HomeMy WebLinkAbout09/21/1993, C-13 - EXTENSION OF FRANCHISE AGREEMENT WITH SONIC CABLE TELEVISION I��YIIII��III��IIIIIIIII Yi II�IIII
City c MEETING DATE:
c� or san �a�s os�spo -� -> >
Nia; COUNCIL AGENDA REPORT ITEM NUMBER j
FROM: Ken Hampian, Assistant City Administratiye Phicer
Prepared By: Deb Hossli, Administrative Analyst `..;
SUBJECT: Extension of Franchise Agreement with Sonic Cable Television
CAO RECOMMENDATION: Approve an amendment that extends the City's franchise
agreement with Sonic Cable Television to October 31, 1993, and authorizes the CAO to
extend the agreement on a month-to-month basis thereafter until December 31, 1993 if
necessary to conclude negotiations.
DISCUSSION:
Franchise Extension
The City's franchise agreement with Sonic Cable Television is scheduled to expire on
September 30, 1993. As the Council is aware, staff has been working with Sonic over the
last six months to develop a renewal franchise agreement. It is staff's opinion that we are
very close to concluding negotiations with Sonic. However, implementation of the 1992
Cable Consumer Protection Act has temporarily stalled our progress. Deadlines for
resolving issues surrounding rate regulation(September 1, 1993) and retransmission consent
(October 6, 1993) have limited Sonic's ability to participate in renewal discussions.
Consequently, staff is requesting City Council approval of a one month extension to our
franchise agreement with Sonic Cable Television and authorization for the CAO to extend
thefranchise on a month to month basis thereafter until December 31, 1993 (if necessary
to conclude negotiations). This should provide staff with ample time to finalize a draft
franchise for the City Council's consideration. Regular status reports on the negotiations
will be provided to the City Council in the interim.
Concurrence
The City has reviewed the proposed extension with our cable television advisor, Carl Pilnick,
who feels that the extension is reasonable. He also believes that the month-to-month status
of the agreement, if negotiations are not concluded by October 31, will put the City in a
stronger position to conclude negotiations shortly thereafter.
Rate Regulation
ation
In accordance with the 1992 Cable Consumer Protection Act, the City filed its petition to
regulate basic cable rates with the Federal Communication Commission (FCC) on
September 1, 1993 (the earliest date possible). The City expects to receive approval from
the FCC to regulate rates in early October. At that time, the City will have the legal
authority to review Sonic's rates and determine if they comply with the benchmark rates
established by the FCC.
ATTACHMENTS: Resolution
G:son-mtm 1���
EXTENSION OF FRANCHISE AGREEMENT
This Agreement is made and entered into this day of , 1993, by and
between the City of San Luis Obispo, a duly authorized municipal corporation (the "City")
and Sonic Cable Leasing Corporation, an Alaska corporation ("Sonic").
WHEREAS, Sonic has operated a cable television system ("System") in the City
pursuant to a franchise agreement ("Franchise Agreement") entered into between the City
and Sonic Cable TV, a California corporation, by Ordinance No. 790, passed December 19,
1978, and effective retroactively April 1, 1978, and transferred to Sonic Leasing Corporation
by Resolution No. 6728, dated December 5, 1989; and
WHEREAS, the franchise under which Sonic has operated its System expires on
September 30, 1993; and .
WHEREAS, Sonic has requested that its franchise be renewed by the City; and
WHEREAS, the City has determined that the public interest would be served by
negotiating a renewal of the franchise to Sonic; and
WHEREAS, Sonic and the city are in the process of negotiating and drafting a
renewal franchise agreement; and
WHEREAS, the City has determined that the public interest would be served by
granting to Sonic and extension of the franchise pending finalization of the renewal franchise
agreement.
NOW, THEREFORE, the City and Sonic do hereby agree as follows:
1. The City hereby grants to Sonic an extension of the franchise to and including
October 31, 1993. Should the City and Sonic not be in the position to conclude franchise
renewal negotiations by October 31, 1993, the CAO will have the authority to extend the
franchise agreement on a month to month basis thereafter until December 31, 1993.
2. Except as otherwise provided herein, all terms and conditions set forth in the
Franchise Agreement shall remain in full force and effect.
3. It is mutually agreed by the City and Sonic that when a renewal franchise agreement
is reached and entered into by the City Council of San Luis Obispo and Sonic, the term of
this Extension shall immediately expire.
