORATED 10-302-000-0000-6514 SALT Salt 1 Transactions8027 13734 CARLBLOM/DENNIS E 02-612-000-0000-6140 PER DIEM 4/24/18 Per Diem 02-612-000-0000-6330 MILEAGE 4/24/18 Mileage 02-612-000-0000-6331 MEALS & LODGING - AIS SUMMIT 4/24/18 Meals And Lodging 3 Transactions13734 1227 CARR'S TREE SERVICE 10-302-000-0000-6350 SERVICE Maintenance Contractor Otter Tail County Auditor BRAUN VENDING INC BRENNAN/KEVIN BROWNELLS INC BUREAU OF CRIM APPREHENSION BUY-MOR PARTS & SERVICE LLC CARGILL INCORPORATED CARLBLOM/DENNIS E csteinba COMMISSIONER'S VOUCHERS ENTRIESRoad And Bridge Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 50,667.00 573.68 467.88 769.83 74.00 132.63 282.62 88.66 404.29 80.73 467.88 533.43 154.42 81.98 74.00 119.64 12.99 38.41 51.46 141.26 23.87 23.87 3.75 Page 6Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 1 Transactions1227 8930 CERTIFIED AUTO REPAIR 01-201-000-0000-6304 UNIT 1606 WIPER BLADES/OIL CHG 37478 Repair And Maintenance 01-201-000-0000-6304 UNIT 1606 BRAKE REPAIRS 37638 Repair And Maintenance 10-304-000-0000-6306 SERVICE Repair/Maint. Equip 3 Transactions8930 1756 CHEMSEARCH 10-304-000-0000-6572 SUPPLIES Repair And Maintenance Supplies 1 Transactions1756 13143 CI SPORT 01-201-000-0000-6526 ACCT 19736 UNIFORM ITEMS 656228 Uniforms 01-250-000-0000-6526 ACCT 19736 JACKET/SHIRT 656979 Uniforms 01-250-000-0000-6526 ACCT 19736 JACKET 657044 Uniforms 3 Transactions13143 5580 CITIZENS ADVOCATE 01-705-000-0000-6242 2 SUBSCRIPTIONS 15978 Registration Fees 1 Transactions5580 32547 CO OP SERVICES INC 10-304-000-0000-6406 SUPPLIES Office Supplies 10-304-000-0000-6572 SUPPLIES Repair And Maintenance Supplies 2 Transactions32547 32603 COOPERS TECHNOLOGY GROUP 01-031-000-0000-6406 ACCT 2189988076 ENVELOPES 426801 Office Supplies 01-041-000-0000-6406 ACCT 2189988030 SUPPLIES 426937 Office Supplies 01-122-000-0000-6406 ACCT 2189988095 MAT 426531 Office Supplies 01-127-000-0000-6406 ACCT 2189988310 FOOTREST 426532 Office Supplies 01-127-000-0000-6406 ACCT 2189988310 FOOTREST 426576 Office Supplies 10-301-000-0000-6406 SUPPLIES Office Supplies 6 Transactions32603 5407 CULLIGAN Otter Tail County Auditor CARR'S TREE SERVICE CERTIFIED AUTO REPAIR CHEMSEARCH CI SPORT CITIZENS ADVOCATE CO OP SERVICES INC COOPERS TECHNOLOGY GROUP csteinba COMMISSIONER'S VOUCHERS ENTRIESSolid Waste Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 32.75 26.25 1,743.75 275.00 1,220.95 1,250.36 38.22 32.75 26.25 1,743.75 275.00 244.19 244.19 732.57 604.00 345.48 58.90 39.95 46.33 112.00 43.70 38.22 70.00 Page 7Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 50-000-000-0170-6290 ACCT 28118 APR2018 Contracted Services. 1 Transactions5407 2364 CULLIGAN OF WADENA 10-304-000-0000-6252 DRINKING WATER Water And Sewage 1 Transactions2364 15018 CYBERSPROUT LLC 02-705-000-1011-6290 WEBSITE SETUP 900 Branding/Website 1 Transactions15018 9018 D & T VENTURES LLC 01-061-000-0000-6202 ESS PAYROLL SUPPORT 298434 County Website 1 Transactions9018 35011 DAILY JOURNAL/THE 01-031-000-0000-6240 ACCT 5296 ADMIN SPECIALIST 456129 Publishing & Advertising 01-122-000-0000-6240 ACCT 5296 L&R DIRECTOR 448324 Publishing & Advertising 10-301-000-0000-6240 NOTICE Publishing & Advertising 3 Transactions35011 1496 DAN'S TOWING & REPAIR 01-201-000-0000-6304 UNIT 1103 TIRES 42633 Repair And Maintenance 01-201-000-0000-6304 UNIT 1403 BRAKE REPAIRS 42677 Repair And Maintenance 01-201-000-0000-6304 INSTALL BATTERY CHARGER 42688 Repair And Maintenance 01-201-000-0000-6304 UNIT 1707 OIL CHANGE 42753 Repair And Maintenance 01-201-000-0000-6304 UNIT 1602 OIL CHANGE 42828 Repair And Maintenance 01-201-000-0000-6304 2 TRAILER TIRES FOR UTV 42863 Repair And Maintenance 10-304-000-0000-6306 SERVICE Repair/Maint. Equip 7 Transactions1496 10250 DIGI-KEY ELECTRONICS 2985686 01-112-000-0000-6572 ACCT 2985686 PARTS 62280426 Repair And Maintenance Supplies 1 Transactions10250 9241 DIGITAL ALLY INC 01-201-000-0000-6304 ACCT OTTMN0 BATTERIES 1099879 Repair And Maintenance Otter Tail County Auditor CULLIGAN CULLIGAN OF WADENA CYBERSPROUT LLC D & T VENTURES LLC DAILY JOURNAL/THE DAN'S TOWING & REPAIR DIGI-KEY ELECTRONICS 2985686 csteinba COMMISSIONER'S VOUCHERS ENTRIESGeneral Revenue Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 70.00 5.84 450.00 6,064.98 69.86 1,434.71 653.44 13.77 47.96 5.84 450.00 6,064.98 69.86 1,434.71 653.44 13.77 47.96 3,240.00 Page 8Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 1 Transactions9241 12429 DOUGLAS CO JAIL 01-250-000-0000-6432 MEDS P SOUKHANOUVONG MAR2018 Medical Incarcerated 1 Transactions12429 941 EGGE CONSTRUCTION INC 50-000-000-0150-6290 SNOW PLOWING @ PR TSF 26201 Contracted Services. 1 Transactions941 6309 ENVIROTECH SERVICES INC 10-302-000-0000-6516 MELT DOWN APEX Magnesium Chloride 1 Transactions6309 364 EVERTS LUMBER CO 10-304-000-0000-6572 SUPPLIES Repair And Maintenance Supplies 1 Transactions364 35594 FARMERS CO OP OIL ASSN 10-304-000-0000-6251 PROPANE Gas And Oil - Utility 1 Transactions35594 373 FARNAM'S GENUINE PARTS INC 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 1 Transactions373 2997 FASTENAL COMPANY 50-399-000-0000-6306 ACCT MNFER0291 SUPPLIES 104617 Repair/Maint. Equip 1 Transactions2997 11382 FELLBAUM/KEVIN 10-303-000-0000-6330 MILEAGE Mileage 1 Transactions11382 57 FERGUS FALLS/CITY OF 50-000-000-0130-6863 ACCT 18240 MAR LEACHATE 33763 Leachate Disposal Otter Tail County Auditor DIGITAL ALLY INC DOUGLAS CO JAIL EGGE CONSTRUCTION INC ENVIROTECH SERVICES INC EVERTS LUMBER CO FARMERS CO OP OIL ASSN FARNAM'S GENUINE PARTS INC FASTENAL COMPANY FELLBAUM/KEVIN csteinba COMMISSIONER'S VOUCHERS ENTRIESSolid Waste Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 3,240.00 8,785.00 301.55 11,420.88 8.69 1,170.00 166.70 276.99 2,200.00 330.00 615.00 5,640.00 143.96 157.59 3,080.88 8,340.00 8.69 1,170.00 125.00 41.70 150.00 126.99 Page 9Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 1 Transactions57 2153 FERGUS POWER PUMP INC 10-302-000-0000-6350 SERVICE Maintenance Contractor 10-304-000-0000-6300 SERVICE Building And Grounds Maintenance 50-000-000-0170-6863 LEACHATE HAULING MAR 2018 38980 Leachate Disposal 50-000-000-0130-6863 LEACHATE HAULING MAR 2018 39016 Leachate Disposal 4 Transactions2153 35018 FERGUS TIRE CENTER 01-044-000-0000-6304 CHANGE BATTERY 342923 Repair And Maintenance 01-044-000-0000-6304 RF OUTER TIE ROD REPAIR 343049 Repair And Maintenance 2 Transactions35018 13636 FIDLAR TECHNOLOGIES, INC 02-103-000-0000-6369 LAREDO USAGE MAR 2018 0220427-IN Miscellaneous Charges 02-103-000-0000-6369 AVID LIFE CYCLE SERVICE QTR 1 0701090-IN Miscellaneous Charges 2 Transactions13636 14379 FIELD/CRISTI 10-302-000-0000-6331 MEALS Meals And Lodging 1 Transactions14379 383 FIRST LUTHERAN CHURCH 01-112-101-0000-6349 PARKING LOT RENTAL QTR 2 46 Miscellaneous Rentals 1 Transactions383 14517 FORUM COMMUNICATIONS COMPANY 01-044-000-0000-6240 ACCT 45604 TAX VALUATION 1970976 Publishing & Advertising 01-124-000-0000-6240 ACCT 352588 PC MTG 4/11/18 1963508 Publishing & Advertising 2 Transactions14517 13304 FRAZIER/BRENT 01-124-000-0000-6140 PER DIEM 4/24/18 Per Diem 01-124-000-0000-6330 MILEAGE 4/24/18 Mileage 2 Transactions13304 Otter Tail County Auditor FERGUS FALLS/CITY OF FERGUS POWER PUMP INC FERGUS TIRE CENTER FIDLAR TECHNOLOGIES, INC FIELD/CRISTI FIRST LUTHERAN CHURCH FORUM COMMUNICATIONS COMPANY FRAZIER/BRENT csteinba COMMISSIONER'S VOUCHERS ENTRIESGeneral Revenue Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 24.35 258.46 304.00 328.10 6,300.00 721.74 74.59 24.35 150.00 108.46 304.00 116.00 120.75 81.90 9.45 6,300.00 56.72 665.02 63.00 11.59 19.48 36.14 Page 10Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 8420 FRESONKE/SHARI 01-121-000-0000-6331 MEALS - CVSO CONFERENCE MAR2018 Meals And Lodging 1 Transactions8420 12835 GABE/RICHARD B 01-124-000-0000-6140 PER DIEM 4/24/18 Per Diem 01-124-000-0000-6330 MILEAGE 4/24/18 Mileage 2 Transactions12835 9647 GOBBLE UP BARBEQUED TURKEYS 01-121-000-0000-6239 8 LARGE TURKEYS 4/2/18 MDVA Grant 1 Transactions9647 5066 GODFATHERS EXTERMINATING INC 50-000-000-0170-6290 ACCT 12465 RAT CONTROL 130117 Contracted Services. 50-399-000-0000-6290 ACCT 7152 RAT CONTROL 130026 Contracted Services. 50-399-000-0000-6290 ACCT 7152 SPIDER CONTROL 130027 Contracted Services. 50-399-000-0000-6290 ACCT 7152 ODOR UNIT 130380 Contracted Services. 4 Transactions5066 6583 GOVERNMENT MANAGEMENT GROUP INC 01-149-000-0000-6807 2017 COST ALLOCATION PREP 1745 Cost Allocation Plan 1 Transactions6583 52564 GRAINGER INC 01-112-109-0000-6572 ACCT 813640729 ANGLES 9746996033 Repair And Maintenance Supplies 01-112-109-0000-6572 ACCT 813640729 SUPPLIES 9747741941 Repair And Maintenance Supplies 2 Transactions52564 983 HENNING AUTO PARTS INC 10-304-000-0000-6565 ANTI-FREEZE Fuels - Diesel 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 2 Transactions983 985 HENNING HARDWARE 10-304-000-0000-6406 SUPPLIES Office Supplies 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies Otter Tail County Auditor FRESONKE/SHARI GABE/RICHARD B GOBBLE UP BARBEQUED TURKEYS GODFATHERS EXTERMINATING INC GOVERNMENT MANAGEMENT GROUP INC GRAINGER INC HENNING AUTO PARTS INC csteinba COMMISSIONER'S VOUCHERS ENTRIESRoad And Bridge Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 55.62 404.85 126.99 2,100.88 28,501.25 141.85 4,577.50 115.80 200.00 179.85 25.00 126.99 2,100.88 28,501.25 36.04 13.26 15.75 76.80 4,577.50 115.80 200.00 Page 11Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 2 Transactions985 448 HOLM/SHELDON 22-622-000-0000-6369 PER DIEM 4/5/18 Miscellaneous Charges 22-622-000-0000-6369 MILEAGE 4/5/18 Miscellaneous Charges 22-622-000-0000-6369 REGISTRATION 4/5/18 Miscellaneous Charges 3 Transactions448 37198 HOLO/SANDY 01-091-000-0000-6271 MILEAGE - DRIVEBYS MAR2018 Fraud Investigator Expenses 1 Transactions37198 453 HONEYWELL INTERNATIONAL INC 01-112-101-0000-6342 ACCT 535849 CONTROLS 5243881944 Service Agreements 1 Transactions453 5835 HOUSTON ENGINEERING INC 10-303-000-0000-6278 SERVICE Engineering & Hydrological Testing 1 Transactions5835 38100 INNOVATIVE OFFICE SOLUTIONS 01-041-000-0000-6406 ACCT C103279 SUPPLIES 2006581 Office Supplies 01-042-000-0000-6406 ACCT C103279 SUPPLIES 2006581 Office Supplies 01-043-000-0000-6406 ACCT C103279 SUPPLIES 2006581 Office Supplies 01-063-000-0000-6406 ACCT C103279 SUPPLIES 2006581 Office Supplies 4 Transactions38100 10049 INTERSTATE ENGINEERING INC 10-303-000-0000-6278 SERVICE Engineering & Hydrological Testing 1 Transactions10049 10959 JOBSHQ 10-301-000-0000-6240 NOTICE Publishing & Advertising 1 Transactions10959 11456 JOHNSON/MICHAEL 22-622-000-0000-6369 PER DIEM 4/5/18 Miscellaneous Charges Otter Tail County Auditor HENNING HARDWARE HOLM/SHELDON HOLO/SANDY HONEYWELL INTERNATIONAL INC HOUSTON ENGINEERING INC INNOVATIVE OFFICE SOLUTIONS INTERSTATE ENGINEERING INC JOBSHQ csteinba COMMISSIONER'S VOUCHERS ENTRIESCounty Ditch Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 254.43 1,209.10 1,192.95 424.64 6,900.00 25.00 29.43 111.99 155.99 135.96 149.93 247.32 33.98 69.99 127.95 175.99 672.39 520.56 424.64 5,800.00 1,100.00 Page 12Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 22-622-000-0000-6369 REGISTRATION 4/5/18 Miscellaneous Charges 22-622-000-0000-6369 MILEAGE 4/5/18 Miscellaneous Charges 3 Transactions11456 3191 KEEPRS INC 01-201-000-0000-6526 OTTERTAISD HOLSTER W/LIGHT 371013-02 Uniforms FELT/STEVE5491 01-201-000-0000-6526 OTTERTAISD MODULAR WEBBING 371227 Uniforms ROGAL/KEITH12964 01-201-000-0000-6526 OTTERTAISD SUPERSHIRT 374425-01 Uniforms WUNDERLICH/MICHAEL5283 01-201-000-0000-6526 OTTERTAISD MOCK SHIRTS 375657 Uniforms BEERY/CHARLES14975 01-201-000-0000-6526 OTTERTAISD UNIFORM ITEMS 375661 Uniforms BEERY/CHARLES14975 01-250-000-0000-6526 OTTERJAIL BW GLOVE POUCH 374704 Uniforms 01-250-000-0000-6526 OTTERJAIL DUTY BELT 374704-01 Uniforms 01-250-000-0000-6526 OTTERJAIL SUPERSHIRT 375399 Uniforms ANDERSON/GREG11977 01-250-000-0000-6526 OTTERJAIL BOOTS 376822 Uniforms WENZEL/DARIEN7576 9 Transactions3191 40336 KELLY SERVICES INC 50-399-000-0000-6290 ACCT 681063-04 BECK W/E 4/1 13074390 Contracted Services. 50-399-000-0000-6290 ACCT 681063-04 BECK W/E 4/8 14081020 Contracted Services. 2 Transactions40336 1002 KIMBALL MIDWEST 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 1 Transactions1002 79 LAKE REGION HEALTHCARE 01-205-000-0000-6273 CORONER SERVICES MAR 2018 49 Coroner Expense 01-205-000-0000-6273 AUTOPSY ASSIST/SECRETARY MAR 53 Coroner Expense 2 Transactions79 10350 LAKES AREA COOPERATIVE Otter Tail County Auditor JOHNSON/MICHAEL KEEPRS INC KELLY SERVICES INC KIMBALL MIDWEST LAKE REGION HEALTHCARE csteinba COMMISSIONER'S VOUCHERS ENTRIESRoad And Bridge Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 507.88 7,428.00 267.43 500.00 599.57 466.78 2,142.00 430.86 492.90 7.99 6.99 7,428.00 267.43 500.00 599.57 300.00 166.78 2,142.00 406.92 20.00 3.94 Page 13Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 10-304-000-0000-6251 PROPANE Gas And Oil - Utility 10-304-000-0000-6406 SUPPLIES Office Supplies 10-304-000-0000-6572 SUPPLIES Repair And Maintenance Supplies 3 Transactions10350 41450 LAKES COUNTRY SERVICE CO OP 01-031-000-0000-6276 HEALTH & SAFETY CONTRACT 2018 86150 Professional Services 1 Transactions41450 14614 LANDS' END BUSINESS OUTFITTERS 01-201-000-0000-6526 ACCT 3233808 UNIFORM ITEMS SIN5974391 Uniforms 1 Transactions14614 81 LARRY OTT INC TRUCK SERVICE 50-399-000-0000-6291 CARDBOARD 4/5/18 72215 Contract Transportation 1 Transactions81 1020 LAWSON PRODUCTS INC 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 1 Transactions1020 11658 LEE/THOMAS 01-123-000-0000-6140 PER DIEM 4/12/18 Per Diem 01-123-000-0000-6330 MILEAGE 4/12/18 Mileage 2 Transactions11658 198 LEIGHTON BROADCASTING/FF 01-121-000-0000-6239 STAND DOWN FOR VETERANS ADS APR2018 MDVA Grant 1 Transactions198 3063 LIBERTY BUSINESS SYSTEMS FARGO 01-031-000-0000-6342 ACCT OT22 CN 150012-01 326717 Service Agreements 10-304-000-0000-6342 SERVICE AGREEMENT Service Agreements 13-012-000-0000-6290 ACCT OT27 CN 9605-01 325960 Contracted Services. 3 Transactions3063 41638 LOCATORS & SUPPLIES INC Otter Tail County Auditor LAKES AREA COOPERATIVE LAKES COUNTRY SERVICE CO OP LANDS' END BUSINESS OUTFITTERS LARRY OTT INC TRUCK SERVICE LAWSON PRODUCTS INC LEE/THOMAS LEIGHTON BROADCASTING/FF LIBERTY BUSINESS SYSTEMS FARGO csteinba COMMISSIONER'S VOUCHERS ENTRIESGeneral Revenue Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 774.53 3,049.00 1,240.68 141.91 88.86 269.95 1,161.58 264.65 71.88 288.00 150.00 3,049.00 272.94 689.12 278.62 141.91 71.89 11.19 5.78 269.95 1,161.58 7.40 Page 14Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 01-122-000-0000-6406 ACCT 23-52A26 GRADE RODS 0264637-IN Office Supplies 50-399-000-0000-6453 ACCT 23-52A28 KNIT GLOVES 0264756-IN Ppe & Safety Equip.&Supplies 50-399-000-0000-6453 ACCT 23-52A28 KNIT GLOVES 0264757-IN Ppe & Safety Equip.&Supplies 50-399-000-0000-6426 ACCT 23-52A28 SAFETY TOE BOOTS 0264759-IN Clothing Allowance 4 Transactions41638 13879 MAGNET FORENSICS USA INC 01-201-000-0000-6348 CUS1931 MAGNET IEF UPGRADE 021954 Software Maintenance Contract 1 Transactions13879 36132 MARCO INC ST LOUIS 01-122-000-0000-6342 ACCT 35700038 CN 500-0450685 355076415 Service Agreements 01-201-000-0000-6340 ACCT 35700038 CN 500-0397774 355076480 Office Equipment Rental & Maint. 01-250-000-0000-6342 ACCT 35700038 CN 500-0461307 354467839 Service Agreements 3 Transactions36132 2721 MARCO TECHNOLOGIES LLC 01-091-000-0000-6342 ACCT OT00-025 CN 123160-03 5105726 Service Agreements 1 Transactions2721 9930 MARKS FLEET SUPPLY INC 10-304-000-0000-6572 SUPPLIES Repair And Maintenance Supplies 10-304-000-0000-6572 SUPPLIES & PARTS Repair And Maintenance Supplies 50-000-000-0130-6306 ACCT 984898 COUPLING 068786/1 Repair/Maint. Equip 3 Transactions9930 12534 MATCO TOOLS 10-304-000-0000-6572 SUPPLIES Repair And Maintenance Supplies 1 Transactions12534 88 MATTHEW BENDER & COMPANY INC 13-012-000-0000-6455 ACCT 0396506001 01466674 Reference Books & Literature 1 Transactions88 14277 McCONN/CHRISTOPHER 50-000-000-0000-6331 MEAL - MEETING W/ TODD CO.4/11/18 Meals And Lodging Otter Tail County Auditor LOCATORS & SUPPLIES INC MAGNET FORENSICS USA INC MARCO INC ST LOUIS MARCO TECHNOLOGIES LLC MARKS FLEET SUPPLY INC MATCO TOOLS MATTHEW BENDER & COMPANY INC csteinba COMMISSIONER'S VOUCHERS ENTRIESSolid Waste Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 7.40 73.84 264.98 178.76 306.96 25.00 50.00 14,218.35 73.84 264.98 178.76 33.15 68.08 144.86 60.87 25.00 50.00 13,770.75 300.00 147.60 Page 15Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 1 Transactions14277 948 MIDWEST MACHINERY CO 50-000-000-0130-6306 ACCT 169818 PARTS 1604547 Repair/Maint. Equip 1 Transactions948 13071 MIDWEST MACHINERY CO 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 1 Transactions13071 8089 MIDWEST MONITORING 01-250-000-0000-6435 SALIVA TEST PANELS MARLABUA Drug Testing 1 Transactions8089 42863 MINNESOTA MOTOR COMPANY 01-044-000-0000-6304 ACCT 2607 OIL CHANGE 682357 Repair And Maintenance 01-044-000-0000-6304 ACCT 2607 OIL CHANGE/CAR WASH 683234 Repair And Maintenance 10-304-000-0000-6306 SERVICE Repair/Maint. Equip 10-304-000-0000-6572 PART Repair And Maintenance Supplies 4 Transactions42863 563 MINNESOTA SHERIFFS' ASSOCIATION 01-250-000-0000-6241 PUBLIC SAFETY MEMBERSHIP DUES 20072 Membership Dues STEWART/JAMES2902 1 Transactions563 7661 MINNKOTA ENVIRO SERVICES INC 01-201-000-0000-6406 ACCT 1159 SHREDDING SERVICES 393714 Office Supplies 1 Transactions7661 42745 MN COUNTIES COMPUTER CO-OP 01-061-000-0000-6346 SUPPORT FEES QTR 2 2Y1804047 Mccc Fees 01-061-000-0000-6346 TAXLINK SUPPORT QTR 2 2Y1804093 Mccc Fees 01-061-000-0000-6346 TAX/CAMA FEES QTR 1 2Y1804166 Mccc Fees 3 Transactions42745 1043 MN DEPT OF COMMERCE Otter Tail County Auditor McCONN/CHRISTOPHER MIDWEST MACHINERY CO MIDWEST MACHINERY CO MIDWEST MONITORING MINNESOTA MOTOR COMPANY MINNESOTA SHERIFFS' ASSOCIATION MINNKOTA ENVIRO SERVICES INC MN COUNTIES COMPUTER CO-OP csteinba COMMISSIONER'S VOUCHERS ENTRIESSolid Waste Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 494.00 10.00 250.00 10.68 104.23 129.73 100.00 94,313.00 234.00 260.00 10.00 250.00 10.68 104.23 21.96 63.57 44.20 100.00 23,578.25 23,578.25 23,578.25 23,578.25 Page 16Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 50-000-000-0120-6290 DEVICE INSPECTION #19001787 DEV-00040993 Contracted Services. 50-000-000-0120-6290 DEVICE INSPECTION #19001795 DEV-00041171 Contracted Services. 2 Transactions1043 928 MN DEPT OF LABOR AND INDUSTRY 10-304-000-0000-6306 SERVICE Repair/Maint. Equip 1 Transactions928 7122 MNCITLA 01-061-000-0000-6241 2018 MEMBERSHIP 4/24/18 Membership Dues 1 Transactions7122 3879 MURDOCK'S ACE HARDWARE 10-304-000-0000-6572 SUPPLIES Repair And Maintenance Supplies 1 Transactions3879 8373 NAPA FERGUS FALLS 50-390-000-0000-6306 ACCT 13050 BATTERY 710607 Repair/Maint. Equip 1 Transactions8373 1056 NAPA OF PERHAM 10-304-000-0000-6565 AUTO TRANSMISSION FLUID Fuels - Diesel 10-304-000-0000-6572 SUPPLIES Repair And Maintenance Supplies 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 3 Transactions1056 14407 NATURE'S PUMPING 10-304-000-0000-6300 SERVICE Building And Grounds Maintenance 1 Transactions14407 35442 NELSON AUTO CENTER 14-407-000-0000-6687 2019 JEEP CHEROKEE (PH #1)F19001 Equipment - Public Health 14-407-000-0000-6687 2019 JEEP CHEROKEE (PH #2)F19002 Equipment - Public Health 14-430-000-0000-6687 2019 JEEP CHEROKEE (HS #2)F19003 Equipment- Current Year Soc. Serv. 14-430-000-0000-6687 2019 JEEP CHEROKEE (HS #1)F19004 Equipment- Current Year Soc. Serv. 4 Transactions35442 Otter Tail County Auditor MN DEPT OF COMMERCE MN DEPT OF LABOR AND INDUSTRY MNCITLA MURDOCK'S ACE HARDWARE NAPA FERGUS FALLS NAPA OF PERHAM NATURE'S PUMPING NELSON AUTO CENTER csteinba COMMISSIONER'S VOUCHERS ENTRIESGeneral Revenue Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 1,043.74 719.66 569.58 574.42 676.71 644.52 1,212.09 517.95 184.80 173.76 75.00 92.23 719.66 375.00 194.58 574.42 676.71 16.00 628.52 951.66 260.43 300.00 Page 17Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 43227 NELSON AUTO CENTER 01-121-000-0000-6304 ACCT 9988605 WINDOW REGULATOR 6185418 Repair And Maintenance 01-201-000-0000-6304 ACCT 7365421 AIRBAG REPAIR 6183418 Repair And Maintenance 10-304-000-0000-6306 SERVICE Repair/Maint. Equip 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 50-399-000-0000-6304 ACCT 9984898 OIL CHG/INSPECT 6185396 Repair And Maint-Vehicles 5 Transactions43227 595 NETWORK SERVICES COMPANY 01-112-101-0000-6485 ACCT 655-790197 SUPPLIES 17087 Custodian Supplies 1 Transactions595 14655 NEWVILLE/DARREN 01-123-000-0000-6140 PER DIEM 4/12/18 Per Diem 01-123-000-0000-6330 MILEAGE 4/12/18 Mileage 2 Transactions14655 6006 NORTHERN SAFETY TECHNOLOGY INC 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 1 Transactions6006 1066 NORTHERN STATES SUPPLY INC 10-304-000-0000-6572 SUPPLIES Repair And Maintenance Supplies 1 Transactions1066 1464 OK TIRE OF PERHAM INC 01-201-000-0000-6304 UNIT 1608 TIRE REPAIR 133308 Repair And Maintenance 01-201-000-0000-6304 UNIT 1502 INSTALL TIRES 133526 Repair And Maintenance 2 Transactions1464 612 OLSON OIL CO INC 50-000-000-0170-6565 ACCT 22631 DIESEL 14320 Fuels - Diesel 50-000-000-0170-6565 ACCT 22631 DIESEL 14321 Fuels - Diesel 2 Transactions612 11757 OLSON/BERTON 01-124-000-0000-6140 PER DIEM 4/24/18 Per Diem Otter Tail County Auditor NELSON AUTO CENTER NETWORK SERVICES COMPANY NEWVILLE/DARREN NORTHERN SAFETY TECHNOLOGY INC NORTHERN STATES SUPPLY INC OK TIRE OF PERHAM INC OLSON OIL CO INC csteinba COMMISSIONER'S VOUCHERS ENTRIESGeneral Revenue Fund Account/Formula OTTER TAIL LAKES COUNTRY ASSOCIATION OUTDOOR RENOVATIONS LANDSCAPE & NURSERY Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 486.39 115.08 40.00 3,564.70 1,000.00 42.74 21,398.67 186.39 115.08 40.00 1,033.70 1,772.00 759.00 1,000.00 42.74 792.54 7,651.02 4,213.71 5,885.40 1,428.00 1,428.00 11,711.25 1,141.25 Page 18Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 01-124-000-0000-6330 MILEAGE 4/24/18 Mileage 2 Transactions11757 5093 ONE CALL LOCATORS LTD 01-112-000-0000-6275 MN OTERCO01 6 TICKETS E145044 Fiber Locating Service 1 Transactions5093 115 OTTER TAIL CO PUBLIC HEALTH 50-399-000-0000-6379 ACCT O2416 HEP B - N HEETER 478 Miscellaneous Charges 1 Transactions115 3167 OTTER TAIL CO TREASURER 10-302-000-0000-6369 SPECIAL ASSESSMENT Miscellaneous Charges 10-303-000-0000-6369 SPECIAL ASSESSMENT Miscellaneous Charges 10-304-000-0000-6253 GARBAGE TAX Garbage 3 Transactions3167 624 02-612-000-0000-6369 VISITOR'S GUIDE ADS INV-0643 Miscellaneous Charges 1 Transactions624 2385 OTTER TAIL POWER COMPANY 02-705-000-1011-6290 ACCT 47882 50 MVVS GRAPHIC 8002363 Branding/Website 1 Transactions2385 7392 OTTERTAIL TRUCKING INC 50-000-000-0120-6291 HAULING CHARGES 3/26/18 36401 Contract Transportation 50-000-000-0170-6291 HAULING CHARGES 3/26/18 36401 Contract Transportation 50-000-000-0120-6291 HAULING CHARGES 4/2/18 36435 Contract Transportation 50-000-000-0170-6291 HAULING CHARGES 4/2/18 36435 Contract Transportation 50-399-000-0000-6291 HAULING CHARGES 3/28/18 36401 Contract Transportation 50-399-000-0000-6290 HAULING CHARGES 4/4/18 36435 Contracted Services. 6 Transactions7392 6351 01-112-000-0000-6319 SNOW REMOVAL & SALT 7101 Snow Removal 01-112-110-0000-6342 SNOW REMOVAL & SALT 7111 Service Agreements OTTER TAIL LAKES COUNTRY ASSOCIATION Otter Tail County Auditor OLSON/BERTON ONE CALL LOCATORS LTD OTTER TAIL CO PUBLIC HEALTH OTTER TAIL CO TREASURER OTTER TAIL POWER COMPANY OTTERTAIL TRUCKING INC csteinba COMMISSIONER'S VOUCHERS ENTRIESGeneral Revenue Fund Account/Formula PAW PUBLICATIONS LLC BATTLE LAKE REVIEW Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 12,852.50 225.00 235.90 349.65 325.00 294.83 228.25 12.00 225.00 200.00 25.00 10.90 349.65 325.00 96.30 32.10 30.00 136.43 117.25 111.00 12.00 Page 19Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 2 Transactions6351 631 OVERHEAD DOOR CO OF FERGUS FALLS 10-304-000-0000-6300 SERVICE Building And Grounds Maintenance 1 Transactions631 11457 PALMER/GEORGE 22-622-000-0000-6369 PER DIEM 4/5/18 Miscellaneous Charges 22-622-000-0000-6369 REGISTRATION 4/5/18 Miscellaneous Charges 22-622-000-0000-6369 MILEAGE 4/5/18 Miscellaneous Charges 3 Transactions11457 45022 PARK REGION CO OP 10-304-000-0000-6251 PROPANE Gas And Oil - Utility 1 Transactions45022 862 PARKERS PRAIRIE/CITY OF 50-000-000-0140-6290 5 SHIFTS MAR2018 Contracted Services. 1 Transactions862 156 01-123-000-0000-6240 BOA MTG AD 4/4/18 Publishing & Advertising 01-124-000-0000-6240 PC MTG 4/11/18 4/4/18 Publishing & Advertising 50-000-000-0000-6379 SUBSCRIPTION RENEWAL 4/24/18 Miscellaneous Charges 50-000-000-0000-6240 BATTLE LAKE TSF HOURS 4/4/18 Publishing & Advertising 4 Transactions156 45047 PELICAN RAPIDS PRESS 01-123-000-0000-6240 BOA MTG 3/28/18 72680 Publishing & Advertising 50-000-000-0000-6240 PELICAN RAPIDS SUMMER HOURS 72643 Publishing & Advertising 2 Transactions45047 1093 PERHAM STEEL & WELDING 10-304-000-0000-6572 SUPPLIES Repair And Maintenance Supplies 1 Transactions1093 3611 PERHAM TRUCK SERVICE INC OUTDOOR RENOVATIONS LANDSCAPE & NURSERY PAW PUBLICATIONS LLC BATTLE LAKE REVIEW Otter Tail County Auditor OVERHEAD DOOR CO OF FERGUS FALLS PALMER/GEORGE PARK REGION CO OP PARKERS PRAIRIE/CITY OF PELICAN RAPIDS PRESS PERHAM STEEL & WELDING csteinba COMMISSIONER'S VOUCHERS ENTRIESRoad And Bridge Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 177.13 673.63 187.50 716.72 250.00 178.95 1,290.00 8.00 83.84 177.13 673.63 187.50 716.72 250.00 178.95 1,290.00 8.00 83.84 425.38 Page 20Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 10-304-000-0000-6306 SERVICE Repair/Maint. Equip 1 Transactions3611 8756 PETERSON MECHANICAL INC 01-112-106-0000-6572 COMPRESSOR/CONTACTOR S47077 Repair And Maint Supplies 1 Transactions8756 1412 PHILLIPE LAW OFFICE 01-013-000-0000-6262 56-JV-17-3427 C GILMER 3/15/18 Public Defender 1 Transactions1412 657 PIONEER RIM & WHEEL CO 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 1 Transactions657 11107 PRAIRIE LAKES MUNICIPAL SOLID WASTE 50-000-000-0160-6861 SPECIALTY WASTE 67467 Perham Processing Incinerator 1 Transactions11107 3867 PRAXAIR DISTRIBUTION INC 10-304-000-0000-6572 LEASE AGREEMENT Repair And Maintenance Supplies 1 Transactions3867 12526 PRECISE MRM LLC 10-304-000-0000-6572 SERVICE Repair And Maintenance Supplies 1 Transactions12526 3730 PREMIUM WATERS INC 50-000-000-0150-6290 ACCT 376004 376004-03-18 Contracted Services. 1 Transactions3730 45475 PRO AG FARMERS CO OP 50-000-000-0120-6565 ACCT 988529 DIESEL 88035833 Fuels 1 Transactions45475 6547 PRO AG FARMERS COOPERATIVE 10-304-000-0000-6251 PROPANE Gas And Oil - Utility Otter Tail County Auditor PERHAM TRUCK SERVICE INC PETERSON MECHANICAL INC PHILLIPE LAW OFFICE PIONEER RIM & WHEEL CO PRAIRIE LAKES MUNICIPAL SOLID WASTE PRAXAIR DISTRIBUTION INC PRECISE MRM LLC PREMIUM WATERS INC PRO AG FARMERS CO OP csteinba COMMISSIONER'S VOUCHERS ENTRIESRoad And Bridge Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 425.38 195.44 300.00 33,982.45 352.72 408.04 76.50 2,464.98 93.00 195.44 300.00 33,982.45 352.72 393.78 14.26 45.00 31.50 2,464.98 93.00 Page 21Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 1 Transactions6547 25082 PRODUCTIVE ALTERNATIVES INC 50-399-000-0000-6290 OTTERTAILRECY01 JANITORIAL INV00055905 Contracted Services. 1 Transactions25082 11855 PROFESSIONAL PORTABLE X-RAY INC 01-250-000-0000-6432 CLAIM 198954 & 201394 X-RAYS 010383 Medical Incarcerated 1 Transactions11855 13639 QUALITY CONSTRUCTION 10-303-000-0000-6651 C.P. 17:PM GARAGE, FLOATING SL Construction Contracts 1 Transactions13639 46006 QUALITY TOYOTA 01-149-000-0000-6354 ACCT 139 REPLACE WINDSHIELD 6019377 Insurance Claims 1 Transactions46006 1099 QUICK'S NAPA AUTO PARTS 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 10-304-000-0000-6572 SUPPLIES Repair And Maintenance Supplies 2 Transactions1099 13481 RAINBOW CLEANING CENTER 01-250-000-0000-6526 HEM PANTS 3/23/18 35963 Uniforms 01-250-000-0000-6526 SEW-ON PATCHES 4/13/18 36226 Uniforms 2 Transactions13481 8622 RDO TRUCK CENTER CO 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 1 Transactions8622 9547 REGENTS OF THE UNIVERSITY OF MN 01-601-000-0000-6406 ACCT 5007218 PRINTING SERVICE 0460004240 Office Supplies 1 Transactions9547 13859 ROSENTHAL/JACK Otter Tail County Auditor PRO AG FARMERS COOPERATIVE PRODUCTIVE ALTERNATIVES INC PROFESSIONAL PORTABLE X-RAY INC QUALITY CONSTRUCTION QUALITY TOYOTA QUICK'S NAPA AUTO PARTS RAINBOW CLEANING CENTER RDO TRUCK CENTER CO REGENTS OF THE UNIVERSITY OF MN csteinba COMMISSIONER'S VOUCHERS ENTRIESGeneral Revenue Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 253.01 323.65 5,240.00 19.96 38.87 1,062.00 22.00 12.00 150.00 103.01 225.00 98.65 1,210.00 4,030.00 19.96 38.87 1,062.00 22.00 12.00 9.70 Page 22Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 01-124-000-0000-6140 PER DIEM 4/24/18 Per Diem 01-124-000-0000-6330 MILEAGE 4/24/18 Mileage 2 Transactions13859 11656 SCHIERER/STEVE 01-123-000-0000-6140 PER DIEM 4/12/18 Per Diem 01-123-000-0000-6330 MILEAGE 4/12/18 Mileage 2 Transactions11656 697 SCOTT HOFLAND CONSTRUCTION INC 50-000-000-0120-6290 SALARY/EQUIP HRS HENNING TSF 731793 Contracted Services. 50-000-000-0130-6290 SALARY/EQUIP HRS NE LANDFILL 731793 Contracted Services. 2 Transactions697 19005 SERVICE FOOD SUPER VALU 01-002-000-0000-6369 K3210 10APR18 Miscellaneous Charges 1 Transactions19005 159 SHERWIN WILLIAMS 01-112-000-0000-6572 ACCT 6629-9141-3 PAINT 7855-7 Repair And Maintenance Supplies 1 Transactions159 10001 SHI CORP 01-061-000-0000-6680 ACCT 1079757 LED MONITORS B08021115 Computer Hardware 1 Transactions10001 705 SIGELMAN STEEL & RECYCLING INC 50-399-000-0000-6306 PARTS 29365 Repair/Maint. Equip 1 Transactions705 48638 SIGNWORKS SIGNS & BANNERS LLC 10-304-000-0000-6572 SUPPLIES Repair And Maintenance Supplies 1 Transactions48638 1469 SILLERUD/DAVID 10-303-000-0000-6331 MEALS Meals And Lodging Otter Tail County Auditor ROSENTHAL/JACK SCHIERER/STEVE SCOTT HOFLAND CONSTRUCTION INC SERVICE FOOD SUPER VALU SHERWIN WILLIAMS SHI CORP SIGELMAN STEEL & RECYCLING INC SIGNWORKS SIGNS & BANNERS LLC csteinba COMMISSIONER'S VOUCHERS ENTRIESRoad And Bridge Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 9.70 115.47 289.80 5,144.34 119.79 172.57 841.04 115.47 289.80 5,144.34 119.79 172.57 138.40 142.76 196.00 363.88 210.34 114.08 630.00 355.00 596.00 1,150.00 Page 23Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 1 Transactions1469 11478 SOURCE ONE SUPPLY INC 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 1 Transactions11478 14513 SR. PERSPECTIVE 01-121-000-0000-6239 LINK VET ADVERTISING 27487E MDVA Grant 1 Transactions14513 6321 SRF CONSULTING GROUP INC 01-002-000-0000-6818 LONG RANGE STRATEGIC PLANNING 11025.00-4 Board Contingency 1 Transactions6321 12882 STAVE/DOUGLAS 50-000-000-0120-6300 WATER HEATER REPAIR 3/29/18 Building And Grounds Maintenance 1 Transactions12882 719 STEIN/WAYNE 01-149-000-0000-6210 BULK MAILING COST 4/2/18 Postage & Postage Meter 1 Transactions719 48183 STEINS INC 01-112-101-0000-6485 ACCT 00224000 SUPPLIES 804145-1 Custodian Supplies 01-112-101-0000-6485 ACCT 00224002 SUPPLIES 804988 Custodian Supplies 01-112-108-0000-6485 ACCT 00224002 BATTERY 805070 Custodian Supplies 01-112-101-0000-6485 ACCT 00224000 SUPPLIES 805547 Custodian Supplies 4 Transactions48183 166 STEVE'S SANITATION INC 01-112-106-0000-6253 ACCT 1496 MAR2018 Garbage 01-112-109-0000-6253 ACCT 4532 MAR2018 Garbage 50-000-000-0110-6290 ACCT 20478 BATTLE LAKE MAR2018 Contracted Services. 50-000-000-0120-6290 ACCT 20478 HENNING MAR2018 Contracted Services. 50-000-000-0130-5561 ACCT 20478 NORTHEAST MAR2018 Ne Landfill-Tipping Fees 50-000-000-0150-6290 ACCT 20478 PELICAN RAPIDS MAR2018 Contracted Services. Otter Tail County Auditor SILLERUD/DAVID SOURCE ONE SUPPLY INC SR. PERSPECTIVE SRF CONSULTING GROUP INC STAVE/DOUGLAS STEIN/WAYNE STEINS INC csteinba COMMISSIONER'S VOUCHERS ENTRIESSolid Waste Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 3,055.42 21.97 480.92 250.00 600.00 49.51 116.40 20.98 0.99 171.98 83.98 86.98 68.99 68.99 250.00 600.00 49.51 58.20 58.20 356.00 1,187.00 710.00 Page 24Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 6 Transactions166 725 STRAND HARDWARE & RADIO SHACK 10-304-000-0000-6406 SUPPLIES Office Supplies 10-304-000-0000-6572 SUPPLIES Repair And Maintenance Supplies 2 Transactions725 168 STREICHERS 01-201-000-0000-6526 ACCT 974 DUTY MAXX SHIRT I1306559 Uniforms PETERSON/CHRIS11583 01-250-000-0000-6526 ACCT 46698 PANTS I1307787 Uniforms 01-250-000-0000-6526 ACCT 46698 PANTS I1309482 Uniforms 01-250-000-0000-6526 ACCT 46698 PANTS I1310077 Uniforms 01-250-000-0000-6526 ACCT 46698 PANTS I1310078 Uniforms 5 Transactions168 5651 SVERDRUP 4-H 50-000-000-0000-6848 UNDERWOOD CANISTER 2017 201712 Public Education 1 Transactions5651 6413 TEAM LABORATORY CHEMICAL CORP 10-302-000-0000-6510 SUPPLIES Bituminous Material 1 Transactions6413 13290 TERMINAL SUPPLY CO. 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 1 Transactions13290 42537 THIS WEEKS SHOPPING NEWS 01-122-000-0000-6240 ACCT 1968 INSPECTORS 47713 Publishing & Advertising 10-301-000-0000-6240 NOTICE Publishing & Advertising 2 Transactions42537 183 THOMSON REUTERS - WEST 01-201-000-0000-6348 ACCT 1003940771 MAR 2018 837991562 Software Maintenance Contract 13-012-000-0000-6455 ACCT 1003217934 MAR 2018 837941432 Reference Books & Literature 13-012-000-0000-6455 ACCT 1000551281 MAR 2018 837960808 Reference Books & Literature Otter Tail County Auditor STEVE'S SANITATION INC STRAND HARDWARE & RADIO SHACK STREICHERS SVERDRUP 4-H TEAM LABORATORY CHEMICAL CORP TERMINAL SUPPLY CO. THIS WEEKS SHOPPING NEWS csteinba COMMISSIONER'S VOUCHERS ENTRIESLaw Library Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 3,217.77 33.87 405.94 767.72 240.00 28,477.87 1,750.00 37.15 964.77 33.87 200.00 25.00 180.94 732.59 35.13 75.00 165.00 28,145.00 332.87 1,750.00 37.15 Page 25Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 13-012-000-0000-6455 ACCT 1000551281 838049705 Reference Books & Literature 4 Transactions183 7249 THRIFTY WHITE PHARMACY 01-250-000-0000-6432 ACCT 749765 MEDICATIONS MAR2018 Medical Incarcerated 1 Transactions7249 11623 TIGGES/DENNIS 22-622-000-0000-6369 PER DIEM 4/5/18 Miscellaneous Charges 22-622-000-0000-6369 REGISTRATION 4/5/18 Miscellaneous Charges 22-622-000-0000-6369 MILEAGE 4/5/18 Miscellaneous Charges 3 Transactions11623 49008 TIRES PLUS TOTAL CAR CARE 01-201-000-0000-6304 UNIT 1205 BATTERY/TIRES 107423 Repair And Maintenance 01-201-000-0000-6304 UNIT 1708 OIL CHANGE 107846 Repair And Maintenance 2 Transactions49008 1999 TNT REPAIR INC 10-304-000-0000-6306 SERVICE Repair/Maint. Equip 10-304-000-0000-6565 D.E.F. FLUID Fuels - Diesel 2 Transactions1999 9693 TOWMASTER 10-302-000-0000-6675 KMI HOT BOX RECLAIMER, UNIT #9 Machinery And Automotive Equipment 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 2 Transactions9693 3023 TRANE U.S. INC 01-112-108-0000-6572 ACCT 2517101 CHILLER EDDY TEST 38922832 Repair And Maintenance Supplies 1 Transactions3023 14919 TULIBASKI/THEODORE 10-302-000-0000-6331 MEALS Meals And Lodging 1 Transactions14919 176 UNITED PARCEL SERVICE Otter Tail County Auditor THOMSON REUTERS - WEST THRIFTY WHITE PHARMACY TIGGES/DENNIS TIRES PLUS TOTAL CAR CARE TNT REPAIR INC TOWMASTER TRANE U.S. INC TULIBASKI/THEODORE csteinba COMMISSIONER'S VOUCHERS ENTRIESGeneral Revenue Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 31.84 210.00 31.47 156.87 391.90 393.41 135.86 402.36 11.60 20.24 210.00 31.47 150.11 6.76 158.00 233.90 225.00 168.41 135.86 402.36 300.00 Page 26Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 01-149-000-0000-6215 SHIPPER 556562 CONTROL 428N 0000556562128 Freight, Ups And Trucking Charges 01-149-000-0000-6215 SHIPPER 556562 CONTROL 4G09 0000556562138 Freight, Ups And Trucking Charges 2 Transactions176 14162 UNLIMITED AUTO GLASS INC 50-399-000-0000-6304 REPLACE WINDSHIELD 3279 Repair And Maint-Vehicles 1 Transactions14162 2068 VERGAS HARDWARE 10-304-000-0000-6406 SUPPLIES Office Supplies 1 Transactions2068 51002 VICTOR LUNDEEN COMPANY 02-612-000-0000-6406 ACCT 7490 SUPPLIES 1079070 Office Supplies 02-612-000-0000-6406 ACCT 7490 INDEX FLAGS 1079071 Office Supplies 2 Transactions51002 6599 VISUAL GOV SOLUTIONS LLC 01-043-000-0000-6267 E-CHECK PROCESSING QTR 1 JS-3436 Electronic Pmt Charges 01-043-000-0000-6267 CREDIT CLERK SERVICE QTR 1 JS-3455 Electronic Pmt Charges 2 Transactions6599 15024 VORDERBRUGGEN/KENNETH 01-123-000-0000-6140 PER DIEM 4/12/18 Per Diem 01-123-000-0000-6330 MILEAGE 4/12/18 Mileage 2 Transactions15024 52574 WADENA HIDE & FUR COMPANY 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 1 Transactions52574 1655 WALLWORK TRUCK CENTER 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 1 Transactions1655 12465 WASS/DAVID F 01-124-000-0000-6140 PER DIEM 4/24/18 Per Diem Otter Tail County Auditor UNITED PARCEL SERVICE UNLIMITED AUTO GLASS INC VERGAS HARDWARE VICTOR LUNDEEN COMPANY VISUAL GOV SOLUTIONS LLC VORDERBRUGGEN/KENNETH WADENA HIDE & FUR COMPANY WALLWORK TRUCK CENTER csteinba COMMISSIONER'S VOUCHERS ENTRIESGeneral Revenue Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 502.74 27,008.54 91.25 160.30 60.41 260.90 725.00 202.74 3,231.29 23,777.25 91.25 160.30 40.00 20.41 200.00 50.00 10.90 25.00 700.00 200.00 25.00 13.08 Page 27Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 01-124-000-0000-6330 MILEAGE 4/24/18 Mileage 2 Transactions12465 2278 WASTE MANAGEMENT 50-000-000-0120-6852 ACCT 3-85099-73002 0001172-0010-5 Msw By Passed Expense 50-000-000-0170-6852 ACCT 3-85099-73002 0001172-0010-5 Msw By Passed Expense 2 Transactions2278 9357 WAYNE'S TOOLWAGON 10-304-000-0000-6572 SUPPLIES Repair And Maintenance Supplies 1 Transactions9357 3720 WELLER OIL CO 50-000-000-0130-6565 FUEL 3/19/18 24349 Fuels 1 Transactions3720 13912 WELLS FARGO BANK NA 01-091-000-0000-6271 REF 19439082 G VONEHRENFELS 265531 Fraud Investigator Expenses 01-091-000-0000-6271 REF 19582101 G VONEHRENFELS 268568 Fraud Investigator Expenses 2 Transactions13912 15015 WERNER/JOHN 22-622-000-0000-6369 PER DIEM 4/5/18 Miscellaneous Charges 22-622-000-0000-6369 DUES & REGISTRATION 4/5/18 Miscellaneous Charges 22-622-000-0000-6369 MILEAGE 4/5/18 Miscellaneous Charges 3 Transactions15015 182 WEST OTTER TAIL SOIL & WATER 22-622-000-0656-6369 NATIVE SEED 1745 Miscellaneous Charges 22-622-000-0656-6369 NATIVE SEED MIX/CUSTOM SEEDING 1746 Miscellaneous Charges 2 Transactions182 13863 WIEBE/JEFFREY JON 22-622-000-0000-6369 PER DIEM 4/5/18 Miscellaneous Charges 22-622-000-0000-6369 REGISTRATION 4/5/18 Miscellaneous Charges 22-622-000-0000-6369 MILEAGE 4/5/18 Miscellaneous Charges Otter Tail County Auditor WASS/DAVID F WASTE MANAGEMENT WAYNE'S TOOLWAGON WELLER OIL CO WELLS FARGO BANK NA WERNER/JOHN WEST OTTER TAIL SOIL & WATER csteinba COMMISSIONER'S VOUCHERS ENTRIESCounty Ditch Fund Account/Formula Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 238.08 2,289.77 235.02 1,444.57 511,106.57 1,589.77 700.00 150.00 85.02 114.49 1,330.08 Page 28Audit List for Board Account/Formula Description Rpt Invoice #Warrant DescriptionVendorName Paid On Bhf #Accr Amount On Behalf of NameNo.Service Dates 3 Transactions13863 14545 WILDLIFE FOREVER 02-612-000-0000-6369 COASTER FOR AWARENESS PROGRAM 43130 Miscellaneous Charges 02-612-000-0000-6369 INSPECTION SIGNS 43141 Miscellaneous Charges 2 Transactions14545 11653 WILSON/WARREN R 01-124-000-0000-6140 PER DIEM 4/24/18 Per Diem 01-124-000-0000-6330 MILEAGE 4/24/18 Mileage 2 Transactions11653 2086 ZIEGLER INC 10-304-000-0000-6572 PARTS Repair And Maintenance Supplies 50-399-000-0000-6306 ACCT 6842300 REPAIRS TO CAT SW020103014 Repair/Maint. Equip 2 Transactions2086 Final Total ............198 Vendors 365 Transactions Otter Tail County Auditor WIEBE/JEFFREY JON WILDLIFE FOREVER WILSON/WARREN R ZIEGLER INC csteinba COMMISSIONER'S VOUCHERS ENTRIESSolid Waste Fund Copyright 2010-2017 Integrated Financial Systems 1:42PM4/19/18 Page 29Audit List for Board Otter Tail County Auditor AMOUNT General Fund Dedicated Accounts 97,918.42 1 22,079.32 2 204,294.72 10 4,027.29 13 94,497.77 14 3,034.98 22 85,254.07 50 511,106.57 NameFundRecap by Fund General Revenue Fund Road And Bridge Fund Law Library Fund Capital Improvement Fund County Ditch Fund Solid Waste Fund All Funds Total Approved by,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OTTER TAIL COUNTY BOARD OF COMMISSIONERS www.co.ottertail.mn.us GOVERNMENT SERVICES CENTER 515 WEST FIR AVENUE 218-998-8065 FERGUS FALLS, MN 56537 FAX: 218-998-8075 Douglas A. Huebsch Wayne D. Johnson John D. Lindquist Roger Froemming Leland R. Rogness First District Second District Third District Fourth District Fifth District OTTER TAIL COUNTY IS AN EQUAL OPPORTUNITY EMPLOYER April 11, 2018 Mr. Ryan Lubben West Central Ag-Air, Inc. Fergus Falls Municipal Airport West End, PO Box 178 Fergus Falls, MN 56538-0178 RE: Authorization to Operate Agricultural Aircraft over Unincorporated Areas of Otter Tail County to Conduct Aerial Spraying of Tent Worm Caterpillars Dear Mr. Lubben: West Central Ag-Air, Inc. has requested permission to operate agricultural aircraft over unincorporated areas of Otter Tail County to spray for tent worm caterpillars using a BT insecticide called Foray 48B. West Central Ag-Air, Inc. is granted permission to operate agricultural aircraft over areas of Otter Tail County while spraying for tent worm caterpillars per FAA waivers. Permission is granted with the following conditions: 1.It applies to only the unincorporated areas of Otter Tail County;2.West Central Ag-Air, Inc. must have a valid license to spray for tent worm caterpillars from the Minnesota Department of Agriculture;3.This permission expires on December 31, 2018 This authorization by Otter Tail County is not an endorsement of this company. West Central Ag-Air, Inc. does not act on behalf of or as an agent of Otter Tail County. OTTER TAIL COUNTY BOARD OF COMMISSIONERS Dated: By: Attest: Wayne Johnson, Chair John Dinsmore, Clerk Page | 1 Tuesday, April 24, 2018 Consent Agenda Items 1. Approve a 2018 Tobacco License for Erik Hoff dba Pelican Hills, Inc. located at 20098 South Pelican Drive 2. Approve the LG220 Application for Exempt Permit as submitted the St. Lawrence Church for an event scheduled for Sunday August 5, 2018 at the St. Lawrence Church located at 46404 County Highway 14. 