cover
TO: Mayor Thomas J. Weisner
FROM: Ted Beck, Chief Technology Officer,
Carie Anne Ergo, Chief Management Officer
DATE: Revised 10/5//15
SUBJECT:
A resolution authorizing a Revised Master Agreement with OnLight Aurora
PURPOSE:
The purpose of the Revised Master Agreement with OnLight Aurora is two fold: (1) to incorporate the addendum language previously approved by City Council on August 27, 2013, and (2) to propose the following additional modifications.
Section 5: Clarifies the language for the term of the IRU (indefeasible right of use) to allow OnLight to continue to offer 20 year fiber leases throughout the term of the Master Agreement;
Section 11c: Lowers the insurance provisions to industry norms;
Section 24b: Modifies the repayment and timing provisions of the startup loan to OnLight Aurora;
Section 25j: Clarifies the language concerning City support of an outside loan to OnLight Aurora; and
Exhibit A 5-6: Changes the way that lease payments are made to provide a graduated payment schedule based on use.
OnLight deems these changes necessary to facilitate the continued growth of Fiber services to the Aurora community.
BACKGROUND:
As Aurora took some giant steps forward with the construction of the fiber optic network in 2007 and 2008, it was also making plans for the more complete use of the technology to provide the City with a competitive advantage over other Illinois cities. The Mayor’s Technology Roundtable recommended the formation of what has become OnLight Aurora, since chartered as an Illinois not-for-profit in January, 2012. In May of 2012, the City and OnLight Aurora came to an agreement to lease up to 36 of the city’s 144 fiber strands and make them available to the Community Anchor Institutions:
Education, Preschool through College (P through 20)
Healthcare
Social Service Agencies
Arts & Entertainment
Business, both to retain current business and help them expand and as a way to attract new business to the City.
The need arose to create a limited profit subsidiary in 2013, OnLight L3C, to work with some for-profit businesses. This is a wholly owned and operated subsidiary of the 501(c)3 not-for-profit OnLight Aurora.
OnLight Aurora functions as a technology advantage for Aurora in its economic development efforts providing access to fiber in Aurora’s business parks and connecting business, both large and small, to the fiber through various technologies.
OnLight’s business model requires a non-traditional approach that has gained recognition across the country as a way to leverage municipal fiber to bring advantage to the community. This advantage has led to the reduction of pricing for these services and the connection by the network to the CME providing access to the world from Aurora.
In 2012, OnLight and the City won a $1 Million Gigabit grant, leveraging local fiber construction into over $2 Million of fiber builds and connections for the Community Anchor Institutions. OnLight and Aurora were the only successful implementation of the Gigabit grants, the others either poorly planned or had difficulty executing their plan. This project added over 13 more miles to the network resulting in a network of over 60 miles of fiber for the City. In the time since then, OnLight has connected to educational facilities including School Districts 129 & 204, IMSA and Aurora Christian, Copley Hospital and Heartland Blood, North Island Center and the Paramount, ByteGrid data center, the new Santori Public Library, Alarm Detection and many other businesses and Aurora institutions.
In the process, OnLight has become cash positive in its operations and continues to connect both business and not-for-profits to the network. This network has become multi-homed under OnLight - multiple sources of Internet connectivity to greatly reduce the chance for the city’s network to be without connectivity, all while driving down the cost of these services to the community. OnLight has been asked to speak to national conferences by both industry associations and the Federal government to help others see the best path to technology.
In the process, OnLight has worked with City IT staff to make the network more resilient, optimizing the fibers used and finding creative ways to connect Aurora customers. It has become a viable alternative to the former duopoly suppliers and continues to grow its customer list.
For the future, OnLight will always be working with local partners to bring grant funding into the project and provide greater and even more resilient connections with the network. Our model has been to run a lean organization, funneling funding into the connections and improving the access to the network. As OnLight grows and connects the clients that are, today, awaiting their connections, the operations will continue to expand to meet this demand. OnLight engages talented local firms to monitor the network and respond to any of the few issues that have arisen. In partnership with the City IT staff, the OnLight team has helped to improve the city network.
