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1992 Cable
John E,ogarty Associate General Counsel 203 328-0629 May 12, 1992 Charles Guttman, Esq. City Attorney City of Ithaca 108 East Green Street Ithaca, New York 14850 Fost•IrM brand fax trarjmIttal memo 7671 RE: City of Ithaca - Franchise Fees Dear Mr. Guttman: i mom ..,.._.,,,,,1 Television & Communlcatrons Corporation A Time Warner Inc. Company Corporate Headquarters 300 First Stamford Place Stamford. CT 06902.6732 203 328-0600 This will respond on behalf of American Television & Communications Corporation, d/b/a American Community Cablevision ("Cablevision") to your letter of January 22, 1992. I appreciate your patience in waiting for this response. In your letter you object that Cablevision's rate for basic service increased beyond the maximum 5% permissible without regulatory approval. Your calculation, however, as your letter explains, is based on including within the rate charged for basic service the amount attributable to the franchise fee paid to the City of Ithaca. Your position would seem to be that the franchise fees are part of the rate charged by Cablevision and therefore part of Cablevision's revenues. For the reasons set forth herein, it is Cablevision's position that monies collected from subscribers and paid as franchise fees are not revenue to Cablevision and are not part of the rate charged for Cablevision's services. Cablevision, as required by the terms of its cable television franchise agreement with the City of Ithaca, collects and remits to the City of Ithaca five percent of its "gross City revenues" (as defined in the Franchise) as a franchise fee. Cablevision lists the appropriate amount of the franchise fee on each customer's bill as a separate item distinct from the charge for the cable television services the subscriber receives. On a quarterly basis, Cablevision pays to the City the exact amount it has received in franchise fee payments from its customers. Thus, Cablevision is, in effect, acting as agent for the City of Ithaca in collecting the franchise fee from its customers and remitting it to the City. In accordance with generally accepted accounting principles, Cablevision reflects such franchise fees on its books as nonrevenue liabilities collected from the subscriber and payable to the City. Cablevision does not treat the franchise fees collected from subscribers as gross revenues of Cablevision and, thus, does not collect or pay five percent of these monies as franchise fees. Put succinctly, Cablevision does not pay a fee on the amount it collects as franchise fees. Providing entertaInnient and Information cholcea The City claims that, contrary to Cablevision's practice, the amount collected by Cablevision in franchise fees should be treated as part of Cablevision's gross revenues and subject to the five percent fee. Iver It is Cablevision's position, as detailed below, that (1) the hinds it collects as -- a franchise fees are not "gross revenues" as defined in the Franchise; (2) Cablevision's treatment of the franchise fees which it collects as nonrevenue liabilities is in accord Cf . with generally accepted accounting principles; and (3) under the provisions of the Cable Communication policy Act of 1984 ("the Cable Act"), monies collected as franchise fees and paid to the. City are not gross revenues and imposing a franchise fee on these monies would violate the franchise fee limitation set in Section 622(b) of the Cable Act. I. Monies co issit fls fr nchisse f,� ar _ not gra ve es as defined in the Franchis -- The Franchise at Section 1.18 defines "gross City revenues" as follows: Gross city revenues means all revenue derived directly or indirectly by the Grantee and by Grantee's affiliates from services provided within the City via the Cable Communications System." The definition of "gross City revenues" is llmited expressly to revenue derived from services provided on the cable system. Under a fair reading of the Franchise, money collected as franchise fees should not be included within this definition. A franchise fee which is simply passed through to the consumer cannot be said to derive from the services provided by a cable operator to its customers via its cable system. It is not part of the consideration paid for cable services or for the operation of the cable system by customers. That consideration is set by Cablevision and is separately indicated on the bill. Franchise fees should not quality as revenues derived from services provided by Cablevision. II. arinciass. ?.! 11' *r_ ! 1 i . • & •r. • 1. • ! 1 . 1 1 As previously indicated, Cablevision's accounting treatment of the monies it collects as franchise fees is in accord with its view of the meaning of the Franchise. Cablevision records these monies as liabilities and does not recognize then as revenues. In so treating these monies, Cablevision is acting in accord with generally accepted accounting principles. Attached is. a letter of November 9, 1989 from accountants Ernst & Young so stating. m. n pot 'gross revenues~" ' Y11 / 1 _ _ 11 1 I i',' Section 622 of the Cable Act provides, in relevant part, that: (b) For any twelve-month period, the franchise fees paid by a cable operator with respect to any cable system shall not exceed 5 percent of such cable operator's gross revenues derived in such period from the operation of the cable system. (c) A cable operator may pass through to subscribers the amount of any increase in a fyranchise fee, unless the franchising authority demonstrates that the rate structure specified in the franchise reflects all costs of franchise fees and so notifies the cable operator in writing. (e) Any cable operator shall pass through to subscribers the amount of any decrease in a franchise fee. (f) A cable operator may designate that portion of a subscriber's bill attributable to the franchise fee as a separate item on the bill. Section 622(b) allows the franchise fee to be assessed only on "gross revenues derived ... from the operation of the cable system." As argued with respect to similar language in the Franchise, money collected as franchise fees is not derived by Cablevision from the operation of the system; rather it is money collected by Cablevision on behalf of the City. Thus, the terms of the Franchise, which do not include money collected as franchise fees within gross revenues, are consistent with Federal law. Other provisions of Section 622 are consistent with the position that franchise fees are a pass-through charge assessed by the franchising authority and not part of the consideration received by the cable operator from operation of the system. Section 622(f) authorizing cable operators to separately itemize franchise fees on customer bills evidences the view implicit in the Cable Act that a franchise fee is a charge passed through to the subscriber which is in addition to and not a part of the charge a customer pays for cable services. Separate itemization is, of course, the way sales taxes are generally treated on consumer bills and Section 622(f) indicates that franchise fees are to be regarded as a similar charge. Section 622(c) and (e) further indicate that franchise fees are to be directly passed through to customers by the cable operator and are not to be treated as part of revenue received in payment for cable services. It should be noted that these provisions are relevant only in circumstances where there is regulation of the rate charged for cable services. Section 622(c) would be meaningless where the cable operator is exempt from rate regulation, since the franchise would not specify a rate structure, or if it did, such language would be preempted. Similarly, the requirement. in subsection (e) that mandates a passthrough of any decrease hi the franchise fee can only have meaning in a rate regulated environment since an unregulated operator would always be free to raise its rates. Both sections make clear the intent of the Act that the portion of the customer's bill attributable to franchise fees and the portion attributable to the charges for cable services are distinct and that the portion attributable to the franchise fee is indeed a straightforward pass through which directly rises or falls as the franchise fee increases . or decreases. The use of the term "pass through" in the Act itself emphasizes that the franchise fee revenues collected from customers are the funds of the City and the cable operator's function is merely to collect these funds on the City's behalf. Subsection (c) ensures that the rate regulated cable operators can pass through any subsequent increase in .the franchise fees without having to seek permission for a rate increase from the franchising authority in those limited situations where a rate regulated cable system has voluntarily chosen not to pass through its franchise fee in place on the effective date of the Cable Act. In short, in enacting a provision which allows even a rate regulated cable operator to pass through any franchise fee increases on top of the fixed rate, subsection (c) evidences Congress' intent to protect the general right to pass through the entire franchise fee by ensuing the availability of the pass through in a situation where the practice might be interpreted to conflict with local rate regulation. Similarly, the purpose of subsection (e) is to ensure that the franchise fee reductions are passed on to subscribers, rather than being absorbed by the cable operator as profit, in those limited situations where a rate regulated cable operator voluntarily had chosen not to pass through its existing franchise fee. In sum, Section 622 of the Cable Act strongly supports Cablevision's practice. The franchise fees are in addition to, distinct from, and not a part of the rate charged for cable services; the monies paid as franchise fees are not consideration for any cable service and therefore not revenue to the cable operator. To treat the portion of the subscriber's bill attributable to franchise fees as revenue on which franchise fees roust be paid would not only be inconsistent with the intent of the Cable Act, it would in the case of the Ithaca franchise violate the prohibition of Section 622(a) on the payments of franchise fees in excess of five percent of gross revenues. Since the portion of the customer's payment attributable to franchise fees is not part of Cablevision's gross revenues and Cablevision already pays five percent of its gross revenues as franchise fees, payment of any percentage of the money paid as franchise fees would result in a payment in excess of five percent of gross revenues in violation of Section 622(b). 4 If, after your review of Cab'elision's position, you wish to discuss this issue further we are, of course, willing to do so. Again, my thanks for your courtesy and patience. Very truly yours, John E. Fogarty H:pg ithaca.fe In the Matter of RECEIVED APR 30 1992 NEW YORK STATE COMMISSION ON CABLE 1±tVISION Amendment of Section 595.1 of the Commission's Rules DOCKET N MEMORANDUM AND RESOLUTION ADOPTING RULEMAKING (Issued: April 9, 1992) By Notice of Proposed Rulemaking (In the Matter of Amendment of Section 595.1 of the Commission's Rules; Docket No. 90327, Order No. 91-305, released: July 24, 1991; published in the New York State Register on July 31, 1991), the Commission proposed to amend Section 595.1(o) of its rules relative to cable television franchise fees payable to municipal governments. Following the receipt and review of comments, the Commission authorized a revised proposal which was issued December 4,' 1991 and published in the State Register on that same date. Having reviewed all the comments submitted, we have determined to amend Section 595.1(o) in accordance with the changes in the revised proposal. Section 595.1(o) was first amended to include requirements concerning franchise fees in 1988. (Order Adopting Regulations . in Docket No. 90327, Order No. 87-191, Released: February 10, 1988.) The rule provided as follows: "Section 595.1 Required Contents of Franchises. Where a cable television franchise is awarded or renewed after April 1, 1973,. ..the franchise will be confirmed by the Commission only if it contains: (o) A provision stating (1) whether a franchise fee shall be payable by the franchisee to the municipality and, if applicable, (2) the precise amount or method of calculation of such franchise fee which, if expressed as a percentage of the franchisee's revenues, shall be expressed as a percentage of the franchisee's gross revenues derived from the operation of the cable system within such municipality.* * For purposes of this Section, the term "franchisee's gross revenues derived from the operation of the cable system "shall mean all revenues required to be reported to the Commission in Accounts 4000.0 through 4230.0 pursuant to ' 599." cid 2 The rationale for the rule and the objectives to be achieved are set forth in the Order Adopting Regulations at pp. 4-5. (See also Notice of Proposed Rulemaking in Docket No. 90327, Order No. 91-305, Released: July 24, 1991.) The _ rule applied to franchise fee provisions contained in franchises granted or renewed after February 11, 1988. Notwithstanding the rules, some franchises submitted for Commission review and approval after the effective date continued to contain franchise fee provisions which required payment on a revenue base other than as set forth in Section 595.1(o). Upon further review and consideration, we determined that some modification of the rule to provide flexibility could be achieved without compromising the underlying objectives of the rule itself. On July 24, 1991, we issued a proposed amendment (the "initial proposal") for comment which we believed maintained the objective that franchise fee provisions be clear and unambiguous but permitted some reasonable flexibility by defining the term "gross revenues" in a less inclusive fashion. We received comments from the Cable Television Association of New York, Inc. ("CTANY"), the Towns of Sand Lake and Saugerties, and a number of parties from Westchester County (See: List of Appearances, attached). A copy of the proposed rule is attached hereto as Appendix A. A copyof the Assessment of Public Comment is attached hereto as Appendix B. The majority of municipalities commenting upon the initial proposal opposed it on practical, rather than legal, grounds. They expressed fear that the proposed minimum revenue base for calculating franchise fees would become the starting point for negotiations with cable operators and thereby impair their ability to obtain fees based on all gross revenues including the maximum fee of 5% of "gross revenues derived from the operation of a cable system" as permitted by federal statute (47 USC Section 542). Although it has never been our intent to effect the total dollar amount of franchise fees payable pursuant to a franchise, we recognize that in many instances the fees are negotiated and that the initial proposal might have the unintended effect described in the comments. Accordingly, we issued a revised proposed amendment (the "revised proposal") wherein we proposed to reinstate an all inclusive definition of gross revenues with language that would permit the parties to exclude some components of revenue in expressing the fee obligation. Specifically, the revised rule, provided that, absent exclusions, a fee based on a percentage of revenues must be based on all revenues; and that notwithstanding exclusions, the fee could not be less than a percentage of all revenues received from subscribers on a regular recurring monthly basis. A list of those parties who commented on the revised proposed amendment is attached as Appendix C. Having considered all comments and our own experience with franchises and franchise negotiations, we conclude that the rule we adopt will preserve our objectives while at the same time provide a degree of flexibility to those municipal governments who may 3 choose to continue existing exclusions for nonrecurring programming charges or to authorize new exclusions consistent with the requirement that there be a uniform fee applicable to all. recurring programming charges. The provisions of Section 202(1) of the State Administrative Procedure Act and Section '101-a(2) of the Executive Law having been complied with, the Administrative Officer shall file with the Secretary of State the attached resolution which adopts the amendment of 9 NYCRR, Section 595.1(o) Commissioners Participating: William B. Finneran, Chairman; John A. Passidomo, Barbara T. Rochman Commissioners. Appendix A TEXT OF RULE Section 595.1 Required Contents of Franchises Where a cable television franchise is awarded or renewed after April 1, 1973, or where a franchise was awarded prior to said date but the franchisee had not commenced operations or substantial construction prior to January 1, 1972, the franchise . will be confirmed by the Commission only if it contains: o. A provision stating: (1) whether a franchise fee shall be payable by the franchisee to the municipality; and, if applicable, (2) the precise amount or method of calculation of such franchise fee which, if expressed as a percentage of the franchisee's revenues, shall be expressed as a percentage of the franchisee's gross revenues derived from the operation of the cable system within such municipality.' A municipality may elect to approve certain exclusions from said revenue base, provided that the resultant revenue base shall not be less than revenues received by the franchisee directly from subscribers for any cable services purchased by subscribers on a regular, recurring monthly basis. 1 For purposes of this section, the term "franchisee's gross revenues derived from the operation of the cable system" shall mean all revenues required to be reported to the Commission in Accounts 4000.0 through 4230.0 pursuant to Part 599 of this Title. Appendix B ASSESSMENT OF PUBLIC COMMENT The Commission proposed to amend Section 595.1(o) of its rules concerning franchise fees by a Notice of Proposed Rulemaking released July 24, 1991. The Cable Television Association of New York, Inc. ("CTANY"), Senator Suzi Oppenheimer, Assemblywoman Cecile D. Singer, Assemblyman Richard Brodsky, Assemblyman George Pataki, Rye Community Television, and a number of municipal governments submitted written comments on the proposed amendment. In response to these comments and in an effort to further clarify Section 595.1(o), the Commission issued a revised proposed amendment to Section 595.1(o) on December 4, 1991. The revised proposed amendment generated written comments from CTANY and a few municipal governments. The initial proposal provided that any franchise fee expressed as a percentage of revenues must be based on revenues that are "no less than gross revenues received by the franchisee directly from subscribers for any cable services purchased by the .subscriber on a regular, recurring monthly basis." This proposal would have relaxed the existing minimum standard in 595.1(o) which required a fee based on revenues to be based on gross revenues from all sources. Although the proposal would not have required any reduction in fees, the majority of comments were in opposition. CTANY, which opposed Section 595.1(o) when it was first adopted, continues to oppose any minimum standard concerning franchise fees. CTANY contends that the amendment threatened to "harm both cable operators and municipalities." According . to CTANY, "expanding the measure of revenues against which a franchise fee percentage will be applied" financially hurts those operators who currently exclude premium services from the revenue base. CTANY maintained that the proposal would prohibit municipalities from excluding revenues derived from subscription pay channels and consequently denies the municipalities freedom to negotiate. Lastly, CTANY reiterates is position that the Commission exceeded its proper role because the proposed amendment infringed on the municipalities' legal right under Executive Law Section 818 to determine the franchise fee, subject only to federal limits. The Commission has previously determined that it has the jurisdiction to promulgate a minimum franchise standard applicable to franchise fees. In adopting the existing standard, we noted that in accordance with early federal policies franchise fees were often stated as a percentage of revenues from "basic service" and that at least since the Cable Act in 1984 "basic service" depends more or less upon unilateral marketing strategies of cable companies. We emphasized our concern that franchise fee obligations should be clear and readily ascertainable. We also expressed our concern about the imposition of fees on some, but not all, categories of programming services. Accordingly, we adopted a rule that required any franchise fee based on revenues, to be based on gross revenues as the term is used in our Uniform System of Accounts. At the same time, it should be clearly understood that neither the existing rule nor the revised rule requires the payment of a franchise fee, or that a fee be based on gross revenues or any minimum percentage payable -2 - thereon. The amount of the fee remains subject only to federal law and Section 818 of the Executive Law. Correspondence from Assemblymen Brodsky and Pataki, . Assemblywoman Singer and Senator Oppenheimer expressed reservations about the initial proposal. They asserted that the proposed amendment would be detrimental to municipalities in that it would place municipalities " at an unfair disadvantage in negotiating contracts with cable companies and would, therefore, result in decreased franchise fee payments. Several municipalities voiced similar concerns in their opposition to the first proposed amendment of 595.1(o). In a written comment, the Larchmont-Mamaroneck Cable TV Board of Control ("Larchmont-Mamaroneck"), on behalf of the Town of Mamaroneck and the Villages of Larchmont and Mamaroneck, objected to the proposed amendment. Correspondence from the Town and Village of .Harrison, the Village of Croton -on -Hudson, and the City of Mount Vernon supported the Larchmont-Mamaroneck comment. Larchmont-Mamaroneck based its opposition to the proposal on the premise that the proposed minimum standard would exacerbate a municipality's already disadvantaged negotiating position and become "the standard." Larchmont-Mamaroneck also insisted that the . unamended rule assists the municipality in obtaining information regarding the franchisee's total revenue, while the amended rule would make disclosure itself the subject of negotiations. Comments from the Towns of Eastchester and Greenburgh, the Villages of North Tarrytown, Irvington, Ossining, Tuckahoe, Rye Brook, Scarsdale, Bronxville, and the City of New Rochelle expressed opposition to the proposed amendment of 595.1(o). Like the Larchmont-Mamaroneck comment, these municipalities also objected to the establishment of a minimum standard that did not include all sources of revenue. The common threads of opposition in these comments was the ' alleged resulting weakened bargaining position of the municipality and the reduction in municipal revenues, particularly lost advertising revenue. Under federal law, "any cable operator may be required under the terms of any franchise to pay a franchise fee." (47 USC Section 542) Certain limitations, including a ceiling of 5% of gross revenues, are contained in the statute. Although it is our view that a municipality may require a specific fee as an absolute condition of a franchise or renewal, we concede that the existence of a fee or the precise amount thereof is often subject to negotiation. It is apparent from the comments that many municipalities believed that the effect of the proposed rule would be to favor cable companies during such negotiations by permitting the companies to characterize the minimum standard as a preferred standard. In fact, it was not the intent of the Commission to influence the amount of the franchise fee payable to a municipality. Rather, the Commission's initial proposed amendment was intended to provide a degree of flexibility consistent with the underlying principle that franchise fee requirements be clear and unambiguous and apply uniformity to all recurring programming. ti -3- Based on the comments received in response to the proposal, the Commission issued a revised proposed rulemaking on December 4, 1991 designed to achieve the same goals in a somewhat different manner. The revised proposed rule reinstates an all- encompassing definition of the term "gross revenues" to be applicable whenever a franchise fee is to be expressed as a percentage of the franchisee's revenues. "Gross revenues" will continue to be defined as all revenues reported to the Commission in Accounts 4000 to 4230 of 9 NYCRR 599. _Municipalities may elect to exclude some components from the revenue base so long as the resulting revenue .base is no less than that derived from regular, recurring monthly subscriber revenues. The revision responds. to concerns of some municipalities that the Commission's initial proposal would set a minimum revenue base which would become the standard in negotiating the franchise fee. Fewer comments were received by the Commission regarding the revised proposal. In contrast to its response to the first, proposal, the Town of Greenburgh does not object to the revised proposal. The Town of Scarsdale neither objected to nor supported the revised proposal, but did express continued concern over the effect it would have on the municipality's negotiating power. CTANY and Larchmont-Mamaroneck reiterated the arguments they advanced in response to the proposed amendment of July 24. A. Thomas Levin, Esq., representing two consortiums of villages in Nassau County, also submitted comments totherevised proposed amendment of 595.1(o). In essence, the Commission and Mr. Levin are in accord. Mr. Levin expresses concern over the municipalities' ability to negotiate for "inclusion in a franchisee's 'gross revenues' any sums which the contracting parties agree are appropriate to include in the franchise agreement." This is exactly what the revised proposal permits. As to existing contract language, the amendment to Section 595.1(o) will vary in its applicability. Many franchises contain a provision obligating the parties to amend their franchises to reflect changes in the Commission's rules. For these municipalities, the amendment of Section 595.1(o) would become effective in accord with the franchise obligation. For. others, Section 595.1(o) would apply at renewal. LIST OF APPEARANCES Comments to First Proposal 1. CTANY 2. Village of Larchmont ) 3. Village of Mamaroneck) 1 letter 4. Town of Mamaroneck ) 5. Town of Saugerties 6. Town of Eastchester 7. Town of Sand Lake 8. Town of Harrison 9. Village of Harrison 10. Village of N. Tarrytown 11. Village of Irvington 12. The Assembly of the State of New York --Rep. Richard L. Brodsky --Rep. George E. Pataki --Rep. Cecile D. Singer 13. The Senate of the State of New York --Sen. Suzi Oppenheimer 14. Village of Croton -on -Hudson 15. Village of Tuckahoe 16. City of New Rochelle 17. Village of Rye Brook 18. City of Mount Vernon 19. Town of Greenburgh 20. RCTV Rye Community Television 21. Village of Scarsdale 22. Village of Bronxville Comments to Revised Proposal 1. CTANY 2.. Village of Larchmont ) 3. Village of Mamaroneck) 1 letter 4. Town of Mamaroneck ) 5. Town of Greenburgh 6. Village of Scarsdale 7. A. Thomas Levin, Esq. - per 16 Villages in Nassau County 599.33 'rJ.TbE 9 EXECUTIVE records shall contain particulars as to liquidation rights, dividend arrears, and other details such as voting rights. 3300.0 Treasury Stock - The cost of capital stock repurchased and held In the treasury. Each class of common or preferred stock held as treasury stock shall be separately identified by means of a subsidiary account. • 3400.0 Proprietor's Equity - Equity of a sole proprietor, partners, or members of a joint venture. Subsidiary accounts •shall be established to reflect the equity of .the individual partners or members of the joint venture. 3500.0 Additional Paid -in Capital - The amount contributed or assigned to carpital stock in excess of par value or stated value; or the value of donations re- ceived; or the reduction in par or stated value of capital stock; or the gain or loss on ;ale of treasury shares; .,r ca;_ta_ s;;;,c..; expenses; or other cred- its which are not properly includable elsewhere. Separate subsidiary ac- counts shall be established as necessary, so as to identify each class of stook or type of transaction as described immediately above. 3600.0 Retained Earnings — Represents the accumulated amount of earnings which have not been capitalized, paid to stockholders as dividends or other- wise utilized. 3610.0 Appropriated Retained Earnings - This account, appropriately sub- divided by purpose, shall include the amount of retained earnings which have been appropriated or set aside for specific purposes. 3620.0 Unappropriated Retained Earnings - This account shall Include the balance, either debit or credit, of unappropriated retained earnings arising from earnings. Authorized dividends shall be debited to this account and credited to account 2180.0, Dividends Payable. 3700.0 Proprietor's Withdrawals - Withdrawal by a sole proprietor, or member of a partnership or joint venture. Subsidiary accounts shall be established to adequately reflect all transactions. 4000.0 • OPERATING INCOME - These accounts shall include all revenues due to render- ing services connected with the cable activity. Classification of income by fran- chise area for the purpose of preparing reports required by FCC, franchising mu- nicipalities and others may be accomplished by account expansion right of the decimal point; but it is not required by the Commission. 4100.0 Subscriber Revenues 4110.0 Installation Income - Represents income obtained: from charges for subscriber connections, relocations and additional outlets. 4120.0 Regular Subscriber Charges - Represents periodical service charge for cable service. 4130.0 Per Program or Per Channel Charges - Income arising from special fees imposed to obtain programs not obtainable by means of regular subscription fees. 4140.0 Other Subscriber Revenues - Subscriber revenues not includable in accounts 4110.0, 4120.0, and 4130.0. 4200.0 Non -Subscriber Revenues 4210.0 Advertising Income - Income arising from advertising on canle chan- nels. 4220.0 Special Service Income - Income attributable to leasing or sale of time or facilities. 4230.0 Other Non -Subscriber Revenues - All other non -subscriber revenues not includable in accounts 4210.0 and 4220.0. 5000.0 COST OF OPERATIONS Account Numbering - The account numbering system has been devised so that the costs of each department or operating function may be accumulated separately but In a consistent manner. In this system, operating expenses have been segregated into three groups; service costs, origination costs and selling, general and adminis- trative. Classification of expenses by franchise area to correspond with similar classifica- tion of revenues may be had by appropriate expansion of accounts. Care should be taken to provide uniform expansions for the various functions. Total company -wide expense for each natural cost can be obtained easily since the unit and tens digit of each account number signify cost factor as follows: 01.0 Salaries and Wages 01.1 Salaries and Wages—Officers and Directors 01.2 Salaries and Wages - All Others 02.0 Employee Benefits 02.1 Employee Benefits - Officers and Directors 02.2 Employee Benefits - All Others 230.544 EX 12-31-74 NEW YORK STATE COMMISSION ON CABLE TELEVISION In the Matter of The Itemization of Franchise Fees on Subscriber Bills STATEMENT OF POLICY 92-217 DOCKET NO. 90389 (Released: April 20, 1992) During the past months, various cable companies in the state have commenced the practice of including all or a portion of a franchise fee as a separate line item on a subscriber's bill. The practice is manifest in one of two ways. In some instances, the franchise fee is one of many items, e.g., basic service, premium service, additional outlets, etc. listed in a single column, the amount for which is included with and added to all other amounts to arrive at a total amount due. In other instances, the bill recites the various services subscribed to and the amounts thereof, sets forth a subtotal of all such amounts and then includes an amount denominated "franchise fee" which, when added to the subtotal, creates a total amount due at the bottom of the bill. In the latter case, the franchise fee is treated in the samemanner as a sales tax. In either case, the fee is stated as if it were a direct charge upon the subscriber. Some companies have instituted this practice coincidental with a franchise renewal or current increase in the amount of the fee or both. For other companies, the practice is unrelated to the franchise term or any change in franchise fee requirements. Because the practice raises fundamental issues concerning the effect of federal law and the relation of federal statute to state statute, Commission regulations and franchise fee provisions in cable television franchise agreements, the Commission has determined that it isappropriate at this time to issue a general statement of policy on franchise fee itemization and "pass-throughs." Itemization of Fee Section 622(f) of the Cable Communications Policy Act of 1984 ("Cable Act") (47 USC Section 542(f)) provides that "[a] cable operatormay designate that portion of a subscriber's bill attributable to the franchise fee as a separate item on the bill." Consistent with this section, a cable operator. may include on a subscriber's bill a separate statement indicating the portion of the bill --as a percentage or fixed amount --that will be payable as a franchise fee by the cable company to the franchising authority. This section is not authority for including a franchise fee as a separate billable line item on a subscriber's bill. 2 b • In this regard, we note that franchise agreements in New York State have traditionally required franchise fees based on a percentage of revenues --either all or some portion thereof --received by the company from subscribers and, in some cases, from other sources. In other words, the fee is calculated . as a percentage of all revenues received without deduction or allocation for such portion of the revenues as may ultimately be paid by the cable company to the municipal government in fulfillment of the franchise fee obligation. This practice is fully consistent with Section 817 of the Executive Law which requires the Commission to impose an assessment upon cable companies calculated on "gross annual receipts." 1 The only exception from "gross annual receipts" recognized in the statute would include sales taxes which are imposed directly on subscribers. (See, e.g., Tax Law, Section 1131(2)) Neither the municipal franchise fee nor the amount of the Commission's assessment is excluded from "gross annual receipts." The practice of billing the fee as a separate line item in addition to rates transforms the very nature of the fee from a component of doing business calculated on all revenues to a separate add-on charge imposed directly on subscribers. This practice also has the effect of transforming the very method by which the fee is calculated and, therefore, purports to modify the underlying statutory and franchise obligations. A simple example will illustrate the effect of itemization. Assume a cable company has been charging $20 per month for a service under a franchise which requires a franchise fee of 3%. The franchise fee attributable to such bill would be sixty cents. If the company determines to separate and itemize the fee as an add-on in the manner of a sales tax, the bill is likely toread as follows: Basic service rate Franchise fee Total $20.00 $0.60 $20.60 1 Section 817(2) provides that the Commission "shall...bill and collect. ..[from cable companies]. ..the total direct and indirect costs necessary to operate and administer the commission for the. ..state fiscal year." Each company is required to pay a pro rata share of the commission's costs based upon its gross annual receipts when compared to the gross annual receipts of all companies. "Gross annual receipts" is defined in Section 812(5) as follows: ". . .any and all compensation received directly or indirectly by a cable television company from its operations within the state, including but not limited to sums received from subscribers or users in payment for programs received and/or transmitted, advertising and carrier service revenue and any other moneys that constitute income in accordance with the system of accounts approved by the commission. Gross annual receipts shall not include any taxes on services furnished by a cable television company imposed directly on any subscriber or user by any municipality, state, or other governmental unit and collected by the company for such governmental unit; Apart from the fact that this is a rate increase subject to notice requirements (and government approval in the absence of effective competition), it is readily apparent that the company, by its own unilateral act, has purported to change the manner of calculating the fee by reducing the base from the total amount billed to an amount which is artificially described as the "rate." In fact, $0.60 is but 2.91% of $20.60 -- the total amount billed. If the fee is calculated as before -- 3% of the full amount billed -- the fee attributable to the bill would be sixty-two cents. We find nothing in the Cable .Act to suggest that Congress intended to transform the nature of a franchise fee or to amend existing franchises by permitting cable television companies to .reduce . franchise fee obligations by manipulating the subscriber's bill in such manner. On the contrary, the effect of Section 622(a) was to increase from 3% to 5% of gross receipts the amount of franchise fees which could be required in a franchise. It could be argued that a cable, company is free to bill in this manner without also intending to modify its franchise fee obligation. If so, such a bill would be inaccurate and, therefore, misleading. Nothing in the Cable Act authorizes cable companies to engage in inaccurate and misleading billing practices. We also note the likelihood that some cable companies would argue that the franchise fee is a tax and, as such, is a separately billable item. We need not.finally determine whether the franchise fee is a tax forthe simple reason that even if the franchise fee is in the nature of the tax, under New York State law it would be in the nature of a special franchise or real property tax; but clearly not in the nature of a sales tax.2 The special franchise tax is imposed on the owner of the special franchise property, i.e., the cable company, and not on the subscriber directly. As such, it is simply a component of doing business similar to other non -sales taxes and business costs. 2 Section 626 of the Real Property Tax Law ("RPTL") provides as follows: "1. (a) When a tax levied on.a special franchise is due in any assessing unit, if the special franchise owner haspaid such assessing unit for its exclusive use during the past year under any agreement or statute requiring the same, a sum. based upon a percentage of gross earnings or other income, a license fee or other sum of money on account of such special franchise possessed by such special franchise owner, which payment was in the nature of a tax, all amounts so paid for the exclusive use of such assessing unit, except money paid or expended for paving or repairing the pavement of a street, highway or public place,. and except in a city having a population of one hundred seventy-five thousand or more according to the latest federal census, car license fees or tolls paid for the privilege of crossing a bridge owned by the city, shall be deducted from the tax based on the assessment made by the state board for purposes of the assessing unit, but not otherwise, and the remainder shall be the tax on such special franchise payable for such propose." 4 In sum, it is our determination that franchise fees cannot be stated as a separate line item on subscriber bills as direct charges on subscribers. This policy does not prevent cable companies from informing subscribers on bills, or otherwise, of the fact that franchise fees are paid to government, including the specific amount of the fee attributable to an individual bill. It is consistent with the Cable Act because companiesmay include a statement on the bill which identifies the franchise fee without imposing a separate and direct charge for the fee itself. Pass Through Provisions We also take this opportunity to express our policy with respect to the so-called "pass through" provisions in the Cable Act. Section 622(c) of the Cable Act (47 USC 542(c)) provides that "[a] cable operator may pass through to subscribers the amount of any increase in a franchise fee unless the franchising authority demonstrates that the rate structure specified in the franchise reflects all costs of franchise fees and so notifies the cable operator in writing." Section 622(c) provides that "[a]ny cable operator shall pass through to subscribers the amount of any decrease in a franchise fee." The issue here is whether these provisions have meaning in a deregulated cable community. We note, initially, that. for many years prior to the enactment of the Cable Act the rates for premium cable television services had been deregulated by the Federal Communications Commission ("FCC"). See Brookhaven v. Kelly, (428 F.Supp. 1216 N.D. New York (1977); 573 F.2d 765, 2d Cir. (1978)) We also note that in many, if not all, cable television franchise agreements in New York State a franchise fee is required to be paid based on revenues derived by the cable television franchisee from premium services or some portion thereof. In fact, at the time the Cable Act became law, cable companies could unilaterally price premium services to account for all costs including franchise fees and increases therein. As a practical matter, the Cable Act did not alter the regulatory status of premium services. Section 623 of the statute provides that "[a]ny franchising authority may regulate the rates for the provision of cable service. . .provided over a cable system to cable subscribers, but only to the extent provided under this section." Section 623(b)(1) required the Federal Communications Commission to "prescribe and make effective regulations which authorize a franchising authority to regulate rates for the provision of basic cable service in circumstances in which a cable system is not subject to effective competition." Under Section 623, only basic cable service can be subject to rate regulation.3 Cable companies remain free 3 Although basic cable service is defined in such a wayas it is theoretically possible that single channel premium services could be marketed as part of basic service, we are not aware of any such circumstances and it is unlikely that a cable company which is not subject to effective competition would choose to submit rates for premium service to regulation by such marketing practice. 5 to price "premium" services without the need for governmental review and approval --a right which transcends the more limited language in Section 622(c) which merely permits a rate increase in the event of an increase in franchise fees. We note, as well, that historically, "pass-through" is used in utility ratemaking to permit a cost or change in cost to be included in the regulated rate borne by ratepayers. It fully appears, therefore, that the pass-through provisions in Section 622(c) of the Cable Act are intended to enable cable television companies to increase regulated rates by an amount equal to any current increase in the franchise fee attributable to the regulated rate.4 Similarly, the obligation imposed by Section 622(e) to decrease rates by any reduction. in the franchise fee is only sensible in an environment where rates are regulated. Otherwise, there is no real benefit to subscribers. In sum, the pass-through provisions are redundant in rate deregulated communities. Granting to a cable company the unilateral ability to charge to subscribers whatever rate it wants --as the Cable Act does --transcends and makes meaningless cost pass-throughs which are reflective of a rate regulated environment. SO ORDERED. Commissioners Participating: William B. Finneran, Chairman; Theodore E. Mulford, John A. Passidomo, Barbara T. Rochman, Commissioners. 