TO: City Council DATE: June 9, 2025 DEPARTMENT: Administration & Finance Department
PREPARED BY: Isaac Whippy, City Manager
PRESENTER: Isaac Whippy, City Manager
AGENDA TITLE: Conduct Public Hearing to consider the Adoption of Municipal Broadband/MCN Fees for MCN and Related Fiber Optic services
RECOMMENDATION
Conduct a public hearing to consider the adoption of Municipal Broadband Fees for MCN and related fiber optic services and make updates to the City of Fort Bragg Fee Schedule
BACKGROUND
The City recently acquired Mendocino Community Network (MCN) as part of its broader municipal broadband initiative to provide reliable, high-speed internet access to residents and businesses in Fort Bragg. This item adopts the fees for legacy services being assumed by the City and establishes the broadband fees that will govern MCN services going forward.
Importantly, the existing MCN fees are not being increased at this time. The proposed fee schedule mirrors MCN’s current rates, as provided in Exhibit B of the acquisition packet. The only new fees being introduced are for the City’s fiber-optic broadband services, developed to comply with funding conditions tied to the California Public Utilities Commission’s Federal Funding Account (FFA) grant.
These fiber service fees were incorporated into the broadband financial pro forma and are projected to generate sufficient revenue to cover the utility’s operating costs and annual debt service obligations associated with the broadband infrastructure investment.
DISCUSSION AND ANALYSIS
The City’s broadband fee strategy is based on a cost recovery model that ensures long-term fiscal sustainability and avoids any reliance on the General Fund. The strategy includes:
No change to existing MCN dial-up and DSL service rates New fiber-optic broadband service fees, aligned with infrastructure costs, staffing, and ongoing operations A combination of fixed rates and deposit-based (time and materials) fees, depending on the service provided This approach is consistent with best practices in utility rate-setting and complies with state laws governing municipal service fees.
The following rate structure outlines the fiber-optic residential service tiers the City will offer through MCN, using a modern, marketable naming system to support user engagement and outreach:
Together with MCN's legacy service fees, these plans are projected to generate approximately $2,305,505 in annual revenue, based on projected subscriber uptake as outlined in the City's broadband business plan.
Installation costs:
Standard Installation includes up to 150 feet of fiber drop from the City right-of-way to the customer’s premises, along with basic restoration of any areas disturbed during the installation process. If the required fiber drop exceeds 150 feet or involves complex conditions, such as boring under driveways, sidewalks, or other hardscapes, additional fees may apply based on hourly labor rates and material costs. A cost estimate will be provided in advance for any non-standard installations.
MCN Legacy Rates
The City intends to maintain the existing MCN rate structure during the initial transition period following the acquisition of the broadband utility. This approach ensures continuity of service for current customers and honors any existing contracts or rate commitments.
As shown in the class-wide summary, revenue and cost relationships vary across service classes. Some service lines, such as Fiber and Email, currently appear to generate a surplus beyond direct operating costs, while others such as Web operate at a deficit. These imbalances reflect legacy pricing models that have not yet been evaluated under the City's cost structure. A cost analysis of the MCN legacy fees is attached. Services marked with an revenue imbalance offset the costs for set up of the service. Based upon the attached schedule, the anticipated break even point from set up is 5 years. In addition, it is anticipated that within those 5 years, as broadband becomes operational, the existing legacy MCN customers within the City will shift their service to broadband infrastructure further reducing the revenue generated from MCN. Accordingly, an independent fee study will be commissioned based upon actual rather than projected fees and costs well before th break even point is reached. In addition, the City holds that the legacy fees evidencing a revenue imbalance are imposed for the use, purchase, rental, or lease of government property.
Following the transition, the City will undertake a comprehensive rate study to ensure all broadband utility fees comply with California law, including Propositions 218 and 26. This analysis will include direct and indirect cost allocations, infrastructure needs, and service-specific financial performance. Rates will be adjusted as necessary to reflect the reasonable cost of service and support long-term sustainability of the utility.
Legacy rates will be phased out as customer contracts expire, and future rate adjustments will be presented transparently with supporting documentation and opportunities for public review Fusion service rates are based on a markup of Sonic’s rates.
The Open Air package was priced to match Fusion (with digital voice), offering a cost-effective option for customers not needing phone service.
By removing Sonic as a middleman, Open Air provides a higher profit margin, with even better returns when bundled with City-provided VOIP phone service.
Rates were compared to Comcast and Further Reach offerings and set below both to enhance affordability and drive subscriber growth.
Financial Projections:
Together with MCN's legacy service fees, these plans are projected to generate approximately $2,305,505 in annual revenue, based on projected subscriber uptake as outlined in the City's broadband business plan. This anticipated revenue will support:
Ongoing operations and maintenance of the City’s fiber-optic network; Customer service, billing, and technical support infrastructure; Annual debt service payments tied to the City’s $7.4 million investment in broadband infrastructure.
