In September 2017, DLS sent out a Guidance Memo with subject of “Last Mile Broadband Project Financial Guidance.” The memo describes recommended practices for accounting for the design / construction of broadband systems; and for subsequent operation of the system. WiredWest and several Town Counsels have some objections to portions of the memo regarding operation. Specifically there are three main concerns:

  1. The advice in the memo appears to contradict Massachusetts General Laws (MGL).
  2. The Enterprise Fund entity created by adopting G.L. c. 44, § 53F1⁄2 is not an MLP. It would require a town meeting to appropriate the use of sales income to meet expenses.
  3. Since the Enterprise Fund entity is not an MLP, it cannot be a member of WiredWest, or any other MLP Coop for regional operation.

Enterprise Fund
G.L. c. 44, § 53F1⁄2

MLP
G.L. c. 164

MGL specifically allows operation of Telecom utility

No

Yes

Regulation / Oversight DLS, however G.L. c. 25C, § 6A prohibits regulation of internet and VOIP phone Normally DPU or DTC, however both declined citing that  G.L. c. 25C, § 6A prohibits regulation of internet and VOIP phone
Law allows for Coops

No

Yes

Advice

DLS

MLP Accountant, WiredWest
Books and Audit Accounts are separate from General Fund but still within Town books and audited with town accounts. Separate set of books. Audited separately from town accounts.
Budget approval including use of business income

Town Meeting

MLP Manager under the direction of the ML Board
Long term contract approval

Town Meeting

MLP Manager under the direction of the ML Board
Depreciation Reserve Held within Enterprise Fund accounts under control of town meeting Held within MLP accounts under control of MLP Manager and ML Board. Town may contribute from General Fund with town meeting approval.
Income and Expenses All gross income and expense must be entered in accounts. May subcontract out to Coop or 3rd party and only include net income in books
Precedent All current operating MLPs do not use Enterprise fund accounting including Leverett.

 

The following letter was sent to DSL questioning aspects of their guidance memo.

We received the following reply from DLS:

We are working with a qualified MLP accountant, to produce guidance for accounting for Telecom MLP’s primarily engaged in broadband service.

Q. Are state bureaucrats infallible?
A. No

Q. What section of the M.G.L,. authorizes a town to operate a telecommunication system?
A. M.G.L. Chap 164 Sect. 36 authorizes a town to create a Municipal Light Plant and Chap 164 Sect 47E authorizes a town’s MLP to operate a telecommunication system

Q. Are there any other sections of the M.G.L. that authorize a town to operate a telecommunications system?
A. No

Q. is regulation of internet and VoIP services allowed by any state or local governmental body?
A. No, M.G.L. Chap 25C sect 6A “… no department, agency, commission or political subdivision of the commonwealth, shall enact, adopt or enforce, either directly or indirectly, any law, rule, regulation, ordinance, standard, order or other provision having the force or effect of law that regulates or has the effect of regulating, the entry, rates, terms or conditions of VoIP Service or IP enabled service. ”

Q. Would an enterprise fund established under Chap. 44 Sect 53F 1/2 have the effect of regulating the internet and VoIP services offered by a town?
A. Yes Chap 44 Sect 53F ½ stipulates “…an estimate of the income for the ensuing fiscal year and a proposed line item budget of the enterprise shall be submitted to the mayor, board of selectmen or other executive authority of the city or town by the appropriate local entity responsible for operations of the enterprise. Said board, mayor or other executive authority shall submit its recommendation to the town meeting, town council or city council, as the case may be, which shall act upon the budget in the same manner as all other budgets.”  By regulating the budget of the enterprise the town meeting would be regulating the rates, terms, and conditions of the VoIP and Internet service provided by the town.

Q. Has the Massachusetts Supreme Judicial Court ruled that the MLP cannot be subject to town meeting vote?
A. Yes The Massachusetts Supreme Judicial Court (“SJC”) has held that with regard to the MLP manager’s authority under G.L. c. 164, § 56, subject to the direction and control of the selectmen or light board, if any, “[t]his in terms is an unrestricted power in the manager and the commission. There is in this section an implication that their determination as to what should be expended for the efficient operation of the business is not subject to change by other public officers or the legislative department..”  Municipal Light Comm’n. of Peabody v. Peabody, 348 Mass. 266, 268 (1964).

Q. Has the Department of Local Services issued guidance as to the appropriate method of establishing a gas and/or electric department?
A. Yes   The document published by DLS titled Enterprise Fund Manual, Informational Guideline Release 08-101, states on page 34 in response to frequently asked questions:

“1. Can a community establish a gas or electric enterprise fund under G.L. c. 44, § 53F½?
No. A gas and/or electric department would be established under G.L. c. 164.”

Q. Does a telecommunications department operated by a town follow the same guidance as a gas and/or electric department?
A. Yes M.G.L. Chap 47E “Wherever apt, the provisions of this chapter and chapter 44, which apply to the operation and maintenance of a municipal lighting plant, shall apply also to the operation and maintenance of such telecommunications system.”

Q. Will DLS take punitive action against a town that chooses to use Chap 164 instead of Chap 44 Sect 53F ½?
A. No.  The letter from Sean Cronin, Senior Deputy Commissioner for DLS states “…DLS will not, as you phrase it, take “negative action” against broadband-only municipal light plants (MLPs).”

WiredWest will provide guidance to participating MLPs regarding setting up books. Individual MLPs will not have many transactions each year as most of the income and expenses will be handled by the Coop. The Coop will arrange for annual audits.