3. Approve the issuance of a Temporary On-Sale 3.2 Malt Liquor License to St. Lawrence Church for an event scheduled for Sunday August 5, 2018 at the St. Lawrence Church located at 46404 County Highway 14. 4. Approve the issuance of on On/Off-Sale 3.2 Malt Liquor License to Heislers Gravel & Rental Prop. Inc. dba Heisler’s Country Pub for the period of July 1, 2018 through June 30, 2019. OTTER TAIL COUNTY COUNTY AUDITOR/TREASURER FINANCIAL SERVICES DIVISION WWW.CO.OTTER-TAIL.MN.US wstein@co.ottertail.mn.us GOVERNMENT SERVICES CENTER OFFICE - 218-998-8030 510 WEST FIR AVENUE DIRECT - 218-998-8041 FERGUS FALLS, MN 56537 FAX - 218-998-8042 APPOINTMENT TO BUFFALO-RED RIVER WATERSHED DISTRICT BOARD OF MANAGERS Pursuant to Minnesota Statute 103D.311, the Otter Tail County Board of Commissioners will appoint a Manager to fill a position representing Otter Tail County on the Buffalo-Red River Watershed Board of Managers. Persons interested in an appointment as a Watershed District Manager may submit their names for consideration for appointment. Letters of interest for appointment to the Buffalo-Red River Watershed District Board of Managers may be mailed to the Otter Tail County Auditor-Treasurer, 510 West Fir Avenue, Fergus Falls, MN 56537 prior to Tuesday, April 24, 2018. Wayne Stein Otter Tail County Auditor-Treasurer Medicare Resolution Whereas, Otter Tail County Public Health became a Medicare Part B Certified Provider as of October 9, 2002 with the assigned Medicare provider number of 870000827, and Whereas, Otter Tail County Public Health was assigned the National Provider Identification Number of 1023001260 on08/23/2005, and Whereas, a Provider Revalidation Request has been received to update and certify provider information in accordance with the Patient Protection and Affordable Care Act, Section 6401 (a), and Whereas, Otter Tail County is required to attest that as a governmental organization it will be legally and financially responsible in the event that there is an outstanding debt owed to the Center for Medicare and Medicaid Services, and Whereas Diane Thorson has been appointed as the authorized official for the Otter Tail County Public Health Department and had been given the authority to legally and financially bind the organization to the laws, regulations, and program instructions of the Medicare Program, Whereas, Jody Lien has been appointed as the delegated official for the Otter Tail County Public Health Department and has been give the authority to legally and financially bind the organization to the laws, regulations and program instructions of the Medicare Program, in the absence of the Authorized Official, Now therefore be it resolved, this resolution has been adopted by the Otter Tail County Board of Commissioners on April 24, 2018. Date____________________ Approved: Opposed: Otter Tail County, Minnesota Broadband Feasibility Study February 11, 2018 Finley Engineering CCG Consulting Otter Tail County Broadband Feasibility Study Page 2 Table of Contents Page Executive Summary .................................................................................................................................. 3 Findings ...................................................................................................................................................... 4 Recommended Next Steps ........................................................................................................................ 8 I. Background Research ................................................................................................................... 9 A. Incumbent Providers ............................................................................................................. 9 B. Current Broadband and Other Prices .................................................................................. 15 C. The Connect America Fund ................................................................................................ 25 II. Engineering Design and Costs ................................................................................................... 27 A. Network Design .................................................................................................................. 27 B. Network Cost Estimates ...................................................................................................... 36 C. Competing Technologies .................................................................................................... 40 III. Financial Business Plan Analysis ............................................................................................... 49 A. Business Plan Key Assumptions ......................................................................................... 49 B. Business Plan Results ......................................................................................................... 61 C. Financing Considerations.................................................................................................... 72 EXHIBIT I: Service Areas of the Incumbent Telephone Companies ................................................ 83 EXHIBIT II: Map of the Proposed FTTH Design ............................................................................... 84 EXHIBIT III: Map of the Proposed Hybrid Design ............................................................................ 85 EXHIBIT IV: Summary of Financial Results ...................................................................................... 86 Otter Tail County Broadband Feasibility Study Page 3 EXECUTIVE SUMMARY Finley Engineering and CCG Consulting submit this report of our findings and recommendations for the feasibility of finding a broadband solution for those parts of the county without fast broadband today. The county is typical of many rural counties where a substantial part of the county has or will soon have good broadband, including fiber, while other parts of the county have little or no broadband. This disparity in broadband coverage is already harming those portions of the county without broadband and you can expect those areas to suffer lower housing prices and become places where families and business don’t want to be located. The base study area looked at the feasibility of bringing broadband to the parts of the county that are not expected to have fiber or fast broadband to homes and businesses over the next few years. This includes the rural parts of the county that are served for telephone service today by CenturyLink as well as part of the county served by Arvig Communications that was formerly the Midwest Telephone Company. The primary focus of the studies was to consider a design that brings fiber to the study areas. There was a second option that brings wireless technology to a portion of the service area in the southwest corner of the county. The wireless network designed by Finley is intended to supply at least 25 Mbps download to rural homes in the county, which is a significant improvement for those without good broadband today. Some customers will be able to get even faster speeds on the wireless network. However, we know the county’s goal is to eventually have fiber everywhere and so implementing a wireless network would not be a permanent solution. All of the broadband trends in the country show that the amount of bandwidth needed by a typical home will keep growing, and at some time in the future a wireless network would become obsolete in the same manner that happened in the past with dial-up and DSL broadband. Our analysis shows that it is not economically feasible to build fiber everywhere in the county using the existing Border-to-Border grant program and conventional commercial financing. But there looks to be ways that can improve the possibility of funding fiber everywhere. One particular challenge the county will face is that the unserved areas are not uniform. There are smaller towns and areas around lakes that have much higher housing density than the more rural portions of the unserved areas. The challenge will in getting fiber everywhere, because as the higher density areas get fiber, the cost per passings to the remaining areas will be higher. The report discusses the next steps the county needs to take after digesting the results of this study. These include such things as looking for a partner to bring broadband to those areas without it today. The goal would be to have a partner by next year to be ready for future state grant funds. Otter Tail County Broadband Feasibility Study Page 4 FINDINGS Following are the key findings of our investigation: THE PROBLEM Lack of Rural Broadband: As the county already knows, there is a glaring lack of broadband in some rural parts of the county today. The county shares one characteristic that we are starting to see all over the country in that significant parts of your county have or will soon have fiber while other areas have practically no broadband options. That kind of contrast will have long-term negative impacts on housing values and quality of life in the areas without broadband. BASIC FACTS ABOUT THE COUNTY The Study Area: The study area consists of those areas that don’t have fast internet today and are not expected to soon have it. The study looked at two different study areas. The base study looked at the rural parts of the county that have been served traditionally by CenturyLink. This study area excludes the large towns of Fergus Falls, Battle Lake, and Henning. This base service area includes the small towns of Clitherall and Elizabeth. This study area is best visualized by looking at the pink areas on Exhibit I (less the big towns). We also considered a larger study are that adds the portion of the county that was traditionally served by Midwest Telephone Company, which is now part of Arvig Communications. This area has been upgraded to faster DSL, but there are no short-term plans to build fiber to this area. Arvig may eventually build fiber, but the county wanted to study this area in order to quantify the cost of building fiber there. One significant finding is that the study areas has two major components. Some areas like small towns and areas around lakes have a much higher housing density than the rest of the study area. It’s likely that a solution might be found to provide fiber to the higher-density areas, meaning that the remaining rural portions of the study area will be high cost and harder to serve with fiber. Potential Customers: The telecom industry uses the term “passing” to mean any home or business that is near enough to a network to be a potential customer. The base scenario looks to bring broadband to the rural portions of the areas served today by CenturyLink. The passings for those areas include: Clitherall 83 Elizabeth 109 Lakes Areas 1,694 Rural 3,466 Total 5,352 A second version of the study adds on the area served today by Arvig around Parkers Prairie, Eagle Bend, and Urbank. This second area adds the following access lines: Otter Tail County Broadband Feasibility Study Page 5 Parkers Prairie 581 Urbank 29 Rural 727 Subtotal 1,337 Grand Total 6,689 Finally, we looked at the cost of bringing wireless to only the southwest corner of the county. This scenario would serve 477 rural passings. Road Miles: Significant fiber must be constructed to bring broadband to the two different study areas. The road miles of fiber needed for the all-fiber scenarios are as follows: Elizabeth 1.7 miles Clitherall 3.0 miles Backbone Fiber 38.3 miles Lakes Area 79.9 miles Rural Fiber 615.7 miles Total 738.6 miles Adding the Arvig Areas: Elizabeth 1.7 miles Clitherall 3.0 miles Urbank 1.1 miles Parkers Prairie 14.0 miles Fiber Ring 80.3 miles Lakes Area 79.9 miles Rural Fiber 807.1 miles Total 987.1 miles THE POSSIBLE SOLUTIONS Scenarios Studied: The primary business plan contemplated was to build fiber to everybody in the study areas. We looked at the cost of providing all fiber to the two different study areas. There is one small corner of the county to the south and west of Fergus Falls that could also readily be served using fixed point-to-multipoint wireless technology. We looked at a scenario for the CenturyLink coverage area that serves this area with wireless while the rest of the footprint receives fiber. We also quantified the cost of only serving the wireless footprint. ENGINEERING FINDINGS Backbone Fiber Network: The base study of the CenturyLink areas includes the construction of a fiber backbone that connects to the various required huts. The larger footprint includes the construction of a fiber ring that would continue to function in the case of a fiber cut. Otter Tail County Broadband Feasibility Study Page 6 Aerial vs Buried Fiber: The entire network was designed using buried fiber. The soil in the county allows for relatively easy burying of fiber and the cost to bury fiber in the rural parts of the county would not be higher than to place the fiber onto existing poles. A buried network will last longer and have fewer maintenance issues. Total Asset Costs: The cost of the assets required to bring fiber to everybody are significant. Following are the assets required to launch each scenario. These assets assume the business would have a 70% customer penetration rate. These asset costs would increase or decrease with a greater or fewer number of customers. Note that the Wireless-only option only covers a portion of the southeast part of the county and is not comparable to the larger service areas of the other options. CenturyLink Rural Add All Fiber Study Area Midwest Tel Fiber & Drops $29,429,126 $37,818,240 Electronics $ 4,444,148 $ 5,484,557 Huts $ 329,245 $ 395,094 Operational Assets $ 634,932 $ 764,928 Total $34,837,451 $44,462,818 CenturyLink Rural Hybrid Study Area Fiber & Drops $23,994,524 Electronics $ 4,219,988 Huts/Towers $ 398,746 Operational Assets $ 592,579 Total $29,205,837 Wireless Area Only_ Fiber $ 1,182,335 Electronics $ 167,948 Huts/Towers $ 135,350 Operational Assets $ 116,713 Total $ 1,602,346 BUSINESS PLAN RESULTS The county’s hope for the project was to find solutions that can bring broadband to the county and that are financially sound, meaning that the network would generate enough cash to cover costs. The county’s ultimate goal is to find a way to eventually bring fiber to everybody. Otter Tail County Broadband Feasibility Study Page 7 Business Plan Results Following are the primary findings of the financial analysis. There is a more detailed discussion of these topics in the report. • Any solution will require significant grant funding (or equivalent). Funding fiber to the CenturyLink footprint with normal commercial financing would require a grant of $19.5 million, or 56% of the cost of the needed assets. • Since the Border-to-Border grants will only fund $5 million per year for any one project it will take multiple years of construction and multiple grants to fund a fiber network everywhere. • The impact of increasing customer prices is significant, and it looks possible that higher-than- market rates might make a project feasible. • Since wireless technology is only a reasonable technology solution for a small part of the county there is not the option to begin with wireless and migrate later to fiber. Otter Tail County Broadband Feasibility Study Page 8 RECOMMENDED NEXT STEPS We recommend the following next steps after this study. 1. Find a partner(s). The first step is to look for one or more operating telcos or other companies as partners. The county has a lot of existing small telephone companies as well as an electric cooperative that could be considered as potential broadband providers in the study areas. We suggest meeting with potential service providers as the first step towards seeking possible Border- to-Border grants awarded at the end of this year. While there is no guarantee that the state will continue this grant program, it’s now in its fourth year. 2. Be prepared to provide assistance to service providers. The grant process requires a showing of customer and community support. The county should be prepared to help service providers by seeking customer support for the grants. There are steps that the county could take to improve the chances of getting grants in future years. The county might consider conducting a survey in the study area that would help to provide support for a grant filing. The county could also instead help to organize a marketing and pledge drive to get customers to pre-subscribe for broadband, if it’s built. 3. Educate and motivate the public. We’ve always seen that a motivated and vocal public can help to convince service providers to bring broadband and can also help to keep the pressure on politicians to maintain the grant programs. The county could form a citizen’s group of those living in the areas without broadband. Such a group might need some minor county funding for such efforts as explaining the need for broadband to citizens as well as gathering support from the public. We have seen such groups be effective in other communities. 4. Be persistent. There will probably not be one service provider to step up and serve everybody that needs broadband immediately. A more likely scenario is that the existing telcos or some other company will build into the study area slowly over time, perhaps with a series of Border-to-Border grants. This means that you can’t get complacent and assume that by doing this study your job is done. You will probably need to work at this over multiple years to make sure that everybody gets broadband. These study results also show that it is unlikely that somebody is going to immediately build fiber everywhere. Even in the hybrid scenario there are a significant number of households that might get fiber, but the county is going to have to make a long-term commitment to keep pushing to get fiber everywhere—an effort that might easily take a decade or more, until every home and business has the broadband the county thinks is needed. 5. Consider the possibility of providing some county funding. If no service provider seems willing to bring the desired broadband, the county needs to consider the option of providing some funding assistance. This was done recently in Swift County—the government there contributed a significant amount of bond funding to help finance the project. They expect the revenues of the projects to be able to cover the bond payments. Yellow Medicine County also recently announced that they will assist a partner with bond financing. There was something similar done a few years ago when Sibley and Renville counties contributed 25% of the cost of building a broadband network. In all these cases it was that pledge of financial support from the county that enabled the service provider to borrow the remaining needed funds. Otter Tail County Broadband Feasibility Study Page 9 I. BACKGROUND RESEARCH This section of the report looks at the incumbent providers in the county, at the products and prices of existing service providers in the market, and at the impact of the Connect America Fund. Like many counties in Minnesota, the county is served by a number of incumbent providers with separate service territories. A. Incumbent Providers The county has numerous incumbent cable and telephone companies service different parts of the county. A map showing the service areas of the incumbent telcos is included as Exhibit I. Historic telephone service in the county was provided by a number of different incumbent providers. There is also service in the county provided by CenturyLink, which is one of the biggest telcos in the country and which purchased the companies that were once known as Qwest (and before that US West). There is also cable TV service provided Fergus Falls by Charter Communications while some of the telephone companies offer cable TV in other towns. Incumbent Telcos The county has a number of incumbent telephone companies serving various parts of the county. A map showing the service areas of the incumbent telephone companies is included as Exhibit I. CenturyLink is the third largest telephone company in the country with headquarters in Monroe, Louisiana. Several years ago the company purchased Qwest, which was formerly Mountain Bell and US West, and was part of the Bell Telephone system. The company provides service in and around Otter Tail. CenturyLink had annual revenues in 2016 of $17.5 billion. As the incumbent provider, CenturyLink is considered the “provider of last resort” in its service areas. This means that CenturyLink is required to serve all residential and business customers for basic local services, and it must provide facilities to all customers. The rules that govern the way that CenturyLink serves customers in the county are embodied in their “General Customer Services Tariff,” which is approved by the Minnesota Public Utilities Commission. This tariff contains all of the regulated products and prices, along with the terms and conditions under which CenturyLink will sell them to customers. The tariff sets forth rules for such customer service procedures as the manner and amount of customer deposits, the rules by which they will disconnect service for nonpayment, and the rules by which they will reconnect service. We’d like to note here that a recent trend is to get states to deregulate many services as competitive and take them out of the tariff; the Minnesota tariff has had many products removed in recent years. As a telco, CenturyLink sells the full range of residential and business voice services. CenturyLink also sells data products. They sell traditional TDM voice services based upon multiples of T1s. They also sell high-speed DSL service. In rural markets, for the last decade CenturyLink has provided DSL speeds of between 1 and 15 Mbps. CenturyLink has been upping those speeds in some markets by installing new DSL equipment. For instance, in some parts of the Twin Cities CenturyLink now supports DSL products with speeds up to 25 Mbps. DSL speeds are advertised in terms of “up to” speeds and customers can get slower speeds than the speeds advertised. Some Otter Tail County Broadband Feasibility Study Page 10 of the factors contributing to slower speeds include the distance the customer is from the CenturyLink central office, and the age and size of the copper wiring in a neighborhood. CenturyLink also builds fiber to some business customers and can sell a gigabit speed broadband. In recent years CenturyLink has invested significant capital in improving data speeds in metropolitan areas. For example, in 2016 the company built fiber to pass 900,000 homes in major markets like Seattle, Phoenix, Denver, and the Twin Cities. There is no expectation that they are ready to invest in fiber in smaller markets. CenturyLink also offers cable TV where the broadband is fast enough. Under the Prism trademark they are delivering cable over bonded pairs of copper using DSL and IPTV technology. In most markets CenturyLink partners with DirecTV for a cable product. The CenturyLink technicians install the satellite service and CenturyLink bills for the DirecTV on the telco bill. They also give a bundling discount, making it cheaper to buy DirecTV through CenturyLink than buying it direct. CenturyLink accepted a significant amount of money from the Connect America Fund (CAF II) to enhance the DSL in rural parts of Otter Tail County. Those homes should be getting a DSL boost to at least 10 Mbps. East Otter Tail Telephone (Arvig Communications System). This was the original incumbent telco owned by Arvig Communications Systems. The company started in Perham, MN, and has grown through acquisition and construction to cover a 9,000 square mile service territory from Moorhead to Rochester and Duluth to Marshall. The incumbent company operates the Bertha, Deer Creek, Dent, New York Mills, Otter Tail, Perham, and Vergas exchanges in the county. The company offers telephone, video, and Internet services along with security services within their service footprint. Video services are provided in city centers via traditional cable TV plants and higher speed Internet services are delivered via cable modem. Loretel Systems Inc. is a subsidiary incumbent telephone company owned by Arvig Communications Systems. The company operates in the Frazee and Pelican Rapids exchanges in northwest Otter Tail County. In 2017, the company was awarded a grant from the state of Minnesota’s Border-to-Border Broadband Grant program for a middle and last mile project in the amount of $633,642, with a total project cost of $1.6 million. This middle and last mile project will upgrade facilities in the Pelican Rapids rural area. Arvig intends to improve broadband service levels to at least 100 Mbps download and 100 Mbps upload. Midwest Telephone. This company in the southeast portion of the county was acquired by Arvig in 2005. This includes the exchanges of Eagle Bend, Parker’s Prairie, and Urbank within the county. This is the one independent telephone company service area that does not have concrete plans to convert to fiber within the next few years, although the expectation is that it will eventually be converted to all fiber. Otter Tail County Broadband Feasibility Study Page 11 The Park Region Mutual Telephone Company, a cooperative, originally operated the Dalton telephone exchange and since its founding in 1906 has acquired several small telecom companies, the most recent being Rothsay Telephone in 2016. Currently the company is the incumbent telephone company in the following exchanges in the county: Ashby, Dalton, Erhard, Maine, Underwood, and Vining. Competitive Ventures: Park Region also operates Otter Tail Telcom, a CLEC (Competitive Local Exchange Carrier). This business operates outside of the historic telephone exchange boundaries and competes directly with other providers. Otter Tail Telcom operates principally in Battle Lake, Fergus Falls, and Henning exchange areas. Otter Tail Telcom was awarded grants from the state of Minnesota’s Border-to-Border Broadband Grant program as follows: 2015 Fergus Falls 864 - Hwy 59 - Grant award: $295,432 - Total Project: $621,962 Broadband infrastructure project in the vicinity of Fergus Falls. Fergus Falls Hwy 59/94 - Grant award: $164,207 - Total Project: $345,699 Middle mile broadband infrastructure north of Fergus Falls near Hwy 59/94 2016 Fergus Falls Area - Grant: $279,271 - Total Project: $558,542 Last mile project near Elizabeth and in rural Fergus Falls. Battle Lake - Grant: $238,170 - Total Project: $476,340 Last mile project in the Clitherall and Battle Lake areas. 2017 Red Oak Drive - Grant $173,683 – Total Project: $347,366 Last mile project north of the city of Fergus Falls. Rothsay Telephone Company is a subsidiary of Park Region Mutual Telephone Company. The company was acquired by Park Region in 2016 and operates the Rothsay telephone exchange area located in Wilkin County and west-central Otter Tail County. The company provides telephone, cable TV, and Internet services utilizing Cable TV RF plant, fiber optics, and DSL over copper plant. Red River Rural Telephone Association, dba Red River Communications, is a cooperative company headquartered in Abercrombie, ND. Operating primarily in North Dakota, the company also serves several telephone exchange areas within Minnesota, and the Barnesville Rural exchange extends into a small portion of northeast Otter Tail County. The company has completed a fiber-to-the-premise build throughout its service area including the portion within Otter Tail County. Telephone, Cable TV, and up to symmetrical Gigabit internet service is offered. The company is recognized by the National Telecom Cooperative Association as a Gig-Capable company, delivering services over a 2,200-mile fiber optic network, serving nearly 4,000 members. Otter Tail County Broadband Feasibility Study Page 12 Runestone Telephone Association, dba Runestone Telecom Association, is a cooperative company, headquartered in Hoffman MN. The company provides service in portions of seven counties in Minnesota including a small portion of southwestern Otter Tail County. The portion of the company’s service area that extends into Otter Tail County is served by fiber-to-the-premise. West Central Telephone Association serves six telephone exchange areas, two of which (Sebeka and Menahga) extend into northeast Otter Tail County. West Central Telephone Association is a cooperative company, serving its members utilizing fiber-to-the-premise technologies. The company provides telephone, broadband Internet, cable TV, security and surveillance, personal emergency response systems, and smart home automation. The company is recognized by the National Telecom Cooperative Association as a Gig-Capable Internet Provider. The company delivers broadband speeds up to 1 Gigabit to all of its members over a 100% fiber optic network. The network includes almost 1,500 route miles of fiber. Competitive Ventures. The cooperative has expanded outside of its incumbent service areas and in Otter Tail County serves some customers in the Wadena exchange. The company was awarded grants from the state of Minnesota’s Border-to-Border Broadband Grant program as follows: 2015 Hwy 71 Wadena area - Grant Award: $193,515 - Total Project: $2,119,018 Broadband infrastructure project. 2016 Wadena Rural North - Grant Award: $718,850 - Total Project: $1,497,605 Last mile project and anchor institutions in Otter Tail County. 2017 Wadena Rural Phase III - Grant Award: $874,581 - Total Project: $1,822,044 Last mile project and unserved businesses within Compton Township in Otter Tail County. Cable TV Providers Charter (Spectrum) Communications is the second largest cable TV company in the country with 25 million customers, just smaller than Comcast. The company reached that size through a 2016 acquisition of Time Warner Cable and Bright House Networks. The company is in the process of rebranding its triple-play products as “Spectrum.” Charter is the incumbent cable provider in Fergus Falls. Charter was founded in 1993 and got its start as a cable company in 1995 when it acquired Cable South. Paul Allen, one of the founders of Microsoft, bought a controlling interest in the company in 1998. The company continued to grow through acquisition, buying a dozen smaller cable systems over the next decade. The company went through a bankruptcy in 2009 and was able to walk away from $8 billion in debt, with the majority of the new shares going to Apollo Management. There have been continued rumors about the merger of the company with Verizon. Charter recently announced that they were partnering with Comcast to be able to provide cellular phone products in their service areas. Otter Tail County Broadband Feasibility Study Page 13 Dish Network is a large satellite provider and has customers in Otter Tail County. The company has around 14 million customers nationwide and annual revenues of over $14 billion. The company has average customer revenues of over $80 per month. Dish Network can be bought as a standalone service and is also available as a bundle for CenturyLink customers. Dish Network now also offers an Internet-based cable product branded as Sling TV. This service offers an abbreviated channel line-up and costs less than traditional cable products. DirecTV is one of the largest cable providers in the US with more than 20 million customers. DirecTV merged with AT&T in 2015. In Otter Tail County, DirecTV is available as a standalone service and is also available as part of a service bundle with CenturyLink. Other Cable Providers. Some of the telephone companies offer cable TV delivered over copper wire using DSL or over fiber. These are not “traditional” cable TV companies and their cable rates and products are shown along with the other rates of the various telcos. WISPs (Wireless ISPs) There are also existing ISPs that deliver broadband using point-to-multipoint radios. This technology will be described in more detail in Section II below. There are numerous WISPs that offer this technology, including a number of them in Minnesota. Satellite Data There are a number of satellite providers available in the county. In each case, the availability depends upon the ability to have a clear line of sight from a satellite dish to the satellites. The top four providers in the country are Exede (which also markets under the name of Wildblue), HughesNet, DishNet, and StarBand. In general, there are several issues with using satellite broadband. First is latency, which means delay in the signal. When an Internet connection must travel to and from a satellite, there is a noticeable delay; that delay makes it hard or impossible to do real-time transactions on the web. Current satellite latency can be as high as 900 milliseconds. Any latency above 100 milliseconds creates problems with any real-time applications such as streaming video, voice over IP, gaming, web sites that require real-time such as education courses and testing, or making connections to corporate WANs (for working at home). When the latency gets too high such services won’t work at all. Any website or service that requires you to maintain a constant connection will perform poorly, if at all, with a satellite connection. The second biggest issue is the small data caps. These caps limit the amount of data a customer can download in a given month. All of the services require contracts of up to 2 years. Finally, the service can be expensive. Here is a short summary of the four providers: Exede (Wildblue): Exede uses the newest satellite and uses technology that has meant a significant increase in download speeds. Exede touts speeds up to 17 Mbps download although customer reviews say the average speed is more like 12 Mbps. Still, that makes it Otter Tail County Broadband Feasibility Study Page 14 the fastest satellite service. They also tout an upload speed of almost 5 Mbps. The company launched a new satellite, ViaSat II, that will allow for services up to 200 Mbps. But most customers on the new satellite will probably stay on the same products offered today. That satellite will go into service in 2019. Monthly plans range from $49.99 to $129.99 per month and vary by the size of the monthly data cap. There is also a $9.99 monthly fee for the modem as well as a $149.99 installation fee. The basic package comes with a monthly allowance of 10 gigabits of total download (same as the largest cellular plans). The premium service has a cap of 25 gigabits. This puts the price per gigabit at $5.50, about half the price of cellular data. Exede does allow unlimited download at night. HughesNet: HughesNet is the oldest satellite provider. They have recently upgraded their satellites and now offer speeds advertised as 8 Mbps download and 0.4 Mbps upload. Their prices range from $49.99 to $129.99. The smallest package has a 10 gigabit download limit per month and the largest one is 20 gigabits. When including the $9.99 cost for the modem, the premium package equates to $7 per downloaded gigabit. DishNet: DishNet is associated with Dish networks and can be bundled with their cable product. DishNet prices range from $49.99 to $79.99. They also charge $10 monthly for the modem. They have download speeds of 7 Mbps and upload at 0.8 Mbps. The monthly caps range from 10 gigabits per month on the smallest plan to 50 gigabits on the larger plan. For the largest plan, this works out to $1.80 per downloaded gigabit, making them the most affordable satellite provider. StarBand: StarBand is a legacy satellite provider that works on older satellites. Their prices range from $59.99 to $119.99 with a $14.99 monthly charge for the modem. Their data caps range from 1 gigabit for the smallest plan up to 5 gigabits on the largest plan. That works out to a cost of $27 per downloaded gigabit for the largest plan, making them probably the most expensive broadband per gigabit in the country. Cellular Data There are four primary cellular companies in the country—AT&T, Verizon, T-Mobile, and Sprint. Only Verizon and AT&T have wide coverage in rural counties like Otter Tail, although there are exceptions. We expect that some households in the county use their cellphone data plans for household broadband. There are several problems with this. First, customer speeds decrease with distance from a cellphone tower. Speeds for cellular data generally are not fast. There are two different cellular data standards in use: 3G and 4G. 3G data speeds are capped by the technology at 3.1 Mbps download and 0.5 Mbps upload. Most rural 4G networks operate at about 12 Mbps download and the upload varies by service provider. There are slightly faster 4G networks which have speeds up to about 25 Mbps download, which you might think of as 4.5G, but which are mostly available today in urban areas. For both of these standards, actual speeds in the field will vary by distance from the tower as well as by how busy a tower is, meaning actual speeds in rural areas tend to be Otter Tail County Broadband Feasibility Study Page 15 fairly slow for most customers. Actual average 4G bandwidth in the country is just over 7 Mbps. But speeds in rural areas are largely determined by how far a customer is from a cell site. While cellular data avoids the latency issue of satellite data, it is more expensive per downloaded gigabit than satellite data and for most customers will be slower. Recently AT&T and Verizon began offering “unlimited” data plans. These plans are not actually unlimited and have monthly data caps in the range of 20+ gigabytes per month of downloaded data. These plans might provide some relief to homes that rely on cellular broadband, although there have been reports of Verizon disconnecting rural customers who use too much data on these plans. B. Current Broadband and Other Prices This section of the report examines the broadband prices available to customers today in the county. It used to be easy to analyze the prices of services. Just a few years ago you could go to the web and find the prices charged by any telco or cable provider, and except for the rare special, most customers in a given town paid about the same thing for service. This is no longer true. Most telco providers have removed their “standard” prices from the web and so there is no baseline cost you can compare. Further, companies have developed strategies to charge different rates to different customers. We know from experience that prices will vary widely by customer. Over the years, customers have purchased various specials or other promotional pricing and might be charged differently than their neighbors. It seems almost counterintuitive, but the customers paying the most from most incumbents are those that have been with them the longest. This means that there is no longer anything that can be considered as a “standard” price in the market. Nevertheless, if you want to compete against these companies, you must understand that there will be a range of prices. CenturyLink Historically the company’s telephone rates were filed under a tariff on file at the Minnesota Public Utilities Commission. A few years ago every one of their telephone customers in the county would have been billed exactly the same rate for the class of service