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Analysis of SB 1209: “No Nonvoted Local Debt for Competing System” SB 1209, dubbed the "No Competing System" bill by broadband advocates, places North Carolina at a disadvantage compared to other states and global competitors by limiting municipalities’ ability to ensure that all North Carolinians have access to affordable, top-quality, and high-speed broadband. Universal access to high-speed broadband networks, combined with programs aimed at increasing broadband adoption, represents one of the best ways to reinvigorate a struggling economy. Broadband networks also provide state and local governments with a means to implement cost saving mechanisms, provide better access to needed services and stimulate job and business growth. North Carolina communities have lost their tobacco, furniture and textile jobs to competition overseas. Currently, the unemployment rate in North Carolina is approximately 11.1%, representing the tenth highest unemployment rate in the nation. In some underserved areas without adequate access to broadband, the unemployment rates are even higher, reaching close to 17%. At a time when North Carolina needs more than ever to invest in 21st Century infrastructure such as broadband to build jobs for the future, SB 1209 impedes local governments from taking effective action. North Carolina’s largest cable provider raised rates 5-50% each year in 2007 and 2008 in all communities except those where municipalities were providing competitive cable service. By allowing municipalities to build their own network and allow independent service providers to compete fairly, a true market for broadband services can be reached. SB 1209 is an industry-sponsored bill that will have the effect of prohibiting new municipal broadband deployments in the state, shutting down current municipal data networks, and preventing competition to the State's current incumbent providers. North Carolina law has long permitted local governments to operate public enterprises (such as gas and electric utilities), which raises the question why communications projects should be treated differently from other public enterprises that are essential for a sound economy. The Truth About SB 1209 Myth: This bill only seeks public approval of municipal broadband before burdening the taxpayer.
Myth: Municipal broadband networks fail.
- Fact: Actually, SB 1209 would place a new burden of financing municipal broadband deployment on taxpayers. Current municipal broadband systems in North Carolina are financed using Certificates of Participation (COPS) financing, where the debt is collaterized by the infrastructure, not by "the full faith and credit" of the local community (general obligation bonds). SB 1209 would shift all borrowing for municipal broadband financing to general obligation bonds, and would require that approval for financing any construction, repair or upgrade of a municipal broadband system to first go to a public referendum.
- Moreover, North Carolina municipalities are prevented by law from expending any funds or staff time advocating for local referendum.
Myth: Local governments would not be held publicly accountable on public broadband projects without SB 1209.
- Fact: Local broadband systems are not failing. In fact, North Carolina has built successful municipal networks in Wilson, North Carolina's Greenlight, and Salisbury's soon to be activated Fibrant FTTP project. These municipal networks provide the 100 Mbps service envisioned by the FCC's National Broadband Plan, making North Carolina a national leader in advanced broadband networks.
- Fact: Hundreds of local governments across the country have built successful telecommunications networks.
Myth: SB 1209 will not affect current municipal broadband operations in North Carolina.
- Fact: Local governments providing an enterprise service to its community are subject to numerous state and local laws requiring public accountability and scrutiny of infrastructure projects. The General Assembly has already established statutory provisions for Public Enterprises (NCGS Chapter 160A, Article 16); conservation finance provisions in the Budget and Fiscal Control Act (NCGS Chapter, 159 Article 3); and oversight by the Local Government Commission (NCGS Chapter, Article 2).
- Fact: For communities seeking to fund such networks with funds provided by the American Recovery and Reinvestment Act, that Act carries accountability requirements.
Myth: SB 1209 will only affect municipal broadband systems
- Fact: SB 1209 will likely shut down current municipal broadband operations in North Carolina, including regional public safety networks. SB 1209 limits financing for the construction, repair, or upgrading of all "external communications systems" (non- governmental communications systems) to general obligation bonds. Current municipal broadband operators who would need to finance new repairs or upgrades to their system would be shut down by having to wait for the results of a referendum to receive approval to borrow the funds to maintain their infrastructures, a pre-requisite for general obligation bond financing. Under Homeland Security law, North Carolina's regional public safety networks are required to connect with critical private sector establishments (e.g., energy companies, hospitals), making them "external communications systems" under SB 1209. This would limit the financing of their construction, repair or maintenance to general obligation bonds. Under SB 1209, public safety networks would lose current COPS financing and would shut down while waiting for a public referendum prior to repairing, modifying, or upgrading their networks. Public safety networks would be prohibited from financing their operations with Homeland Security or Department of Agriculture grants.
Myth: SB 1209 will not prevent North Carolina municipalities from receiving ARRA Broadband Grant funds.
- Fact: SB 1209's effects go well beyond municipal broadband systems that compete with incumbent operators. For example, it will affect municipal electric utilities and severely constrain their ability to upgrade energy equipment or deploy smart grid technologies. This is because section the list of entities that are considered to be "unit of local government" (in 160A-20(h)) does not exclude electric utilities, implying that an electric utility could not borrow funds for SCADA or smart grid systems without a full public referendum.
- Fact: SB 1209 would require North Carolina communities who are awarded federal ARRA broadband grants to decline those funds because the bill limits all financing for construction, operation, repair and maintenance of municipal broadband systems from general obligation bonds.
Historically, Enfield was known for its tobacco and peanuts. Today, there’s a new wave cresting in this small rural community in eastern North Carolina.