4 It is important to note here (1) that Congress sanctioned basic rate regulation for a minimum of two years following the effective date of the Cable Act for all cable systems irrespective of the existence of effective competition, and (2) that FCC regulations rather than statutory mandates caused most cable systems to be rate deregulated. MEMORANDUM TO: Cookie Paolangeli, City Clerk FROM: Chuck Guttman, City Attorney DATE: November 18, 1992 SUBJECT: ACC P. Enclosed please find a Notice of Public Hearing for the public hearing which will be held at C & 0 on Wednesday, December 10, 1992. This public hearing is being called pursuant to Section 22.1 of the Franchise Agreement which merely states that "in the event ACC fails to cure the default within the stated period, the City shall convene a public hearing on reasonable notice at which hearing ACC may be heard and afterwards the City shall specify the complaint against ACC." Council has decided to hold the public hearing at C & 0 on Wednesday, December 10th. I assume we should publish this (if we have not already done so). I will also be sending a letter to ACC specifically advising them of this so there can be no question that they have received appropriate notice. I'll send you a copy of that letter. If you have other questions about the public notice for this, let me know. In terms of the public hearing itself, I do not think we need to have a stenographic transcript of this hearing made; however, I think we should attempt to tape the hearing. Please talk to me before December 10th as to what can be done so we can tape the hearing. If you give me good enough instructions, I can probably do it myself. We also will be having a public hearing on curfew that evening. Again, we will not need a stenographic transcript of that but we should also tape that. If you trust me, I will try to take good care of your tape recording equipment. Enclosure The City of Ithaca has reason to believe that American Community Cablevision has defaulted in the performance of certain provision of the franchise existing between the City of Ithaca and American Community Cablevision. The City of Ithaca has notified American Community Cablevision (ACC) in writing of the provision or provisions which the City believes ACC may be in default and has provided to ACC an opportunity to respond and to cure such default. The City of Ithaca has reason to believe that the default has not been corrected. A public hearing has been held on these you will notice, at which hearing ACC had an opportunity to be heard. Pursuant to Section 22.1 of the Franchise Agreement existing between the City of Ithaca and ACC, the City hereby specifies the following as issues in which the City believes ACC is in default under the Franchise Agreement. 1. ACC has failed to provide 9 downstream channels designated for public, governmental and educational access as required by Section 14.1 (A) (1) of the Franchise Agreement. 2. ACC has failed to make available to access users, local origination equipment as required by Section 14.1 (C) (1) of the Franchise Agreement. 3. ACC has failed to provide 2% of gross City revenues for PEG access equipment replacement and expansion as required by Section 14.1 (C)(3) of the Franchise Agreement. 4. ACC has failed to maintain and/or replace in a manner consistent with good operating practice, PEG municipal access and local origination equipment as required by Section 14.1(C)(4) of the Franchise Agreement. 5. ACC has failed to construct and maintain a midsplit 300 megahertz institutional network with 8 upstream and downstream channels, free drops and necessary video converters as required by Section 15.1 of the Franchise Agreement. 6. ACC has failed to maintain and install dedicated cables as required by Section 15.2 of the Franchise Agreement. 7. ACC has failed to provide an all channel audio emergency alert system as required by Section 15.4 of the Franchise Agreement. 8. ACC has failed to designate one upstream channel for City and public sector uses as required by Section 15.5 of the Franchise Agreement. C & 0 Mtg-2/18/93 Acc/Violations 1 9. ACC has failed to publish all rates for subscriber services and leasing of channels as required by Section 16.4 of the Franchise Agreement. 10. ACC has raised basic rates higher than the schedule set forth in Section 19.1 of the Franchise Agreement. 11. ACC has failed to pay to the City the franchise fee set forth in Article 20 of the Franchise Agreement. C & 0 Mtg-2/18/93 Acc/Violations 2 WHEREAS, the City has entered into a Franchise Agreement with American Community Cablevision under which American Community Cablevision (ACC) is operating and maintaining a cable communications system within the City of Ithaca; and WHEREAS, pursuant to Article XXII of such Franchise Agreement entitled "Breech" it is provided that in the event that the City has reason to believe that ACC has defaulted in the performance of any provision of the Franchise Agreement that the City shall notify ACC in writing of the provision or provisions which the City believes may be in default; that ACC shall have a period of time to respond to the City testing the City's assertion or curing such default; and in the event ACC fails to cure the default within the stated period that the City shall convene a public hearing on reasonable notice at which hearing ACC may be heard and afterwards the City shall specify the complaint against ACC; and WHEREAS, the above procedural steps have been completed. NOW THEREFORE BE IT RESOLVED, that the City of Ithaca hereby specifies the following allegations as its complaint against ACC: 1. ACC has failed to provide 9 downstream channels designated for public, governmental and educational access as required by Section 14.1 (A) (1) of the Franchise Agreement. 2. ACC has failed to make available to access users, local origination equipment as required by Section 14.1 (C) (1) of the Franchise Agreement. 3. ACC has failed to provide 2% of gross City revenues for PEG access equipment replacement and expansion as required by Section 14.1 (C)(3) of the Franchise Agreement. 4. ACC has failed to maintain and/or replace in a manner consistent with good operating practice, PEG municipal access and local origination equipment as required by Section 14.1(C)(4) of the Franchise Agreement. 5. ACC has failed to construct and maintain a midsplit 300 megahertz institutional network with 8 upstream and downstream channels, free drops and necessary video converters as required by Section 15.1 of the Franchise Agreement. 6. ACC has failed to maintain and install dedicated required by Section 15.2 of the Franchise Agreement. 7. ACC has failed to provide an all channel audio alert system as required by Section 15.4 of the Agreement. cables as emergency Franchise 8. ACC has failed to designate one upstream channel for City and public sector uses as required by Section 15.5 of the Franchise Agreement. 9. ACC has failed to publish all rates for subscriber services and leasing of channels as required by Section 16.4 of the Franchise Agreement. 10. ACC has raised basic rates higher than the schedule set forth in Section 19.1 of the Franchise Agreement. 11. ACC has failed to pay to the City the franchise fee set forth in Article 20 of the Franchise Agreement. AND BE IT FURTHER RESOLVED, by the City Attorney is directed to forward a copy of such complaint to the appropriate officials at ACC and is further directed to continue in proceedings against ACC. /A CONFIDENTIAL MEMORANDUM TO: Mayor Benjamin Nichols FROM: Chuck Guttman, City Attorney DATE: October 28, 1992 SUBJECT: Negotiations with ACC. In September, Peter Hess and I met with Barbara Lukens and John Fogarty, the attorney for ACC, regarding the City's alleged violations by ACC of the franchise agreement. At that time, we set forth a list of items where we felt ACC was either in violation of the franchise and in addition other items where we felt ACC could or should be granting additional concessions to the City. Peter and I met again with Barbara Lukens and John Fogarty on October 22nd and received their response. I will try and outline below the items which we raised and their response. The first issue had to do with the manner in which ACC calculates the 5% franchise fee. ACC is allowed, on their bills to customers, to separately itemize the franchise fee. For example, if the basic charge to the customer was $20.00 the bill to the customer would list the $20.00 fee for services and would separately itemize the 5% or $1.00 franchise fee. ACC then was paying to the City a $1.00 franchise fee. It is our position that ACC should have been paying to the City 5% of $21.00 or $1.05. The relevant wording from § 20.1 of the franchise agreement is that the City shall be entitled to receive from ACC a franchise of 5% of ACC's gross City revenue. Gross City revenues are defined in § 1.18 as "all revenue derived directly or indirectly by the grantee (ACC) and by grantee's affiliates from services provided within the City via the cable communications system". There is a policy statement by the New York State Cable Commission to the effect that the method of calculating the franchise fee which we are proposing is the correct method. ACC is very opposed to conceding this point because it would establish a precedent which would apply to other municipalities. ACC's response on this issue is that money collected as franchise fees should not be included in the definition of gross City revenues. ACC went on to state that including that portion of the subscribers bill would not only be contrary to the intent of the franchise agreement but would be i Memo to Mayor Benjamin Nichols 2 October 28, 1992 contrary to federal law. A copy of Fogarty's letter to myself of May 12, 1992 discussing this point as well as others and a copy of the New York State Commission on Cable Television statement of policy from April 20, 1992 are attached hereto. Depending on how that issue is resolved would determine whether ACC is, in fact, overcharging customers by one cent for basic service. Another issue that is connected with the calculation of franchise fees is whether advertising revenues are to be included in gross City revenues. At present, ACC is not including in gross revenues monies they earn from advertising. Our position is that advertising revenues are included in all revenues derived directly or indirectly from...the services provided within the City. ACC's position is that these are not revenues derived for services provided within the City. Fogarty points to a broader definition which he says is used in some other franchise agreements; namely, revenues derived "of operations of the system". ACC's response on October 22nd was as follows: Fogarty stated that under the new federal legislation regulating cable companies that the FCC has until April 3, 1993 to establish regulations governing rate regulation. He claims that when these regulations are established it is likely that this issue will be clearly determined by the FCC. Since there is a 5% cap, if FCC determines that the 5% cap applies to only the $20.00 in the above example that their position will be upheld. Alternatively, if FCC states that the franchise fee should be calculated on the total amount the customer pays, the City's position will be fairly clearly established. He therefore suggests that this issue be put on hold until the FCC issues its regulations. I will be checking with John Grow, the attorney for the New York Commission on Cable TV, to see if the City loses or risks anything by leaving this issue on hold until that time. This would apply to prospective calculations of the total franchise fee and how customers are charged. With regard to the question of whether to include advertising revenues within the base on which the franchise fee is calculated, Fogarty is willing to concede this point both prospectively and retroactively if the City is willing to drop any claim for retroactive calculation of the "franchise fee on franchise fee" issue discussed above. I have not done complete calculations on this issue. However, based on 1991 figures that we have, total revenues of ACC excluding advertising revenues was $2,412,000.00. Five percent (5%) of that is $120,600.00. Five percent (5%) of that 5% would be an additional $6,030.00. By contrast, advertising revenues for 1991 Memo to Mayor Benjamin Nichols 3 October 28, 1992 were $184,000.00. Five percent (5%) of that amount is $7,400.00. I also have the figures for January through June of 1992. Doubling those figures to come up with estimated figures for 1992, total revenues excluding advertising would be $2,550,000.00. Five percent (5%) of that amount would be $127,500.00. Five percent (5%) of the 5% would be $6,375.00. By contrast, advertising revenues would be $202,000.00. Five percent (5%) of that amount would be $10,100.00. In § 19.1 of the franchise agreement, ACC agreed to give a need - based senior citizen discount of ten percent (10%) to those who qualify for real property tax exemption and others who qualify using mutually agreeable criteria. In § 19.1, this only applied to fees for the basic tier. We requested that this ten percent (10%) exemption apply not only for the basic tier but also for the expanded tier. ACC has responded that, assuming agreement can be reached on all other issues, that they would agree to extend this to the expanded tier (but not to premium channels or pay per view) provided that appropriate procedure can be established to determine who is eligible. With regard to senior citizens who own their own homes, it is very simple. With regard to senior citizens who do not own their own homes some checking of their age and income has to take place. It appears that this would be an easy procedure to establish. Article XV of the franchise agreement has to do with the institutional network,(I-net). ACC, inthe franchise agreement, agreed to do specific things some of which, according to the Cable Commission, are not particularly valuable to the City. For example, in § 15.2 ACC agreed to maintain dedicated cables to I -net sites. At this point, they have "drops". The Cable Commission says that what the City really wants in this respect is to have modulators and demodulators available for check out in sufficient quantities. ACC in principle is agreeable to this. Our Cable Commission would also like this expanded to three additional sites; namely, Southside Community Center, Sciencenter and Cooperative Extension. ACC is seriously considering agreeing to extend the I - net to those sites provided the City drops its demand for dedicated cables. This appears to be a "win-win" situation where the City will drop a right it has under the franchise agreement in exchange for ACC giving the City something it wants more which ACC is not obligated to provide. The remaining issues with ACC have to do with access and with the 2% monies. With regard to access, ACC agreed to televise the monthly Council meetings and not less than two of the five standing committees on a rotating monthly basis. ACC is also agreeing, probably starting next March, to additionally televise the Memo to Mayor Benjamin Nichols 4 October 28, 1992 Committee Of the Whole meetings. In § 14.C(3) ACC agreed to set aside 2% of gross City revenues for access equipment. Obviously, both prospectively and retroactively, this amount will have to be adjusted as the definition or calculation of gross City revenues is adjusted. In addition there have been disputes as to what equipment is to be purchased with these 2% funds. The dispute centers around a difference of opinion as to whether these monies should go for production or transmission equipment. In particular, when a new channel is activated, certain equipment such as modulators and demodulators have to be acquired or purchased. It has been ACC's position that this equipment should come out of the 2% budget. The access community's position is that this expense should not be paid out of the 2% money.ACC has agreed on October 22nd, that, assuming everything else can be agreed, prospectively, and retroactively with regard to Channels 53 and 54 those expenses will be paid by ACC and not out of the 2% money. It appears that this will result in a retroactive increase to the 2% monies of approximately $10,000.00. The last issue, and the one on which we are still farthest from agreement, is determining a standard for activation of new access channels. § 14.1(A)(1) of the franchise agreement provides that nine downstream channels shall be designated for access. Based on this, the City and the access community have been maintaining that the City has the sole discretion of determining when access channels should be activated and that we are, at this time, entitled to nine channels if we wish them. § 14.1(A)(3) provides that any access channels unused by the City three years after the rebuild is complete shall revert to ACC, provided that if community needs substantially require the use of any such channel ACC will return said channel to the City six months after receiving written notice if ACC has a use for the channel and immediately if there is no use for the channel. ACC maintains that the current number of access channels are sufficient and that they are unwilling to activate more channels until there is a demonstrable need for those channels. We have been taking the position that a clear procedure should be established in which the Cable Commission would request of Council that the City determine that another access channel should be activated; ACC would have a right to comment and Council would make that decision. ACC would rather have this decision made based on a clear calculation of how much the access channel is used for "new programming". In terms of this, they would define new programming as both the first showing and one repeat of a show that has just Memo to Mayor Benjamin Nichols 5 October 28, 1992 been created plus the first showing and a repeat of a show which was done sometime in the past which people wish to have reshown. Obviously, there still has to be work done on clarifying the definition of "new programming" and also on determining what a reasonable percentage is. We will be discussing this matter with ACC in the next few weeks to see if we can reach hopefully a mutually agreeable definition and standard. Council has decided to call a public hearing on this issue at the December C & 0 Meeting. I would suggest, that in light of ACC's recent proposal, that the issue be put on the November C & 0 meeting for a short discussion in Executive Session so that Peter Hess and I may get a sense as to Council's feeling on this matter and some direction as to our future negotiating position. If any of you have any questions about this, please get back to me. Enclosures cc: Dominick Cafferillo, City Controller Peter Hess, Chair, Cable Commission Daniel Hoffman, Chair, Charter and Ordinance TIMEWARNER CABLE July 25, 1994 Ms. Callista Paolangeli, Clerk City of Ithaca 108 E. Green Street Ithaca, NY 14850 Ei2Tl9941 1p M ff—FR N 1111.U- z issaJ 0 CITY CLERK'S OFFICE Gl� Dear Ms. Paolangeli: - Due to the expected demand from orders for "Cable Plus" and the aging of our Scientific Atlanta- addressable converters, we are preparing for the depletion of our addressable converter inventory. As of August 1, we will introduce a new addressable in-home terminal for customers. This new terminal, which will be very different from the current channel selector box, will provide many new benefits: • An on-screen channel guide which gives the consumer the ability to choose what to watch from a program grid and go directly to the desired program; • Self -programmed parental control; • A favorite channel feature which allows consumers to quickly tune to a set of favorite channels; • Volume control; and • A switch that will simplify VCR recording. The Jerrold In -Home Video Terminal, which is manufactured'#'by General Instruments, has been introduced in other communities around the country. The on-screen channel guide has been the preferred feature, and the VCR recording switch also is a popular quality. - It is our plan initially to provide the In -Home Terminals only to subscribers connecting the service after August 1. The monthly charge for the terminal will be $3-.57 based upon the rate formulas determined by the Federal Communications Commission. Current customers who choose to upgrade their service will continue to be issued the Scientific Atlanta channel selector box if they prefer while inventory continues to be available. erely, /0/1 /1/, aytond H. McCabe Area Manager cc: The Honorable Ben Nichols Ms. Jean Finley, Chair of the Cable Commission 519 West State Street Ithaca, New York 14850 272-7875 MEMORANDUM TO: Chuck Guttman, City' Attorney FROM: Tim Roulan, Intern /ex DATE: June 10, 1992 SUBJECT: ACC There are four issues facing our relationship with ACC that require response by the City: AUDIT Ithaca should initiate an audit of ACC's accounts. This demonstrate how Gross City Revenues are determined, whether or not the Cityaudit will revenues. is receiving and will showh It will enable the Cityg its fair sharedof the Revenues fit within ACC Gross Revenue calculations. to learn how Advertising clearly set forth the ACC calculations that It will also ,.-.Franchise and the 2% ,Access Funding. ofFr ACC's Feeomean from the City mayngenerate the 5% dealings. prove In addition, a historyue invaluable in future In January 1992, you requested a financial statement forth ACC general operating costs for 1990, setting 1992 to demonstrate that the 58 1991 and service since December of projected for percent increase for basic cable increases for general operatingcosts. actuallys related to overallo determine, this request has been denied, in� violation . far as I am able to of the Franchise Agreement.of 18.5 (A) According to 18.4 (A) , BOOKS AND RECORDS AVAILABLE TO THE the City may inspect ACC books, records, financial statements other like material of ACC upon reasonable notice and duringCITY, business hours. and 18.7 sets forth the City's RIGHT OF INSPECTION. According to 18.5 (A), REPORTS REQUIRED, ACC is , with all reports ACC files to NYSCCT. to Provide the City at the City's request or submits. 18.5 (C)(2) requires ACC's annual report and C ires an annual certified income statement. o not disclose either the information date, these statements e information requested. Theyothe City needs nor audit would shed light on exactlyhowthe n the general and inconclusive. An 18.5 (E) requires ACC to ambers are crunched. information necessary and appropriate provide the City with the rights, functions or dues of the tCity in connection any and all o the performance of any of Franchise. The City is entitled to and deserves informaion at ion that Memo to Chuck Guttman 2 June 10, 1992 • is more specific and informative as to ACC's business practices and acceptable accounting practices. Initially the City should request the assistance of the State. NYSCCT will provide Ithaca with an Auditor, free of charge. Don Buckelew can be contacted at NYSCCT. Mr. Cafferillo should be asked to contact Mr. Buckelew, and provide him with all information received from ACC since the last Franchise renewal. RATE REGULATION Section 19.1 of the Franchise limits the March 1, 1992 rate to $14.64. Since March 1, 1992, the Rate has been $14.65, one cent over. This was caused by an increase of the basic rate from $12.58 to $13.95, with the 5% Franchise Fee tacked on. Section 20.1 states that the City shall be entitled to receive from ACC, not from the consumer, the Franchise Fee. The maximum ACC can charge the consumer, including the Franchise Fee, is the $14.64 charge. A refund needs to be made to the consumers. An adjustment to the City's Revenue is also in order. ACC is in default. FRANCHISE FEE. Two aspects of ACC'scomputation of Franchise Fees mustbe changed to conform to existing laws and regulations. 1. Section 20.1 states that the City is entitled to receive a Franchise Fee of 5% of ACC's Gross City Revenue- (20.2 A). Advertising income is not included in ACC's computation of gross receipts for determining the City Franchise Fee. The model of gross city revenue as set by Executive Law, Section 812(5) includes advertising income. According to this same law, gross annual receipts are defined as "...any and all compensation received directly or indirectly by a cable company from its operations within the state, including but not limited to payment for programs received or transmitted, advertising...and any other monies that constitute income." 20.3 provides that ACC Affiliates must pay a Franchise Fee in order to utilize the Cable System. This needs to be more clearly accounted for so the City can assure that no revenues are being diverted from the City. Merely listing commercial/bulk accounts in the Basic Service Revenue does not serve the City's right to know. The timing of the NYSCCT Rate of .359% and .277% that is being deducted from the 5% also requires an explanation. We do not know why one is applied for three months and the other for nine months. • Memo to Chuck Guttman 3 June 10, 1992 2. ACC is calculating the Franchise Fee incorrectly. You questioned ACC about this back in January but they did not respond till May. The NYSCCT issued a Statement of Policy one month after the new ACC Rate went into effect. This Policy (Docket No. 90389) concerns the Itemization of Franchise Fees on Subscriber Bills. It states that the Franchise Fee is calculated "as a percentage of all revenues received without deduction or allocation for such. portion of the revenues as may ultimately be paid for by the cable company to the municipal government in fulfillment of the franchise fee." ACC is listing the Franchise Fee as a separate line item in addition to its rates. This transforms the Fee from correctly placed as a component of doing business calculated on all revenues to an incorrect separate add-on charge imposed directly on, City subscribers. It is important to note that thispractice of ACC transforms the method by which the City's Franchise Fee is calculated thus modifying ACC's Franchise Fee obligation. An audit will describe the loss of revenue to the City. "Franchise Fees cannot be stated as a separate line item on subscriber bills as direct charges on subscribers." The NYSCCT Statement provides an example: .Assuming a franchise fee of 3%, a bill where a fee of $.60 is added to a service rate of $20.00 results in the incorrect payment of.a 2.91% fee, as $.60 is 2.91% of $20.60. The correct fee must be calculated on the .basis of the bottom line of the bill, or $20.60. The amount collected by ACC in Franchise Fees are to be treated as part of ACC's gross revenues and subject to the 5% fee. In its letter of May 12, 1992, responding to your letter of January 1992, ACC incorrectly claims Franchise Fees are not part of its revenues. In addition, ACC clearly violates Section 24.10 of the Franchise Agreement when it claims to be acting as an agent for the City in collecting the fee and transferring it on to the City. ACC is expressly prohibited from doing this. Furthermore, ACC is not allowed by state policy to•utilize a "pass-through" practice whereby ACC passes on to the City subscribers the increase. of its basic rate that surpasses the rate amount ($14.64) set forth in the Franchise Agreement. (Docket No. 90389, April 1992). This was done by ACC causing the rate to reach $14.65. 20.4: In the event that the proper fees are not tendered, interest shall accrue on the due date. The City should consider imposing a due date for proper payments and refunds. To insure accuracy and disclosure: 20.5: All amounts paid shall be subject to audit and recomputation, by an independent auditor chosen by the City. Memo to Chuck Guttman 4June 10, 1992 Performance Bond The City has an ACC Performance Bond of $25,000 available. See 21.1. According to 21.1(B) the Performance Bond is recoverable to the City for any and all damages, losses, costs and expenses suffered or incurred by the City resulting from the failure of ACC to: faithfully comply with the provisions of the Franchise; comply with all lawful orders,... directives of any City agency; pay fees due to the City; pay any claims, liens or taxes due the City which arise by reason of the ...operation... of the System. Such losses, costs and expenses shall include but not be limited to attorney's fees and other associated expenses. 21.1(D) states that the City must notify ACC that payment is due and ACC shall have 30 days to make a complete payment. After 30 days the City may use the Performance bond. 21.1(2) states that the City shall not seek recovery from the Performance Bond until it has provided ACC with 30 days to cure any default. Breach Upon Breach of the Franchise Agreement, Section 22.1 provides ACC with 30 days to: (A) respond to the City in writing, contesting the City'•s assertion of ;default and providing such information ordocumentation as may be necessary or;. (B) cure any default and/or prove due diligence in curing any default. A public hearing and fact finder report is then available to the Common Council to aid the Council's response. The Council may then (A) Foreclose on any or all of the Performance Bond and/or Letter of Credit; (B) Commence an action at law for monetary damages; (C) Declare the Franchise to be revoked; (D) seek, Specific Performance of any Franchise provision as an alternative to damages. Possibly the issues with Access and Equipment might be addressed here. For the failure of ACC to submit reports as have been requested by the City, or as may be requested, Section 22.2 requires the City to notify ACC of ACC's violation. After 30 days or an amount of time the City may specify, the City will be entitled to recover damages. 22.2(B) states that these damages may include $10.00 per day for each day that failure to submit reports or supply data continues. 22.4 allows the City to bring ACC to any appropriate court in New York. ACCESS The calculation of Gross Revenues, as required and set forth above, will also provide the City with a correct calculation as to funding of Access equipment with 2% of Gross Revenues. In addition, advertising revenues should be accounted for. Memo to Chuck Guttman 5 June 10, 1992 The Resolution of the Ithaca Cable Commission, dated 2/11/92, regarding the Activation of Access Channels should be submitted to ACC for ACC compliance. ACC is in default of 14.1(A) . ACC should be notified that it is to adhere to the Franchise Agreement and provide all nine activated access channels, or any lesser number as may be set by the City. In addition, ACC should rebate any money taken from the Access Capital Equipment funds. New York State Cable Regulations are clear concerning the cost of designating new channels as being borne by ACC. Furthermore, 14.1(C)(3) asserts that the funds are for equipment, not for designating channels. A second public access channel should be activated within 60 days of the filing of the City's demand. CONCLUSION The City appears to be in a very good position to assert that ACC is in default of the Franchise Agreement. ACC should formally be put on notice. Otherwise it may continue to ignore our requests and/or forestall suitable response. ACC is in violation of the City Franchise Agreement, New York State Regulations Policy, and is improperly .calculating .monies due the City and cable subscribers. 'The City stands to recoup an as yet unknown amount of revenue. This amount may be substantial. An audit of ACC coupledwith a demand for proper fee payments and adjustments, along with a demand for ACC compliance with the Resolution of the Cable Commission must be time -framed by the appropriate authorities. The City should also inquire of other Cable Companies how their respective calculations are made and how they respond to requests such as we have made of ACC. For example, we could contact: Cablevision Industries, Inc. Six Wierk Ave. Box 311 Liberty, New York 12754 This company provides service to Canandaigua, N.Y. A copy of its Franchise Agreement is now in the Correspondence File for 1992 in our office. INDEX TO CABLE DOCUMENTS DATE DOCUMENT 1992 May 18 Franchise Fee Payment Memo, Chuck to Dominick May 12 ACC Response from J. Fogarty to Chuck's January letter giving notice of Fee violation and request for information May 12 Fee Calculation review request of Dominick by Chuck and Draft of letter from Cable Commission to ACC. May 7 Unsent letter from Cable Commission to ACC requesting Channel Activation and Notification. of 14.1 A Default Status May 26 Receipt of (April) NYSCCT Policy of "Itemization of Franchise Fees On Subscriber Bills" April 30 Receipt of April 9 Memorandum of NYSCCT on Section 595.1 on "Required Contents of Franchises" GROSS REVENUES are set forth per 599 of 9 NYCRR 4000.0-4230.0 Operating Income April 14 Repeat letter from Chuck about Rate calculation of $14.65 to B.Lukens April 6 Basis of 1991 Franchise Fee as submitted to the City March 9 Activation .of Second Access Channel and 2o. Revenues addressed by B. Lukens to P. Hess "Designating" per 9 NYCRR 595.4 Feb. 11 Resolution of Cable Commission: Channel Activation and Rebate of Capital Funds Jan. 22 Notice to ACC of Rate overcharge and request for financial statement setting forth operating costs from Chuck to B. Lukens. Jan. 15 Rate increase notice sent to Cookie from B. Lukens Dec. 20 ACC position declared to Cable Commission on channel activation and 2% revenue funds not as source of channel activation. ACCESS CHANNELS FRANCHISE AGREEMENT 14.1 (A) Designation (B) Equipment Funding BOOKS AVAILABLE TO THE CITY 18.4 REPORTS REQUIRED 18.5 AND 18.5 (E) RIGHT OF INSPECTION 18.7 RATE REGULATION 19.1 FRANCHISE FEE 20.1 PERFORMANCE BOND 21.1 BREACH 22.1 FAILURE TO SUPPLY REPORTS 22.2(B) PRINCIPAL -AGENT RELATIONSHIP BARRED 24.10 MEMORANDUM TO.: Chuck Guttman, City Attorney FROM: Tim Roulan, Intern DATE: June 10, 1992 SUBJECT: ACC /Vb l l7- i Ji) tier" z_ v -f • There are four issues facing our relationship with ACC that require response by the City: AUDIT Ithaca should initiate an audit of ACC's. accounts. This audit will demonstrate how Gross City Revenues are determined, and will show whether or not the City isreceiving its fair share of the revenues. It will enable the City to learn how Advertising Revenues fit within ACC Gross Revenue calculations. It will also clearly set forth the ACC calculations that generate the 5% Franchise Fee and the 2% Access Funding. In addition, a history of ACC's income from the City may prove invaluable in future dealings. In January 19.92, you requested a financial statement setting forth ACC general operating costs for 1990, 1991 and projected for 1992 to demonstrate that the 58 percent increase for basic cable service since December of 1989 is actually related to overall increases for general operating costs. So far as I am able to determine, this request has been denied, in violation of 18.5 (A) of the Franchise Agreement. According to 18.4 (A) , BOOKS AND RECORDS AVAILABLE TO THE CITY, the City may inspect ACC books, records, financial statements and other like material of ACC upon reasonable notice and during normal business hours. 18.7 sets forth the City's RIGHT OF INSPECTION. According to 18.5 (A), REPORTS REQUIRED, ACC is to provide the City at the City's request, with all reports ACC files or submits to NYSCCT. 18.5 (C)(2) requires ACC's annual report and (C)(4) requires an annual certified income statement. To date, these statements do not disclose either the information the City needs nor the information requested. They are too general and inconclusive. An audit would shed light on exactly how the numbers are crunched. 18.5 (E) requires ACC to provide the Citywith any and all information necessary and appropriate to the performance of any of the rights, functions or duties of the City in connection with the Franchise. The. City is entitled to and deserves information that Memo to Chuck Guttman 2 June 10, 1992 is more specific and informative as to ACC's business practices and acceptable accounting practices. Initially the City should request the assistance of the State. NYSCCT will provide Ithaca with an Auditor, free of charge. Don Buckelew can be contacted at NYSCCT. Mr. Cafferillo should be asked= to contact Mr. Buckelew, and provide him with all information received from ACC since the last Franchise renewal. RATE REGULATION Section 19.1 of the Franchise limits the March 1, 1992 rate to $14.64. Since March 1, 1992, the Rate has been $14.65, one cent over. This was caused by an increase of the basic rate from $12.58 to $13.95, with the 5% Franchise Fee tacked on. Section 20.1 states that the City shall be entitled to receive from ACC, not from the consumer, the Franchise Fee. The maximum ACC can charge the consumer, including the Franchise Fee, is the $14.64 charge. A refund needs to be made to the consumers. An adjustment to the City's Revenue is also in order. ACC is in default. FRANCHISE 'FEE.. Two aspects of ACC's computation of Franchise Fees must be changed to conform to existing laws and regulations. 1. Section 20.1 states that the City is entitled to receive a Franchise Fee of 5% of ACC's Gross City Revenue (20.2 A). Advertising income is not included in ACC's computation of gross receipts for determining the City Franchise Fee. The model of gross city revenue as set by Executive Law, Section 812(5) includes advertising income. According to this same law, gross annual receipts are defined 'as "...any and all compensation received directly or indirectly by a cable company from its operations within the state, including but not limited to payment for programs received or transmitted, advertising...and any other monies that constitute income." ,ree_ n e w Pie Ai-, q C( a-77 c/LJ 'etc ker 20.3 provides that ACC Affiliates must pay a Franchise Fee in order to utilize the Cable System. This needs to be more clearly accounted for so the City can assure that no revenues are being diverted from the City. Merely listing commercial/bulk accounts in the Basic Service Revenue does not serve the City's right to know. The timing of the NYSCCT Rate of .359% and .277% that is being deducted from the 5% also requires an explanation. We do not know why one is applied for three months and the other for nine months. Memo to Chuck Guttman 3 June 10, 1992 2. ACC is calculating the Franchise Fee incorrectly. You questioned ACC about this back in January but they did not respond till May. The NYSCCT issued a Statement of Policy one month after the new ACC Rate went into effect. This Policy (Docket No. 90389) concerns the Itemization of Franchise Fees on Subscriber Bills. It states that the Franchise Fee is calculated "as a percentage of all revenues received without deduction or allocation for such portion of the revenues as may ultimately be paid for by the cable company to the municipal government in fulfillment of the franchise fee." ACC is listing the Franchise Fee as a separate line item in addition to its rates. This transforms the Fee from correctly placed as a component of doing business calculated on all revenues to an incorrect separate add-on charge imposed directly on City subscribers. It is important to note that this practice of ACC transforms the method by which the City's Franchise Fee is calculated thus modifying ACC's Franchise Fee obligation. An audit will describe the loss of revenue to the City. "Franchise Fees cannot be stated as a separate line item on subscriber bills as direct charges on subscribers." The NYSCCT Statement provides an example: Assuming a .franchise fee. ;of 3%, a bill wherea fee of $.60 is added to a service rate of $20.:00 results in the incorrect payment of a 2.91% fee, as $.60 is 2.91% of $20.60. The correct fee must be calculated on the basis of the bottom line of the bill, or $20.60. The amount collected by'ACC in Franchise Fees are to be treated as part of ACC's gross revenues and subject to the 50 fee. In its letter of May 12, 1992, responding to your letter of January 1992, ACC incorrectly claims Franchise Fees are not part of its revenues. In addition, ACC clearly violates Section 24.10 of the Franchise Agreement when it claims to be acting as an agent for the City in collecting the fee and transferring it on to the City. ACC is expressly prohibited from doing this. Furthermore, ACC is not allowed by state policy to•utilize .a "pass-through" practice whereby ACC passes on to the City subscribers the increase of its basic rate that surpasses the rate amount ($14.64) set forth in the Franchise Agreement. (Docket No. 90389, April 1992). This was done by ACC causing the rate to reach $14.65. 20.4: In the event that the proper fees are not tendered, interest shall accrue on the due date. The City should consider imposing a due date for proper payments and refunds. To insure accuracy and disclosure: 20.5: All amounts paid shall be subject to audit and recomputation, by an independent auditor chosen by the City. Memo to Chuck Guttman 4 June 10, 1992 Performance Bond The City has an ACC Performance Bond of $25,000 available. See 21.1. According to 21.1(B) the Performance Bond is recoverable to the City for any and all damages., losses, costs and expenses suffered or incurred by the City resulting from the failure of ACC to: faithfully comply with the provisions of the Franchise; comply with all lawful orders,... directives of any City agency; pay fees due to the City; pay any claims, liens or taxes due the City which arise by reason of the ...operation... of the System. Such losses, costs and expenses shall include but not be limited to attorney's fees and other associated expenses.. 21.1(D) states that the City must notify ACC that payment is due and ACC shall have 30 days to make a complete payment. After 30 days the City may use the Performance bond. 21.1(I) states that the City shall not seek recovery from the Performance Bond until it has provided ACC with 30 days to cure any default. Breach Upon Breach of the. Franchise Agreement, Section 22.1 provides ACC with 30 "days to:. (A) respond ,to the City in writing, contesting the City's assertion of .default and providing such information or documentation as may be necessary or; (B) cure ,any defaultand/or prove due .diligence, in curing any default. . A...public hearing and fact finder report is then available to the Common Council to aid the Council's response. The Council may. then (A) Foreclose on, any or all of the Performance Bond and/or Letter of Credit; (B) Commence an action at law for monetary damages; (C) Declare the Franchise to be revoked; (D) seek Specific Performance` of any Franchise provision as an alternative to damages. Possibly the issues with Access and Equipment might be addressed here. For the failure of ACC to submit reports as have been. requested by the. City, or as may be requested, Section 22.2 requires the City to notify ACC of ACC's violation.' After 30 days or an amount of time the City may specify, the City will be entitled to recover damages. 22.2(B) states that these damages may include $10.00 per day for each day that failure to submit reports. or supply data continues. 