BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SCR 6 - Lowenthal Hearing
Date: April 5, 2011 S
As Introduced: January 31, 2011 FISCAL C
R
6
DESCRIPTION
Current law establishes the Tax Credit Allocation Committee
(TCAC) to administer the federal and state Low-Income Housing
Tax Credit Programs for the developers of affordable rental
housing.
This resolution would encourage state and local multifamily
housing lending agencies to follow the CTAC policy that
provides competitive points for developer loan applicants that
commit to provide high-speed Internet service to each unit for
at least 10 years free of charge to tenants.
BACKGROUND
Current law establishes the TCAC to administer the federal and
state Low-Income Housing Tax Credit Programs. Through a
highly competitive application process, TCAC awards tax
credits to the developers of affordable rental housing. In
turn, these developers take on investors as limited liability
partners, who in exchange for the tax credits provide funds in
the form of equity for building the affordable housing.
In 2003, TCAC amended its scoring regulations to encourage
affordable housing developers to provide broadband Internet
access as a service amenity to their tenants. The current
regulations provide two points (three points in rural areas)
within the site amenity category for providing high-speed
Internet service to each unit for a minimum of 10 years, free
of charge to the tenants. As a practical matter, TCAC
considers the infrastructure design and installation costs
associated with the Internet network as eligible development
costs that can be included when calculating the amount of tax
credits for which the development is eligible. The on-going
costs of network maintenance and the recurring monthly
Internet service charges are also eligible operating costs.
The Department of Housing and Community Development (HCD)
administers a number of programs that finance the development
of affordable rental housing, including the Multifamily
Housing Program, the Joe Serna, Jr. Farmworker Housing Grant
Program, and others. HCD's regulations are not specific to
the issue of Internet-related costs, but its practice is to
allow the costs of the design and installation as eligible
development costs but not to allow the on-going costs of
maintaining a high-speed Internet network and providing free
Internet service to residents as an eligible operating cost.
Many counties and cities also provide financing for the
development of affordable rental housing. Counties and cities
primarily use redevelopment resources from the 20% low- and
moderate-income housing fund and federal funds from the HOME
Program and the Community Development Block Grant Program for
these purposes. Counties and cities establish their own
policies with respect to allowing Internet hardware and
recurring costs as eligible expenditures, and these policies
vary widely.
COMMENTS
1. Author's Purpose . This resolution seeks to increase
access to broadband Internet services for low-income
residents of affordable housing. According to the author
"�t]he Internet is rapidly changing the way people live,
learn, and earn in modern society. Without access and
training, many citizens will be unable to compete in the
increasingly technology-driven, knowledge-based economy.
Low-income households are significantly less likely to
have a computer, Internet access, or home broadband
service, while almost all adults earning over $80,000 a
year have a computer, Internet access at home, and a
broadband connection."
2. Closing the Digital Divide . In 2002, the
Legislature explicitly added to the state's
telecommunications policies the goals of promoting
ubiquitous access to advanced communications services and
"to assist in bridging the 'digital divide' by
encouraging expanded access to state-of-the-art
technologies for rural, inner-city, low-income, and
disabled Californians" (SB 1563 Polanco, 2002). The
"digital divide" refers to the unequal degree of access
to computers and the Internet across various
socioeconomic groups and the inequality of economic
opportunity which results for those without access.
Among those least likely to subscribe to high-speed
Internet service are low-income, Latino, and African
American populations. In addition, as stated in the
resolution, 73 percent of homeowners have a home
broadband subscription, compared to only 48 percent of
renters.
This resolution highlights one among many strategies the
state is pursuing to close the digital divide and ensure
that all Californians have access to broadband and the
economic opportunities that come with it. Moreover, it
is consistent with the National Broadband Plan, released
by the Federal Communications Commission in March 2010,
which proposes many strategies for promoting broadband
deployment and adoption and highlights the urgency of
getting all Americans connected.
3. Progress to Date . The TCAC encourages, but does not
require, affordable housing developers to use housing tax
credit funding to provide broadband as a service amenity
in affordable housing units. As a result of this policy,
more than 19,000 units of affordable housing throughout
the state currently enjoy in-home Internet service as a
basic service amenity. The nonprofit One Economy
Corporation has assisted 283 affordable housing
developments in California design and install data
network infrastructure.
4. Installation and Operating Costs . This resolution
encourages state and local lenders to recognize both the
costs for installing high-speed Internet network
infrastructure as eligible development costs and
recurring Internet service charges and network
maintenance costs as eligible operating costs. This is
consistent with the need to address both access to
broadband through deployment of infrastructure and
broadband adoption through affordable service rates.
Studies show that, even where broadband facilities are
available, up to a third of people do not subscribe to
broadband at home, with affordability being the single
biggest reason. Thus, this resolution addresses both
barriers to ensuring that all citizens are connected to
the Internet.
5. Double Referral . Should this bill be adopted by the
committee, it should be re-referred to the Senate
Committee on Transportation and Housing for its
consideration.
POSITIONS
Sponsor:
One Economy Corporation
Support:
None on file
Oppose:
None on file
Jacqueline Kinney
SCR 6 Analysis
Hearing Date: April 5, 2011