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Rural Internet Access Authority; Authority to Award Telecenter Grants to For-Profit Organizations

May 29, 2001

Dr. James Leutze, Chair Rural Internet Access Authority 4021 Carya Drive Raleigh, North Carolina 27610

VIA FACSIMILE (919/250-4325)

Re: Advisory Opinion; Rural Internet Access Authority; Authority to Award Telecenter Grants to For-Profit Organizations; N.C. Gen. Stat. § 143B-437.43

Dear Dr. Leutze:

You have requested an advisory opinion on whether the Rural Internet Access Authority Commission (“RIAA”) has the authority to award a telecenter grant to a for-profit organization if it determines such an organization meets the criteria for the grant. The RIAA, created by the General Assembly in 2000, is part of the Department of Commerce and is governed by a 21member Commission. Its governing body includes appointed representatives of “rural counties,” “regional partnerships,” and “the communications industry, which may include local telephone exchange companies, rural telephone cooperatives, Internet service providers, commercial wireless communications carriers, and other communications businesses.” N.C. Gen. Stat. § 143B-437.42(b). “The purpose of the [RIAA] is to manage, oversee, and monitor efforts to provide rural counties with high-speed broadband Internet access.” N.C. Gen. Stat. § 143B437.42(a). In addition, the RIAA shall “serve as the central rural Internet access policy planning body of the State and shall communicate and coordinate with State, regional, and local agencies and private entities in order to implement a coordinated rural Internet access policy.” Id.

The RIAA has specific statutory duties set out in N.C. Gen. Stat. § 143B-437.43(b). These include developing “a plan to provide rural counties with high-speed broadband Internet access,” proposing funding from “appropriate sources for incentives for the private sector to make necessary investments to achieve the [RIAA’s] goals and objectives,” and setting “specific targets and milestones to achieve” its goals and objectives. The following goals and objectives are set forth in N.C. Gen. Stat. § 143B-437.43(c):

(1) Local dial-up Internet access provided from every telephone exchange within one year.

Dr. James Leutze May 29, 2001 Page 2

High-speed Internet access available to every citizen of North Carolina within three years, at prices in rural counties that are comparable to prices in urban North Carolina.
Two model Telework Centers in either enterprise tier one or enterprise tier two area established by January 1, 2002. To the extent practicable, the Centers should be established in existing facilities.
Significant increases in ownership of computers, related web devices, and Internet subscriptions promoted throughout North Carolina.
Accurate, current, and complete information provided through the Internet to citizens about the availability of present telecommunications and Internet services with periodic updates on the future deployment of new telecommunications and Internet services.
Development of government Internet applications promoted to make citizen interactions with government agencies and services easier and more convenient and to facilitate the delivery of more comprehensive programs, including training, education, and health care.
Open technology approaches employed to encourage all potential providers to participate in the implementation of high-speed Internet access with no technology bias.
To coordinate activities, conduct and sponsor research, and recommend and advocate actions, including regulatory and legislative actions to achieve its goals and objectives.

In pursuing these goals, the RIAA is given statutory authority to contract with personnel and consultants, “apply for, accept, and utilize grants, contributions, and appropriations,” “enter into contracts,” and “provide support and assistance to local governments, nonprofit entities, and regional partnerships, in carrying out its duties and goals.” Finally, it has the power to recommend changes in “laws, rules, programs, and policies . . . to further the goals of rural Internet access.” N.C. Gen. Stat. § 143B-437.43 (a).

The RIAA has no taxing authority and thus far has received no appropriations from the General Assembly. Rather, all of the money it has received has been contributed to it by the MCNC pursuant to a Memorandum of Agreement among the MCNC, the RIAA, and the Rural Center, by statute the fiscal and staffing agent of the RIAA. MCNC is a corporation located in the Research Triangle Park whose predecessor organization, the Microelectronics Center of North Carolina, received public funding from the State of North Carolina. MCNC has committed to provide $ 30,000,000 to the RIAA, subject to certain reporting requirements. The legislation creating the RIAA gives it only a little more than three years to meet its goals and objectives in Dr. James Leutze May 29, 2001 Page 3

that the organization will be dissolved and its enabling statutes repealed effective December 31, 2003.