22.4 allows the City .to bring ACC to any appropriate court in New York. ACCESS The calculation of Gross Revenues, as required and .set forth above, will also provide the City with a correct calculation as to funding of Access equipment with 2%. of Gross Revenues. In addition, advertising revenues should be accounted for. Memo to Chuck Guttman 5 June 10, 1992 The Resolution of the Ithaca Cable Commission, dated 2/11/92, regarding the Activation of Access Channels should be submitted to ACC for ACC compliance. ACC is in default of 14.1(A). ACC should be notified that it is to adhere to the Franchise Agreement and provide all nine activated access channels, or any lesser number as may be set by the City. In addition, ACC should rebate any money taken from the Access Capital Equipment funds. New York State Cable Regulations are clear concerning the cost of designating new channels as being borne by ACC. Furthermore, 14.1(C)(3) asserts that the funds are for equipment, not for designating channels. A second public access channel should be activated within 60 days of the filing of the City's demand. CONCLUSION The City appears to be in a very good position to assert that ACC is in default of the Franchise Agreement. ACC should formally be put on notice. Otherwise it may continue to ignore our requests and/or forestall suitable response. ACC is in violation of the City Franchise Agreement, New York State Regulations Policy, and is improperly calculating ironies due the City and cable subscribers. The City stands to recoup an as yet unknown amount of revenue. This amount may be substantial. An audit of ACC coupled with a demand for proper fee payments and .adjustments, along with a demand for ACC compliance with the Resolution of the Cable Commission must be time -framed by the appropriate authorities. The City should also inquire of other Cable Companies how their respective calculations are made and how they respond to requests such as we have made of ACC. For example, we could contact: Cablevision Industries, Inc. Six Wierk Ave. Box 311 Liberty, New York 12754 This company provides service to Canandaigua, N.Y. A copy of its Franchise Agreement is now in the Correspondence File for 1992 in our office. MEMORANDUM TO: Chuck Guttman, City Attorney FROM: Tim Roulan, Intern DATE: June 10, 1992 SUBJECT: ACC There are four issues facing our relationship with ACC that require response by the City: AUDIT Ithaca should initiate an audit of ACC's accounts. This demonstrate how Gross City Revenues are determined whether or not the Cityaudit will vnus.wis receivingand will showthe Revenues fit It thillACC enable GrothCity its fair sharedof ng Y to learn how Awill also clearly set forth Revenue calculations. It will also Franchise and the the2° ACC .calculations that ofFr ACC's Feeoa from % Access City Fundin generate the 5% Funding. In addition, a history dealings. may prove invaluable in future In January 1992, you requested a .financial statement forth ACC general operating 1992rto demonstrate that the 58 for .1990, 1991 and setting service sincen December of percent increase fobasic projected cable ryfor 1989 is actually related to overall increasescthis general operating costs. ) of the Franchise Agreementest s been denied, in° violation ofar as I f lgb5e(A° According to 18.4 (A), BOOKS AND RECORDS AVAILABLE TO the City may inspect ACC books, records, THE CITY, f other like material of ACC upon reasonable notice and during normal and business hours. 18.7 sets forth the City's RIGHT OF According to18.5 INSPECTION. City at den City's r(A), REPORTS REQUIRED, ACC is to to NYSCCT. quest, withall reports ACC filespide orvsubmithe ts 18.5 (C)(2) requires ACC's annual report and ires an annual certified income statement. (C)(4) re disclose either the To date, these statements do notordcinformation the City needs nor the quested. They are too general and inconclusive. audit would shed light on exactly how the numbers are crunched. An 18.5nformation necessary and o provide the City with any the rights, functions or duties of the ropriateto City in conte and all the performance of any of Franchise. The City is entitled to and deserves inform n with the anon that Memo to. Chuck Guttman 2 June 10, 1992 • is more specific and informative as to ACC's business practices and acceptable accounting practices. Initially the City should request the assistance of the State. NYSCCT will provide Ithaca with an Auditor, free of charge. Don Buckelew can be contacted at NYSCCT. Mr. Cafferillo should be asked to contact Mr. Buckelew, and provide him with all information received from ACC since the last Franchise renewal. RATE REGULATION Section 19.1 of the Franchise limits the March 1, 1992 rate to $14.64. Since March 1, 1992, the Rate has been $14.65, one cent over. This was caused by an increase of the basic rate from $12.58 to $13.95, with the 5% Franchise Fee tacked on. Section 20.1 states that the City shall be entitled to receive from ACC, not from the consumer, the Franchise Fee. The maximum ACC can charge the consumer, including the Franchise Fee, is the $14.64 charge. A refund needs to be made to the consumers. An adjustment to the City's Revenue is also in order. ACC is in default. FRANCHISE. FEE Two aspects.of ACC's.computation of Franchise Fees must. be changed to conform to existing laws and regulations. 1. Section 20.1 states that the City is entitled to receive a Franchise Fee of 5% of ACC's Gross City Revenue (20.2 A). Advertising incomeis not included in ACC's computation of gross receipts for determining the City Franchise Fee. The model of gross city revenue as set by Executive Law, Section 812(5) includes advertising income. According to this same law, gross annual receipts are defined as "...any and all compensation received directly or indirectly by a cable company from its operations within the state, including but not limited to payment for programs received or transmitted, advertising...and any other monies that constitute income." 20.3 provides that ACC Affiliates must pay a Franchise Fee in order to utilize the Cable System. This needs to be more clearly accounted for so the City can assure that no revenues are being diverted from the City. Merely listing commercial/bulk accounts in the Basic Service Revenue does not serve the City's right to know. The timing of the NYSCCT Rate of .359% and .277% that is being deducted from the 5% also requires an explanation. We do not know why one is applied for three months and the other for nine months. Memo to Chuck Guttman 3 June 10, 1992 2. ACC is calculating the Franchise Fee incorrectly. You questioned ACC about this back in January but they did not respond till May. The NYSCCT issued a Statement of Policy one month after the new ACC Rate went into effect. This Policy (Docket No. 90389) concerns the Itemization of Franchise Fees on Subscriber Bills. It states that the Franchise Fee is calculated "as a percentage of all revenues received withoutdeduction or allocation for such portion of.the revenues as may ultimately be paid for by the cable company to the municipal government in fulfillment of the franchise fee." ACC is listing the Franchise Fee as a separate line item in addition to its rates. This transforms the Fee from correctly placed asa component of doing business calculated on all revenues to an incorrect separate add-on charge imposed directly on City subscribers. It is important to note that this practice.of ACC transforms the method by which the City's Franchise Fee is calculated thus modifying ACC's Franchise Fee obligation. An audit will describe the loss of revenue to the City. "Franchise Fees cannot be stated as a separate line item on subscriber bills as direct .charges on subscribers." The NYSCCT Statement provides an example: Assuming a franchise fee .of .3%, a bill where a fee of $.60 is .added to a service rate of $20.00 results in the incorrect payment -of a 2.91% fee, as $.60 is 2.91% of $20.60. The correct fee must be calculated on the basis of the bottom line of the bill, or $20.60. The amount collected. by ACC in Franchise Fees are to be treated as part of ACC's gross revenues and subject to the 5% fee. In its letter of May 12, 1992, responding to your letter of January 1992, ACC incorrectly claims Franchise Fees are not part of its revenues. In addition, ACC clearly violates Section 24.10 of the Franchise Agreement when it claims to be acting as an agent for the City in collecting the fee and transferring it on to the City. ACC is expressly prohibited from doing this. Furthermore, ACC is not allowed by state policy to 'utilize a "pass-through" practice whereby ACC passes on to the City subscribers the increase of its basic rate that surpasses the rate amount ($14.64) set forth in the Franchise Agreement. (Docket No. 90389, April 1992). This was done by ACC causing the rate to reach $14.65. 20.4: In the event that the proper fees are not tendered, interest shall accrue on the due date. The City should consider imposing a due date for proper payments and refunds. To insure accuracy and disclosure: 20.5: All amounts paid shall be subject to audit and recomputation, by an independent auditor chosen by the City. Memo to Chuck Guttman 4 June 10, 1992 Performance Bond The City has an ACC Performance Bond of $25,000 available. See 21.1. According to 21.1(B) the Performance Bond is recoverable to the City for any and all damages, losses, costs and expenses suffered or incurred by the City resulting from the failure of ACC to: faithfully comply with the provisions of the Franchise; comply with all lawful orders,... directives of any City agency; pay fees due to the City; pay any claims, liens or taxes due the City which arise by reason of the ...operation... of the System. Such losses, costs and expenses shall include but not be limited to attorney's fees and other associated expenses. 21.1(D) states that the City must notify ACC that payment is due and ACC shall have 30 days to make a complete payment. After 30 days the City may use the Performance bond. 21.1(1) states that the City shall not seek recovery from the Performance Bond until it has provided ACC with 30 days to cure any default. Breach Upon Breachof the Franchise Agreement, Section 22.1 provides ACC with 30 days to: (A) respond to the City in writing, contesting the City's assertion of default and providing such information or documentation as may be necessary or; (B) cure any default and/or prove due diligence in curing any default. A public hearing and fact finder report is then available to the Common Council to aid the Council's response. The Council may then (A) Foreclose on any or all of the Performance Bond and/or Letter of Credit; (B) Commence an action at law for monetary damages; (C) Declare the Franchise to be revoked; (D) seek Specific Performance of any Franchise provision as an alternative to damages. Possibly the issues with Access and Equipment might be addressed here. For the failure of ACC to submit reports as have been requested by the City, or as may be requested, Section 22.2 requires the City to notify ACC of ACC's violation. After 30 days or an amount of time the City may specify, the City will be entitled to recover damages. 22.2(B) states that these damages may include $10.00 per day for each day that failure to submit reports or supply data continues. 22.4 allows the City to bring ACC to any appropriate court in New York. ACCESS The calculation of Gross Revenues, as required and set forth above, will also provide the City with a correct calculation as to funding of Access equipment with 2% of Gross Revenues. In addition, advertising revenues should be accounted for. Memo to Chuck Guttman 5 June 10, 1992 The Resolution of the Ithaca Cable Commission, dated 2/11/92, regarding the Activation of Access Channels should be submitted to ACC for ACC compliance. ACC is in default of 14.1(A). ACC should be notified that it is to adhere to the Franchise Agreement and provide all nine activated access channels, or any lesser number as may be set by the City. In addition, ACC should rebate any money taken from the Access Capital Equipment funds. New York State Cable Regulations are clear concerning the cost of designating new channels as being borne by ACC. Furthermore, 14.1(C)(3) asserts that the funds are for equipment, not for designating channels. A second public access channel should be activated within 60 days of the filing of the City's demand. CONCLUSION The City appears to be in a very good position to assert that ACC is in default of the Franchise Agreement. ACC should formally be put on notice. Otherwise it may continue to ignore our requests and/or forestall suitable response. ACC is in violation of the City Franchise Agreement, New York State Regulations Policy, and is improperly calculating monies due the City and cable subscribers. The City stands to recoup an as yet unknown amount of revenue. This amount may be substantial. An audit of ACC. coupledwith a demand for proper fee .payments and adjustments, along with a demand for ACC compliance with the Resolution of the Cable Commission must be time -framed by the appropriate authorities. The City should also inquire of other Cable Companies how their respective calculations are made and how they respond to requests such as we have made of ACC. For example, we could contact: Cablevision Industries, Inc. Six Wierk Ave. Box 311 Liberty, New York 12754 This company provides service to Canandaigua, N.Y. A copy of its Franchise Agreement is now in the Correspondence File for 1992 in our office. MEMORANDUM TO: Chuck Guttman, City Attorney FROM: Tim Roulan, Intern DATE: June 10, 1992 SUBJECT: ACC There are four issues facing our relationship with ACC that require response by the City: AUDIT Ithaca should initiate an audit of ACC's accounts. This demonstrate how Gross City Revenues are determined whether or not the Citand will show revenues. It will enabletheCityreceiving to learn its fair share of the Revenues fit within ACC Gross Revenue calculations. clearly set forth the Advertising Franchise forth the ACC calculations .that It will also ofFr ACC's oand me 2% Access City Fndin generate the 5% Funding. In addition, a history dealings, may prove invaluable in future In January 1992, you requested a financial statement forth1992 ACC general operating setting to demonstrate that te costs for 1990, 1991 and service eoDecember of percent increase fobasic projected cable increasesrvefor 1989 is actually related to overall determine, this request hasoperating costs. been denied df ere ne, hiss Agreement. So far as I am able to in violation of 18.5 (A) According to 18.4 (A) , BOOKS AND RECORDS AV the City may inspect ACC books AILABLE TO THE CITY, financial statements and other like material of ACC upon �reasonable notice and gnorm business hours. 18.7 sets forth the City's RIGHT OF INSPECTIONal o According tt18.5 (A)� City at din Cy's REPORTS REQUIRED, ACC is to provide to NYSCCT. quest,'with all reports ACC filesorsubmits 18.5 (C)(2) requires ACC's annual report and ires an annual certified income statement.(C)(4) re not disclose either the information date,hthese statements doe information requested.. Theythe City audit would shed light on are too general and inconclusive, the 18.5 (E) requires ACC to exactly how the numbers are crunched,An information necessary and appropriate provide the City with an the rights, functions or dues of the tC1t he any and all thenrighe. performance of any of The City is entitled to and deserves connection information that Memo to Chuck Guttman 2 June 10, 1992 • is more specific and informative as to ACC's business practices and acceptable accounting practices. Initially the City should request the assistance of the State. NYSCCT will provide Ithaca with an Auditor, free of charge. Don Buckelew can be contacted at NYSCCT. Mr. Cafferillo should be asked to contact Mr. Buckelew, and provide him with all information received from ACC since the last Franchise renewal. RATE REGULATION Section 19.1 of the Franchise limits the March 1, 1992 rate to $14.64. Since March 1, 1992, the Rate has been $14.65, one cent over. This was caused by an increase of the basic rate from $12.58 to $13.95, with the 5% Franchise Fee tacked on. Section 20.1 states that the City shall be entitled to receive from ACC, not from the consumer, the Franchise Fee. The maximum ACC can charge the consumer, including the Franchise Fee, is the $14.64 charge. A refund needs to be made to .the consumers. An adjustment to the City's Revenue is also in order. ACC is in default. FRANCHISE FEE Two aspects of ACC's.computation of Franchise Fees must be changed to conform to existing laws.and regulations. 1. Section 20.1 states that the City is entitled .to receive a Franchise Fee of 5% of ACC's Gross City Revenue (20.2 A). Advertising income is not included in ACC's computation. of gross receipts for determining the City Franchise Fee. The model of gross city revenue as set by Executive Law, Section 812(5) includes advertising income. According to this same law, gross annual receipts are defined as "...any and all compensation received directly or indirectly by a cable company from its operations within the state, including but not limited to payment for programs received or transmitted, advertising...and any other monies that constitute income." 20.3 provides that ACC Affiliates must pay a Franchise Fee in order to utilize the Cable System. This needs to be more clearly accounted for so the City can assure that no revenues are being diverted from the City. Merely listing commercial/bulk accounts in the Basic Service Revenue does not serve the City's right to know. The timing of the NYSCCT Rate of .359% and .277% that is being deducted from the 5% also requires an explanation. We do not know why one is applied for three months and the other for nine months. Memo to Chuck Guttman 3 June 10, 1992 2. ACC is calculating the Franchise Fee incorrectly. You questioned ACC about this back in January but they did not respond till May. The NYSCCT issued a Statement of Policy one month after the new ACC Rate went into effect. This Policy (Docket No. 90389). concerns the Itemization of Franchise Fees on Subscriber Bills. It states that the Franchise Fee is calculated "as a percentage of all revenues received without deduction or allocation for such portion of the revenues as may ultimately be paid for by the cable company to the municipal government in fulfillment of the franchise fee." ACC is listing the Franchise Fee as a separate line item in addition to its rates. This.transforms the Fee from correctly placed as a component of doing business calculated on all revenues to an incorrect separate add-on charge imposed directly on City subscribers. It is important to note that this practice of ACC transforms the method by which the City's Franchise Fee is calculated thus modifying ACC's Franchise Fee obligation. An audit will describe the loss of revenue to the City. "Franchise Fees cannot be stated as a separate line item on subscriber bills as direct charges on subscribers." The NYSCCT Statement provides an example: Assuming a franchise fee of 3%, a bill where.a fee of $.60 is added to a service rate of $20.00 results in the incorrect paymentof a 2.91% fee, as $.60 is 2.91% of $20.60. The correct fee must be calculated on the .basis of the bottom line of the bill, or $20.60. The amount collected by ACC in Franchise Fees are to be treated as part of ACC's gross revenues and subject to the 5% fee. In its letter of May 12, 1992, responding to your letter of January 1992, ACC incorrectly claims Franchise Fees are not part of its revenues. In addition, ACC clearly violates Section 24.10 of the Franchise Agreement when it claims to be acting as an agent for the City in collecting the fee and transferring it on to the City. ACC is expressly prohibited from doing this. Furthermore, ACC is not allowed by state policy to -utilize a "pass-through" practice whereby ACC passes on to the City subscribers the increase of its basic rate that surpasses the rate amount ($14.64) set forth in the Franchise Agreement. (Docket No. 90389, April 1992). This was done by ACC causing the rate to reach $14.65. 20.4: In the event that the proper fees are not tendered, interest shall accrue on the due date. The City should consider imposing a due date for proper payments and refunds. To insure accuracy and disclosure: 20.5: All amounts paid shall be subject to audit and recomputation, by an independent auditor chosen by the City. Memo to Chuck Guttman 4 June 10, 1992. Performance Bond The City has an ACC Performance 'Bond of $25,000 available. See 21.1. According to 21.1(B) the Performance Bond is recoverable to the City for any and all damages, losses, costs and expenses suffered or incurred by the City resulting from the failure of ACC to: faithfully comply with the provisions of the Franchise; comply with all lawful orders,... directives of any City agency; pay fees due to the City; pay any claims, liens or taxes due the City which arise by reason of the ...operation... of the System. Such losses, costs and expenses shall include but not be limited to -attorney's fees and other associated. expenses. 21.1(D) states that the City must notify ACC that payment is due and ACC shall have 30 days to make a complete payment. After 30 days the City may :use the Performance bond. 21.1(1) states that the City shall not seek recovery from the Performance Bond until it has provided ACC with 30 days, to cure any default. Breach Upon Breach of the Franchise Agreement, Section 22.1 provides ACC with 30 days to: (A) respond to the City in writing, contesting the City's assertion of :.default and providing such information or documentation as may be necessary or; (B) cure any default and/or prove due diligence in curing any default. A public hearing and fact finder report is then available to the Common Council to aid the Council's response. The Council may then (A) Foreclose on any or all of the Performance Bond and/or Letter of Credit; (B) Commence an action at law for monetary damages; (C) Declare the Franchise to be revoked; (D) seek Specific Performance of any Franchise provision as an alternative to damages. Possibly the issues with Access and Equipment might be addressed here. For the failure of ACC to submit reports as have been requested by the City, or as may be requested, Section 22.2 requires the City to notify ACC of ACC's violation. After 30 days or an amount of time the City may specify, the City will be entitled to recover damages. 22.2(B) states that these damages may include $10.00 per day for each day that failure to submit reports or supply data continues. 22.4 allows the City to bring ACC to any appropriate court in New York. ACCESS The calculation of Gross Revenues, as required and set forth above, will also provide the City with a correct calculation as to funding of Access equipment with 2% of Gross Revenues. ;. In addition, advertising revenues should be accounted for. Memo to Chuck Guttman 5 June 10, 1992 The Resolution of the Ithaca Cable Commission, dated 2/11/92, regarding the Activation of Access Channels should be submitted to ACC for ACC compliance. ACC is in default of 14.1(A) . ACC should be notified that it is to adhere to the Franchise Agreement and provide all nine activated access channels, or any lesser number as may be set by the City. In addition, ACC should rebate any. money taken from the Access Capital Equipment funds. New York State Cable Regulations are clear concerning the cost of designating new channels as being borne by ACC. Furthermore, 14.1(C)(3) asserts that the funds are for equipment, not for designating channels. A second public access channel should be activated within 60 days of the filing of the City's demand. CONCLUSION The City appears to be in a very good position to assert that ACC is in default of the Franchise Agreement. ACC should formally be put on notice. Otherwise it may continue to ignore our requests and/or forestall suitable response. ACC is .in violation of the City Franchise Agreement, New York State Regulations Policy, and is .improperly .calculating 'monies due the City and cable subscribers. The City stands to recoup an as yet unknown amount of revenue. This amount may be substantial. An audit of ACC coupledwith a demand for proper fee payments and adjustments, along with a demand for ACC compliance with the Resolution of the Cable Commission must be time -framed by the appropriate authorities. The City should also inquire of other Cable Companies how their respective calculations are made and how they respond to requests such as we have made of ACC. For example, we could contact: Cablevision Industries, Inc. Six Wierk Ave. Box 311 Liberty, New York 12754 This company provides service to Canandaigua, N.Y. A copy of its Franchise Agreement is now in the Correspondence File for 1992 in our office. MEMORANDUM TO: Chuck Guttman, City Attorney FROM: Tim Roulan, Intern DATE: June 10, 1992 SUBJECT: ACC There are four issues facing our relationship with ACC that require response by the City: AUDIT Ithaca should initiate an audit of ACC's accounts. This demonstrate how Gross City Revenues are determined, whether or not the Cityaudit will revenues. is receiving and will showh Revenues fit It willACC enable the Cityshare to learn how Advertising clearly set forth ACC Revenue calculations. It will also Franchise and the the calculations that Fr ACC's Feeoan from 2% Ac City Fndin generate the 5% Funding. In addition, a history dealings. may prove invaluable in future In January 1992, you requested a financial forth ACC general operatingstatement setting 1992 to demonstrate that te o58 s for 1990, 1991 and service since December of percent increase fobasic projected cable service for 1989 is actually related to overall increases this neral operating costs. So far as i o I. able Ato ) of the Franchise` Agreements been denied, in violation of 18.5 (A) According to 18.4 (A), BOOKS AND RECORDS AV the City may inspect ACC booksAILABLE TO THE CITY, financial statements and other like material of ACC upon �reasonable notice and during normal business hours. 18.7 sets forth the City's RIGHT OF According to 18.5 INSPECTION. City at din City's r(A), REPORTS REQUIRED, ACC is.to to NYSCCT. quest, with all reports ACC filespide orvsubmithe ts 18.5 (C)(2) requires ACC's annual report and annual certified income statement.a(C)(4) re not disclose either the informati n° thee�these statements do Cityquires an information requested. They audit would shed light on exactlytoo general and inconclusive, s nor the (E) requires ACC to how the numbers are crunched. An 18.5nformation necessary and appropriate provide the City with an of rights, functions or dues of the Cit the any and all theenrighe. performance with any the The City is entitled to and deserves connection information that Memo to Chuck Guttman 2 June 10, 1992 • is more specific and informative as to ACC's business practices and acceptable accounting practices. Initially the City should request the assistance of the State. NYSCCT will provide Ithaca with an Auditor, free of charge. Don Buckelew can be contacted at NYSCCT. Mr. Cafferillo should be asked to contact Mr. Buckelew, and provide him with all information received from ACC since the last Franchise renewal. RATE REGULATION Section 19.1 of the Franchise limits the March 1, 1992 rate to $14.64. Since March 1, 1992, the Rate has been $14.65, one cent over. This was caused by an increase of the basic rate from $12.58 to $13.95, with the 5% Franchise Fee tacked on. Section 20.1 states that the City shall be entitled to receive from ACC, not from the consumer, the Franchise Fee. The maximum ACC can charge the consumer, including the Franchise Fee, is the $14.64 charge. A refund needs to be made to the consumers. An adjustment to the City's Revenue is also in order. ACC is in default. FRANCHISE FEE `Two aspects of ACC's computation of Franchise Fees must be changed to conform to existing laws and regulations. 1. Section 20.1 states that the City is entitled to. receive a Franchise Fee of 5% of ACC's Gross City Revenue (20.2 A). Advertising income is not included in ACC's computation of gross receipts for determining the City Franchise Fee. The model of. gross city revenue as set by Executive Law, Section 812(5) includes advertising income. According to this same law, gross annual receipts are defined as "...any and all compensation received directly or indirectly by a cable company from its operations within the state, including but not limited to payment for programs received or transmitted, advertising...and any other monies that constitute income." 20.3 provides that ACC Affiliates must pay a Franchise Fee in order to utilize the Cable System. This needs to be more clearly accounted for so the City can assure that no revenues are being diverted from the City. Merely listing commercial/bulk accounts in the Basic Service Revenue does not serve the City's right to know. The timing of the NYSCCT Rate of .359% and .277% that is being deducted from the 5% also requires an explanation. We do not know why one is applied for three months and the other for nine months. Memo to Chuck Guttman 3 June 10, 1992 2. ACC is calculating the Franchise Fee incorrectly. You questioned ACC about this,back in January but they did not respond till May. The NYSCCT issued a Statement of Policy one month after the new ACC Rate went into effect. This Policy (Docket No. 90389) concerns the Itemization of Franchise Fees on Subscriber Bills. It states that the Franchise Fee is calculated "as a percentage of all revenues received without deduction or allocation for such portion of the revenues as may ultimately be paid for by the cable company to the municipal government in fulfillment of the franchise fee." ACC is listing the Franchise Fee as a separate line item in addition to its rates. This transforms the Fee from correctly placed as a component of doing business calculated on all revenues to an incorrect separate add-on charge imposed directly on City subscribers. It is important to note that this practice of ACC transforms the method by which the City's Franchise Fee is calculated thus modifying ACC's Franchise Fee obligation. An audit will describe the loss of revenue to the City. "Franchise Fees cannot be stated as a separate line item on subscriber bills as direct charges on subscribers." The NYSCCT Statement provides an example: Assuming a franchise fee .of 3%, a bill where a fee of $.60 is added to a service rate of $20.00 results in the incorrect payment of a 2.91% fee, as $.60 is 2.91% of $20.60. The correct fee must be calculated on the basis of the bottom line of the bill, or $20.60. The amount. collected by ACC in Franchise Fees, are to be treated as part of ACC's gross revenues and subject to the 5% fee. In its letter of May 12, 1992, responding to your letter of January 1992, ACC incorrectly claims Franchise Fees are not part of its revenues. In addition, ACC clearly violates Section 24.10 of the Franchise Agreement when it claims to be acting as an agent for the City in collecting the fee and transferring it on to the City. ACC is expressly prohibited from doing this. Furthermore, ACC is not allowed by state policy to•utilize a "pass-through" practice whereby ACC passes on to the City subscribers the increase of its basic rate that surpasses the rate amount ($14.64) set forth in the Franchise Agreement. (Docket No. 90389, April 1992). This was done by ACC causing the rate to reach $14.65. 20.4: In the event that the proper fees are not tendered, interest shall accrue on the due date. The City should consider imposing a due date for proper payments and refunds. To insure accuracy and disclosure: 20.5: All amounts paid shall be subject to audit and recomputation, by an independent auditor chosen by the City. Memo to Chuck Guttman 4 June 10, 1992 Performance Bond The City has an ACC Performance Bond of $25,000 available. See 21.1. According to 21.1(B) the Performance Bond is recoverable to the City for any and all damages, losses, costs and expenses suffered or incurred by the City resulting from the failure of ACC to: faithfully comply with the provisions of the Franchise; comply with all lawful orders,... directives of any City agency; pay fees due to the City; pay any claims, liens or taxes due the City which arise by reason of the ...operation... of the System. Such losses, costs and expenses shall include but not be limited to attorney's fees and other associated expenses. 21.1(D) states that the City must notify ACC that payment is due and ACC shall have 30 days. to make a complete payment. After 30 days the City may use the Performance bond. 21.1(1) states that the City shall not seek recovery from the Performance Bond until it has provided ACC with 30 days to cure any default. Breach Upon Breachof the Franchise Agreement, Section 22.1 provides ACC with 30 days to: (A) respond to the ,City in writing, contesting the City's assertion of :default and providing such information or documentation as may be necessary or; (B) cure any default and/or prove due diligence in curing any default. A public hearing and fact finder report is then available to the Common Council to aid the Council's response. The Council may then (A) Foreclose on any or all of the Performance Bond and/or Letter of Credit; (B) Commence an action at law for monetary damages; (C) Declare the Franchise to be revoked; (D) seek Specific Performance of any Franchise provision as an alternative to damages. Possibly the issues with Access and Equipment might be addressed here. For the failure of ACC to submit reports as have been requested by the City, or as may be. requested, Section 22.2 requires the City to notify ACC of ACC's violation. After 30 days or an amount of time the City may specify, the City will be entitled to recover damages. 22.2(B) states that these damages may include $10.00 per day for each day that failure to submit reports or supply data continues. 22.4 allows the City to bring ACC to any appropriate court in New York. ACCESS The calculation of Gross Revenues, as required and set forth above, will also provide the City with a correct calculation as to funding of Access equipment with 2% of Gross Revenues. In addition, advertising revenues should be accounted for. Memo to Chuck Guttman 5 June 10, 1992 The Resolution of the Ithaca Cable Commission, dated 2/11/92, regarding the Activation of Access Channels should be submitted to ACC for ACC compliance. ACC is in default of 14.1(A) . ACC should be notified that it is to adhere to the Franchise Agreement .and provide all nine activated access channels, or any lesser number as may be set by the City. In addition, ACC should rebate any money taken from the Access Capital Equipment funds. New York State Cable Regulations are clear concerning the cost of designating new channels as being borne by ACC. Furthermore, 14.1(C)(3) asserts that the funds are for equipment, not for designating channels. A second public access channel should be activated within 60 days of the filing of the City's demand. CONCLUSION The City appears to be in a very good position to assert that ACC is in default of the Franchise Agreement. ACC should formally be put on notice. Otherwise it may continue to ignore our requests and/or forestall suitable response. ACC is in violation of the City Franchise Agreement, New York State Regulations Policy, and is .improperly calculating monies due the City and cable subscribers. 'The City stands to recoup an as yet unknown amount of revenue. This amount may be substantial. An audit of ACC coupledwith a demand for proper fee payments and adjustments, along with a demand for ACC compliance with the Resolution of the Cable Commission must be time -framed by the appropriate authorities. The City should also inquire of other Cable •Companies how their respective calculations are made and how they respond to requests such aswe have made of ACC. For example, we could contact: Cablevision Industries, Inc. Six Wierk Ave. Box 311 Liberty, New York 12754 This company provides service to Canandaigua, N.Y. A copy of its Franchise Agreement is now in the Correspondence File for 1992 in our office. MEMORANDUM TO: Chuck Guttman, City Attorney FROM: Tim Roulan, Intern DATE: June 10, 1992 SUBJECT: ACC There are four issues facing our relationship with ACC that require response by the City: AUDIT Ithaca should initiate an audit of ACC's accounts. demonstrate how Gross City Revenues are determined, and whether or not the CityThis audit will veus. is receiving its fair share will of show Revenues fit It willn ACC enable the even City c to learn how RevenlGcalculations. It will also Y set forth the ACC calculations that will also Franchise Fee and the 2% Access Funding. of ACC's income from the City may In addition, a history dealings. prove invaluable in future In January 1992, .you re forth ACC p quested a financial statement setting general operating costs for 1990, 1992 to demonstrate that the 58 1991 and service since n December of percent increase fobasic projected cable rvefor 1989 is actually related to overall increasescgeneral operating costs. this request has been denied, ino violation ofar as I f 18.5e (Ato ) A) of the Franchise Agreement. According to 18.4 (A), BOOKS AND RECORDS AVAILABLE TO THE the City may inspect ACC books, records, financial stat other like material of ACC upon reasonable notice and duringCITY, business hours. statements and 18.7 sets forth the City's RIGHT OF INSPECTION. o According tt18.5 (A), City at din Cy's re REPORTS REQUIRED, ACC is to provide the to NYSCCT. quest, with all reports ACC filesor submits 18.5 (C)(2) requires ACC's annual report and (C)(4) re annual certified income statement. not disclose either the informati no theTate these statements do City needs quires an information requested. They are too how the n nor the general and inanclusiv. An audit would shed light on 18.5 (E) requires ACC to Y umbers are crunched. provide the City with an the rights, functions or dutitthe Y and all information necessary and a ropriateperformance of any of es of the City Franchise. The City is entitled to and deserves n ntion the ion that t]. Memo to Chuck Guttman 2 June 10, 1992 is more specific and informative as to ACC's business practices and acceptable accounting practices. Initially the City should request the assistance of the State. NYSCCT will provide Ithaca with an Auditor, free of charge. Don Buckelew can be contacted at NYSCCT. Mr. Cafferillo should be asked to contact Mr. Buckelew, and provide him with all information received from ACC since the last Franchise renewal. RATE REGULATION Section 19.1 of the Franchise limits the March 1, 1992 rate to $14.64. Since March 1, 1992, the Rate has been $14.65, one cent over. This was caused by an increase of the basic rate from $12.58 to $13.95, with the 5% Franchise Fee tacked on. Section 20.1 states that the City shall be entitled to receive from ACC, not from the consumer, the Franchise Fee. The maximum ACC can charge the consumer, including the Franchise Fee, is the $14.64 charge. A refund needs to be made to the consumers. An adjustment to the City's Revenue is also in order. ACC is in default. FRANCHISE FEE Two aspects of ACC'scomputation of Franchise Fees must be changed to conform to existing laws and regulations. 1. Section 20.1 states that the City is entitled to receive a Franchise Fee of 5% of ACC's Gross City Revenue (20.2 A). Advertising income is not included in ACC's computation of gross receipts for determining the City Franchise Fee. The model of. gross city revenue as set by Executive Law, Section 812(5) includes advertising income. According to this same law, gross annual receipts are defined as "...any and all compensation received directly or indirectly by a cable company from its operations within the state, including but not limited to payment for programs received or transmitted, advertising...and any other monies that constitute income." 20.3 provides that ACC Affiliates must pay a Franchise Fee in order to utilize the Cable System. This needs to be more clearly accounted for so the City can assure that no revenues are being diverted from the City. Merely listing commercial/bulk accounts in the Basic Service Revenue does not serve the City's right to know. The timing of the NYSCCT Rate of .359% and .277% that is being deducted from the 5% also requires an explanation. We do not know why one is applied for three months and the other for nine months. Memo to Chuck Guttman 3 June 10, 1992 2. ACC is calculating the Franchise Fee incorrectly. You questioned ACC about this back. in January but -they did not respond till May. The NYSCCT issued a Statement of Policy one month after the new ACC Rate went into effect. This Policy (Docket No. 90389) concerns the Itemization of Franchise Fees on Subscriber. Bills. It states that the Franchise Fee is calculated "as a percentage of all revenues received without deduction or allocation for such portion of the revenues as may ultimately be paid for by the cable company to the municipal government in fulfillment of the franchise fee." ACC is listing the Franchise Fee as a separate line item in addition to its rates. This transforms the Fee from correctly placed as a component of doing business calculated on all revenues to an incorrect separate add-on charge imposed directly on City subscribers. It is important to note that this practice of ACC transforms the method by which the City's Franchise Fee is calculated thus modifying ACC's Franchise Fee obligation. An audit will describe the loss of revenue to the City. "Franchise Fees cannot be stated as a separate lineitem on subscriber bills as direct charges on subscribers." The NYSCCT Statement provides an example: Assuming a franchise fee of 3%, a bill where a fee of $.60.is.added to a service rate of $20.00 results in the: incorrect payment of a 2.91% fee, as $.60 is 2.91% of $.20.60. _ The correct fee must be calculated on the basis of the bottom line of the bill, or $20.60. The amount collected by ACC in Franchise. Fees are to be treated as part of ACC's gross revenues and subject to the 5% fee. In its letter of May 12, 1992, responding to your letter of January 1992, ACC incorrectly claims Franchise Fees are not part of its revenues. In addition, ACC clearly violates Section 24.10 of the Franchise Agreement when it claims to be acting as an agent for the City in collecting the fee and transferring it on to the City. ACC is expressly prohibited from doing this. Furthermore, ACC is not allowed by state policy to•utilize a "pass-through" practice whereby ACC passes on to the City subscribers the increase of its basic rate that surpasses the rate amount ($14.64) set forth in the Franchise Agreement. (Docket No. 90389, April 1992). This was done by ACC causing the rate to reach $14.65. 20.4: In the event that the proper fees are not tendered, interest shall accrue on the due date. The City should consider imposing a due date for proper payments and refunds. To insure accuracy and disclosure: 20.5: All amounts paid shall be subject to audit and recomputation, by an independent auditor chosen by the City. Memo to Chuck Guttman 4 June 10, 1992 Performance Bond The City has an ACC Performance Bond of $25,000 available. See 21.1. According to 21.1(B) the Performance Bond is recoverable to the City for any and all damages, losses, costs and expenses suffered or incurred by the City resulting from the failure of ACC to: faithfully comply with the provisions of the Franchise; comply with all lawful orders,... directives of any City agency; pay fees due to the City; pay any claims, liens or taxes due the City which arise by reason of the ...operation... of the System. Such losses, costs and expenses shall include but not be limited to attorney's fees and other associated expenses. 