Promoting rural broadband with tax breaks

Montana Free Press and Belgrade News

Montana lawmakers are again considering a previously vetoed measure intended to spur broadband development by offering telecom companies property tax breaks for constructing internet lines.

The measure, proposed by Sen. Jason Ellsworth, R-Hamilton, in this year’s Legislature as Senate Bill 51, aims to address what lawmakers and lobbyists testifying before the Senate Taxation Committee Tuesday called an obvious gap in 21st-century Montana infrastructure: places where residents still don’t have access to reliable broadband.

Participants in Tuesday’s hearing, however, disagreed about whether the measure would be a step forward in the state’s efforts to encourage the universal connectivity that can support remote work, schooling and health appointments.

As introduced, the bill exempts new fiber optic and coaxial internet cables from all property taxes for five years after installation, and from some property taxes during the subsequent five years. In order to qualify, companies would have to show that they’re reinvesting those savings in installation of more internet lines.

Ellsworth said the tax relief would make it easier for telecom companies to deploy “last mile” internet connections in often-underserved rural areas. That point was echoed by lobbyists representing the Montana Telecommunications Association, the Montana Chamber of Commerce, the Montana Taxpayers Association and Charter Communications.

“We believe that this is a reasonable approach to incentivise that kind of investment,” said Montana Chamber of Commerce lobbyist Bridger Mahlum.

Opponents, including Democrats and lobbyists representing the Montana League of Cities and Towns and the Montana Infrastructure Coalition, argued otherwise. They noted that the measure would shift some property tax burden onto homeowners and non-telecom businesses, and said it isn’t clear that the incentives would steer companies toward projects in rural areas where the sparse population makes it difficult to turn a profit selling internet services.

“This bill does not require that companies build in rural areas, or that the tax savings be invested in rural areas versus cities,” testified Rose Bender, an analyst with the left-leaning Montana Budget and Policy Center.

Critics also pointed out that telecom companies are already eligible for hundreds of millions of dollars a year in broadband subsidies from the federal government. The Federal Communications Commission, for example, awarded nearly $126 million last month to six firms that had submitted proposals to bring high-speed internet to parts of Montana — though MTN News reported that $73 million of that went to a bid by Elon Musk’s company SpaceX to provide internet access via satellites instead of terrestrial fiber-optic lines.

Ellsworth’s proposal, in comparison, would eventually reduce state property tax collections by about $183,000 a year, according to a fiscal analysis prepared by the governor’s budget office. That figure doesn’t include lower tax collections by cities, counties and schools.

similar bill, also sponsored by Ellsworth, passed both houses of the Republican-controlled Legislature in 2019 but was vetoed by then-Gov. Steve Bullock, a Democrat. In his veto message, Bullock said he believed the bulk of the bill’s tax break “would go to large multi-state corporations deploying fiber optic and coaxial cable in cities.”

Kurt Alme, budget director for Gov. Greg Gianforte, told committee members Tuesday that the new governor, a Republican, supports the measure and has included it in the budget proposal Gianforte unveiled Jan. 7.

In a separate conversation with reporters Tuesday, committee member Sen. Jill Cohenour, D-East Helena, criticized the bill, saying it is “basically going to pay companies and large corporations to do what they already do.”

Cohenour, the Democratic Senate minority leader, and Rep. Kim Abbott, the Democratic House minority leader, said Tuesday that Democrats have other broadband access legislation being drafted.

At Tuesday’s hearing, Ellsworth acknowledged that his proposal isn’t a silver bullet for Montana’s rural broadband shortcomings, but he maintained it is a reasonable step forward.

“Yes, there will be some deployment regardless of whether this bill happens or not,” he said. “But this does change the game to some degree.”