Loading...
HomeMy WebLinkAboutA4. MOU Bozeman Fiber Lease Dark Fiber1 DRAFT – NOT FOR DISTRIBUTION Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: David Fine, Economic Development Specialist Karen Stambaugh, Assistant City Attorney SUBJECT: Memorandum of Understanding between Bozeman Fiber, Inc. and the City of Bozeman for the Lease of Dark Fiber MEETING DATE: August 24, 2015 AGENDA ITEM TYPE: Action RECOMMENDATION: Authorize the City Manager to sign Memorandum of Understanding between Bozeman Fiber, Inc. and the City of Bozeman for the Lease of Dark Fiber for the use of the City and Bozeman School District #7. SUGGESTED MOTION: “I move to authorize the City Manager to sign the Memorandum of Understanding between Bozeman Fiber, Inc. and the City of Bozeman for the Lease of Dark Fiber for the use of the City and Bozeman School District #7.” BACKGROUND: The City and Bozeman Public Schools have been collaborating on the procurement of faster, more reliable and more affordable broadband service. The Schools and the City share an interest in securing a long-term agreement to lease dark fiber while maintaining City and School control over their own connections to the dark fiber network. The Schools and the City are original members of the Broadband Steering Committee, which was endorsed by City Commission Resolution 4434 in 2013. The culmination of the Broadband Steering Committee’s efforts, the Bozeman Fiber Master Plan and Feasibility Study (the “Master Plan”), was unanimously adopted by the Commission pursuant to Resolution 4576 in January 2015. The Master Plan recommended an open access community fiber network allowing businesses, schools, residents, local governments and service providers to share infrastructure, benefit from improved services, and reduce costs. The Master Plan also recommended partnership with local schools in order to “lower telecommunications costs for all partners.” It further suggested that, “The K-12 school system is an essential partner because it is among the largest users of broadband connections.” 2 DRAFT – NOT FOR DISTRIBUTION The Master Plan recommended creating a private sector enterprise to manage and operate a community fiber network. In May 2015, pursuant to Resolution 4596, the Commission unanimously authorized the City Manager to file articles of incorporation for Bozeman Fiber, Inc. and endorsed the idea that collaboration between community anchor institutions, like schools and local governments, could “support a financially sustainable, open access community fiber network.” Bozeman Fiber, Inc. was incorporated in May and its board of directors was seated in June. A significant purpose of creating a separate private entity to build and operate the network was to minimize financial risk for the City. Bozeman Fiber, Inc. sought private debt financing in order to construct its open access fiber network. A coalition of community minded banks, who recognized the significant economic development potential of an open access network, stepped forward to finance the network. In order to secure financing, however, the banks now need assurances from Bozeman Fiber, Inc. regarding long-term lease commitments by large anchor tenants in order to release funding for engineering and then construction of the community network. Such private financing avoids public indebtedness while leveraging the public funds already allocated to network services in support of the construction of a community open access network and of the Commission’s larger economic development policy goals as articulated in Resolutions 4434, 4576, and 4596. FEATURES OF THE MOU: The MOU under consideration includes the following terms: • A 10 year lease commitment for $556 per month, per location. (An 11% discount from what the City currently pays for its wide area network.) • The City and Schools receive dark fiber at all of the locations where they currently need it for less than the monthly price of their current lit services. (For a detailed description of dark fiber and why it adds significant value for the City, please see the attached memo by Scott McMahan and Anna Rosenberry.) o Dark fiber offerings are not currently available at all of the sites required by the City and the Schools. • The City receives the opportunity to reduce its lease payment by up to 10% after 5 years if there are significant price improvements in the dark fiber market. • The City receives ring-protected physical redundancy at its core sites. • The Lease will include a contingency allowing the City to terminate the Lease without penalty if Bozeman Fiber, Inc. is unable to deliver access to the dark fiber by a date certain to be identified in the lease agreement. • Lease payment in future fiscal years is contingent on the appropriation of funds by the City Commission. 