21.1(D) states that the City must notify ACC that payment is due and ACC shall have. 30 days to make a complete payment. After 30 days the City may use the Performance bond. 21.1(2) states that the City shall not seek recovery from the Performance Bond until it has provided ACC with 30 days to cure any default. Breach Upon Breach of the Franchise Agreement, Section 22.1 provides ACC with 30 days to: (A) respond to the City in writing, contesting the City's assertion of .default and providing such information or documentation as may be necessary or; (B) cure any default and/or prove due diligence in curing any default. A public hearing and fact finder report is then available to the Common Council to aid the Council's response. The Council may then (A) Foreclose on any or all of the Performance Bond and/or Letter of Credit; (B) Commence an action at law for monetary damages; (C) Declare the Franchise to be revoked; (D) seek Specific Performance of any Franchise provision as an alternative to damages. Possibly the issues with Access and Equipment might be addressed here. For the failure of ACC to submit reports as have been requested by the City, or as may be requested, Section 22.2 requires the City to notify ACC of ACC's violation. After 30 days or an amount of time the City may specify, the City will be entitled to recover damages. 22.2(B) states that these damages may include $10.00 per day for each day that failure to submit reports or supply data continues. 22.4 allows the City to bring ACC to any appropriate court in New York. ACCESS The calculation of Gross Revenues, as required and set forth above, will also provide the City with a correct calculation as to funding of Access equipment with 2% of Gross Revenues. In addition, advertising revenues should be accounted for. Memo to Chuck Guttman 5 June 10, 1992 The Resolution of the Ithaca Cable Commission, dated 2/11/92, regarding the Activation of Access Channels should be submitted to ACC for ACC compliance. ACC is in default of 14.1(A) . ACC should be notified that it is to adhere to the Franchise Agreement and provide all nine activated access channels, or any lesser number as may be set by the City. In addition, ACC should rebate any money takenfrom the Access Capital Equipment funds. New York State Cable Regulations are clear concerning the cost of designating new channels as being borne by ACC. Furthermore, 14.1(C)(3) asserts that the funds are for equipment, not for designating channels. A second public access channel should be activated within 60 days of the filing of the City's demand. CONCLUSION The City appears to be in a very good position to assert that ACC is in default of the Franchise Agreement. ACC should formally be put on notice. Otherwise it may continue to ignore our requests and/or forestall suitable response. ACC is .in violation of the City Franchise Agreement, New York State Regulations Policy, and is :improperly .calculating monies due the .City and cable subscribers. The City stands to recoup an as yet unknown amount of revenue. This amount .may be substantial. An audit of ACC coupled: with a demand for proper fee payments and adjustments, along with a demand for ACC compliance with the Resolution of the Cable Commission must be time -framed by the appropriate authorities. The City should also inquire of other Cable Companies how their respective calculations are made and how they respond to requests such as we have made of ACC. For example, we could contact: Cablevision Industries, Inc. Six Wierk Ave. Box 311 Liberty, New York 12754 This company provides service to Canandaigua, N.Y. A copy of its Franchise Agreement is now in the Correspondence File for 1992 in our office. MEMORANDUM TO: Chuck Guttman, City Attorney FROM: Tim Roulan, Intern DATE: June 10, 1992 SUBJECT: ACC There are four issues facing our relationship with ACC that require response by the City: AUDIT Ithaca should initiate an audit of ACC's accounts. This demonstrate how Gross City Revenues are determined whether or not the Cityand will show revenues. It will enabletheCityreceiving learn its fair share of the Revenues fit within ACC Gross Revenue calculations. ow clearly set forth the ACC .calculations that Advertising Franchise Fee and the 2% It will also Ff ACC's Access Funding.generate the 5% income from the City may In a history dealings. prove invaluable .in future In January 1992, you requested a .financial statement forth ACC general operating costs for.1990 1992rto demonstrate that the 58 1991 and forsetting service since December of n projected e percent increase for basic cable service for 1989 is actually related to overall determine, this request hasoperating costs. been denied in of the Franchise Agreement, So far as I am able to violation of 18.5 (A) According to 18.4 (A), BOOKS AND RECORDS AVAI the City may inspect ACC books LABLE TO THE CITY, records, financial statements and other like material of ACC upon reasonable notice and durg business hours. 18.7 sets forth the City's RIGHT OF NSpECTIONal Y According to 18.5 (A), REPORTS REQUIRED, ACC is to p City at the City's request, withfilesorvide the all reports ACC to NYSCCT. or submits 18.5 (C)(2) requires ACC's annual report and C annual certified income statement. not disclose either the statement. To date ( )(4) requires an these statements do information requested. TheyoCity needs nor audit would shed light on exactlyhowthe numbers are c the general and inconclusive. An 18.5 (E) requires ACC to ranched. information necessary and appropriate provide the City with the rights, functions or dues of the Citythe any and all performance of any of in Franchise. The City is entitled to and deserves info connection with the rmation that Memo to Chuck Guttman 2 June 10, 1992 • is more specific and informative as to ACC's business practices and acceptable accounting practices. Initially the City should request the assistance of the State. NYSCCT will provide Ithaca with an Auditor, free of charge. Don Buckelew can be contacted at NYSCCT. Mr. Cafferillo should be asked to contact Mr. Buckelew, and provide him with all information received from ACC since the last Franchise renewal. RATE REGULATION Section 19.1 of the Franchise limits the March 1, 1992 rate to $14.64. Since March 1, 1992, the Rate has been $14.65, one cent over. This was caused by an increase of the basic rate from $12.58 to $13.95, with the 5% Franchise Fee tacked on. Section 20.1 states that the City shall be entitled to receive from ACC, not from the consumer, the Franchise Fee. The maximum ACC can charge the consumer, including the Franchise Fee, is the $14.64 charge. A refund needs to be made to the consumers. An adjustment to the City's Revenue is also in order. ACC is in default. FRANCHISE FEE Two aspects of ACC'scomputation of Franchise Fees must be changed to conform to existing laws and regulations. 1. Section 20.1 states that the City is entitled: to receive a Franchise Fee of 5% of ACC's Gross City Revenue .(20.2 A). Advertising income is not included in ACC's computation: of gross receipts for determining the City Franchise Fee. The model of gross city revenue as set by Executive Law, Section 812(5) includes advertising income. According to this same law, gross annual receipts are defined as "...any and all compensation received directly or indirectly by a cable company from its operations within the state, including but not limited to payment for programs received or transmitted, advertising...and any other monies that constitute income." 20.3 provides that ACC Affiliates must pay a Franchise Fee in order to utilize the Cable System. This needs to be more clearly accounted for so the City can assure that no revenues are being diverted from the City. Merely listing commercial/bulk accounts in the Basic Service Revenue does not serve the City's right to know. The timing of the NYSCCT Rate of .359% and .277% that is being deducted from the 5% also requires an explanation. We do not know why one is applied for three months and the other for nine months. Memo to Chuck Guttman 3 June 10, 1992 2. ACC is calculating the Franchise Fee incorrectly. You questioned ACC about this back in January but they did not respond till May. The NYSCCT issued a Statement of Policy one month after the new ACC Rate went into effect. This Policy (Docket No. 90389) concerns the Itemization of Franchise Fees on Subscriber Bills. It states that the Franchise Fee is calculated "as a percentage of all revenues received without deduction or allocation for such portion of the revenues as may ultimately be paid for by the cable company to the municipal government in fulfillment of the franchise fee." ACC is listing the Franchise Fee as a separate line item in addition to its rates. This transforms the Fee from correctly placed as a component of doing business calculated on all revenues to an incorrect separate add-on charge imposed directly on City subscribers. It is important to note that this practice of ACC transforms the method by which the City's Franchise Fee is calculated thus modifying ACC's Franchise Fee obligation. An audit will describe the loss of revenue to the City. "Franchise Fees cannot be stated as a separate line item on subscriber bills as direct .charges on subscribers." The NYSCCT Statement provides an example: Assuming a franchise fee .of 3%, a bill where . a fee of $.60 is added to a service rate of $20.00 results in the incorrect paymentof a 2.91% fee, as $.60 is 2.91% of $20.60. The correct fee must be calculated on the basis of the bottom line of the bill, or $20.60. The amount collected by ACC in Franchise Fees are to be treated as part of ACC's gross revenues and subject to the 5% fee. In its letter of May 12, 1992, responding to your ' letter of January 1992, ACC incorrectly claims Franchise Fees are not part, of its revenues. In addition, ACC clearly violates Section 24.10 of the Franchise Agreement when it claims to be acting as an agent for the City in collecting the fee and transferring it on to the City. ACC is expressly prohibited from doing this. Furthermore, ACC is not allowed by state policy to•utilize a "pass-through" practice whereby ACC passes on to the City subscribers the increase of its basic rate that surpasses the rate amount ($14.64) set forth in the Franchise Agreement. (Docket No. 90389, April 1992). This was done by ACC causing the rate to reach $14.65. 20.4: In the event that the proper fees are not tendered, interest shall accrue on the due date. The City should consider imposing a due date for proper payments and refunds. To insure accuracy and disclosure: 20.5: All amounts paid shall be subject to audit and recomputation, by an independent auditor chosen by the City. Memo to Chuck Guttman 4 June 10, 1992 Performance Bond The City has an ACC Performance Bond of $25,000 available. See 21.1. According to 21.1(B) the Performance Bond is recoverable to the City for any and all damages, losses, costs and expenses suffered or incurred by the City resulting from the failure of ACC to: faithfully comply with the provisions of the Franchise; comply with all lawful orders,... directives of any City agency; pay fees due to the City; pay any claims, liens or taxes due the City which arise by reason of the ...operation... of the System. Such losses, costs and expenses shall include but not be limited to attorney's fees and other associated expenses. 21.1(D) states that the City must notify ACC that payment is due and ACC shall have 30 days to make a complete payment. After 30 days the City may use the Performance bond. 21.1(1) states that the City shall not seek recovery from the Performance Bond until it has provided ACC with 30 days to cure any default. Breach Upon Breach of the .Franchise Agreement, Section 22.1 provides ACC with 30 days to: (A) respond to the City in writing, contesting the City's assertion of default and providing such information or documentation as may be necessary or; (B) cure any default and/or prove due diligence in curing any default. A public hearing and fact finder report is then available to the Common Council to aid the Council's response. The Council may then (A) Foreclose on any or all of the Performance Bond and/or Letter of Credit; (B) Commence an action at law for monetary damages; (C) Declare the Franchise to be revoked; (D) seek Specific Performance of any Franchise provision as an alternative to damages. Possibly the issues with Access and Equipment might be addressed here. For the failure of ACC to submit reports as have been requested by the City, or as may be requested, Section 22.2 requires the City to notify ACC of ACC's violation. After 30 days or an amount of time the City may specify, the City will be entitled to recover damages. 22.2(B) states that these damages may include $10.00 per day for each day that failure to submit reports or supply data continues. 22.4 allows the City to bring ACC to any appropriate court in New York. ACCESS The calculation of Gross Revenues, as required and set forth above, will also provide the City with a correct calculation as to funding of Access equipment with 2% of Gross Revenues. In addition, advertising revenues should be accounted for. a Memo to Chuck Guttman 5 June 10, 1992 The Resolution of the Ithaca Cable Commission, dated 2/11/92, regarding the Activation of Access Channels should be submitted to ACC for ACC compliance. ACC is in default of 14.1(A). ACC should be notified that it is to adhere to the Franchise Agreement and provide all nine, activated access channels, or any lesser number as may be set by the City. In addition, ACC should rebate any money taken from the Access Capital Equipment funds. New York State Cable Regulations are clear concerning the cost of designating new channels as being borne by ACC. Furthermore, 14.1(C)(3) asserts that the funds are for equipment, not for designating channels. A second public access channel should be activated within 60 days of the filing of the City's demand. CONCLUSION The City appears to be in a very good position to assert that ACC is in default of the Franchise Agreement. ACC should formally be put on notice. Otherwise it may continue to ignore our requests and/or forestall suitable response. ACC is in violation of the City Franchise Agreement, New York State Regulations Policy, and is improperly .calculating monies due the .City and cable subscribers. The City stands to recoup an as yet unknown amount of revenue. This amount may be substantial. An audit of ACC coupled .with .a demand for proper fee payments and adjustments, along with a demand for ACC compliance with the Resolution of the Cable Commission must be time -framed by the appropriate authorities. The City should also inquire of other Cable Companies how their respective calculations are made and how they respond to requests such as we have made of ACC. For example, we could contact: Cablevision Industries, Inc. Six Wierk Ave. Box 311 Liberty, New York 12754 This company provides service to Canandaigua, N.Y. A copy of its Franchise Agreement is now in the Correspondence File for 1992 in our office. franchise fee/ xI CAZ?L packo- C,G F/ ,r✓e Gaief t (I ( he (eJM/1 b Page 1 DO i le A61c/c.-e,( pe= /iee[«. Mr e/ d- A- C cuff A B C D E F 1 2 . Cost to residents of the City of Ithaca resulting from ACC's attempt to redefine 3 rate for basic service to exclude franchise fee payments. 4 -assumes 8200 subscribers 5 Max. Month. Max. Month. Add'I Cost Add'I Cost Total Add'I 6 Basic rate Basic rate per month ea per yr ea Annual cost to 7 -Franchise -ACC subscriber subscriber subscribers 8 March '93 - Feb '94 $15.37 $16.14 $0.77 $9.22 $75,630 9 March '94 -Feb '95 $16.14 $16.95 $0.81 $9.68 $79,412 10 March '95 - Feb '96 $16.95 $17.80 $0.85 $10.17 $83,382 11 March '96 - Feb '97 $17.80 $18.68 $0.89 $10.68 $87,551 12 March '97 - Feb '98 $18.68 $19.62 $0.93 $11.21 $91,929 13 March '98 - Feb '99 $19.62 $20.60 $0.98 $11.77 $96,525 14 15 Total for the remainder of the franchise: $62.74 $514,430 16 17 Cost to City of Ithaca resulting from ACC's attempt to redefine "total city revenues" 18 to exclude franchise fee payments. 19 -assumes 10% annual growth in subscribers and rates • 20 21 Franchise Franchise Annual Loss to 22 fee - City fee - ACC City . 23 1992 $132,672 $126,370 ($6,302) 24 1993 $145,939 $139,007 ($6,932) 25 1994 $160,533 $152,908 ($7,625) 26 1995 $176,586 $168,199 ($8,388) 27 1996 $194,245 $185,019 ($9,226) 28 1997 $213,669 $203,521 ($10,149) 29 1998 $235,036 $223,873 ($11,164) 30 1999 $258,540 $246,260 ($12,280) 31 32 Loss to City over term of franchise: ($58,832) CAZ?L packo- C,G F/ ,r✓e Gaief t (I ( he (eJM/1 b Page 1 DO i le A61c/c.-e,( pe= /iee[«. Mr e/ d- A- C cuff CITY OF ITHACA 108 EAST GREEN STREET ITHACA, NEW YORK 14850 OFFICE OF TELEPHONE: (607) 274-6504 CITY ATTORNEY MEMORMDUM FAX: (607) 272-7348 TO: Dominick Cafferillo, Controller FROM: Chuck Guttman, City Attorney DATE: May 18, 1992 SUBJECT: .ACC I am in receipt of a copy of a letter of May 12, 1992 to Cookie in which ACC enclosed a check in the amount of $30,615.54 representing what they claim to be the appropriate franchise fee for the first quarter of 1992. They attached a statement, copy which I am enclosing, showing gross revenues and the 5 percent fee. My concern is whether they have correctly calculated gross revenues. Questions have been raised as to whether they are including in gross revenues advertising revenues and whether they are including in gross revenues the franchise fee which is separately listed on bills. I believe we should look into this further to make sure that their calculation of gross revenues is , correct. Please get back regarding this at your convenience. Enclosure 'An Equal Opportunity Employer with an Affirmative Action Program' tot Recycled Paper OFFICE OF CITY ATTORNEY CITY OF ITHACA 108 EAST GREEN STREET ITHACA. NEW YORK 14850 MEMORANDUM TO: Dominick Cafferillo, Controller FROM: Chuck Guttman, City Attorney DATE: May 12, 1992 SUBJECT: American Community Cablevision TELEPHONE: (607) 274-6504 FAX: (607) 272-7348 Enclosed please find a draft of a proposed letter from the Cable Commission to ACC. As you can see, there are at least a couple of questions as to the manner in which ACC is calculating its franchise fees. We should review exactl what, in the City's opinion, ACC is using as I s figure or gross City revenues and the _manner in w is =y are ca culating t e ranc•ise ee. It appears they may be underpaying us for the two reasons stated in this draft letter. Please look into this and get back to me at your convenience to discuss it. I am also attaching the Basis of Franchise Fee Payments. In Footnote (4) it says a rate of 5% is applied to the total revenues to determine the franchise fees due. They then subtract .359% and .277% for the NYSCCT Rate. I am not sure what type of subtraction is being done and whether that subtraction is justified. Attachments 'An Equal Opportunity Employer with an Affirmative Action Program' • ci Recycled Paper DRAFT City of Ithaca Cable Commission 108 E. Green St. • _ Ithaca, NY 14850 Barbara Lukens, General Manager American Community Cablevision 519 W. State ST. Ithaca, NY 14850 Date DearBarbara, We believe that two aspects of your computation of franchise fees need to be changed to conform to existing laws and regulations: 1. Our franchise establishes the franchise fee to be paid to the City of Ithaca at "five percent (5%) of ACC's Gross City Revenue" (§20.2 A). According to Executive Law §812(5), which deals with the collection of the statefranchise fee, gross annual receipts are defined as "...any and all compensation received directly or indirectly by a cable company from its operations within the state, including but not limited to_payrrient for programs received and/or transmitted, advertising...and any other monies that constitute income...". According to your report BASIS OF FRANCHISE FEE PAYMENTS, submitted at our request, advertising incomeis not included in your computation of gross receipts for determining the City franchise fee. In discussions with a representative of the NYSCC, he clearly stated that advertising income should be included in the computation of gross city revenue, as it is in the model set by Executive Law. 2. In a recent Statement of Policy, Docket No. 90389, the NYSCC states the franchise fee "is calculated as a percentage of all revenues received without deduction or allocation for such a portion of the revenues as may ultimately be paid for by the cable company to the municipal government in fulfillment of the franchise fee". To use the NYSCC example, which assumes a franchise fee of 3%, a bill where a franchise fee of $.60 is added to a service rate of $20.00 results in the incorrect payment of a 2.91% franchise fee, as $.60 is 2.91% of 20.60. The correct franchise fee must be calculated on the basis of bottom line of the bill. In reviewing my ACC bill, it appears that ACC is calculating the franchise fee similarly to the incorrect example. Please let us know by our next meeting what actions you plan to take to resolve these discrepancies. Sincerely, • DRAFT City of Ithaca Cable Commission 108 E. Green St. Ithaca, NY 14850. Barbara Lukens, General Manager American Community Cablevision 5.19 W. State ST. Ithaca, NY 14850. May 7, 1992 (o Dear Barbara, We have received your letter of March 9th responding to our resolution of February 1 1 th, 1992, regarding activation of access channels. Our position.. continues to be that our franchise and state regulations require the designation of nine active access channels. Activation of these channels should have been provided initially as part of the fulfillment of your franchise obligations. By not activating the channel called for in our resolution of February 1 1 th and by not restoring the money spent from Access Capital Equipment funds for the activation of two of the existing channels, as called for in that resolution, we find that ACC is in default of its franchise obligations under section 14.1 A. If you continue to be unwilling to comply fully with the terms of our resolution, the City will seek redress. We await your reply and look forward -to putting this difficult issue behind us. Sincerely, Peter Hess, Chair City of Ithaca Cable Commission In the Matter of NEW YORK STATE COMMISSION ON CABLE TELEVISION The Itemization of Franchise Fees on Subscriber Bills STATEMENT OF POLICY 92-217 DOCKET NO. 90389 (Released: April 20, 1992) During the past months, various cable companies in the state have commenced the practice of including all or.a portion of a franchise fee as a separate line item on a subscriber's bill. The practice is manifest in one of two ways. In some instances, the franchise fee is one of many items, e.g., basic service, premium service, additional outlets, etc. listed in a single column, the amount for which is included with and added to all other amounts to arrive at a total amount due. In other instances, the bill recites: the various services subscribed to and the amounts thereof, sets forth a subtotal of all such amounts and then includes an amount denominated "franchise fee" which, when added to the subtotal, creates a total amount due at the bottom of the bill. In the latter case, the franchise fee is treated in the same manner as a sales tax. In either case, the fee is stated as if it were a direct charge upon the subscriber. Some companies have instituted this practice coincidental. with a franchise renewal or current increase in the amount of the fee or both. For other companies, the practice is unrelated to the franchise term or any change in franchise fee requirements. Because the practice raises fundamental issues concerning the effect of federal law and the relation of federal statute to state statute, Commission regulations and franchise fee provisions in cable television franchise agreements, the Commission has determined that it is appropriate at this time to .issue a general statement of policy on franchise fee itemization and "pass-throughs." Itemization of Fee Section 622(f) of the Cable Communications Policy Act of 1984 ("Cable Act") (47 USC Section 542(f)) provides that "[a] cable operator may designate that portion of a subscriber's bill attributable to the franchise fee as a separate item on the bill." Consistent with this section, a cable operator. may include on a subscriber's bill a separate statement indicating the portion of the bill --as' a percentage or fixed amount --that will be payable as a franchise fee by the cable company to the franchising authority. This section is not authority for including a franchise fee as a separate billable line item on a subscriber's bill. 2 In this regard, we note that franchise agreements in New York State have traditionally required franchise fees based on a percentage of revenues -either all or some portion thereof --received by the company from subscribers and, in some cases, from other sources. In other words, the fee is calculated as a percentage of all revenues received without deduction or allocation for such portion of the revenues as may ultimately be paid by the cable company to the municipal government in fulfillment of the franchise fee obligation. This practice is fully consistent with Section 817 of the Executive Law which requires the Commission to impose an assessment upon cable companies calculated on "gross annual receipts.i' The only exception from "gross annual receipts" recognized in the statute would include sales taxes which are imposed directly on subscribers. (See, e.g., Tax Law, Section 1131(2)) Neither the municipal franchise fee nor the amount of the Commission's assessment is excluded from "gross annual receipts." The practice of billing the fee as a separate line item in addition to rates transforms the very nature of the fee from a component of doing business calculated on all revenues to a separate add-on charge imposed directly on subscribers. This practice.: also has the effect of transforming the very method by which the fee is calculated and, therefore, purports to modify the underlying statutory and franchise obligations. A simple example will illustrate the effect of itemization. Assume a cable company has been charging $20 per month for a service under a franchise which requires a franchise fee of 3%. The franchise fee attributable to such bill would be sixty cents. If the company determines to separate and itemize the fee as an add-on in the manner of a sales tax, the bill is likely toread as follows: Basic service rate --- $20.00 Franchise fee --- $0.60 Total $20.60 1 Section 817(2) provides that the Commission "shall...bill and collect. ..[from cable companies]...the total direct and indirect costs necessary to operate and administer the commission for the. ..state fiscal year." Each company is required to pay a pro, rata share of the commission's costs based upon its gross annual receipts when compared to the gross annual receipts of all companies. "Gross annual receipts" is defined in Section 812(5) as follows: ". . .any and all compensation received directly or indirectly by a cable television company from its operations within the state, including but not limited to sums received from subscribers or users in payment for programs received and/or transmitted, advertising and carrier service revenue and any other moneys that constitute income in accordance with the system of accounts approved by the commission. Gross annual receipts shall not include any taxes on services furnished by a cable television company imposed directly on any subscriber or user by any municipality, • state, or other governmental unit and collected by the company for such governmental unit.' 3 Apart from the fact that this is a rate increase subject to notice requirements (and government approval in the absence of effective competition), it is readily apparent that the company, by its own unilateral act, has purported to change the manner of calculating the fee by reducing the base from the total amount billed to an amount which is artificially described as the "rate." In fact, $0.60 is but 2.91% of $20.60 — the total amount billed. If the fee is calculated as before -= 3% of the full amount billed — the fee attributable to the bill would be sixty-two cents. We find nothing in the Cable Act to suggest that Congress intended to transform the nature of a franchise fee or to amdnd existing franchises by :permitting cable television companies to reduce franchise fee obligations by manipulating the subscriber's bill in such manner. On the contrary, the effect of Section 622(a) was to increase from 3% to 5% of gross receipts the amount of franchise fees which could .be required in a franchise. ,It could be argued that a cable company is free to bill in this manner without also intending to modify its franchise fee obligation. If so, such a bill would be inaccurate and, therefore, misleading. Nothing in the Cable Actauthorizes cable companies to engage in inaccurate and misleading billing practices. We also note the likelihood that some cable companies would argue that the franchise fee is a tax and, as such, is a separately billable item. We need not finally determine whether the franchise fee is a tax for the simple reason thateven if the franchise fee is in the nature of the tax, under New York. State law it would be in 'the nature of a special franchise or real property tax; but clearly not in the nature of a sales tax.2 The special franchise tax is imposed on the owner of the special franchise property, i.e., the cable company, and not on the subscriber directly. As such, it is simply a component of doing business similar to other non -sales taxes and business costs. 2 Section 626 of the Real Property Tax Law ("RPTL") provides as follows: "1. (a) When a tax levied on a special franchise is due in any assessing unit, if the special franchise owner has paid such assessing unit for its exclusive use during the past year under any agreement or statute requiring the same, a sung_ based upon a percentage of gross earnings or otherincome, a license fee or other sum_ of money on account of such special franchise possessed by such special franchise owner, which payment was in the natureof a tax, all amounts so paid for the exclusive use of such assessing unit, except money paid or expended for paving or repairing the pavement of a street, highway or public place,. and except in a city having a population of one hundred seventy-five thousand or more according to the latest federal census, car license fees or tolls paid for the privilege of crossing a bridge owned by the city, shall be deducted from the tax based on the assessment .made by the state board for purposes of the assessing unit, but not otherwise, and the remainder shall be the tax on such special franchise payable for such propose." 4 In sum, it is our determination that franchise fees cannot be stated as a separate line item on subscriber bills as direct charges on subscribers. This policy does not prevent cable companies from informing subscribers on bills, or otherwise, of 'the fact that franchise fees are paid to government, including the specific amount of the fee attributable to an individual bill. It is consistent with the Cable Act because companies may include a statement on the bill which identifies the franchise fee without imposing a separate and direct charge for the fee, itself. Pass Through Provisions We also take this opportunity to express our policy with respect to the so-called "pass through" provisions in the Cable Act Section 622(c) of the Cable Act (47 USC 542(c)) provides that "[a] cable operator may pass through to subscribers the amount of any increase in a franchise fee unless the franchising authority demonstrates that the rate structure specified in the franchise reflects all costs of franchise fees and so notifies the cable operator in writing." Section 622(c) provides that "[a]ny cable operator shall pass through to subscribers the amount of any decrease in a franchise fee." The issue here is whether these provisions have meaning in a deregulated cable community. We note, initially, that for many years_ prior to the enactment of the Cable Act the rates for premium cable television services had been deregulated by the Federal Communications Commission ("FCC"). See Brookhaven v. Kelly, (428 F.Supp. 1216 N.D. New York (1977); 573 F.2d 765, 2d Cir. (1978)) We also note that in many, if not all, cable television franchise agreements in New York State a franchise fee is required to be paid based on revenues derived by the cable television franchisee from premium services or some portion thereof. In fact, at the time the Cable Act became law, cable companies could, unilaterally price premium services to account for all costs including franchise fees and increases therein. As a practical matter, the Cable Act did not alter the regulatory status of premium services. Section 623 of the statute provides that "[a]ny franchising authority may regulate the rates for the provision of cable service. . .provided over a cable system to cable subscribers, but only to the extent provided under this section." Section 623(b)(1) required the Federal Communications Commission to "prescribe and make effective regulations which authorize a franchising authority to regulate rates for the provision of basic cable service in circumstances in which a cable system is not subject to effective competition." Under Section 623, only basic cable service can be subject to rate regulation.3 Cable companies remain free 3 Although basic cable service is defined in such a way as it is theoretically possible that single channel premium services could be marketed as part of basic service, we are not aware of any such circumstances and it is unlikely that a cable company which is not subject to effective competition would choose to submit rates for premium service to regulation by such marketing practice. S to price "premium" services without the need for governmental review and approval --a right which transcends the more limited language in Section 622(c) which merely permits a rate increase in the event of an increase in franchise fees. We note, as well, that historically, "pass-through" is used in utility ratemaking to permit a cost or change in cost to be included in the regulated rate borne by ratepayers. It fully appears, therefore, that the pass-through provisions in Section 622(c) of the Cable Act are intended to enable cable television companies to increase regulated rates by an amount equal to any current increase in the franchise fee attributable to the regulated rate.4 Similarly, the obligation imposed by Section 622(e) to decrease rates by any reduction in the franchise fee is only sensible in an environment where rates are regulated. Otherwise, there is no real benefit to subscribers. In sum, the pass-through provisions are redundant in rate deregulated communities. Granting to a cable company the unilateral ability to charge to subscribers whatever rate it wants—as the Cable Act does --transcends and makes meaningless cost pass-throughs which are reflective of a rate regulated environment. SO ORDERED. Commissioners Participating: William. B. Finneran, Chairman; Theodore E. Mulford, John A. Passidomo, Barbara T. Rochman, Commissioners. 4 It is important to note here (1) that Congress sanctioned. basic rate regulation for a minimum of two years following the effective date of the Cable Act for all cable systems irrespective of the existence of effective competition, and (2) that FCC regulations rather than statutory mandates caused most cable systems to be rate deregulated. RECEIVED APR ' 0 1992 NEW YORK STATE COMMISSION ON CABLE cLEVISION Our C. - In the Matter of 92-21.0 Amendment of Section 595.1 of the Commission's Rules DOCKET N MEMORANDUM AND RESOLUTION ADOPTING RULEMAKING (Issued: April 9, 1992) By Notice of Proposed Rulemaking (In the Matter of Amendment of Section 595.1 of the Commission's Rules; Docket No. 90327, Order No. 91-305, released: July 24, 1991; published in the New York State Register on July 31, 1991), the Commission proposed to amend Section 595.1(o) of its rules relative to cable television franchise fees payable to municipal governments. Following the receipt and review of comments, the Commission authorized a revised proposal which was issued December 4, 1991 and published in the State Register .on that same date. Having reviewed all the comments submitted, we have determined to amend Section 595.1(o) in accordance with the changes in the revised proposal. Section 595.1(o) was first amended to include requirements concerning franchise fees in 1988. (Order Adopting Regulations in Docket No. 90327, Order No. 87-191, Released: February 10, 1988.) ' The rule provided as follows: "Section 595.1 Required Contents of Franchises. Where a cable television franchise is awarded or renewed after April 1, 1973,. ..the franchise will be confirmed by the Commission only if it contains: (o) A provision stating (1) whether a franchise fee shall be payable by the franchisee to the municipality and, if applicable, (2) the precise amount or method of calculation of such franchise fee which, if expressed as a percentage of the franchisee's revenues, shall be expressed as a percentage of the franchisee's gross revenues derived from the operation of the cable system within such municipality.* * For purposes of this Section, the term "franchisee's gross revenues derived from .the operation of the cable system "shall mean all revenues required to be reported to the Commission in Accounts 4000.0 through 4230.0 pursuant to rr 599-" fl 7f't CLLr� 2 The rationale for the rule and the objectives to be achieved are set forth in the Order Adopting Regulations at pp. 4-5. (See also Notice of Proposed Rulemaking in Docket No. 90327, Order No. 91-305, Released: July 24, 1991.) The rule applied to franchise fee provisions contained in franchises granted or renewed after February 11, 1988. Notwithstanding the rules, some franchises submitted for Commission review and approval after the effective date continued to contain franchise fee provisions which required payment on a revenue base other than as set forth in Section 595.1(o). Upon further review and consideration, we determined that some modification of the rule to provide flexibility could be achieved without compromising the underlying objectives of the rule itself. On July 24, 1991, we issued a proposed amendment (the "initial proposal") for comment which we believed maintained the objective that franchise fee provisions be clear and unambiguous but permitted some reasonable flexibility by defining the term "gross revenues" in a less inclusive fashion. We received comments from the Cable Television Association of New York, Inc. ("CTANY"), the Towns of Sand Lake and Saugerties, and a number of parties from Westchester County (See: List of Appearances, attached). A copy of the proposed rule is attached hereto as Appendix A. A copyof the Assessment of Public Comment is attached hereto as Appendix B. The majority of municipalities commenting upon the initial proposal opposed it on practical, rather than legal, grounds. They expressed fear that the proposed minimum revenue base for calculating franchise fees would become the starting point for negotiations with cable operators and thereby impair their ability to obtain fees based on all gross revenues including the maximum fee of 5% of "gross revenues derived from the operation of a cable system" as permitted by federal statute (47 USC Section 542). Although it has never been our intent to effect the total dollar amount of franchise fees payable pursuant to a franchise, we recognize that in many instances the fees are negotiated and that the initial proposal might have the unintended effect described in the comments. Accordingly, we issued a revised proposed amendment (the "revised proposal") wherein we proposed to reinstate an all inclusive definition of gross revenues with language that would permit the parties to exclude some components of revenue in expressing the fee obligation. Specifically, the revised rule provided that, absent exclusions, a fee based on a percentage of revenues must be based on all revenues; and that notwithstanding exclusions, the fee could not be less than a percentage of all revenues received from subscribers on a regular recurring monthly basis. A list of those parties who commented on the revised proposed amendment is attached as Appendix C. Having considered all comments and our own experience with franchises and franchise negotiations, we conclude that the rule we adopt will preserve our objectives while at the same time provide a degree of flexibility to those municipal governments who may 3 choose to continue existing exclusions for nonrecurring programming charges or to authorize new exclusions consistent with the requirement that there be a uniform fee applicable to all recurring programming charges. The provisions of Section 202(1) of the State Administrative Procedure Act and Section 101-a(2) of the Executive Law having been complied with, the Administrative Officer shall file with the Secretary of State the attached resolution which adopts the amendment of 9 NYCRR, Section 595.1(o) Commissioners Participating: William B. Finneran, Chairman; John A. Passidomo, Barbara T. Rochman Commissioners. Appendix A TEXT OF RULE Section 595.1 Required Contents of Franchises. Where a cable television franchise is awarded or renewed after April 1, 1973, or where a franchise was awarded prior to said date but the franchisee had not commenced operations or substantial construction prior to January 1, 1972, the franchise will be confirmed by the Commission only if it contains: o. A provision stating: (1) whether a franchise fee shall be payable by the franchisee to the municipality; and, if applicable, (2) the precise amount or method of calculation . of such franchise fee which, if " expressed as a percentage of the franchisee's revenues, shall be expressed as a percentage of the franchisee's gross revenues derived from the operation of the cable system within such municipality.' A municipality may elect to approve certain exclusions from said revenue base, provided that the resultant revenue base shall not be less than revenues received by the franchisee directly from subscribers for any cable services purchased by subscribers on a regular, recurring monthly basis. 