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Committee recommends legislation limiting municipal broadband authority

May 05, 2010

On Wednesday, May 5, the N.C. General Assembly’s Revenue Laws Study Committee reviewed and recommended a bill that would severely limit municipalities’ authority to build their own broadband systems.

 

The bill, which was brought before the committee at the request of Senator David Hoyle, would prevent cities from using installment purchase financing – typically certificates of participation (COPs) – for “external communication systems,” which includes municipal broadband, municipal cable TV systems, and municipal telecommunications systems. The bill also authorizes the Revenue Laws Study Committee to study local government-owned systems and make additional recommendations to the 2011 Session of the General Assembly.

Because the bill was recommended by the Revenue Laws Study Committee, it is now eligible for consideration during the 2010 Short Session of the General Assembly. It still must be passed by both the House and the Senate and signed by the Governor before it becomes law.

 

As noted above, the bill prevents local governments from using installment purchase financing for all external communication systems, including municipal broadband. Thus far, cities have used COPs to finance these systems, with the intent of paying the debt with the revenues generated by the systems themselves. The new debt limitations do not apply to installment purchase debt issuances that occurred prior to the effective date of the new law. However, future debt issuances for external communication systems could not be in the form of installment purchase financing.

 

Without the ability to use COPs, cities wishing to develop municipal broadband and other external communication systems will be forced to use General Obligation (G.O.) Bonds. With G.O. Bonds, cities must seek voter approval for the bonds. In other states with a requirement that G.O. bonds be used for municipal broadband, cable providers have spent heavily to have voters defeat the bonds, and have been successful in their efforts to do so.

 

There was extensive debate surrounding this legislative recommendation before it was approved. Representative Paul Luebke and Representative Jennifer Weiss spoke in support of municipalities and voted against the proposal.

 

The League will continue to track this recommended legislation throughout the 2010 Short Session of the General Assembly and will keep you informed as to its status.

Posted on May 05, 2010 by Erin Wynia