I would expect that the buildout could be funded by a municipal bond issue, with the repayment being handled via the revenue from the customer-facing companies that lease access to the infrastructure. I've heard of municipal networks like this being run profitably and being repaid in a reasonable timeframe (on the order of a decade or two), but unfortunately I don't know more than that.
Except where it did before the State stepped in to ensure Comcast/TWC didn't have competition.
But other than that it'll never happen.