1 For purposes of this section, the term "franchisee's gross revenues derived from the operation of the cable system" shall mean all revenues required to be reported to the Commission in Accounts 4000.0 through 4230.0 pursuant to Part 599 of this Title. Appendix B ASSESSMENT OF PUBLIC COMMENT The Commission proposed to amend Section 595.1(o) of its rules concerning franchise fees by a Notice of Proposed Rulemaking released July 24, 1991. The Cable Television Association of New . York, Inc. ("CTANY"), Senator Suzi Oppenheimer, Assemblywoman Cecile D. Singer, Assemblyman Richard Brodsky, Assemblyman George Pataki, Rye Community Television, and a number of municipal governments submitted written comments on the proposed amendment. In response to these comments and in an effort to further clarify Section 595.1(o), the Commission issued a revised proposed amendment to Section 595.1(o). on December 4, 1991. The revised proposed amendment generated written comments from CTANY and a few municipal governments. The initial proposal provided that any franchise fee expressed as a percentage of revenues must be based on revenues that are "no less than gross revenues received by the franchisee directly from subscribers for any cable services purchased by the subscriber on a regular, recurring monthly basis." This proposal would have relaxed the existing minimum standard in 595.1(o) which required a fee based on revenues to be based on gross revenues from all sources. Although the proposal would not have required any reduction in fees, the majority of comments were in opposition. CTANY, which opposed Section 595.1(o) when it was first adopted, continues to oppose any minimum standard concerning franchise fees. CTANY contends that the amendment threatened to "harm both cable operators and municipalities." According to CTANY, "expanding the measure of revenues against which a franchise fee percentage will be applied" financially hurts those operators who currently exclude premium services from the revenue base. CTANY maintained that the proposal would prohibit municipalities from excluding revenues derived from subscription pay channels and consequently denies the municipalities freedom to negotiate. Lastly, CTANY reiterates is position that the Commission exceeded its proper role because the proposed amendment infringed on the municipalities' legal right under Executive Law Section 818 to determine the franchise fee, subject only to federal limits. The Commission has previously determined that it has the jurisdiction to promulgate a minimum franchise standard applicable to franchise fees. In adopting the existing standard, we noted that in accordance with early federal policies franchise fees were often stated as a percentage of revenues from "basic service" and that at least since the Cable Act in 1984 "basic service" depends more or less upon unilateral marketing strategies of cable companies. We emphasized our concern that franchise fee obligations should be clear and readily ascertainable. We also expressed our concern about the imposition of fees on some, but not all, categories of programming services. Accordingly, we adopted a rule that required any franchise fee based on revenues, to be based on gross revenues as the term is used in our Uniform System of Accounts. At the same time, it should be clearly understood that neither the existing rule nor the revised rule requires the payment of a franchise fee, or that a fee be based on gross revenues or any minimum percentage payable -2 - thereon. The amount of the fee remains subject only to federal law and Section 818 of the Executive . Law. Correspondence from Assemblymen Brodsky and Pataki, Assemblywoman Singer and Senator Oppenheimer expressed reservations about the initial proposal. They asserted that the proposed amendment would be detrimental to municipalities in that it would place municipalities at an unfair disadvantage in negotiating contracts with cable companies and would, therefore, result in decreased franchise fee payments. Several municipalities voiced similar concerns in their opposition to the first proposed amendment of 595.1(o). In a written comment, the Larchmont-Mamaroneck Cable TV Board of Control ("Larchmont-Mamaroneck"), on behalf of the Town of Mamaroneck and the Villages of Larchmont and Mamaroneck, objected to the proposed amendment. Correspondence from the Town and Village of Harrison, the Village of Croton -on -Hudson, and the City of Mount Vernon supported the Larchmont-Mamaroneck comment. Larchmont-Mamaroneck based its opposition to the proposal on the premise that the proposed minimum standard would exacerbate a municipality's already disadvantaged negotiating position and become "the standard." Larchmont-Mamaroneck also insisted that the unamended rule assists the municipality in obtaining information regarding the franchisee'stotal revenue, while the amended rule would make disclosure itself the subject of negotiations. Comments from the Towns of Eastchester and Greenburgh, the Villages of North Tarrytown, Irvington, Ossining, Tuckahoe, Rye Brook, Scarsdale, Bronxville, and the City of New Rochelle expressed opposition to the proposed amendment of 595.1(o). Like the Larchmont-Mamaroneck comment, these municipalities also objected to the establishment of a minimum standard that did not include all sources of revenue. The common threads of opposition in these comments was the alleged resulting weakened bargaining position of the municipality and the reduction in municipal revenues, particularly lost advertising revenue. Under federal law, "any cable operator may be required under the terms of any franchise to pay a franchise fee." (47 USC Section 542) Certain limitations, including a ceiling of 5% of gross revenues, are contained in the statute. Although it is our view that a municipality may require a specific fee as an absolute condition of a franchise or renewal, we concede that the existence of a fee or the precise amount thereof is often subject to negotiation. It is apparent from the comments that many municipalities believed that the effect of the proposed rule would be to favor cable companies during such negotiations by permitting the companies to characterize the minimum standard as a preferred standard. In fact, it was not the intent of the Commission to influence the amount of the franchise fee payable to a municipality. Rather, the Commission's initial proposed amendment was intended to provide a degree of flexibility consistent with the underlying principle that franchise fee requirements be clear and unambiguous and apply uniformity to all recurring programming. -3 - Based on the comments received in response to the proposal, the Commission issued a revised proposed rulemaking on December 4, 1991 designed toachieve the same goals in a somewhat different manner. The revised proposed rule reinstates an all- encompassing definition of the term "gross revenues" to be applicable whenever a franchise fee is to be expressed as a percentage of the franchisee's revenues. "Gross revenues" will continue to be defined as all revenues reported to the Commission in Accounts 4000 to 4230 of 9 NYCRR 599. Municipalities may elect to exclude some components from the revenue base so long as the resulting revenue base is no less than that derived from regular, recurring monthly subscriber revenues. The revision responds to concerns of some municipalities that the Commission's initial proposal would set a minimum revenue base which would become the standard in negotiating the franchise fee. Fewer comments were received by the Commission regarding the revised proposal. In contrast to its response to the first proposal, the Town of Greenburgh.does not object to the revised proposal. The Town of Scarsdale neither objected to nor supported the revised proposal, but did express continued concern over the effect it would have on the municipality's negotiating power. CTANY and Larchmont-Mamaroneck reiterated the arguments they advanced in response to the proposed amendment of July 24. A. Thomas Levin, Esq., representing two consortiums of villages in Nassau County, also submitted comments to therevised proposed amendment of 595.1(o). In essence, the Commission and Mr. Levin are in accord. Mr. Levin expresses concern over the municipalities' ability to negotiate for "inclusion in a franchisee's 'gross revenues' any sums which the contracting parties agree are appropriate to include in the franchise agreement." This is exactly what the revised proposal permits. As to existing contract language, the amendment to Section 595.1(o) will vary in its applicability. Many franchises contain a provision obligating the parties to amend their franchises to reflect changes in the Commission's rules. For these municipalities, the amendment of Section 595.1(o) would become effective in accord with the franchise obligation. For others, Section 595.1(o) would apply at renewal. LIST OF APPEARANCES Comments to First Proposal 1. CTANY 2. Village of Larchmont ) 3. Village of Mamaroneck) 1 letter 4. Town of Mamaroneck ) 5. Town of Saugerties 6. Town of Eastchester 7. Town of Sand Lake 8. Town of Harrison 9. Village of Harrison 10. Village of N. Tarrytown 11. Village of Irvington 12. The Assembly of the State of New York --Rep. Richard L. Brodsky --Rep. George E. Pataki —Rep. Cecile. D. Singer 13. The Senate of the State of New York --Sen. Suzi Oppenheimer 14. Village of Croton -on -Hudson 15. Village of Tuckahoe 16. City of New Rochelle 17. Village of Rye Brook 18. City of Mount Vernon 19. Town of Greenburgh 20. RCTV - Rye Community Television 21. Village of Scarsdale 22. Village of Bronxville Comments to Revised Proposal 1. CTANY 2. Village of Larchmont ) 3. Village of Mamaroneck) 1 letter 4. Town of Mamaroneck ) 5. Town of Greenburgh 6. Village of Scarsdale 7. A. Thomas Levin, Esq. - per 16 Villages in Nassau County . . 4. § 599.33 TITLE 9 EXECUTIVE records shall contain particulars as to liquidation rights, dividend arrears, and other detarils such as voting rights. 3300.0 Treasury Stock - The cost of capital stock repurchased and held in the treasury. Each class of common or preferred stock held as treasury stock shall be separately identified by means of a .subsidiary account. 3400.0 Proprietor's Equity - Equity of a sole proprietor, partners, or members of a joint venture. Subsidiary accounts shall be established to reflect the equity of the individual partners or members of the joint venture. 3500.0 Additional Paid -in Capital - The amount contributed or assigned to capital stock in excess of par value or stated value; or the value of donations re- ceived; or the reduction in par or stated value of capital stock; or the gain or loss on Wale of treasury shar=es; .71r co-aLa s ,cam: expenses; or other cred- its which are not properly includable elsewhere. Separate subsidiary ac- counts shall be established as necessary, so as to identify each class of stook or type of transaction as described immediately above. 3600.0 Retained Earnings — Represents the accumulated amount of earnings which have not been capitalized, paid to stockholders as dividends or other- wise utilized. 3610.0 Appropriated Retained Earnings - This account, appropriately sub- divided by purpose, shall include the amount of retained earnings which have been appropriated or set aside for specific purposes. 3620.0 Unappropriated Retained Earnings - This account shall include the balance, either debit or credit, of unappropriated retarined earnings arising from earnings. Authorized dividends shall be debited to this account and credited to account 2180.0, Dividends Payable. 3700.0 Proprietor's Withdrawals - Withdrawal by a sole proprietor, or member of a partnership or joint venture. Subsidiary accounts shall be established to adequately reflect alltransactions. 4000.0 OPERATING INCOME - These accounts shall include all revenues due to render- ing services connected with the cable activity. Classification of income by fran- chise area for the purpose of preparing reports required by FCC, franchising mu- nicipalities and others may be accomplished by account expansion right of the decimal point; but it is not required by the Commission. 4100.0 Subscriber Revenues 4110.0 Installation Income - Represents income obtained from charges for subscriber connections, relocations and additional outlets. 4120.0 Regular Subscriber Charges - Represents periodical service charge for cable service. 4130.0 Per Program or Per Channel Charges - Income arising from special fees imposed to obtain programs not obtainable by means of regular subscription fees. 4140.0 Other Subscriber Revenues - Subscriber revenues not includable in accounts 4110.0, 4120.0, and 4130.0. 4200.0 Non -Subscriber Revenues 4210.0 Advertising Income - Income arising from advertising on caole chan- nels. 4220.0 Special Service Income - Income attributable 'to leasing or sale of time or facilities. 4230.0 Other Non -Subscriber Revenues - All other non -subscriber revenues not includable in accounts 4210.0 and 4220.0. • 5000:0 COST OF OPERATIONS Account Numbering - The account numbering system has been devised so that the costs of each department or operating function may -be accumulated separately but in •a consistent manner. In this system, operating expenses ha -e been segregated into three groups; service costs, origination costs and selling, general and adminis- trative. Classification of expenses by franchise area to correspond with similar classifica- tion of revenues may be had by appropriate expansion of accounts. Care should be taken to provide uniform expansions for the various functions. Total company -wide expense for each natural cost can be obtained easily since the unit and tens digit of each account number signify cost factor as follows: 01.0 Salaries and Wages 01.1 Salaries and Wages—Officers and Directors 01.2 Salaries and Wages - All Others 02.0 Employee Benefits 02.1 Employee Benefits - Officers and Directors 02.2 Employee Benefits - All Others 230.544 EX 12-31-74 § 595.4 TITLE 9 EXECUTIVE (c) For purposes of this section, a subscriber shall be deemed to have affirmatively requested a service if (1) the subscriber voluntarily makes payment for such service after an initial free. trial period, and (2) there was included, in the notice or advertising material describing the service, a statement clearly advising the subscriber that he has incurred no obligation to pay for such service and that he need not take any action to avoid incurring any such obligation. Historical Note Sec. filed March 23, 1976. 595.4 Minimum standards for public, educational and governmental (PEG) access. (a) Definitions. (1) The term public access channel means a channel designated for noncommercal use by the public on a first-come, first-served, nondiscriminatory basis. (2) The term educational access channel means a channel designated for use by school districts and not-for-profit educational institutions chartered or licensed by the New York State Education Department or Board of Regents. (3) The term government access channel means a channel designated for use by municipal, county and State government, or agencies thereof. (4) The term public, educational, or governmental (PEG) access facilities means (i) channel capacity designated for public, educational or governmental use; and (11) facilities and equipment for the use of such channel capacity. (5) The term local use means noncommercial use by residents of the State of New York including school districts and not-for-profit educational institutions and munici- pal, county and State governments, or agencies thereof. (6) The term access cablecast day means a day or part thereof during which public, educational or governmental access facilities are available for PEG use. ne Designation of channels. Every cable television franchisee shall designate chan- apacity for PEG access as follows. (1) The franchisee of a cable television system with a channel capacity of 21 or more channels shall designate (i) at least one full-time activated channel for public access use; (ii) at least one full-time activated channel for educational and governmental use; and (iii) one additional full-time activated channel for educational/governmental use whenever the first channel so designated shall have been used for such educational and governmental programming on the average of at least 12 hours per day during any 90 - day period; provided, however, that the calculation of such average shall not include any day when the unavailability of PEG access facilities precludes achieving such programming level. In the event that two channels for educational and governmental use are required by this subdivision, one channel shall be designated the educational access channel and one channel shall be designated the governmental access channel; provided, however, that either channel may be used for either purpose if necessary to satisfy the demand for channel time. (2) The franchisee of a cable television system with a channel capacity less than 21 channels shall designate at least one full-time activated channel for public, educa- tional and governmental use. 230.520b EX 8-31-88 SUBTITLE R COMMISSION ON CABLE TELEVISION § 595.4 (c) Administration and use. The use of the channel capacity for PEG access shall be administered as follows: (1) The public access channel shall be operated and administered by the entity designated by the municipality or, until such designation is made, by the cable televi- sion franchisee; provided, however, that the municipality may designate such entity at any time throughout the term of a franchise by a resolution duly adopted by the legislative body thereof.* (2) The educational and governmental access channel shall be operated and admin- istered by a committee or a commission appointed by local government and shall include appropriate representation of local school districts within the service area of the cable television system and may include for purposes of coordination an employee or representative of the cable television franchisee.** (3) The entity responsible for administering and operating the public access chan- nel shall provide notice to the general public of the opportunity to use such channel which notice shall include (i) a character -generated message transmitted at least hourly on such channel between the hours of 6 p.m. and 10 p.m. each day and (ii) written notice to subscribers at least annually. Notices shall include the name, address and telephone number of the entity to be contacted for use of the channel. All access programming shall be identified as such. (4) Channel time shall be scheduled on the public access channel by the entity responsible for the administration thereof on a first-come, first-served, nondiscrimina- tory basis. (5) Local use of educational and governmental access channels shall have pre- ferred status in the event of competing requests for channel time. Priority may be afforded to local governments within the service area of the system. (6) Channel time for PEG access programming shall be without charge to the user. The designation of PEG access facilities shall include the provision by the cable sion franchisee of the technical ability to. play back prerecorded programming and to transmit programming information consistent with the designated uses of PEG access channels. (8) The cable television franchisee shall not exercise any editorial control over any public, educational or governmental use of channel capacity designated for PEG purposes. (9) A municipality shall not exercise any editorial control over any use by the public of a public access channel. (10) The entity responsible for the administration of a public access channel shall maintain a record of the use of such channel which shall include the names and addresses of all persons using or requesting the use of any such channel and which record shall be available for public inspection for a minimum of two years. * If a single public access channel is shared by more than one municipality, a single entity shall be jointly designated by the local legislative bodies of each franchising municipality in the system. If agreement cannot be reached on a single entity, the commission shall arbitrate the issue. ** Where an educational or a governmental channel is shared by more than one school district or local government or combination thereof, administration of such channel(s) on a cooperative basis is encouraged. 230.520b1 EX 8-31-88 • 13.4 ACC shall provide free cable drops to locations already provided with free drops, and at any City designated locations in any new or renovated public, educational or public ser`,ice offices or buildings designated by the City -at the time of'the rebuild up to a maximum of 50. After the rebuild, ACC shall provide additional drops as specified by the Cityat the time of building construction or renovation of existing or new public., educational or public service offices or buildings .designated by the City. The City shall provide ACC with reasonable notice of such construction and renovation. The first tier of service, closed circuit channels, institutional, and applicable two-way channels shall be provided free of charge to all of these locations. 13.5 All closed -captioned programming retransmitted by''the system shall include the closed -caption signal. 13.6 ACC will make VCR connections available to customers and will provide training in the proper use of VCRs in connection with the cable system and equipment. XIV ACCESS CHANNELS AND SERVICES 14.1 In order to develop and promote public, educational and governmental access programming for the system's access channels and institutional services, ACC hereby agrees to provide the following: A. (1) Nine downstream channels shall be designated for public, governmental, and educational access. The access channels shall be available for use by New York State, local governments, educational institutions, or members of the general public for education and public service programming, municipal services and local expression. (2) The public, governmental,' and educational access channels shall be available on a first-come, first- served basis at no charge to any individual, association, or organization desiring to utilize them. (3) Any PEG access channels unused by the City three years after the rebuild is complete shall revert to ACC, provided that if community needs subsequently require the use of any such channel, ACC will return said channel to the City six (6) months after receiving written notice iE ACC -has a use for the channel and immediately if there is no use for the channel. . B. Upon the request of the. City, ACC shall interconnect the access channels of the Cable Communications System with neighboring cable systems in Tompkins County. -15- C. EQUIPMENT (1) Local Programming Equipment.. In instances., as set forth in Appendix (D], where the use of local origination equipment is shared with access, this equipment shall be made available to access users free of charge at such times as the facilities are open and where the equipment is not being utilized for local origination productions. All local programming equipment shall remain the property of ACC but shall be made available for access use by the City of Ithaca, local institutions and residents and surrounding ACC System residents. (2) Public, Governmental and Educational Access Equipment. New public, governmental and educational access equipment (PEG) with a purchase value of $165,000 shall be purchased by ACC for additions to existing access equipment inventory listed in Appendix (E). ACC :shall prepare an equipment purchase list for City approval within sixty (60) days of the receipt of the Franchise. All equipment purchased shall be new and shall be purchased and installed by March 1, 1989. (3) Access Equipment Ownership and Availability. All access equipment shall remain the property of ACC but shall be made available for access use by the City of Ithaca, local institutions and residents and surrounding ACC system residents. On an average annual basis ACC has agreed to provide 2% of Gross City Revenues for capital PEG access equipment replacement and expansion. Any- future access equipment replacement and expansion commitments that are made by ACC to municipalities served by the same headend as the City of Ithaca, will be deducted to a floor of one percent of gross City revenues. All access equipment shall be available to access users on a first priority basis before local origination users. (4) Equipment Maintenance. PEG, municipal access and local origination equipment will be maintained and/or replaced by ACC in a manner consistent with good operating practice. Maintenance of that equipment will be done on site, or at any ACC facility, or at a manufacturer's repair facility in a reasonable timely manner. D. ACC shall maintain in its local programming studios in the City of Ithaca the equipment specified in (B) above. -16- .osts of such engineer if the tests performed show that the quality of service is below the standards set forth in this Franchise. 18.4 BOOKS AND RECORDS AVAILABLE TO CITY. A. The City reserves the right to -inspect all pertinent books, records, maps, plans, financial statements and other like material, of ACC, upon reasonable notice and during normal business hours. B. IE any of such maps or records are not kept in the City, or upon notice ACC is unable to provide the records in the City, and if the City shall determine that an examination of such maps or records is necessary or appropriate to the performance of any of their duties, then all travel and maintenance expenses necessarily incurred in making such examination shall be paid by ACC. 18.5 REPORTS REQUIRED. ACC shall file with the City: A. Upon request all reports required by or voluntarily submitted to the New York State Commission on Cable Television and the Federal Communications Commission (FCC) related to the City of Ithaca shall be provided to the City. B. An annual report setting forth the physical miles of plant construction and plant in operation during the fiscal year shall be submitted to the City. Such report shall also contain any revisions to the system "as built" maps filed with the City, and copies of all materials required by this Franchise to be given to subscribers. C. The following financial reports shall be submitted annually to the- City. (1) An ownership report, indicating all persons, who at any time during the preceding year did control or benefit from an interest in this Franchise of -five percent (5%) or more. (2) A copy of franchisee's annual report. (3) A report on the placement of any .limited partnership oEEering, if any, including the amount subscribed and the amount paid in. (4) An annual City -only, certified income statement. (5) An annual list of officers and members of the Board of ACC's and of any parent corporation. -27- D. The following system and operational reports shall be submitted annually to the City: . (1) ACC shall provide the City with a copy of its annual performance testing results as submitted to the' FCC. (2) An annual summary of the previous year's activities including, but not limited to, subscriber totals for each category of service offered including number of pay units sold, new services offered, and the character and extent of the service rendered to other users of the system, subject to ACC's need to protect proprietary information. (3) An annual summary of service requests and. complaints received and handled. (4) An annual summary of the number of outages. (5) An annual summary of all reports required by or voluntarily submitted to the New York State Commission on Cable Television and the Federal Communications Commission (FCC) related to the City of Ithaca. E. ACC. shall furnish to the City such additional information and records with respect to its operation, affairs, transactions or property, as may be reasonably necessary and appropriate to the performance of any of the• rights, functions or duties of the City in connection with this Franchise. 18.6 MANDATORY RECORDS. ACC shall at all times maintain: A. A record of all complaints received and interruptions or degradation of service experienced for the preceding period prior to a performance review, consistent with state law and regulation. B. An annual log showing the date, approximate time and duration, type and probable cause of all Cable Communications System outages, whole or partial, due to causes other than routine testing or maintenance. The entries in such log .shall be retained by ACC for one (1) additional year and shall be subject to inspection and copying by the City or its designee during ACC's regular business hours upon reasonable request. C. A full and complete set of plants, records and "as built" maps showing the exact location of all cable installed or in use in the City, exclusive of subscriber service drops.. -28- 18.7 RIGHT OF INSPECTION A. The City shall leve the right to inspect all books, records, reports, maps, plans, financial statements and other like materials of ACC as provided in this. -Franchise,' at any time during normal business hours. Set /6P.V,Y iTooKs d Rec-Pir B. The City shall have the right - to inspect all construction or installation work performed subject to the provisions of this Franchise and to make such tests as it shall find necessary to ensure compliance with the terms of this Franchise and other pertinent provisions of law. C. At all reasonable times and .for the purpose of enforcement of this Franchise, ACC shall permit examination by any duly authorized representative of the City, of all Cable Communication System'and facilities, together with any appurtenant property of ACC situated within the City and outside of the City if it is utilized in the operation.of the City's Cable Communications.System. XIX RATE REGULATION 19.1 City having established its right to rate regulation under applicable law, ACC will not raise basic.rates higher than the following for a five year period. On February 1, 1988 the maximum rate will be $9.00. On March 1, 1989 the maximum rate will be $11.00. On March 1, 1990, the maximum rate will be $12.10. On March 1, 1991, the maximum rate will be $13.31. On March 1, 1992, the maximum rate will be $14.64. Starting on March 1, 1993, and for each and every year thereafter for the term of this Franchise the maximum rate will be the previous year's maximum allowed rate plus 5 percent or that percentage equal to the rise in the Consumer Price Index, whichever is higher. Additionally, ACC will give a need -based senior citizen discount of 10 percent to those who qualify fcr real property tax exemption and others who qualify using mutually agreeable criteria. Effective March 1, 1989, ACC will not charge custoemrs for additional outlets or FM service. 19.2 ACC covenants that it will not bring or fund any lawsuit or other proceeding seeking deregulation of the aforementioned rates prior to March 1, 1991 and further agrees to •pay the attorney's fees and other costs of the City incurred in defending any such lawsuit or other proceeding should ACC bring them or fund them prior to March 1, 1991. 19.3 Effective March 1, 1991 ACC may seek deregulation of basic cable service rates. If at any time any additional' cable -29- franchises granted by the City, or any additional cable television is authorized to operate within the City, there will be no further regulation of ACC's rates from the date of said grant of any additional franchise or the beginning of construction ofsuch additional system, whichever comes sooner, until the termination of such additional franchise or of the operation of such additional system, whichever is later. 19.4 ACC shall file with the City schedules which shall describe all services offered by ACC, all rates and charges of any kind and all terms or conditions relating thereto. Thereafter, ACC shall file with the City all changes in services, all rates and charges of any kind and all terms and conditions relating thereto thirty (30) days prior to all such changes'. No rates or charges shall be effective except as they appear on a schedule so filed. XX FRANCHISE FEE 20.1 The City of Ithaca shall be entitled to receive from ACC a Franchise fee of five percent (5%) of ACC's Gross City Revenue. 20.2 The Franchise fee established in 20.1 .above shall be tendered as follows: A. Five percent (5%) of ACC's Gross City Revenue for successive three (3) month calendar periods tendered within forty-five (45) days after each such period. 20.3 To the extent necessary to prevent ACC from. diverting revenues from the operation of the Cable Communications System from ACC to Affiliates to the detriment of the City, Affiliates (excluding any affiliate which provides a national or regional programming service) shall be permitted to utilize the Cable Communications System only if a Franchise fee on City revenues derived therefrom is paid. 20.4 In the event that the fees herein required are not tendered on or before the dates fixed in this Franchise, interest due on such fee shall accrue from the date due at an annual rate of three percent (3%) above the prime rate or rates of interest, at the City's primary depository bank. 20.5 Tender or acceptance of any payment shall not be construed asan accord that the amount paid is correct, nor shall such acceptance of payment be construed as a release of any claim the City of Ithaca may have for additional sums including interest payable under this Franchise. All amounts paid shall be subject to audit and .recomputation, by an independent auditor -30- chosen by the City, which shall be based on a fiscal year and shall occur in no event later than one (1) year after the fees are tendered with respect tb such fiscal year. If, after audit and recomputation, an unpaid fee is owed to the City, such fee shall be paid within thirty (30) days after audit and recomputation and ACC shall pay the costs of the audit. The interest on such unpaid fee shall be charged Erom the due date at an annual rate of three percent (3%) above the prime rate or rates of interest at the, city's primary depository bank during the period that such unpaid amount is owed. XXI BONDS, INSURANCE AND INDEMNIFICATION 21.1 PERFORMANCE BOND. A. ACC shall provide a performance bond in the amount of $500,000 (five hundred thousand dollars) until construction is completed and shall maintain a performance bond in the amount of $25,000 (twenty-five thousand dollars) for the remaining term of the Franchise. The performance bond shall be provided and regulated in accordance with this Franchise. The performance bond shall be provided within thirty days of the receipt of final operating authority. B. The performance bond shall provide the following conditions: (1) There shall be recoverable by the City jointly and severally from the principal and surety., any and all fines and penalties due to the City and any and all damages, losses, costs and expenses suffered or incurred by the City resulting from the failure of ACC to: faithfully comply with the provisions of this Franchise; comply with all lawful orders, permits and directives of any City agency- or body having jurisdiction over its acts or defaults; pay fees due to the City; pay any claims due the City as resulting from judicial action; -pay any claims, liens or taxes -due bh-e -City which arise by reason of the construction, operation, maintenance or repair of the Cable Communications System. Such losses, costs and expenses shall include but not be limited to attorney's fees and other associated expenses. (2) The total amount of the bond shall be forfeited in favor of the City in the event: (a) ACC abandons the Cable Communications System at any time during the term of this Franchise or any extension thereto; -31- (b) ACC assigns this Franchise without the express written consent °of the City. C. Upon written application by.ACC, the City may, at its sole option, permit the amount of the bond to be reduced .or waive the requirements for 'a performance bond subject to the conditions set forth below. -Reductions granted or denied upon application by ACC shall be without. prejudice to ACC's subsequent applications or to the City's right to require the full bond at any time. thereafter. However, no application shall -be made by ACC within one (1) year of any prior applications. D. 'Prior to drawing upon the performance bond for the purposes described in this Section, the City shall notify ACC in writing that payment is due and ACC shall have thirty (30) days from the receipt of such written notice to make a full and complete payment. If ACC does not make the payment within thirty (30) days, the City may, upon determination.of. a breach of this Franchise pursuant to Section 3.6, withdraw the amount thereof, with interest and penalties, from the performance bond. E. Within three (3) days of a withdrawal from the performance bond, the City shall send to ACC, by certified mail, return receipt requested, written notification of the amount, date and purpose of such withdrawal. T. No later than thirty (30) days after mailing to ACC by certified mail notification of a withdrawal pursuant to paragraph D above, ACC shall replenish the performance bond in an amount equal to the amount so withdrawn. Failure to make timely replenishment of such amount to the performance bond shall constitute a substantial violation of the Ordinance and this Franchise. G. The performance bond required herein shall be in a form satisfactory to the City and shall require thirty (30) days written notice to the City of any non -renewal, alteration or cancellation to both the City and ACC. ACC shall, in the event of any such cancellation notice, obtain, pay all premiums for and file replacement bond or policies within thirty (30) .days following receipt by the City or ACC of any notice of cancellation. H. To offset the effects of inflation, the amounts of the bond provided for herein are subject to reasonable increases at the end of every three (3) year period of this Franchise, applicable to the next three year period, upon the reasonable determination of the City. Inflation compensation shall be computed in accordance with the regional:Consumer Price Index. -32- (2) Arising out of any claim for invasion by ACC, its servants, agents or employees of the right of privacy, or for defamation, of. any person, firm or corporation, or the violation or infringement of any copyright, trademark, trade name, service .mark or patent,••or of any other right of any person, firm or corporation. (3) Arising out of ACC's failure to comply with the provisions of any federal, state, or local statute, ordinance, or regulation applicable to ACC in its business hereunder. B. The foregoing indemnity is conditioned upon the following: e ma ing o any a-n-y—a-Lion, suit or other proceeding covered by the provisions of this Section. Nothing herein shall be deemed to prevent the City from cooperating with ACC and participating in the defense of any litigation by its own counsel at its solecost and expense. XXII BREACH 22.1 In the event that the City has reason to believe that ACC has defaulted in the performance of any provision of this Franchise except as excused by force majeure, the City shall notify ACC in writing of the provision or provisions which the City believes may be in default. ACC shall have thirty (30) days from the receipt of such notice to: A. Respond to the City in writing, contesting the City's assertion of default and providing such information or documentation as may be necessary or; B. To cure any such default or, in the event that, by nature of the default, such default cannot be cured within such thirty (30) day period, to take reasonable steps to cure the default and diligently continue such efforts until said default is cured. ACC shall report to the City in writing, at thirty (30) day intervals as to ACC's efforts, indicating the steps taken by ACC to cure the default and reporting ACC's progress until such default is cured. In the event ACC fails to cure the default within the stated period the City shall convene a public hearing on reasonable notice at which hearing ACC may be heard and after which the City shall specify the complaint against ACC; thereafter the City shall appoint an impartial person to act as factfinder.who shall -35- fix a date for a hearing at which evidence shall be received and a record kept of evidence of the complaint. The factfinder shall report in writing to both parties with his or her findings of fact. The Common Council shall make a finding of violation or no violation based'on those findings. In the event that the City after such hearing determines that ACC is in default of any such provision of this Franchise, the City may also determine to pursue any or all of the following remedies: A. Foreclose on all or any part of. the security provided pursuant to this Franchise, including without limitation the performance bond and/or the letter of credit, provided, however, the foreclosure shall be in such amount as the City reasonably •determines is necessary to remedy the default and shall include payment of all City expenses incurred in connection with the factfinding hearing. B. Commence an action at law for monetary damages, including the expenses of the factfinding hearing. C. Declare this Franchise to be revoked and order ACC to commence the removal of the Cable Communications System immediately or to cooperate with the City, or any such agency or person authorized or directed by the City to operate the Cable Communications System for a one year period, in maintaining the continuity of service; and D. Seek specific performance of any provision, which reasonably lends itself to such remedy, as an alternative to damages. ACC may seek recourse as available by law or federal or state regulation. 22.2 For the violation of any of the following provisions of this Franchise, the City shall notify ACC in writing of the violation and ACC shall be allowed not less than thirty (30) days, or such greater amount of time as the City may specify, to correct such violation. In the event ACC fails to correct the violation, the City will be entitled to collect liquidated damages according to the schedule listed below. Such liquidated damages, if not paid by ACC, shall be chargeable, to the extent available, to the. bond tendered by ACC within the aforesaid period of time. These liquidated damages shall be in addition to and not a limitation upon the other penal provision of this Franchise and applicable law, including penalties or revocation, or other statutorily or judicially imposed penalties or remedies. A. For Failure to complete construction and installation in accordance with this Franchise, $100.00 per day. -36- B�. For failure to submit reports or supply data in accordance with this Franchise, $10.00 per day for each day that such noncompliance continues. C. For failure to test, analyze and report on the performance of the Cable Communications System in accordance with this Franchise, $25.00 per day for each day, or part thereof, that such noncompliance continues. D. For failure to provide the capital equipment, and facilities, and services for public, .educational and governmental access, as specified in this Franchise, $75.00 per day, or part thereof, that such noncompliance continues. The City retains the right, at its sole option, to reduce or waive any of the above -listed penalties where extenuating circumstances or conditions beyond the control of ACC are deemed to exist. The Common Council or its designee shall determine the. City's willingness to reduce or waive any of the above -listed penalties. 22.3 No decision by the City to invoke any any remedy under this Franchise or under any statute, law or Ordinance shall preclude the availability of any other such remedy. 22.4 Exclusive jurisdiction and venue over any dispute, action or suit arising therefrom shall be in any court of - appropriate subject matter jurisdiction located in the State of New York and the parties by this instrument subject themselves to the personal jurisdiction of said court for the entry of any judgment and for the resolution of any dispute, action, or suit arising in connection with the entry of such judgment. XXIII TRANSFER OF OWNERSHIP OR CONTROL. 23.1 This Franchise cannot in any event be sold, transferred, leased,. assigned or disposed of, including but not limited to by force or voluntary sale, merger, consolidation, receivership or other means without the prior consent of the City. 23.2 ACC shall promptly notify the City of any actual or proposed change in control of ACC. The word "control" as used herein is not limited to major stockholders but includes actual working control in whatever manner. exercised. The current ownership of ACC is as listed in Appendix [G]. 23.3 Prior City authorization is required for every change, transfer or acquisition of control of ACC. City consent will not be unreasonably withheld. For the purpose of determining whether -37- 24.6 The parties recognize that it is within their mutual best interests for the Cable Communications System to be operated as efficiently as possible in accordance.with the requirements set forth in this Agreement. To achieve this, the parties agree to cooperate with each other in accordance with the terms and provisions of this Agreement. Shouldeither party believe that the other is not acting timely or reasonably within the confines of applicable regul.ations and procedures in responding to a request for action, that party shall notify the agents designated for that purpose by the other. The agent will use its best effort to facilitate the particular action requested. 