they were using (residential and business rates are different). We would have been able to look at bills for Qwest at the time and would have seen the same rates for every resident. But CenturyLink now has bundling discounts and they also run specials, and so you will be able to find different telephone rates in town. Because telephone is so competitive, the tariffed rates are now generally viewed as the highest rate that CenturyLink can charge and there will be customers paying less than the tariff rate. CenturyLink sells DSL for broadband and these rates have never been regulated. The company has always been free to charge different rates to different customers for the same services. CenturyLink does not directly offer cable TV, but they bundle DirecTV on the same bill. Otter Tail County Broadband Feasibility Study Page 16 Telephone Rates Their basic rates were as follows when last tariffed. This does not mean that these are the rates any longer and with a de-tariffed rate CenturyLink is allowed to charge whatever they want, within reason. The following rates were the last listing of the flat rate option, meaning a telephone line using these rates can make unlimited local calls. There used to be options available for customers who wanted to be able to make and pay for fewer local calls. Monthly Flat Rate Residential Phone Line $18 - $22 Flat Rate Business Telephone Line $42 - $45 Business PBX Trunk Lines $45 - $51 These rates do not include the Subscriber Line Charge which is currently $6.50 for both a business and a residential line and would be added to the above rates. The rates also do not include the Access Recovery Fee (ARC), which is a new FCC fee that is currently capped at $1 per month, and CenturyLink could be charging any amount up to and including the $1 rate. CenturyLink telephone line prices don’t include any features. These features are either sold a la carte or sold in bundles and packages. Some of the most commonly purchased features are call waiting, 3-way calling, voice mail, and caller ID. CenturyLink offers dozens of features and they range in price from $2.95 to $8.50 per feature for residential service. These products are also now de-tariffed and CenturyLink can charge whatever it likes for these products. CenturyLink DSL CenturyLink provides internet in the exchanges of Appleton, Benson, Granite Falls and Montevideo. CenturyLink sells high speed Internet using DSL technology. They sell both a bundled DSL product, meaning that you purchase it along with a telephone line, and also a “Pure” product, meaning a customer can buy just DSL. As discussed above, CenturyLink offers a lot of specials, with special rates available on their web site for new customers. But as typical with most big ISPs, a subscriber’s rates will increase back to “normal” rates at the end of a special promotion. Following are some of the rates charged for residential DSL. We say some of the rates because there are certainly going to be customers in the market on older specials that have different rates than these. Note that the quoted speeds offered by CenturyLink DSL are “best effort” speeds, meaning they are not guaranteed. In fact, rural customers typically get speeds significantly slower than the advertised speeds. Residential DSL CenturyLink currently advertises three special DSL products on their website. These are bundled prices that assume that the customer also buys a telephone line at the full regular price. Bundled Pricing (bundled with either telephone service or DirecTV) Fast From 786k to 3 Mbps Download $14.95 to $24.95 for a 1-year contract Otter Tail County Broadband Feasibility Study Page 17 $39.95 Regular Pricing Faster From 7 Mbps to 12 Mbps $29.95 for 1-year contract $39.95 Regular Pricing Fastest Over 12 Mbps $29.95 for 1-year contract $39.95 Regular Pricing As you can see, all of the DSL has a regular price of $39.95 and the speed a customer can get is related to the specific DSL technology that is deployed in their area. In addition to the base price, CenturyLink charges $6.99 per month for a DSL modem. Customers can provide their own compatible modem to avoid the fee, but the web is full of cautionary tales of customers who were unable to get “compatible” modems to work for them. Pure DSL Pure DSL is CenturyLink’s name for a DSL line that is not bundled with telephone or DirecTV. The CenturyLink website shows the following current prices for Pure DSL. A customer must sign a 2-year contract to get the discounts. There is one price for the first year, a higher price for the second year, and after that the customer pays the list price: 1st Year 2nd Year List 1.5 Mbps download, 896 Kbps upload $30.00 $40.00 $42.00 7 Mbps download, 896 Kbps upload $35.00 $45.00 $47.00 12 Mbps download, 896 Kbps upload $40.00 $50.00 $52.00 20 Mbps download, 896 Kbps upload $50.00 $60.00 $62.00 40 Mbps download, 896 Kbps upload $60.00 $70.00 $72.00 Pure DSL also comes with the $6.99 CenturyLink DSL modem. We don’t expect that there is any DSL in the county faster than 12 Mbps. Generally, the faster speeds are available only in the metropolitan markets. CenturyLink Business DSL CenturyLink no longer publishes business DSL prices. There are no prices on the website and no prices listed in any of their sales literature or tariffs. Basically, CenturyLink will negotiate a price with a business customer based upon how many other products they purchase and also depending upon how long they are willing to sign a contract. When CenturyLink last published rates their slowest business DSL ranged from $40.00 per month for a 3-year contract up to $62.50 for a month-to-month product and no contract commitment. But today each customer will negotiate with a salesperson and rates charged in the market are all over the board for the same product. Otter Tail County Broadband Feasibility Study Page 18 East Otter Tail Telephone (Arvig Communications System). The company’s current prices include: Telephone The rate for local service varies by exchange and varies from $16.95 and $21.95. Broadband These rates also vary by city or township. The company offers maximum available speeds up to 100 Mbps download in most cities served. In some rural townships, Internet service is still provided via DSL at speeds significantly lower than shown below. Range of Pricing Up to 25 Mbps $34.95 - $42.95 Up to 50 Mbps $44.95 - $52.95 Up to 100 Mbps $64.95 - $72.95 Cable TV Cable is not available everywhere and also varies by city. In Perham City, Battle Lake City, and Clitherall City published rates are: One Star - $40.95 Two Star - $82.95 Three Star - $97.95 Four Star - $141.95 In Clitherall Township, Otter Tail Township, and Everts Township rates are: Basic - $40.95, Home - 83.95, Life and Leisure - $96.95, Total Entertainment - $141.95 In Nidaros Township only one package is offered: The Home Entertainment package at $83.95. For all plans HD is $9.95 additional for each plan. Premium channels are available for additional fees. Loretel Systems (Arvig Communications) The company’s published rates are as follows: Telephone Residential - $ 20.00 Otter Tail County Broadband Feasibility Study Page 19 Broadband 25/3 Mbps $45.00 50/5 Mbps $50.00 100/10 Mbps $65.00 Cable TV Basic - $40.95 Home - $83.95 Life and Leisure - $96.95 Total Entertainment - $141.95 HD is $9.95 additional for each plan. Premium channels are available for additional fees. Park Region Mutual Telephone Company Bundled rates for Telephone, Cable TV, and Internet services vary by location. Cable TV is not available in all areas. A sampling of published bundled rates are listed below: Ashby, Dalton, Erhard, Underwood, and Vining Telephone - $18.00 Telephone and Broadband 2 Mbps - $42.85 4 Mbps - $53.95 6 Mbps - $63.95 8 Mbps - $79.40 10 Mbps - $88.45 16 Mbps - $108.45 Telephone, Broadband, and Cable TV Basic/24 channels/4 Mbps - $87.55 Super/103 channels/4 Mbps - $105.00 Battle Lake, Elisabeth, and Fergus Falls Telephone - $18.00 Telephone and Broadband 3 Mbps - $39.95 30 Mbps - $54.96 60 Mbps - $69.95 Telephone, Broadband, Cable TV Basic/24 channels/30Mbps - $89.95 (upgrade to 60 Mbps additional $15.00) Super/103 channels/30 Mbps - $151.06 (upgrade to 60 Mbps additional $10.00) Additional bundles are offered. A $14.00 loop fee is added to stand-alone Internet service. Premium channels are available for additional fees. Otter Tail County Broadband Feasibility Study Page 20 Rothsay Telephone Company (Park Region Mutual) The company publishes rates as follows: Telephone Business and Residential $18.00 Broadband 1 Mbps - $25.95 10/1 Mbps - $36.95 10/2 Mbps - $46.95 25/2 Mbps - $55.95 25/4 Mbps - $65.95 30/2 Mbps - $75.95 30/5 - $79.95 Cable TV Basic Cable - $70.95 Super - $109.84 Premium channels are available at additional charges. No bundled rates are offered. Red River Telephone Association Prices obtained from their website are as follows: Telephone Telephone service is sold as bundles of various features. The most typical voice packages cost around $30. Residential Basic Line $18.00 Business Basic Line $18.50 Subscriber line charge $ 6.50 Features sold separately and not included in the basic line: Caller ID $4.00 Caller name and number $6.00 Voice mail options $3.95 to $8.95 Many other features $1.00 each Long Distance $0.14 per minute Broadband (on fiber) 7 Mbps $69.24 15 Mbps $72.24 30 Mbps $82.24 50 Mbps $90.24 Otter Tail County Broadband Feasibility Study Page 21 100 Mbps $121.24 300 Mbps $146.24 1 Gbps $170.24 Installation $35.00 Managed WiFi $3.95 Television Basic $25.95 Expanded Basic $60.29 Choice (100 channels) $68.29 Digital Package with Music $8.00 The Works $101.14 HBO $15.95 Cinemax $7.95 Starz $10.95 Runestone Telecom Association Prices obtained from their website are as follows: Telephone Residential Basic Line $18.00 Business Basic Line $18.50 Subscriber line charge $ 6.50 Features sold separately and not included in the basic line: Caller ID $4.00 Caller name and number $6.00 Voice mail options $3.95 to $8.95 Many other features $1.00 each Long Distance $0.14 per minute Broadband (on fiber) 7 Mbps $69.24 15 Mbps $72.24 30 Mbps $82.24 50 Mbps $90.24 100 Mbps $121.24 300 Mbps $146.24 1 Gbps $170.24 Otter Tail County Broadband Feasibility Study Page 22 Installation $35.00 Managed WiFi $3.95 Television Basic $25.95 Expanded Basic $60.29 Choice (100 channels) $68.29 Digital Package with Music $8.00 The Works $101.14 HBO $15.95 Cinemax $7.95 Starz $10.95 West Central Telephone Association The company offers standalone and bundled rates as follows: Telephone Residential - $17.75 Business - $21.75 Telephone & Cable TV Six bundles available ranging in price from $54.95 to $113.95 dependent upon number and type of channels selected. Telephone, TV & Broadband Five bundles are available ranging in price from $89.95 to $159.95 dependent upon number and type of channels selected and Internet speeds. The $89.95, $129.95, and $139.95 options include Internet at 25 Mbps. The $149.95 option includes Internet at 25 Mbps and two movie channels. The $159.95 option includes Internet at 60 Mbps and two movie channels. Premium channels are available for additional fees. Customers can upgrade broadband speeds for the following upcharges: 60 Mbps add $10.00 100 Mbps add $35.00 250 Mbps add $75.00 1 Gigabit add $155.00 Most Internet speeds offered are symmetrical, meaning upload and download speeds are the same. Otter Tail County Broadband Feasibility Study Page 23 Charter (Spectrum) While Charter is a giant company their pricing structure is one of the simplest in the country. The company is going through some major turmoil in that they are moving prices in the recently acquired Time Warner markets to Charter prices, which in many cases are higher, especially since Time Warner was generous in handing out continuing specials and promotions. Broadband Pricing The company currently offers two or more broadband products dependent upon location. The base product in some areas offers speeds up to 60 Mbps, while in other areas the base product offers 100 Mbps with the caveat that in smaller and older markets the speeds might be less than that. They also have a premium service at 300 Mbps which is mostly available in metropolitan areas. The company has also announced that they are making the upgrades to DOCSIS 3.1 that will allow them to offer speeds as high as 1 gigabit. Pricing and speeds vary by location for example in some areas the maximum available speed is 100 Mbps download by 5 Mbps upload (100/5 Mbps) and in others 300 Mbps download by 20 Mbps upload (300/20 Mbps). Charter Spectrum Internet 60/5 Mbps Regular Price $64.99 60/5 Mbps Regular Price Bundled with TV $54.99 100/5 Mbps Promotional Price $44.99 100/5 Mbps Regular Price $64.99-$89.99 100/5 Mbps Regular Price Bundled with TV $54.99-$79.99 300/20 Mbps Regular Price $89.99 300/20 Mbps Regular Price Bundled with TV $79.95 A mandatory activation fee of $49.99 applies to all new installations. Charter does not charge for a cable modem. They are the only large company not to do so and compare this to Comcast which charges $11 a month for the modem. Charter bills a one-time activation fee of $9.99 plus $5 month for their WiFi router. There are no data caps on broadband monthly download. Telephone Pricing Residential Telephone Service is only available as part of a bundle and not as a standalone product. Depending upon the bundle, the voice product which comes with the most popular features adds $19.99 per month to the cost of a bundle. Otter Tail County Broadband Feasibility Study Page 24 Spectrum TV Basic Cable $23.99 Spectrum Select/125 Channels $64.99 (Includes Basic plus Expanded Service) Spectrum Silver/175 Channels $84.99 (Adds digital Tier 1, plus HBO, Showtime, Cinemax and NFL Network) Spectrum Gold/200 Channels $104.99 (Adds digital Tier 2, plus HBO, Showtime, Cinemax, NFL, NFL Red Zone, TMC, and Starz Encore) Spectrum Triple Play promotional offers (36 months) Triple Play Select - 125 Channels/100 Mbps $89.97 Triple Play Silver - 175 Channels/100 Mbps $109.97 Triple Play Gold - 200 Channels/100 Mbps $129.97 There are also numerous other ways to add digital tiers, foreign language programming, and premium channels. There is a fee called a Broadcast TV Service Charge of $7.50 per month that is added to all of the TV prices list above. There is monthly fee of $5.99 (depends on the package) per month per settop box. A DVR- capable box is $11.99 per month. The cable TV product offering is the opposite of the company’s broadband offering. It’s complex with a lot of options. And unexpected and hidden fees can inflate a cable bill. They also offer inside wire maintenance for $4.99 per month Satellite Data Satellite data is very expensive, but not quite as costly as cellular data. The best broadband prices for downloading 1 gigabit of data from the four major satellite providers are: Exede at $5.50 per gigabit, HughesNet at $7.00, DishNet at $1.80, and StarBand at an incredible $27. All of them have tiny monthly data caps and they generally cut a customer off for the rest of the month once the cap is hit. Otter Tail County Broadband Feasibility Study Page 25 C. The Connect America Fund There are two federal broadband programs that come from the Connect America Fund, which is part of the FCC’s Universal Service Fund (USF). Funding from these two programs will be used to improve broadband in some parts of the county. The Universal Service Fund today is funded primarily from surcharges on telephony revenues. Originally, the USF was funded by surcharges on landline telephones and special access circuits only, but eventually a surcharge was also placed on cellphones. The first program is aimed at the largest telcos like CenturyLink and is called Connect America Fund II (CAF II). The FCC has set aside $1.7 billion per year nationwide for the six years starting with 2016 to build or upgrade rural broadband. These funds were made available to census blocks that have little or no broadband today. The FCC awarded $1,421,898 per year for 6 years ($8,531,388 in total) to CenturyLink to bring better broadband to 3,305 rural households in their service area. That equates to $2,581 per household. CenturyLink has said that they plan to use the money mostly to improve rural DSL to the affected customers. CAF II requires that customers must be upgraded to data speeds of at least 10 Mbps download and 1 Mbps upload. Note that those speeds are far slower than the FCC’s own current definition of broadband—25 Mbps download and 3 Mbps upload. Following is a map of the areas in the county that are supposed to get CAF II upgrades, shown as green. These upgrades will create some dilemma for any other provider that wants to bring broadband to the rural parts of the county. The customers affected by CAF II funding are rural and have no broadband today. That means that the customers in the CAF II areas will be glad to have something faster than dial-up. However, the DSL speeds that are required by the program are already inadequate today for many homes. When considering that household demand for broadband has been growing at a rate that doubles every 3 years, by the end of 6 years these areas will have 4X the demand for broadband than they have today. But one would expect these companies to get some customers in these rural areas, making it a bit more of a challenge to a competitor that doesn’t have faster speeds or similar prices. The second Connect America Fund program provides funding for small telcos to improve broadband within their service areas. The program is called A-CAM (Alternate Connect America Cost Model); Arvig and Park Region Telephone have both accepted this funding in the county and will use it to help pay for an upgrade to fiber. Companies accepting this ACAM funding have 10 years to use the funding, with 2017 to be the first year. Otter Tail County Broadband Feasibility Study Page 26 Otter Tail County Broadband Feasibility Study Page 27 II. ENGINEERING DESIGN AND COSTS Finley Engineering performed an engineering analysis and prepared a cost estimate of the cost of building broadband in unserved and underserved parts of Otter Tail County. A. Network Design Before looking at the specific network designs, we gathered information about the county demographics for use in all of the scenarios. Following is a description of the data we gathered and the approach we took to the engineering analysis. Study Area The county elected to look at a study that brings broadband to all parts of the county that are either unserved or underserved today and for which there are no plans to bring fiber in the next few years. We started by looking at maps of existing service levels and found that northwest areas of the county meet the state’s 2026 goal of 100Mbps download and 20Mbps upload. We also found that the broadband offered within the city limits of Fergus Falls meets the state’s 2020 speed goals of 25 Mbps download and 3 Mbps upload. We then researched and contacted all of the local providers in the county. We inquired about the level of service they offered today and what their plans for future upgrades were. A map showing the historic service areas for the telcos is shown as Exhibit I. Below is a summary of what we learned: CenturyLink – CenturyLink operates the Wadena, Fergus Falls, Battle Lake, Henning, Campbell, and Detroit Lakes exchanges in the county. They have taken CAF II funding from the FCC to increase broadband speeds in much of the rural areas to at least 10 Mbps download and 1 Mbps upload. The expectation is that these increases will be achieved by augmenting existing DSL technology on the copper networks. Even after these upgrades none of the rural areas in these exchanges will meet the State’s expected broadband speeds of at least 25/3 Mbps, and thus these rural areas were all included in the study area for our analysis. But there are currently providers that supply such broadband within the city limits of Fergus Falls, Battle Lake, and Henning, which were all excluded from the studies. Arvig – Arvig is the largest telco in the county in terms of coverage area. Arvig has grown over the years through the acquisition of other telephone companies and they operate parts of the county that were historically part of East Otter Tail Telephone Company (where Arvig started), Loretel Systems, and Midwest Telephone Company. The company has accepted federal ACAM funding in the north and eastern portions of their study area. This funding will be used to build fiber to customers, and so these areas were excluded from our analysis. The exception is the exchanges of Parkers Prairie, Urbank, and Eagle Bend in the southeastern part of the county that historically part of Midwest Telephone. These areas are currently served using DSL in a Fiber-to-the-Node network and there are not currently short-term plans to build fiber in this area. This area was included in versions of the study. Otter Tail County Broadband Feasibility Study Page 28 Park Region Mutual Telephone Company/Otter Tail Telecom – The company serves six exchanges in the county. These areas were excluded from the study since the company has taken FCC ACAM funding and is in the process of building fiber to the home throughout these exchanges. The company also serves outside of their historic telco service areas under the brand name of Otter Tail Telecom. They serve a number of small pockets of customers around small lakes and have service in and around Fergus Falls, Battle Lake, and Clitherall. These are a mix of short-length DSL or in some cases full FTTP networks. These areas were excluded from the study. West Central Telephone Association – The company operates the Menahga and Sebeka exchanges in the northeastern part of the county. These areas currently have a full FTTH network and are excluded from all versions of the study. Additionally, they have been expanding outside of their exchanges into the rural portions of the Wadena exchange. This area has also been excluded in all versions of the study including portions that were awarded Border-to-Border Grant Funding in 2017. Runestone and Red River Communications – These two companies mostly serve outside the county but have a few customers within the county. Both companies operate FTTH networks and are excluded from this study. Charter Communications – The company is the incumbent cable TV company within the city limits of Fergus Falls. They provide service using a hybrid-fiber network that currently offers speeds up to 100 Mbps. The company has announced nationwide plans to upgrade speeds to gigabit download speeds. We were not able to determine what the plans are or a timeline in the county, but a safe assumption would be upgraded software and hardware equipment that would result in significantly increased speeds. For these reasons Fergus Falls was excluded from the study. Passings: The telecom industry uses the term “passing” to mean any home or business that is near enough to a network to be a potential customer. We verified passings through the use of county GIS information that showed us the location of all occupied buildings in the study area. With this information we determined the following number of passings for the various scenarios. Our base scenario looks to bring broadband to the rural portions of the areas served today by CenturyLink. The passings for those areas include: Clitherall 83 Elizabeth 109 Lakes Areas 1,694 Rural 3,466 Total 5,352 A second version of the study adds on the area served today by Arvig around Parkers Prairie, Eagle Bend, and Urbank. This second area adds the following access lines: Otter Tail County Broadband Feasibility Study Page 29 Parkers Prairie 581 Urbank 29 Rural 727 Total 1,337 Grand Total 6,689 Finally, we looked at the cost of bringing wireless to only the southwest corner of the county. This scenario would serve 477 rural passings. Road Miles. Otter Tail County has an extensive GIS system in place. This information was used as the primary resource for the study. Analysis of the GIS data, satellite imagery, and also MNDOT maps of streets and roads were used to determine fiber routes in the study area. These are roads that are maintained all year, meaning they are plowed when it snows. Our study is conservative in that it assumes that fiber would be built along nearly all of these roads. It’s likely that in a detailed design some efficiencies could be found that would result in small reductions in the road miles that need fiber. The road miles of fiber needed for the all-fiber scenarios are as follows: Fiber to Century Link Exchanges: Elizabeth 1.7 miles Clitherall 3.0 miles Backbone Fiber 38.3 miles Lakes Area 79.9 miles Rural Fiber 615.7 miles Total 738.6 miles Adding the Arvig Areas: Elizabeth 1.7 miles Clitherall 3.0 miles Urbank 1.1 miles Parkers Prairie 14.0 miles Fiber Ring 80.3 miles Lakes Area 79.9 miles Rural Fiber 807.1 miles Total 987.1 miles Basic Network Design Fiber Backbone All network designs utilize the construction of a backbone fiber. A map of the proposed fiber backbone is shown as Exhibit III. The purpose of the fiber backbone is to provide a path to bring fiber signal to and from the fiber nodes or wireless towers in the different network configurations. Otter Tail County Broadband Feasibility Study Page 30 In the network design for the scenario of building to the CenturyLink areas we designed a backbone fiber of 38.3 miles. This fiber reaches into the various parts of the service area to connect to the needed fiber huts that include splitters and electronics. The scenario that adds on the Arvig areas is large enough to justify instead building a fiber ring of 80.3 miles. A fiber ring provides a redundant connection and allows the network to self-heal and not lose service for a single fiber cut. It’s also possible that if the county was served by telcos that are edging out from the current service territories that the backbone might not be needed or would be constructed in a different manner. However, this wouldn’t greatly change the cost of fiber construction since all of the roads have to be built to get to customers. This backbone configuration was chosen because it would be able to feed either FTTH huts or wireless towers depending upon the design chosen. The design placed huts at the following two locations to house equipment and fiber optic splitters for distribution to subscribers. Again, the buildings could be located elsewhere, but we think two nodes are the best design for reaching all homes with fiber utilizing a centralized design that would maximize bandwidth capabilities. 1. Orwell – Located west of Fergus Falls, would serve rural customers in the southwestern portion of the county. This would be eliminated under a hybrid fiber/wireless design. 2. Friberg – Located northeast of Fergus Falls, would serve rural customers in the area and the town of Elizabeth. 3. Battle Lake – Located on the city limits of Battle Lake and would serve rural customers. 4. Henning – Located on the city limits of Henning and would serve rural customers. 5. Clitherall – Located southwest of Clitherall and would serve the town of Clitherall and rural customers. 6. Parkers Prairie – Located on the city limits of Parkers Prairie and would serve the city of Parkers Prairie and rural customers. This would be eliminated in study versions that do not include the Arvig territory areas. These remote electronics huts are sized to be large enough to accommodate all electronics, batteries, and equipment that would be required with some spare capacity. In all scenarios, we based pricing upon recent quotes we have received from vendors like Calix, AdTran, Clearfield, Cienna, and others. Finley is not proposing any specific vendors as we are vendor neutral. The costs chosen are representative of current electronic costs. In pricing the fiber construction, Finley used pricing from recent construction of fiber in similar conditions (soil type). The labor in the forecasts was estimated at current market rates and did not include the prevailing wage rate. Fiber Drops Fiber drops are the connection from the street or road to the customer premise. The characteristics for needed drops vary in the county. For example, the drops in towns and for customers living near many of the lakes are relatively short. Rural fiber drops would be significantly longer due to the distance of homes and farms from the road. Otter Tail County Broadband Feasibility Study Page 31 We estimate that the average length of the drops in the towns and along lakes are relatively short drops with an average length of 100 feet. However, in the rest of the county the average length of fiber drops looks to be about 350 feet and there are numerous homes that are located far off of roads. This longer drop length adds considerably to the cost of building homes to the rural areas. The All-Fiber Network Scenario The first option studied was an all-fiber design. There are several key factors to consider in the design of a rural fiber network: • Whether to use buried fiber, aerial fiber, or some mix of the two. • The design of the fiber electronics. Since we don’t know if one or more of the existing providers in the area might build broadband to the study area, we designed a network for the whole study area that stands on its own in terms of a design. As mentioned earlier, that design assumes a fiber backbone and also the construction of two fiber nodes to hold electronics. However, should the existing providers build out from existing fiber networks there would likely be some savings from our cost estimates. For example, a network might be designed with fewer huts if existing huts could be utilized. If the network was designed without a fiber backbone or incorporated into existing backbones by different providers there could be savings on the fiber costs and electronics. We took the most conservative approach to the design. The network has been designed as if only one service provider would serve the whole area. In doing so we have not started with any assumption that there are existing fiber assets that might benefit the fiber build. This means that our estimated costs are, by definition, conservatively high. In Otter Tail County, the soil is mostly soft and deep with a few areas of rock that would allow for easy construction for buried fiber. We have also accounted for lakeside construction which is usually more expensive due to wet soils, additional boring requirements, and higher density of potential subscribers. Finley determined that it is probably not more expensive to bury the rural fiber than to put the fiber on poles in those places where there are poles. An all-buried design has the added advantage of having lower future maintenance costs. The one downside to a buried network is that it is more susceptible to fiber cuts by anybody doing rural excavation near roads or at the end of driveways, and it is likely that a buried fiber network would incur these fiber cuts from time to time. This would be another reason to utilize redundant network paths as a single cut would not take the network down. For electronics, the first design issue to consider is whether to centralize or distribute the electronics in the network. The second design issue looks at using a star versus a ring topology. A third issue in the design is to determine whether to use distributed splitter locations or local convergence points for splitter locations. In the all-fiber study, we chose the locations of the huts so that no customer is more than 12 miles away from a hut, the maximum recommended distance for a signal on a FTTH network. That is 12 miles of fiber along a road, not a 12-mile circle. The study shows the need for four huts to act as PON local originating points. Which, as stated earlier, allows us to serve heavy as well as light bandwidth users. Otter Tail County Broadband Feasibility Study Page 32 The huts were designed using prefabricated buildings that are designed to weather all seasons of the year. These buildings are relatively inexpensive and allow for future flexibility. Due to the concentration of customers in small pockets around lakes and small towns we elected to use a combination of remote splitter cabinets and splitters in the remote huts. From each splitter cabinet or hut there is a dedicated fiber built to each customer. This would allow for the option of serving customers with either Passive Optical Network (PON) electronics or with active Ethernet (only for high bandwidth customers). The remote splitter cabinets would not require electronics. The major difference in the two technologies is the number of lasers in the network. In a PON network, one laser in a hut can light up to 64 home lasers (although it’s more typical to light no more than 32 or 16). With active Ethernet there must be one laser in a hut for every laser at a home or business. The cost of the network was determined using pricing of PON electronics. A GPON network shares 2.4G downstream and 1.2G upstream which is split between the numbers of subscribers attached to a GPON splitter with 64, 32, or 16 ports. An active Ethernet port provides up to 1 Gbps of upstream and downstream data to customers today and would be upgradable to 10 Gbps. There are not likely to be any customers in the rural parts of the county that would insist on having a dedicated Ethernet feed, which requires active Ethernet technology. An end user will want a dedicated feed when they don’t want to share bandwidth with other customers anywhere in the network, and that sort of requirement is generally only made by very large data users, like a school system, or security-conscious customers like a military or government building. In today’s market the cost of using active Ethernet probably adds at least 15% or more to the cost of the network electronics. For this reason we priced and entirely GPON design, although some active Ethernet could easily be incorporated. In the design, Finley used large enough fibers for each part of the network to accommodate potential customers in a given area. In a competitive environment, you are not going to know at the time of design where customers are going to be on the network. Over the long life of a fiber, it is to be expected that many of the homes in the rural areas might become customers, and it’s certainly possible over time for many more homes to be built throughout the service area. The fibers were sized to potentially serve everybody in the rural areas, with additional spare fiber strands to act as replacements for any fibers that go bad, as well as to accommodate future new homes. When designing FTTH networks, there are options for how many customers to serve from one neighborhood fiber point. The technology will allow up to 64 customers to share a PON system. Since there are not many customers in the rural areas, the rural network was designed with a 1x16 fiber split while the towns were designed with a 1x32 fiber split. Having a lower split allows the signal to travel farther. If in the final design there are a few customers more than 12 miles from a hut they could be accommodated by placing them on a fiber that has a split of 1x8 or even lower. Customer Electronics The customer electronic devices used to serve customers in a PON network is referred to in the industry as an ONT (Optical Network Terminal). This is an electronic device that contains a laser and which can Otter Tail County Broadband Feasibility Study Page 33 connect to the fiber optic signal using light from the network and convert that signal to traditional Ethernet on the customer side of the network. Traditionally, ONTs have been placed on the outside of buildings in a small enclosure and powered by tapping into the electricity after the power meter. Today there is also an ONT that can be placed indoors and which plugs into an outlet, much like the cable modems used by cable companies. Some companies still put the ONT on the outside of the home to give their technicians 24/7 access to the units. Other providers are electing internal units because of the greater protection from the weather. The industry is split on this choice but it appears that internal ONTs are becoming the most predominant choice for new construction. The cost of the two kinds of units is nearly identical and so the study doesn’t choose between the two types of units. ONTs are also available in multiple configurations. The most common unit is the one that can be used to serve either homes or small businesses, with larger units designed to serve large businesses. The study assumes that only the smaller standard units are used since we don’t think there are any complex businesses in the service area. The network could easily accommodate the larger ONTs if needed. Hybrid Fiber and Wireless Network We also considered a hybrid network that would provide wireless broadband to some rural residents. The large amount of vegetation and terrain make large-scale wireless deployment difficult in Otter Tail County. While a network could be constructed to serve select pockets of customers, it would be very difficult to build a large-scale wireless network that would cover the unserved portions of the county. However, in the southwest portion of the county the topography is conducive to a wireless network. This is largely the area to the east and south of Fergus Falls. Using wireless technology would eliminate the need for the Orwell remote in the southwest corner of the county. The design assumes that customers would be served using point-to-multipoint wireless technology and that the towers would have fiber backhaul from Fergus Falls. The rest of the county would be served with fiber as in other versions of the study. The wireless network begins by assuming nearly the same fiber backbone route as in the all-fiber study. There would be a few short lateral fibers built to get to existing tower sites. We see the following benefits for this network design: • The ultimate goal of the county is to find a way to serve all homes and businesses in the county with fiber. Building a backbone provides the basis for future fiber expansion even if some parts of the county start using wireless technology. • A design that includes a fiber backbone to serve the wireless towers will could also be used to connect homes and businesses on the routes we chose. We’ve seen several DEED grants that received funding to serve customers along similar backbone fibers. • Fiber allows the delivery of large amounts of bandwidth to the towers, which then results in the highest quality wireless product. While it is possible to feed towers with point to point radios instead of fiber, with a fiber network the amount of bandwidth that can be delivered to a given tower is nearly unlimited, which will be important as wireless technology improves over time. • Fiber networks are generally among the most reliable components of modern networks. Usually the electronics on a fiber network are designed with redundant switchover, meaning that the network can quickly heal itself in case of an electronics failure. In addition, other than an Otter Tail County Broadband Feasibility Study Page 34 occasional fiber cut, the fiber is generally reliable. Microwave backhaul systems are also reliable, but not as reliable as fiber systems as they are more susceptible to interference and inclement weather. The wireless network was designed with 2 total towers. The design would lease space on one existing tower and build one new tower. These towers would create a network that is within 6 airline miles of each potential customer. Before building an actual network we would highly recommend doing a more detailed propagation study to determine the optimum location of the new towers. Such a study would consider trees and other details not included in our study. For this kind of network, the towers should be as tall as possible because the taller they are, the easier it is to reach to homes. Any tower that is taller than 190 feet must be registered with the FCC and meet some additional obligations (such as having a blinking light on the top). The new towers included in this study are 300 feet tall. But again, with final engineering, the heights could be changed if needed for any or all towers. Finley determined that reducing the tower height to 190ft would save $48,350 per tower. At each tower is a set of radio transmitters and receivers that will communicate with customers. Each tower site has more than one transmitter and each transmitter is designed to transmit in a 60 to 120 degree path, called a sector. Thus, it takes at least three transmitters to serve the full circle around one base station. Each sector can comfortably handle a set number of point-to-multipoint connections, and so multiple sectors means the ability to serve more customers. We are