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Telecommunications Bill a Problem for Houston’s Budget?

By Urban Reform Staff | May 9, 2019

Two bills in the Texas legislature drew strong opposition from Mayor Turner who argued the city would lose at least $17 million in tax revenue if one of them became law. Unfortunately for the administration, the Senate version passed in the midst of the fiscal year 2020 budget cycle, but some say it’s fortunate for consumers.

The bill was Senate Bill 1152 by Chairman Kelly Hancock, simply put it creates a system where a telecommunications provider (internet and telephone company) would be able to choose between paying a telecommunications fee or a franchise fee rather than both, with is now the case.

The provider would pay the larger of the two fees and be exempt from the smaller, this is the sticking point for the city.

In a letter to Chairman Hancock back in March, Turner said, “As proposed, the bill presents significant concerns to collect franchise fees for the use of our right-of-way.”

Turner claimed that by eliminating these so-called “right-of-way rental fees,” the bill ignores a constitutional mandate against giving public property as a gift, essentially allowing the use of public property while charging below market rates.

The other, more pressing, problem is that the city just closed a $179 million gap in its current proposed budget and this bill, if signed into law, would save telecommunications providers between $17 million and $27 million annually, money that the city anticipated and already worked into the 2020 budget.

The last argument is that the bill wouldn’t allow cities to accurately plan their budgets. Turner argues that since they set budgets months in advance, it’s impossible to predict the amount of revenue they would receive from franchise and telecommunications taxes if they don’t know what providers will choose.

On the flip side, the bill removes barriers for providers and allows them to bring in a product at a lower cost to consumers. In many cities, Houston being one of them, the taxes are truly duplicative because providers run one line for both voice and video services rather than two, separate lines.

Many argue that by reducing one level of taxation we will see more economic growth and innovation as providers reinvest the money they once had to pay to the government.

The bottom line is that this could drill another hole into Houston’s proposed budget and everyone should be paying attention.

Mayor Turner’s office sent the following statement after publication: 

“It is disappointing the Texas Legislature has attempted to unconstitutionally take the value of Houston’s Right-of-way through Senate Bill 1152. Members of City Council joined me in warning Legislators the effect this Bill would have on Houston’s budget. Houstonians will feel the consequences of this, through a reduction of millions of dollars in revenue. I sincerely thank Rep. Harold Dutton and his staff for their efforts to stop the legislation last night. Unfortunately, this is another over-reach of the state that limits local control and works to the detriment of the city’s ability to serve its citizens.”

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