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Alabama rural broadband bill now offers grants rather than incentives

A bill that would help the expansion of rural broadband in Alabama passed a House committee Wednesday, but a big change in the legislation could affect the pocketbooks of state taxpayers.

The Alabama Rural Broadband Act, sponsored by Sen. Clay Scofield (R-Guntersville), passed by unanimous voice vote in the House Education Committee after breezing through the Senate.

Scofield had initially hoped to offer tax incentives to private providers to expand into rural areas. His original legislation would have exempted broadband telecommunications network facilities from taxation for 10 years, exempted equipment and materials used by those facilities from the state’s sales and use tax, and would have offered an income tax credit equal to 10 percent of the investment in those facilities. Total tax credits would have been capped at $20 million per company.

But the House wanted to switch that to a grant program to possibly tap into President Trump’s infrastructure plan. The White House released a few details about the proposal last month. It would dedicate $50 billion to rural America, and governors of each state – as determined by an as-of-yet unspecified formula – would get 80 percent of the money to spend as they wish under the proposal. The other 20 percent of the funds would be provided to “selected states” that apply for Rural Performance Grants. Trump has said he’d like states to buy-in by chipping into the potential grant program.

Trump’s plan doesn’t dedicate infrastructure funds to broadband, but deems it a high priority.

“It’s not the delivery method we devised,” Scofield told Yellowhammer News of his bill. “The credits were not going to pass the House. That was clear.”

The substituted bill approved by the House Education Committee now offers grants at two tiers to pay for up to 20 percent of a broadband project’s total cost – a cap of $1.4 million per project that offers speeds of 25 megabits per second down and 3 megabits per second up, and a cap of $750,000 per project for 10/1 speeds.

The program would be administered by the Alabama Department of Economic and Community Affairs. Companies would apply for grants, providing detailed information about what areas and residents would be served. Cooperatives would be eligible for the grants, but government entities could not receive the money, preventing the spread of municipal broadband projects through this program.

Rep. Donnie Chesteen (R-Geneva), the bill’s champion in the House, said at a Business Council of Alabama briefing earlier this week that compromise was needed to ensure the legislation moves forward in 2018.

“If we are going to be forward looking in technology, we can’t wait,” he said.

Scofield said some lawmakers wanted to provide the cash up front, but the money will still be given on the back end if the bill passes.

“They asked, ‘If you’re OK with the State of Alabama writing a check and say go build,’…unh-uh. It’s still not a giveaway program with cash.”

The total money that will be appropriated to the bill is still up in the air, but Scofield said he’s been told he could expect $10 million annually.

Although he had to compromise on the funding method for rural broadband expansion, the legislation still contains language that restricts overbuilding and establishes a legislative oversight committee that would monitor the grants to ensure effectiveness.

“It’s a good start to begin getting broadband out to our unserved and underserved areas of the state,” Scofield said.

The bill will be considered by the entire House next week – Scofield said he hopes to place it first on the agenda for Tuesday – and, if passed, would go to Gov. Kay Ivey’s desk. Ivey, in her State of the State speech in January, expressed a strong desire for programs to expand rural broadband.