This article was written by Community Broadband Networks initiative intern, Kate Svitavsky.

Publicly owned Internet infrastructure is typically funded with revenue grants, interdepartmental loans, or through avoided costs at the local level. Part of the planning and infrastructure costs, however, can sometimes be covered by state and federal grants known as Community Development Block Grants (CDBG). Nelson County, Virginia, leveraged CDBG to expand their fiber network and maximize benefits to the community.

CDBG funds, are distributed to 1,200 units of state and local government by the federal Department of Housing and Urban Development (HUD) and can go toward a variety of infrastructure and development purposes. When communities consider ways to use CDBG funding, they can get long-term valuable benefits by directing those funds toward Internet infrastructure.

Nelson County Broadband

Currently, the network has 39 miles of middle mile fiber and laterals. Nelson County began preparing for the network in 2007, when it received an initial planning grant of CDBG funds. The grant allowed the county to develop a project which improved their eligibility for federal funding from the American Recovery and Reinvestment Act (ARRA).

They applied and in 2010 for stimulus funding and received a $1.8 million grant from the Broadband Technology Opportunities Program (BTOP) to build out a middle mile network. In the first phase of their construction, the county used the BTOP funding and approximately $456,000 in required local matching funds to deploy 31 miles of fiber backbone. The second phase added another eight miles to the network in 2015, funded in part by $200,000 of CDBG funding; the community has also contributed about $690,000 in other local funds.

“It becomes a win-win for residents and businesses and for service providers,” said Alan Patrick, Chair of the Nelson County Broadband Authority. “Residents and businesses have an opportunity to receive broadband access, which may have not been available prior to the county building infrastructure in the area, and it is also a benefit to the service providers.”

As of November 2016, 240 businesses, residents, and organizations subscribe to Nelson’s network, which serves the communities of Lovingston, Nellysford, Colleen, Woods Mill, Martins Store, and Avon. Multiple ISPs operate on the open access network, including Nelson Cable, SCS Broadband, and Ting Internet.

The Broadband Authority hopes to add another 52 customers in two additional neighborhoods in the near future. They retained a consulting firm that recently provided a broadband build out plan. The Authority is still considering the recommendations that suggest adding another 75 miles of fiber. The expansion would reach the towns of Faber, Shipman, Piney River, Tyro, Arrington, Afton, and Wintergreen. The estimated cost of the expansion is approximately $7.8 million.

About CDBG

Congress created the CDBG program in 1974 as a way to help communities revitalize neighborhoods, requiring the majority of funds to benefit low-to-moderate income (LMI) individuals, families, and areas.

In 2015, HUD distributed over $3 billion in CDBG funds to units of government including cities, counties, and 49 states. A funding formula, which takes into account population trends and indicators of need such as housing age and poverty levels, dictates what level of CDBG support HUD offers recipients. If communities aren’t populous enough to receive funding on their own, they are eligible to apply for CDBG funds through their state CDBG authority.

Nelson County applied to the state of Virginia for funding, as it does not receive CDBG dollars directly from HUD the way larger counties and cities do. The state’s Department of Housing and Community Development receives $17 million annually in CDBG funds.

HUD recently clarified its position on using CDBG for municipal broadband-related activities, publishing a Frequently Asked Questions sheet that details requirements for CDBG funded projects. While CDBG dollars can be used for a multitude of activities, they must focus on LMI communities, create jobs, and demonstrate compliance with HUD’s national objectives. HUD also writes:

“State CDBG grantees should fully examine the scope of their activities to ensure that it is both an eligible activity and is able to demonstrate compliance with the appropriate national objective. For example, the installation of a broadband trunk line would be eligible as an infrastructure activity, however, it is unlikely that this would be able to demonstrate compliance with the low-and moderate income national objective because the service area would be too large.”

Other Ways To Use CDBG To Improve Connectivity

CDBG funding can also apply to broadband infrastructure improvements for public housing. HUD recently passed a rule requiring recipients of the department’s funding to include broadband infrastructure when upgrading multi-family housing units.

In addition, HUD administers Section 108 loan guarantees as a part of the CDBG program, providing a way for CDBG recipients to access capital. Under Section 108, recipients may borrow up to five times their annual CDBG allocation from a bank, and the repayment is guaranteed by HUD. With Section 108 loan guarantees, recipients can secure lower interest rates because the Federal government assures loan repayment if the recipient is unable to pay. Section 108 also offers greater flexibility for loan recipients, including longer loan terms.

If a community qualifies, CDBG is another funding source for improving Internet access. Whether the municipality receives funds directly from HUD or has to go to their state’s CDBG board, the potential grant can get a community started by funding a feasibility study and may even help fund deployment.

Image of the Nelson County Courthouse by Pubdog [Public domain], via Wikimedia Commons.

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This article is a part of MuniNetworks. The original piece can be found here.