OnLight works closely with Seize the Future and the school districts to further enhance the technology opportunities of the those Community Anchor Institutions, allowing them to focus on what they do best, leaving the high speed broadband and network connections to OnLight for the community. Before 2012, many of the OnLight customers were forced to suffer through intermittent connections and slow speeds. These same fiber customers can now access up to 10 Gigabits of bandwidth, should they need it over highly resilient fiber connections. Through the Revised Master Agreement OnLight Aurora can continue to provide competitive services and make better use of this municipal resource.
DISCUSSION:
The Revised Master Agreement makes the following five (5) substantive changes to the original terms.
Section 5: Clarifies the language for the term of the IRU (indefeasible right of use) to allow OnLight to continue to offer 20 year fiber leases throughout the term of the Master Agreement.
Due to an End User’s business model for Fiber Use or financial investment to ready an organization for Fiber Use, it is fairly common practice in the industry to provide for 20 year IRU agreements. Without the ability to provide 20 year agreements, OnLight will not be able to expand the network to these types of users.
Section 11c: Lowers the insurance provisions from $20 million to $10 million, which is in line with industry norms.
Section 24b: Modifies the repayment and timing provisions of the $150,000 startup loan to OnLight Aurora.
The original agreement called on the City to loan OnLight Aurora $150,000 upon execution of the agreement. Because OnLight did not have immediate capital needs, it chose not to draw down the entire $150,000. To date, the City has extended 2 loans of $50,000 each to OnLight Aurora.
The repayment provisions were based on the assumption that the loan would be fully realized upon execution of the original agreement. Due to the fact that the entire loan did not commence upon execution, the City and OnLight recognized the need to revisit the repayment terms.
The original repayment plan was very aggressive at the request of OnLight Aurora. The proposed modification would allow the loan principle to be paid back over a period of five years, versus in a lump sum. This would OnLight to use a larger portion of its revenues to continue to expand the Fiber and meet its mission.
Section 25j: Clarifies the language concerning City support of an outside loan to OnLight Aurora.
While the original agreement contemplated the City guaranteeing loan and grant commitments, it provided no mechanism to accomplish this. The modified language would allow the City’s Chief Financial Officer to approve a guarantee of grant commitments or loan instruments in an amount not to exceed $500,000.
Exhibit A 5: Changes the way that lease payments are made to provide a graduated payment schedule based on use.
The initial Agreement calls for a $500 per month, per fiber fee after 6 months. While the fee level is appropriate once a fiber is fully utilized, often it takes longer than 6 months to achieve this goal. As such, OnLight is in the position of choosing to delay Fiber implementation until enough Fiber commitments can be obtained to generate the $500 fee or risk losing money on an on-going implementation.
In order to continue to grow the Fiber, the terms now provide for an on-going 10% cost share of the revenue generated by the utilization of an in-use Fiber after six (6) months up to $500 per month.
Additionally, the original agreement did not contemplate End Users who may choose to lease Dark Fiber for a one-time fee for a set period. The revised agreement outlines revenue sharing for this situation.
IMPACT STATEMENT:
The Revised Master Agreement with OnLight Aurora does not have additional cost to the City of Aurora.
RECOMMENDATIONS:
I ask the members of the City Council to authorize adoption of the Revised Master Agreement with OnLight Aurora.
cc: Alderman O’Connor, Chairman
Alderman Mervine
Alderman Bohman
Alderman Mesiacos, Alternate
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
title
A Resolution Authorizing the Revised Master Agreement with OnLight Aurora.
body
WHEREAS, the City of Aurora has a population of more than 25,000 persons and is, therefore, a home rule unit under subsection (a) of Section 6 of Article VII of the Illinois Constitution of 1970; and
WHEREAS, subject to said Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals, and welfare; and
WHEREAS, OnLight Aurora has been successful in leveraging the City's fiber optic network for the mutual benefit of OnLight Aurora and schools, hospitals and the City of Aurora community generally up to the present; and
WHEREAS, OnLight Aurora is continuing to pursue business opportunities, and seeking further clients as well as funding sources in order to move further down the path of growth, and in so doing, proposes to amend certain of the provisions in the Master Agreement with the City of Aurora.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Aurora, Illinois, as follows: that the Revised Master Agreement between the City of Aurora and OnLight Aurora is hereby approved, and further, that the Mayor or his designee is hereby authorized to execute all documents needed to complete the terms contained therein,