Lawmakers Respond To Scathing Kentucky Wired Broadband Audit

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The troubled Kentucky Wired broadband initiative received another public lashing on Thursday as state legislators weighed in on a scathing audit of the delayed and costly project.

Last month, State Auditor Mike Harmon released an examination that accused officials in former Gov. Steve Beshear’s administration of botching the procurement of Kentucky Wired, placing too much financial risk on taxpayers and creating an unrealistic timeline for completion.

Portions of the statewide fiber optic network were initially scheduled to go live in the summer of 2016, but now officials say it’s been delayed until early 2020.

Harmon also said the $324 million project, which was financed with bonds backed by the state’s credit, is now about $100 million over budget.

Rep. Lynn Bechler, a Republican from Marion, called for the state to cancel the initiative.

“I think we ought to just stop the whole project and then try to get going as to handling the lawsuits,” Bechler said. “I really don’t think the commonwealth would be in worse shape by doing that.”

The network is supposed to be an economic boon for Kentucky, stretching more than 3,000 miles to bring high speed internet to every county in the state.

But construction on the project has been costly and slow-going as the state has had difficulties securing right of way agreements and permission from companies that own telephone poles where the fiber optic cable has to be installed.

Kentucky wired officials are currently negotiating a settlement that would include an $88 million payment to the private partners for the delays.

The state is also on the hook for paying about $30 million per year to private partners — payments that were supposed to be offset by wholesaling part of the network’s capacity to local internet providers and using the network for state government buildings and schools.

But since no part of Kentucky Wired is close to going live yet, it’s unclear when the state could begin generating revenue off the network.

Harmon said that state officials erred by agreeing to pay the private partners before the network was viable.

“Proposals of a fixed-price, date-certain project have obviously not panned out,” Harmon said. “The effect of these changes gives the private sector less incentive to monitor and deliver the project on time and on budget.”

Harmon’s audit also found that a nonprofit tied to 5th district Congressman Hal Rogers would receive a massive chunk of revenue generated by portions of the network in eastern and central Kentucky, and that the main private partner of the project was until recently unaware of this agreement.

Republican leaders of the legislature threatened to cancel the project earlier this year, but backed off when state officials warned that doing so would cost about $500 million, could ding the state’s credit rating and leave the state vulnerable to a lawsuit.

Rep. Arnold Simpson, a Democrat from Covington, said that the audit “shows the limitation of government.”

“Perhaps we should stick to things that we should typically do as government. This is obviously something that the private sector should have had a large hand in. We don’t have the expertise,” Simpson said.

Sen. Reggie Thomas, a Democrat from Lexington, said he still thought Kentucky Wired was a “worthwhile project.”

“I think if Kentucky has any serious intention of joining the 21stcentury and advancing commercially, educationally and medically, we need to have this broadband highway,” Thomas said.

Harmon said he was still investigating why state officials signed off on the project and would issue subpoenas if necessary.