Some details emerge on $14.4M “spider” TIF funding for Meridiam’s high-speed internet in Bloomington

Late last year, a high-speed internet fiber-to-the-home project for Bloomington showed some signs of progress after starting in April 2016.

In mid-November last year, Bloomington announced that it had about six weeks earlier signed a letter of intent (LOI) with Meridiam, an international player that builds infrastructure.

The $40-million investment by Meridiam, which was announced in November, grew to $50 million in mid-May, when Bloomington made another announcement about the pending deal. The service is supposed to provide up to 1 gigabit symmetric upload-download speeds to at least 85-percent of Bloomington.

The master development agreement (MDA) is not yet signed. But some aspects of the partnership have been sketched out. The basic idea is that the network will be operated as an open access platform, which eventually any internet service provider (ISP) can use—after an exclusive period for the initial ISP.

Meridiam has requested that Bloomington establish a tax increment finance (TIF) allocation area to support the project. Bloomington officials are calling it a “spider” TIF, because of the web-like appearance that will come from following the path of conduit to be installed by Meridiam.

One of the big unanswered questions prompted by the mid-May announcement was how such a “spider” TIF would actually work.

Some of those details about the TIF district have started to emerge—at a city council work session held on Friday, and at Monday’s meeting of Bloomington’s redevelopment commission (RDC).

One of those details is the estimated benefit that Meridiam will receive from the establishment of the new TIF district—around $14.4 million over the course of 25 years.

That’s not money that will come from a new tax, or a tax rate increase to be paid by Bloomington residents or businesses. That’s an amount that will come from the taxes paid by Meridiam on its personal property—the conduit and fiber—that it installs underground mostly along the path of existing utilities. The effect of the new TIF area will be to reimburse Meridiam for the taxes it has to pay on personal property.

At last Friday’s city council work session, after getting briefed on the proposed TIF by Bloomington corporation counsel Beth Cate , councilmember Steve Volan characterized the effect of the proposed TIF district as more like a tax abatement.

A comparison between the tax break for Catalent, which was approved by the city council in early March, and Meridiam’s TIF district is apt, Volan said—because 90 percent of tax break for Catalent was on personal property.

At Friday’s work session, councilmember Isabel Piedmont-Smith drew out the fact that if the city council declined to approve the TIF district, it would be a deal-breaker for Meridiam. Responding to a question, Cate told Piedmont-Smith that Meridiam had said the TIF district is “vital” to the company’s proposal.

Personal property, like medical manufacturing equipment in Catalent’s case, or conduit and fiber for Meridiam, stands in contrast to real property like land and buildings. Bloomington’s existing consolidated TIF area is defined in terms of real property, not personal property.

Generally, TIF districts depend on the difference between the value of property in a base year, and the value of property as it increases over time, due to inflation or investment. That difference is the “increment” in the term “tax increment finance.”

In a TIF district, the revenue from property taxes on the increment flows not to the unit that levied the tax (city, county, schools, etc.) but rather to a separate pool, which is overseen by the redevelopment commission.

Generally, it’s not possible to layer one TIF district on top of another. But Meridiam’s TIF district would be defined in terms of personal property, not real property—which would avoid layering the same kind of TIF area on top of each other. At Monday’s RDC meeting, assistant city attorney Larry Allen described the area in Meridiam’s “spider” TIF as “virtual parcels.”

Meridiam would be named as the beneficiary of the TIF district.

The RDC did not take any action at its Monday meeting. But the resolution that gets the TIF district rolling will appear on the RDC’s May 31 agenda. It’s set for a first reading in front of the city council on June 1, which would queue it up for final approval at the council’s June 15 meeting. Bloomington’s plan commission also gets a say, so it will appear on the plan commission’s June 13 meeting.

Not all the other features of Meridiam’s proposal are clear, but some details are starting to emerge.

The identity of the initial ISP, with which Meridiam is working with to finalize a deal, has not yet been revealed. But at Monday’s meeting of Bloomington’s redevelopment commission (RDC), Bloomington’s IT director Rick Dietz told the group that Bloomington has a pretty good idea of who the ISP will be and described the firm as “reputable and a good fit for our community.”

How long that exclusive period for the initial ISP will last is still under discussion. Dietz pegged it between five and 10 years.

One of the big talking points for Bloomington about the Meridiam deal is the digital equity component. Meridiam is planning to offer 250 megabit symmetric service to low-income residents in a way that works out to zero net cost to eligible residents.

The question of how low-income eligibility will be determined got an answer at Monday’s RDC meeting. Bloomington IT director Rick Dietz told the group that eligibility would be be extended to those receiving benefits from: SNAP (Supplemental Nutrition Assistance Program), TANF (Temporary Assistance for Needy Families), Indiana Department of Education free/reduced meal program, or the Social Security Administration’s OASDI (Old-Age, Survivors, and Disability Insurance) program.

The Paris-based Meridiam is a “benefit corporation” under French law, which means that it has a legal commitment to social and environmental sustainability. Meridiam’s status as a benefit corporation is key to the part of the deal that will require Meridiam to provide internet service to low-income residents.

According to Bloomington’s mid-May press release, the city of Bloomington is also contributing $1 million to ensure that those with lower incomes can still access the internet service.

Among the other assets that Bloomington is contributing to the deal will be 30 years of access to the Bloomington Digital Underground (BDU) network. The BDU initiative, to install conduit to carry fiber-optic cable, started two decades ago.  Based on Herald-Times reporting from 2015, Bloomington has spent at least $1.2 million on the BDU and it includes at least 17 miles worth of conduit.

At Monday’s RDC meeting, Dietz said that the city’s use of its own fiber is separate from the Meridiam deal. The city’s fiber bundle supports city buildings, Dietz said. And the city provides “dark fiber”  under usage agreements with the Monroe County Community School Corporation, Monroe County Public Library and with Monroe County government, Dietz said. The Meridiam deal will not affect those arrangements, Dietz said.