September 28, 2018
A state audit report released earlier this week found that while Kentuckians initially expected to spend $30 million on the floundering KentuckyWired network when the project began in 2014, the cost to taxpayers is now projected to be $1.5 billion.
While the network was sold as a public-private partnership, Kentucky Auditor Mike Harmon suggested that taxpayers are carrying 93% of the burden of costs. It also seems that Australia’s Macquarie Group, the partner selected for this venture, is no longer doing business in Kentucky and is no longer party to a contract with the Commonwealth.
The audit also found that the project is 35 percent over budget, due in part to continued delays that have led to penalties for “supervening events” totaling upwards of $110 million. The project’s initial financing was provided by tax-exempt bonds to cut costs, but made Kentucky ultimately liable for the debt, tying the state’s future bond rating to the fate of the project.
Harmon said he intends to continue the investigation, including issuing subpoenas if necessary.
Back in April, lawmakers raised concerns about the delays and whether the project should be allowed to proceed, though they ultimately approved additional funding to keep the network afloat and prevent further loss to taxpayers that would be incurred from backing out.
According to the report, as of March, just 735 miles of the planned 3,200 miles had been completed. As of now, none of the network is functional. And as it is a middle-mile network, getting service to end users like residents and businesses will depend on private ISPs or individual cities stepping up to provide the last mile of service.
In a news conference announcing the release of his audit, Harmon suggested that the state’s “best bad option” would likely be to stop funding the project and look for a new partner to buy out the project.
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