Lawmakers on both sides of the aisle are urging Gov. Andrew Cuomo to waive a state-imposed fee on fiber optic internet cables as the fee surprises corporations and halts broadband expansion projects in Northern New York.
Earlier this year, the state Department of Transportation started charging fees to fiber optic line installers who build lines in a state-controlled highway right-of-way after the 2019-2020 state budget contained language that enacted a right-of-way tax or use and occupancy fee. The DOT requires installers enter annual fee-bearing permits to charge corporations per foot, per cable, for fiber optic lines they own. It does not apply to phone, water or sewer lines.
The fee recently stopped a town of Louisville broadband expansion project with Slic Network Solutions that’s been in the works for two years, Supervisor Larry Legault said. About 15 town residents and businesses signed a petition requesting Slic install a 2-mile strip of high-speed broadband aerial lines on Route 37 on electric poles. Construction was expected to begin last fall, but the corporation halted the installation after finding out about the DOT’s required fee-bearing permit.
“This was going to be a quick project ... but the new DOT ‘tax’ would make it unaffordable for them to continue,” Legault said. “It makes it so we’re not able to move forward unless that fee is removed. Slic has told us they wouldn’t be able to remove it and be able to complete the service to businesses.”
DOT charges corporations three types of fiber optic permit fees depending if they are underground, aerial or cross a highway right-of-way.
Fiber optic-owning corporations in the North Country, Twin Counties and Batavia are annually charged $200 per foot, per cable for up to 96 strands; $316 per foot between 216 and 431 strands and $549 per foot for 432 strands or more when cable lines cross a highway right-of-way. The fee is significantly lower for aerial liens at $0.26 per feet, per cable for up to 96 strands; $0.42 per foot for 97 to 216 strands; and $0.80 per foot for 217 aerial strands or greater, according to dot.ny.gov.
“It’s an annual fee, which cost too much to charge the customers,” Legault said. “It’s affecting a lot of other Slic projects.”
The DOT referred all questions about the fee to the state budget or governor’s offices.
“The governor’s office did not respond to a request for comment about why the fee was implemented.”
This administration is fully committed to expanding broadband throughout the state, which is why it has invested $500 million in its Broadband for all Program,” said Freeman Klopott, spokesman for the state Division of the Budget, in a statement Friday. “The FY 2020 budget, as approved by the Legislature, simply enabled the state to recognize the full value of its assets by authorizing the Department of Transportation to enter into agreements with fiber-optic utility companies to use state rights of way, offsetting costs for taxpayers.”
The fee is projected to raise as much as $30 million this fiscal year, Klopott said. Companies are typically charged when they pass through privately owned right of ways.
“The 2020 budget enabled the state to do the same,” he added. “The revenue it generates helps offset Department of Transportation maintenance costs for the right of ways.”
Slic was not anticipating the new DOT fee, Legault said, and company representatives were surprised to learn of the additional project price tag.
“I think it was something that got snuck in,” the town supervisor said of the 2019-20 budget. “A Slic representative) was very surprised when he told me there was going to be a fee from the DOT.”
Assemblyman Mark Walczyk, R-Watertown, said he did not remember public budget conversations about the fee before it was adopted into law in spring 2019.
State lawmakers seriously negotiate the state budget each year from January through its April 1 deadline.
“This fee could have been intentionally inserted into the state budget,” Walczyk said Thursday, adding the budget process is “broken” because Democrats hold the majority in the state Assembly and Senate, ultimately leaving decisions to leaders Gov. Cuomo, Assembly Speaker Carl Heastie, D-Bronx; and Senate Majority Leader Andrea Stewart-Cousins, D-Yonkers.
“I don’t recall it coming up in any public budget conversations whatsoever,” the assemblyman said of the DOT fee. “That speaks to how broken the budget process is. The two men and the woman in the room end up with stuff like this, and it certainly hasn’t boded well.”
The town of Louisville received $20,000 in grant money from the North Country IDA and River Valley Redevelopment Agency and planned to invest $10,000 of capital funds for the project.
“The only thing I could do is reach out (to area representatives) and hopefully get the fee waived or exempt for at least our project so we could move forward,” Legault said. “The people in this area need good access to broadband and internet, and they don’t have it right now. Now we’re at a roadblock because of a state tax that is preventing us.”