This rate structure ensures that the MCN broadband utility is financially self-sustaining, fulfills the terms of the CPUC grant, and maintains quality service delivery without the use of General Fund dollars. The City will continue to monitor cost recovery, system performance, and market competitiveness annually and make adjustments as necessary. No additional fee increases are proposed at this time
LEGAL FRAMEWORK
The proposed broadband fees comply with all applicable state requirements, including Government Code Section 66016, which governs the process for adopting service-related fees. This statute requires:
Advance public notice and publication of the proposed fees; A public hearing to receive input from the community;
Availability of the supporting documentation at least 10 days prior to adoption; A minimum 60-day waiting period before newly adopted fees take effect.
The City has fully satisfied all procedural and public notice obligations.
The MCN enterprise is scheduled to be officially operated by the City of Fort Bragg effective July 1, 2025. As part of the transition, existing MCN service rates (such as dial-up and DSL) will remain in place without modification. Because these fees are already established and in use, the City will not impose a 60-day waiting period on their continued collection. This ensures a seamless transition for existing customers and uninterrupted service delivery during the operational handoff.
Only the newly introduced fiber-optic service fees will become effective 60 days after adoption, as required under state law. The fees proposed here are fees for the use of City property. Regardless, the fees have been determined to not exceed the cost of providing the service for which the fees are charged.
FISCAL IMPACT
The proposed fees are essential to the financial health and long-term sustainability of the City’s municipal broadband utility. Based on the broadband financial pro forma and projected subscriber levels, the combination of existing MCN service fees and newly adopted fiber-optic broadband fees is estimated to generate approximately $2,305,505 in annual revenue.
This revenue will support the following key components:
Operations and maintenance of both fiber-optic and legacy broadband infrastructure; Customer service, billing, network management, and administrative support; Annual debt service payments tied to the City’s $17.4 million broadband infrastructure investment, including the $10.4 million Federal Funding Account (FFA) grant administered by the California Public Utilities Commission.
To ensure financial transparency and accountability, the Broadband Utility will be structured as a separate Enterprise Fund, distinct from the City’s General Fund. This separation guarantees that broadband-related revenues and expenditures are independently tracked and used solely for broadband operations, infrastructure, and related obligations.
The fee structure is rooted in a cost recovery model, which aligns with Government Code requirements and best practices in municipal utility management. Rates have been set at levels that are competitive, affordable, and sufficient to meet all operating and capital obligations without the need for General Fund support. . All fees proposed for adoption do not exceed the cost of the service and supporting infrastructure for which they are imposed. A key fiscal goal of the Broadband Utility is to ensure that revenues remain sustainable and proportionate to long-term operational and infrastructure costs. The City will regularly monitor system performance, subscriber trends, and financial results to adjust rates as needed and maintain service reliability and fiscal discipline.
This approach reflects a forward-thinking, fiscally responsible investment in local infrastructure, digital equity, and community resilience.
STRATEGIC GOALS CONSISTENCY
The adoption of the broadband fee schedule directly supports multiple goals outlined in the City of Fort Bragg’s 2024–2028 Strategic Plan, specifically:
Goal 1 – Invigorate Economic Opportunity and Community Vibrancy The City’s investment in a municipally operated fiber-optic broadband network expands access to high-speed internet, supporting local businesses, remote workers, students, and entrepreneurs. Affordable broadband services enhance digital inclusion, attract modern industries, and improve quality of life.
Goal 2 – Implement Resilient Infrastructure and Encourage Environmental Stewardship Establishing a financially sustainable broadband utility aligns with the City’s infrastructure modernization objectives. A robust, locally controlled network improves resilience, supports smart city capabilities, and complements other forward-thinking infrastructure investments such as solar energy and water system upgrades.
Goal 5 – Fund Our Future with Financial and Fiscal Responsibility The broadband fee structure is grounded in a cost recovery model that ensures the utility is self-sustaining, without reliance on the General Fund. It enables the City to meet ongoing operational needs and service debt associated with its $7.4 million broadband infrastructure investment, while maintaining affordability for users.
Goal 6 – Champion a Sustainable Municipal Organization By acquiring and operating MCN, the City is demonstrating innovation, self-reliance, and long-term thinking in the delivery of essential services. This initiative positions the City as a forward-looking organization capable of managing complex public utilities while centering
ATTACHMENTS
Exhibit A – Resolution Adopting MCN & Broadband Fees
Exhibit B- Broadband Fee Schedule (MCN+ Fiber Optic Services) Exhibit C - Public hearing Notice (Published)
AGENDA ITEM NO. 7B
CITY COUNCIL STAFF REPORT