The gaming industry is a vital part of the Mississippi Coast economy. To paraphrase Kenny Rogers: Coast residents know when to hold ’em and when to fold ’em. But, today, it’s municipal leaders who need to understand when to walk away from a lousy deal.
Currently, cities on the Coast, through their local and state elected officials, are considering how to manage and spend BP oil-spill settlement money. One option Biloxi and other coastal municipalities are evaluating is whether to build public broadband networks to supply internet service to residents, businesses and government offices. Supporters of this idea argue a city-run internet service provider could make money for municipalities.
Don’t bet on it. Municipal broadband is a gamble Biloxi would almost certainly lose. A 2014 study by New York Law School found government networks often cost significantly more to build and operate than their supporters predict. And, as my organization, National Taxpayers Union, and a professor at the University of Denver have illustrated, government broadband networks almost always cost more to build and operate than local lawmakers expect. As a result, 70 to 80 percent of these networks fail to cover their operating costs on an annual basis. When government networks can’t make ends meet, many times the city has to step in to provide taxpayer dollars to cover the shortfalls.
The National Taxpayers Union has highlighted similar failures as part of its annual “February Fails” campaign. The group has noted, for instance, how taxpayers in Marietta, Georgia, got hoodwinked. This city ran a broadband network for about eight years. That network was sold in 2004 to a private buyer for $11.2 million. Not bad … except Marietta had put up $35 million for the project. In all, the system had about 180 subscribers, which means its final cost was about $195,000 per subscriber. Marietta’s mayor said there was “no way” the system ever could have been profitable because of the high costs of continual upgrades.
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A municipal broadband gamble is especially risky when funding for vital services is in short supply. As news reports over the last few months have noted, Biloxi’s budget situation is already tenuous. In August, the city faced significant cuts to first responder budgets. A month later, it still had to deal with a $3 million city budget hole.
The city also faces budget pressures because of cuts and decisions made at the state level. A couple of weeks ago, it was reported that Biloxi could lose education dollars under a new statewide funding formula. On top of that, lawmakers in Jackson already have cut public-safety programs and are attempting to resolve a statewide crisis in the safety of roads and bridges that could require tens of millions of taxpayer dollars to rectify.
City leaders used a portion of Biloxi’s BP settlement money to pay down debt. This investment was a wise one that could pay off in a better bond rating at some point and certainly will pay off in increased financial stability. Investing in a municipal network — which equates to gambling with taxpayer money — will undo that good work.
The cards are on the table and they are clear: Spending taxpayer money on a function the private sector provides is a bad bet for the Coast.
Clark Packard is counsel and government affairs manager for the National Taxpayers Union, where he primarily tracks state legislative efforts and advocates on behalf of taxpayers.