Cities and other local agencies in California will be able to issue bonds to pay for building broadband infrastructure, thanks to two new laws approved by Governor Brown yesterday. Assembly bill 2292 and senate bill 628 expand the use of infrastructure financing districts (IFDs), on the one hand specifically allowing broadband to be included in old-style IFDs and creating a new kind, called enhanced infrastructure financing districts, on the other. In both cases, the bonds can be repaid by earmarking the incremental tax revenue that the project is expected to produce.
It’s more like a win and a half than two solid victories for community-financed broadband, though. SB 628 creates enhanced IFDs, which only require a single two-thirds majority vote by the electorate and have more flexible structures. It goes a long way toward replacing the old redevelopment agencies that the legislature (and the governor and the courts) killed in 2012. It will be a very useful tool for upgrading California’s ageing and overused water and transportation infrastructure, among other things. But it doesn’t specifically allow enhanced IFDs to issue bonds to build broadband facilities. Nor does it prevent it, particularly. So until someone actually tries to use it for, say, a fiber network, broadband will be in a grey area of the new law.
Not so with traditional IFDs, though. AB 2292, authored by San Leandro assemblyman Rob Bonta, specifically allows the use of bonds to build broadband infrastructure, and defines it as “communications network facilities that enable high-speed Internet access”.
Legally, the two don’t overlap, so Bonta’s bill doesn’t directly affect the new and improved system created by SB 628. But as far as it goes, it gives broadband the same critical infrastructure status as roads, sewers and aqueducts.
Three bills with big implications for community broadband in California are still sitting on Governor Brown’s desk, waiting for his approval or veto:
Assembly bill 2272 would blow a huge hole in the California Advanced Services Fund and roll back much of the progress made last year when the legislature – and Brown – added $90 million to the kitty and made independent ISPs eligible for broadband construction subsidies. By requiring every CASF-funded project – past, present and future – to follow the state’s so-called prevailing wage rules, the effective subsidy would drop from 60% (for underserved areas) to less than 30% and the cost to the state would nearly double. And AB 2272 would impose a heavy paperwork burden on any company that took the money. Brown should veto it.
On the other hand, AB 2292 would give cities and other local agencies another financing tool to pay for community broadband infrastructure. Authored by San Leandro assemblyman Rob Bonta, it would put broadband on a par with other types of public works, like roads, sewers or water systems, and make it possible for cities to pay for it via bonds issued by infrastructure financing districts. Brown should approve it.
Senate bill 628 is a half a step in the right direction for community broadband development, but a giant leap for public infrastructure overall. It would create the legal framework for enhanced infrastructure funding districts that would have far greater flexibility in building – with two-thirds voter approval – basic facilities. Like roads, sewers and water systems. But not specifically broadband networks, although it doesn’t exactly preclude it either. Half a step forward is still progress and Brown should also approve it.
The deadline for a decision is the end of the month.
A deal to give local governments more infrastructure financing options finally came together in the closing hours of the California legislature’s 2014 session. Assuming Governor Brown signs senate bill 628 – likely, considering that his staff was deep in the negotiations that led to it – it’s good news overall for local governments. The measure gives local agencies the ability to create enhanced infrastructure financing districts that can issue bonds to build public facilities and earmark the future tax revenue the project is expected to generate to pay the money back. With the notable exception of tax money designated for schools.
The current version of IFDs – which would also remain an option – require three successive votes by the public, two of which have to pass by a two-thirds majority. This new version – enhanced, as they call it – only requires a single ballot measure with 55% approval. The EIFDs would also have more flexibility in putting financing packages together and cities, counties and other agencies could work together to form one.
A big hurdle in the bill is a requirement that local governments more or less wrap up the leftover business of former redevelopment agencies. Given the messy and litigious way those agencies were shut down by the legislature and the courts, it might be a while before many cities can take advantage of EIFDs.
The biggest disappointment from my point of view is that the list of allowable enhanced projects doesn’t specifically include broadband infrastructure, as was originally intended, at least by the governor’s staff. On the other hand, it isn’t prohibited either. Along with the long list of the types of projects that are specifically allowed, the bill leaves the door open for EIFDs to finance other sorts of “public capital facilities or other specified projects of communitywide significance that provide significant benefits to the EIFD or the surrounding community”.
So broadband projects are at least theoretically possible. It would have much better if the bill removed any doubt, since uncertainty and risk don’t play well with either elected officials or voters. But that’ll be a problem for next year.
A new plan to finance public infrastructure is being hatched in Sacramento and, at this point, broadband is included.
Chris Hill, a senior budget analyst working for California governor Jerry Brown, talked about the negotiations going on with legislative leaders, during an infrastructure breakout session at yesterday’s California Economic Summit conference at the state capitol. The idea is to allow local governments to create what are being called enhanced infrastructure financing districts that could sell bonds to build a wide variety of projects and repay the debt using property tax money.
Depending on your point of view, the plan would either upgrade or create giant loopholes in current law that allows a more restricted version of IFDs. There’s already a proposal on the table to explicitly include broadband infrastructure in the list of projects allowed under the current structure. But the enhanced IFD plan would go further.
Deal points on the table include…
- Lowering the threshold for voter approval to 55% from the current two-thirds, and only requiring a single vote, instead of the three needed now.
- Allow the bonds to be bundled with a wide variety of other financial vehicles, including fees and private investment.
- Expand the list of allowable projects, including broadband, housing and transportatation, and give local governments the discretion to choose which ones to pursue – no requirements for set-asides for specific types of infrastructure.
- Allow two or more local agencies – cities, counties, special districts – to collaborate on a project and jointly issue bonds.
The enhanced IFDs would be a replacement of sorts for the local redevelopment agencies that the governor and legislature scuppered a few years ago. One major difference is that, contrary what some local officials are urging, voters would be involved in the decision.
“This governor has made it very clear that the voters should have a say”, Hill explained.
The deal isn’t done. Negotiations over the details continue. Hill acknowledged that time is tight – the legislative clock is ticking down for this year, with a key deadline looming next week.