3 DRAFT – NOT FOR DISTRIBUTION UNRESOLVED ISSUES: The MOU binds the City and Bozeman Fiber, Inc. to conduct good faith negotiations to execute a lease of dark fiber under the terms of the agreement. The final lease agreement has not been finalized at this time and will be presented to the City Commission for final approval. ALTERNATIVES: As determined by the Commission. FISCAL EFFECTS: The MOU proposes a 10 year lease agreement for six (6) locations at a cost of $556 per location per month (An 11% discount off what the City currently pays for its wide area network.). The cost of the 10 year lease for the City is $400,320. The City may also incur one time connection fees of up to $2,500 per location for a total one-time cost not to exceed $15,000. If the City Commission adopts an Interlocal Agreement with the Schools to procure dark fiber, the City will lease fiber to an additional 12 locations on behalf of the schools for a 10 year cost of $800,640. The City will be compensated by the Schools for this purchase under the terms of the Interlocal Agreement. The Schools may also incur one-time costs for connecting its 12 locations, not to exceed $30,000. The City may also incur incidental maintenance fees for its leased fibers if the fiber is cut or damaged. These fees will be negotiated in the final lease agreement. Attachments: 1. Memorandum of Understanding between Bozeman Fiber, Inc. and the City of Bozeman for the Lease of Dark Fiber 2. Memorandum: Request to Sole Source the Purchase of Dark Fiber Services from Bozeman Fiber Inc. (McMahan & Rosenberry) 3. Memorandum: Re: Request to Sole Source the Purchase of Dark Fiber Services from Bozeman Fiber Inc. (Kukulski) 4. Resolution 4596 Hyperlinks: May 4, 2015 City Commission Packet Material – Resolution No. 4596 January 26, 2015 City Commission Packet Material – Resolution No. 4576 Report prepared on August 17, 2015 Memorandum of Understanding Between Bozeman Fiber, Inc. and the City of Bozeman for the Lease of Dark Fiber This Memorandum of Understanding (“MOU”) is intended to summarize the principal terms of a future dark fiber lease agreement (“Lease”) and to set forth the intention of the City of Bozeman, a self governing municipal corporation organized and existing under its Charter and the laws of the State of Montana with its principal offices located at 121 North Rouse, Bozeman, MT (“City”) and Bozeman Fiber, Inc., a Montana non-profit corporation with its principal offices located at 2000 Commerce Way, Bozeman, MT (“BFI”) to enter into a definitive dark fiber lease agreement. This MOU binds the City and BFI (hereinafter collectively called “the Parties”) to conduct good faith negotiations to execute a lease of dark fiber serving the City and Bozeman School District #7 (“Schools”) locations listed in Exhibit A under the following terms, subject to negotiation between the Parties: 1. BFI will grant Lease to the City for the use and benefit of the City and the Schools at the price of $556 per month per location, not including maintenance fees, payable annually. The Lease will be signed by the City as Lessee, and will include an exhibit executed by the Schools granting the City authority to enter into the Lease on behalf of the Schools. 2. The Lease will be for a fixed term of ten (10) years. After the end of the initial ten (10) year lease term, the City and the Schools will have the option to renew the Lease term for an additional ten (10) years. 3. The City and Schools agree to pay connection fees for each site at a rate not to exceed $2,500 per location. The Parties will negotiate building entrance locations/demarcation points that are mutually favorable. 4. If, after five (5) years of service under the original Lease pricing, the City finds an identical dark fiber service is available in the market at a lower price point, it may engage BFI in negotiations on lease price. If both parties find that dark fiber offering is a technically like product, the City may receive a discount on the remaining five (5) years of the contract for a price matching the competing service’s price, provided that the total discounted price may not be more than 10% less than the original Lease price. 