always asked how fast the customer broadband connections are in a wireless network, and in this kind of network the answer is: it depends. As mentioned earlier, the two most important limiting factors affecting data speeds are the specific spectrum being used and the distance between a customer and a tower, with customers who are close capable of getting faster speeds than those who are farther away. The overall goal with our design was to try to design a network capable of delivering a minimum of 25 Mbps to customers. There are several different frequencies of radios that can be used for the wireless deployment. • The primary frequency used for this technology today is WiFi. This is the same WiFi frequency used to deliver broadband inside homes. WiFi is really two frequencies – one at 2.4 GHz and another band at 5 GHz. Probably the biggest advantage of WiFi in this use is to use each frequency to serve different customers – matching each customer to the one that gives them the best signal. • New radios also often include the 3.65 GHz frequency that was recently approved for rural broadband by the FCC. There are several advantages of this frequency over WiFi. First, the channels in this frequency naturally allow for greater bandwidth deliver. The 3.65 GHz frequency handles trees much better than WiFi. However, no frequency is perfect with foliage and some customers, particularly those farther away from the tower, might need to take some steps like cutting down trees to improve reception. Licenses for this frequency are currently on hold from the FCC and new rules should be in place by early 2018 to promote the use of this frequency to build high reliability wireless networks. Otter Tail County Broadband Feasibility Study Page 35 • Radios used for this purpose today are largely software tunable and we envision networks that use both 3.65 GHz and WiFi, and which might be able to accommodate future frequencies allowed by the FCC. • There is another wireless technology that will be available in a few years for rural wireless broadband. The frequency is referred to as white space radio and uses the same frequencies that are deployed by UHF television channels (channels above channel 13). The FCC recently finished an auction where TV stations offered their frequencies which were then sold in an auction to bidders. The frequencies were bought by the wireless carriers like T-Mobile and AT&T. Dish Networks also bought spectrum. The surprise buyer was Comcast which is now entering the wireless business and has announced partnering with Charter to do so. Now that the auction is over it is expected that the FCC will release some portions of this spectrum for public use. The benefit of this frequency is that it can carry a larger data signal (wider channels) as well as travel farther than existing frequencies. This frequency is not going to be available everywhere in the US, but the areas where it’s likely to not be available are mostly near the oceans since some of this frequency is used by the Navy. The promise of the white space frequency is that it probably could be used to serve 50 Mbps service to about the same number of customers on a 3.65 MHz network getting 20 Mbps. Another side benefit of wireless networks is that they don’t care about political boundaries, and so it is likely that a network would be able to pick up some customers outside the county. The 6-mile radius is only a limitation for delivering quality bandwidth. Many wireless companies sell slower products at greater distances; there might be many customers 10 miles from a tower willing to pay for 5 Mbps broadband if all they can get today is dial-up. So there could be some small amount of additional revenue available that is not reflected in the business plan. Product Assumptions We assumed that the all-fiber network would be capable of delivering the triple play products of broadband, telephone, and cable TV. We have assumed that the wireless customers would not be able to receive cable TV but could get telephone service using VoIP. Other Capital Costs and Considerations Following are some of the additional capital costs that we considered in the financial models. Triple Play Capital The studies all assume that any ISP that builds to these rural areas would either already be delivering the triple play elsewhere or else would be able to buy these services from one of the existing ISPs in the area. We already know that a rural business as small as this one would not be able to support the construction of a large headend building, a full cable TV headend, a telephone switch, and the other assets needed to provide those products. The business plans include the electronics needed at the customer location to provide services. For example, in the versions that assume the delivery of cable TV, there are settop boxes provided to customers. There are also voice gateways provided to deliver Voice over IP (VoIP). These are Otter Tail County Broadband Feasibility Study Page 36 small boxes that allow the use of existing telephone wiring and telephones served from a broadband network, nearly identical to the little devices supplied with VoIP services like Vonage. Other Assets: The business plan also includes the other assets needed to operate a triple play business. This would include new vehicles for the outside technician. The business plan includes a computer for every employee along with furniture and office equipment. Inventory/Spares: The business plan includes inventory. This inventory consists of spare fiber, settop boxes, ONTs, and spare cards for all the electronics. Battery Backup: Historically, engineers designed many FTTH networks with battery backup for the ONT. However, many small fiber providers have stopped providing batteries. The batteries were installed to provide power to telephones in the case of a power outage at the home. However, there are fewer and fewer phones in existence that are powered from the phone line and most phones must be plugged into an outlet. When such a phone loses power it can’t be powered by the battery. Our design does not include a battery backup, but a provider could provide optional batteries for customers who really want one. Telephone companies are required by FCC rules to offer an optional battery backup plan for customers. They are allowed to charge enough to recover their costs. B. Network Cost Estimates Following are the cost estimates for constructing the network and the other assets needed for each business plan scenario. Capital Assumptions in the Study Capital is the industry term for the assets required to operate the business. The capital expenditures predicted in these models reflect the results of the engineering studies referenced in Section II.A of the report. The launch of a broadband network requires a significant investment in the fiber network and electronics and this is by far the biggest cost of getting into the business. Below is a summary of the specific capital assets needed for each base scenario. The amount of capital investment required varies by the technology used as well as by the number of customers covered by a given scenario. Telecom capital includes several broad categories of equipment including fiber cable, electronics for FTTH, huts and wireless towers, wireless electronics, and customer devices like cable settop boxes, VoIP gateways, and WiFi modems. In addition to capital needed for the network, there are operational capital costs predicted for assets like furniture, buildings, computers, vehicles, tools, inventory, and capitalized software. We have tried to be realistic in our estimates so that hopefully the actual cost of construction will be something lower than our projections. One way we were conservative was by including a 10% construction contingency in the cost of the fiber to cover any cost overruns. Otter Tail County Broadband Feasibility Study Page 37 However, it is important to remember that the engineering used to make these estimates is high level. Detailed engineering is expensive and would involve having an engineer examine local construction conditions across the proposed network. That kind of engineering is generally not done until a project is ready for construction. Instead the engineering was done using some field examination of the county, but mostly relying upon maps and other tools. Finley has made many such estimates over the years and we know that this level of engineering is generally good enough to assess if a project is worth further consideration. The studies all assume that the provider of service will not build a new cable TV headend or buy a new voice switch for the provision of cable TV or telephone service. If the new provider is an ISP that already offers those products elsewhere, the assumption is that they would transport in the products over the fiber backbone. Following is the capital required for the base case for each of the scenarios at a 70% customer penetration. These represent the capital expended during the first 4 years, which for most projects are covered by borrowing before the business becomes cash positive. The capital costs would be higher or lower if there were greater or fewer customers than the 70% used to calculate these figures. All-Fiber Scenario CenturyLink Rural Add Study Area Midwest Tel Land $ 100,000 $ 120,000 Vehicles $ 71,750 $ 108,522 Tools $ 75,000 $ 75,000 Buildings $ 329,245 $ 395,094 Furniture $ 6,000 $ 9,000 Computers $ 15,360 $ 21,633 Settop Boxes $ 214,383 $ 265,595 Fiber Electronics $ 4,444,148 $ 5,484,557 Fiber Drops $ 5,286,155 $ 6,474,934 Fiber Network $24,142,971 $31,343,306 Inventory $ 100,000 $ 100,000 Capitalized Software $ 52,439 $ 65,178 Total $34,837,451 $44,462,818 Hybrid Fiber & Wireless This scenario only builds wireless in the southwest corner of the county where the area is most suited to a wireless solution. This still builds fiber to customers in the rest of the proposed service areas. Otter Tail County Broadband Feasibility Study Page 38 CenturyLink Rural Study Area Land $ 80,000 Vehicles $ 71,750 Tools $ 75,000 Towers/Huts $ 398,746 Furniture $ 6,000 Computers $ 15,360 Settop Boxes $ 195,031 Fiber Electronics $ 4,054,460 Wireless Electronics $ 165,528 Fiber Drops $ 4,682,525 Fiber Network $19,311,999 Inventory $ 100,000 Capitalized Software $ 49,438 Total $29,205,837 Wireless Only This scenario is an incremental look at the cost to only build a wireless solution for the southwest corner of the county. This scenario does not any other parts of the county and is not comparable to the scenarios above. Southwest Study Area Vehicles $ 17,938 Tools $ 40,000 Towers $ 135,350 Furniture $ 1,500 Computers $ 6,090 Voice Gateways $ 9,450 Wireless Electronics $ 167,948 Fiber Network $ 1,182,335 Inventory $ 40,000 Capitalized Software $ 1,735 Total $ 1,602,346 Customer Costs Residential Fiber Electronics Costs: The model assumes that the hardware electronics for an ONT cost $317. In the projections it was assumed that the installation would be done by external contractors. It could be less expensive to do this using existing company personnel at the service providers. This design uses ONTs that are designed to deliver only voice and data. There are older ONTs on the market that allow for delivery of a separate analog TV data path, but newer networks assume that the cable TV offering will be digital and delivered over the IP data path. This requires the use of IPTV where video Otter Tail County Broadband Feasibility Study Page 39 is 100% digitalized and delivered in an IP data format to the settop box. IPTV is becoming the video delivery method of choice in the fiber industry and is even being considered by cable companies. In the scenarios that considered cable TV, it was assumed that a basic settop box costs $115 and an advanced one costs $240. Fiber Drops: Fiber drops are the fiber that connects between the distribution fiber and a customer’s location. In this study the cost of fiber drops is significant. The assumption has been made that with the volume of drops needed, plus the anticipated speed of network deployment, the drops during the first 4 years of the project would be installed by external contractors. The cost for fiber drops in the towns are estimated to cost $638. The much longer drops in the rural areas were estimated to cost $1,904. That includes $182 of materials and the rest for labor. There are ways that the nonrural drops could be done at lower cost using pre-connectorized drops. These are drops that come in preset standard lengths and that can be plugged into the ONT without the need for splicing. There could be some modest savings using this method if it’s determined that the actual drop lengths are somewhat predicable and fit the available lengths of drops that are available. It might be possible to save some on labor costs should a builder be able to somehow assemble their own construction team for the rural drops. But the prices included in the study represent recent pricing being paid in several Minnesota projects to external contractors. Starting the in the fifth year there are only a few drops added each month and it’s assumed that this would be done by company technicians, for a substantial saving on labor costs. Business Costs We assumed that the businesses in this area would be able to use the same ONTs and drops as residences, with identical costs. There may a few businesses that would require more expensive ONTs, but that would add only a tiny amount of extra cost to the study. Wireless Radios A customer wireless CPE costs $601 including the cost of installation. This consists of a small dish and associated electronics. This assumption includes installation by external contractors and it’s possible that this could be done less expensively with the personnel of a service provider. Triple Play Services We have assumed that the ISP operating this network would already be providing these services for other customers in the area. Thus, there was no cost in the model for a voice switch or a cable TV headend. To be conservative we have added in some routers and servers, but these might not be needed. Other Assets The business plan also includes the other assets needed to operate a triple play business. This would include new vehicles for the outside technician. The business plan includes a computer for every employee Otter Tail County Broadband Feasibility Study Page 40 and furniture and office equipment. The business plan includes inventory, which would consist of spare fiber and spare electronics. Backhaul Options Each of the telcos in the area already has a backbone connection to get bandwidth to and from the open Internet. The forecasts assume that the new customers would be served by one or more of these telcos, and thus there would not be a need for a new and separate backbone connection to the Internet. This means there would be no additional transport cost, but there would be an additional cost to buy bandwidth. C. Competing Technologies Following is a more in-depth discussion of the technologies that are currently provided in the rural areas today. Wireless Technologies There is always a lot of confusion about wireless technology since there are so many different frequencies in use and different technologies used for each. It is likely that there are rural residents in the county today using the following wireless technologies for broadband: Cellular Data There are rural customers all over the US that use their cellphone data plans as a way to get or to supplement a home broadband connection. There are several reasons why this is a major problem and concern. Cellular data is the most expensive bandwidth in the US. The cell phone companies sell it at between $8 and $15 per downloaded gigabit of data. To put that into perspective, a significant percentage of households today already download over 100 gigabits of data per month. Somebody using that much bandwidth with cellular data would be spending $1,000 a month. The cellphone companies justify the high prices by arguing that they must limit usage to avoid network congestion. They have argued that big users tie up networks and make it hard for others to get good service. A few years ago, Michael Powell, ex FCC Chief and head of the NCTA, admitted that data caps are not about congestion but are about ‘pricing fairness,’ which means they are not about fairness at all, but about charging more to large data users. We also know that data caps are about money due to the recent practice of zero-rating. That is the practice where wireless carriers will give customers unlimited access to data and video that they sponsor but count video from anybody else against monthly data caps. If you can watch all you want of DirecTV Now on your AT&T cellphone then there is obviously plenty of capacity at cell sites. There is some validity in the cellular companies’ claims in that cellphone networks were not originally designed to deliver data. The cell towers were spaced to maximize voice coverage. Data transmissions travel for a shorter distance than voice and so the data coverage from any given cell tower is not as good as the voice coverage. Further, cell towers can only handle some set number of customers for data Otter Tail County Broadband Feasibility Study Page 41 purposes. This is why you can’t get coverage when you’re in a sports stadium or convention center with a lot of other people. Another issue with cellular data is that the speeds in rural areas are not as fast as those in urban areas. Cell phone companies have made a lot of upgrades over the last decade or so, upgrading first from 2G to 3G data and then to 4G data with a few intermediate steps in between. While most urban areas now have 4G data, the vast majority of rural cell towers are still at 3G data speeds. Like all wireless bandwidth, the speeds seen by customers are directly in proportion to how far they are from the cellular tower. Cellular data speeds diminish quickly with distance; people who are not close to a cell tower are going to get relatively slow speeds. While we don’t expect to see it deployed in the county, AT&T has begun offering fixed cellular service in places where they are the incumbent telephone company. Customers are guaranteed speeds of at least 10 Mbps down and 1 Mbps up. The broadband product is priced at $60 per month with a contract or $70 per month with no contract. Installation is $99. The product comes with a WiFi router that also includes 4 Ethernet ports for wired connections. However, there is one big drawback for this product in that it comes with a monthly data cap of 160 gigabytes per month. Extra data above this limit costs $10 for each 50 gigabytes (or fraction thereof). A household that uses these connections in the same manner as most households with landline data connections will experience bills greater than $100 per month or more. 5G Cellular There have been a lot of press announcements recently about the upcoming 5G cellular technology and the press releases from both AT&T and Verizon would make one believe that we will be seeing gigabit speeds for cellphones. What are the real facts about 5G? Consider some of the following: First, there is no standard yet for 5G and a standard isn’t expected until late 2018. The Next Generation Mobile Network Alliance (the group that will be developing the standard) states that the standard is going to be aimed at enabling the following: • Data rates of several tens of megabits per second should be supported for tens of thousands of users. • 1 gigabit per second can be offered simultaneously to workers on the same office floor. • Several hundreds of thousands of simultaneous connections to be supported for massive sensor deployments. How does this stack up against AT&T’s claims that 5G will be bringing gigabit speeds? According to OpenSignal (who studies the speeds from millions of cellular connections), the average LTE download speeds in the 3rd quarter of last year for the major US carriers were 6 Mbps for Sprint, 8 Mbps for AT&T, and 12 Mbps for both Verizon and T-Mobile. This is what we are getting today from 4G. The 5G standard is going to be aimed at improving speeds for regular outdoor cellular usage to “several tens of megabits per second,” which means speeds of maybe 20–30 Mbps. The gigabit hype comes from the part of the standard that will address the capability of what are called millimeter waves (very high frequencies). The 5G standard will include the ability to use high frequencies to deliver very fast speeds. However, this is a very different application than cellphones and so while Otter Tail County Broadband Feasibility Study Page 42 everyone reading the announcements of gigabit wireless are expecting those speeds for cellular data—it will just not be the case. The 5G standard is going to allow for combining multiple very high frequencies together to create a high bandwidth data path of a gigabit or more. But there are characteristics of millimeter wavelengths that limit this to indoor usage inside the home or office. For one, these frequencies won’t pass through hardly anything and are killed by walls, curtains, and to some extent even clear windows. In addition, the signal from these frequencies can only carry large bandwidth a very short distance—perhaps sixty feet. This technology is really going to be a competitor to WiFi while using cellular standards. It will allow the fast transfer of data within a room or an office and will provide a wireless way to transmit something like Google’s gigabit broadband around an office without wires. These millimeter waves are not going to be of any use outdoors, or at least no farther away than a patio. This technology cannot be used for roaming cellphones. The use of multiple antennas for multiple high frequencies is going to require an intricate and complicated antenna array at both the transmitter and the receiver. In any case, the distance limitations of the millimeter frequencies means this will never be used for outdoor cellphone coverage. Thus, the 5G standard might enable really fast speeds inside the home, at a convention center, or maybe a hotel, assuming that those places have a fast internet connection, but the 5G standard is not shooting for gigantic increases in cellphone speeds. The problem with this kind of hype is that it convinces nontechnical people that it’s a bad idea to invest in fiber because gigabit cellular service is coming soon. While nothing could be further from the truth, the positive press along with the market confusion over this are probably great for AT&T and Verizon. Point-to-Multipoint Data The second kind of wireless network is a point-to-multipoint data network that is transmitted from one central transmitter to many individual points. This is the technology recommended in this report for the hybrid network designs. There are three current slices of spectrum that can be used for this purpose and two more that will be coming on the market in the next few years: • 900 MHz: This spectrum has been available for this application for many years. This is the spectrum used back in the 70s and 80s to provide the bandwidth for garage door openers and cordless phones. This spectrum got saturated; in urban areas there were many stories about people opening their neighbors’ garage doors when they made a phone call. This spectrum can still be used today in a point-to-multipoint radio system. The best characteristic of this spectrum is that it travels well through impediments like trees and it can go for a long distance—over ten miles. The down side is that, since it has a low frequency, the channels aren’t very big and it can only deliver a few megabits per second of data speed. Otter Tail County Broadband Feasibility Study Page 43 • WiFi: WiFi is short for wireless fidelity and is meant to be used generically when referring to any type of 802.11 network. The FCC has currently set aside two swaths of frequency for WiFi: 2.4 GHz and 5.7 GHz. In a point-to-multipoint network, these two frequencies are often used together. The most common way is to use the higher 5.7 GHz to reach the closest customers and save the lower frequency for customers who are farther away. In practical use, in wide-open conditions, these frequencies can be used to serve customers up to about 3–4 miles from a transmitter. They have a theoretical cap of 28 Mbps on the bandwidth that can be delivered, and in ideal conditions they can achieve that much speed. But the signals are disrupted by trees and leaves and can be degraded by rain, snow, or even just heavy humidity. The ideal condition is in the flat, open southwest desert; everywhere else performs worse than the ideal. • 3.65 GHz: The FCC authorized the 3.65 GHz–3.70 GHz frequency for trials of public use in 2006, and is just now making it available for widespread use in rural applications. This spectrum is promising because the existing trials showed that it can penetrate trees much better than the 2.4 GHz WiFi. There are a few limitations of this spectrum. The spectrum cannot be used close to existing government installations or satellite earth stations that use the spectrum. Since these facilities are mostly near to a few submarine bases, it should not be an issue in Minnesota. The spectrum will be licensed for a very affordable $280 fee. However, the license is not exclusive and every user of the spectrum will be expected to coordinate with other users. This is not like a normal FCC license and it is not first come first serve. Everyone using the spectrum in a given area is expected to work with others to minimize interference. The FCC will act as the arbiter if parties can’t work this out together. There are different rules for using the spectrum depending upon how it is deployed. The FCC rules suggest using radios that use other spectrum in addition to 3.65 GHz. For radios that only use this spectrum the usage is limited to the 25 MHz band between 3.65 and 3.675 GHz. Radios that allow for a shift to other frequencies when there is contention can use the full 50 MHz channel within this frequency. The frequency can support bandwidth on one channel up to 37 Mbps download. It’s possible to bond channels within the frequency band or with other unlicensed spectrum to get even faster throughput. It’s theoretically possible with bonding to get speeds of 100 Mbps. Radios for this frequency are readily available from most of the major point-to-multipoint radio manufacturers. The price of the base stations and customer CPE are slightly higher than the cost of radios in the unlicensed bands. In practical application, this spectrum can be used to deliver up to 25 Mbps at six miles from the transmitter, with more bandwidth for those customers who are closer than that. It can theoretically transmit to the horizon, but at greatly diminished speeds. The network proposed by Finley Engineering has the goal of delivering 25 Mbps or more to customers. • White Space Spectrum: The FCC has been doing trials in what is called white space spectrum. This is spectrum that is the same range as TV channels 13 through 51, in four bands of frequencies Otter Tail County Broadband Feasibility Study Page 44 in the VHF and UHF regions of 54–72 MHz, 76–88 MHz, 174–216 MHz, and 470–698 MHz. The FCC order refers to whitespace radio devices that will work in the spectrum as TVBD devices. The FCC auctioned a lot of this frequency earlier this year, with the buyers ranging from the big cellular companies and Comcast. This was called an incentive auction, because TV stations that gave up their spectrum will share in the sale of the spectrum. The FCC is now expected to make some of this spectrum available for rural broadband. The rules have not yet been worked out, but they will probably be something similar to what governs WiFi and be available to anybody. There are two possible uses for the spectrum. On a broadcast basis, this can be used to make better hotspots. A 2.4 GHz WiFi signal can deliver just under 100 Mbps out to about 100 meters (300 feet). But it dies quickly after that and there may be only 30 Mbps left at 200 meters and nothing much after that. Whitespace spectrum can deliver just under 50 Mbps out to 600 feet and 25 Mbps out to 1,200 feet. There is potential for the spectrum to extend point-to-multipoint radio systems in rural areas. White space radios should be able to deliver about 45 Mbps up to about 6 miles from the transmitter. That’s easily twice as far as what can be delivered today using unlicensed spectrum. Physics limit this to about 45 Mbps of total bandwidth for a single channel, but it will be possible to bond together multiple channels. While not at fiber speeds, this spectrum can enhance rural broadband. It is likely to be at least a few more years before the FCC releases this spectrum and equipment becomes available from vendors. One issue to be worked out is that the FCC rules require the radios using this frequency to use what they are calling cognitive sensing. What this means is that an unlicensed user of the spectrum will be required to vacate any requests for usage from a licensed user. While this would not be a problem where there is only one user of the white space spectrum, where there is a mix of licensed and unlicensed users the unlicensed provider needs to pair radios with other spectrums to be able to serve customers when they have to cede usage to a licensed user. Microsoft’s White Space Concept As we were writing this report Microsoft proposed a concept that is aimed towards bringing white space radio broadband to the 23 million people in the country that don’t have broadband. Some of the early press about the company’s announcement read it to mean that the company would be launching a major broadband initiative. But a closer reading of their whitepaper shows an idea that still has a number of hurdles to cross. Here is what Microsoft actually said in both their whitepaper: • Microsoft will partner with telecom companies to bring broadband by 2022 to 2 million of the 23.4 million people that don’t have broadband today. We have to assume that these “partners” are picking up a significant portion of that cost. Those partners could be rural telcos, electric coops, or even government entities. Microsoft is not proposing to be an ISP or a service provider. • Microsoft hopes their effort will act as a catalyst to push white space broadband to the rest of the country. Microsoft is not themselves planning to fund or build to the remaining rural Otter Tail County Broadband Feasibility Study Page 45 locations. They said for that to be able to happen that some combination of public grants and private money would needed to be found to do this. At this point in time there is no federal broadband funding program. Since these radios won’t meet DEED speed standards they also might not be eligible for DEED grants. We also have to wonder where the commercial partners are going to be found who are willing to invest the $8 billion to $12 billion that Microsoft estimates this will cost to do this everywhere. • Microsoft only thinks this is viable if the FCC follows their recommendation to allocate three channels of unlicensed white space spectrum in every rural market. The FCC has been favoring creating one channel of unlicensed spectrum per market. A skeptic would say that this white paper and announcement is a clever way for Microsoft to put pressure on the FCC to free up more spectrum. If so, does that mean this will quietly die if the FCC sticks to their own proposed solution? • The white paper admits that for this idea to work that manufacturers must mass-produce the needed components. This is the classic chicken-and-egg dilemma that has killed other deployments of new spectrum. Manufacturers won’t commit to mass-producing the needed gear until they know there is a market, and carriers are going to be leery about using the technology until there is a standardized mass-market product available. This alone could kill this idea just as what happened to the FCC’s plans for the LMDS and MMDS spectrum in the late 1990s. Those spectrums were touted as being good for broadband, but a market never developed. There are a number of major hurdles that must be overcome to use the spectrum: • First, the technology has to work. The white space band is going to carry a mix of licensed and unlicensed users. Since the spectrum carries for such great distances there is a lot more chance of interference between licensed and unlicensed users. The FCC has proposed solving this problem by using radios for unlicensed use that can sense a licensed use and that then vacate the spectrum. If this create challenges for grabbing an open channel for an unlicensed use then nobody will trust using this spectrum. There have been trials of the technology, but they were not done in a busy spectrum environment where there are a bunch of licensed users. • Second, somebody has to be willing to fund the $8 B to $12 B Microsoft estimates this will cost. There may or may not be any federal grants ever available for this technology, and there may never be commercial investors will to spend that much on a new technology. The fact that Microsoft thinks this needs grant funding is indicative that a business plan based upon this technology might not stand on its own. • Third, the chicken-and-egg issue of getting over the hurdle to have mass-produced gear for the spectrum must be overcome. • Finally, the FCC needs to adopt Microsoft’s view that there should be 3 unlicensed channels available everywhere—something that the licensed holders are going to strongly resist. If that doesn’t work then there might not be enough rural unlicensed spectrum to make this viable. Wireless vs Fiber In general, wireless technologies are not as good as fiber for delivering data. There are many who claim that wireless is the future and that it is a waste of time to build fiber. Most of the time people making these Otter Tail County Broadband Feasibility Study Page 46 claims are talking about broadcast networks like cellular systems. They believe that 4G and future 5G cellular technologies are going to deliver large amounts of broadband and that fiber is not really needed. There are many reasons why that is not true; consider the following: • In the US, the FCC has chopped almost all of our spectrum into tiny channels. This was done years ago before there was any concept of needing fast data, but these channels make it a challenge to cobble together a fast data product over wireless. To make a fast connection means tying together a number of channels at the same time from different frequencies. This can be done, but what it means in practice is that from any one cell site, only a few users can be using big wireless data at the same time. • Wireless data capabilities drop off significantly with distance. The physics of wireless spectrum dictates that the higher the frequency, the shorter the distance that data can be sent. • The best frequencies for sending data a long way are the somewhat longer frequencies like 700 and 900 MHz. These frequencies have small channels and can only deliver a few megabits of data. These are some of the primary frequencies used in 3G and can send out the smaller data pipes for 10 miles or more. • The higher the frequency, the less the distance. For instance, the primary WiFi frequency is 2.4 GHz. It can send out a strong signal, perhaps 100 Mbps, but this is only good for about 150 feet from a hotspot. • The other free frequency is 5 MHz. It can do up to about 200 Mbps, and theoretically up to almost a gigabit, but this is only good within a room. It won’t travel more than about 60 feet from a hotspot. • What these data limitations mean is that in order to have robust broadcast wireless data you must have cell sites that are close together. That means having them deep into neighborhoods. The cellular companies are already starting to build mini-cell sites in cities to get cell sites close together and ultimately there might be a few in every block. But each of those cell sites has to be fed by fiber and so it would be as expensive to build this fiber-fed wireless network in rural areas as it is to put fiber into homes and businesses. Contrast this with fiber that has almost limitless data capacity. Today, consumer fiber networks are already delivering gigabit speeds. That is fifty times faster than the best rural wireless solution available today. There is even a 10-gigabit residential fiber product in St. Paul, which is 500 times faster than the best wireless solution. While the wireless solutions are not going to get better because they are limited by physics and not by technology, fiber can always be improved by using faster and cheaper lasers. The difference between the two technologies is so gigantic that there is no real comparison. When people talk about gigabit wireless, they are talking about having a wireless technology that will deliver that much speed within a room. This has only been done in a lab, but those kinds of speeds will eventually be available within your living room. While there will undoubtedly be technological improvements in techniques to deliver rural wireless, those improvements will probably increase the capacity of the signal a few times, but not nearly to the speeds that fiber can deliver today. DSL and Copper Technology In the county any telco, such as CenturyLink, not using fiber are using DSL (Digital Subscriber Line) to deliver broadband. DSL works by using the higher frequencies that are available on a piece of copper Otter Tail County Broadband Feasibility Study Page 47 wire. These frequencies are not used for voice service. DSL is used to provide an Ethernet data path over the copper that can be used to deliver customer broadband service. There are different kinds of DSL standards, each of which has a different characteristic in terms of how much bandwidth they deliver and how far the signal will travel. The most important characteristic of DSL is that customer data speed decreases with the distance the signal travels. The general rule of thumb is that DSL can deliver a decent amount of bandwidth for about 2 to 2.5 miles over copper. The vast majority of people in the rural areas are more than 2 miles from a town; they are able to get only very weak and slow DSL, if they’re able to get any DSL at all. The large telcos will sometimes sell DSL with speeds as slow as 124 kbps, or just barely faster than dial-up. DSL signal strength is also affected by the quality of the copper. The newer the copper and the larger the gauge of the copper wires, the better the signal and the greater the bandwidth. Most of the copper wires in the county are 50 years old or older and have outlived their original expected service life. Hybrid Fiber Coaxial Network Currently in the county the only Hybrid Fiber Coaxial (HFC) network is operated by Charter in Fergus Falls. Hybrid refers to the fact that an HFC network uses both a fiber backbone network and a copper network of coaxial cable to deliver service. HFC networks are considered lean fiber networks (meaning only a relatively few fiber strands) since the fiber is only used to deliver bandwidth between the headend core and neighborhood nodes. At each node is a broadband optical receiver that accepts the fiber signal from the headend and converts it into a signal that is sent over coaxial cable to reach homes and businesses. An HFC system handles delivery of customer services differently than an all-fiber network. For example, in an HFC network, all of the cable television channels are sent to every customer and various techniques are then used to block the channels a given customer doesn’t subscribe to. In an HFC network all of the customers in a given node share the data available to that node. This means that the numbers of customers sharing a node is a significant factor—the smaller the node the stronger and more reliable the data product. Before cable systems offered data services they often had over 1,000 customers on a node. But today the sizes of the nodes have been “split” by building fibers deeper into neighborhoods so that fewer homes share the data pipe for each node. It is this node-sharing that has always given a cable network the reputation that data speeds will slow down during peak usage times, like evenings. If nodes are made small enough then this slowdown does not necessarily have to occur. If nodes were made as small as PON fiber networks (less than 32 homes), then the data delivery issues would be similar, but cable company nodes today are typically between 100 and 500 homes, with an average size being around 250 homes. The amount of data that is available at a given node is a function of how many “channels” of data the cable company has dedicated to data services. Historically a