["_ 13 -Z
Page 2
Sonic Agreement
SONIC CABLE LEASING CORPORATION
By:
Steve Burrell, General Manager
CITY OF SAN LUIS OBISPO
By:
Peg Pinard, Mayor
ATTEST:
By:
Diane Gladwell, City Clerk
APPROVED AS TO FORM:
(-2C4tIJ,,, /Lk� C (� [`Laren>�
e ey G. J rgensen, City Attorney
\bh\franagre
C - i3. 3
T ITEM # -
�►II II IIIIIIII �� ���IIII�IIIII IIIII�
city of sAn luis oaspo
990 Palm Street/Post Office Box 8100 • San Luis Obispo, CA 93403.8100
TO: CITY COUNCIL
FROM: KEN HAMPIAN, ASSISTANT CITY ADMINISTRATIVE OFFICER
SUBJECT: ADDITIONAL INFORMATION RELATED TO ITEM C-13 ON THE
SEPTEMBER 21, 1993 MEETING AGENDA - UPDATE ON THE
FRANCHISE NEGOTIATIONS WITH SONIC CABLE TELEVISION
Since preparation of Item C-13 for the City Council's September 21 , 1993 meeting,
staff has received a counter franchise renewal proposal from Sonic Cable Television.
Based on the contents of the proposal (See Attachment 1), staff feels it is necessary
to advise the City Council that our assessment of the status of franchise renewal
negotiations has changed significantly. After our last meeting with Sonic, it appeared
that we were very close to agreement on the crucial elements connected with the
franchise, and as such, we expected to conclude negotiations in the very near future.
We subsequently requested a short-term extension to the franchise (Item C-13 on the
September 21, 1993 agenda) with an expectation of presenting a draft franchise to
the City Council well before the end of this year.
Attached is Sonic's most recent proposal. There is a large disparity between what we
thought we had tentatively reached agreement over and what Sonic's counter
proposal actually contains. Significant examples of the disparity in our positions
include:
► System Upgrade
Sonic is only willing to upgrade the cable system to seventy channels if the
City, in turn, is willing to guarantee rate increases that allow the cable company
to fully recoup from subscribers all costs associated with the system upgrade.
From the City's perspective, the Cable Company's stance on this issue is
unacceptable. According to the City's cable advisor (Carl Pilnick), 70 channel
systems are considered an industry standard and a very reasonable expectation
in any franchise agreement exceeding seven years. In addition, the City cannot .
legally guarantee rate increases to offset capital improvements under the terms
of the soon to be implemented FCC rate regulation.
► Low-income Assistance Program
_ Sonic-_has—declined_to_ provide-.a_._low-income assistance program to cable _
subscribers. Staff recognizes that the law precludes the City from requiring
Sonic to offer a low-income assistance program. However, as evidenced in the
recently adopted cable franchise between the County and Falcon Cable, some
OThe City of San Luis Obispo is committed to include the disabled in all of its services, programs and activities.
�� Telecommunications Device for the Deaf(805) 781-7410.
Page 2
cable companies have offered such tiered rate programs.
► PEG Access
Sonic's proposal for PEG access funding is approximately $350,000 short of
what staff (along with advice from our cable advisor) has determined to be
reasonable based on contributions from cable systems of comparable size.
► Reimbursement for Cable Advisor Costs
Sonic's current proposal takes exception to reimbursing the City for the costs
of our cable advisor. Requiring cable companies to reimburse a municipality for
costs associated with franchise renewals is standard practice throughout the
United States and a reasonable expectation on the part of the City.
► Business Tax Exemption
It is the City's position that Sonic will be responsible for paying business taxes
once a new franchise is adopted (the current franchise precludes this). As set
out in their proposal, Sonic takes exception to this. Again, assessing a cable
company a business tax is common practice and a reasonable expectation on
the part of the City.
In summary, Sonic's current proposal is unacceptable to the City and represents a
step backward in our negotiations. Given this, we need to prepare ourselves for more
protracted negotiations. And, despite the recent Federal Legislation, the strongest
tool still available to the City is refusal to grant a long-term franchise agreement.
Therefore, staff recommends no change in the recommendations outlined in Item C-
13, which is to essentially convert to a month-to-month agreement for the time being.
Staff is currently conferring with our cable advisor to develop a further strategy for
responding to Sonic.
