News Story

Bill Would Let Townships Impose Property Tax Hikes For Broadband Projects

Use it or not, property owners would pay

A Washtenaw County lawmaker is renewing efforts to authorize local tax hikes to finance government-owned high-speed internet infrastructure projects, despite concerns that they may saddle taxpayers with losses.

Rep. Donna Lasinski, D-Ann Arbor, along with nearly a dozen co-sponsors, introduced House Bill 5673 on March 17. The bill would amend a 1954 statute that allows townships to create special assessment districts for public works projects.

Traditionally, this kind of property tax has been used to pay for services like garbage collection, parks and erosion control efforts. Lasinski’s bill would add the construction, improvement and maintenance of communications infrastructure, “including broadband and high-speed Internet.”

When introducing nearly identical legislation in 2017, Lasinski said in an op-ed in the website, “Expanding broadband access for our state has been my personal mission since coming to the Legislature. Every hardworking Michigander deserves the opportunity to define for themselves what success looks like, and in today’s economy you simply cannot achieve that success without access to the internet.”

In a March 31 interview, Lasinski said recent developments “magnify the crisis” of less-than-universal access to high-speed internet service. She pointed to the current public health coronavirus emergency, school closures and government-mandated stay-at-home orders.

Theodore Bolema, director of the Institute for the Study of Economic Growth at Wichita State University, said that local governments can either use their regulatory powers to favor their own projects or rework regulations to help private companies.

“Governments have no sustainable advantage in offering broadband, as compared to private companies that bring far more experience from other communities where they operate,” said Bolema, who is a member of the Mackinac Center for Public Policy's Board of Scholars. “So the only way governments can compete is by giving themselves regulatory advantages or by arranging for taxpayer subsidies for their operations. Instead of building government-run systems that drive off private alternatives, local governments could help private companies obtain regulatory approvals and access to rights-of-way.”

Publicly funded broadband initiatives have a poor record of success. A 2017 study conducted at the University of Pennsylvania found that only 2 of 20 such projects reviewed nationally earned enough to cover the projected costs over the life of the network.

This poor record is probably due to the same local market realities that cause officials to perceive a need for taxpayer funding in the first place. Specifically, less-densely populated communities might not have enough potential subscribers to justify the cost of installing high-speed fiber networks. If there were, private internet service providers would install them.

According to the U.S. Census Bureau, nearly 9 of 10 Washtenaw County residents (88.6%) subscribed to high-speed internet in 2017. But local elected officials there have persistently sought to expand that number in the county’s rural areas.

The county commission has an active group called a “broadband equity subcommittee” that seeks government-led solutions to a perceived deficit of broadband options in rural areas.

In 2017, voters in Lyndon Township, a rural outpost north of Chelsea, approved $7 million in bonded debt to finance universal local broadband access. The average taxpayer in the township has been paying $22 per month for the system since 2018. Both users of the service and those who do not use it are responsible for this amount.

According to the Lyndon broadband committee, by 2020, about 850 households have signed up for the service (at an additional cost of $35-$70/month). Construction of the network is scheduled to be completed later this year, a forecast clouded by uncertainties related to work stoppages caused by the COVID-19 coronavirus outbreak.

In 2018, voters in Sharon Township, also in Washtenaw County, resoundingly rejected a similar broadband property tax proposal of $4.9 million from a levy of 3.25 mills over 20 years.

Lasinski said she believes the negative vote in Sharon Township was a consequence of many voters, who already had broadband service, rejecting the idea of subsidizing a broadband build out for their neighbors.

Creating a special assessment district, in which only those within the prospective service area are required to pay for it, would obviate that concern, she said.

Lasinski’s 2017 proposal would have expanded the use of special tax assessments to include government-funded broadband, but it never received a hearing in the state House. Since then, she said, she has worked to develop a coalition of supporters, including the Michigan Townships Association and AARP.

Lasinski acknowledged that restrictions on the legislative agenda imposed by the current health emergency make it unlikely the proposal will get a committee hearing anytime soon.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.