cable network was used only for television service, but in order to provide data services the cable company had to find ways to create empty channel slots that no longer carry programming. Most cable systems have undergone a digital conversion, done for the purpose of freeing up channel slots. Otter Tail County Broadband Feasibility Study Page 48 The technology that allows data to be delivered over an HFC system follows a standard called DOCSIS (Data Over Cable Interface Specification) that was created by CableLabs. Most of the cable companies in the country are currently using DOCSIS 2.0 or 3.0 that allows them to bond together enough channels to create data products as fast as about 250 Mbps download. However, there is now a new standard, DOCSIS 3.1, that theoretically allows all of the channels on the network to be used for data and which could produce speeds as fast as 8–10 Gbps if a network carried only data and had zero television channels. The one big data limitation of a DOCSIS network is that the standard does not anticipate symmetrical data speeds, meaning that download speeds are generally much faster than the upload speeds. This is not an issue for most customers, but it does give a fiber network a marketing advantage and there are customers who care about upload speeds. If an HFC network wanted to offer gigabit upload speeds they would need to dedicate an additional 24 empty channels just for the upload, something nobody is ever likely to do. There is a distance limitation on coaxial cable, but since these networks are not often built in rural areas this rarely comes into play. Unamplified signals are not generally transmitted more than about 2.5 miles over a coaxial network. This limitation is based mainly on the number of amplifiers needed on a single coax distribution route. Amplifiers are always needed for coax distribution over a couple of thousand feet. Modern cable companies try to limit the number of cascaded amplifiers on a coax route to 5 or less. They will want fewer amplifiers if they are trying to deliver top data speeds. Improved Satellite Technology? There are several companies that are looking for the funding to build a newer satellite network using satellites placed in orbits much closer to the earth than the current satellites providing broadband. This would solve the latency issue discussed above. The biggest company looking at this is Elon Musk. He already owns SpaceX, the company that is commercially launching satellites. Musk says it will require a $10 billion investment to build the satellite network. The satellites would use frequencies between 10GHz and 30GHz, in the Ku and Ka bands. Musk says that SpaceX is designing every component from the satellites to earth gateways and customer receivers. There is a detailed filing with the FCC of his plans for the network at https://cdn.arstechnica.net/wp- content/uploads/2016/11/spacex-Technical-Attachment.pdf. The specifications say that the network could produce gigabit links to customers, although that would require making simultaneous connections from several satellites to one single customer. And while each satellite has a lot of capacity, using them to provide gigabit links would chew up the available bandwidth in a hurry and would mean serving far fewer customers. It’s more likely that the network will be used to provide speeds like 50 Mbps to 100 Mbps. Those speeds could be revolutionary for rural America. The FCC and their CAF II program is currently spending $9 billion to bring faster DSL or cellular service to rural America with speeds that must be at least 10/1 Mbps. Musk says this whole venture will cost about $10 billion and could bring faster Internet not only to the US, but to the world. Still, at this point there is no way to guess if this will ever happen or if the satellites will operate as claimed. Otter Tail County Broadband Feasibility Study Page 49 III. FINANCIAL BUSINESS PLAN ANALYSIS The goal of the financial analysis was to see if there is a way to provide profitable broadband to the parts of the county without broadband. First, we studied three different footprints for building a broadband network, as follows: • Broadband to Rural CenturyLink Areas. This scenario brings broadband to the rural portions of the areas where CenturyLink is the incumbent telephone provider today. This area is most easily visualized as the pink areas on Exhibit I less the big towns of Fergus Falls, Battle Lake, and Henning. There are also areas outside of these towns and near some of the lakes that have already gotten fiber, and those are also excluded. The study area includes the towns of Elizabeth and Clitherall. • Full Study Area. The largest geographic footprint for fiber includes the same CenturyLink areas as the scenario above and adds the portion of the county served by Arvig that does not have short- term plans for a fiber upgrade. This is the area that was formerly served by Midwest Telephone Company and is shown in Exhibit I as light green. The study area includes the towns of Parkers Prairie and Urbank. • Smaller Wireless-Only Footprint. Finally, we look at the cost of providing wireless broadband to the portion of the county that looks to be suited to this kind of deployment. This study area covers the southeast corner of the county and is shown in light green on Exhibit III. We looked at the following specific scenarios: • Build Fiber-to-the-Premise: This scenario looks at the economics of building fiber to every home and business within the first two study areas described above. • Hybrid Model: This scenario builds fiber to the towns and also to any homes or businesses that are located near to the fiber backbone contemplated by the studies. The remaining customers who are the most rural are offered fixed wireless broadband. A. Business Plan Key Assumptions This section of the report looks at the detailed assumptions that were made in creating the financial business plans. The business plans created are detailed and contemplate all aspects of operating a broadband network in the county. The business plan assumptions used in the forecast include our best estimate of the operating characteristics for such a business. As a firm, CCG consults to hundreds of communications entities that operate triple-play businesses. We not only work with clients to develop original business plans, but we work with them to help maximize profits with existing businesses. This has given us a lot of insight into how triple-play businesses work and we are experienced in how businesses really operate under all sorts of conditions. We believe that the financial results shown in these models are characteristic of similar operations elsewhere and we believe our assumptions are realistic. Following are some of the key assumptions that were used in all of the scenarios. Otter Tail County Broadband Feasibility Study Page 50 Incremental Analysis It’s important to note that all of the projections were done on an incremental basis. This means that the studies only consider new revenues, new expenses, and new expected capital costs. This is the most common way that businesses of all sorts look at potential new ventures since the incremental analysis answers the question of whether any business line will be able to generate enough revenue to cover the full cost of entering the new market. It’s important to understand what an incremental analysis shows and does not show. An incremental analysis is basically a cash flow analysis. It looks at the money spent to launch and operate a new venture and compares those cash flows to the revenues that might be generated from the venture. An incremental analysis is not the same as a prediction of what the accounting books of the new venture might look like. For example, if one of the existing telcos in the area was to undertake one of these business plans, they would allocate some of their existing overhead costs to the new venture. The classic textbook example of this is that some of the existing cost of the general manager of the telco would be allocated to the venture in the accounting books. However, the cost of the salary of the general manager is not considered in an incremental analysis. That salary is already being paid by the existing business. If these studies were to show an allocation of the general manager then they would not be properly showing the net impact to the telco of entering the new market since the allocation of this expense would improve the financial performance of the existing business and would then not be considered when looking at the new venture. Timing Timing is critical to any business plan. The faster that a business can start generating revenues the sooner it can cover costs. These studies are somewhat conservative in the predictions of the speed of the rollout of the business venture. That means that a service provider can do better than these plans by taking steps to launch the new business faster than what is shown in these projections. Following are the major milestones as predicted by these forecasts: • Financing: All of the forecasts assume that the financing is available in January 2019. This is illustrative only and basically establishes a starting date for the project—this could be changed to any other future date as needed. • Construction: Core construction of the network is done during the spring and summer after financing. That doesn’t mean that all of the construction needs to be finished by then and some of the rural construction can be completed in the second year. Revenue Assumptions It has been our experience in recent years that a new broadband business in a rural market does not necessarily need to offer low prices to get customers. Faster broadband and good customer service are the keys to success for areas that have not had adequate broadband before. With that said, our base business plans set broadband prices at market rates, meaning the rates that are being charged in the county today for faster broadband. There are a number of telcos operating in the county today and we tried to set prices Otter Tail County Broadband Feasibility Study Page 51 based upon a composite of their existing prices. In highly competitive markets it’s sometimes necessary for a new competitor to lower rates to get customers. But in this market, particularly in the rural parts of the county, the goal should be to deliver a quality product at a fair price and not try to gain market share with big discounts. In the all-fiber scenario, we assumed the delivery of the normal triple play of video, voice, and high-speed data. We also assumed that the products would be as simple as possible. As an example, the incumbent telephone companies in the county offer a wide range of different kinds of telephone products. We assumed that a new business would offer only a few options. For instance, for residential service we have assumed only a basic telephone line and a telephone line with unlimited long distance. Telephone Rates Our study used the following very simplified pricing for residential phone service: Basic Local Line $24.00 Line with Unlimited Long Distance $39.00 We’ve assumed that both kinds of lines include a full package of features like voice mail, caller ID, etc. If a provider charged extra for these features they would probably get a little more revenue than predicted by our business plan. The above prices also include any Subscriber Line Charge that is added to the basic rate. All of the telcos in the county charge this rate today, which is a regulatory fee defined by the FCC that the telephone companies bill and keep as revenue. Our business plan keeps the assumptions simple and the basic telephone rate includes a few dollars per month for long distance. It’s been our experience recently that most customers make long distance calls using cell phones. Those that want to make many long distance calls from a landline usually opt to buy the unlimited long distance plan. Our assumptions are probably a little conservative in that there could be some customers that still make a lot of long distance calls and pay on a per minute basis. Our assumption in the study is that the basic line would have the same limited local calling scopes that exist in the county today. Today customers in any one telephone exchange only get free calling to a small number of other places, as shown below. Customers must pay long distance to call anywhere else on their landline. Following are the long distance calling scopes for the exchanges in and around the county today. Most customers in the county are served from telco central offices located inside the county, but a few are served from locations outside the county. Exchange Phone Company Can Call for Free Ashby Park Region Dalton, Evansville Battle Lake CenturyLink Maine Otter Tail County Broadband Feasibility Study Page 52 Exchange Phone Company Can Call for Free Bertha East Otter Tail Eagle Bend, Verndale, Wadena Campbell CenturyLink Abercrombie ND, Breckenridge, Colfax ND, East Abercrombie, East Fairmount, Fairmount, Great Bend ND, Harkinson, ND, Lidgerwood ND, Mooreton ND, South Lidgerwood SD, Wahpeton ND, Wyndmere ND Cormorant Loretel Audubon, Lake Park, Pelican Rapids Dalton Park Region Ashby, Underwood Deer Creek East Otter Tail New York Mills, Wadena Dent East Otter Tail Maine, Perham, Vergas Detroit Lakes CenturyLink Audubon, Vergas Eagle Bend Midwest Tel Bertha, Clarissa, Miltona, Parkers Prairie, Urbank Erhard Park Region Pelican Rapids Fergus Falls CenturyLink None Frazee Loretel None Henning CenturyLink Otter Tail, Vining Maine Park Region Battle Lake, Dent, Otter Tail, Underwood Menahga West Central Nimrod, Park Rapids, Sebeka, Wolf Lake New York Mills East Otter Tail Deer Creek, Otter Tail, Perham, Sebeka, Wadena ‘ Otter Tail East Otter Tail Henning, Maine, New York Mills, Perham Parkers Prairie Midwest Tel Eagle Bend, Miltona, Urbank Pelican Rapids Loretel Cormorant, Erhard Otter Tail County Broadband Feasibility Study Page 53 Exchange Phone Company Can Call for Free Perham East Otter Tail Dent, New York Mills, Otter Tail, Vergas Rothsay Rothsay Tel None Sebeka West Central Menahga, New York Mills, Nimrod, Wadena Underwood Park Region Dalton, Maine Urbank Midwest Tel Eagle Bend, Millerville, Miltona, Parkers Prairie Vergas East Otter Tail Dent, Detroit Lakes, Perham Vining Park Region Henning Wadena CenturyLink Bertha, Deer Creek, New York Mills, Nimrod, Sebeka, Verndale Wendell Runestone Norcross, Tintah Customers buying the unlimited long distance plan would be able to call anywhere, including all parts of the county, as part of their plan. These plans today often include Canada and even some other international locations. The above prices do not include taxes and other fees that are billed and submitted to tax authorities. This includes several state and federal taxes, such as a tax to support 911 as well as a federal fee to help fund the FCC’s Universal Service Fund. The study is less specific with business phone rates. Businesses are often interested in other features that include such things as easily being able to put a call on hold or transfer calls to another phone line. Businesses also differ in terms of how many lines they buy, although many of the small businesses in this county would likely have only one telephone line. In the models we have assumed a monthly telephone revenue of $50 per business customer. This assumption is conservative and there might be a few businesses that could greatly exceed that average. Cable TV Products Offering competitive cable TV in a new rural market is a challenge. In the rural areas today every existing TV customer is using satellite. This means there is already a lot of competition for cable. No small provider can really compete on price with the satellite providers and landline prices are almost always significantly higher than satellite prices. For a small company the cost to buy the Otter Tail County Broadband Feasibility Study Page 54 programming is much higher than what is paid by the huge satellite companies. Still, some rural telcos have surprisingly high cable TV penetration rates, particularly cooperatives where customers choose to buy from a company that they also own. But it’s been our experience that when any small provider moves into a new rural market a lot of the existing customers are going to elect to stay with their satellite cable product. Small providers are at an additional disadvantage in that they are forced to raise cable rates every year since the cost of programming goes up significantly every year. For the past decade, programming costs have risen steadily by around 7% per year, but in the last few years has exceeded 10% annually for many small cable operators. This is one of the main causes of the annual rate increases done by cable companies. The most significant factor in offering cable TV for a provider is the difference between the cable retail rates and the programming costs—what is called gross margin in accounting terms. We’ve made the assumption in the models that this margin will stay the same going into the future. The easiest way to do that from a modeling perspective is to not increase either the cable TV prices or the cost of programming over time. That holds the margin per customer the same and it makes the assumption that any cable TV provider will pass on all increases in programming costs to customers. In recent years the majority of our clients have adopted that philosophy and have decided that they will not absorb increased programming costs. There is general expectations by industry experts that the current cable TV model is not sustainable and that something drastic is going to change with the cable TV product during the coming decade. There is already a lot of alternate programming available on the Internet and perhaps it’s expected that a lot of households will cut the cord and will not buy traditional cable products. This has been reflected in the study by showing the penetration rate for cable dropping over time. But nobody has a good crystal ball on how cable might change, so this is probably the one assumption in the study that might have the most variance compared to what has been projected in these studies. The industry might also undergo other changes. For example, the major cable companies are now offering skinny bundles, which means small line-ups of just the essential channels that customers say they want to watch. It might be possible in the future for this business to offer something like skinny bundles and be more profitable than what is shown in the studies. The other extreme is also possible in that it might become economically infeasible for small companies to offer cable TV. The margins on cable TV in the model are small enough that either of these two extremes would not have a major impact on the overall financial results. We are aware of a number of our clients that have already discontinued a cable product line. The model assumes the following cable TV products. These products would be the same for residents and businesses. Basic Cable: $33. This is the line-up of network channels like ABC, NBC, CBS, FOX, and PBS plus a few other channels. Expanded Basic Cable. $81. This would be a cable line-up of 65–80 channels of the most popular programming, including the channels included in basic cable. Otter Tail County Broadband Feasibility Study Page 55 Premium Cable. $88. This would be the largest package of around 90 cable channels that would also include everything in expanded basic cable. Movie Channels: These are extra and can be added to the other packages. These are priced close to cost in the projections since there is not much margin on movie channels for small cable operators. Pay-per-View: A few years ago pay-per-view generated decent revenue for many cable operators. But today most small cable providers either don’t carry pay-per-view movies or offer them largely at cost. Many cable operators still carry pay-per-view special events like wrestling, but the amount of net margin from this is generally small and so it is not included in the studies. Broadband Products We have assumed that the new networks being built by these business plans would deliver much faster data speeds than are available to residents today. We again note that the rural parts of our study area have no effective broadband today. By FCC definition these area of the county are considered to be unserved. For purposes of this study we have mimicked the pricing of Redwood County Telephone Company. However, the pricing is not specific by speed, but rather includes four tiers, from slow to fast. The models assume the following rates for fiber-based broadband: Residential Tier 1 $42.95 Tier 2 $52.95 Tier 3 $72.95 Tier 4 $107.95 Business Tier 1 $62.95 Tier 2 $72.95 Tier 3 $92.95 Tier 4 $127.95 The study also considers a point-to-multipoint wireless product in the rural areas that is priced as follows. This pricing mimics that of MVTV today. However, if the network is fiber fed, meaning faster speeds, then the actual speeds would probably be greater than shown: Residential Tier 1 $52.95 Tier 22 $62.95 Tier 3 $82.95 Tier 4 $117.95 Otter Tail County Broadband Feasibility Study Page 56 Business 2.5 Mbps $72.95 5 Mbps $82.95 10 Mbps $102.95 25 Mbps $137.95 Most service providers charge more to businesses for broadband. It’s typical that customers will buy the lowest speed product they are comfortable with in order to save money. The studies assume that most customers will buy the lower several speed products. These are shared data products, meaning that the overall bandwidth to provide them is shared among multiple customers. This is not to say that the data path to a given customer is not secure, because the transmission to any specific customer is encoded for privacy purposes. Still, there might be some business customers that will want a dedicated data product that is not shared with anyone else. The network can accommodate this by providing such customers with an active ethernet connection. Prices for these services would cost a lot more than shared data services. It would be surprising if there are any businesses in the rural parts of the county that would ask for dedicated broadband. The financial models assume that the data products don’t have data caps and provide unlimited broadband usage to customers. If there were data caps then customers that exceeded those caps would be charged more than the basic prices. Very few small service providers impose data caps. There are data caps on CenturyLink DSL, but it’s been widely reported that the company often doesn’t bill for data overages. Customer Penetration Rates The factor that has the most probable impact on the revenues is the number of customers projected to buy services, which we refer to in the industry as the customer penetration rate. In the forecasts, we looked at customer penetration rates in several different ways. We started the analysis using what we call expected rates. The expected rates are an estimate on our part that allowed us to build the starting models. We used an expected penetration rate of 70% as the starting point of our analysis. This is not to say that we are predicting that a broadband business would do that well in these areas. We have witnessed the construction of broadband in a number of rural markets in the last few years and we have seen customer penetration rates in those markets range between 60% and 80%, with one or two even higher. The 70% penetration rate was used to construct the first version of each scenario, but from there we then calculated the breakeven penetration rate. There is no reason to think that the rural portions of the study area won’t do as well as other rural markets we’ve seen. The people living in the study area have little or no expected broadband options today. CenturyLink will be bringing better broadband to some of the homes, but the FCC funding for this upgrade only requires deliver of speeds of 10/1 Mbps. Even the towns included in Otter Tail County Broadband Feasibility Study Page 57 the study area are tiny and don’t have the same kind of broadband available in Fergus Falls and larger towns. The only real way to understand the potential broadband penetration rate would be to do a survey or a canvass and quantify the potential customer interest in the service area in buying broadband from a new network. A survey would ask a statistically representative sample of homes if they are interested in better broadband. A canvas would try to ask everybody. We have found that surveys results are the most accurate when customers can understand the issue—such as when prices for broadband products have been determined. Other Future Revenues The forecasts also suppose better broadband networks will be able to offer other products in the future in addition to the triple play. As service providers continue to see declines in telephone and cable TV customers (as shown in our projections) many telcos and ISPs will enter into new business lines. Already today we see small ISPs offering: • Security: This is burglar alarms, motion detectors, smoke and CO2 detectors, and other devices to create a home security suite. • Home Automation: We see companies now offering the service of connecting Internet of Things devices. This might include surveillance cameras, smart thermostats, smart lighting, watering systems, smart door locks, and other devices that automate the home or office. • Managed WiFi: This is a product where the service provider helps to improve the WiFi system in homes by placing networked WiFi routers, and then also making it easier in the future to add devices to the WiFi network. The business plan is not specific about which future products might be introduced and in fact it could be products that we don’t even envision today. Since we can’t know the specific products the forecasts include the net margin—the cash profits—from these future revenue sources rather than trying to predict both the revenue and expenses. The forecasts also add this slowly. For example, the forecasts predict that there will be new products of some sort sold to only 3% of customers by 2020 with an average margin for those few customers at $10 per month. This doesn’t add a lot of bottom line to the model, but we are certain that over time all small ISPs will offer services that are not included in the base forecasts. Expense Assumptions Expenses are the recurring costs of operating the business once it’s built. We strive when building financial projections to be conservatively high with expense estimates. It’s often less costly for an existing service provider to add a new market than what is shown in these projections. For example, if we predict the new business might need to hire additional staff for customer service or for field technicians we often find that existing staff at service providers are able to pick up much of the new work load without having to hire more employees. We made the following assumptions about expenses: Otter Tail County Broadband Feasibility Study Page 58 Employees: Labor is generally either the largest or second largest expense of operating a broadband network (cable TV programming is the other large expense). Our models assume that a service provider will need to hire additional staff to take care of the added customers. We have assumed salaries at market rates with an annual 2.5% inflation increase for all positions. We’ve assumed that the benefit loading is 32% of the basic annual salary. That would cover payroll taxes and other taxes like worker’s compensation, as well as employee benefits. As stated earlier, these models are incremental and only consider the additional labor needed because of the customers added. At a minimum, the new business would require the following two additional types of employees: Customer Service Representatives: These employees take new orders, answer customer questions about billing, services, etc. We’ve assumed the CenturyLink territory option will require 2 new positions; the full fiber build would require 3. Install/Repair Technician: This function installs new customers and visits customers for needed maintenance and repairs. We’ve assumed the CenturyLink territory option will require 2 new positions; the full fiber build would require 3. There are obviously other functions that must be done in a new business. For example, a service provider must have a general manager. There will generally be an accountant or bookkeeper of some sort. There might be intermediate management in charge of the technicians or customer service representatives. There might be full-time marketing people. But, as described above, this analysis would not show these functions unless it was necessary to hire new employees due to adding the new market. We anticipated that construction contractors will build the fiber and/or wireless networks. We’ve also assumed that the installations at the customer site would be outsourced during the construction process and for the first few years thereafter. However, once the bulk of customers has been added the forecasts assume that future installations will be done by company technicians. Start-up Costs: To be conservative, there are some start-up costs included in each scenario. There are expenses associated with launching a new business or new market and rather than list them all specifically we have included them as start-up costs. There are start-up costs even for an existing ISP when entering a new market. Sales and Marketing Expenses: Every scenario is going to require a significantly high customer penetration rate to be successful. We used the assumption that there would be a marketing effort to sign customers (instead of the word-of-mouth that often happens in rural markets). It would be too risky to spend the money to build a network without knowing for sure that there are enough interested customers to allow the business to pay for itself. Marketing expenses shown in the models are likely going to be for that effort. It’s possible that such money would be spent earlier than shown in the model. There have been rural start-ups that have been able to sign up customers using community volunteers, so it’s possible that the marketing costs could be lower than shown. Otter Tail County Broadband Feasibility Study Page 59 Cable TV Programming: Almost all small cable operators purchase cable signal from the National Cable Television Cooperative (NCTC), a cooperative of small cable providers. NCTC currently provides programming to nearly 20 million subscribers, meaning they get some of the best prices for programming in the industry. As described above, in these models the assumption has been made that the gross margin on cable TV per customer will remain the same throughout the study period. This was done in the model by showing no increase in cable rates and also no increases in cable programming costs. This assumes that the service provider will pass all programming cost increases on to customers. Should they not do this then the forecasts will perform worse than shown. Delivery of Triple-play Products: The projections assume that the new business will not construct a headend to provide the triple-play services. If the service provider is already offering these products then the assumption is that they would deliver the same product to the new customers in the same manner that they delivery to existing customers. If the county or some new provider was to operate the business it’s assumed that they would buy the wholesale services from another service provider. Since this is an incremental model the assumption is made that the service provider will pay to gain wholesale access to the products. This includes a monthly fee to pay for voice lines and a monthly fee for use of the cable TV headend. Maintenance Expenses: There are a number of routine maintenance expenses that the new business would incur on an incremental basis. These include: • Vehicle expenses to maintain the vehicles required for the field technicians. • Computer expenses to support the computers used by employees. • Tools and equipment expenses. • Power expenses to provide power to the network. • General maintenance and repair of the outside plant network and the electronics to repair damaged or nonfunctional electronics. • Internet Backbone. Since this is an incremental analysis we have shown only incremental increases in the cost of internet bandwidth. If this business was served by a new entity then the cost of bandwidth would be higher to also cover the cost of transport to reach the Internet. • Internet Help Desk. The monthly fee for this service covers several different functions. This fee would cover those functions used to deliver broadband such as spam monitoring and security, as well as network monitoring. The fee also includes the help desk function, which is the function of assisting customers with broadband and network issues. Software Maintenance: Triple-play providers maintain a complex software system called BSS/OSS (billing and operational support systems). This software provides a wide range of functions: order taking, provisioning new customers, tracking of customer equipment, tracking of inventory, creation of customer bills, tracking of customer payments (or nonpayment). Since most such software is billed to providers on a per-customer basis we have assumed an expense for this maintenance. Otter Tail County Broadband Feasibility Study Page 60 Billing: Billing costs are shown as the incremental cost used to bill customers. We assumed that there would be some mix of mailing paper bills, of charging bills to credit cards, and of charging bills directly as debits to bank accounts. Taxes: The model assumes that the business that operates the business will pay state and federal income taxes. These taxes would not apply if this was operated as a municipal business or as a nonprofit. We have assumed no property taxes on assets, but it’s possible that some amount of this might apply. The forecasts do not include any taxes that are assessed to customers. For example, this business would be expected to charge and collect various telephone taxes. These kinds of fees are normally added to the customer bill, and thus customers directly pay these taxes. The models don’t show these taxes and the assumption is that the taxes would be collected and sent to the tax authorities on the customers’ behalf. They are not shown as revenue or expense to the forecasts, but rather are just a pass-through. Overhead Expenses: The forecasts include various overhead expenses. Again, since this is an incremental model it does not include allocated expenses such as an allocation of the general manager’s salary. But there are incremental costs attributable directly to the new business. This would include things like legal expenses, accounting audit expenses, consulting expenses, business insurance, and other similar expenses that are directly related to entering a new market. Depreciation and Amortization Expense: The forecasts include both depreciation and amortization expense. These are the expenses recognized by writing off assets over their expected accounting lives. For example, the depreciation rate for a vehicle is 20% per year (is written off over 5 years). The cost of a new vehicle is then depreciated monthly to write off the asset over the 5 years, or 60 months. All hard assets are depreciated except land. Depreciation rates are set according to the expected life of the assets—something that is usually determined to comply with IRS rules and also accounting standard practices. Soft assets like software are instead amortized, using the same process as depreciation. Why the Projections Are Conservative We always try to make our business plans conservative. By conservative, we mean that an actual business plan ought to perform a little better than we are projecting. Following are some of the conservative assumptions used in the business plan: • The models contain no “home run” revenues. These would be sales of larger broadband products such as selling bandwidth to the local schools. We know that every fiber business gets some of this kind of revenue, but we took the conservative approach of not showing it because we can’t guess how much and when such opportunities might occur. • The engineering estimates include a 10% contingency. We think the estimates of construction costs are solid and this contingency might not be needed. Otter Tail County Broadband Feasibility Study Page 61 • If the network was constructed by “edging out” from existing telcos, there could be some savings in the cost of building fiber. There could also be a savings from serving rural customers from existing fiber huts. • In the model, we show an increase in the cost of wholesale bandwidth over time. However, industry costs for raw data might be less than we are projecting and might even drop over time. • Our model assumes a regular replacement of electronics. However, it is possible that upgrades will be needed less often than we have shown. Further, our assumption is that the cost of electronics at the time of each upgrade would cost as much as the equipment that is being retired. The experience of the electronics industry is that electronics get cheaper and more efficient over time, so the cost of upgrades is probably going to be less than is shown in the model. The vendors in the industry have also gotten better at having phased upgrades that allow for keeping older equipment in place and not having to replace everything at once, making upgrades less expensive than we have projected. • There are steps that the new business could take to improve upon these projections. • Preselling: We’ve seen service providers that are able to get earlier revenues when they presell to customers. This gives them the opportunity to begin connecting the network to the homes of presold customers while the network is being built. This would allow customers to be turned on in “nodes” or neighborhood-by-neighborhood as construction to specific parts of the county was completed. • More Concentrated Build Schedule: It’s always possible to build faster than shown in these forecasts if the service provider insists on a faster construction schedule. Basically, for these kinds of networks, the amount of network that can be built increases by adding more construction crews. • Get Temporary Help: There are often other bottlenecks at small companies that can slow down customer installations. This could mean the need for more sales and marketing staff, additional customer service reps, or inside technicians needed to provision new customers. Service providers should strongly consider using temporary employees during the roll-out of a major new market. • Evaluate Based Upon Speed to Market: Any given service provider might tackle the business plan in a different sequence than shown in these forecasts. For example, in the hybrid scenario they might determine that the fastest way to launch the business might be to deploy rural wireless customers before fiber customers. B. Business Plan Results It is never easy to summarize the results of complicated business plans to make them understandable to the nonfinancial layperson. In the following summary are some key results of each study scenario that we think best allows a comparison of the numbers between scenarios. We look at the amount of cash generated over the life of the plan as well as at the years when each plan achieves positive net income and debt breakeven. Those two new terms are defined as follows: Positive Net Income: The year when the business shows a positive profit defined in the normal accounting sense. This uses the taxation and public accounting definition of profitability and includes depreciation and amortization, which are not cash expenses. The net income also does not consider repayment of debt principle and annual operating capital. Reaching positive net income is an important milestone for a new business and is one of the ways that the public will Otter Tail County Broadband Feasibility Study Page 62 judge your success. Just note, though, that the business can have a positive net income and still not have enough cash to operate the business. But it’s even more common for an asset-intensive business like this one for a business to reach positive cash flow but still have a negative net income—due almost entirely to depreciation expense on the network, which is a non-cash expense. Debt Breakeven: The year when the business has generated enough excess cash that would enable the retirement of the remaining debt. Many loan and bond covenants don’t allow excess cash from a business to be used for anything else, like dividends, until the debt has been retired. The way to measure profitability