County to vote on $8M loan for Bug Tussel

By Kevin O’Brien

Later this month, the Marathon County Board of Supervisors will be asked to approve a revised financing plan for Bug Tussel, which had previously asked the county to approve $12.5 million in additional conduit bonding to complete a fiber optic cable loop around the county and a separate project in the Kronenwetter area (Leathercamp) for broadband internet.

In August, a vote on the $12.5 million proposal was postponed after it was clear that it did not have the support of three-fourths of supervisors, which is required for conduit bonds to be issued. Since then, the chairman of the county’s broadband task force, supervisor John Robinson, and others have been working with Bug Tussel on an alternative financing plan.

Under the new plan, the county would use $8 million in reserve funds to issue a loan to Bug Tussel so it can finish work on the countywide fiber loop and the Leathercamp project. The terms of the loan would require Bug Tussel to make interest- only loans for the first five years, followed by principal and interest payments for the next 10 years. After 15 years, the company will make a balloon payment that will settle its debt with the county, though the loan itself will be on a 30-year amortization schedule. The county will charge an interest rate of 5.4 percent, which will be locked in for the life of the loan.

The alternative borrowing plan comes after months of negotiations between the county and Bug Tussel, which had asked multiple counties in north-central Wisconsin to issue conduit bonds in August so it can complete various projects it has already started.

In 2021, the county approved $25 million in conduit bonding for Bug Tussel to build 16 towers and install about 190 miles of fiber optic cable, and in 2022, the board agreed to issue a loan for up to $3 million for the Leathercamp project. After the company ran into cost overruns, it asked the county to issue additional conduit bonds, which would have increased the total debt by 50 percent.

Under a conduit bonding arrangement, Bug Tussel and its parent company, Hilbert Communications, are responsible for paying back the debt, with interest, on behalf of the county over a 30-year period. The bonds do not count against the county’s debt limit, and in the event of a default by both Bug Tussel and Hilbert, the county would take ownership of all the towers and fiber optic cable that has been installed.

Even with the protections provided provided by conduit borrowing, many supervisors were leery about issuing another $12.5 million in bonds after the company originally said it could do the fiber loop for the $25 million issued in 2021. The $12.5 million bond would have included $5 million to complete the loop, $3 million for Leathercamp and $4.5 million for capitalized interest.

Robinson told the county’s Infrastructure Committee last Thursday that the new loan proposal will allow the county to reduce the amount of debt by $4.5 million and still ensure the work gets done by reimbursing Bug Tussel for its expenses going forward.

“We won’t give them $8 million upfront,” he said. “We will give them up to $8 million once the project is done.”

At a meeting of the Education, Extension and Economic Development Committee, committee chairwoman Stacey Morache wondered if the county can continue negotiating for a shorter payback period. She implied that Bug Tussel’s cost overruns were preventable, citing the fact that it initially hired a poor-performing subcontractor, did not factor in the cost of boring through the county’s granite bedrock and miscalculated the distances needed for running the cable fiber.

“Those are three things that are still stuck in my craw,” she said. “So, that’s why I would really like to see payback ASAP.”

John Robinson