Vermont broadband development faces funding cliff

A project to build out Vermont’s broadband infrastructure is facing several hurdles to its completion that could affect costs and schedules, according to a report by the state auditor’s office.

Vermont State Auditor Doug Hoffer said in a recently published investigative report that “one of the largest infrastructure projects in state history” to improve broadband networks statewide could stall because federal funding may be exhausted before construction is complete.

Vermont has one of the lowest broadband connection rates in the nation, particularly in its rural townships.

IIn 2020, Vermont lawmakers tapped funds from the Coronavirus Aid, Relief, and Economic Security Act as well as the American Rescue Plan to renew efforts that began during the Obama administration to overhaul broadband systems statewide.

Since, lawmakers have allocated $350 million for the installation of new equipment across the state, $114 million of which has already been doled out to local project managers as grants by the quasi-governmental Vermont Community Broadband Board.

Hoffer said his investigation concluded that those federal funds will run dry by the end of the year, leaving the state facing a temporary funding gap sometime in 2024 as it waits for additional support from the federal Broadband Equity, Access, and Deployment program.

The amount of new funds and the timeframe in which they’ll arrive is still unknown, meaning the state would likely have to hit the brakes on ongoing work unless another funding stream could be found.

“This would put construction on hold and could lead to higher project costs and delayed service availability,” Hoffer said.

If that happens, the report said, it could lead to a host of other problems, including a labor shortage as qualified specialists seek out other work.

“According to the VCBB, an additional 200 fiber technician workers are needed to support Vermont’s broadband buildout,” Hoffer said. “These new positions would join a labor market that is already unstable.”

Given persistent issues with the supply chain, “materials will likely be scarcer and more costly” as well, with any delay made worse by the fact that rates and payments schedules associated with ongoing projects are linked to pre-estimated levels of growth in the number of paying internet users when service came online.

Instead of waiting, the auditor recommended several alternative financing options that could hold the state over until federal funds arrive.

That included the creation of a revolving door fund that would distribute state support to municipal project managers to be repaid with federal dollars when they arrive.

Hoffer also raised the possibilities of reappropriating $30 million from Vermont’s fiscal year 2023 Budget Adjustment Act or seeking a loan from the Northern Borders Regional Commission, a federal-state partnership that distributes grants for economic development in northern Maine, New Hampshire, Vermont, and New York.

The investigation also found that efforts to expand broadband in Vermont may be stymied as well by a lack of expertise at the local level.

Most local project managers had ” little or no track record receiving and administering grant funds” and “activities to date have not always been smooth” because of it, Hoffer said.

“The speed and nature of the undertaking have resulted at times in accountability and risk mitigation strategies being developed after dollars are awarded, rather than before,” he said. “If current estimates are correct, the total cost to build a universal broadband network in Vermont will be between $600-800 million.”