ATTACHMENTS:
1 - Sonic's Proposal
' t
WARREN A.SINSHEIMER III SINSHEIMER, SCHIEBELHUT & BAGGETT
ROBERT K.SCHIEBELHUT A PROFESSIONAL CORPORATION STREET ADDRESS
K.ROBIN BAGGETT
MARTIN 1. TANGEMAN ATTORNEYS AT LAW 1010 PEACH STREET
THOMAS M. DUGGAN POST OFFICE BOX 31 FACSIMILE
MARTIN P.MOROSKI
DAVID A.IUHNKE SAN LUIS OBISPO. CALIFORNIA 93406-0031 805.541.2802
STEVEN 1. ADAMSKI
THOMAS D. GREEN 805-541-2800
M.SUZANNE FRYER
DIANE W. MOROSKI
CYNTHIA CALDEIRA CLIENT 0133222
W. ARTHUR GRAHAM
SUSAN S. WAAG
ROY E. OGDEN
THOMAS I. MADDEN III
CHRIS A.CARR
MARIA L HUTKIN
NINA NEGRANTI
September 13, 1993
Jeffrey G. Jorgensen HAND-DELIVERED
City Attorney
City of San Luis Obispo
City Hall
990 Palm Street
San Luis Obispo, California 93401
Deb Hosli HAND-DELIVERED
Administrative Analyst
City of San Luis Obispo
City Hall
990 Palm Street
San Luis Obispo, California 93401
Re: City of San Luis Obispo Cable Franchise
Dear Jeff and Deb:
After considering the proposal made by the City at our meeting on August 6, Sonic
would be willing to enter into an agreement with the City of San Luis Obispo for the
renewal of the cable television franchise on substantially the following terms:
1. The Franchise Agreement would incorporate Sonic's offer of July 12, 1993,
with regard to the payment of franchise fees. This offer included raising franchise fees to
5% after the end of the FCC-imposed rate freeze, paying franchise fees on franchise fees
for 1993 and beyond and paying the City $24,819.30 for underpayment of franchise fees
prior to 1993.
2. The Franchise Agreement would incorporate Sonic's offer of July 12 with
respect to funding for PEG access. This offer included $0.14 per subscriber per month,
commencing 180 days after the effective date of the rate regulations, with a one time
advance of $100,000 in September 1994, and an increase to $0.19 per subscriber in the
tenth year of the franchise.
3. The Franchise Agreement would obligate Sonic to rebuild the system to a 70-
channel capacity within 3 years, but only if the City approves any rate increase which
Jeffrey G. Jorgensen
Deb Hosli
September 13, 1993
Page 2
would be required to allow Sonic to recover the cost of the rebuild plus a reasonable rate
of return.
4. The Franchise Agreement would continue to exempt Sonic from the payment
of the City business tax.
5. The Franchise Agreement would incorporate Sonic's July 12 offer with respect
to reimbursement of the City's costs on renewal or transfer. This offer provided that any
such reimbursement would be credited towards franchise fees.
6. The Franchise Agreement would incorporate Sonic's July 12 offer with respect
to the performance bond. This offer required Sonic to put a letter of credit in place for
$15,000 to serve as a security fund.
7. The Franchise Agreement would provide for liquidated damages in the amount
of $250 per day for any failure to complete the rebuild in a timely manner (unless such
failure was excused as provided in the Ordinance). Liquidated damages would be $50 per
separate, unrelated incident for failures to comply with other provision of the franchise
agreement.
8. The Franchise Agreement would provide for the City's acceptance of Sonic's
current line extension service policy but Sonic would be required to provide service in those
areas in the existing city limits where Sonic has reasonable access (without expense for
trenching or relating costs) to the necessary open trenches during construction to install any
required plant. In newly annexed areas of the City, Sonic would only be required to
provide service in areas where the density is greater or equal to 10 dwelling units per 1/4
mile.
9. The franchise Agreement would provide for rate regulation by the City in
accordance with the standards adopted by the Federal Communications Commission.
10. The Franchise Agreement would provide for a fifteen year term.
Although this offer does not contain the same terms as those which you and the
City's other representatives indicated you would be willing to recommend to the City
Council for adoption, we hope that this proposal can form the basis for a mutually
satisfactory agreement between the City and Sonic. If the City does not believe that further
discussion with Sonic along the terms outlined above would be productive, however, then,
without waiving any rights it may have to renewal under the Federal Cable Act, as
amended, Sonic would be willing to agree to a month-to-month extension of its current
franchise with the City until such time as another satisfactory arrangement can be reached.
r
Jeffrey G. Jorgensen
Deb Hosli
September 13, 1993
Page 3
If you have any questions regarding these matters, please do not hesitate to contact
me.
Sincerely,
SINSHEIMER, SCHIEBELHUT & BAGGETT
47 M. SUZE FRYER
MSF/hkm
15:Jorg0910.1tr
cc: Steve Burrell (by telecopy)
Chris Cohan (by telecopy)