Finding funding to build a new fiber network is the nothing short of a challenge. Traditionally, a community could borrow money through bonds but for rural communities, this method isn’t so easy. Banks are more likely to be hesitant in loaning large sums of money for more than 12 years in length. Here are some creative ways that communities around the U.S. have found to fund municipal projects or public-private partnerships (like LanCity).
In Wabash County, Indiana, the community wanted to utilize tax increment funding (TIF) to finance a new fiber network. TIF helps people gain funds by borrowing today against future increases in property taxes. As long as the network can pay for its annual debt, the property taxes should remain the same. If it cannot, property taxes will increase. Essentially, the property tax is the collateral for this project. Unfortunately, this creative funding resource was shut down by the Indiana Association of Cities and Towns.
RS Fiber Cooperative is a cooperative based in Minnesota. They found two financial resources and combined them to gain funding. A portion of their company was financed with an economic development bond. With combined municipal entities and a large rural service area, this fund acted like an equity seed in the project. The rest of the project was funded through a bank consortium. This process allows a borrower to borrow from multiple banks at one time. Banks have a restriction on the amount of money they can lend, a consortium allows multiple banks to participate in a high-quality loan.
These ideas aren’t traditional ways of finding funding but they allow people opportunities to start building their infrastructure.
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