Broadband or boondoggle? Colorado agency spends millions of stimulus dollars, resists audit

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Brad Jones Contributor
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A government agency tasked with connecting far-flung Colorado communities to the Internet has spent millions, but can’t be audited by the state and refuses to produce full records to lawmakers.

EAGLE-Net Alliance, once hailed as a soaring initiative for rural Colorado, has few customers and has failed to meet budget goals since its creation.

Awarded $100 million in federal stimulus funds in 2009, ENA’s access to those funds was temporarily suspended this spring after the Department of Commerce said the agency changed its plans without consulting federal regulators first.

As previously reported by The Daily Caller News Foundation, ENA faces a federal audit after Colorado Republican Reps. Cory Gardner and Scott Tipton and Oregon Republican Greg Walden questioned how the stimulus money was spent.

Network administrators told a state legislative audit panel Wednesday they will require up to $25 million in additional funds to complete construction. Federal funding was matched by the Colorado Department of Transportation to the tune of $34.6 million. Nearly all existing funding for the project has been committed to be spent. A bank line of credit extended to the project was reduced from $17 million to $671 thousand, plus interest.

While federal agencies including the National Telecommunications and Information Administration have authority to review EAGLE-Net’s activities, the Colorado Attorney General’s Office concluded the state auditor has no statutory authority to conduct a formal audit of ENA’s finances.

The bipartisan state legislative audit committee requested in March a list of ENA services and their costs, as well as the “basis and method for calculating” its fees. The network refused, “because it considers such information privileged and confidential commercial, financial data.” Despite being a public agency receiving taxpayer funding, ENA wrote it “believes that a substantial injury to this public project if such information were disseminated and could be accessed by any member of the public.”

This denial prompted a spark rebuke from Democrat Rep. Angela Williams, the audit committee chair. “There is no local independent oversight of ENA in Colorado,” she wrote. “In fact, it appears that the intergovernmental organizational structure that they currently operate under was intentionally created to avoid existing state law and any meaningful local oversight.”

While federal agencies may have audit authority the state lacks, Williams says her committee’s concerns are unique. “While NTIA claims to have oversight, their concerns are much different than what the actual impact is here in the state for companies, customers and taxpayers.” In testimony Wednesday, EAGLE-Net executives cited “non-disclosure” clauses in its contracts as a reason for withholding this “large category of information” that has been withheld.

EAGLE-Net budgeted to earn roughly $3.2 million in the fiscal year ending July 2013; its actual income was $2 million less, according to statements made in Wednesday’s hearing.

While the project is often cited as connecting rural Colorado, lawmakers questioned ENA’s existing connections with urban districts which have existing broadband contracts. “We’re not aiming for underserved and rural areas,” said EAGLE-Net CEO Mike Ryan, saying the agency instead aims to create a “ubiquitous” network connecting every school district in the state. He cited clauses in the federal grant requiring “open access” to the network.

EAGLE-Net recently issued an “Intent to Negotiate,” seeking a private-sector telecom to assume operations of the network, which may mean non-governmental customers could connect, competing with for-profit and co-op networks along its route. The potential for competition from a taxpayer-subsidized utility has prompted protests from industry groups, including the Colorado Telecommunications Association.

In written testimony earlier this spring, CTA claimed its member networks were being “overbuilt” by EAGLE-Net, limiting the value of its’ members offerings in those locations. In a letter to the legislative audit committee August 1, ENA refused to disclose its rates, stating: “…it would put EAGLE-Net at a significant competitive disadvantage if it were required to publicly disclose the detail of its pricing mechanisms.”

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Tags : colorado
Brad Jones