Congress 2019

Several bills teed up in Congress that would have a direct impact on broadcasters, including who owns local radio and television stations, received broad support during a House hearing in Washington on Wednesday. None was better received than a proposal that would revive the minority tax certificate program as a means to increase the number of women and minority owners.

Communications and Technology Subcommittee Chairman Mike Doyle (D-PA) set the tone for the hearing when he opened with statistics illustrating what he called “shortcomings” in the current ownership numbers. They show that women and minorities own just 10% of radio and TV stations. “We know that media outlets reflect the values and priorities of their owners and employees, so it’s critical that we find ways to make these distribution channels more reflective of this country’s racial and demographic makeup, so that our media may effectively serve needs of the diverse communities,” said Doyle.

The proposed Expanding Broadcast Opportunities Act (H.R. 3957) is seen as a fix. If passed, it would offer tax breaks to companies that sell their radio or television stations to minority-owned groups. It would also require the Federal Communications Commission to expand its recently created radio incubator program to TV as well. The FCC would also be mandated to study the link between diversity of ownership and diversity of viewpoints and report its findings back to Congress.

Rep. G.K. Butterfield (D-NC) reintroduced the bill last summer. During the program’s earlier iteration from 1978 to 1995, the number of minority-owned stations rose from 40 to 323, Butterfield said. “It’s time for Congress, and I hope in a bipartisan manner, to do its part to ensure women and minorities have equal access to the ownership market,” he told his counterparts.

Reviving the tax certificate program has the backing of the National Association of Broadcasters. Speaking on its behalf, Shooting Star Broadcasting CEO Diane Sutter urged lawmakers to pass the bill. “The program was highly effective in leveling the playing field for underrepresented broadcasters,” said Sutter. Congress should also look at the Small Business Administration’s loan guarantees, she said, to better reflect the “unique challenges” of broadcast ownership, where the most valuable asset – the station license – cannot be used as collateral.

Maurita Coley, President of the Multicultural Media, Telecom and Internet Council (MMTC), said some owners in the past were able to leverage the tax certificate into deal-making. “The tax certificate was used like currency because when they encountered a deal they wanted to buy, more than likely the seller was not going to even give them a chance. But when they were able to offer the possibility of the tax certificate, that’s something that distinguished them from the crowd of buyers and gave them a leg up,” said Coley. “The tax certificate helped make the difference.”

Beyond just having access to capital, Santa Clara University School of Law professor Catherine Sandoval testified that the tax certificate also gave minority operators access to deals. And because the FCC cannot play favorites among potential owners under federal law, Sandoval said the program created private sector-based incentives to sellers to strike deals with minority buyers.

Green Is Biggest Color Barrier

In stark contrast to the impeachment debate raging elsewhere on Capitol Hill, the media ownership hearing had a spirit of bipartisanship with members from both sides of the political aisle agreeing steps could be taken to help boost ownership diversity.

Rep. Greg Walden (R-OR), himself a former station owner, said the problem facing women and minority broadcasters cannot be solved without looking at the broader lending and media marketplaces. “The tech industry has increasingly become a prime competitor to traditional broadcasters,” he said. “One of the biggest problems facing the broadcast industry is a lack of financing. As any businessperson knows, it’s really difficult to create opportunities when there’s a lack of cash flow.”

Sutter, who bought her first television station without the tax certificate program, instead leveraging her management role at former radio and TV owner Shamrock Broadcasting, agreed the biggest problem for women and minorities remains securing the loan. “Access to capital clearly was then, and is now, the major deterrent to being able to get a deal done,” Sutter told lawmakers. She said the hurdle has grown higher after the Great Recession frightened away many lenders from writing broadcast loans.

“We went through a very serious economic crisis in 2008-2010 and what that did was take many companies that were in the broadcast lending space and they left the business. We have fewer financial institutions that have experience loaning to broadcasters, which makes it more difficult,” explained Sutter. “The bigger companies have bank deals, so for us the tax certificate is an answer to so many issues that face women and minorities,” she added.

The NAB is also urging Congress to step in and save the radio incubator program that was adopted by the FCC in August 2018 but struck down last September by the Third Circuit Court of Appeals. While the agency may yet appeal that decision, Sutter told the subcommittee members that it wouldn’t face the same “constraints” as the FCC and that Congress should add the incubator program to the lineup of media-related bills that are under consideration. “We would also ask that you include television,” she added.

Sutter also told lawmakers that the NAB’s Broadcast Leadership Training initiative for the past two decades has used a ten-month MBA-style training program for potential owners. She noted that of its 325 graduates over the years, 55 have gone on to become station owners.” However, the BLT program cannot alone address all of the significant challenges broadcasters face in striving to promote diversity,” said Sutter.