24.7 During the term for the acts or omissions are involved directly installation, maintenance system as if the acts or acts or omissions of ACC. of this Agreement, ACC shall be liable of its affiliates while such affiliates or indirectly in the construction, or operation of the cable television omissions of such affiliates were the 24.8 If by reason of force majeure either party is unable in whole or in part to carry out its obligations hereunder, said party shall not be deemed in violation or default during the continuance of such inability. The term "force majeure" as used herein shall mean the following: acts of God; acts of public enemies; orders of any kind of the government of the United States of America or of the State of New York or any of their departments, agencies, political subdivision, or officials, or any civil or military authority; insurrections; riots; epidemics; landslides; lightening; earthquakes; fires; hurricanes; 'volcanic activity; storms; floods; washouts; droughts; civil disturbances; and explosions. 24.9 The Mayor or the Cable Commission shall be responsible for the continuing administration of this Franchise. Such designation cannot be changed without prior written notification to ACC. 4.10 Nothing herein shall be deemed to create a joint venture or principal -agent relationship between the parties, and neither party is authorized to, nor shall either party act toward third persons or the public in any manner which would indicate any such relationship with the other. 24.11 Every notice to be served upon the City shall be sent by certified mail, postage prepaid, to the City. Every notice to be served upon ACC shall be sent by certified mail, postage prepaid, to ACC at its Ithaca office. 24.12 The captions to sections throughout this Franchise are intended solely to facilitate reading and reference to the sections and provisions of this Franchise. Such captions shall not affect the meaning or interpretation of the Ordinance. -40-- CABLE COMMISSION MANUAL TABLE OF CONTENTS - ACC / City Franchise Agreement - 12/31/88 - City Cable Ordinance - ACC : Community Access : Policies & Procedures (Revised to 01/90) - NYS Cable Commission : Order Approving franchise Renewal (adopted 02/01/89; Released: 09/12/89; Expires 02/01/99) - Resolutions & Opinions re: Cable Opinion: Ralph Nash 11/05/89 - Interplay of Common Council, Mayoral & Cable Commissions Authority Resolution: Commons Council 02/24/75 Establishing Cable Commission Resolution: Commons Council 10/05/88 Cable Ordinance "marked up copy" adopted Resolution: Charter & Ordinance 1989 Renames Cable Commission & provides for day to day administration by Commission. - NYS minimum standard for Designation & Use for PEG Channels (Effective 08/19/88) - NYCRR Sec. 595.4 & 595.5: minimum standard for PEG c:\wp50\pat\cabletab.lst TABLE OF CONTENTS FRANCHISE AGREEMENT Page I. DEFINITIONS 1 II. GRANT OF FRANCHISE,5 III. RIGHT OF CITY TO ISSUE FRANCHISE 6 IV. FRANCHISE NONEXCLUSIVE 6 V. EFFECTIVE DATE OF FRANCHISE; EFFECT UPON EXISTING FRANCHISE 7 VI. TERM 7 VII. FRANCHISE RENEWAL 7 VIII. SERVICE AREA 7 IX. USE OF STREETS AND PUBLIC GROUNDS 8 X. DESIGN AND CONSTRUCTION PROVISIONS 9 XI. MAINTENANCE AND INSPECTION 13 XII. SYSTEM DESIGN AND CAPACITY 14 XIII. SYSTEM SERVICES 14 XIV. ACCESS CHANNELS AND SERVICES 15 XV. INSTITUTIONAL NETWORK 19 XVI. SUBSCRIBER AND USER RIGHTS 20 XVII. EQUAL EMPLOYMENT OPPORTUNITY AND AFFIRMATIVE ACTION 25 XVIII. REGULATION OF FRANCHISE 25 XIX. RATE REGULATION 29 XX. FRANCHISE FEE 30 XXI. BONDS, INSURANCE AND INDEMNIFICATION 31 XXII. BREACH 35 XXIII. TRANSFER OF OWNERSHIP OR CONTROL 37 XXIV. MISCELLANEOUS PROVISIONS 39 FRANCHISE AGREEMENT THIS AGREEMENT is made and entered into as of this day of , 1988, by and between the City of Ithaca, New York, a municipal corporation, hereinafter referred to as "City," and American Community Cablevision, a division of American Television and Communications Corporation (hereinafter referred to as "ACC") with its principal place of business at 519 West State Street, Ithaca, New York 14850. WHEREAS, the City is authorized to grant one or more nonexclusive, revocable, franchises to operate and maintain a Cable Communications System with the City; WHEREAS, the City received an application from ACC for renewal of its existing franchise; and WHEREAS, the City, after due evaluation, has determined that it is in the best interest of the City and its residents to renew the Franchise of ACC for a term as herein provided, NOW., THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties do mutually agree as follows: I DEFINITIONS. For the purpose of this Franchise the following terms, phrases, words and their derivations shall have the meaning given herein. When not inconsistent with the context, words used in the present tense include the future, words in the plural number include the singular number. The word "shall" is mandatory and "may" is permissive. Words not defined shall be given their common and ordinary meaning. 1.1 ACCESS CHANNELS means channels (6MHz each) set aside for public use, educational use or governmental uses with no charge for usage by ACC. Access channels designed for public use shall be available on a nondiscriminatory basis. 1.2 AFFILIATE means each person who falls into one or more of the following categories: (a) each person having, directly or indirectly, control or a controlling interest in ACC; (b) each person in which ACC has; directly or indirectly, control or a controlling interest; (c) each officer, director, general partner, joint venturer or joint venturee partner, of ACC; and (d) each person, directly or indirectly, controlling, controlled by, or otherwise related to ACC by common ownership, common management, or common control; provided AFFILIATE shall in no event mean: A. The City; B. Any duly authorized PEG Access Organization; C. Any educational institution acting on its capacity as such, for public, educational, or charitable purposes; or D. Any creditor of ACC solely by virtue of its status as a creditor and which is not otherwise an Affiliated person by reason of owning controlling interest in, being owned by, or being under common control with, ACC. E. Time Inc. or any subsidiary of Time Inc. other than American Television and Communications Corporation. 1.3 BASIC RATE means the rate charged for the lowest priced tier of service which at a minimum shall offer twelve channels including the delivery of broadcast channels, one access channel and FM service. 1.4 CABLE. COMMUNICATIONS SYSTEM, also referred to as "system," .means a facility, consisting of a set of closed transmission paths and associated signal generation, reception and control equipment that is designed to provide cable service. which includes video programming and other services which may include two-way services on the subscriber network and which is provided to multiple subscribers within a community, but such term does not include (a) a facility that serves only to retransmit the television signals of one or more television broadcast stations; (b) a facility that serves only subscribers in one or more multiple unit dwellings under common ownership, control, or management, unless such facility or facilities uses any public -rights-of-way; (c) a facility of a common carrier which is subject, in whole or in part, to the provision of Title II of the Cable Act, except that such facility shall be considered a cable system to the extent such facility is used in the transmission of video programming directly to subscribers; or (d) any facilities of any electric utility used solely for operating its electric utility systems. Cable Communications System also includes any institutional network. , 1.5 CITY means the City of Ithaca, New York. 1.6 CHANNEL means a six Megahertz (MHz) frequency band, which is capable of carrying either one standard video signal, a number of audio, digital or other nonvideo signals or some combination of such signals. -2- 1 1.7 COMMON COUNCIL means the mayor and aldermen of the City of Ithaca. 1.8 COMMUNICATIONS POLICY ACT or CABLE ACT means the Cable Communications Policy Act of 1984 as 'it may be amended or succeeded. 1.9 COMPLAINT means that a subscriber or user informs ACC or the City, that a problem has been brought to the attentionof ACC, but is unresolved to the satisfaction of the subscriber. 1.10 CONVERTER means an electronic device which converts signals to a frequency not susceptible to interference within the television receiver of a subscriber, and any channel selector which permits a subscriber to view all signals delivered at designated converter dial locations at the set or by remote control. 1.11 DROP shall mean a connection from feeder cable to the subscriber/user television set, radio or other terminal. 1.12 EDUCATIONAL ACCESS CHANNEL means any channel where educational programs are the only designated use. The educational access channel(s) shall only be used for non- commercial purposes. 1.13 FAIR MARKET VALUE means the price that a willing buyer would pay to a willing seller for a going concern based on the system valuation prevailing in the industry at the time. 1.14 FCC means the Federal Communications Commission and any • legally appointed or elected successor. 1.15 FRANCHISE means this Franchise contract and any mutually agreed to additions or deletions therefrom. 1.16 FRANCHISE AREA means the entire City. 1.17 FRANCHISE FEE means the percentage, as specified in this Franchise agreement, of ACC's gross annual revenues earned from all sources within the City payable in exchange for the rights granted pursuant to the Franchise. 1.18 GROSS CITY REVENUES means all revenue derived directly or indirectly by the Grantee and by Grantee's affiliates from services provided within the City via the Cable Communications System. 1.19 INSTALLATION shall mean the connection of the system from feeder cable to subscribers' terminals. -3- 1.20 INSTITUTIONAL NETWORK means a separate cable within the cable communications system which can be used to transmit video, audio and data signals in two directions. 1.21 INSTITUTIONAL SERVICE means such video, audio, data and other services provided to institutional users. These may include, but are not limited to, one-way video, two-way video, audio or digital signals. 1.22 LOCAL ORIGINATION means` programming produced or purchased by ACC (e.g., advertisements, news, programming with advertising) which is under the control of ACC. Local origination is specifically not to be construed as public, governmental or educational access. 1.23 LOCAL ORIGINATION CHANNEL means any channel designated for local origination. This channel may be used for commercial purposes. 1.24 MONITORING means observing a communications signal, or the absence of a signal, where the observer is not a party to the communication, whether the signal is observed by visual or electronic means, for any purpose whatsoever. 1.25 PERSON means an individual, partnership, association, organization, corporation or any lawful successor Transferee of said individual, partnership, association or corporation. 1.26 STREETS AND PUBLIC GROUNDS means the surface, the air space above the surface and the area below the surface of any public street, highway, lane, path, alley, sidewalk, boulevard, drive, bridge, tunnel, park, parkways, waterways, utility easements or other public rights-of-way or hereafter held by the City which shall entitle the City and ACC to the use thereof for the purpose of installing and maintaining the Cable Communications System. No reference herein, or in any Franchise, to the "Streets and Public Grounds" shall be deemed to be a representation or guarantee by the City that its title to any property is sufficient to permit its use for such purpose, and ACC shall, by its use of such terms, be deemed to gain only such rights to use property in the City as the City may have the undisputed right and power to give. 1.27 REASONABLE NOTICE shall be written notice addressed by either party at its principal office within the City or such other office as ACC has designated to the City as the address to which notice shall be transmitted to it, which notice shall be certified and postmarked not less than ten (10) business days prior to that day in which the party giving such notice shall commence any action which requires the giving of notice. -4- 1.28 RESIDENT means any person residing in the City as otherwise defined by applicable law. 1.29 RESIDENTIAL SUBSCRIBER means a subscriber who receives a service in an individual dwelling unit where the service is not. to be utilized in connection with a business, trade or profession. 1.30 SALE shall include any sale, exchange or barter. 1.31 SCHOOL means any public or nonprofit educational institution including primary and secondary schools, colleges and universities, both public and private. 1.32 SERVICE AREA means the entire geographic area within the Franchise Area. 1.33 SERVICE REQUEST means a request from the subscriber for a technical service, such as installation, adjustment for poor picture quality and converter 'repair. 1.34 STATE means the state of New York. 1.35 SUBSCRIBER means any person, firm, corporation or other entity who or which elects to subscribe to, for any purpose, a service provided by ACC by means of or in connection with a Cable Communications System. 1.36 TRANSFER means the disposal by ACC, directly or. indirectly, by gift, assignment, voluntary sale, merger, consolidation or otherwise, of five percent (5%) or moreat one time of the ownership or controlling interest in the Cable Communications System, or twenty percent (20%) cumulatively over the term of the Franchise of such interests to a corporation, partnership, limited partnership, trust or• association or person or groups of persons acting in concert. 1.37 USER means a person or organization utilizing channel or equipment and facilities for purpose of producing and/or transmission of material, as contrasted with receipt thereof in a subscriber capacity. II GRANT'OF FRANCHISE 2.1 ACC is hereby granted for itself and its successors and assignees, subject to the terms and conditions of this Franchise, the right, privilege, and authority to operate and maintain a Cable Communications System within the streets, alleys, and public ways of the City. ACC shall provide a modern, state-of- the-art Cable Communications System to the residents and institutions of the City in accordance with this Franchise. -5- T 2.2 For the purpose of operating and maintaining a Cable Communications System in the City, ACC may erect, install, extend, repair, replace, and retain in, on, over, under, or upon, across and along the public streets, alleys, and ways within the City such wires, cables, conductors, ducts, conduits, vaults, manholes, amplifiers, appliances, pedestals, attachments, and other property and equipment as are necessary and appurtenant to the operation of the Cable Communications System in conformance with the City's specifications. Prior to any extension, relocation, or alteration, however, ACC shall file plans with the appropriate City agencies and utility companies and receive written approval before proceeding. 2.3 Nothing in this Franchise shall be deemed to waive the requirements of the various codes and Ordinances of the City regarding permits, fees to be paid, or manner of construction. III RIGHT OF CITY TO ISSUE FRANCHISE 3.1 ACC acknowledges and accepts the legal right of the - City to issue and maintain a Franchise. 3.2 No Cable Communications System shall be allowed to occupy or use the streets of the City or be allowed to operate without a Franchise. IV FRANCHISE NONEXCLUSIVE 4.1 This Franchise shall not be construed as any limitation upon the right of the City to grant to other persons rights, privileges, or authorities similar to the rights, privileges, and authorities herein set forth, in the same or other streets, alleys, or other public ways or public places. The City specifically reserves the right to grant at any time during the term of this agreement or renewal thereof, if any, such additional franchises for a Cable Communications System as it deems appropriate. If any franchise is granted on terms more favorable to grantee thereof than those contained herein then ACC shall have the right to comply with all the terms of such other franchise, to the extent applicable, in lieu of compliance herewith. V EFFECTIVE DATE OF FRANCHISE; EFFECT UPON EXISTING FRANCHISE 5.1 The effective date of the Franchise shall be January 20, 1988, and, immediately upon the taking effect of this Franchise, the prior Franchise granted to ACC, on , bythe passage of Ordinance No. shall be superseded and of no further force and effect; provided,, however, that vested rights relating to billings and the City's rights to accrued Franchise fees shall not be affected thereby; and provided, further, that any criminal proceedings commenced under or pursuant to said Franchise shall in no manner be affected. VI TERM 6.1 The City will request, along with ACC, that the New York State Commission on Cable Television waive its rules and permit the City to grant ACC a franchise for 15 years. If such request is not granted, the term will be ten years and the other terms of this Franchise will not be affected. Such term shall be subject to sooner termination as provided in this Franchise at which time this Franchise shall expire and be of no further force and effect. The term of the Franchise shall be for a period of 15 years, or such shorter term as approved by the State Commission on Cable Television, from the date of issuance of a Certificate of Confirmation of this Franchise by the New York State Commission on Cable Television, unless sooner terminated as provided herein at which time it shall expire and be of no further force and effect. VII FRANCHISE RENEWAL 7.1 Upon completion of the term of this Franchise the City may grant or deny renewal of this Franchise of ACC in accordance with the provisions of the Cable Act and any other applicable federal, state and local laws. VIII SERVICE AREA 8.1 ACC shall offer full cable communications service to all residents in the Franchise Area, which shall be the corporate limits of the City of Ithaca, including all territory thereafter annexed to the City. -7- 1 8.2 ACC shall make cable service available to all dwelling units and commercial establishments within thirty (30) days of a request for such service and the receipt of any applicable City, state, federal and utility company permits and of permission from any landlord or other person controlling access to such premises. IX USE OF STREETS AND PUBLIC GROUNDS 9.1 In exercising rights pursuant hereto, ACC shall not endanger or interfere with the lives of persons, interfere with any installations of the City, any public utility serving the City or any other person permitted to use the Streets and Public Grounds nor unnecessarily hinder or obstruct the free use of the Streets and Public Grounds. The grant of this Franchise does not establish priority for use over the other present or future permit or Franchise holders. or the City's own use of the Streets and Public Grounds. The Common Council of the City shall at all times control the distribution of space in, over, under or across all Streets or Public Grounds and occupied by the Cable Communications System. All rights granted for the construction and operation of the Cable Communications System shall be subject to the continuing right of the Common Council to require such reconstruction, relocation, change of discontinuance of the appliances used by the Cable Communications System in the streets, alleys, avenue, and highways of the City, as shall in the opinion of the Common Council be necessary in the public interest. 9.2 Nothing in the Franchise shall be in hindrance to the right of the City or any governmental authority to perform or carry on, directly or indirectly, any public works or public improvements of any description. Should the Cable Communications System in any way interfere with the construction, maintenance or repair of such public works or public improvements, ACC shall, at its own cost and expense, protect or relocate its Cable Communications System, or part thereof, as reasonably directed by the City officials or any governmental authority. 9.3 If at any time, in case of fire or disaster in the City, it shall become necessary in the reasonable judgment of the City to cut or move any of the wires, cables, amplifiers, appliances or appurtenances of the Cable Communications System, the City shall have the right to do so at the sole cost and expense of ACC. 9.4 The City shall have the power at any time to order and require ACC to remove or relocate any pole, wire, cable, or other structure that is unnecessarily dangerous to life or property. Restoration shall be made in as good a condition or better. In the event that ACC, after notice, fails or refuses to act within -8- a reasonable time, the City shall have power to remove or relocate the same at the sole cost and expense of ACC. 9.5 Upon termination of the Franchise by passage of time or otherwise, and unless ACC transfers the Cable Communications System to a subsequent franchise approved by the Common Council, ACC shall remove its supporting structures, poles, transmission and distribution systems, and all other appurtenances from the Streets and Public Grounds and shall restore those areas to as good a condition or better. Such removal shall be made so as not to conflict with public health, safety or convenience. Removal shall be completed within twelve (12) months after such termination. At that time the City may deem any property not_ removed as having been abandoned. Such property may then by removed at the option of the City at ACC's expense less any recoverable salvage value. X DESIGN AND CONSTRUCTION PROVISIONS 10.1 ACC shall construct, install, operate and maintain all elements of the Cable Communications System within the City in accordance with the maps and other documents submitted in connection with this Franchise. Poles, towers and other obstructions shall be erected so as not to interfere with vehicular or pedestriantraffic over public ways and places. The erection and location of all poles, towers and other obstructions shall be fixed with the prior written approval and under the supervision of the City pursuant to local regulation, provided, however, ACC shall not have a vested interest in such location; and such construction shall be removed by ACC at its sole cost and expense whenever, in the judgment of the City, the same restricts or obstructs the operation or location or any future operation or location of public ways and places, or whenever the City closes or abandons any public way or place. 10.2 ACC shall, at its sole cost and expense, protect, support, temporarily disconnect, relocate in the same street or other streets and public grounds, or remove from any street or any other public ways and places and of its property as requested for reason of traffic conditions, public safety, street construction, change or establishment of street grade, or the construction of any public improvement or structure by any City Department. 10.3 ACC shall be subject to all laws, ordinances or regulations regarding private property in the course of constructing, installing, operating or maintaining the Cable Communications System in the City of Ithaca. ACC shall promptly repair or replace all private property, both real and personal, damaged or destroyed as a result of the construction, -9- t� F installation, operation or maintenance of the Cable Communications Systems at is sole cost and expense. 10.4 ACC shall restore any street it has disturbed and shall, at its own cost and expense, restore and replace any other property disturbed, damaged or in any way injured by or on account of its activities to as good as the condition such property was in immediately prior to the disturbance, damage or injury. Restoration must be in accordance with the rules and regulations established by the City. 10.5 ACC may trim trees or other vegetation owned by the City to prevent branches, leaves or roots from touching or otherwise interfering with its wires, cables or other structures as approved by the City. 10.6 In all areas of the City where cables, wires and other like facilities of the telephone and electric utilities are already underground, ACC must also place its facilities underground to the extent practicable. At such time as these facilities are placed underground by the telephone and electric utility companies or are required as are telephone- and/or electric to be placed underground by the City, ACC shall likewise place its facilities underground at its sole cost and expense. Underground cable lines shall be placed beneath the pavement subgrade (minimum 22 inches to top of cable). 10.7 Where any damages or alterations, occur to the City's water, sewage or drainage lines or to any other municipal structures in the streets during the construction due to the presence, negligence, operation or maintenance of the Cable Communications System, the sole cost of such repairs including all services and materials will be billed to ACC and these charges shall be paid within sixty (60) days of receipt of notice, or the City may foreclose on performance bonds or invoke other appropriate sanctions provided for in this Franchise. 10.8 ACC shall temporarily raise or lower its wires or other equipment upon the reasonable request of any person, including without limitation a person holding a building moving permit issued by the City. The expense of such raising or lowering shall be paid by the person requesting the same and ACC shall have the authority to require such payment in advance. ACC shall be given reasonable notice necessary to maintain continuity of service. This provision shall not apply to requests by the City for City purposes for which movement there shall not be a charge by ACC. 10.9 The City does not guarantee the accuracy of any maps showing the horizontal or vertical location of existing structures. In public -rights -of -ways, where necessary, the location shall be verified by excavation. -10- 10.10 ACC shall give appropriate notice to the City .and residents within a reasonable period of time of proposed construction, excavation, laying or stringing of cable under streets. or on poles, but in no event shall such notice be given less than seven (7) days before such commencement. 10.11 The construction, installation, operation, maintenance and/or removal of the Cable Communication System shall meet all of the following safety, construction and technical specifications and codes and standards: Occupational Safety and Health Administration Regulations (OSHA) National Electrical Code National Electrical Safety Code (NESC) National Cable Television Standard Code AT&T Manual of Construction Procedures (Blue Book) Bell Telephone.Systems Code of Pole Line Construction All Federal, State and Municipal Construction Requirements, including FCC Rules and Regulations Utility Construction Requirements All Building and Zoning Codes, and all Land Use Restrictions as the Same Exist or may be Amended Hereafter. 10.12 All contractors or subcontractors of ACC must be properly licensed under all applicable federal, state and local laws and regulation. ACC shall be responsible for all acts or omissions of any such contractor or subcontractor in the construction, installation, maintenance or operation of ACC's Cable Communications System. 10.13 CONSTRUCTION PLAN APPROVAL. A. Prior to the erection or installation by ACC of any towers, poles, underground conduits or fixtures for use in connection with initial construction, rebuild, upgrade or line extension of the Cable Communications System under this Franchise, ACC shall make available for City approval a concise description of the facilities proposed to be erected or installed, including strand maps, if required, together with a map and plans indicating the proposed location of all, such facilities. Approval, by the City shall not be unreasonably withheld and shall be completed in a timely. manner. B. For the rebuild ACC shall allow a City selected engineer to inspect such information, maps and plans for five business days in ACC's office. Prior to the five days, ACC shall give the City thirty (30) days prior notice that such information will be available. ACC shall accommodate reasonable scheduling modifications. If ACC makes a material -11- change in any part of the system design, the City shall be notified prior to construction and shall have a reasonable period of time to have an engineer review the changes in. ACC's office. C. No erection or installation of any tower, pole, underground conduit or fixture for use in the Cable Communications System shall be commenced by any person until approval therefor has been received from the City pursuant to local regulation provided that such approval shall not be unreasonably withheld. D. ACC will develop a plan for cutover of the rebuild system which will include the activation of the new system prior to cutover and a minimal disruption to customer service. 10.14 ERECTION, REMOVAL AND COMMON USE OF POLES. A. No poles shall be erected by ACC without prior approval of the City with regard to location, height, types and any other pertinent aspect. However, no location of any pole or wire -holding structure of ACC shall give rise to a vested interest and such poles or structures shall be removed or modified by ACC at its own expense whenever the City determines that the public convenience would be enhanced thereby. ACC shall utilize existing poles and conduits where possible. B. Where poles already exist for use in serving the City and are available for use by ACC, but it does not make arrangement for such use, the City may require ACC to use such poles and structures if it determines that the public convenience would be enhanced thereby and the terms of the use available to ACC are just and reasonable. C. Where a public utility serving the City desires to make use of the poles or other wire -holding structures of ACC, but agreement thereof with ACC cannot be reached, the City may require ACC to permit such use for such consideration and upon payment of the prevailing public utility rates for make ready and pole attachment rental, if the City determines that the use would enhance the public convenience and would not unduly interfere with ACC's operation. 10.15 The City or its designee shall have the right to inspect at any time all construction or installation work performed subject to the provisions of this Franchise and to make such tests as it shall deem necessary to ensure compliance with the terms of this Franchise and all other applicable law. ACC shall cooperate fully with the City during all inspections and -12- tests and shall provide access to all equipment records, and other materials and information necessary for such inspections and tests. 10.16 CONSTRUCTION REPORTING REQUIREMENTS. A. Within thirty (30) days of the granting of this Franchise, ACC shall have applied for any necessary agreements, licenses or certifications and shall provide the City with a written progress report. B. Written progress reports shall be submitted to the City on a monthly basis throughout the entire construction process. 10.17 All work involved in construction, installation, maintenance, and repair of the Cable Communications System shall be performed in a safe and reliable manner. Any construction, extension or installation performed pursuant to this Franchise shall be in conformance with all applicable federal, state and local laws, codes and regulations. ACC shall at all times comply with the standards set forth in the "American Television and Communications Corporation Construction Specifications and Practices" (attached hereto as Appendix [A] and incorporated by reference), in addition to the National Electrical Safety Code, the National Electrical Code, the Bell System Code of Pole Line Construction, and the National Cable Television Association Code of Construction Practice. ACC shall file "requests for all necessary operating authorizations and permits with the New York Commission on Cable Television, utilities, and the Federal Communications Commission no later than sixty (60) days from the date the franchise is awarded. The Cable Communications System shall be completed by March 1, 1989. 10.18 Initial proof of performance testing shall occur within sixty (60) days prior to the commencement of the Cable Communications System service to each section of the City as set forth in this Franchise. Should performance prove defective, the defect shall be appropriately remedied. The costs of such test shall be borne solely by ACC. XI MAINTENANCE AND INSPECTION 11.1 ACC shall maintain wires, cables and all other real and personal property and facilities constituting the Cable Communications System in good condition, order and repair at all times during the term of this Franchise. 11.2 Except where there exists an emergency situation necessitating a more expeditious procedure, ACC may interrupt -13- service for the purpose of repairing the Cable Communications System only during periods of minimum use. 11.3 Radiation monitoring shall be conducted on an ongoing basis. The results of said monitoring shall be made available to the City upon request. 11.4 ACC shall perform allsystem tests and maintenance procedures as required by the Cable Ordinance and in accordance with tests and procedures as specified by the FCC, New York State Commission on Cable Television, and the National Cable Television Association's (NCTA) testing procedures. The NCTA testing manual is attached hereto as Appendix [B] and incorporated by reference. XII SYSTEM DESIGN AND CAPACITY_ 12.1 ACC shall operate and maintain in the City of Ithaca a Cable Communications System spaced to permit a minimum of 450 MHz operation, capable of using state-of-the-art converters. In constructing, operating and maintaining the system, ACC shall at all times comply with applicable laws, construction standards, safety codes, government requirements and FCC technical standards. 12.2 Equipment used for the distribution system, headend and reception facilities shall be of good and durable quality and be serviced and repaired on a regular basis. Any substitution or changes in hardware components must be of good and durable. quality (e.g., amplifiers, cable, antennas). XIII SYSTEM SERVICES 13.1 The basic cable service shall have a minimum of 12 (6Mhz) channels. If the Basic has only 12 channels, one channel shall be designated for public access. If the basic service has more than 12 channels, all access channels will be provided on basic. 13.2 ACC shall maintain, at a minimum, the mix, quality, and level of programming set forth in Appendix [C], attached hereto and incorporated by reference. 13.3 ACC will provide the stereo signal for the premium service channels and broadcast stations which broadcast in stereo. Additionally, a customer may elect to receive premium and other selected channels via FM stereo service. -14- 13.4 ACC shall provide free cable drops to locations already provided with free drops, and at any City designated locations in any new or renovated public, educational or public service offices or buildings designated by the City at the time of the rebuild up to a maximum of 50. After the rebuild, ACC shall provide additional drops as specified by the City at the time of building construction or renovation of existing ornew public, educational or public service offices or buildings designated by the City. The City shall provide ACC with reasonable notice of such construction and renovation. The first tier of service, closed circuit channels, institutional, and applicable two-way channels shall be provided free of charge to all of these locations. 13.5 All closed -captioned programming retransmitted by the system shall include the closed -caption signal. 13.6 ACC will make VCR connections available to customers and will provide training in the proper use of VCRs in connection with the cable system and equipment. XIV ACCESS CHANNELS AND SERVICES 14.1 In order to develop and promote public, educational and governmental access programming for the system's access channels and institutional services, ACC hereby agrees ,to provide the following: A. (1) Nine downstream channels shall be designated for public, governmental, and educational access. The access channels shall be available for use by New. York State, local governments, educational institutions,or members of the general public for education and public service programming, municipal services and local expression. (2) The public, governmental, and educational access channels shall be available on a first-come, first- served basis at no charge to any individual, association, or organization desiring to utilize them. (3) Any PEG access channels unused by the City three years after the rebuild is complete shall revert to ACC, provided that if community needs subsequently require the use of any such channel, ACC will return said channel to the City six (6) months after receiving written notice if ACC has a use for the channel and immediately if there is no use for the channel. B. Upon the request of the City,. ACC shall interconnect the'access channels of the Cable Communications System with neighboring cable systems in Tompkins County. -15- C. EQUIPMENT (1) Local Programming Equipment.. In instances, as set forth in Appendix [D], where the use of local origination equipment is shared with access, this equipment shall be made available to access users free of charge at such times as the facilities are open and where the equipment is not being utilized for local origination productions. All local programming equipment shall remain the property of ACC but shall be made available for access use by the City of Ithaca, local institutions and residents and surrounding ACC System residents. (2) Public, Governmental and Educational Access Equipment. New public, governmental and educational access equipment (PEG) with a purchase value of $165,000 shall be purchased by ACC for additions to existing access equipment inventory listed in Appendix [E]. ACC shall prepare an equipment purchase list for City approval within sixty (60) days of the receipt of the Franchise. All equipment purchased shall be new and shall be purchased and installed by March 1, 1989. (3) Access Equipment Ownership and Availability. All access equipment shall remain the property of ACC but shall be made available for access use by the City of Ithaca, local institutions and residents and surrounding ACC system residents. On. an average annual basis ACC has agreed to provide 2% of Gross City Revenues for capital PEG access equipment replacement and expansion. Any future access equipment replacement and expansion commitments that are made by ACC to municipalities served by the same headend as the City of Ithaca, will be deducted to a floor of one percent of gross City revenues. All access equipment shall be available to access users on a first priority basis before local origination users. ,(4) Equipment Maintenance. PEG, municipal access and local origination equipment will be maintained and/or replaced by ACC in a manner consistent with good operating practice. Maintenance of that equipment will be done on site, or at any ACC facility, or at a manufacturer's repair facility in a reasonable timely manner. D. ACC shall maintain in its local programming studios in the City of Ithaca the equipment specified in (B) above. -16- ACC shall adopt business hours which shall provide for the use of the studio at a minimum of sixty (60) hours a week between the hours of 9 a.m. and 11 p.m.,including some evening hours and some hours on Saturdays. ACC shall offer additional weekday or weekend hours as community needs dictate. 14.2 • ACC shall establish rules to insure that the studio(s) and portable equipment are available equitably to the governmental, educational and public sectors. Rules for public access should assure the availability of the studio(s) and portable equipment on a first-come, first-served basis. Any changes to current access rules shall be established by ACC within three months of the Franchise award, and ACC shall file those rules with the New York State Commission on Cable Television. Any further changes thereafter shall also be filed with the New York State Commission on Cable Television. Such rules shall at all times include the following provisions. A. Procedures for scheduling the use of television production equipment and for scheduling the cablecasting of programming on the channel(s) designated for the purposes enumerated inparagraphA above; B. Procedures for registering and resolving complaints regarding channel availability, priorities and usage. 14.3 ADDITIONAL ACCESS REQUIREMENTS. The following requirements shall also apply to access use: A. Channel time shall be available on a first come, first serve nondiscriminatory basis, except as provided in the rules of the New York State Commission on Cable Television; B. No charges shall be paid for the use of production equipment facilities and personnel; C. Records shall be maintained of the use of the designated television channels, including the names and addresses of persons and organizations providing programming for such channels; such record shall be available locally for public inspection and retained for a minimum of two. years; D. Designated channels shall not be used for the promotion or sale of commercial products or services, including advertising by or on behalf of candidates for public office. 14.4 ACC shall provide adequate programming and technical staffing for the maintenance and operation of the access channels, facilities, studio and equipment, and the provision of -17- access services as required.in the -franchise and as contained in the franchise proposal. ACC shall provide, at a minimum, two full-time access staff people at the time of the Franchise award, and an additional full-time access staff person at the completion of the rebuild (no later than March 1, 1989), and a fourth full- time access staff person at the beginning of year five of the Franchise, and a fifth full-time staff person at the beginning of year ten of the Franchise. ACC shall have the right. to petition the Cable Commission in 1991 and 1996 to have the requirement to employ the fourth and/or fifth access staff person waived, which waiver shall not be granted in any event if community needs support the position. 14.5 ACC shall provide adequate training for access users free of charge. At a minimum, ACC shall provide monthly access production and editing training classes, provided that community interest of five or more residents in any given month exists. At no time will a resident be requested to wait over two months for training. The two training classes will each be approximately nine hours in duration. 14.6 ACC, at a minimum, shall provide each suh;criber information on the.' availability of the access channels, production equipment, training and ACC's address and telephone number on a regular basis. Access programs shall be announced in the cable guide based on reasonable rules for timely submissions. ACC will also advertise programs- and access services in newspapers of local circulation. ACC shall conduct facility tours and maintain a speaker's bureau to provide informational presentations to local organizations and institutions. Additional outreach activities will be conducted as described in ACC's proposal. ACC shall ensure the development and propagation of public, governmental and educational access as a vital community resource. 14.7 ACC will cablecast the monthly Common Council meetings and not less than two (2) of the five (5) Standing Committees of Council meetings on a rotating monthly basis. 