Fiber-optic business receives interest-free loan from city

n City loans $250,000 and was contracted to pay $600,000 to middleman companies owned by Tammy Eighmy

The day after Rockford’s historic April 5 election, which ousted now lame-duck Mayor Doug Scott, city officials awarded what appears to be another sweetheart deal for high-speed communications business operator, Tammy Eighmy. She and her recently formed company, Rocknet Services LLC, were awarded a $250,000 one-year, interest-free loan from Rockford officials April 16 two days after aldermen gave city administrators the green light to make the loan in a 13-0 vote.

The action by City Council members and administrators comes on the heels of a series of articles by The Rock River Times that questioned city officials awarding a $600,000 no-bid contract to another Eighmy-owned company, Metro Fiber Solutions LLC. Metro Fiber received the no-bid contract last October to connect seven government facilities and two hospitals to a 22-mile fiber-optic communications cable that remains largely dormant.

Late afternoon on April 19, city officials announced a press conference to detail plans to house Eighmy’s Network Operator Center, which is expected to be a round-the-clock facility to answer questions about the network. The press conference was scheduled after The Rock River Times made inquiries April 18 about the loan.

In what may have been a partial response to the news series, Eighmy formed Rocknet Services March 11—about three months after the first article in the series was published Dec. 1, 2004. In that article, it was revealed some of the strands of the high-speed cable were leased to Metro Fiber Solutions from Michigan-based U.S. Signal Company LLC.

U.S. Signal owns and installed the communications cable, which was buried under the city during the 1990s. Like Eighmy’s Metro Fiber Solutions, Rocknet Services also appears to be leasing strands from U.S. Signal, according to the city’s April 6 agreement.

In early February, U.S. Signal announced plans to expand service later this year in Rockford, Madison and Milwaukee. U.S. Signal’s business plan means they would be in direct competition with Eighmy’s companies.

For Rockford taxpayers, the city’s action means Rockford is paying and loaning money to middleman businesses that have the same owner, when they may have paid less by dealing directly with the owner of the cable—U.S. Signal.

Rich Postma, president and chief executive officer of U.S. Signal, said in December he wasn’t aware of the city’s plan to connect users to his company’s fiber-optic cable ring. City Information Services Manage Glenn Trommels eliminated U.S. Signal as a possible provider for the service by inspecting the company’s Web site.

No city officials personally contacted U.S. Signal to inquire whether they were interested in bidding on the project. Instead, Metro Fiber Solutions was awarded the no-bid contract last October.

The no-bid contract with Metro Fiber Solutions calls for connecting six locations that are composed of seven facilities to U.S. Signal’s cable: City Hall, the Fire Department administration building, Public Safety Building, City Yards, Cedar Street water shop, Rockford Memorial Hospital, and SwedishAmerican Hospital.

Later it was discovered Eighmy’s co-owner of Metro Fiber, Richard D. Elk served on Mayor Scott’s Broadband Technology Task Force in 2002. While serving on the task force, members of the group learned of U.S. Signal’s largely unused cable.

Elk is not listed as an owner of Rocknet Services.

What services and equipment the city received from Elk and Eighmy for the original contract of $600,000 was not certain by time of publication. However, the agreement with Rocknet Services appears to duplicate and surpass services offered by Metro Fiber Solutions.

The city’s April 6 agreement reads that Rocknet Services “is engaged in the development of a high-speed fiber-optic network for the transmission of data between hospitals, schools, government facilities and private commercial and manufacturing enterprises within the City of Rockford.

“The company wishes to expand its operations to connect its network with Freeport, Rochelle, DeKalb, and other locations in Northern Illinois. …

“[T]he company is ready to start a Network Operating Center (NOC) to operate its network and provide services to other networks utilizing as many as 16 persons trained by the city-supported Workforce Investment Board.”

The agreement details where NOC would be located. The company would be housed in the former Ingersoll facility at 605 Fulton Ave., at the federally-supported Eiger Lab. Rock Valley College’s small business and procurement technical centers are also located in the facility, just off North Main Street.

At least half the 16 workers for Rocknet Services may come from low to moderate income households, which would make some of the financing for the venture eligible for federal Housing and Urban Development (HUD) funds.

Requests for draws on the loan money, and documentation of expenditures will be handled by Rockford Joint Ventures. At time of publication, who composed Rockford Joint Ventures and the Workforce Investment Board were not known.

However, as of April 18, Rockford Joint Ventures is not a business registered with the Illinois Secretary of State. The agreement indicates Aaron W. Brooks, an attorney at Holmstrom and Kennedy P.C. is named as a recipient of relevant documents. Brooks was Eighmy’s attorney in March.

The agreement also severely restricts the city’s monitoring of the “means and methods” Rocknet Services employs to perform services in the contract. A portion of clause 6 reads that Rocknet Services “shall not be subject to control or supervision by the city except as to the results of the work.”

Messages left for Brooks and Eighmy were not returned by time of publication.

Alderman Dan Conness (D-14) is chairman of the Planning and Development Committee that recommended the no-interest loan. Conness was not in town April 19 and was unavailable for comment.

Alderman Doug Mark (R-3) said he thought Rockford Joint-Ventures was conposed of a consortium of businesses.

To read the fiber-optic series, visit Search the archives for Dec. 1, 2004, article “City of Rockford awards $600,000 no-bid contract”; Dec. 29, 2004, article “No-bid contract awarded to mayor’s task force member”; Jan. 5 article “Fiber-optic owner not contacted before awarding no-bid contract”; and March 16 article “Fiber ring owner announces service to Rockford.”

From the April 20-26, 2005, issue

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