in a new business is going to differ according to the structure of the business. A municipal business, for example, generally measures success by the ability of the business to generate enough cash to operate without any external subsidy. While for-profit business would generally use something like net income to measure profits. It is important that a business always have cash in the bank to meet its obligations. In this particular business plan the ideal situation would be to always have at least $400,000 in the bank to have a cushion against nonlinear monthly expenditures. Not all expenditures are spent evenly throughout the year and so you need to have a cash cushion to allow for those times of the year when the expenses are higher than normal or when the revenues are lower than normal. Following are the results of the various scenarios. Also note that a table of all of the financial results is included in Exhibit IV. Fiber to Rural CenturyLink Areas This scenario looks at building fiber to the rural areas that CenturyLink serves as the telephone company. This also includes the towns of Elizabeth and Clitherall. These scenarios assume normal commercial financing that would require a 20% equity investment into the project. Base @ 70% With Maximum Breakeven Penetration $10 M Grant Grant Grant Asset Costs $34.84 M $34.84 M $34.84 M $34.84 M Grant $ 5.00 M $10.00 M $17.42 M $19.50 M Debt $27.13 M $22.50 M $15.53 M $13.58 M Equity $ 6.78 M $ 5.63 M $ 3.88 M $ 3.39 M Total $38.91 M $38.13 M $36.82 M $36.47 M Passings Fiber 5,362 5,362 5,362 5,362 Penetration Rates 70% 70% 70% 70% Years until Positive Net Income Never Never Never Never Years until Cash Covers Debt Never Never Year 24 Year 20 Cash after 25 Years ($16.23 M) ($9.43 M) $ 0.85 M $3.72 M Otter Tail County Broadband Feasibility Study Page 63 Results • These scenarios show different levels of grants to help pay for the fiber network. The first column shows $5 million in Minnesota Border-to-Border grant funding, which is the most that can be given to one project in any given year. The second shows a $10 M Border-to-Border grant, which would be possible if the study area was built over multiple years and received grants in two years. The third scenario show getting the maximum amount of grant funding possible—grants totaling $17.42 million. To get that much grant funding would require breaking the study area into parts and receiving grants over multiple years. The final column shows the amount of grant that is needed for the project to always have positive cash flow during the period of bond financing. • It’s worth noting that these scenarios all assume that 20% of the project will be financed with equity – meaning cash from the network owner. This is not an unusual requirement by banks for loans of this magnitude. However, many small telcos would find the amount of equity needed—between $3 million and $5 million—to be a barrier to borrowing the needed funds. Thus, it might be necessary for some builders to find this seed money elsewhere, such as with a grant from the county or from some other source. • Current Border-to-Border grants only match up to 50% of the cost for eligible assets. The fourth scenario shows that a larger grant is required. The needed $19.5 million grant would require a 56% matching. There have been discussions at the state for awarding a higher matching from this grant program. • It doesn’t look financially viable to immediately build fiber to the whole CenturyLink rural footprint without a significant grant. That alone is a challenge because it assumes breaking the project into sections and getting grant funding for multiple years. Fiber to Full Rural Study Areas This scenario begins with the rural CenturyLink areas and adds the portion of Arvig that was formerly part of Midwest Telephone in the southeast portion of the county. This scenario includes the towns of Elizabeth, Clitherall, Urbank, and Parkers Prairie. Base @ 70% With Maximum Breakeven Penetration $10 M Grant Grant Grant Asset Costs $44.46 M $44.46 M $44.46 M $44.46 M Grant $ 5.00 M $10.00 M $22.23 M $26.00 M Debt $35.93 M $31.33 M $19.80 M $16.28 M Equity $ 8.98 M $ 7.83 M $ 4.95 M $ 4.07 M Total $49.91 M $49.16 M $46.98 M $46.34 M Passings - Fiber 6,689 6,689 6,689 6,689 Penetration Rates 70% 70% 70% 70% Years until Positive Net Income Never Never Never Never Years until Cash Covers Debt Never Never Never Year 20 Cash after 25 Years ($24.37 M) ($17.57 M) ($ 0.62 M) $4.58 M Otter Tail County Broadband Feasibility Study Page 64 Results • These scenarios show different levels of grants to help pay for the fiber network. The first column shows $5 million in Minnesota Border-to-Border grant funding, which is the most that can be given to one project in any given year. The second shows a $10 M Border-to-Border grant, which would be possible if the study area was built over multiple years and received grants in two years. The third scenario show getting the maximum amount of grant funding possible—grants totaling $22.23 million. To get that much grant funding would require breaking the study area into parts and receiving grants over multiple years. The final column shows the amount of grant that is needed for the project to always have positive cash flow during the period of bond financing. • Current Border-to-Border grants only match up to 50% of the cost for eligible assets. The fourth scenario shows that a larger grant is required. The needed $26 million grant would require a 59% matching. There have been discussions at the state for awarding a higher matching from this grant program. • It doesn’t look financially viable to immediately build fiber to the whole CenturyLink rural footprint without a significant grant. That alone is a challenge because it assumes breaking the project into sections and getting grant funding for multiple years. Hybrid Fiber and Wireless to Rural CenturyLink Areas This scenario builds to the rural CenturyLink Footprint. It builds wireless technology to those customers living to the west and south of Fergus Falls and builds fiber everywhere else. Even in the wireless area it would bring fiber to customers living near to fiber. Base @ 70% With Maximum Breakeven Penetration $10 M Grant Grant Grant Asset Costs $29.21 M $29.21 M $29.21 M $29.21 M Grant $ 5.00 M $10.00 M $14.30 M $11.00 M Debt $21.68 M $17.08 M $13.03 M $16.12 M Equity $ 5.42 M $ 4.27 M $ 3.26 M $ 4.03 M Total $32.09 M $31.34 M $30.58 M $31.16 M Passings Fiber 4,875 4,875 4,875 4,875 Wireless 477 477 477 477 Penetration Rates 70% 70% 70% 70% Years until Positive Net Income Year 15 Year 12 Year 12 Year 12 Years until Cash Covers Debt Never Year 24 Year 16 Year 20 Cash after 25 Years ($2.17 M)1 $4.62 M $10.57 M $6.00 M 1 In year 20 the business plan has a $7.8 million negative cash position. Otter Tail County Broadband Feasibility Study Page 65 Results • These scenarios show different levels of grants to help pay for the fiber network. The first column shows $5 million in Minnesota Border-to-Border grant funding, which is the most that can be given to one project in any given year. The second shows a $10 M Border-to-Border grant, which would be possible if the study area was built over multiple years and received grants in two years. The third scenario show getting the maximum amount of grant funding possible—grants totaling $14.30 million. To get that much grant funding would require breaking the study area into parts and receiving grants over multiple years. The final column shows the amount of grant that is needed for the project to always have positive cash flow during the period of bond financing. In this case that is $11 million, which requires a 38% matching grant. • It looks to be financially feasible to construct this scenario. However, there are various funding hurdles that are discussed in detail in the summary of the findings of this report. Wireless Only This scenario builds wireless broadband to the portion of the county that is to the west and south of Fergus Falls. This area is shown as light green on Exhibit III. The primary purpose of creating this scenario was to understand the financial characteristics of the wireless technology. No Grant Full Grant Asset Costs $ 1.60 M $ 1.60 M Grant $ 0.00 M $ 0.53 M Debt $ 1.60 M $ 1.13 M Equity $ 0.40 M $ 0.28 M Total $ 2.00 M $ 1.93 M Passings Wireless 477 477 Penetration Rates 70% 70% Years until Positive Net Income Year 4 Year 4 Years until Cash Covers Debt Year 15 Year 10 Cash after 25 Years $ 1.70 M $ 2.33 M Results • This scenario would be eligible for a Border-to-Border matching grant of up to $530,000. • This scenario looks financially feasible and can be profitable for the service provider. Sensitivity Analysis While each of the financial forecasts is based upon numerous assumptions, only a few of these assumptions have the potential to significantly change the results of the analysis. For example, the results of the studies would change only slightly by changing the assumed salary of one of the new employees. Otter Tail County Broadband Feasibility Study Page 66 However, the study results would change more significantly if changing the interest rates on debt financing. The following sensitivity analysis looks at the impact of changing those assumptions that can most affect the results. All aspects of the sensitivity analysis look at the scenario of building fiber to the rural CenturyLink footprint, but similar results would be expected for the other major scenarios. The sensitivity analysis specifically tested the following variables: • Changing the number of customers in the rural area. • Changing the interest rate on debt. • Changing customer broadband prices. • Not offering cable TV. • Considering bond financing. • Shortening the term of the loan. Following are the results of each of these scenarios, compared to the base expected case. This comparison lets you see the bottom line impact of each change. Changing Customer Penetration Rates: This scenario decreases the customer penetration rate from 70% to 60%. @ 70% @ 60% Penetration Penetration Asset Costs $34.84 M $33.52 M Grant $ 5.00 M $ 5.00 M Debt $27.13 M $26.13 M Equity $ 6.78 M $ 6.53 M Total $38.91 M $37.66 M Penetration Rates 70% 60% Years until Positive Net Income Never Never Years until Cash Covers Debt Never Never Cash after 25 Years ($16.23M) ($20.84 M) This shows that dropping customer penetration rates by 10% lowers cash flow over 35 years by $4.6 million. This relationship is somewhat linear and the impact would be about the same for increasing the customer penetration rate. Not Offering Cable TV: This scenario looks at the option of offering only broadband and telephone service. Base @ 70% With Penetration No CATV Asset Costs $34.84 M $34.59 M Grant $ 5.00 M $ 5.00 M Otter Tail County Broadband Feasibility Study Page 67 Debt $27.13 M $27.10 M Equity $ 6.78 M $ 6.78 M Total $38.91 M $38.88 M Years until Positive Net Income Never Never Years until Cash Covers Debt Never Never Cash after 25 Years ($16.23 M) ($18.74 M) This shows that there is still a positive margin contribution from offering cable TV service. Both cable penetration rates and cable margins have been decreasing, but this shows a benefit of $2.5 million over 25 years for carrying the product. Paying a Higher Interest Rate: This looks at the impact of increasing the interest rate by 100 basis points from 5.5% to 6.5%. 1% Interest Base Case Rate Increase Assets $34.84 M $34.84 M Grant $ 5.00 M $ 5.00 M Debt $27.13 M $27.70 M Equity $ 6.78 M $ 6.93 M Total $38.91 M $39.63 M Interest Rate 5.5% 6.5% Debt Term 20 Years 20 Years Years until Positive Net Income Never Never Years until Cash Covers Debt Never Never Cash after 25 Years ($16.23 M) ($20.12 M) As would be expected, a higher interest rate on debt reduces long-term cash flow. In this case, the cash generated over the study period decreases significantly by $3.9 million Increasing Customer Prices: This looks at the impact of two scenarios. The first increases broadband prices across-the-board by $5 per month. The second is a more significant rate increase and brings the cost of the lowest-cost broadband product to $60. $5 Rate Base Case Increase $60 Price Asset Costs $34.84 M $34.59 M $34.84 M Grant $ 5.00 M $ 5.00 M $ 5.00 M Debt $27.13 M $26.88 M $26.40 M Equity $ 6.78 M $ 6.72 M $ 6.60 M Total $38.91 M $38.59 M $38.00 M Otter Tail County Broadband Feasibility Study Page 68 Years until Positive Net Income Never Never Never Years until Cash Covers Debt Never Never Never Cash after 25 Years ($16.23 M) ($11.19 M) ($ 0.90 M) This demonstrates that the business plan is highly sensitive to prices. Increasing the price of the broadband products by $5 increases the cash by almost $5.1 million over 25 years. An even larger price increase brings the scenario close to breakeven. This raises the question of whether rural broadband customers ought to pay more than urban customers, if by doing so they can help to justify the cost of building a network. This topic will be discussed in more detail below. Considering Bond Financing: This looks at the idea of funding some or all of the project with bonds. The first new scenario looks at 100% bond financing. The second looks at the impact of funding $5 million of the project with bonds (perhaps contributed by the county). All Bond $5 M Bond Base Case Financing Financing Asset Costs $34.84 M $34.84 M $34.84 M Grant $ 5.00 M $ 5.00 M $ 5.00 M Bond $ 0.00 M $46.10 M $ 5.00 M Loan $27.13 M $ 0.00 M $23.38 M Equity $ 6.78 M $ 0.00 M $ 5.84 M Total $38.91 M $51.10 M $39.22 M Interest Rate 5.5% 4.5% Mix Debt Term 20 Years 25 Years Mix Years until Positive Net Income Never Never Never Years until Cash Covers Debt Never Never Never Cash after 25 Years ($16.23 M) ($30.00 M) ($17.60 M) This shows how bond financing can be more expensive than commercial financing. It’s generally assumed that bond financing is less expensive due to the lower interest rate. However, there are many additional costs with bond financing that often make it more expensive. These differences will be discussed in more detail in the financing section of the report. Shorten the Loan Term: This looks at the impact of borrowing the funding for 15 years instead of 20 years. Base Case 15-Year Loan Assets $34.84 M $34.84 M Grant $ 5.00 M $ 5.00 M Debt $27.13 M $27.70 M Equity $ 6.78 M $ 6.93 M Total $38.91 M $39.63 M Otter Tail County Broadband Feasibility Study Page 69 Interest Rate 5.5% 6.5% Debt Term 20 Years 20 Years Years until Positive Net Income Never Never Years until Cash Covers Debt Never Never Cash after 25 Years ($16.23 M) ($11.63 M) Borrowing the funds for a shorter amount of time increases long-term cash flow by lowering the overall amount of interest paid during the financing period. But the offset is higher annual debt payments. In this case the long-term cash flow improved by $4.7 M. Conclusion to Draw from the Sensitivity Analysis There are several variables that are significant for a fiber project in the county. This significance means that attention must be paid to these variables when planning a fiber project. Of particular interest is: • Customer Penetration Rates. A difference of 10% of customer penetration resulted in a difference of cash flow over 25 years of $4.6 million. This tells us that anybody thinking of building fiber needs to have some assurance of the number of customers. That assurance can come from conducting a statistically valid survey. Even better would be a canvass, a 100% survey, or else a presales campaign that gets customers to commit to the fiber business before the project is constructed. • Interest Rate on Debt. A 1% difference in the interest rate means a difference of $3.9 million in cash over 20 years. We have been lucky in that interest rates have been relatively low and have held steady for over a decade. But historically interest rates vary significantly and is something that somebody planning a project must pay attention to. • Customer Prices. We looked at two scenarios for increasing customer prices. The first increased broadband prices across the board by $5 and changed cash over 25 years by $5.1 million dollars. That is both an invitation to set prices higher than assumed in the financial studies. It is also a caution against lowering prices for any reason. A second more drastic look raised starting broadband prices to $60 and largely wiped out the cash deficits of the fiber everywhere business plan. This raises the question of whether rural customers ought to be willing to pay more if it can help bring them fiber. This is discussed in more detail below. • Bond Financing. The analysis shows that bond financing is more expensive than bank financing. Many counties have considered loaning money to fiber project, with the goal of getting repaid from the revenues of the business. This analysis shows that bonds are likely to be more expensive than bank financing. This is likely to only be of interest to a telco or ISP that is going to struggle to use traditional bank financing. Otter Tail County Broadband Feasibility Study Page 70 What Conclusions Can We Draw from the Financial Results? There are a number of findings and concerns that come through an analysis of the results of the various financial models we created to look at funding broadband in the county. In undertaking this study the county has made it clear that their ultimate goal is to have fiber everywhere in the county. Already today the smaller telephone companies in the county are constructing fiber to a significant portion of the county. This makes for a stark disparity for the portions of the county that are not getting fiber since the people living there will all be close to many areas that have fiber. The households without fiber will suffer the consequences which include lower home values, challenges for school kids to keep up with school work, the inability to easily work from home, and the various many other ways that broadband has grown to be a part of our daily life. The financial results highlight the following issues: Significant Grant Money Required Building fiber is expensive in rural areas. In looking at the costs to build fiber to the CenturyLink rural areas the cost of the needed assets are $6,498 per passing or $9,282 per customer with a 70% customer penetration rate. But the full cost of the project is even higher due to start-up expenses and the cost of financing the project. For example, looking at the full cost of building the new network using normal commercial financing raises the cost to $7,257 per passing or $10,367 per customer with a 70% customer penetration rate. The analysis shows that a significant amount of funds from Border-to-Border (or other grants) is required to make it feasible to build fiber. With normal commercial financing it would require grants of $19.5 million, or 56% of the cost of building the network, to make the project work. But there are significant hurdles to overcome to get that much grant money: • Border-to-Border grants are limited to $5 million per project in a given year. To get enough grant money would somehow mean building the project over time with four different grants. • There is no guarantee of the continuation of the Border-to-Border grant program. This program has been easier for the legislature to justify since the state has been in a budget surplus position for several years. However, it looks like that surplus is gone for the 2018 budget cycle. There also is considerable political pressure against the grant program. These grant funds are largely being used to build in areas served today by CenturyLink and Frontier Communications. Those telcos and other large service providers are active in lobbying against the grants. • The grant award process seems to be spreading the grants around the state, which would likely make it hard to get a huge amount of grants for one area. The county is competing with the many other counties in the state that are also trying to get grants to improve broadband in rural areas. There are also significant challenges for private telcos and ISPs that would build and operate the rural broadband networks. • The Border-to-Border grants require at least a 50% matching of grant funds by the builder and owner of the network. The total cost of building fiber just to the rural CenturyLink areas is nearly $35 million, even without considering start-up and financing costs. That means that that whatever entity or entities that build fiber to these areas have to come up with over $17 million in loans and Otter Tail County Broadband Feasibility Study Page 71 equity to fund the networks. The public and politicians often assume that telcos can borrow whatever money they need to grow their networks, but borrowing of that magnitude is beyond the borrowing capacity of many small telcos. • When small companies borrow significant new funding they generally have to use their entire company as collateral for a loan. This makes building new fiber risky because it puts the entire company at risk should the new part of the company not perform as well as expected. This is a risk that many small telcos are unwilling to take. This is perhaps the major reason we are seeing many small Border-to-Border grant requests to build small pockets of customers rather than large grant requests to build larger footprints. There is a unique issue with building the county in a series of small projects rather than building it all at once. The rural areas in the county are not all the same. For example, over 1/3 of the homes and businesses without good broadband today are either in small towns or are along lake fronts where the homes are much closer together than in the rural parts of the county. It is significantly less expensive to build where the household density is higher. If somebody tackles building parts of the county they are likely to tackle these lower cost areas first. We’ve already seen this around Fergus Falls and Battle Lake where telcos have already build around some of the lake fronts. The issue this creates with getting fiber everywhere is that as lower-cost areas are built first, the remaining areas are higher cost and harder to justify. This is going to be a major issue if fiber is extended through a series of small projects rather than with just one large project. In Otter Tail County is looks like a likely scenario would be to fund fiber to 1/3 of the rural areas, with nobody necessarily willing to tackle the rest. Beginning the build-out with wireless technology is not a reasonable option in the county. There are counties that are looking at a business plan that builds rural wireless first and then uses the profit from that business to fund fiber over time. For example, this is the business plan adopted by RS Fiber in Renville and Sibley Counties. But the same wireless option won’t work for most of Otter Tail County due to the terrain and the heavy woods. Finley Engineers have identified that the only area where starting with wireless first would be feasible is the portion of the county to the west and south of Fergus Falls. Finally, the business plans show that customer prices make a huge difference. Our base studies used the average broadband prices of the telcos already operating in the county today. However, there are reasons why the prices for some of those providers are lower than you might expect. First, a few of the telcos in the area are cooperatives which often hold down prices to the customers who own the company. Another reason for relatively low prices are that the telcos in general have had various subsidies to help construct and maintain their networks. Other than perhaps getting a Border-to-Border grant there are no other subsidies that would apply to anybody who builds in the study area. Any business there must be self- sufficient and revenues must cover all operating expenses. The analysis shows that charging higher, yet still reasonable rates makes a big difference in the financial performance of a company offering broadband in the rural areas. For example, a pricing structure that starts with the lowest-price broadband product at $60 per month will generate enough revenue to largely offset the cost of financing. It is reasonable to ask the question if customers in rural areas need to pay more for broadband to offset the high cost of building a new network to serve them. This runs contrary to public policy. For example, the Border-to-Border grants hope that broadband in areas funded by the grants won’t be higher than prices in Otter Tail County Broadband Feasibility Study Page 72 the urban parts of the state. But considering the cost to build and the lower density of homes that will support a network this seems to be an unrealistic policy. Anybody that wants to build in these rural areas is going to have to charge enough to cover costs. Our guess is that as long as the prices aren’t too high rural customers will gladly pay the price to get broadband. Especially if the alternative is no broadband at all. C. Financing Considerations One of the most significant costs of building a broadband network is the financing cost needed to raise the money to pay for the network. In this section of the report we are going to look at some of the key ways that local governments look to finance fiber expansion. Public Financing Options We know the county is not interested in operating an ISP, but if no other solution surfaces, then the county could finance the project and partner with somebody else to operate the business. It would also be possible for the county to act as the bank to pay for a portion of broadband expansion, as was done in Sibley County and in Swift County. The two primary mechanisms used for public financing are revenue bonds and general obligation bonds. There are some major benefits of using bond financing. First, the term of the bond can match the expected life of the assets and it is not unusual to find bonds for fiber projects that stretch out for 25 to 30 years. Second, you can finance a project completely with bonds, meaning that no cash or equity needs to be put into the business up front. Revenue Bonds: Most municipal fiber systems have been finance through the issuance of municipal tax-exempt revenue bonds. Revenue bond are backed by the revenues and the assets of the fiber network and the associated business. Revenue bond financing is chosen for several reasons. First, there often is enough projected revenue from a fiber project to cover bond payments. Probably more important than this, though, is that local governments often already have a significant demand for general obligation bonds that are backed by local tax revenues. Fiber projects are expensive and are often larger than local governments can finance in a traditional way. Finally, revenue bonds protect the local government to some extent if the project is not successful—with the caveat being that any government that has a bond in default is hurt in the bond market even if the troubled bond is a revenue bond. However, it is getting harder to finance a project with revenue bonds due to some failures on the part of other municipal networks. Among these are Monticello, MN; Crawfordsville, IN; and Alameda, CA. These kinds of failures have made investors leery about buying bonds that are only backed by the business. This reluctance has made financing with revenue bonds more expensive. There is a general belief in the public and with government officials that bond financing is cheaper than traditional bank financing. However, the long-term cost of a bond issue cannot be judged only by the interest paid. It’s been our experience that bond issues are significantly more costly, but still have some major benefits over traditional bank financing. The benefits of bond financing, compared to bank financing include: Otter Tail County Broadband Feasibility Study Page 73 • Bonds can often be used to finance 100% of a project—something that is rare with bank financing. • Bond issues can often also have a longer repayment period, called the term, which can mean smaller monthly payments, in the same manner that the payments are lower on a 30-year home mortgage compared to a 15-year one. • Bonds also allow can cover the interest payments on the early years of a project until the revenues can cover the expense. This is done with bonds by borrowing the expected interest payments, which is called “capitalized interest.” Bank loans expect the borrower to pay interest starting at the day of the loan. Because of market reluctance to buy revenue bonds, they often have higher interest rates than general obligation bonds, but they also can incur the following costs: Debt Service Reserve Fund (DSRF): Many revenue bonds require borrowing additional funds to be kept in escrow as a hedge against missing future payments. The DSRF is often set to equal a year’s worth of principle and interest payments. This money is put into escrow and is not available to operate the business. Capitalized Interest: Bonds begin accruing interest from the day the money is borrowed. Since fiber businesses take a number of years to generate enough cash to make bond payments, the bondholders require capitalized interest that is used to make the interest payments for up to the first five years of the project. Basically, the project must borrow the amounts needed to make debt payments which can add a significant amount to the size of the bond issue. Bond Insurance: Bond insurance is an up-front fee paid to an insurance company that will then pay one year of bond payments to bond holders in case of a default. We’ve seen bonds issued that have required both a debt service reserve fund and bond insurance. In recent memory the interest rates on bonds have been lower than the interest rate on commercial loans. But that has not always historically been the case. The difference between bond interest rates and commercial interest rates both change over time; that difference is referred to in the industry as the “spread.” Sometimes the spread favors bonds and at other times it favors commercial borrowing. In our financial analysis we assumed that the interest rates are lower on bonds. Interest rates are also not the same for all kinds of bonds. For instance, the interest rate for revenue bonds can be considerably higher than general obligation bonds due to the perceived higher risk. In addition to revenue bonds, communities have other bond options that include: General Obligation Bonds (GO Bonds): If revenue bonds aren’t an option then the next typical alternative is general obligation bonds. General obligation bonds are backed by the tax revenues of the entity issuing the bonds. This backing can be in the form of various government revenues such as sales taxes, property taxes, or the general coffers of a government doing the borrowing. Otter Tail County Broadband Feasibility Study Page 74 In Minnesota many kinds of general obligation bonds require a referendum approval by a simple majority of voters. There are some kinds of economic development bonds and other types of GO bonds that don’t require a referendum, although government entities sometimes hold a referendum anyway just to make sure the public supports the initiative being financed. Variable Rate Demand Obligations (VRDOs): VRDOs are a bond where the principal is paid in a lump sum at maturity. However, the borrower has the right to repay the bonds in whole or in part at any time (upon an agreed upon notice). VRDOs are effective in circumstances when the borrower wants to match the repayment of the bonds to a revenue stream that varies year to year or a revenue stream that can vary from initial estimates and changes over time. In the case of the new telecommunications system, this type of financing provides the flexibility to make bond payments that match the actual revenues received. If revenues are slower than anticipated, principal payments do not need to be made. If revenues come in faster than anticipated, repayment of the bonds can be accelerated without penalty. We can recall having only ever seen this used once for a municipal telecom system by the city of Alameda, California. This kind of financing is used fairly routinely for other kinds of municipal needs. VRDOs are most commonly structured as 7-day floating rate bonds. Interest rates are reset each week and this adds a lot of risk to this type of financing. Unlike fixed-rate bonds, the borrower does not know what the interest rate will be on the VRDOs over the life of the issue. Interest rates on VRDOs are on the short end of the yield curve and have therefore historically been lower than interest rates on fixed-rate bonds even with the additional ongoing costs for a liquidity provider and a remarketing agent. There is typically a maximum rate stated which the VRDOs cannot exceed. But in a market where there is a significant increase in overall interest rates this kind of financing could end up being significantly more expensive. Capital Appreciation (zero coupon) Bonds (CABs): CABs are bonds that are issued at a deep discount and which do not bear any stated interest rate. Like a Series E savings bond, CABs are bought at a price that implies a stated return calculated on a basis of the bond being payable at par at maturity. With no stated interest rate there is no interest paid until maturity, at which time all of the compounded accreted interest is paid. With no interest payments required in the beginning years of the bonds, this would enhance the cash flow in the beginning years of the business. CABs do, however, have several drawbacks over other types of available financing. First, the interest rates on CABs are typically higher than both the fixed-rate and VRDOs. Second, investors prefer not to have a prepayment option on CABs, which limits the flexibility of the government to call the bonds early if revenue collections are better than anticipated or if a restructuring of the debt is needed. This structure is used frequently for various government borrowings, but we’ve never heard of them being used for telecom. Private Financing Options Since the county doesn’t want to be an ISP and prefers to find a private ISP to build fiber, it’s important to understand how telcos and other private entities get funded. Local governments often don’t appreciate the difficulties that private entities have in reasoning money. Otter Tail County Broadband Feasibility Study Page 75 The traditional way for commercial ventures to get financed is through bank loans. Banks have grown increasingly conservative over the last few decades, making it harder for companies of all kinds to borrow money. Here are a few of key criteria that banks use to judge prospective projects (and which act as hurdles for telcos and ISPs to overcome to get bank financing): • Equity: Most bank borrowing requires some kind of equity. Equity means that the borrowing entity brings some sort of cash or cash equivalent as part of the financing package. The amount of equity required will vary according to the perceived risk of the venture by the lender. The higher the risk, the more equity required. It’s not unusual for a bank to expect 20% of the project to be funded with equity—an amount of cash that many telcos and ISPs don’t have on hand. Equity can take a number of different forms: o Cash: Cash is the preferred kind of equity and lenders like to see cash infused into a new business that can’t be taken back out or that doesn’t earn an interest rate. o Preferred Equity: For a stock organization (like an LLC or other type of corporation) the business can issue some form of preferred stock that then acts as equity. Preferred equity usually gets some sort of interest rate return, but the payments are not usually guaranteed like they are for bank loans. If the business gets into a cash crunch they must pay bank loans and other forms of debt before they pay preferred equity interest. o Assets: It’s possible to contribute assets as equity. For example, a new fiber venture might be seeded by having one of the partners contribute an existing fiber route or other valuable asset to the business. In such a case the contributed asset generally has to be assigned a market value by an independent appraiser. o Non-recourse Cash: Non-recourse cash would be taking cash in an obligation that is not guaranteed to be paid back. To give an example, in Sibley and Renville counties, a fiber business was recently launched in the form of a cooperative. The local government provided an economic development bond to the business as a non-recourse loan. This means that the new fiber business will make their best effort to make the bond payments, but if they are short of cash then the government entities who issued the bonds would have to make bond payments. The other sources of financing for that project looked upon these bonds as a form of equity. • Short Payment Term: Banks don’t generally like long-term loans and many banks won’t make any loan that is more than 12 or 15 years long. These short payment terms mean significantly higher annual debt payments and can make fiber project unfeasible. This is the primary reason why the country has a large infrastructure deficit. Fifty years ago, banks would fund things like power plants, electric and water systems, and other long-term revenue-generating assets. But various changes in banking laws, which have required banks to maintain larger cash reserves along with a general desire to go after higher interest rate projects mean that banks have largely stopped doing this kind of lending. It’s not impossible to finance an infrastructure project at a traditional bank, but the general parameters of bank loans make it a challenge. • Small Credit Limits: Fiber projects are expensive and are often larger in cost than the lending limits of banks. For example, most smaller local banks won’t make individual loans greater than some relatively small amount like $1 million. However, even larger banks are going to be leery about making loans greater than $10 million unless the borrower is a large, well-known company. The Otter Tail County Broadband Feasibility Study Page 76 companies building rural fiber are generally relatively small companies when judged on a national scale and are unable to borrow the amount of money needed to build large fiber networks. This problem can be overcome through the use of a consortiums of multiple banks to make larger loans. This spreads the risk of any one loan across many banks. Banks who do this usually take part in consortium loans for a number of projects. These smaller banks see this as a way to make loans to quality projects and quality customers that they could not loan to on their own. But putting together a consortium for a fiber project is difficult since many banks view fiber as a high-risk venture. • Collateral: Banks routinely expect a small company to pledge the whole company as collateral for a large new loan. That makes small telcos think twice before taking on a new loan, because failure of a new venture could bring down the whole company, including the parts of the business that might have been profitable for a century. • Balance Sheet/Metrics: Banks also use various metrics to measure the ability of a company to make payments. This process judges companies by their accounting books and is often referred to as looking for companies with “strong balance sheets.” This largely means that a bank is going to favor companies that have large cash reserves on hand, which is hard for a small company to do if they also need to provide 20% equity to a new venture. Comparing Bond and Bank Financing Benefits of Bond Financing: There are several major benefits for using bond financing. • The term of the bond can match the expected life of the assets and it is not unusual to find bonds for fiber projects that stretch out for 25 to 30 years. It’s difficult to finance a commercial loan longer than 15 years. The longer the length of the loan, the lower the annual bond payments. • Bonds can be used to 100% finance a project, meaning there is no need for cash or equity to fund the new business. Lack of cash equity is generally the requirement that creates a challenge for traditional commercial financing. • Bonds often, but not always, have lower interest rates. The interest rate is dependent upon several factors including the credit-worthiness (bond rating) of the borrower as well as the perceived risk of the project. • It’s generally easier to sell bonds than to raise commercial money from banks. Sometimes bonds require a referendum, but once bonds are approved there is generally a ready market for buying the bonds and raising the needed funds. Benefits of Commercial Financing: There are also a few benefits for commercial financing. • Generally, the amount that must be