Telecoms, broadband providers await Bullock decision on tax-abatement bill for new fiber

Posted at 4:14 PM, May 03, 2019
and last updated 2019-05-03 22:30:41-04

HELENA — Companies that install high-speed cable, for Internet and cell-phone service in Montana, are awaiting — and lobbying — Gov. Steve Bullock, on his decision whether to sign a bill granting a 10-year property-tax abatement for new cable installation.

“It just affords us the opportunity to make sure we’re reaching those customers that are hard to get to, that are expensive to get to,” says Rob Johnstone, CEO of Range, which serves 4,600 telephone and Internet customers in rural, southeast Montana.

Senate Bill 239, mentioned by legislative Republicans as one of their top priorities of the 2019 session, passed the Legislature last month and hit Bullock’s desk on Monday.

Bullock, a Democrat, could sign the bill into law or veto it. He’s given no indication what he plans to do.

Supporters of SB239 says its lengthy tax abatement will push companies to install more high-speed cable to bring high-speed Internet and cell-phone service to rural Montanans that have poor service or no service at all.

State Sen. Jason Ellsworth, R-Hamilton

“If you look at where we’re at, with only 50 percent (of the state’s population) served, we at some point have to make that decision: What’s going to be a big enough incentive?” says Sen. Jason Ellsworth, R-Hamilton, the sponsor of the bill. “In speaking to local telecoms, this is a game-changer for them, to be able to serve those communities.”

If SB239 becomes law, any new fiber-optic or coaxial cable installed in Montana after July 1 will be exempt from property taxation for five years. And, for the next five years, property taxes on the cable will be phased in, starting at 20 percent of its value the first year and increasing another 20 percentage points each year until it reaches 100 percent.

The bill also says companies can’t qualify for the abatement unless they reinvest the savings in additional fiber installation within two years.

“It’s kind of a snowballing effect,” Ellsworth told MTN News. “You get a small abatement up front, reinvest in fiber, and then it’s continually growing. At the end of the day, this will start servicing our rural areas, underserved areas.”

The bill passed the House 67-30 and the Senate 37-13. Critics said the bill is little more than a tax giveaway to giant corporations that don’t need the money.

But many of its supporters are smaller telephone/Internet companies in Montana that serve rural and urban areas.

Jason Williams of Missoula-based Blackfoot said rural telephone cooperatives get federal subsidies to help fund higher-speed cable in Montana, but that those subsidies aren’t nearly enough to meet the need.

“Something like SB239 enables us to leverage the subsidies (and) get into the rural areas more to reach even more Montanans,” he said.

Williams and Johnstone said their board members and others from the rural telecom community have been writing letters to the governor, encouraging him to sign the bill.

“It’s a bit of a head-scratcher why we wouldn’t make this law in Montana,” Williams said.

A fiscal analysis of the bill by the Bullock administration says it will cost the state treasury about $600,000 within the next two years, and more after that.

Bullock, when asked about SB239 last week, said he’s evaluating all bills on his desk both for public-policy and fiscal impacts.

Supporters of the bill dispute the analysis, saying it really won’t cost state or local governments any money, because it’s a tax abatement rather than a tax cut. Government wouldn’t collect any taxes unless the cable is installed in the first place, and will eventually get full property-tax revenue on the new cable, they say.