14.8 ACC shall provide access users with the following access damage waiver policy for negligent damage to equipment. Negligent damage shall not include ordinary wear and tear, and mechanical breakdown through causes not the fault of the operator. A. An annual payment of $15 will reduce the volunteer's total liability for equipment damage and repair to $250 for each individual use of the equipment. Such annual payment may be increased by ACC consistent with increases in the Consumer Price Index. -18- B. An annual payment of $25 will reduce the volunteer's total liability for equipment damage and repair to $125 for each individual use. Such annual payment may be increased by ACC consistent with increases in the Consumer Price Index. C. ACC may require access users who do not elect the damage waiver policy to be fully liable for damage to equipment. 14.9 ACC shall support the creation and maintenance of an Access Advisory Board, to consist of nine (9) members: three (3) City residents (two to be appointed by the City, one to be appointed by ACC), two (2) non -City residents (one to be appointed by the City, one to be appointed by ACC), two (2) representatives of institutional access users. (both to be appointed by the City), and one (1) ACC representative and one (1) City representative.' The ACC representative and City representative will be non-voting members. The City Cable Commission shall designate one of the members of the Advisory. Board to serve as Chair. The Board shall schedule regular - meetings as it deems appropriate. Four (4) members shall constitute a quorum. The Advisory Board shall report regularly to the City Cable Commission. If at any time the City Cable Comimission determines that the Advisory Board is no longer effective or necessary, the Cable Commission may dissolve the Board and its duties and responsibilities shall revert to the City Cable Commission. The Adivosry Board shall review and monitor all access policies and procedures but will remain advisory in nature. ACC shall consult with the Advisory Board on the purchase of equipment, the studio hours available for access users, and access rules. ACC shall provide quarterly reports to the Board on the purchase and maintenance of equipment, the schedules of access staff, and the use of studio time. XV INSTITUTIONAL NETWORK 15.1 ACC will construct and maintain a midsplit 300 megahertz institutional network that will connect the following buildings: City Hall, Cornell University, Ithaca College, Tompkins County Library, Ithaca High School, Boynton Junior High School, The Alternative School, Ithaca Youth Bureau, GIAC, Police Headquarters, Central Fire and the Bus Garage. The I -net shall be capable of being interconnected at the headend to the subscriber network. ACC will provide the City with eight upstream and eight downstream channels, free drops and necessary video converters to all aforementioned locations at no charge for the duration of the.Franchise. For purposes of this section, an upstream channel shall be a channel which can transmit from institutional and other locations on the I -net to the headend and -19- other points on the I -net. Any channels unused by the City three years after the institutional network, is activated will revert to ACC provided that if the City subsequently has a use for any such channel ACC will return said channel(s) to the City six (6) months after receiving written notice if ACC has a use for the channel and immediately if there is no use of the channel. ACC will have the same liability for I -net users that the telephone company has for telephone users. ACC will respond to repair calls for the I -net within two. (2) hours. For requests received during non -business hours the City or other I -net users will pay ACC $40 per hour for such service. Such hourly fee may be raised by ACC annually consistent with increases in the Consumer Price Index. For requests received during business hours there will be no charge. ACC shall provide scrambling services to I -net users as reasonably requested. 15.2 ACC shall maintain existing dedicated cables to sites for originating local programming (City Hall, Ithaca College and Tompkins County Library). During the rebuild, ACC shall install and thereafter maintain dedicated cable or cables to the following additional locations for originating local programming: Ithaca High School, Boynton Junior High School, The Alternative School, Ithaca Youth Bureau, GIAC and Cornell University. The origination site at Cornell University shall be selected by Cornell. 15.3 Existing agreements with the City for use of the Cable Communications System, such as the City's fire alarm system, shall be continued by ACC for the term of this Franchise. 15.4 ACC shall provide an all channel audio emergency alert system to the City. The initiation site for emergency messages shall be the Central Fire Station. ACC shall provide a telephone line activation system for the emergency alert system. 15.5 Upon activation of the upstream capacity on the Cable Communications System, one upstream channel shall be designated for City and public sector uses. The City shall designate appropriate uses and users for the upstream channel designated for the City. For purposes of this section, an upstream channel shall be a channel which can transmit upstream from subscriber homes or other locations on the cable system to the headend and other points on the system. XVI SUBSCRIBER AND USER RIGHTS 16.1 At the time an installation or service agreement is to be signed, ACC shall furnish to each subscriber a simple but -20- thorough written explanation of all services offered; the fees, charges, terms and conditions of such services; information regarding billing and service calls; complaints; information regarding the availability of parental control devices; and a complete statement of the subscriber's right to privacy in conformance with 47 U.S.C. Section 631. Thereafter, ACC shall provide subscribers with privacy information at least once a year and other service related information at any time upon request. 16.2 ACC shall provide to all subscribers annually and all prospective subscribers or users complete written information concerning all services and rates available to such subscriber upon solicitation of service and prior to the consummation of any agreement for installation of service. Such sales material shall clearly and- conspicuously disclose the price and other information concerning ACC's least costly service. Such information shall be written in plain English and shall include but shall not be limited to the following: all services, tiers and rates, deposits if applicable, installation costs, additional television set charges, service upgrade or downgrade charges, lockout devices and information concerning the utilization of video cassette records (VCRs) with cable service(s) and the cost for hooking up such VCRs. 16.3 ACC shall inform all subscribers annually and all prospective subscribers or users of complete information respecting billing and collection procedures, procedures for ordering changes in or termination of services and refund policies upon solicitation of service and prior to the consummation of any agreement for installation of service. Such information shall be written in plain English. 16.4 All rates for subscriber services and leasing of channels shall be published. A written schedule of all rates shall be available upon request during business hours at ACC's - business office and all other facilities. Nothing in this Franchise shall be construed to prohibit the reduction or waiver of charges for attracting subscribers, or the establishment of charges and rate schedules that may vary with volume or nature of usage or programs. 16.5 In the event that ACC's service to any subscriber is interrupted for twenty-four (24) or more consecutive hours, ACC shall expeditiously grant such subscriber a pro -rata credit. 16.6 Each representative or employee of ACC entering upon private property shall be required to wear an employee identification card issued by ACC and bearing a picture of said representative. 16.7 ACC shall provide a standard identification document to .all employees,. including employees of subcontractors, who will be -21- in contact with the public. Such documents shall include a telephone number that can be used to verify identification. In addition, ACC shall use its best effort, to clearly .identify all personnel, vehicles, and other major equipment that are operating under the authority of ACC. 16.8 ACC shall have the right to disconnect service to a - subscriber for non-payment after sixty (60) days. ACC will discontinue billing customers for service on the date requested by the customer. ACC may bill customers for any unreturned equipment until the equipment is returned to ACC by the - customer. ACC shall refund on a pro -rata basis any prepayments made by the customer. 16.9 CUSTOMER SERVICE STANDARDS. A. Requests for repair service shall be responded to by ACC no later than the end of the next regular business day. B. Response to outages shall be immediately. C. ACC shall maintain a person -operated 24-hour answering service for repair service. D. ACC shall complete all requests for installation within one week after receipt of such requests. Reasonable allowances for peak periods associated with the return of the student population in August and September will be made by the City. E. ACC shall maintain the system to meet all technical requirements of the FCC, the New York State Commission on Cable Television and, to the extent allowable under applicable law, the technical standards included in the Franchise. F. ACC shall maintain a business office within the City of Ithaca and shall inform customers of its hours. ACC agrees to extend business hours if necessary to meet the needs of its customers. G. ACC shall maintain staffing levels and support equipment to assure that telephone inquiries are handled promptly in order to minimize busy signals and hold time. Reasonable allowances for peak periods associated with the arrival of the student population in August and September will be made by the City. H. ACC shall respondto all written billing inquiries within one week. -22- I. ACC will issue a billing credit to any customer affected by a service outage that lasts for more, than 24 hours equal to a pro rata share of the customer's monthly bill, but in no case less than 1/30 of the monthly bill. If the City at any time feels that these standards are not being met, the City shall notify ACC in writing and ACC shall have 30 days to respond to the City's notice. This response will include a reasonable plan to cure the problem, if applicable. Such plan to cure the problem shall be made satisfactory to the City. 16.10 ACC shall inform all persons in advance of the date and approximate time its employee or agents shall enter onto such person's property for the purpose of installing cable communications service. 16.11 COMPLAINT PROCEDURE. A. ACC shall maintain and operate within the City of Ithaca a business office for the purpose of receiving and resolving all complaints, including without limitation those regarding service, equipment malfunctions. or billing and collection disputes. . The business office shall have a publicly listed local telephone number and shall be open for both telephone and walk-in business. ACC shall provide all subscribers or users with at least thirty (30) days prior written notice of a change in business office hours. B. ACC shall periodically, and at various times of the day, present its business office address and publicly listed local telephone number by means of alpha -numeric display on a local origination channel. C. ACC shall respond to requests for repair service no later than the next business day. System outages, whole or partial, shall be acted upon as soon as practicable. ACC shall keep a record of all such complaints in compliance with state law and provide the record to the City as requested. D. Should a subscriber or user have a complaint which is unresolved after fourteen (14) days after notifying ACC thereof, the subscriber or user shall be entitled to file his complaint with the City, which shall have primary responsibility for the continuing administration of this Franchise and the implementation of complaint procedures. A representative of ACC shall be available thereafter to meet jointly with the City and the affected subscriber or user, within thirty (30) days after said subscriber or user has filed the complaint, to fully discuss and resolve the matter. If the matter cannot be resolved, the City may use judicial proceedings to resolve the matter; if the City -23- prevails, all judgments and costs for,attorney's fees will be paid by ACC. 16.12 Whenever notice of any public meeting relating to the Cable Communications System is required by law or regulation, the City shall publish or cause to be published a notice of same sufficient to identify its time, place and purpose in an Ithaca newspaper of general circulation once in each of. two (2) successive weeks, the first publication being not less than fourteen (14) days before the day of any such hearing, and ACC by periodic announcement on the programming guide channel, or if such channel is not available on a local origination. channel between the hours of seven (7) p.m. and, nine (9) p.m., for four (4) consecutive days during each such week. 16.13 ACC shall at all times protect the privacy of subscribers as provided in this Franchise and other applicable Federal, State and Local laws. 16.14 No people meter shall be used without the express written consent of the subscriber. 16.15 ACC shall use state-of-the-art converters. ACC shall make converters available to subscribers for rent or purchase. ACC shall allow subscribers to purchase or rent converters from - other vendors. ACC shall provide detailed information written in plain English to consumers and upon request to any sellers of converters on the items necessary for converter compatibility with ACC's Cable Communications System. Subscribers shall not be required to replace damaged converters rented from ACC if the damage resulted from fire, flood, earthquake or other natural disaster or act of God. 16.16 ACC shall install and/or maintain internal wiring for subscribers. As of March 1, 1989, ACC may own the internal wiring or, at the subscribers discretion, the subscriber may own the wiring. ACC shall allow subscribers or other vendors to install, own and/or maintain internal wiring. Any subscriber who duly notifies ACC within the time period reasonably established and advertised by ACC, may acquire ownership of the internal wiring at his/her premises without charge. In the event of signal leakage ACC may terminate service consistent with Federal law. 16.17 ACC shall make remote control units available to subscribers to purchase or rent. ACC shall allow subscribers to purchase or rent remote control units from other vendors. ACC may provide remote control units to subscribers at no charge as a part of its package of services. ACC shall provide detailed information written in plain English to- consumers and upon request to any sellers of remote controls on the items necessary for compatibility with ACC's Cable Communications System. -24- Subscribers shall not be required to replace damaged remote control units rented from ACC if the damage resulted from fire, flood, earthquake or other natural disaster or act of God. .16.18 ACC employees will not enter a customer's home except when requested to by the customer. XVII EQUAL EMPLOYMENT OPPORTUNITY AND AFFIRMATIVE ACTION 17.1 ACC agrees that it shall not discriminate against any. employee or applicant for employment because of race, color, religion, sex, disability, national origin, age, marital status, or sexual orientation or affectional preference. In the employment of persons, ACC shall fully comply with applicable local, state and federal law, and shall take affirmative action to ensure that applicants are employed and that employees are treated during employment without regard to their race, color, religion, sex, disability, national origin, age, marital status or sexual orientation or affectional preference. 17.2 ACC shall be an Equal Opportunity/Affirmative Action .Employer adhering to all Federal, State or municipal laws and' regulations. Pursuant.to 47 CFR 76.311 and other applicable regulations of the FCC, ACC shall file an Equal Employment Opportunity Affirmative Action Program with the FCC and otherwise comply with all FCC regulations with respect to Equal .Employment/Affirmative Action Opportunities. 17.3 ACC shall act affirmatively to increase the number of women and members of various minority groups to their approximate proportion in the total population of the Franchise area at all levels of employment and to enhance the opportunities for women and various minority groups to advance and win promotions in all -categories of employment. As part of its obligation under Section 17.1 above, ACC shall take affirmative action to employ, during the construction, operation and maintenance of the Cable Communications System minorities and females. ACC shall submit to the City annual EEO reports required by the Federal Communications Commission. XVIII REGULATION OF FRANCHISE 18.1 PERFORMANCE EVALUATION. A. The City and ACC shall, at the discretion of the City, hold annual performance evaluation sessions. All such evaluation sessions shall be open to the public. -25- B. Topics which may be discussed at any scheduled or special evaluation session may include, but not be limited to, system performance, compliance with this Franchise and applicable law, customer service and complaint response, subscriber privacy, services provided, programming offered, service rate structures, Franchise fees, penalties, free or discounted services, applications of new technologies and judicial and FCC filings. C. ACC shall notify its subscribers of all evaluation sessions by announcement on at least one channel of its Cable Communications System between the hours of seven (7) p.m. and nine (9) p.m., for five (5) consecutive days preceding each session. D. During review and evaluation ACC and the City shall fully cooperate with each other and shall provide such information and documents as each may reasonably need to perform its review. 18.2 In accordance with the terms of the Franchise, the City may, at any time, make reasonable inquiries concerned with the management and affairs of the Cable Communications System. ACC shall respond to such inquiries in a timely fashion. 18.3 Where the City has questions about the reliability or technical quality of cable service, the City shall have the right and authority to require ACC to test,'analyze and report on the performance of the Cable Communications System. ACC shall fully cooperate with the City in performing such testing and shall prepare the results and a report, if requested, within thirty (30) days after notice. Such report shall include the following information: A. the nature of the complaint or problem which precipitated the special tests; B. the system component or area tested; C. the equipment used and procedures employed in testing; D. the method, if any, in which such complaint or problem was resolved; and E. any other information pertinent to said tests and analysis which may be required. The City may require that tests be supervised or conducted by a City staff member or a professional engineer who is not an employee or agent of ACC. ACC shall reimburse the City for the -26- costs of such engineer if the tests performed show that the quality of service is below the standards set forth in this Franchise. 18.4 BOOKS AND RECORDS AVAILABLE TO CITY. A. The City reserves the right to inspect all pertinent books, records, maps, plans, financial statements and other like material, of ACC, upon reasonable notice and during normal business hours. B. If any of such maps or records are not kept in the City, or upon notice ACC is unable to provide the records in the City, and if the City shall determine that an examination of such maps or records is necessary or appropriate to the performance of any of their duties, then all travel and maintenance expenses necessarily incurred in making such examination shall be paid by ACC. 18.5 REPORTS REQUIRED. ACC shall file with the City: A. Upon request all reports required by or voluntarily submitted to the New York State Commission on Cable Television and the Federal Communications Commission (FCC) related to the City of Ithaca shall be provided to the City. B. An annual report setting forth the physical miles of plant construction and plant in operation during the fiscal year shall be submitted to the City. Such report shall also contain any revisions to the system "as built" maps filed with the City, and copies of all materials required by this Franchise to be given to subscribers. C. The following financial reports shall be submitted annually to the City. (1) An ownership report, indicating all persons, who at any time during the preceding year did control or benefit from an interest in this Franchise of five percent (5%) or more. (2) A copy of franchisee's annual report. (3) A report on the placement of any limited partnership offering, if any, including the amount subscribed and the amount paid in. (4) An annual City -only, certified income statement. (5) An annual list of officers and members of the Board of ACC's and of any parent corporation. -27- D. The following system and operational reports shall be submitted annually to the City: (1) ACC shall provide the City with a copy of its annual performance testing results as submitted to the FCC. (2) An annual summary of the previous year's activities including, but not limited to, subscriber totals for each category of service offered including number of pay units sold, new services offered, and the character and extent of the service rendered to other users of the system, subject to ACC's need to protect proprietary information. (3) An annual summary of service requests and complaints received and handled. (4) An annual summary of the number of outages. (5) An annual summary of all reports required by or voluntarily submitted to the New York State Commission on Cable Television and the Federal Communications Commission (FCC) related to the City of Ithaca. E. ACC shall furnish to the City such additional information and records with respect to its operation, affairs, transactions or property, as may be reasonably necessary and appropriate to the performance of any of the rights, functions or duties of the City in connection with this Franchise. 18.6 MANDATORY RECORDS. ACC shall at all times maintain: A. A record of all complaints received and interruptions or degradation of service experienced for the preceding period prior to a performance review, consistent with state law and regulation. B. An annual log showing the date, approximate time and duration, type and probable cause of all Cable Communications System outages, whole or partial, due to causes other than routine testing or maintenance. The entries in such log shall be retained by ACC for one (1) additional year and shall be subject to inspection and copying by the City or its designee during ACC's regular business hours upon reasonable request. C. A full and complete set of plants, records and "as built" maps showing the exact location of all cable installed or in use in the City, exclusive of subscriber service drops.. -28 18.7 RIGHT OF INSPECTION A. The City shall have the right to inspect all books, records, reports, maps, plans, financial statements and other like materials of ACC as' provided in this Franchise, at any time during normal business.hours. B. The City shall have the right to inspect all. construction or installation work, performed subject to the provisions of this Franchise and to make such tests as it shall find necessary to ensure compliance with the terms of this Franchise and other pertinent provisions of law. C. At all reasonable times and for the purpose of enforcement of this Franchise, ACC shall permit examination by any duly authorized representative of the City, of all Cable Communication System and facilities, together with any appurtenant property of ACC situated within the City and outside of the City if it is utilized in the operation of the City's Cable Communications System. XIX RATE REGULATION 19.1 City having established its right to rate regulation under applicable law, ACC will not raise basic.rates higher than the following for a five year period. On February 1, 1988 the maximum rate will be $9.00. On March 1, 1989 the maximum rate. will be $11.00. On March 1, 1990, the maximum rate will be $12.10. On March 1, 1991, the maximum rate will be $13.31. On March 1, 1992, the maximum rate will be $14.64. Starting on March 1, 1993, and for each and every year thereafter for the term of this Franchise the maximum rate will be the previous year's maximum allowed rate plus 5 percent or that percentage equal to the rise in the Consumer Price Index, whichever is higher. Additionally, ACC will give a need -based senior citizen discount of 10 percent to those who qualify for real property tax exemption and others who qualify using mutually .agreeable criteria. Effective March 1, 1989, ACC will not charge custoemrs for additional outlets or FM service. 19.2 ACC covenants that it will not bring or fund any lawsuit or other proceeding seeking deregulation of the aforementioned rates prior to March 1, 1991 and further agrees to •pay the attorney's fees and other costs of the City incurred in defending any such lawsuit or other proceeding should ACC bring them or fund them prior to March 1, 1991. 19.3 Effective March 1, 1991 ACC may seek deregulation of basic cable service rates.• If at any time any additional cable -29- • franchises granted by the City, or any additional cable television is authorized to operate within the City, there will be no further regulation of ACC's rates from the date of said grant of any additional franchise or the beginning of construction of such additional system, whichever comes sooner, until the termination of such additional franchise or of the operation of such additional system, whichever is later. 19.4 ACC shall file with the City schedules which shall describe all services offered by ACC, all rates and -charges of any kind and all terms or conditions relating thereto. Thereafter, ACC shall file with the City all changes in services, all rates and charges of any kind and all terms and conditions relating thereto thirty (30) days prior to all such changes. No rates or charges shall be effective except as they appear on a schedule so filed. XX FRANCHISE FEE 20.1 The City of Ithaca shall be entitled to receive from ACC a Franchise fee of five percent (5%) of ACC's Gross City Revenue. 20.2 The Franchise fee established in 20.1 above shall be tendered as follows: A. Five percent (5%) of ACC's Gross City Revenue for successive three (3) month calendar periods tendered within forty-five (45) days after each such period. 20.3 To the extent necessary to prevent ACC from diverting revenues from the operation of the Cable Communications System from ACC to Affiliates to the detriment of the City, Affiliates (excluding any affiliate which provides a national or regional programming service) shall be permitted to utilize the Cable Communications System only if a Franchise fee on City revenues derived therefrom is paid. 20.4 In the event that the fees herein required are not tendered on or before the dates fixed in this Franchise, interest due on such fee shall accrue from the date due at an annual rate of three percent (3%) above the prime rate or rates of interest, at the City's primary depository bank. 20.5 Tender or acceptance of any payment shall not be construed as an accord that the amount paid is correct, nor shall such acceptance of payment be construed as a release of any claim the City of Ithaca may have for additional sums including interest payable under this Franchise. All amounts paid shall be subject to audit and recomputation, by an independent auditor -30- chosen by the City, which shall be based on a fiscal year and shall occur in no event later than one (1) year after the .fees are tendered with respect to such fiscal year. If, after audit and recomputation, an unpaid fee is owed to the City, such fee shall be paid within thirty (30) days after audit and recomputation and ACC shall pay the costs of the audit. The interest on such unpaid fee shall be charged from the due date at an annual rate of three percent (3%) above the prime rate or rates of interest at the city's primary depository bank during the period that such unpaid amount is owed. XXI BONDS, INSURANCE AND INDEMNIFICATION 21.1 PERFORMANCE BOND. A. ACC shall provide a performance bond in the amount of $500,000 (five hundred thousand dollars) until construction is completed and shall maintain a performance bond in the amount of $25,000 (twenty-five thousand dollars) for the remaining term of the Franchise. The performance bond shall be provided and regulated in accordance with this Franchise. The performance bond shall be provided within thirty days of the receipt of final operating authority. B. The performance bond shall provide the following conditions: (1) There shall be recoverable by the City jointly and severally from the principal and surety, any and all fines and penalties due to the City and any and all damages, losses, costs and expenses suffered or incurred by the City resulting from the failure of ACC to: faithfully comply with the provisions of this Franchise; comply with all lawful orders, permits and directives of any City agency- or body having jurisdiction over its acts or defaults; pay fees due to the City; pay any claims due the City as resulting -from judicial action; pay any claims, liens or taxes due the City which arise by reason of the construction, operation, maintenance or repair of the Cable Communications System. Such losses, costs and expenses shall include but not be limited to attorney's fees and other associated expenses. (2) The total amount of the bond shall be forfeited in favor of the City in the event: (a) ACC abandons the Cable Communications System at any time during the term of this Franchise or any extension thereto; -31- (b) ACC assigns this Franchise without the express written consent of the City. C. Upon written application by ACC, the City may, at its sole option, permit the amount of the bond to be reduced .or waive the requirements for a performance bond subject to the conditions set forth below. Reductions granted or denied upon application by ACC shall be without prejudice to ACC's subsequent applications or to the City's right to require the full bond at any time thereafter. However, no application shall be made by ACC within one (1) year of any prior applications. D. Prior to drawing upon the performance bond for the purposes described in this Section, the City shall notify ACC in writing that payment is due and ACC shall have thirty (30) days from the receipt of such written notice to make a full and complete payment. If. ACC does not make the payment within thirty (30) days, the City may, upon determination of. a breach of this Franchise pursuant to Section 3.6, withdraw the amount thereof, with interest and penalties, from the performance bond. E. Within three (3) days of a withdrawal from the performance bond, the City shall send to ACC, by certified mail, return receipt requested, written notification of the amount, date and purpose. of such withdrawal. F. No later than thirty (30) days after mailing to ACC by certified mail notification of a withdrawal pursuant to paragraph D above, ACC shall replenish the performance bond in an amount equal to the amount so withdrawn. Failure to make timely replenishment of such amount to the performance bond shall constitute a substantial violation of- the Ordinance and this Franchise. G. The performance bond required herein shall be in a form satisfactory to the City and shall require thirty (30) days written notice to the City of any non -renewal, alteration or cancellation to both the City and ACC. ACC shall, in the event of any such cancellation notice, obtain, pay all premiums for and file replacement bond or policies within thirty (30) days following receipt by the City or ACC of any notice of cancellation. H. To offset the effects of inflation, the amounts of the bond provided for herein are subject to reasonable increases at the end of every three (3) year ,period .of this Franchise, applicable to the next three year period, upon the reasonable determination of the City. Inflation compensation shall be computed in accordance with the regional Consumer Price Index. -32- I. The City shall not seek recovery from the Performance Bond until it has provided ACC with thirty (30) days to cure any default. 21.2 LIABILITY AND INSURANCE. A. Prior to commencement of construction, but in no event later then sixty (60) days after the effective date of this Franchise and thereafter continuously throughout the duration of this Franchise and any extensions or renewals thereof, ACC shall furnish to the City certificates of insurance, approved by the City, for all types of insurance required under this Section. Failure to furnish 'said certificates of insurance in a timely manner shall constitute a violation of this Franchise. B. Neither the provisions of this Section or any damages recovered by the City hereunder, shall be construed 'to or limit the liability of ACC under this Franchise for. damages. C. ACC shall provide the City with written notice of its intention to cancel or not renew any of the insurance policies maintained pursuant to this Franchise. D. The Company agrees to indemnify, save harmless and defend the City, its agents, servants and employees and each of them against and hold it and them harmless from any and all lawsuits, claims, demands, liabilities, losses and expenses, including court costs and reasonable attorney's fees for or on account of any injury to any person, or any death at any time resulting from such injury, or any damage to any property, which may arise or which may be alleged to have risen out of or in connection with the work covered by this Franchise. The foregoing indemnity shall apply except to the extent such injury, death or damage is caused by the negligence or other fault of the City, its agents, servants, or employees or any other person indemnified hereunder. E. All insurance policies obtained under the provisions of the Ordinance or this Franchise shall be written by companies authorized to do business in the State, and approved by the State. 21.3 ACC shall maintain, and by its acceptance of this Franchise granted hereunder specifically agrees that it will maintain throughout the term of this Franchise, general liability insurance insuring ACC in the minimum of: A. $500,000 for property damage per occurrence; -33- B. $1,000,000 for property damage aggregate; C. $1,000,000 for personal bodily injury to any one person; and D. $2,000,000 bodily injury aggregate per single accident or occurrence. Such general liability insurance must include coverage for all of the following: comprehensive, premises -operations, explosion and collapse hazard, underground hazard, products/completed operations hazard, contractual insurance, broad form property damage, and personal injury. 21.4 ACC shall maintain, and by its acceptance of this Franchise granted hereunder specifically agrees that it will maintain, throughout the term of this Franchise automobile liability insurance for owned, non -owned or rented vehicles in the minimum amount of: A. $1,000,000 for bodily injury and consequent death per occurrence; B. $1,000,000 for bodily injury and consequent death to any one person; and - C. $500,000 for property damage per occurrence. 21.5 ACC shall maintain and by its acceptance of this Franchise granted hereunder specifically agrees that it will maintain throughout the term of • this Franchise, Worker's Compensation and employer's liability, valid in the State, in the minimum amount of: A. Statutory limit for Worker's Compensation. B. $100,000 for employer's liability. 21.6 INDEMNIFICATION A. ACC shall, at its sole cost and expense, fully indemnify, defend and hold harmless the City, its officers, boards and commissions and City employees against any and all claims, suits, actions, liability and judgments for damages (including but not limited to expenses for reasonable legal fees and disbursements and liabilities assumed by the City in connection therewith): (1) To persons or property, arising out of or though the acts or omissions of ACC, its servants, agents or employees. -34- (2) Arising out of any claim for invasion by ACC, its servants, agents or employees of the right of privacy, or for defamation, of any person, firm or corporation, or the violation or infringement of any copyright, trademark, trade name, service mark or patent, or of any other right of any person, firm or corporation. (3) Arising out of ACC's failure to comply with the provisions of any federal, state, or local statute, ordinance, or regulation applicable to ACC in its business hereunder. B. The foregoing indemnity is conditioned upon the following: The City shall give ACC prompt notice of the making of any claim or the commencement of any action, suit or other proceeding covered by the provisions of this Section. Nothing herein shall be deemed to prevent the City from cooperating with ACC and participating in the defense of any litigation by its own counsel at its sole cost and expense. XXII BREACH 22.1 In the event that the City has reason to believe that ACC has defaulted in the performance of any provision of this Franchise except as excused by force majeure, the City shall notify ACC in writing of the provision or provisions which the City believes may be in default. ACC shall have thirty (30) days from the receipt of such notice to: A. Respond to the City in writing, contesting the City's assertion of default and providing such information or documentation as may be necessary or; B. To cure any such default or, in the event that, by nature of the default, such default cannot be cured within such thirty (30) day period, to take reasonable steps to cure the default and diligently continue such efforts until said default is cured. ACC shall report to the City in writing, at thirty (30) day intervals as to ACC's efforts, indicating the steps taken by ACC to cure the default and reporting ACC's progress until such default is cured. In the event ACC fails to cure the default within the stated period the City shall convene a public hearing on reasonable notice at which hearing ACC may be heard and after which the City shall specify the complaint against ACC; thereafter the City shall appoint an impartial person to act as factfinder who shall -35- fix a date for a hearing at which evidence shall be received and a record kept of evidence of the complaint. The factfinder shall report in writing to both parties with his or her findings of fact. The Common Council shall make a finding of violation or no violation based on those findings. In the event that the City after such hearing determines that ACC is in default of any such provision of this Franchise, the City may also determine to pursue any or all of the following remedies: A. Foreclose on all or any part of the security provided pursuant to this Franchise, including without limitation the performance bond and/or the letter of credit, provided, however, the foreclosure shall be in such amount as the City reasonably determines is necessary to remedy the default and shall include payment of all City expenses incurred in connection with the factfinding hearing. B. Commence an action at law for monetary damages, including the expenses of the factfinding hearing. C. Declare this Franchise to be revoked and order ACC to commence the removal of the Cable Communications System immediately or to cooperate with the City, or any such agency or person authorized ordirected by the City to operate the Cable Communications System for a one year period, in maintaining the continuity of service; and D. Seek specific performance of any provision, which reasonably lends itself to such remedy, as an alternative to damages. ACC may seek recourse as available by law or federal or state regulation. 22.2 For the violation of any of the following provisions of this Franchise, the City shall notify ACC .in writing of the violation and ACC shall be allowed not less than thirty (30) days, or such greater amount of time as the City may specify, to correct such violation. In the event ACC fails to correct the violation, the City will be entitled to collect liquidated damages according to the schedule listed below. Such liquidated damages, if not paid by ACC, shall be chargeable, to the extent available, to the. bond tendered by ACC within the aforesaid period of time. These liquidated damages shall be in addition to and not a limitation upon the other penal provision of this Franchise and applicable law, including penalties or revocation, or other statutorily or judicially imposed penalties or remedies. A. For failure to complete construction and installation in accordance with this Franchise, $100.00 per day. -36- B. For failure to submit reports or supply data in accordance with this Franchise, $10.00 per day for each day that such noncompliance continues. C. For failure to test, analyze and report on the performance of the Cable Communications System in accordance with this Franchise, $25.00 per day for each day, or part thereof, that such noncompliance continues. D. For failure to provide the capital equipment, and facilities, and services for public, educational and governmental access, as specified in this Franchise, $75.00 per day, or part thereof, that such noncompliance continues. The City retains the right, at its sole option, to reduce or waive any of the above -listed penalties where extenuating circumstances or conditions beyond the control of ACC are ,deemed to exist. The Common Council or its designee shall determine the City's willingness to reduce or waive any of the above -listed penalties. 22.3 No decision by the City to invoke any 'any remedy under this Franchise or under any statute, law or Ordinance shall preclude the availability of any other such remedy. 22.4 Exclusive jurisdiction and venue over any dispute, action or suit arising therefrom shall be in any court of appropriate subject matter jurisdiction located in the State of New York and the parties by this instrument subject themselves to the personal jurisdiction of said court for the entry of any judgment and for the resolution of any dispute, action, or suit arising in connection with the entry of such judgment. XXIII TRANSFER OF OWNERSHIP OR CONTROL. 23.1 This Franchise cannot in any event be sold, transferred, leased, assigned or disposed of, including but not limited to by force or voluntary sale, merger, consolidation, receivership or other means without the prior consent of the City. 23.2 ACC shall promptly notify the City of any actual or proposed change in control of ACC. The word "control" as used herein is not limited to major stockholders but includes actual working control in whatever manner exercised. The current ownership of ACC is as listed in Appendix [G]. 23.3 Prior City authorization is required for every change, transfer or acquisition of control of ACC. City consent will not be unreasonably withheld. For the purpose of determining whether -37- it shall consent to such change, transfer or acquisition of control, the City may inquire into the legal, financial, character, technical and other public interest qualifications of the prospective controlling party, and ACC shall assist the City in any such inquiry. Failure to provide all transfer related information reasonably requested by the City as part of said inquiry shall be grounds for denial of the proposed change, transfer or acquisition of control. 