You call that a ‘partnership’? 4th ‘P’ in broadband deal is pain.

In one of state government’s first big public-private partnerships — former Gov. Steve Beshear’s laudable but fumbled effort to bring high-speed internet to all of Kentucky — the public was — how should we put this? — fleeced, rolled and taken to the cleaners by its private partners. That’s been clear for a while. Lawmakers explored the state’s missteps earlier this year before deciding that Kentucky would lose more by backing out of the deal than by paying for all the cost overruns and seeing the broadband network through to completion, albeit years later than promised. An audit released Sept. 27 by state Auditor Mike Harmon lays out the government’s blunders in painful detail. The audit should be required reading for any state agency or local government contemplating a public-private partnership (P3, for short). Between the initial agreement and the signed contracts, almost all of KentuckyWired’s financial risk was shifted onto taxpayers from the private partners. The state is on the hook for millions in payments to contractors because of delays stemming from the state’s assuming from the contractors the responsibility for acquiring rights-of-way to string wire on poles owned by uncooperative telecom companies. In its response to the audit, the Kentucky Communications Network Authority explains that the state relied on the expertise of Macquarie Infrastructure Development, an Australian investment firm, and Macquarie’s consortium for guidance on financing, design, construction, maintenance and how much revenue the broadband network would generate. “Such expertise is the cornerstone of all P3 projects. ” Well, guess what, the private partners are looking out for their interests not those of the state, making that a shaky cornerstone. The Beshear administration official who could explain some of the puzzling decisions and was the first head of the Kentucky Communications Network Authority is deceased. The current executive director, Phillip K. Brown, seems competent and is trying to correct earlier mistakes and put the state on fairer contractual footing. Brown negotiated a settlement to pay contractors for delays, and this year’s legislature authorized $88 million to pay those claims and $22 million for future claims. The settlement still is unsigned. Despite the stumbling start, KentuckyWired is critical to the state’s future. Without reliable connectivity, large swathes of Kentucky have scant economic hope. The private sector alone is no more going to bring broadband to low-population areas than it would have brought electricity to those places 80 years ago. Fortunately, Harmon’s audit exaggerates KentuckyWired’s cost to taxpayers which he puts at $1.5 billion over 30 years. That estimate overlooks the fact that the state will be paying a lot of money for internet service over the next 30 years anyway, so it might as well be to KentuckyWired. Oddly, despite this cautionary tale, lawmakers this year suspended until 2020 the legislature’s oversight role in approving large public-private partnerships — an abdication of responsibility the legislature should reconsider. Source: Kentucky