borrowed from commercial financing is lower, sometimes significantly lower. This is due to several issues associated with bond financing. Bond financing often contains the following extra costs that are not included with commercial loans: o Surety: Bonds often require a pledge of surety to protect against default of the bonds. The two most common kinds of surety are the use of a debt service reserve fund and bond insurance. A debt service reserve fund (DSRF) borrows some Otter Tail County Broadband Feasibility Study Page 77 amount of money, perhaps the equivalent of one year of bond payments and puts it into escrow for the term of the bond. The money just sits there to be used to help make bond payments should the project have trouble making the payments. Bond insurance works the same way and a borrower will pre-pay and insurance policy at the beginning of the bond that will cover some defined amount of payments in case of a default. o Capitalized Interest: Bonds typically borrow the interest payments to cover bond payments for some period of time, up to 5 years. • Construction Loans: Another reason that commercial financing usually results in smaller debt is through the use of construction loans. A commercial loan will forward the cash needed each month as construction is done, and interest is not paid on funds until those funds have been used. However, bonds borrow all of the money on day one and begin accruing interest expense on the full amount borrowed on day one. Construction loans also means that a borrower will only draw loans they need while bond financing is often padded with a construction contingency in case the project costs more than expected. • Deferred Payment: Commercial financing often will be structured so that there are no payments due for the first year or two. This contrasts with bonds that borrow the money required to make these payments. Fiber projects, by definition, require several years to generate revenue and deferring payments significantly reduces the size of the borrowing. • Retirement of Debt: It’s generally easy to retire commercial debt, which might be done in order to pay a project off early or to refinance the debt. This contrasts to bonds that often require that the original borrowing be held for a fixed number of years before it can be retired. Grants One way to overcome the difficulty to fund fiber is through grants. Grants can act as the equity for a project, making it far easier for the commercial ISP to borrow the rest of the finds. But there are only a handful of possible source of grants: Border-to-Border Grants: We have now seen 4 consecutive years that the Minnesota legislature has provided grant money for rural broadband that is administered through DEED (Department of Employment and Economic Development). There are a few key rules for Border-to-Border grants that are important to remember: • The grants can only be awarded to serve areas that are defined as unserved or underserved. Unserved areas are those that have no landline broadband alternative available. Underserved areas are those that don’t have any broadband today with speeds of at least 100 Mbps download. Unserved areas don’t have any providers that today offer broadband speeds pf 25/3 Mbps. • The largest grant award for any project is $5 million, although the majority of the grants awarded in previous years were for less than this. • The grants can only be given to the entity that is going to own and operate the network. • The entity getting the grant has to be an operating entity already in business. The state won’t give a grant to a start-up that doesn’t yet have customers or a company that is still in Otter Tail County Broadband Feasibility Study Page 78 the process of being formed. Because of this almost every grant award so far has gone to telephone companies, with a few to cable companies. • Grant money must be used within 2 years of the award. • Anybody applying for a grant has to show proof that they have secured the financing required for the matching part of the grant. • The grants will provide up to 50% of the capital cost for a project. The grant process awards applicants that ask for less than 50% matching. • Not all assets are eligible for the grants. Generally, only the direct assets that will provide broadband directly to customers are eligible. Also, equipment to provide wireless broadband are not eligible, although the fiber and towers needed to support the technology are eligible. • While it’s not an official rule, it seems the grants are spread around the state as much as possible. Federal Broadband Grants: There is no current federal broadband grant program. There has been a lot of talk in Washington DC of creating an infrastructure program. But after one year of the new administration there has been no progress on infrastructure financing and there is no way to predict if this will happen. There have been federal grant programs in the past, so we can guess how this might work. For example, federal grant programs have been similar to the Border-to-Border grants in favoring existing telcos over start-ups. Past federal grants have also required matching funds and have favored projects that ask for the smallest percentage of grant assistance. In looking at past federal grant programs there has also been a proclivity to favor “shovel-ready” projects. The fact that you have undertaken this study and built business plans puts the county ahead of others that have not studied the cost of broadband. The New Markets Tax Credit: (NMTC) Program was established in 2000 as part of the Community Tax Relief Act of 2000. The goal of the program is to spur revitalization efforts of low-income and impoverished communities across the United States and Territories. Eligibility of the county to use these funds would depend upon meeting the earnings test. However, much of rural America meets this test if you earmark the funds towards only the poorest parts of a county. The NMTC Program works by giving big tax credits to investors that are willing to invest in infrastructure projects in qualifying communities. The tax credits are so lucrative that often the other terms for accepting the funding are modest. The tax credit equals 39% of the investment paid out—5% in each of the first three years, then 6% in the final four years, for a total of 39%. The Community Development Financial Institutions (SDFI) Fund and the Department of the Treasury administer the program. The process of how the Treasury allots credits is a complicated one and we won’t cover it, but in the end there are entities who end up each year with some amounts of New Markets Tax Credits that they must invest to gain the tax credits. The credits are often purchased by the large national banks or other firms that invest in infrastructure. Otter Tail County Broadband Feasibility Study Page 79 Generally, in practice, these funds act like a mix of loans and credits to the recipient. For instance, a community that received these funds might have to pay some modest amount of interest during the 7 years of the tax credit, and at the end would have a balloon for the principal. However, often some or even all of the principal will be excused, making this also look like a grant. Because the entities that get the credits change each year, and because you apply with the entities that hold the credits, and not with the federal government, the processes for applying for this money are somewhat fluid. However, there are entities and consultants who help find New Market Tax Credits and who can help you through the maze of requirements. These funds are not likely to fund a whole, or even a large percentage, of a fiber project, but they might be used to find 5% to 10% of the needed funds of a project and can be a very affordable piece of a funding package. In some cases the terms for getting these credits are so good that other pieces of the financing might look at the tax credit money as equity. State Programs There are existing Minnesota programs that might provide some assistance to fiber projects. Following are several specific loan and grant programs that could provide some support for a fiber project. None of these grants are large enough that they are going to make a difference in whether the full project gets funded, but any money you can raise this way will lower the overall cost of debt financing. Each of these projects is specific about what they will or won’t fund. Minnesota Angel Loan Fund: This is an economic development fund in Minnesota that is used to spur new start-up businesses. The funds come from the Minnesota Department of Employment and Economic Development. This is a loan fund and the program can make 0% interest loans for up to a 7-year term. The loans can be for as much as 10% of the amount of equity received by the start-up after approval in the program. That is an important point, in that the start-up business needs to register with this fund before raising equity and not after. At least one of the equity investors must be certified by the Minnesota Angel Tax Credit program and must also be qualified as an accredited investor per the US Security and Exchange Commission under Rule 501 of Section D. In a nutshell, that means that this must be a professional investor and might be something like an insurance company, a pension fund, an investment bank, or some other entity that invests in businesses as a normal course of business. This would not include small private investors like the sort of investors that buy municipal bonds for personal investment purposes. The amount of the loan must be at least $20,000 but is capped at $250,000. The loan payment is a balloon payment for the full amount due at the end of the seventh year. If the business is sold before the end of seven years, the fund will charge a 30% premium on top of the principal due. This loan only covers 10% above the amount of qualified equity the new business raises, but the zero percent interest rate still makes it attractive. However, fiber projects are generally of such a Otter Tail County Broadband Feasibility Study Page 80 magnitude that even a loan of $250,000 will probably not make a huge difference in affecting the overall interest rate or in making it easier to raise the rest of the funding. Greater Minnesota Public Infrastructure Program: This is a grant program that is part of the Small Cities Development Program. The purpose of this grant is to help stimulate economic development and jobs through investments in public infrastructure. Applicants must be home-rule cities that are outside of the 7-county metropolitan area. The money is available for any publicly owned infrastructure project and includes projects like water and wastewater, economic development projects, utilities, and streets. It seems by the description that municipally owned fiber projects should qualify. The grants can be up to $1 million and a community can’t receive more than $1 million in total over any 2-year period. The big catch of this program is that the municipality must make a cash contribution to the project. The community must put in equity equal to at least half of the amount of the grant. This matching can be either cash or in-kind. Fiber projects are often 100% debt funded, but perhaps a community that is willing to contribute land, buildings, or other in-kind assets to a fiber project should consider pursuing this grant as a way to stretch their contribution. Minnesota Community Development Funding: This is a grant program that is aimed at municipalities of fewer than 50,000 people or counties with fewer than 200,000 residents. The grants are available for three different categories or projects—Housing, Water Projects, and Comprehensive Grants. Any project that is funded must meet certain tests, and one of these is that it provides benefits to people of low- and moderate-income. The Comprehensive Grants are the ones that might be granted to fiber projects. A comprehensive grant can be up to $1.4 million. There is some expected matching by the community taking the grant, but this is not a specific formula like with the Greater Minnesota Public Infrastructure Program. Rather, the amount of matching is determined and negotiated as part of the grant process. However, the general rule of thumb is that the greater the matching the more likely a grant. Comprehensive grants can be provided for economic development projects. This fund has never made a grant for a telecom project, but it appears that such programs could be eligible if they can demonstrate the benefit for low- and moderate-income households. A strategy might be to have at least part of the broadband project aimed at low-income households. Customer Financing When all else fails, an idea that we have seen work in other communities is for the citizens to step up and agree to somehow directly fund some or all of a broadband project. When you consider that the cost of building rural fiber can be $15,000 or more per home passed, getting some assistance directly from potential customers is sometimes the only solution that can attract the rest of the needed funding. There are several examples of places where this has been done in the country: Property (or Other Kind of Tax) Revenues: It is possible to obtain some or all of the cost of a broadband network through a pledge of future tax revenues. That pledge can then support a bond. This is different than most bonds for a broadband network where the network would be secured Otter Tail County Broadband Feasibility Study Page 81 by revenues of the broadband venture. But a pledge of some other kind of tax revenue is one of the easiest ways to get a bond. There are some real examples of this kind of financing: • Leverett, Massachusetts: In Leverett MA, the citizens all voted to raise property taxes to fund and build a municipal fiber project. This is a relatively small town of about 2,000 people, but there was enough demand for broadband that a ballot initiative passed easily to use property revenues to pay for the fiber. • UTOPIA, Utah: UTOPIA is a consortium of a number of small towns in Utah that banded together to get fiber. They also have pledged property tax revenues to fund part of the cost of the network. • Cook County, Minnesota: Cook County funded about half of their fiber network using a federal grant awarded from the Stimulus funding program in 2008. The county held a referendum and used a sales tax increase to pay for the matching funds needed to build the project. Direct Customer Contributions: It’s also possible to pay for some of a broadband project through direct contribution of possible customers. This has never been done on a large scale because it would be exceedingly difficult to get a lot of residents to agree to write a check to fund a network. But there are some examples to consider: • Contribution to Aid in Construction: Most utilities have a program where they will agree to extend their network to customers if those customers agree to pay the cost of the connection. We are aware in the broadband area of numerous cases where small pockets of rural home raised the needed money to get connected to a nearby broadband network. • Ammon, Idaho: This is the only municipal attempt at funding a network in this way. The City of Ammon will connect customers to a fiber network if they will contribute $3,500 up-front to cover the cost of construction. This program is just getting started and it reportedly has a few hundred homes interested. But it’s an unusual combination of a city prompting citizens to pay for the needed network themselves. Public Private Partnerships A public private partnership (PPP) is formed when a government entity and commercial entity fund a project together. There is no one model for a PPP and such an arrangement can be structured in many different ways. The main benefit of a PPP is that the commercial operator of a project benefits by getting some bond financing from the municipal partner. This allows the business to blend the benefits of bond and commercial financing and is one of the ways that makes it easier to get through the first few years of the project. The general benefits of bond financing are what makes public money attractive to a commercial partner— low interest rates, long repayment term, and small or no payments for the first few years. But the downside is that there are more overall financing costs and in the long run a bond makes a project cost more in terms of cash. The safety of a bond in the first few years, though, can be very attractive. Combining Public and Private Financing. There are benefits to combining the two kinds of financing: • Banks will often consider the financing that comes with bonds as the equivalent of equity, meaning that the commercial partner will not require as much, or even no, cash equity. Otter Tail County Broadband Feasibility Study Page 82 • In terms of the amount borrowed, the two methods work well together if construction loans are used to cover the construction and bond financing is used for the longer-term financing costs. • Combining the two methods works to produce a payment term that is longer than a traditional commercial loan. • Combining the two methods also usually means lower debt payment during the first few critical years while the network is being built. • Both municipalities and commercial telcos have a natural borrowing limit—meaning that there is always some upward limit on the amount of money they can borrow. Combining both kinds of financing can mean that neither partner has to hit their debt ceiling. Just as an aside, the debt ceiling is often the main impediment to funding project 100% with bonds. Fiber projects are generally large projects and the required funds can easily exceed the ability of a government to fund it 100%. There are numerous PPP broadband projects around the state. Here are two that are interesting models to consider: • RS Fiber: RS Fiber is a new broadband cooperative that was formed in Renville and Sibley counties. The project was funding from various sources including a loan for 25% of the project supplied a bond backed by the cities and counties involved in the project. • Swift County: The county government there contributed a significant percentage of the cost needed to construct a broadband network in the county. The bond proceeds were loaned to Federated Telephone Cooperative and are expected to be paid back over time. EXHIBIT I: SERVICE AREAS OF THE INCUMBENT TELEPHONE COMPANIES Otter Tail County Broadband Feasibility Study Page 84 EXHIBIT II: MAP OF THE PROPOSED FTTH DESIGN Otter Tail County Broadband Feasibility Study Page 85 EXHIBIT III: MAP OF THE PROPOSED HYBRID DESIGN Otter Tail County Broadband Feasibility Study Page 86 EXHIBIT IV: SUMMARY OF FINANCIAL RESULTS Take Total Year 25 Net Income Cover Assets Rate Grant Equity Debt Financing Cash Positive Debt FTTP to CenturyLink Rural 70% Penetration $34.84 M 70% $5.00 M $6.78 M $27.13 M $38.91 M -$16.23 M Never Never 60% Penetration $33.52 M 60% $5.00 M $6.53 M $26.13 M $37.66 M -$20.84 M Never Never With No CATV $34.59 M 70% $5.00 M $6.78 M $27.10 M $38.88 M -$18.74 M Never Never With $10M Grant $34.84 M 70% $10.00 M $5.63 M $22.50 M $38.13 M -$9.43 M Never Never With Maximum Grant $34.84 M 70% $17.42 M $3.88 M $15.53 M $36.82 M $0.85 M Never Year 24 With Breakeven Grant $34.84 M 70% $19.50 M $3.39 M $13.58 M $36.47 M $3.72 M Never Year 20 With Higher Interest Rates $34.84 M 70% $5.00 M $6.93 M $27.70 M $39.63 M -$20.12 M Never Never With $5 Higher Prices $34.84 M 70% $5.00 M $6.72 M $26.88 M $38.59 M -$11.19 M Never Never With $60 Base Price $34.84 M 70% $5.00 M $6.60 M $26.40 M $38.00 M -$0.90 M Never Never With Bond Financing $34.84 M 70% $5.00 M $0.00 M $46.10 M $51.10 M -$30.00 M Never Never With $5 M Bond Financing $34.84 M 70% $5.00 M $5.84 M $28.38 M $39.22 M -$17.60 M Never Never With 15-Year Loan Term $34.84 M 70% $5.00 M $6.93 M $27.70 M $39.63 M -$11.63 M Never Never FTTP Adding Arvig 70% Penetration $44.46 M 70% $5.00 M $8.98 M $35.93 M $49.91 M -$24.37 M Never Never With $10 M Grant $44.46 M 70% $10.00 M $7.83 M $31.33 M $49.16 M -$17.57 M Never Never With Maximum Grant $44.46 M 70% $22.23 M $4.95 M $19.80 M $46.98 M -$0.62 M Never Never With Breakeven Grant $44.46 M 70% $26.00 M $4.07 M $16.28 M $46.34 M $4.58 M Never Year 20 Hybrid Fiber & Wireless 70% Penetration $29.21 M 70% $5.00 M $5.42 M $21.68 M $32.09 M -$2.17 M Year 15 Never With $10 M Grant $29.21 M 70% $10.00 M $4.27 M $17.08 M $31.34 M $4.62 M Year 12 Year 24 With Maximum Grant $29.21 M 70% $14.30 M $3.26 M $13.03 M $30.58 M $10.57 M Year 12 Year 16 With Breakeven Grant $29.21 M 70% $11.00 M $4.03 M $16.12 M $31.16 M $6.00 M Year 12 Year 20 Otter Tail County Broadband Feasibility Study Page 87 Wireless Only 70% Penetration $1.60 M 70% $0.40 M $1.60 M $2.00 M $1.70 M Year 4 Year 15 With Maximum Grant $1.60 M 70% $0.53 M $0.28 M $1.13 M $1.93 M $2.33 M Year 4 Year 10 Otter Tail County Broadband Feasibility Study March 13, 2018 CCG Consulting and Finley Engineering The Study Area Studied three options (see map on next page) The base study area includes those areas of the County served by CenturyLink. This includes the towns of Clitherall and Elizabeth. It excludes Fergus Falls, Battle Lake and Henning. (Pink areas on map) A second version also adds the area served by Midwest Telephone Company (Arvig). This also adds the towns of Parkers Prairie and Urban. (light green area on map) The final option looks at providing wireless broadband in the southwestern corner of the county. Why Broadband Matters Lower property values / County tax base Education Agriculture Medical Working at home Taking part in modern society Expanding demand –home broadband usage is doubling every 3 Years. Designs & Business Plans We Considered Build Fiber to entire study areas. Hybrid models that build wireless in the southwestern portion of the county and fiber everywhere else. Potential Broadband Customers Adding Version 1 Midwest Tel All-fiber scenario 5,352 6,689 Hybrid scenario On Fiber 4,875 On wireless 477 Network Design There are 739 total miles of roads that would need fiber in the base version. There are 987 miles of roads in the version that adds Midwest Tel. It’s cost effective to bury the whole network, but the network could be placed on rural poles. Rural Wireless Scenario Would construct wireless towers in the southwestern portion of the county. (light green area on next map). This is the only part of the county without broadband that lends itself to a wide wireless serving area. Would use combination of WiFi and licensed 3.65 GHz spectrum. Designed to deliver speeds of at least 25 Mbps. Could possibly upgrade in future years to white space spectrum to increase bandwidth. Network Costs At a 70% Customer Penetration Scenario 1 Fiber everywhere -$34.84 Million Hybrid -$29.21 Million Add Midwest Tel Fiber Everywhere -$44.46 Million Products Offered For customers on fiber -Triple play of fast Internet, cable TV and telephone For wireless customers –Internet and telephone only Financial Results –Scenario 1 Fiber Everywhere Expensive to finance: Even with a $5 M Border-to-Border Grant it requires a loan of $27.1 M of debt with normal commercial financing (20% equity). Loses $16.2 M over 25 years. Even with maximum grant ($17.4 M) it would lose $2.8 M over 25 years. It requires a grant with a 56% grant ($19.5 M) to break even. Hybrid Even with a $5 M Border-to-Border Grant it requires a loan of $21.7 M of debt with normal commercial financing (20% equity). Loses $7.8 M over 25 years. Requires a Border-to-Border grant of $11 M to break even (37% matching) Financial Results –Adding Midwest Tel Fiber Everywhere Expensive to finance: Even with a $5 M Border-to-Border Grant it requires a loan of $35.9 M of debt with normal commercial financing (20% equity). Loses $24.3 M over 25 years. Even with maximum grant ($22.2 M) it would lose money over 25 years. It requires a grant of $26 M (58% matching) to break even. Financial Results –What it Means The good news is that telcos are spending a lot of money to bring fiber to a substantial portion of the county. Largest Border-to-Border grants are $5 M in a given year. To get fiber to the whole area would mean multiple large grant awards over many years. The hybrid option improves the finances, but still requires significant multi-year grants. Is probably going to require some county financial help (or perhaps someday some federal grants) to ever get fiber everywhere. Next Steps Talk to prospective partners. Educate the public. Be prepared to assist partners with 2018 grant filings. Be persistent –it’s going to take a number of years to solve the problem. Consider contributing County grant / loan towards financing the project. Contact Us Doug Dawson, President, CCG Consulting blackbean2@ccgcomm.com 202 255-7689 Chris Konechne, Project Engineer, Finley Engineering c.konechne@finleyusa.com 507 777-2255 This is a chapter that has been drafted for the Center for Rural Policy and Development. They are preparing a publication on rural Minnesota issues that will be presented to all MN gubernatorial candidates. They specifically asked Otter Tail County if we were interested in writing a chapter on the balance between economic and environmental sustainability. Economic and Environmental Sustainability in Rural Minnesota Finding balance between economic and environmental sustainability is crucial for rural Minnesota. The areas that can achieve that delicate balance with continue to grow – both in population and economic prosperity. Minnesota’s next governor will have significant influence over their ability to do so. With that in mind, the chapter highlights the importance of traditional industries such as agriculture and tourism in rural Minnesota. It proposes that rural Minnesotan’s can have their cake and eat it too – economic development and environmental protection. Finally, and most importantly, this chapter stresses the importance of individualized approaches for rural challenges. From childcare to broadband and everything in between, there is no one-size-fits-all solutions for rural Minnesota. Using real examples from Otter Tail County, Minnesota, this chapter highlights how – when given the authority and resources – rural Minnesotans have the resourcefulness and expertise to address the challenges that they face. Agriculture and Tourism – Backbones of Rural Minnesota Agriculture and tourism have traditionally been two of the predominant industries for rural Minnesota. From planting, harvesting and livestock production to food processing and distribution – Minnesota is a leader in agriculture and food. Similarly, few states can compete with the recreational opportunities afforded by Minnesota’s rich natural resources. As a result, for decades, farms and resorts have been the lifeblood many rural Minnesota economies. However, these industries have more in common than their rural economic engines. For starters, Minnesota’s rural infrastructure (i.e. roads, power, telephone, etc.) are the result of early farms and resorts. They were built so that people living in urban areas could have food and the luxuries of home during their summer vacations. Another commonality is their work ethic. Farmers and resort owners both work tirelessly and adapt to unpredictable conditions to “make hay while the sun shines.” Like agriculture, given the seasonal nature of the industry, rural tourism is heavily dependent on weather and most businesses only have five months to generate enough revenue for twelve months of expenses. Unfortunately, another trait that both Minnesota farms and resorts share is their disappearance. The number of operating farms and resorts in Minnesota have been shrinking for decades. The number of resorts in Minnesota has dropped by nearly half since 1985: from about 1,400 then to 760 in 2015, according to the most recent statistics from the Minnesota Department of Revenue, which tracks resorts for tax purposes. During that same period, Minnesota has lost over 22,000 farms – nearly a quarter of all farms according to the latest USDA numbers. Another common face regulatory burdens, negative stereotypes, and children fleeing the family business. Last, farmers and resort owners have a strong bond to the land and their community. Their identity is intertwined with their respective professions and having an intimate understanding of the land and water. Farmers and resort owners have a deep emotional connection to their land and/or body of water. It is part of their personal identity, often based on generational linkages, family traditions, and a history of social interactions and experiences with friends and family. Their connection is also functional. That is, farmers and resort owners depend on this land to earn a living. However, the family farm and resort are much more than a business. It is also their home. It is the place where their children are raised and groomed to be the next generation of farmers and resort owners. Environment vs. Economy – A False Choice Based on the unique relationship that farmers and resort owners have with nature, it is ironic that these industries are frequently associated with environmental controversy. However, despite best intentions, past practices have not always been environmentally sensitive. It is well documented on both theoretical and empirical grounds that, beyond a certain point, there is an unavoidable conflict between economic development and environmental protection. Throughout history, there have been trade-offs in rural Minnesota between the environment and food security, industrialization, infrastructure, recreational opportunities and many other aspects of development. Overcoming trade-offs between the social benefits of regulation and the economic benefits of development has never been an easy process. While few would dispute that both a growing economy and a safe and healthy environment are desirable, elected leaders are often confronted with choices between protecting their citizens and their environment through regulatory actions on the one hand, and promoting economic growth and development on the other. In recent years, Minnesota has become a national model for environmental protection. Minnesota’s air, land and water are cleaner now than they were 40 years ago. In Otter Tail County, home to 1,048 lakes – the most in any county in the United States – water quality is improving. These results were possible because of environmental regulation. Without the rule of law and rigorously enforced environmental regulation, there seem to be too many personal and economic incentives for trading off long-term benefits for short-term gains. However, despite increased regulation, it is important to point out that Minnesota has enjoyed significant population growth, industrialization and economic vitality over the past half century. Is a trade-off between the social benefits of regulation and the economic benefits of development inevitable? Probably. Must rural Minnesota choose between economic growth and environmental preservation. Absolutely not. Let’s be clear. You can’t put the toothpaste back in the tube. Humans being part of nature has been deemed an acceptable “trade-off.” However, rural Minnesotan’s can continue to improve environmental conditions while simultaneously growing their economy. Elected leaders will be tempted to achieve this balance through legislation. While reasonable rules and enforcement are certainly necessary, they are by no means sufficient. For rural Minnesotan’s to effectively do so will require significant communication and collaboration between diverse stakeholders, a willingness to discard the traditional either/or thinking, and desire to take greater ownership over their future. Lessons from the Field Otter Tail County is one of Minnesota’s largest counties in size. It is comprised of 2200 square miles of fields, wooded hills and crystal-clear lakes. Given its landscape, Otter Tail County is significantly connected to agriculture and tourism. For decades, Otter Tail County has attempted to protect their robust natural resources while simultaneously encourage economic growth. They’ve experienced many successes and failures along the way. In either case, there have been a multitude of lessons learned. The following are a few Otter Tail County “lessons from the field” and suggestions for helping rural Minnesotan’s with this delicate balancing act. Promote Sustainability…Economic and Environmental Economic and environmental sustainability are closely linked. Producing goods and services requires, to a greater or lesser degree, the use of natural resources – and thus comes attached with an environmental cost. Such is the case for Minnesota’s resort industry. Historically, resorts were intentionally positioned near lakes and rivers to provide visitors access to the scenic and recreational opportunities they afford. As Otter Tail County’s resort industry reached its peak during the early to mid- 1980’s, private lake home owners became increasingly vocal about the “environmental” impact of commercial development. What followed was a series of increasingly restrictive county shoreland ordinances for commercial entities such as resorts. In fact, in 1989, after the DNR revised the state-wide shoreland rules to clearly delineate between resorts and their residential equivalent (i.e. residential planned unit developments), Otter Tail County policymakers opted to keep their ordinance more restrictive. At the time, while larger resort complexes were popping up across Minnesota, Otter Tail County prioritized environmental sustainability over economic. However, nearly a quarter of a century later, the county board of commissioners was asked to reexamine whether that delicate balance had shifted. In deed it had. The economic sustainability of the Minnesota family resort was now serious concern. Of the 126 resorts that dotted the Otter Tail County landscape in 1985, fewer than 65 resorts remained. Furthermore, from an environmental perspective, the impact from resorts on Otter Tail County’s lakes and rivers was miniscule – comprising less than 2% of the overall lakeshore in Otter Tail County. Comparatively, agriculture comprised over 25% of all lakeshore while over 66% of the county’s lakeshore consisted of private homes and cabins. In 2016, based on these data and a desire to promote both economic and environmental sustainability, Otter Tail County made updates to its shoreland ordinance. In doing so, the county provided the resort industry greater opportunity for growth and development while simultaneously managing environmental impacts. Talk, Don’t Point Fingers Sometimes it is easier to see our own mistakes in other people than in the mirror. Fortunately, most rural Minnesotan’s are more worried about solving problems than pointing fingers. Follow their lead. If agreements can’t be made legislatively, give local units of government the administrative tools and resources they need to find solutions. That’s what community leaders did in Perham when they learned their community’s water supply was contaminated. In the 1990s, city workers discovered that the level of nitrates in city well water was so high that they needed to dilute it with water sourced from uncontaminated wells to meet public health standards. The likely culprit was nitrogen fertilizer use by local farmers. Instead of pointing fingers, a group of city officials, staff from the local conservation district, farmers, members of the agribusiness community, concerned citizens and the Minnesota Department of Agriculture held a series of meetings focused on both securing clean drinking water and ensuring a strong agricultural economy. The residents were understandably interested in keeping nitrogen out of their drinking water. However, what they quickly learned was that farmers were equally interested in keeping nitrogen out of the groundwater — not only to keep their own drinking water safe, but also due to the economics of fertilizer management. Together, the farmers and city officials developed several mutually agreeable and economically feasible solutions, including changing types of fertilizer, rotating crops, putting land in CRP, and in one case, the city bought farmland that was close to the public well and especially vulnerable to contamination and redeveloped it as a residential property. Now decades after their work began, Perham is seeing improved drinking water quality with the concentration of nitrate declining. What Perham’s story demonstrates is that environmental and economic interests can be balanced when both sides are willing to look for common ground. Make Participation and Compliance Easy Woody Guthrie said, “Any fool can make something complicated. It takes a genius to make it simple.” Government has a long history of making programs and regulation compliance overly complex. The larger the governmental unit, the more complex. To some extent, it has become the status quo – consumers have begun to expect complex programs that require expert assistance to navigate, and therefore confer disproportionate benefits on those who can afford the assistance of lawyers, accountants, and lobbyists. Complexity also suppresses overall compliance. Therefore, when Otter Tail County - through delegated authority from the state - began licensing private vacation rentals, developing a program that was easy to navigate and encouraged compliance was paramount. Over the past decade, the short-term rental of private vacation homes has grown dramatically. Spurred by the ease of Internet marketing, the need of owners to cover increasing expenses, and overall consumer interest, Minnesota’s second-home owners have become active operators in the vacation home rental market. From an economic standpoint, the rentals offer new lodging opportunities and boost tourism revenue. However, when unmanaged and unregulated, private rentals can also create concerns – noise, traffic, heath and safety risks, capacity issues, zoning compliance, and environmental concerns. To maximize the economic opportunity while mitigating the aforementioned health and environmental risks, Otter Tail County was confronted with creating a program that made compliance easy and cost effective. To do so, the county created a program that was client centered and focused on removing barriers to licensing. County staff developed a customized plan review for private vacation rentals to target the highest risk health and environmental concerns such as safe drinking water and septic system compliance. After the initial plan review, county staff inspect the property biennially. The average annual cost for licensing is around $200 – which is generally less than a one-night stay at the property. While Otter Tail County’s environmental health program is still quite new, early data look quite promising with over 50 properties already voluntarily signed up for the program. The lesson learned from Otter Tail County? Maybe it doesn’t take a genius to make things simple! Give Local Government the Authority and Resources Well before it was legislatively mandated, Otter Tail County was working on buffer strips – the vegetated land adjacent to a streams, rivers, lakes, ditches, and wetlands designed to help filter runoff that can affect water quality. Getting complete buy-in was a daunting task in a county with 4,618 miles of shoreline — nearly the length of the California and Oregon ocean shorelines combined. How was Otter Tail County successful? It certainly wasn’t though a one-size-fits-all, heavy handed crackdown. Rather, after receiving a $290,000 grant from the state Clean Water Land and Legacy Program, the Otter Tail County Soil and Water Conservation Districts took a flexible, individualized approach to gain compliance. The county set up specific guidelines for identifying areas that needed buffers. After an area that potentially needed buffers was identified, technicians met with landowners, measured the area and provided information on all options available to landowners, including government programs that pay landowners to install the buffer strips. Otter Tail County identified over 1,100 parcels as potentially out of compliance through high-resolution photography. To date, despite having more lakes than any other county in the nation, Otter Tail County has achieved 99% compliance county wide. Buffers are a sensitive subject and as such, the conservation districts have gone to great lengths to ensure the process is fair and equitable. The low-key, individualized approach and sense of fair play by local officials has been critical in getting voluntary compliance. Port Authority of the City of Saint Paul Property Assessed Clean Energy Program (MinnPACE) JOINT POWERS AGREEMENT Saint Paul Port Authority 850 Lawson Commons 380 St. Peter Street Saint Paul, MN 55102 (651) 224-5686 (651) 223-5198 (fax) www.sppa.com 2 JOINT POWERS AGREEMENT This Agreement, made and entered into as of the _____ day of _____________, 20___, by and between the Port Authority of the City of Saint Paul (the “Port Authority”), a body corporate and politic, and the County of Otter Tail, Minnesota, a political subdivision under the laws of Minnesota (the “County”), provides as follows: WHEREAS, the Port Authority has been engaged in governmental programs for providing financing throughout the State of Minnesota (the “State”) by making loans evidenced by various financing leases and loan agreements, and in the process of operating these programs the Port Authority has developed a high degree of financial expertise and strength; and WHEREAS, Minnesota Statutes, Sections 216C.435 and 216C.436 and Chapter 429 and 471.59 (collectively the “Act”) authorize the County to provide for the financing of the acquisition and construction or installation of energy efficiency and conservation improvements (the “Cost Effective Energy Improvements” as defined in the Act or “Improvements”) on Qualifying Real Properties” as defined in the Act (the “Properties” or “Property”) located within the boundaries of the County through the use of special assessments; and WHEREAS, the Act authorizes the County to designate a local government unit other than the County to implement the program under the Act on behalf of the County; and WHEREAS, the County has one or more projects within the boundaries of the County that have Improvements in need of financing, and has adopted its Resolution No. _______ (a copy of which is attached hereto as Exhibit A) to designate the Port Authority to implement and administer a program on behalf of the County to finance such Improvements; and WHEREAS, the Port Authority has created a program under the Act known as the Property Assessed Clean Energy Program (“MinnPACE”) for purposes of implementing and administering the activities described in the Act, and the Port Authority is willing to implement and administer that program on behalf of the County as requested herein; and WHEREAS, the County has expressed a desire to make energy improvement financing programs of the kind managed by the Port Authority available for improvements of eligible properties within its boundaries, including but not limited to the Energy Savings Partnership, Trillion BTU and MinnPACE, and a joint powers agreement is required between the County and the Port Authority for MinnPACE; and WHEREAS, the Improvements will serve citizens of Otter Tail County and the State of Minnesota. NOW THEREFORE, in consideration of the mutual covenants herein made, the parties to this Agreement hereby agree as follows: 3 1. The Port Authority will exercise the powers of the Act on behalf of the County by providing financing for Improvements located within the boundaries of the County. Except as otherwise provided in this Joint Powers Agreement, the Port Authority shall be solely responsible for the implementation and administration of MinnPACE and the financing of the Improvements. 