Holland government broadband proposal follows troubled history

Holland city officials are asking residents to approve $24 million in debt to support a municipal broadband service in an area already well-served by private providers. But the experience of very similar efforts in other Michigan municipalities doesn’t bode well for the project.

Holland residents will decide on the new debt issue in an August ballot initiative. The proposal closely follows broadband projects implemented in Marshall and in Traverse City.

Ed Rice, Marshall’s director of utilities, admitted in 2019 that the city government has an unfair advantage over private providers, because it can cut the red tape that usually goes along with installing broadband. Even so, official projections for how many customers would use the municipal broadband network have fallen short. Marshall has taken years even to begin repaying the debt on the project.

Marshall installed its broadband in 2018 and said it would start making payments in 2020. It extended the timeline, however, and according to City Manager Derek Perry, the city made its first payment of $334,911.11 in 2022.

Traverse City, which also has a government-owned broadband network, run by its electric utility, predicted that half the residents in the areas it serves would sign up. After far fewer did, the government-run system is now bringing in less than 40% of the revenue predicted for it. Taxpayers have already paid millions and are on the hook for more.

Now Holland is attempting to re-create those experiences.

Holland has at least 16 broadband service providers, according to Broadband Now. Even so, the city government is planning to install its own broadband system to compete with them. If voters approve the plan, homeowners could be liable for as much as 1.5 mills of taxation, or approximately $6.25 for every $100,000 of home value. That’s the amount they would have to pay each year until the debt is paid — whether they use the city’s broadband or not. This does not include the $820 homeowners will have to pay if they want to hook up to the service, which is not feasible for many low-income residents. The city is also considering using $4 million in federal COVID money it received from the federal government through the American Rescue Plan Act, according to WZZM-TV.

City officials say broadband should be a utility like electricity and water. Ted Bolema, economics professor at Wichita State University and a Holland resident, questions the city’s reasoning.

“We have a lot of necessities,” Bolema told Michigan Capitol Confidential, “including food and gasoline, and we don’t see local governments proposing millages to build more grocery stores or gas stations, or to subsidize the costs of grocery stores and gas stations through millages.”

Bolema, who is on the board of scholars at the Mackinac Center for Public Policy, says if the city does not have enough customers to pay back the debt, residents who are not customers would likely pay. Speaking of city officials, he says, “The temptation is to raise rates for their monopoly services, so that the electricity or water customers end up subsidizing the broadband service.”

A 2017 University of Pennsylvania Law School study looked at municipal broadband programs, analyzing all 20 for which financial data was available over a long period of time. Of those 20 projects, 18 failed to provide enough revenue to cover their costs.

Keith Van Beek, a Holland city council member, says that the ballot question came in response to a communitywide survey in 2021 that showed strong support for the fiber network. The city wants to elevate broadband to become an “essential utility available to all at an affordable cost,” Van Beek told Capitol Confidential.