Walczyk and Sen. Patricia Ritchie, R-Oswegatchie, led a bipartisan group of upstate lawmakers in a letter June 25 calling on Gov. Cuomo to roll back the fee. Assembly Minority Leader Will Barclay, R-Pulaski; Senate Deputy Minority Leader John Griffo, R-Rome; Assemblymembers D. Billy Jones, D-Chateaugay; Ken Blankenbush, R-Black River; Dan Stec, R-Queensbury; and Robert Smullen, R-Johnstown; and Sen. Elizabeth “Betty” Little, R-Queensbury; signed the recent plea to the governor.
“Collectively, we’ve heard from several municipalities on this matter — many of whom have indicated this language handcuffs them from moving forward with their respective projects to deliver broadband to residents,” according to the letter. “...This fee does nothing more than disincentivize the expansion of rural broadband and is nothing more than a roadblock for broadband expansion.”
Rural New York towns and counties, especially upstate, have grappled with lacking high-speed internet access for years. Gov. Cuomo launched the Broadband For All initiative in 2015 investing more than $550 million through three rounds of grants to secure high-speed internet upgrades for the most rural, underserved parts of the state.
The coronavirus COVID-19 pandemic has compounded the issue where upstate residents and businesses continue to lack adequate broadband connectivity as more people work from home and students depend on remote learning.
Lawmakers said the fee is counterproductive to Cuomo’s Broadband For All program.
“We respectfully request that you reconsider and waive this right-of-way tax on fiber optic lines along a state right-of-way,” according to the letter. “Albany should be doing everything possible to build a climate for accessible broadband, not discouraging it.”
As of Friday afternoon, lawmakers had not received a response to the letter from Cuomo, his aides or the governor’s office.
“As soon as this went into effect, I said this is unfair,” Walczyk said. “It’s a business-killing fee. I have to imagine if we’re talking about this in a public hearing, common sense is going to prevail.”
High-speed internet is essential to commerce, learning and to staying connected with friends and family as people continue to stay home because of COVID-19, Ritchie said.
“The COVID-19 pandemic has demonstrated that now, more than ever, this service is critical to the daily lives of all New Yorkers and especially those in our rural communities,” Ritchie said in a statement. “I am hopeful the governor will reconsider this unnecessary fee.” The bipartisan effort is working to reverse the fee as companies compete to satisfy the upstate need for broadband access, especially amid increased dependency on high-speed internet access during the COVID-19 pandemic.
“We’ve been looking behind the scenes for answers from the DOT if they are interpreting the law wrong or an administrative work-around,” Walczyk said. “It should remain a priority for this administration. ...There is no partisan here — we’re all in this together. This is one thing we want to highlight to say, ‘Governor, you missed the mark here. The result is a bad one.’” Under the DOT fee, the Development Authority of the North Country will have to pay about $2,000 per mile for a total of $1.6 million on its roughly 830 miles of existing owned fiber, said Laurie Marr, DANC director of communications and public affairs. The $1.6 million is about 25% of the network’s annual projected, generated revenue.
“The fee is on any fiber optic cable that is in or even crosses a state right-of-way, including fiber that is on a pole,” Marr said.
DANC immediately halted outstanding fiber installation projects after the organization first received DOT invoices for the new fee in January. Marr would not say how much DOT invoiced DANC for the fees, but the organization has not had to pay the additional sum because crews did not begin construction.
“Now, however, we must move forward with some of those installations because we made commitments to our customers (service providers) before we knew about the new fee,” Marr explained. “We have current commitments to customers that we must fulfill, but future projects will be in doubt.”
Marr would not specify where DANC was slated to install fiber optic cables, or which projects would be completed regardless of the fee.
“We are not going to get into details about customer orders,” she said. “It would not be appropriate.”
DANC has laid much of the region’s broadband connectivity to smaller, which regional internet and utility providers use in Jefferson, Lewis, St. Lawrence, Franklin, Essex, Clinton, Hamilton, Herkimer, Oneida and Oswego counties.
“We’re in a continuous process of filling new orders — we continuously reinvest into this huge telecommunications system,” Marr said. “This new fee means we won’t have $1.6 million a year to invest in our telecommunications system, which is vital to the education for our students and business operations across northern New York.”
Fee rates will increase by 2% each year and may be adjusted when DOT renews a permit. Fee-bearing permits are required for existing fiber optic line occupancies and new installations, according to dot.ny.gov.
Lawmakers adopted the 2019-2020 state budget and updated section 10 of New York’s Highway Law to authorize the DOT to enter fee-bearing permits with fiber optic installers. Last year’s spending plan also added Section 7 of the Transportation Corporation Law, allowing the DOT to charge fiber optic corporations installing and operating the utility lines for fair-market use and occupancy of the state right-of-way.
The DOT developed a fee schedule in October based on market data, according to the permit fee schedule published on dot.ny.gov.