Companies say there's a hold up on Iowa broadband law

DES MOINES — Companies trying to expand high-speed Internet in rural areas of Iowa say a key part of Gov. Terry Branstad's new broadband law is still not formally in effect, and it could hinder how they plan for future projects in the state.

At the heart of the 2015 law is a 10-year property tax exemption for service providers who build out broadband — also known as high-speed Internet — in limited areas. More than six months after the law went into effect, those companies are waiting for the Iowa Department of Revenue to write rules so they can apply for the exemption.

The law specifies an annual Feb. 1 deadline for applications to be submitted, with some flexibility for seeking tax relief up to two years later. But for service providers spending large amounts of money, they're looking for tax details sooner rather than later so they can see some return on their investments.

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Doug Boone, CEO of Premier Communications in northwest Iowa, has about 10,000 broadband customers in 23 communities. Since July, his company has invested $4.4 million to build out infrastructure for high-speed Internet in three rural areas.

Boone's next budget includes $8 million to build out broadband for additional locations, but he said the company is holding back, in part because of the confusion over the property tax relief program.

"It's one thing to go the first year, it's kind of hard to double down and do it again," he said.

Department spokeswoman Victoria Daniels said the agency will provide a draft of the rules soon to industry stakeholders, but the process to finalize them may take months.

"We have to make sure that what we're intending is on track with the governor's vision," she said.

Daniels noted the broadband law involves the Office of the Chief Information Officer, which is tasked with determining if a service provider's new project falls under the state's definition of limited broadband service. Daniels called the law's implementation a joint project between their offices.

"They have to go through their process as well," she said. "This is state government. Things do not happen overnight, unfortunately."

Robert von Wolffradt, Iowa's chief information officer, said his office is in the midst of working on a web portal that will allow service providers to quickly determine whether an area has limited broadband. He said while his office's work did not directly impact the Department of Revenue's ability to write the tax exemption rules, they're collaborating to roll out their services together.

Von Wolffradt understands if there's frustration from service providers, but he noted his office has had limited time with no direct state dollars to do the web portal work. He wouldn't specify those costs, and he didn't place blame on anyone.

"I think we've done a fairly good job about dotting the i's, crossing the t's with all our procurement rules and all of that to get these things out quickly," he said.

Broadband has been a key issue at the Iowa Legislature for the past couple of years. But its expansion is expensive, particularly in rural Iowa.

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Minburn Communications in central Iowa recently completed a $4.7 million project around Christmas to deploy broadband to nearly 900 homes.

Debra Lucht, general manager for Minburn, said they're looking into continued broadband expansion, but they want more tax clarity from the state.

"We have to step back and say, we've made some substantial investments here and unless we know financially that we can continue to support what we've already invested, we can't even look at additional opportunities," she said.

Iowa Communications Alliance represents more than 125 telecommunications companies in the state that offer services like broadband. CEO Dave Duncan noted the group's support of the law but acknowledged concern with the delay.

"Depending on what the rules actually say when they get drafted it's possible these providers might be forced to pay full taxes on property that was supposed to be exempt for 2016," he said in a statement.

Branstad included $2 million in his latest budget recommendation for broadband, though it's unclear how the money would be used. When asked about the concern from service providers, Branstad spokesman Ben Hammes said the governor supports the ongoing efforts.

"We're working quickly with the Department of Revenue to provide certainties needed for providers to build out broadband to the unserved and underserved areas of our state," he said.

Daniels called it unfortunate that some service providers were feeling hesitate about building.

"We want companies to install broadband. We want people to have access to it," she said. "We are not going to stand in the way of that for unnecessary reasons."