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Pikeville, Ky. Raising Taxes For Government Broadband

April 27, 2017

It appears that the city of Newport, Tenn. isn’t the only one that’s about to make a municipal broadband mistake. (See our blog post from earlier this week about Newport and its deliberations.) According to the Bluegrass Institute’s Jim Waters, Pikeville, Ky. also is about to put taxpayers dollars at risk in the pursuit of government-owned broadband.

In a column at SurfKY News, Waters reports that “Pikeville recently raised its restaurant tax by a full percentage point just to finance a government-owned broadband network.” Waters argues, “If history is any guide – and it usually is – this tax increase won’t be the only one city officials will claim they need to keep a municipal broadband network functioning.”

Waters explains that the 11 cities in Utah that make up the UTOPIA network tried raising taxes to pay for their government Internet Service Provider, and it wasn’t enough. After 15 years, “the network still isn’t complete, has barely a quarter of the subscribers it promised to attract and runs a multimillion-dollar deficit annually.”

Why do cities often need to raise taxes in order to pay for their government networks? Waters explains that “revenues are rarely enough to cover these projects’ operating costs” because “fiber networks require constant upkeep and upgrades to stay on the cutting edge and attractive to subscribers.”

Waters also says government ISPs don’t help generate new economic growth or tax revenue. In fact, he says, studies show that “at best, these networks are a wash economically.” In fact, they deter the type of private investment that would drive growth and an expanded tax base.