5. The City will take all reasonable steps to seek budget appropriations, to the extent permitted by law, in each fiscal year during the term of the Lease to meet its payment obligations under the Lease, but payment is contingent on the appropriation of funds by the City Commission. In the event that no funds or insufficient funds are appropriated by the City Commission for the next fiscal year for payments due under the Lease, the Lease will terminate on the last day of the fiscal year for which appropriations were received. 6. The Lease will include a contingency allowing the City to terminate the Lease without penalty if BFI is unable to deliver access to the dark fiber at a date certain to be identified in the Lease agreement. 7. The Parties agree to work diligently toward finalizing and executing the Lease agreement upon receiving written notice from BFI of the conclusion of its engineering of the network. A formal technical description and exhibit will be included in the Lease agreement detailing the dark fiber assets that will be provided. 8. The Parties may not assign or otherwise transfer the Lease or its rights or obligations to another party, either in whole or in part, without the other Party’s consent, such consent not to be unreasonably withheld. 9. If BFI engages in any action to sell any or all of the BFI network assets, the City will have a right of first refusal to purchase any or all of such assets. 10. Technical requirements. Each site shown on Exhibit A will receive a pair of fiber strands in a ring configuration. For sites that are on laterals off of the main BFI network rings, a collapsed ring will be established utilizing two pair in each required lateral. 11. The Parties will negotiate other separate agreements as necessary to address service, network operations, connectivity, repair and maintenance, and other related issues. For example, the City’s maintenance obligations will be contained in the Lease agreement, while the Schools’ maintenance obligations will be contained in a separate agreement between the Schools and BFI. 12. Nondiscrimination. BFI agrees that all hiring by BFI of persons performing under this MOU or the Lease will be on the basis of merit and qualifications. BFI will have a policy to provide equal employment opportunity in accordance with all applicable state and federal anti-discrimination laws, regulations, and contracts. BFI will not refuse employment to a person, bar a person from employment, or discriminate against a person in compensation or in a term, condition, or privilege of employment because of race, color, religion, creed, political ideas, sex, age, marital status, national origin, actual or perceived sexual orientation, gender identity, physical or mental disability, except when the reasonable demands of the position require an age, physical or mental disability, marital status or sex distinction. BFI will be subject to and comply with Title VI of the Civil Rights Act of 1965; Section 140, Title 2, United States Code, and all regulations promulgated thereunder. BFI will require these nondiscrimination terms of its subcontractors providing services under the Lease. 13. Nothing contained in this MOU shall be construed to create any partnership or agency relationship between the Parties for any purpose, action, or transaction, including those related to this MOU. This MOU does not create a joint venture or any form of separate legal entity. IN WITNESS WHEREOF, this MOU has been executed by a duly authorized representative of each Party as of the day and year written below. BOZEMAN FIBER, INC. CITY OF BOZEMAN (Authorized Signature) (Authorized Signature) (Printed Name) (Printed Name) (Title) (Title) (Date) (Date) EXHIBIT A Initial Sites City of Bozeman 1. City Hall 121 N. Rouse Ave 2. Professional Building 20 East Olive St 3. Bozeman Public Library 626 East Main St 4. Law and Justice Center (City) 615 S. 16th Ave (Collapsed Ring) 5. Fire 2 410 S. 19th Ave (Collapsed Ring) 6. Fire 3 and 911 1705 Vaquero Pkwy (Collapsed Ring) Bozeman Public Schools 1. Bozeman High School 205 North 11th Ave 2. Chief Joseph Middle School 4255 Kimberwicke (Collapsed Ring) 3. Sacajawea Middle School 3525 South 3rd Ave. (Collapsed Ring) 4. Emily Dickinson Elementary School 2435 Annie Street 5. Hawthorne Elementary School 114 North Rouse 6. Hyalite Elementary School 3600 West Babcock 7. Irving Elementary School 611 South 8th 8. Longfellow Elementary School 516 South Tracy 9. Meadowlark Elementary School 4415 Durston Road 10. Morning Star Elementary School 830 Arnold Street (Collapsed Ring) 11. Whittier Elementary School 511 North 5th 12. Willson Building 404 West Main Street If the City or Schools require additional sites to be connected at a future date, they will negotiate with BFI on construction costs associated with additional sites.