Newsom’s budget plan lowers barriers to public broadband financing

by Steve Blum • , , , ,

Following up on one of the items in his campaign manifesto, California’s new governor, Gavin Newsom, might make it easier to finance municipal broadband projects. One of the many, many ideas offered in his maiden budget proposal is to make it easier to form enhanced infrastructure financing districts by eliminating requirements for voter approval of bond issues…

Various economic development tools have been introduced following the dissolution of Redevelopment Agencies (RDAs), including Enhanced Infrastructure Financing Districts (EIFDs). However, only three EIFDs have been formed since statute created them in 2014. EIFDs can be created by cities or counties without voter approval and expend tax increment revenues without voter approval. However, an EIFD must receive 55-percent voter approval to issue debt.

The Budget encourages the formation of additional EIFDs through removal of the 55-percent voter approval requirement to issue debt. This change will allow EIFDs to support longer-term infrastructure commitments, similar to former RDAs.

Although it’s always been arguable that EIFDs can build and operate publicly-owned broadband infrastructure, the California legislature removed all doubt last year when it passed assembly bill 1999. Public agencies in California – cities, counties and special districts, including EIFDs – were given explicit authority to get into the broadband business.

As with the redevelopment agencies that were killed off by the legislature in 2012, an EIFD would repay the debt with future increases in tax revenue attributable, in theory, to the infrastructure improvements. It’s a complicated process. Even if Newsom succeeds in making it easier for EIFDs to borrow money, that doesn’t mean it’ll be easy.

Forming an EIFD will not be the first step towards a community broadband project. It will come further down the road, after a city or other local agency decides it wants to get into the broadband business. But it’s one more tool in the kit, and that’s useful.