Sevastopol Building Broadband without a Tax Levy

Another Door County municipality has selected an internet service provider (ISP) to bring fiber-optic broadband to its entire town – this one different from other arrangements made to date.

The partners that municipalities have chosen include Nsight (Baileys Harbor and Liberty Grove), Bertram Communications (Clay Banks and Nasewaupee) and Frontier (Jacksonport). The model emerging for most of these municipalities is to debt-finance construction costs through the tax levy, and any grants received would offset those costs.

Sevastopol selected Bug Tussel, a broadband wireless and fiber-optic service provider and a subsidiary of Green Bay–based Hilbert Communications. The approach is to finance buried fiber optics to Sevastopol addresses with 30-year conduit bonds, which are municipal securities designed to raise capital for revenue-generating projects that benefit the public. 

“Sevastopol is the first municipality to take this approach,” said Jessica Hatch, broadband coordinator for the County of Door. 

Hospitals, private schools, affordable-housing developers, charitable organizations and energy companies are typically issuers of conduit bonds. 

“Using the municipality’s credit score, we can finance the assets over a long enough period of time,” said Mitchel Olson, chief development officer and general counsel for Bug Tussel.

Municipalities issue bonds all the time to fund improvements such as street projects. In this case, Bug Tussel would be the borrower, and Sevastopol – backed by the full power of its ability to levy tax – would guarantee the debt used to install the infrastructure. Down the line, if Bug Tussel couldn’t make the debt payments with revenue from the town’s internet subscribers, Sevastopol would be on the hook. 

“There’s a risk. We didn’t see there was an extreme amount of risk,” said Jeanne Vogel, Sevastopol town board supervisor and chair of the town’s Communication and Technology Committee, which recommended Bug Tussel after more than a year of work and research. 

Much of the town’s and Bug Tussel’s confidence comes from the survey the town did in early 2022 that yielded 432 responses, or 33% of the town’s households. Seventy-two percent were unserved or underserved. Those who do have service with Charter, DC Broadband, HughesNet, Viasat or Starlink indicated if they would subscribe and at what cost. 

Bug Tussel’s starting monthly fees would be lower than all those existing providers at $62 per month for 300/300 Mbps of service. 

The town issued a Request for Information and conducted interviews in July 2022. It then invited broad participation with a Request for Proposals (RFP) in September 2022. (That document became a template for other Door County broadband committees to use, Hatch said.)

AT&T, Bertram, Bug Tussel and Charter/Spectrum responded to the RFP; Frontier, Nsight and TDS declined. The decision came down to Bertram and Bug Tussel. The committee recommended Bug Tussel after comparing proposed coverage for the entire town, the “future-proof” solution, the ISP’s viability and the overall project cost – estimated at $6.82 million, including design. 

“At first we put the whole bonding thing aside because it was such a different concept than everyone else,” Vogel said. “We thought this was too good to be true. Then we dug into it more and had more conversations. We checked with Fond du Lac County; we checked with Iowa County. Once we learned how it works and was it working, we got to, OK, this seems to work.”

Olson and Bug Tussel’s website indicate the company partnered with Fond du Lac and Adams counties in 2012 to issue bonds and has completed those projects. The company partnered with five counties (Fond du Lac, Marathon, Waushara, Calumet and Jackson) to issue bonds in 2021, and seven counties (Jefferson, Iowa, Taylor, Oconto, Rock, Green Lake and Wood) in 2022. 

The bond issue for Sevastopol would be far smaller than those unless Bug Tussel can bring other municipalities on board that have not yet made decisions on ISP partners. 

“We group them together whenever possible, so we are engaged with a couple other [Door County] municipalities,” Olson said.

During its Feb. 20 meeting, the Sevastopol Town Board unanimously accepted the Communication and Technology Committee’s recommendation and approved a resolution to create a public-private partnership with Bug Tussel. Sevastopol agreed to collaborate with other municipalities that may join in and to support Bug Tussel’s application for broadband-expansion grants. 

Bug Tussel has already received 34 broadband-expansion grants from the Public Service Commission between 2015 and 2022, according to the company’s website. The latest grants are helping to fund the company’s gradual transition to fiber.

“Fixed wireless is going to be a factor for Bug Tussel for the next seven to 10 years, but federal and state money is earmarked for fiber,” Olson said. “But that is going to take a long time.”

Sevastopol’s resolution also supports Bug Tussel’s future bond issuance, but those financial arrangements would require another resolution. In addition, the full scope of the project has yet to be defined.

“There’s a lot more to come down the road,” said town board chair Dan Woelfel.

Olson said Bug Tussel “will give the other municipalities a month or two” before moving forward with the bond issuance.