2. In connection with its implementation and administration of MinnPACE, and its financing of the Improvements located within the boundaries of the County, it is anticipated that the Port Authority will enter into various agreements with persons wishing to obtain financing for Improvements located within the boundaries of the County as well as with sources of financing for such Improvements (collectively the “Program Documents”). 3. The Port Authority may and is permitted to charge fees for its implementation and administration of MinnPACE, which fee will be described in, and payable under, the Program Documents. 4. The Port Authority will have the sole duty and responsibility to comply with or enforce covenants and agreements contained in the Program Documents. This power specifically includes the responsibility for monitoring and enforcing compliance with the provisions of the Program Documents. 5. Either the Port Authority or a lending institution (the “Lender”) will use its own financial resources to finance the Improvements (the “Loan”), or a taxable special assessment revenue bond(s) (the “Bond(s)”) issued by the Port Authority in favor of the Lender will be used to finance the Improvements. Regardless of the financing mechanism, the Lender will advance funds under the Program Documents to be paid from levied special assessments. 6. The Loan(s) or Bond(s) must be a special/limited obligation of the Port Authority, payable solely from special assessments levied by the County as provided herein. The Loan(s) or Bond(s) and interest thereon must neither constitute nor give rise to a general indebtedness or pecuniary liability, or a general or moral obligation, or a pledge or loan of credit of the Port Authority, the County, the City of Saint Paul or the State of Minnesota, within the meaning of any constitutional or statutory provision. To that end, the Port Authority hereby agrees to indemnify and hold harmless the County from and against any claims or losses arising out of the failure of the Port Authority to provide for the payment of principal of, and the interest or any premium on the Loan(s) or Bond(s), from special assessment payments actually paid to the Port Authority by the County. This indemnity must not, however, be construed to relate to any claims or losses which might arise by virtue of the exercise, by the County, of its governmental powers in connection with the Project, or by virtue of the failure of the County to levy and collect special assessments with respect to the Improvements or promptly remit such special assessment payments to the Port Authority as provided in the Program Documents. 7. As and for its contribution to the financing of the Improvements, and as provided in the Act, the County must impose and collect special assessments necessary to pay debt service on that portion of the Loan(s) or Bond(s) attributable to the Improvements located within the boundaries of the County. Evidence that the County has imposed such special assessments is a 4 precondition to the Port Authority’s obligation to provide financing to any Improvements located within the boundaries of the County in accordance with the following process: A. The Port shall provide to County an application from an Applicant under the Program which includes the following documentation: 1) A copy of the Application containing the legal name of the Applicant, its legal status, its legal address, a description of the Project, the cost of the Improvements, the total amount to be assessed against the Property and the address, legal description and tax identification code for the Property upon which the Improvements are to be constructed or installed. 2) A statement from the Port that the proposed Project as described in the Application qualifies under the requirements of the Act and the Port Authority. 3) A fully-executed copy of the Applicant’s Petition and Assessment Agreement suitable for evidencing, and recording if necessary, Applicant’s agreement to be assessed for the amount of the Improvements. B. Upon receipt of the documentation described in Subparagraph A above, County agrees that it will levy an assessment against the Property for the amount to be assessed as set forth in Section 7.A. above. C. Evidence that the County has imposed such special assessments is a precondition to the Port Authority’s obligation to provide financing to any Improvements located within the boundaries of the County. D. In the event that, after the County levies an assessment against the Property for the costs of the Improvements and related costs as provided for in Subparagraph B above, the Port does not fund the cost of the Improvements as contemplated by this Agreement, the Port shall promptly notify County that it has not and will not fund the costs of the Improvements under the Program and County shall thereafter inform the County Auditor to remove the subject assessment from the Property. 8. Once the County has imposed special assessments to finance Improvements located within the boundaries of the County, the County transfer all collections of the assessments received by it upon receipt to the Port Authority for application to the payment of the applicable Loan(s) or Bond(s). The County will take all actions permitted by law for the recovery of the assessments, including without limitation, reinstating the outstanding balance of assessments when the land returns to private ownership, in accordance with Minn. Stat. Section 429.071, Subd. 4. The County has no obligation to make any payment on the applicable Loan(s) or Bond(s) other than by the imposition and collection of special assessments pursuant to the Act. The County acknowledges that the Lender is a third-party beneficiary of the County’s covenants herein with respect to the imposition and transfer of special assessments described herein. 5 9. Unless otherwise provided by concurrent action of the Port Authority and the County, this Agreement will terminate upon a 30-day’s advanced written notice to the other Joint Powers Agreement partner or upon the retirement or defeasance of all Loan(s) or Bond(s), whichever is later; and notwithstanding any other provisions, this Agreement may not be terminated in advance of such retirement or defeasance. 10. This Agreement may be amended by the Port Authority and the County, at any time, by an instrument executed by both of them. The Port Authority or the County may not amend this Agreement, however, if the effect of the amendment would impair the rights of the holder of the Loan(s) or Bond(s), unless the holder has consented to the amendment. 11. This Agreement may be executed in any number of counterparts, each of which when taken together will constitute a single agreement. [Remainder of page intentionally left blank] S – 1 IN WITNESS WHEREOF, the Port Authority and the County have caused this Agreement to be executed on their behalf, by their duly authorized officers, as of the day and year first above written. PORT AUTHORITY OF THE CITY OF SAINT PAUL By: Its: President By: Its: Chief Financial Officer COUNTY OF OTTER TAIL, MINNESOTA By: Its: By: Its: A-1 EXHIBIT A Extract of Minutes of Meeting of the Board of Commissioners of the County of Otter Tail, Minnesota Pursuant to due call and notice thereof, a regular meeting of the Board of Commissioners of the County of Otter Tail (the “County”), was duly held at the Otter Tail County Government Center in the County, on ________ ______, 20____, at _________________P.M. The following members were present: and the following were absent: * * * * * * * * * The Chair announced that the next order of business was consideration of the designation of the Port Authority of the City of Saint Paul to implement and administer a program under Minnesota Statutes, Sections 216C.435 and 216C.436 and Chapter 429 and 471.59 on behalf of the County. Member ____________________ introduced the following resolution and moved its adoption, the reading of which had been dispensed with by unanimous consent: RESOLUTION NO. _______ RESOLUTION DESIGNATING THE PORT AUTHORITY TO IMPLEMENT AND ADMINISTER A PROPERTY ASSESSED CLEAN ENERGY IMPROVEMENT FINANCING ON BEHALF OF THE COUNTY, AND PROVIDING FOR THE IMPOSITION OF SPECIAL ASSESSMENTS AS NEEDED IN CONNECTION WITH THAT PROGRAM BE IT RESOLVED by the Board of Commissioners of the County of Otter Tail (the “County”), as follows: 1. The Port Authority of the City of Saint Paul (the “Port Authority”) has established the Property Assessed Clean Energy Program (“MinnPACE”) to finance the acquisition and construction or installation of energy efficiency and conservation improvements A-2 (the “Improvements”), on properties located throughout the State of Minnesota through the use of special assessments pursuant to Minnesota Statutes Sections 216C.435 and 216C.436 and Chapter 429 and 471.59 (the “Act”). 2. In order to finance the Improvements, the County hereby determines that it is beneficial to participate in MinnPACE, and to designate the Port Authority as the implementor and administrator of that program on behalf of the County for purposes of financing Improvements located within the County. 3. The County understands that the Port Authority may obtain funding from designated lending institutions or may issue its MinnPACE special assessment revenue bond(s) to finance the Improvements, and that the sole security for the loan(s) or bond(s) will be special assessments imposed by the governmental entity participating in MinnPACE. 4. To facilitate and encourage the financing of Improvements located within the County, the County covenants to levy assessments for said Improvements on the property so benefitted, in accordance with the Application and Petition for Special Assessments received from the owner(s) of the Property and approved by the Port Authority. The interest rate on the Special Assessments shall be the interest rate on the Loan(s) or Bond(s), and may include additional interest. 5. After imposition of the special assessments, the County shall collect such assessments and remit them to the Port Authority for use in the repayment of the Loan(s) or Bond(s). The County will take all actions permitted by law to recover the assessments, including without limitation, reinstating the outstanding balance of assessments when the land returns to private ownership, in accordance with Minn. Stat. Section 429.071, Subd. 4. 6. The County Manager or Assistant County Manager are authorized to execute on behalf of the County, any documents, certificates or agreements necessary to implement the program authorized by this resolution. The motion for the adoption of the foregoing resolution was duly seconded by Member ______________ upon vote being taken thereon the following voted in favor thereof: and the following voted against the same: whereupon said resolution was declared duly passed and adopted. A-3 STATE OF MINNESOTA ) ) ss. COUNTY OF OTTER TAIL ) I, the undersigned, being the duly qualified and acting __________ of the County of Otter Tail, hereby certify that I have carefully compared the attached and foregoing extract of minutes of a meeting of the Board of Commissioners of said County held _______________, with the original thereof on file and of record in my office and the same is a full, true and complete transcript therefrom. WITNESS My hand officially and the seal of the County this ___________ of ______________. By: ______________________________ Its: ______________________________ County of Otter Tail (Seal) What is Property Assessed Clean Energy (PACE)? Why PACE, and how does it work? PACE is a new way to ﬁnance energy efﬁciency and renewable energy upgrades to the buildings of commercial property owners. Energy-saving measures pursued by the owners receive project ﬁnancing and are repaid as a separate item on their property tax assessment for a set period. PACE eliminates the burden of upfront costs by providing low-cost, long-term ﬁnancing. Learn more on reverse PACE ﬁnancing helps overcome several barriers to making energy improvements: n Eliminates high up-front costs n Reduces dependence on credit Property Assessed Clean Energy (PACE) ﬁnancing allows property owners to ﬁnance energy-related improvements to their buildings with affordable, long-term capital. n Allows for comprehensive retroﬁts n Allows programs to recoup their costs Ready To Get Started? Dig a little deeper: Visit the CERTs website resource page on PACE, which includes program details, a map of all participating cities and counties, and interviews with business owners who have completed projects at http://mncerts.org/pace. Go further: Contact Pete Lindstrom with the Clean Energy Resource Teams at plindstr@umn.edu or 612-625-9634. Can I use PACE to ﬁnance building improvements? Minnesota state law allows local units of government to enter into joint powers agreements to create PACE programs. Under this innovative arrangement, commercial, industrial, nonproﬁt and multi- housing property owners can take on voluntary special assessments to ﬁnance energy efﬁciency, renewable energy, or electric vehicle infrastructure improvements to their properties. PACE allows companies the opportunity to maintain a positive cash ﬂow while investing in energy upgrades at no cost to taxpayers. PACE ﬁnancing can also make it easier for building owners to transfer ﬁnanced improvement repayment to the next owner upon sale, as the repayment resides with the property tax assessment. Basic qualiﬁcations for PACE ﬁnancing: n Property owners must be current on mortgage and property taxes n No federal or state liens against the property n Must not be in bankruptcy proceeding n Lender acknowledgement or “consent” from current mortgage lender n Term of ﬁnancing may not exceed weighted average useful life of improvements n Improvements may not exceed 20% of assessed property value What programs exist in Minnesota? There are currently two commercial PACE programs available to Minnesota cities and counties that want to help ﬁnance building energy improvements in their jurisdictions. Rural Minnesota Energy Board Available to entities in the Rural Minnesota Energy Board’s counties. The program is administered by the Southwest Regional Development Commission. Learn more at http://mncerts.org/pace#rmeb. Saint Paul Port Authority Available to entities in any city or county in Minnesota. Interested local governments can work with the Saint Paul Port Authority to authorize the program. Learn more at http://mncerts.org/pace#sppa. Otter Tail County Contract Outline Presented to Human Service Board January 9, 2018 Agency Program Effective Date Targeted Population Amount of Contract Funding Source Contract Renewals Good Life Services, Inc. Semi-Independent Living Skills 04-01-18 Through 12-31-18 Persons with Developmental Disabilities or related conditions Unit Cost = $35.64/hr. County of Financial Responsibility OTTER TAIL COUNTY PLANNING COMMISSION Otter Tail County Government Services Center, 540 West Fir, Fergus Falls, MN 56537 218-998-8095 April 11, 2018 Meeting of the Otter Tail County Planning Commission was held on April 11, 2018 at 6:30 P.M. in the Commissioner's Room, Government Services Center, Fergus Falls, Minnesota. Roll Call: Members Present: Loren Bailey, Rod Boyer, Brent E. Frazier, Richard Gabe, Bert Olson, Jack Rosenthal, David Trites, David Wass and Rick Wilson. Members Absent: Robert Schwartz. Michelle Eldien represented the County Attorney's Office and Bill Kalar represented the Land & Resource Management Office. Minutes of February 14, 2018: A motion by Gabe, second by Frazier to approve the February 14, 2018 Minutes as presented. Voting: All members in favor. Ace A. Brandt – Approved With Conditions: A Conditional Use Permit Application (as stated by the Applicant on the Application): Please consider this application for natural shoreline enhancements. The project proposes to remove existing riprap and replace with a combination of new granite riprap complimented with naturalized plant beds including native shrubs, perennials, grasses and no mow fescue grass creating a more natural appearing and stable shoreline. The project removes 680SY of existing riprap and installs 482SY of new granite outcropping stone with 298SY native plant bed area and 380SY of no-mow fescue tuft grass. The project proposes to remove 226CY of existing soil and replaces that with 226CY of newly amended plant soil for enhanced root zone growth. Length of shoreline to be naturalized is 400±Ft. The proposal is in Tract A of Res Land Survey #14 and Tract B Registered Land Survey #14, Section 11 of Scambler Township; Pelican Lake (56-786), GD. Michael Lloyd (Landscape Designer) and Jesse Omdahl (Property Manager) represented the Application. Rudy Dotzenrod provided a document expressing concerns on the traffic, activity and movement of trucks and materials on the hillside road that passes in front of his property. Correspondence was read into the record. Motion: A motion by Trites, second by Frazier to approve the project per the Application submitted, provided: 1. The existing riprap remains undisturbed from the toe landward 3’ above the OHWL. 2. An Engineer’s Plan is approved by Land & Resource that addresses all issues related to slumping, erosion and the potential effects on adjacent property owners. 3. DNR approval is acquired by the Applicant and submitted to Land & Resource. Voting: All Members in favor. DGD Enterprises LLP – Tabled To May 9, 2018: A Conditional Use Permit Application (as stated by the Applicant on the Application): I would like to build a 60’ x 150’ building for marine sales and service. We would be looking at an 8 inch gravel overlay for parking lot and outdoor parking. The proposal is in Pt Govt Lot 5, Lying Easterly of Line Desc. Comm NE Cor Lot 18 Engles Bch S 78̊ W 87.2’ N 347.62’, Section 01 of Scambler Township; Pelican Lake (56-786), GD. Otter Tail County, Planning Commission April 11, 2018; Page 2 Motion – October 11, 2017: A motion by Bailey, second by Schwartz to table, at the Applicant’s request, to November 8, 2017, to allow the Applicant time to provide: 1. A drainage plan. 2. A site plan identifying specific locations and amount of proposed fill. 3. A revised impervious surface calculation which includes all onsite impervious surfaces. Information must be received by Land & Resource no later than October 20, 2017 Motion – November 8, 2017: Motion by Wilson, second by Wass to table the Application to March 2018 as requested by the Applicant. A letter from Cale Arneson, dated March 21, 2018, was read into the record requesting the Application be tabled to the May 2018 Meeting. Motion: A motion by Boyer, second by Wilson to table to the May 9, 2018 Meeting as requested by the Applicant. Voting: All Members in favor. Otter Tail County Highway Department – Approved As Requested: A Conditional Use Permit Application (as stated by the Applicant on the Application): To replace deficient Bridge No. 7267 located on CSAH 15 in Orwell Township over the Otter Tail River in Gov’t. Lots 4 & 5, Section 26. Bridge to be replaced with a 104’8” long Slab Span Bridge 50’3” wide. Approximately 405 feet of highway reconstruction is associated with the project. MnDNR and USACE permits will be obtained prior to construction. An MPCA permit is not required. Construction Easements will be obtained prior to construction. Plans are on file in the Otter Tail County Highway Department. Work is to be completed in 2018. The project is at a Crossing of CSAH 15 and Otter Tail River in Gov’t Lots 4 & 5, Section 26 of Orwell Township. Old Bridge No. 7267, New Bridge No. 56544. Project No. S.A.P. 056-615-018; Otter Tail River (56-OTR), AG. Charles Grotte represented the Application. David Johnson had questions regarding the timeframe of the project. Motion: A motion by Trites, second by Bailey to approve as requested. Voting: All Members in favor. Otter Tail County Highway Department – Approved As Presented: A Conditional Use Permit Application (as stated by the Applicant on the Application): Project No. S.A.P. 056-601-054, reconstruction of CSAH 1 from 0.2 miles East of CSAH 10 to CSAH 35, 5.643 miles. This 5.643 mile segment of CSAH 1 was last surfaced in 1984, which is the last date that any major work has been done on this roadway. The date of original grading is 1947. The existing highway is deficient in cross-section, design speed and payment section structure. The proposed project will be constructed to current Mn/DOT State Aid Standards and will provide a safer and more efficient highway. Detailed project plans are on file at Land & Resource Management and are available at the Otter Tail County Highway Department. All needed easements will be obtained prior to construction. Prior to construction all appropriate permits will be obtained. The project is located from a point 845 feet West of the North Quarter Corner of Section 4-T133N-R42W to the Southeast Corner of Section 32- T134N-R41W (CSAH 1 from 0.2 miles East of CSAH 10 to CSAH 35). From Station 461+00 to 466+50 and Station 682+50 to 690+00 are within the Shoreland Area, totaling 1,300 feet; West Lost Lake (56-481), NE & Holtz Lake (56-661), NE. Charles Grotte represented the Application. Motion: A motion by Wass, second by Wilson to approve as presented. Voting: All Members in favor. Otter Tail County, Planning Commission April 11, 2018; Page 3 Cynthia Fronning – Tabled to May 9, 2018: A Conditional Use Permit Application (as stated by the Applicant on the Application): Remove soil from ice berm on lake (No.’s 1 & 2 on drawing), Fill in low area with soil from berm (No. 3 on drawing), Bring in approximately 13 yds of sand to make beach (No. 4 on drawing). No.’s 1 & 2 will be vegetated with grass. Details of proposal are indicated on the drawing submitted with application on file at Land & Resource Management. The project is located on Lot 7 Blk 2 of Sunrise Cove 1st Addn, Section 23 of Clitherall Township; Clitherall Lake (56-238), RD. LeRoy Fronning represented the Application. Correspondence was read into the record. Motion: A motion by Bailey, second by Wass to table, at the Applicant’s request, to the May 9, 2018 Meeting, allowing Members to view the property without snow cover. Voting: All Members in favor. Steven & Rebecca Scott – Tabled to May 9, 2018: A Conditional Use Permit Application (as stated by the Applicant on the Application): To build and open a Boarding Kennel Housing up to 16 dogs; Run a small Breading Kennel of no more than 30 adult dogs; 3 x 4 solar light sign placed near driveway entrance; Hours 8:30 – 6:30 7 days a week; Over a period of next 5 years for completion. The proposal is in Pt NW ¼ & Pt GL 2, Section 35, Dora Township; Star Lake (56-385), GD & Unnamed River (56-TR), Trib. Steven & Rebecca Scott were present and correspondence from the Applicant’s Attorney requesting the Application be tabled to the May meeting, was read into the record. Motion: A motion by Wilson, second by Frazier to table, as requested by the Applicant, to the May 9, 2018 Meeting. Voting: All Members in favor. J and K’s Sunset Bay Inc. / Sunset Bay Resort – Approved With A Condition: A Conditional Use Permit Application (as stated by the Applicant on the Application): J and K’s Sunset Bay, Inc. (d/b/a Sunset Bay Resort) is seeking approval for a Conditional Use Permit to add 1 cabin and 4 campsites with a total livable area of 3016 S.F., and a storage building/garage not to exceed 24’ x 30’ in Tier 2 of parcel 14000160135001. This proposal would include all site work, septic system, and well to service the project. The project is in the S 550’ of Lot 4, Section 16 of Dead Lake Township; Dead Lake (56-383), NE. Jim and Kristen Wherley represented the Application. Motion: A motion by Wilson, second by Rosenthal to approve as presented, provided the existing driveway easement is changed to align with the existing onsite driveway. Voting: All Members in favor. Wee Villa Resort / Cory Budke – Approved With a Condition: A Conditional Use Permit Application (as stated by the Applicant on the Application): 1. Spread the soil removed from Ditch #1 onto grass field on Southeast side of channel (approx. 1,200 yards) 2. Pour concrete for basketball court 26’ x 30’ (adding onto existing) 3. Add a deck to Cabin on Lot #72 12’ x 18’. The property is in Lot 4 Ex Trs (36.06 Acres), Section 14 of Elizabeth Township; Long Lake (56-784), RD. Cory Budke represented the Application. Correspondence was read into the record. Otter Tail County, Planning Commission April 11, 2018; Page 4 Motion: A motion by Trites, second by Gabe to approve as requested, with the condition that the spoil disposition complies with the requirements of the Wetland Conservation Act. Voting: All Members in favor. Miscellaneous: 1. Bill informed Members that the County Board will not host a joint meeting in April as proposed. This meeting may be scheduled for a later date (fall or winter). 2. Bill informed Members the County Board of Appeal and Equalization Meeting has been scheduled for June 13th in the County Board Room. After discussing the Meeting date conflict for the Planning Commission’s June Meeting, it was determined to reschedule it to June 20th. There will be a revised 2018 Planning Commission Meeting Schedule to reflect this change, this information will be available on the County Website. 3. Bill distributed information on 2018 Land Use Training & Education Workshops. Marsha will email information to Members on these workshops that will include the registration process. 4. Bill informed Members that due to his planned retirement, this is his last Planning Commission Meeting. Members expressed their appreciation of his knowledge and wished him the best. Adjourn: At 8:35 P.M., Chairman Olson set the Meeting. The next Meeting is scheduled for 6:30 P.M. on May 9, 2018. Respectfully submitted, Marsha Bowman Recording Secretary Page | 1 Tuesday, April 24, 2018 Non-Consent Agenda Items 1. Motion by , second by and unanimously carried, to authorized the County Auditor-Treasurer’s signature on the Sales Order Agreement for the acquisition of 83 DS200 Ballot Tabulator at a cost of $362,395.50 and on the Purchase Order for the acquisition of one EVS 5.3.2.0 Reporting Standard System at a cost of $3,532.67. $77,847.65 of the total cost will be covered by our recently received grant. 2. See attached DNR Letter – Motion by , second by and unanimously carried, to voluntarily return the equipment issued to Otter Tail County in recognition of the County’s minimal usage. In 2017 we sold 181 licenses, with 40 of those being issued with no fee. The County’s total 2017 revenue was $127.50. 3. Motion by , second by and unanimously carried, to authorize payment to Essentia Health, in the amount of $692.00 for costs incurred under the provision of Minnesota Statue 609.35. 4. Tax-Forfeited Land Conveyance – Tax-Forfeited Land Conveyance Government Acquisition City of Pelican Rapids Otter Tail County Resolution No. 2018- Upon motion by__________, second by __________and unanimously carried, the following resolution was offered and adopted: WHEREAS, The Otter Tail County Board of Commissioners on Wednesday December 23, 1992 approved, by resolution, the request from the City of Pelican Rapids to acquire for an authorized public use the following described parcel of tax-forfeited land: Parcel No. 76-000-22-0016-000 Section 22 Township 136 Range 43 West Half of the Southwest Quarter (W½ SW¼) Except Jacob’s Addition, Except R. J. Miller Addition, and Except Tracts; and Parcel No. 76-000-21-0004-000 Section 21 township 136 Range 43 SE1/4 SE1/4 WHEREAS, the request from the City of Pelican Rapids identified the authorized public use of the above reference parcel exclusively for the land spreading of sludge from the City of Pelican Rapids Wastewater Treatment Facility; and WHEREAS, based upon the Otter Tail County Board of Commissioners’ recommendation, the Commissioner of Revenue did on Friday, January 22, 1993, by State Deed No. 0178452 and State Deed No. 0178453, convey the above described tax-forfeited land to the City of Pelican Rapids for the authorized public use as stated above; and WHEREAS, State Deed No. 0178452 and State Deed No. 0178453 was recorded on January 28, 1993 with the Otter Tail County Recorder’s office as Document No. 740033 and Document No. 740034; and WHEREAS, The City of Pelican Rapids after determining that the following described property was no longer needed exclusively for the land spreading of sludge did on Tuesday, June 13, 2017 by Resolution No. 2017-13 conveyed the following described property, which is a portion of Parcel 76-000-21-0004-000 and 76-000-22-0016-000, to the State of Minnesota: Page | 2 All that part of the West Half (W½) of the Southwest Quarter (SW¼), Section 22, Township 136, Range 43, lying both southerly of: southerly boundary line of the Northerly 20 rods of said West Half (W½) of the Southwest Quarter (SW¼) and northerly of: the northerly boundary line, the westerly extension of the northerly boundary line and the easterly extension of the northerly boundary line, of the following described real property: RESERVE LOT “A” EXCEPT THE EASTERLY 16 FEET THEREOF, of MOBROTEN’S ADDITION, Pelican Rapids, Minnesota; and WHEREAS, this reconveyance was approved by the Minnesota Department of Revenue on Monday, June 26, 2017 and recorded on Friday, June 30, 2017 as Document No. 1192761; and WHEREAS, The City of Pelican Rapids has determined that another portion of Parcel 76-000-21-0004-000 and 76-000-22-0016-000 described as follows is no longer needed exclusively for the land spreading of sludge from the City of Pelican Rapids Wastewater Treatment Facility: All that part of the Southeast Quarter of Section 21, Township 136 North, Range 43 West, Otter Tail County, Minnesota, located within the boundaries of the following described tract: Commencing at the southeast corner of Lot 1, R. J. MILLER ADDITION, according to the recorded plat thereof; thence on an assumed bearing of North 90 degrees 00 minutes 00 seconds West along the south line of said Lot 1 and along the northerly right-of-way line of Trunk Highway No. 108, a distance of 191.02 feet to the point of beginning of the land to be described; thence North 01 degrees 27 minutes 50 seconds West and parallel with the west line of said Lot 1, a distance of 449.77 feet; thence North 89 degrees 28 minutes 01 seconds West 250.15 feet; thence South 01 degrees 27 minutes 50 seconds East 450.27 feet to said northerly right-of-way line; thence South 89 degrees 28 minutes 01 seconds East along said northerly right-of-way line, 195.97 feet; thence South 90 degrees 00 minutes 00 seconds East along said northerly right-of-way line, 54.17 feet to the point of beginning (abstracted from City Resolution No. 2018-06); and All that part of the Southwest Quarter of Section 22, Township 136 North, Range 43 West, Otter Tail County, Minnesota, located within the boundaries of the following described tract: Commencing at the southeast corner of Lot 1, R. J. MILLER ADDITION, according to the recorded plat thereof; thence on an assumed bearing of North 90 degrees 00 minutes 00 seconds West along the south line of said Lot 1 and along the northerly right-of-way line of Trunk Highway No. 108, a distance of 191.02 feet to the point of beginning of the land to be described; thence North 01 degrees 27 minutes 50 seconds West and parallel with the west line of said Lot 1, a distance of 449.77 feet; thence North 89 degrees 28 minutes 01 seconds West 250.15 feet; thence South 01 degrees 27 minutes 50 seconds East 450.27 feet to said northerly right-of-way line; thence South 89 degrees 28 minutes 01 seconds East along said northerly right-of-way line, 195.97 feet; thence South 90 degrees 00 minutes 00 seconds East along said northerly right-of-way line, 54.17 feet to the point of beginning (abstracted from City Resolution No. 2018-07); and WHEREAS, The City of Pelican Rapids has passed City Resolution No. 2018-06 and City Resolution No. 2018-07 granting, conveying and quit claiming the above described property to the State of Minnesota: and WHEREAS, The City of Pelican Rapids has submitted Minnesota Department of Revenue PT Forms 976 for the purpose of reconveyance to the State of Minnesota that portion of the previously acquired tax-forfeited land, as described above, that the City of Pelican Rapids no longer requires for the authorized public use as stated in State Deed No. 0178452 and State Deed No. 0178453; and WHEREAS, The City of Pelican Rapids has identified that the highest and best use of the land that is no longer required for the authorized public use is to make that land available to the City of Pelican Rapids for the purpose of creating additional affordable housing units within the City; and WHEREAS, The City of Pelican Rapids upon completion of the reconveyance process, the approval of the reconveyance to the State of Minnesota by the Commissioners of Revenue, the filing of the approved Minnesota Department of Revenue PT Forms 976 by the Commissioner of Revenue with the Otter Tail County Auditor-Treasurer’s office and the recording of the approved Minnesota Department of Revenue PT Forms 976 by the County Auditor-Treasurer with the County Recorder Offices, does hereby respectfully request that the Otter Tail County Board of Commissioners approve the purchase, by the City of Pelican Rapids, of the re-conveyed tax-forfeited land for an authorized public purpose (affordable housing); and WHEREAS, It is the intention of the City of Pelican Rapids to use the above described property for a housing project, which will provide safe, decent, affordable, sanitary rental housing for residents of the City of Pelican Rapids. Page | 3 NOW, THEREFORE, BE IT RESOLVED, by the Otter Tail County Board of Commissioners that the request of the City of Pelican Rapids to purchase the following described tax-forfeited parcels is hereby approved conditioned upon the successful completion of the re-conveyance process by the City of Pelican Rapids, the approval of the re-conveyance to the State of Minnesota by the Commissioner of Revenue, the filing of Minnesota Department of Revenue PT Forms 976 by the Commissioner of Revenue with the County Auditor-Treasurer’s office and the recording of Minnesota Department of Revenue PT Forms 976 by the County Auditor-Treasurer with the County Recorder’s office: All that part of the Southeast Quarter of Section 21, Township 136 North, Range 43 West, Otter Tail County, Minnesota, located within the boundaries of the following described tract: Commencing at the southeast corner of Lot 1, R. J. MILLER ADDITION, according to the recorded plat thereof; thence on an assumed bearing of North 90 degrees 00 minutes 00 seconds West along the south line of said Lot 1 and along the northerly right-of-way line of Trunk Highway No. 108, a distance of 191.02 feet to the point of beginning of the land to be described; thence North 01 degrees 27 minutes 50 seconds West and parallel with the west line of said Lot 1, a distance of 449.77 feet; thence North 89 degrees 28 minutes 01 seconds West 250.15 feet; thence South 01 degrees 27 minutes 50 seconds East 450.27 feet to said northerly right-of-way line; thence South 89 degrees 28 minutes 01 seconds East along said northerly right-of-way line, 195.97 feet; thence South 90 degrees 00 minutes 00 seconds East along said northerly right-of-way line, 54.17 feet to the point of beginning; and All that part of the Southwest Quarter of Section 22, Township 136 North, Range 43 West, Otter Tail County, Minnesota, located within the boundaries of the following described tract: Commencing at the southeast corner of Lot 1, R. J. MILLER ADDITION, according to the recorded plat thereof; thence on an assumed bearing of North 90 degrees 00 minutes 00 seconds West along the south line of said Lot 1 and along the northerly right-of-way line of Trunk Highway No. 108, a distance of 191.02 feet to the point of beginning of the land to be described; thence North 01 degrees 27 minutes 50 seconds West and parallel with the west line of said Lot 1, a distance of 449.77 feet; thence North 89 degrees 28 minutes 01 seconds West 250.15 feet; thence South 01 degrees 27 minutes 50 seconds East 450.27 feet to said northerly right-of-way line; thence South 89 degrees 28 minutes 01 seconds East along said northerly right-of-way line, 195.97 feet; thence South 90 degrees 00 minutes 00 seconds East along said northerly right-of-way line, 54.17 feet to the point of beginning; and NOW, THEREFORE, BE IT FUTHER RESOLVED, by the Otter Tail County Board of Commissioners that it is their desire to set the basic sale price of this parcel at $0.00 and to allow the City of Pelican Rapids to purchase this property for the total of the applicable fees for the following reasons: 1.) the property has been held by the City of Pelican Rapids since 1993 for an authorized public use; 2.) the intended use of this property is to create additional affordable housing which is needed significantly in Otter Tail County and specifically in the City of Pelican Rapids, 3.) requiring purchase at full market value or even a significantly reduce market value will negatively impact the proposed housing project and, 4) the conditional use restriction is scheduled to be released Sunday, January 22, 2023, which is 30 years form the date the state deeds were acknowledged at which time the City of Pelican Rapids could use this property for any authorized public purpose. Adopted this _______ day of __________ 2018 Otter Tail County Board of Commissioners Dated: By: Attest: Wayne Johnson, Chair John Dinsmore, Clerk