City Commissioners Support Borrowing Additional $10 Million for Smart Grid Buildout
By Beth Milligan | April 18, 2023
Traverse City commissioners voted Monday to provide public notice of the city’s intent to borrow an additional $10 million to pay for the buildout of a city smart grid, a project that will include the expansion of fiber Internet citywide. That amount is in addition to $18.2 million already approved in project funding – a $14.7 million USDA loan and $3.5 capital improvement bond – bringing the total project financing up to $28.2 million. Commissioners Monday also agreed to interview two candidates for interim city manager at a special meeting next week.
Smart Grid Expansion
Federal delays in releasing loan funds, inflation and interest rate impacts, and contingency costs are some of the reasons Traverse City is preparing to borrow up to an additional $10 million to complete the buildout of a city smart grid. The buildout will not only expand fiber Internet citywide but is intended to increase security and reliability for government services, as well as allow for real-time monitoring of power usage and outages and give utility customers the option to track and adjust their energy consumption.
City commissioners already voted last year to borrow up to $18.2 million for the Traverse City Light & Power (TLCP) smart grid project. The United States Department of Agriculture (USDA) is providing nearly $14.7 million of that amount through a loan, and a capital improvement bond will provide an additional $3.5 million to cover drop costs for connecting customers to the fiber network. While the city charter requires the debt to be approved by commissioners and backed by the city’s full faith and credit, TCLP is solely responsible for paying it off. An agreement between the city and TCLP holds the city harmless for any financial liability for the project.
USDA delays in releasing loan funding over the last year meant that it took until this week until city commissioners could finally vote to execute the loan documents. Rising interest rates and inflationary impacts incurred during the months-long delay prompted TCLP to seek city commission approval Monday to bond up to $10 million more to cover additional expenses. TCLP CFO Karla Myers-Beman said that figure includes contingency costs of nearly $4.3 million, funds she hopes the utility won’t have to actually use. But the bond approval gives TCLP flexibility to cover costs if needed without having to repeatedly return with more funding requests, she said.
Former City Treasurer Bill Twietmeyer questioned during public comment Monday what will happen if the smart grid buildout is a “financial failure,” noting that current fiber take rates are lower than initially projected. Mayor Pro Tem Amy Shamroe, who sits on the TCLP board, said that the initial fiber rollout focused on downtown and the city’s commercial core and came just as the pandemic hit, impacting business demand. The remaining buildout is focused on expanding into the city’s residential neighborhoods, where TCLP already has “wait lists of people waiting to sign up for (service) for their homes,” Shamroe said. Myers-Beman said she was also confident the fiber take rate will increase and the project will be successful, but that in a worst-case scenario where it “becomes a failure,” the debt payments would be covered by an estimated 4.5 percent increase in customer electric rates.
Multiple commissioners, including Shamroe and Commissioner Tim Werner, said the project isn’t just about providing citywide fiber Internet and shouldn’t be measured solely on those metrics. “Even if we weren’t interested in being on the Internet...we will need a smart grid,” said Werner, adding the infrastructure was crucial to meeting the city’s future energy needs and climate change goals. Shamroe pointed to the increasing importance of municipalities upgrading to more secure, sophisticated grids in an era of surging cyberattacks on energy infrastructure. “This is all to reinforce our grid,” she said. “This is huge for us, for our security, for our ability to operate, for our ability to operate decades into the future.”
Monday’s commission vote kicks off a 45-day period during which city voters can petition to put the $10 million in additional bonds on the ballot (the previously approved $18.2 million already passed its 45-day referendum window last year). Assuming there is no referendum, city commissioners could vote in June to move forward with actually issuing bonds, with a bond sale likely to place in July or August.
Interim City Manager Interviews
City commissioners agreed Monday to hold a special meeting next week on Monday, April 24 to interview two candidates for interim city manager. Based on the availability of candidates and commissioners, the meeting will take place Monday morning, though the exact time has not yet been set.
Commissioners last week used a ranked-choice voting system to identify three interim city manager finalists: George Korthauer, Nate Geinzer, and Ryan Cotton. Cotton subsequently withdrew from consideration, as he works for a firm – GovHR USA – that intends to respond to the city’s RFP to lead a national search for a permanent city manager. Commissioners Monday discussed adding other candidates to the mix, but ultimately agreed to interview just Korthauer and Geinzer. Korthauer most recently served as city manager in Oneonta, New York, but was previously city manager of Petoskey for 25 years. Geinzer is the founder and CEO of municipal and organizational consulting services firm Double Haul Solutions. He served as city manager of Brighton from 2016 to 2022.
Assuming commissioners are satisfied with at least one of the candidates following interviews, they will likely vote at that same meeting to offer the position of interim city manager to their preferred candidate. That person is set to hold the role for several months as commissioners go through the search process to find a permanent city manager. Assistant City Manager Penny Hill is currently filling in as interim city manager following the departure of former City Manager Marty Colburn, but told commissioners her existing duties won’t allow her to serve in that capacity for long.Comment