In pursuit of its most specific goal, the creation of two telework centers by January 1, 2002, the RIAA has recently published a request for proposals (“RFP”) to fund model telecenters in four economically distressed rural counties. The mission of the telecenters supported by the RIAA will be “to strengthen and grow the economy, and create new opportunities for businesses and residents of rural North Carolina counties. Telecenters will help individuals and enterprises participate in opportunities that can result from the use of technology and the Internet in work and daily life, use technology to conduct business and support business activities, access a wide range of resources and services, and acquire and use the technical knowledge and skills necessary to participate successfully in a digital economy.” In addition, “[t]elecenters will work with business/economic development groups and local governments to provide applications and support services to build economic strength in the community.” Every telecenter will be required to have a T-1 line with transmission speeds of 1.5 mbps, although the specific combination of technologies which best meets its needs will be determined by the telecenter. The RFP makes clear that it is anticipated community colleges “will be critical partners in all facets of telecenter development and operation.” RFP at p. 4. Any grant recipient will be required to sign a grant agreement with reporting and other requirements.

Your question is whether the RIAA has authority to award funds to a grant applicant which is a for-profit organization, assuming it meets the RFP criteria and is chosen by the Commission in its discretion as an applicant worthy of funding. The funds to be awarded are from contributions made by the MCNC to the RIAA, a public agency.

A State agency has constitutional authority to award funds to private entities if the award of those funds will serve a public purpose and if the agency has enabling legislation to do so. Since the adoption of Article V, Section 2 (7) of the North Carolina Constitution, “direct disbursement of public funds to private entities is a constitutionally permissible means of accomplishing a public purpose provided there is statutory authority to make such appropriation.” Maready v. City of Winston-Salem, 342 N.C. 708, 720, 467 S.E.2d 615, 623 (1996) (quoting Hughey v. Cloninger, 297 N.C. 86, 95, 253 S.E.2d 898, 904 (1979)).

Thus, the question is whether there is statutory authority for issuing the grants contemplated by the RFP to for-profit organizations. “The primary rule of statutory construction is that the intent of the legislature controls the interpretation of a statute. In seeking to discover this intent, the courts should consider the language of the statute, the spirit of the act, and what the act seeks to accomplish.” Stevenson v. City of Durham, 281 N.C. 300, 303, 188 S.E.2d 281, 283 (1972).

One of the powers of the RIAA is “[t]o apply for, accept, and utilize grants, contributions, and appropriations in order to carry out its duties and goals.” N.C. Gen. Stat. § 143B-437.43. The term “utilize” is not further defined or limited by the RIAA statutes. Thus, the statute gives the RIAA authority to use monies it receives, such as the contributions by the MCNC, in a manner Dr. James Leutze May 29, 2001 Page 4

that furthers its duties and goals. It is clear that the spirit and purpose of the legislation creating the RIAA is to foster economic development in rural areas of the state by facilitating high speed broadband Internet access. Creating at least two telework centers is a specific goal of the RIAA. Grant-making for telecenters as described in the RFP is an appropriate use of the funds received from the MCNC and is consistent with the purposes of the RIAA. The statute does not limit the entities which may receive grants from the RIAA. The award of funds under the control of a public agency to private entities has long been recognized as a tool for furthering the public purpose of economic development. See Maready v. City of Winston-Salem, 342 N.C. at 723, 467 S.E.2d at 623, and cases cited therein. Finally, using grant funding to provide incentives for the private sector to participate in the development of telecenters is consistent with the duty to propose and locate funding “for incentives for the private sector to make necessary investments to achieve the [RIAA’s] goals and objectives.” N.C. Gen. Stat. § 143B-437.43(b)(2).

Thus, we conclude that it is within the statutory authority of the RIAA to issue grants to worthy applicants, including for-profit organizations, to further its goals and perform its duties.


Ann Reed Senior Deputy Attorney General

Susan K. Nichols Special Deputy Attorney General

Karen E. Long Assistant Attorney General