House panel wonders if Obama broadband stimulus effort is connecting

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Photo -  Fiber optic cable for $66 million stimulus broadband system in northern Minnesota. The House Energy and Commerce Committee is raising serious questions about whether the project has complied with federal reguirements. (Watchdog.org photo)
Fiber optic cable for $66 million stimulus broadband system in northern Minnesota. The House Energy and Commerce Committee is raising serious questions about whether the project has complied with federal reguirements. (Watchdog.org photo)
News,Watchdog,Tom Steward

TWO HARBORS, Minn. -- Lake County Minnesotans can't field calls or emails over their $66 million federal-stimulus funded Lake Connections broadband network yet, but the U.S. House of Representatives Energy and Commerce Committee sure got through.

The federal loan and grant awarded by the Rural Utilities Service to wire vast swaths of wilderness between Duluth and Canada has become Exhibit A in the House committee's oversight of the administration's $7.2 billion broadband stimulus programs.

"Lake County will fully cooperate with RUS regarding the request of the House committee," Lake County Administrator Matt Huddleston said in an email to Minnesota Watchdog.

Two and a half years into the project, the Lake County system designed to deliver voice, video and data services to 16,000 homes and businesses is not only still under construction, it's also under intensifying congressional scrutiny.

In a pointed March 13 letter sent to Rural Utilities Service Acting Administrator John Padalino, committee chairman U.S. Rep. Fred Upton, R-Mich., and other Republican committee members pressed for documents and correspondence on the $66.4 million in grants and loans to Lake County under the Broadband Initiatives Program.

A key concern: Whether Rural Utilities Service sidestepped government "eligibility requirements and placed taxpayer dollars at risk" in granting the American Recovery and Reinvestment Act (ARRA) funding.

"While the committee recognizes the importance of expanding broadband access to rural areas of the country, we are concerned with suggestions that the BIP program may have been used to overbuild existing systems rather than extend service to areas that legitimately meet the underserved/unserved eligibility requirements," states Upton's nine-page letter.

"Materials reviewed by committee staff also raise questions as to whether RUS adequately considered the financial viability of the Lake County project before committing $66.4 million in government funding," the letter said.

The House committee wants to know whether seasonal cabins and homes were used to inflate the number of potential customers needed to qualify for federal funding.

After being rejected in the first round of funding, Lake County officials expanded its reach and doubled the number of available households and businesses in its application, including some in adjoining St. Louis County.

"There has been an outpouring of community interest and support for the Lake Connections project. This month Lake Connections hosted meetings in Duluth Township, Silver Creek and Knife River," Huddleston, the county administrator, said. "The respective attendance at those meetings was 79, 58 and 78 people - near capacity and standing room only attendance."

Congressional investigators also question whether the project, one of the largest in the country, can be completed within three years from the Sept. 13, 2010, award announcement, as required.

County officials anticipate wrapping up the first phase of construction in June, some 75 miles of fiber-cable to the county's two main cities. Although it's expected to take two more years to lay the remaining 750-plus miles of fiber, local officials say it won't be an issue because RUS extended its original deadline.

"This was accomplished through a contract modification issued by RUS which was necessary to address issues beyond the control of awardees and RUS, and to maximize the efficiency of taxpayer and awardees' resources," project manager Jeff Roiland said in an email.

"Weather, seasonal conditions and project volume posed challenges for interagency and intergovernmental review processes, suppliers of goods and services and awardees," he said.

To date, just $7.3 million of the $66.4 million funding for the project has been disbursed, according to the Recovery.gov website, which indicates the project remains less than 50 percent complete.

Lake County officials, however, say more than $23 million in contracts have been awarded to project vendors with many bids coming in under budget.

The House panel's inquiry raises wider questions about RUS broadband stimulus programs, asking the Government Accountability Office to examine all loans and grants awarded through the BIP program with a focus on potential duplication of existing services.

"Overbuilding diverts scare budget resources from areas without broadband service to areas with service and can impede vital private-sector investment," the committee's letter says.

"Given the need to ensure the most efficient and effective use of federal dollars and guard against waste, fraud, and abuse, we ask that GAO conduct an in-depth analysis of work already completed under BIP."

Go here for more information on Minnesota Watchdog.

Tom Steward is a reporter for MinnesotaWatchdog.org, which is affiliated with the Franklin Center for Government and Public Integrity.

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