23.4 The City agrees that any financial institution having a pledge of the Franchise or its assets for the advancement of money for the construction and/or operation of the Franchise shall have the right to notify the City that it or its designees satisfactory to the City will take control and operate the Cable Communications System. Further, said financial institution shall also submit a plan for such operation that will insure continued service and compliance with all Franchise obligations during the term the financial institution exercises control over the system. The financial institution shall not exercise control over the system for a period exceeding one year, unless extended by the City at its discretion and during said period of time it shall have the right to petition for transfer of the Franchise to another grantee. If the City finds that such transfer, after considering the legal, financial, character, technical and other public interest qualifications of the applicant, is satisfactory, the City will transfer and assign the rights and obligations of such Franchise as in the public interest. The consent of the City to such transfer shall not be unreasonably withheld. 23.5 The consent or approval of the City to any transfer of ACC shall not constitute a waiver or release of•the rights of the City in and to the streets, and any transfer shall, by its terms, be expressly subordinate to the terms and conditions of the Franchise. 23.6 Any approval by the City of transfer of ownership or control shall be contingent upon the prospective controlling party becoming a signatory to the Franchise. 23.7 The City shall act on a request for any consent or approval required by this section within 120 days of a presentation to the Common Council requesting such consent or approval. The City's approval of any transfer or assignment shall not be deemed an approval of the purchase price. 23.8 In the absence of extraordinary circumstances, the.City will not approve any transfer or assignment of the Franchise prior to completion of construction of the proposed system. xxIV MISCELLANEOUS PROVISIONS 24.1 ACC shall comply with all statutes, rules, and regulations of the New York State Commission on "Cable Television. The terms of this Franchise are. subject to the approval of the New York State Commission on Cable Television. 24.2 In accepting this Franchise, ACC acknowledges that its rights hereunder are subject to the police powers of the City to adopt and enforce general Ordinances necessary to the safety and welfare of the public, and it agrees to comply with all applicable general laws and Ordinances enacted by the City pursuant to such power. This Franchise is subject to applicable federal and state law, including the Cable Communications Policy Act of 1984. Nothing contained in this Franchise shall be construed so as to require the commission of any act contrary to such applicable federal and state law. In the event of any conflict between this Franchise and applicable federal and state law the latter shall apply. ACC's acceptance of this Franchise shall not constitute a waiver or relinquishment of any right it may have, now or hereafter, to seek judicial or other review of the validity, constitutionality or enforceability of any of its provisions. 24.3 ACC recognizes but does not adopt the City's position that the City's Cable Communications Ordinance [number, date], is valid and enforceable against ACC. The City recognizes but does not adopt ACC's position that said ordinance is invalid and unenforceable against ACC. 24.4 Nothing contained in this Franchise shall be construed to deprive ACC or the City of any "grandfather" rights in any future amendments to any statute or regulation. This Franchise, however, shall be subject to such regulations as the City finds necessary to adopt in the exercise of its police power, provided that such regulations are reasonable and donot materially conflict with the privileges granted in this Franchise. 24.5 If any section, sentence, paragraph, term or provision of this Franchise is determined to be illegal, invalid or unconstitutional, or otherwise unenforceable by any court of competent jurisdiction upon final adjudication or by any state or federal regulatory agency having jurisdiction thereof, such determination shall have no effect on the validity of any other section, sentence, paragraph, term or provision hereof, all of which will remain in full force and effect. In the event of such determination ACC and the City shall negotiate in good faith and agree upon a provision which will achieve the same purpose as closely as possible. -39- 24.6 The parties recognize that it is within their mutual best interests for the Cable Communications System to be operated as efficiently as possible in accordance with the requirements set forth in this Agreement. To achieve this, the parties agree to cooperate with each. other in accordance with the terms and provisions of this Agreement. Should either party believe that the other is not acting timely or reasonably within the confines of applicable regulations and procedures in responding to a request for action, that party shall notify the agents designated for that purposeby the other. The agent will use its best effort to facilitate the particular action requested. 24.7 During the term of this Agreement, ACC shall be liable for the acts or omissions of its affiliates while such affiliates are involved - directly or indirectly in the construction, installation, maintenance or operation of the cable television system as if the acts or omissions of such affiliates were the acts or omissions of ACC. 24.8 If by reason of force majeure either party is unable in whole or in part to carry out its obligations hereunder, said party shall not be deemed in violation or default during the continuance of such inability. The term "force'majeure" as used . herein shall mean the following: acts of God; acts of public enemies; orders of any kind of the government of the United States of America or of the State of New York or any of their departments, agencies, political subdivision, or officials, or any civil or military authority; insurrections; riots; epidemics; landslides; lightening; earthquakes; fires; hurricanes; volcanic activity; storms; floods; washouts; droughts; civil disturbances; and explosions. he Mayor or the Cable Commission shall be responsible for --' continuing administration of this Franchise. Such designation cannot be changed without prior written notification to ACC. 24.10 Nothing herein shall be deemed to create a joint venture or principal -agent relationship between the parties, and neither party is authorized to, nor shall either party act toward third persons or the public in any manner which would indicate any such relationship with the other. very notice to be served upon the City shall be sent by c- if' -d mail, postage prepaid, to the City. Every notice to be served upon ACC shall be sent by certified mail, postage prepaid, to ACC at its Ithaca office. 24.12 The captionsto sections throughout this Franchise are intended solely to facilitate reading and reference to the sections and provisions of this Franchise. Such captions shall not affect the meaning or interpretation of the Ordinance. -40- 24.13 This Agreement and all attachments hereto, represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof, supersede all prior oral negotiations between the parties, and can be amended, supplemented, modified, or changed only as provided herein. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. ATTEST: CITY OF ITHACA, NEW YORK, a municipal corporation Witness AMERICAN COMMUNITY CABLEVISION, a Division of American Television and Communications Cor oration SEAL STATE OF NEW YORK ) ss: COUNTY OF TOMPKINS ) On this 3 Sf day of OG.? jerr , 1988 before me personally came John C. Gutenberger, to me personally known, who being by me duly sworn, did depose and say that he resides at 110 Eastwood Terrace, Ithaca, New York and that he is the Mayor of the City of Ithaca, the municipal corporation described in and which executed the above Instrument; and that he signed his name thereto by direction of the Common Council of the City of Ithaca. STATE OF COLORADO. ) ss: COUNTY OF ARAPAHOE Notary P'blic sr W. NA ,f+ ':a•; Public, State of Now York ib. 02 NA 4669490, Reg. in Tompkins County by CCUllllisSl011 Expires thertn'S07-4'`3•- 3/, HOS On this '% day of NOVE_P)/3&'Q , 1988 before me personally came THQ/1/1 S k'. R4C'kEEgy, to me personally known, who being by me duly sworn, did depose and say that he resides at /NVC A- 1JRlv'E E COLORi O , New—York and that he is the VICE 1/kESIDiVT of the corporation described in and which executed the above Instrument; and that he signed his/her name thereto by direction of the Board of Directors of said corporation. Nota 'fy Public fiy Commission Ex{ a July 24, 1889 APPENDIX C PROGRAMMING rovic�e, at,,,. a minimum, the When cable service is offrd P subscribers on the rebuilt system, the franchisee shall following categories of programming: _ (e.g. Arts and Entertainment Full-time Cultural Programming Network, etc.) Full-time Movies (e.g. American Movie Classics, etc.) Full-time Religious Programming - (e.g. (MN, Eternal Word Network, Inspiration Network, National Jewish Television, Trinity Broadcasting, Affiliated Christian Television Service, etc.) Shopping Service - (e.g. Home shopping Network, Full-time Slioi Y .3 Quality Value Cable, Cable Value Network, etc.) � Full-time Minority Programming - (e.g. Black Entertainment Television, Spanis►.1 Information network, Silent Network, etc.) ` Full-time Familyand Children's Programming - (e.g. Nickelodeon, Lifetime, etc.) Full-time Sports Programming - (e.g. ESPN, SCORE, etc.) lC-SPAN I, Full-time Non -Local Government Programming (e.g. C -SPAM II, etc.) Full-time Music Programming - (e•9- MTV, Nashville fretwork, VH -1, etc.) Full-time News Programming - (e.g. CNN, deadline News, Financial News Network, etc.) g. The Full-time Information and Non-Fic't'ione LearningProymmi �nelng e. etc. ) Weather Channel, Discovery Charnel, Entertainment Programming (e.g. USA Full-time General etc.) Network, Nostalgia Channel, superstations, Public, Educational and Government Access Channels (at least one on 12-chann►el basic and the rest of next tier of service) 1'1.1 radio service, in stereo where available, in various formats (e.g„ . C:lassicals, Easy Listening, ]adult Rock, Young hock, Proyressive lock, Jazz, folk, Country, etc.) APPENDIX D EXISTING KCAL ORIGINATION EQUIP INVENTORY CABLE NEWSCEIITER 7 Studio 2 Sony Studio M3A Video Cameras 1 Sony ENG/Studio M3A Video Camera 3 Sony Al2x9BRM0-88 Lenses 3 Sony LO -1011 Rear Lens controls 3 Sony CCQ-10AR Camera Cables 4 Sony DR -100 Headsets 3 Tiffen 72mm Clear Filters 3 ITE II -6 Ilydr ocam Head 3 ITE T10 Tripod 3 ITE Wedge Plate 3 ITE Mitchell Adapter 3 ITE D-7 1)oly 3 Tiffen Clear Filters 1 Q -TV Prompting System (2 Cameras) 1 Buhl 573-200 Mobil Multiplexer 2 Buhl 620-400 Model E-3 Projectors 1 20'x20' Studio Lighting Package TOTAL $22,797.60 7,976.80 3,451.50 1,982.40 371.70 311.52 34.30 6,566.70 2,465.61 359.31 284.97 2,713.41 42.48 6,500.00 1,197.70 486.75 8,823.19 $58,766.74 Control Room 4 Sc:;. - :;-530 3/4" VTR's 4 So:._ ::iM-501 Rack Mount Kits 2 Sony RM -580 Remote Controls 2 Sony RM -V5 VTR Input Selectors 2 Sony RM -555 Multi -Unit Control 2 Sony VCS -500 Video/Audio Switchers 2 Nova 500 Time Base Correctors 2 Sony RMM-505 Rack Mount Kits 1 Sony CVM -1271 Preview Monitor 1 Sony PVM-1220 Program Monitor 2 Sony EVM-920 Tape Monitors 1 Sony PVM-122 C.G. Preview Monitor 1 Sony CVM -1271 C.G. Program Monitor 1 Sony MI3-502 Rack Mount Kit 1 Electrohome RAK-9A Rack .Mount 1 JVC Switcher 1 CDT, 860 Downstream Keyer 1 Winsted E4902 C.C. console 1 Laird 1500 Character Generator 1 Laird 1030 Color Encoder 1 Videotelc RS -10A Routing Switcher 1 Videotelc VIS -1200 Video Switcher 1 Videotek VDA-16 Video Dist. Amp. 1 Videotelc DAT -1 Rack Mount Kit 2 Videotek DAT -2 Blank Panels 1 Videotek TSM -60 Waveform Monitor 56b 660.80 1,073.80 379.96 3,122.28 2,065.00 8,236.40 49.56 675.43 1,775.90 717.44 398.25 675.43 90.86 44.84 8,177.40 2,587.15 822.70 6,808.60 1,056.10 1,060.82 339.84 268.45 64.90 47.20 1,826.64 1 Videotelc TSM -60 Vectorscope 2,092.14 1 Videotelc DRC -1 Rack Mount Kit 177.00 1 NEC CM -2551A 25" Video Monitor 578.20 1 Davis and Sanford RWM -3 Wall Mount 112.10 1 Sony RMM-502 Rack Mount Kit 04 2 Sony RMM-503 Rack Mount Kits 57.82 1 Lenco 300-312T Test Set •• 9,233.15 1 Winsted.G8538'Production Console 2,639.07 1 Fostex A-2 Reel to Reel Recorder 702.10 1 JVC KD -V601 Audio Cassette Recorder 389.40 4 1 JVC QL-G901J Turntable 1 JVC MI -2000 Audio Mixer 1,008.90 1 Fostex T-20 Headphones 56.64 1 Fostex 6301 Monitor Speakers 228.92 TOTAL $75,665.96 2 Editing 4 Sony VO -5850 Editing Recorders 2 Sony RM -440 Editing Controller 4 Sony UCC -5F Control Cables '2 Sony VDC-5 Dub Cables 4 JVC TMR-9U Color Monitors 2 Fostex 6301 Audio Monitors (1 Pair) 4 JVC RK -911 Rack Mount Kits 2 Winstcd 11-8350 Iciiting Console 2 For -A400 Full Frame Time I3ase Correctors 2 Videotek PDA -16 Pulse Dist. Amp. 2 Videotelc DAT -1 Rack Mount Kit 4 Videotelc DAT -2 Blank Panels 2 Videotelc TSM -60 Waveform Monitor 2 Videotek DRC -1 Rack Mount Kit 2 JVD ADP -9U Rack Mount Adapter TOTAL Portable 3 Sony DXC-1820KA Video Cameras 1 Sony BC -1000 Battery Charger 4 Sony BP -60 Flatteries 3 Sony VO -6800 Recorders 2 Sony CMA -8 AC Adapters 2 Sony BC1-WA Battery Charger 6 Sony NP -1 Ni -Cad Batteries 2 Sony Porta -Brace C-6800 Case 2 Tiffen 72mm Clear Filters 2 ITE T-40 Tripods 2 ITE II -40 Fluid Heads 2 E1 cc irovoi ce 635A Microphones 4 Shure SM-83CN Lavalier Microphones 2 Lowel 01-93 Lighting Kits TOTAL 56c 24,430.72 2,924.04 363.44 82.60 2,407.20 457.84 396.48 2,835.66 9,888.40 536.90 129.80 94.90 3,653.28 354.00 155.76 $48,710..52 7,320.00 346.50 190.40 7,980.00 546.00 460.00 270.00 201.60 19.38. 288.00 354.00 141.30 560.00 1,561.00 $20,238.18 PRODUCTION UNIT Studio 1 Cyclorama (Studio Gray) 746.35 531.30 1 Cyclorama (Black) Carriers for above 300.00 Photographic Backgrounds . .... 586.22 Editing 1 Sony 5850PAC 2 JVC TMR-9U Video Monitors 2 Fostex Speakers 1 For -A FA -400 TBD 1 Leader Waveform monitor Cables and Connectors 1 JVC Audio Mixer 1 Urie Equalizer 12,376.00 1,318.60 249.90 5,307.40 2,042.50 94.90 1,034.55 729.45 Portable 2 Sharp XC-A1PP Color Video Camera 12,744.90 2 Sharp XC-A14VC 14 -Pin VTR Cable 190.40 2 Sharp XC-A1BR Battery Bracket 133.28 4 Sharp XC-80DAT 14.4V 4AH Battery 825.86 2 Sharp XC-70SC Battery Charger 114.24 2 Fujinon A16X9. 5A 16:1 Servo Zoom 3,198.72 2 ITE 1140 Fluid head 637.50 2 ITE T44 Tripod with Pedestal 585.00 2 Sony VO -6800 3/4" Portable Recorders 6,962.00 2 Sony CMA -8 AC Adapters 767.00 2 Sony 13C1 -WA Battery Chargers 660.80 1 Sony PVM-8020 8" color Video Monior 562.86 1 Sony VO -5850 3/4" Editing Recorder 6,903.00 2 Porta -Brace C-6800HB-20 Record Case 290.50 1 Porta -Brace PC -2 Production Case 260.75 1 Porta -Brace PC -1 Production Case 234.50 2 Porta -Brace MO -8020 Monitor Case 178.50 1 Lowel D2-93 3 Light DP Kit 984.37 3 Lowel D2-25 DP Umbrella 121.20 1 Lowel S2-92 Softlight Kit 546.87 4 Shure SM-83CN Lavalier Microphone 723.32 1 Electrovoice 635A Omnidirectional Mic 104.16 1 Cine 60 8328FC Battery Belt 700.00 1 Cine 60 9400 Fast Charger 315.00 1 Cine 60 6475 Cable 59.00 1 Tracking dolly 2,190.00 1 Lowel Omni Kit 1,115.00 . 1 Chevy Astro Van 12,000.00 TOTAL $79,425.90 CONTROL ROOM" VCRs: 3 Sony VP -5000 3/4" Recorders 1 Sony VO -5800 3/4" Recorders 1. Sony 2800 3/4" Recorders 1 JVC DR -3100V 1/2" VHS Recorder 1 JVC 1/2" Det. Recorder Monitors: 1 Videotek KV -1217 13" Monitor 1 NEC CT1305A 13" Monitor 1 Sony CVM 1271 13" Monitor 1 RCA 13" Monitor 1 Panasonic 9" Monitor 2 Panasonic CCTV 9" Monitor 2 RCA TC1910 9" Monitor 3 Setchell Carlson 5" Monitor 6 Panasonic WV -5203 5" Monitor 1 Sony. CVM 2370 with case Test equipment: 1 Leader LVS-58508 STSC Vector Scope . 2000.00 1 Tektronix 528A Waveform Monitor 2000.00 1 Panasonic WV -5361U Pulse Cross Monitor 750.00 Audio: 1 Realistic MPA -20 Amp 1 Orban 422A De -Esser 1 Shure 12 -channel Audio Mixer 2 Sentry 100A Studio (Audio) Monitor 1 IIarmon/Kardon CD201 Audio Tape Deck 1 AR77X13 Turntable Video: 1 JVC KM -2000 Seg 1.Videotek RS10A Switcher • 2 Panasonic WJ-22SR Switcher 1 Barris 550 Time Base Corrector 1 Lenco PCD 473 NTSC Decoder 1 Shintron Character Generator $ 6,000.00 5,000.00 1,000.00 550.00 500.00 650.00 450.00 650.00 200.00 200.00 300.00 400.00 600.00 1200.00 950.00 TOTAL CONTROL ROOM UPGRADE FOR 2 Sony VO -5800 Decks 1 Lang Video video/audio switcher • 1 Videotek audio monitor 1 Shure M267 mixer 2 Electrovoice EVM-920 I3/W Monitors 1 Electrochrome rack mount 1 Shure rack mount for mixer 1 Nova 620 time base corrector 1 Winsted Rack with Tilt Miscellaneous cable & connectors TOTAL 110.00 583.00 1600.00 438.00 385.00 150.00 4012.00 1061.00 500.00 6000.00 3000.00 3500.00 $52,939.00 1987" $10,200.00 3,000.00 500.00 470.00 750.00 50.00 35.00 5,000.00 900.00 150.00 $21,055.00 * Shared with access users. Access users have priority use. 56e EDITING SUITE" 1 Sony VO -5800 3/4" Recorder $ 5,000.00 1 Sony VO -5850 8,350.00 1 Sony RM -440 Control Unit 1,400.00 1 Connecting Cables 90.00 2 JVC 9" Color Monitors .• 1,191.00 1 Panasonic 9" B/W WV -5370 Monitor 150.00 2 Fostex 6301B Personal Audio Monitors 280.00 1 Realistic Mixing Console 89.00 1 Realistic Parametric Equalizer 40.00 1 Knox K1008 Ch'romafont CG 3,450.00 1 Dual Turntable 450.00 1 Nakamichi BX100 Audiocassette 500.00 1 Realistic LV10 Headphones 35.00 1 Panasonic WJ225R Video Switcher 250.00 1 For -A FA -400 Time Base Corrector 6,000.00 TOTAL $27,275.00 Shared with access users. Access users have priority. 56f' STUDIO"''* 3 Sony 1820 Cameras with Tripods, . Dollies, Studio and Portable Monitors - Cases, Cables, CCUs, CCU Rack Mount Unit 1 Sony DXC-1610 color video cameras w/ Quicicset 7301 Sampson tripods, 7201 Head and 7601 Dollies $21,000.00 $ 5,000.00 1 Sony AVC 3450 B/W portable camera $ 674.00 Audio: Mics: 3 Shure Lavaliers 300.00 6 Shure Spi91 Mics 300.00 6 Electrovoice 635A 450.00 2 Calrad Mics 180.00 Stands:6 Desk Mic Stands 180.00 6 GooseNecics 72.00 4 Baby Booms 200.00 1 Boom with Wheels 100.00 5 Electrovoice Shock Mount Clamps 313A 50.00 5 Electrovoice Shock Mount Clamps 312 40.00 Speakers 300.00 Lights: 2 Photogenic Machine co CP -15 Floodlight Scoops 2 Kliegel Scoops 4 Kliegel 111 Fresnels 2 Mole -Richardson 751 Baby Combo Fresnels 4 Kobold Porta Lites with Stands, Handles & Mounts 4 Kobold Porta Lites with STands, Handles & Mounts 1 20' x 40' Lighting Grid Total replacement value of Lighting System $10,000.00 Miscellaneous: Sawyer 500 I3 Slide Projector with 40 slide tray Comp. Video CVC - 2500 videocassette eraser 125.00 345.00 $39,316.00 ***Shared with access users. LO will have priority on this used equipment. • • c .. PORTABLE EQUIPMENTN*"' 2 Sony 1800 Color Cameras 7,000.00 (with viewfinders, cases, cables) 2 Sony 4800 3/4" VCRs with AC adapter 9,000.00 2 Sony 4800 Porta -Braces •• 280.00 2 Davis/Sanford Tripods 300.00 1 VC 100 Battery Charger 300.00 5 BP -60 Portable Batteries 300.00 1 Audio Tec Lavalier Mic 55.00 1 Sony 3800 3/4" Portable VCR 2,400.00 1 Sony 3800 3/4" Porta -Brace 100.00 2 Sony 25' Camera Extension Cable 132.00 TOTAL $22,367.00 **.wShared with access users. L.O. will have priority on this used equipment. . APPENDIX E EXISTING ACCESS EQUIPMENT I Current Equipment: CONTROL, ROOM" VCRs: 3 Sony VP -5000 3/4" Recorders 1 : VO - 1590 744" Recorders 1 Sony 2800 3/4" Recorders 1 JVC BR -3100V 1/2" VHS Recorder 1 JVC 1/2" Beta Recorder Monitors: 1 Videotek KV -1217 13" Monitor 1 NEC CT1305A 13" Monitor 1 Sony CVM 1271 13" Monitor 1 RCA 13" Monitor 1 Panasonic 9" Monitor 2 Panasonic CCTV 9" Monitor 2 RCA TC1910 9" Monitor 3 Setchell Carlson 5" Monitor 6 Panasonic WV -5203 5" Monitor 1 Sony CVM 2370 with case Test 1 1 1 $ 6,000.00 5,000.00 1,000.00 550.00 500.00 650.00 450.00 650.00 200.00 200.00 300.00 400.00 600.00 1200.00 950.00 equipment: Leader LVS-5850B STSC Vector Scope 2000.00 Tektronix 528A Waveform Monitor 2000.00 Panasonic WV -5361U Pulse Cross Monitor 750.00 Video: 1 JVC KM -2000 Seg 1 Videotek RS10A Switcher 2 Panasonic WJ-22SR Switcher 1 Ilarris 550.TBC 1 Lenco PCD 473 NTSC Decoder 1 Shintron Character Generator Audio: 1 Realistic MPA -20 Amp 1 Orban 422 A De -Esser 1 Shure 12 -Channel Audio Mixer 2 Sentry 100A Studio (Audio) Monitor 1 IIarmon/Kardon CD201 Audio Tape Deck 1 AR77XB Turntable TOTAL CONTROL ROOM UPGRADE FOR 2 Sony VO -5800 Decks 1 ILang Video video/audio switcher 1 Videotek audio monitor 1 Shure M267 mixer 2 Electrovoice EVM-920 B/W Monitors 1 Electrochrome rack mount 1 Shure rack mount for mixer 1 Nova 620 time base corrector 1 Winsted Rack with Tilt Miscellaneous cable & connectors TOTAL 4012.00 1061.00 500.00 6000:00 3000.00 3500.00 110.00 583.00 1600.00 438.00 385.00 150.00 $41,473.00 1987* $10,200.00 3,000.00 500.00 470.00 750.00 50.00 35.00 5,000.00 900.00 150.00 $21,055.00 * Shared 'with L.O. Access users have priority use. 51d .r•{x•�J`. .. _ ....... ... 1. _._ _..�,..... ... .....�:'�.'.l:iy:: ... t.:..:}:': .... _.._. ,.v .1..:,v...!. ..ate. ...._x....w'�:i: lui,l.:.ei. .. .. .. ... kip EDITING SUITE" 1 Sony VO -5800 3/4" Recorder $ 5,000.00 1 Sony VO -5850 8,350.00 1 Sony'RM-440 Control Unit 1,400.00 1 Connecting Cables 90.00 2 JVC 9" Color Monitors •••• 1,191.00 1 Panasonic 9" B/W WV -5370 Monitor 150.00 2 Fostex 6301B Personal Audio Monitors 280.00 1 Realistic Mixing Console 89.00 1 Realistic Parametric Equalizer 40.00 1 Knox K1008 Chromafont CG 3,450.00 1 Dual Turntable 450.00 1 Naltamichi BX100 Audiocassette 500.00 1 Realistic LV10 Headphones 35.00 1 Panasonic WJ225R Video Switcher 250.00 1 For -A FA -400 Time Base Corrector 6,000.00 TOTAL $27,275.00 LIGIITING SYSTEMm 2 Photogenic Machine co CP -15 Floodlight Scoops 2 Kliegel Scoops 4 Kliegel 111 Fresnels 2 Mole -Richardson 751 Baby Combo Fresnels 4 Kobold Porta Lites with Stands, Handles & Mounts 4 Kobold Porta Lites with STands, Handles & Mounts 1 20' x 40' Lighting Grid Total replacement value of Lighting. System $10,000.00 * Shared with Local Origination. Access users have priority. 51e STUDIO""" 3 Sony 1820 Cameras with Tripods, Dollies, Studio and Portable Monitors - Cases, Cables, CCUs, CCU Rack Mount Unit 1 Sony DXC-1610 color video cameras w/ Quickset 7301 Sampson tripods, 7201 head and 7601 Dollies $21,000.00 $ 5,000.00 1 Sony AVC 3450 B/W portable camera $ 674.00 Audio: Mics: 3 Shure Lavaliers 6 Shure Spi91 Mics 6 Electrovoice 635A 2 Calrad Mics Stands : 6 Deslc Mic Stands 6 GooseNecks 4 Baby Booms 1 Boom with Wheels 5. Electrovoice Shock Mount Clamps 313A 5 Electrovoice Shock Mount Clamps 312 Speakers Miscellaneous: Sawyer 500 I3 Slide Projector with 40 slide tray Comp. Video CVC - 2500 videocassette eraser 300.00 300.00 450.00 180.00 180.00 72.00 200.00 100.00 50.00 40.00 300.00 125.00 345.00 $29,316.00 ***Shared with Local Origination.f has priority use. 51f PORTABLE EQUIPMENT*** 2 Sony 1800 Color Cameras 7,000.00 (with viewfinders, cases, cables) 2 Sony 4800 3/4" VCRs with AC adapter 9,000.00 2 Sony 4800 Porta -Braces 280.00 2 Davis/Sanford Tripods 300.00 1 VC 100 Battery Charger 300.00 5 BP -60 Portable Batteries 300.00 1 Audio Tec Lavalier Mic 55:00 1 Sony 3800 3/4" Portable VCR 2,400.00 1 Sony 3800 3/4" Porta -Brace 100.00 2 Sony 25' Camera Extension Cable 132.00 TOTAL $19,867-00 ***Shared with Local Origination. 51g LLC has priority use. APPENDIX E CONSTRUCTION PRACTICES For reliability, all of ACC's cable distribution syste will be powered by battery-operated standby power supplies. capable of up to four hours of standby operation. ACC's hu will have engine -generator standby power., All distribution active and passive electronic equipment will be enclosed in corrosion -resistant aluminum alloy housings. These housings incorporate a bolt closure system to provide ready access for maintenance and. in conjunction with the housing's environmental and electromagnetic gaskets, ensure the housing's RF ane environmental integrity. In the rebuild of the cable system, further reliabilit and safety is guaranteed by ACC's -use of only the highest quality, latest design equipment and •cable, and by the use of surge protectors in all trunk and feeder amplifiers. TY Mitek TR -1 will be used to ensure constant monitoring and rapid detection and location of signal leakage in the new plant. Every trunk amplifier will contain, automatic gain control and automatic slope control circuitry to maintain levels over the varying temperature conditions which exist in Ithaca. APPEPIX G OWNERSHIP INFORMATION American Coimnuni Ly Cablevision is a division of American Television and Communications Corporation (ATC) and has no separate legal status or existence. Its resources and existence are at the disposal of ATC management, subject to contractual commitments by ATC to perform certain long- term contracts within the present divisional structure. Its assets are legally available for the satisfaction of debts of the entire corporation and its debts may result in claims against other assets of ATC. The division has material transactions with ATC. No debt or equity'is directly associated with American Community Cablevision. Tire, Inc. has a controlling• interest in the voting stock of ATC. 1988 AFFIRMATIVE ACTION POLICY STATEMENT Ara towailar5sa NIZIMI Mnrtn::ut I, Ii viaun R C"nnnuuu::rinnrs Ciniiocttnnr Corporate Headquarters 160 Inverness Drive West Englewood. Colorado 80112 303 799.1200 American Television and Communications Corporation (ATC) reaffirms its commitment to take Affirmative Action in providing equal opportunities for employment and advancement to qualified individuals without regard to race, color, sex, national origin, religion, age, ancestry, medical condition, creed, marital status, sexual orientation, handicap or status as a disabled or Vietnam -era veteran. This commitment is a result of ATC's acceptance of Equal Employment Opportunity (EEO) and Affirmative Action as a social obligation and an economic and business necessity. ATC's policy, which has the steadfast support of each person in management, ensures equal opportunities for all individuals through the development and administration of equitable personnel practices and actions in areas such as recruitment, hiring, compensation, benefits, training and development, educational assistance, transfers, lay offs, returns from layoffs, promotions, discipline, company -sponsored recreation and social activities. The commitment espoused by ATC extends beyond a merely "neutral policy" and requires the ongoing efforts of all employees to achieve successful results. Accordingly, managers will share the responsibility of establishing Affirmative Action goals designed to correct any inequities found to exist in any area of employment at ATC. Each system and corporate department will submit reports to the Director of Employee Relations on a semi-annual basis. This information will be consolidated and analyzed to determine trends and accomplishments. The Affirmative Action Plan, including goals and timetables, will be revised on an annual basis. The performance evaluations of ATC managers will take into account their acceptance and achievement of Affirmative Action goals. Successful performance on Affirmative Action goals will provide positive benefits to ATC through full utilization and development of our human resources. Through our Affirmative Action Plan (AAP), we are taking positive steps to ensure that equal employment opportunities prevail. Elements of our written plan are available to all employees upon request. Anyone interested in reviewing this program should contact their respective Human Resources Director or Manager within the business unit, or any ATC division president or system manager. Trygv4( E. ©, hren CEO and Ch • firman off' Board PrUVuWln Pater! uu:"t•ur .1:11 r 1i' .. • •: . CITY OF ITHACA 108 EAST GREEN STREET ITHACA. NEW YORK 14850 OFFICE OF TELEPHONE: (607) 274-6504 CITY ATTORNEY FAX: (607) 272-7348 MEMORANDUM TO: Cookie Paolangeli, City Clerk FROM: Chuck Guttman, City Attorney DATE: February 18, 1992 SUBJECT: Resolution - ACC Attached please find a resolution regarding ACC from the Charter and Ordinance Committee for the February COW Meeting and the March Council Meeting. Attachment cc: Dan Hoffman "An Equal Opportunity Employer with an Affirmative Action Program" ti, Recycled. Paper WHEREAS, American Community Cablevision (the "Franchisee") is the holder of a cable television franchise (the "Franchise") for the City of Ithaca; and WHEREAS, the Franchisee is a subsidiary or division of American Television and Communications Corporation ("ATC"); WHEREAS, ATC is a majority owned subsidiary of Time Warner Inc. ("Time Warner"), a widely held New York Stock Exchange company which has offered to purchase the shares in ATC which it does not own (the "ATC Minority Shares"); and WHEREAS, Time Warner intends to create a new limited partnership entity comprised of the business and assets o,- its filmed entertainment, programming and cable divisiro_yn ,- which entity shall be known as Time Warner Entertainment Company, L.P. ("TWE"); and WHEREAS, Time Warner will retain majority ownership as well as operating and management control of TWE and will operate TWE as a controlled subsidiary of Time Warner employing the assets of ATC including the Franchise and the Franchisee, and the assets of Warner Cable, Lorimar Telepictures, HBO, and Warner Bros.; and WHEREAS, Time Warner intends to offer minority limited partnership interests in TWE to strategic partners in TWE, including Toshiba Corporation and C. Itoh & Co. Ltd; and WHEREAS, ATC will continue to exist as anoperating division of TWE, with the existing management structure remaining at both the local and corporate levels and no change is anticipated in the manner in which the business and operations of the Franchisee are conducted; and WHEREAS, the Franchisee will continue to be the grantee of the Franchise as an operating division of TWE and will continue to operate under the Franchise;a NOW, THEREFORE, be it resolved that, insofar as9Tmay be necessary or advisable under the Er anchise,Y" transfer of the ATC Minority Shares to Time Warner andntransfer of the Franchise and the cable television system operating pursuant to the Franchise from the Franchisee to TWE (including any necessary transfers through one or more subsidiaries of Time Warner), are hereby authorized and consented to in all respects. L{,Xerc a $ -, RESOLUTION 2 WHEREAS, American.: Community Cablevision. (the "Franchisee") is the holder of a cable television franchise (the "Franchise") for the City of Ithaca; and WHEREAS, the Franchisee is a subsidiary or division of American Television and Communications Corporation ("ATC"); WHEREAS, ATC is a majority owned subsidiary of Time Warner Inc. ("Time Warner"), a widely held New York Stock Exchange company which has offered to purchase the shares in ATC which it does not own (the "ATC MinorityShares"); and WHEREAS, Time Warner intends to create a new limited partnership entity comprised of the business and assets of its filmed entertainment, programming and cable divisions, which entity shall be known as Time Warner Entertainment Company, L.P. ("TWE"); and WHEREAS, Time Warner will retain majority ownership as well as operating and management control of TWE and will operate TWE as a controlled subsidiary of Time Warner employing the assets of ATC including the Franchise and the Franchisee, and the assets of Warner Cable, Lorimar Telepictures, HBO, and Warner Bros.; and WHEREAS, Time Warner intends to offer minority limited partnership interests in TWE to strategic partners in TWE, including Toshiba Corporation and C. Itoh & Co. Ltd; and WHEREAS, ATC will continue to exist as an operating division of TWE, with the existing management structure remaining at both the local and corporate levels and no change is anticipated in the manner in which the business and operations of the Franchisee are conducted; and WHEREAS, the Franchisee will -continue to be the grantee - of the Franchise as an operating division of TWE and will continue to operate under the Franchise; NOW, THEREFORE, be it resolved that, insofar as may be necessary or advisable under the Franchise, transfer of the ATC Minority Shares to Time Warner and transfer of the Franchise and the cable television system operating pursuant to the Franchise from the Franchisee to TWE (including any necessary transfers through one or more subsidiaries of Time Warner), are hereby authorized and consented to in all respects. �J yakifpzi2fiadfifei-c_ WHEREAS, American Community Cablevision (the "Franchisee") is the holder of a cable television franchise (the "Franchise") for the City of Ithaca; and WHEREAS, the Franchisee is a subsidiary or division of American Television and Communications Corporation ("ATC"); WHEREAS, ATC is a majority owned subsidiary of Time Warner Inc. ("Time Warner"), a widely held New York Stock Exchange company which has offered to purchase the shares in ATC which it does not own (the "ATC Minority Shares"); and WHEREAS, Time Warner intends to create a newlimited partnership entity comprised of the business and assets of its filmed entertainment, programming t cable divisions, which entity ?C&yefiL shall be known as Time Warner Entertainment Company, L.P. ("TWE); and WHEREAS, Time Warner will retain majority ownership as well as operating and management control of TWE and will operate TWE as a controlled subsidiary of Time Warner employing the assets of ATC including the Franchise and the Franchisee, and the assets of Warner Cable, Lorimar Telepictures, HBO, and Warner Bros.; and WHEREAS, Time Warner intends to offer minority limited partnership interests in TWE to strategic partners in tWE, including Toshiba Corporation and C. Itoh & Co. Ltd; and WHEREAS, ATC will continue to exist as an operating division of TWE, with the existing management structure remaining at both the local and corporate levels and no change is anticipated in the manner in which the business and operations of the Franchisee are conducted; and WHEREAS, the Franchisee will continue to be the grantee of the Franchise as an operating division of TWE and will continue to operate under the Franchise; and WHEREAS, pursuant to Article 23 of the Franchise Agreement, the Franchise cannot be transferred without the prior consent of the City and prior City authorization is required for every change, transfer, and acquisition of control of the Franchisee; NOW, THEREFORE, be it resolved that, insofar as it may be necessary or advisable under the Franchise, the transfer of the ATC Minority Shares to Time Warner and the transfer of the Franchise and the cable television systemoperating pursuant to the Franchise from the Franchisee to TWE (including any necessary transfers through one or more subsidiaries of Time Warner), are hereby authorized and consented to in all respects. Franchise.acc February 18, 1992 OFFICE OF CITY ATTORNEY CITY OF ITHACA 1OB EAST GREEN STREET ITHACA. NEW YORK 14850 July 8, 1992 Barbara Lukens General Manager American Community Cablevision 519 W. State Street Ithaca, NY 14850 TELEPHONE: (607) 274-6504 FAX: (607) 272-7348 CERTIFIED MAIL RE: City of Ithaca Franchise Agreement Dear Ms. Lukens: • This will serve on behalf of the City of Ithaca, as.a notice cf.default by American Television and Communica.tions•Corporation d/b/a American Community Cablevision -(ACC). This notice of default is as provided for in Chapter XXII, §22..1, of the Franchise Agreement between the City of Ithaca and ACC. The City of Ithaca finds ACC does not adhere to New York State Regulations and Policies as set forth in §24.1 of the. Franchise Agreement; has failed to provide all monies due the City of Ithaca; ACC charges cable subscribers in excess of the maximum Franchise Agreement amount; ACC failed to activate Access channels as demanded; ACC failed to rebate money spent from the Access Capital Equipment fund for the activation of two Access channels. Pursuant to §22.1 of the Franchise Agreement., the. City demands, within thirty (30) days of receipt of this letter, either a cure, or a response as set forth in §22.1 of the Franchise Agreement. After thirty (30) days, if a response is not made., a cure not effected, or reasonable and diligent steps not taken to cure the provisions in default, the City may pursue remedies as set forth in Chapter XXII of the Franchise Agreement entitled "BREACH". THE CITY OF ITHACA FINDS THE FOLLOWING PROVISIONS IN DEFAULT: Chapter XXIV MISCELLANEOUS PROVISIONS 524.1: ACC is not in compliance with all statutes, rules, and regulations of the New York State Commission on Cable Television (NYSCCT). 'An Equal Opportunity Employer with an Affirmative Action Program' t*/ Recycled Paper Barbara Lukens 2 July 8, 1992 §24.10: ACC is to cease and desist from acting or performing in any agency capacity on behalf of the City of Ithaca. Please refer to letter of J. Fogarty to C. Guttman, May 12, 1992. Any and all agency actions known or unknown, disclosed or undisclosed are to stop immediately. Chapter XX FRANCHISE FEE §20.1: The City hereby demands accurate receipt of the total Franchise Fee due from ACC. ACC is in violation of the NYSCCT STATEMENT OF POLICY (Docket No. 90389_). As expressed in §24.1, ACC is to comply with the regulations of the NYSCCT. The Franchise Fee of 5% of ACC's Gross City Revenue is to be correctly calculated for past, present and future paymentsdue the City, considering all income, including, but not limited. to Franchise Fees and Advertising Revenues. The City demands an accounting of Gross Revenues pursuant to the Franchise Agreement, the regulations of New York State as set by the New York State Commission on Cable Television, and the FCC. The City demands full disclosure of Gross Revenue accounting practices in the past and those to be used in the future. The City also.demands'disclosure and accounting of advertising revenues and revenues from affiliates utilizing the ACC system. Please refer to §20.3. The City demands an explanation of how the NYSCCT Rate of .359% and .277%, deducted from the 5% Franchise Fee, is timed and applied, as well as the impact this fee and its accounting has had on the Franchise Fee calculation and subsequent fees paid to the. City. The City imposes a due date for the proper payment of all fees now due and additionally for the fees incorrectly accounted for and not made in the past. The date for the proper payments and refunds shall be 30 days from the receipt of this letter. This notice is made pursuant to §21.1 (D) of the Franchise Agreement. Chapter XIX RATE REGULATION §19.1: ACC adjusted its Basic rate of service to more than the $14.64 amount set forth in §19.1 of the Franchise Agreement. A refund is due the customers of ACC of the amount overcharged. since March 1, 1992. Chapter XIV ACCESS CHANNELS AND SERVICES The City demands that ACC comply with §14.1 of the Franchise Agreement as demanded in 1991 by the City as well as by Resolution of the Ithaca Cable Commission (attached; dated 02/11/92), Barbara Lukens 3 July 8, 1992 regarding the activation of nine access channels, and the rebate of all monies taken from the Access Capital Equipment Fund to activate access channels. In addition, the City demands a detailed, specific and .clearly set forth calculation of the 2% of Gross Revenues used to fund Access equipment. The dates of this calculation are to include all years of the Franchise Agreement along with available projections for 1992 and for 1993. Please take notice that it is the City's position that ACC is required to pay 2% of its total Gross Revenues to the Access fund and the salaries of the ACC Access staff in addition to the 5% Franchise Fee. ACC is expected to adhere to the NYSCCT Statement of Policy Docket No. 90389 and 47 USCS §542 (g)(B)(C). If ACC has a contrary position, ACC is requested to respond in detail immediately. Chapter XVIII REGULATION OF FRANCHISE Pursuant to §18.2 of the Franchise Agreement the City now makes inquiry into the management and affairs of ACC. Please advise as to the process you wish us to follow in reviewing these documents. Pursuant to §18.4, the City of Ithaca gives notice of its intent to exercise its right to inspect the Books, Recordsandall pertinent materials of ACC, whether kept in ACC's Ithaca Office or elsewhere. Pursuant to §18.5(A) the City requests ACC to immediately provide the City with any and all reports required by or voluntarilysubmitted to the NYSCCT and the. FCC. If any reports are not currently on file, please make them so. In addition, the City requests immediately, statements setting forth ACC general operating costs in Ithaca for 1990, 1991, and projected for 1992 and 1993. Pursuant to the provisions of §18.5(C), ACC shall immediately submit to the City the following financial reports: (1) An ownership report, including all persons, who at any time during the preceding year did control or benefit from an interest in this Franchise of five percent (5%) or more. (2) A copy of ACC's annual report. (3) A report on the placement of any limited partnership offering, if any, including the amount subscribed and the amount paid in. Barbara Lukens 4_ July 8, 1992 (4) An annual City -only, certified income statement., (5) An annual list of officers and members of _the Board of ACC's and of any parent corporation. Pursuant . to §18.5(E), the City demands ACC immediately furnish any and all information and records with respect to its operation, affairs, transactions or property, as may be reasonably necessary and appropriate to the performance of any of the rights, functions or duties of the City in connection with this Franchise. Pursuant to §18.7, the City is exercising its right to inspect. A representative of the Ithaca City Attorney's Office and/or the City Controller's Office and/or an auditor from the NYSCCT will notify ACC inthe near future of inspections on site in Ithaca, or, if necessary at the location of the information. sought. Chapter XXI BONDS, INSURANCE AND INDEMNIFICATION §21.1 et seq. ACC is advised to note the ACC Performance Bond is.subject to. conditions set forth in §21.1(B). If ACC :does not .comply with. the notice of default and demands herein, the. City may foreclose the ACC Performance Bond. as provided at §21.1,...and'seek such other relief as allowed .by the terms of the Franchise Agreement and as may.be appropriate. under the circumstances. If ACC fails to respond, cure, or take reasonable and diligent steps to cure the provisions in default, the City will begin to accrue damages as provided for in §22.2 Please respond to this letter and demands herein. Very truly /% es G -- ' an City Attorney Attachment cc: Mayor Benjamin Nichols Dominick Cafferillo, Controller Resolution of the Ithaca Cable Commission Regarding Activation of Access Channels Passed unanimouly, 2/11/92 The cable 'franchise adopted by the City Council of Ithaca on June 8th 1988, submitted to the NYSCC on December 20th 1988 and approved by NYSCC on September 12, 1989 contains the following language: 14.1 A. (1) Nine downstream channels shall be designated for public, governmental, and educational access. The access channels shall be available for use by New York State, local governments, educational institutions, or members of the public for education and public service programming, municipal services and local expression. The City and ACC have been arguing over whether the word designate means to set aside space in the spectrum (ACC) or to provide activated channelsfor PEG access use (the City). The following language is found in the NYSCC rules "setting minimum standards for the designation and use of channel capacity for public access". Notice of these rules' was released on February 24, 1988, and they became effective on September 8, 1988: 595.4 (b) (7) The designation of PEG access facilities shall include the provision by the cable franchisee of the technical ability to playback prerecorded programming and to transmit programming information consistent with the designated use of PEG channels. We have every reason to believe that the drafters of our franchise were familiar with the proposed access rules and the way they construed designation of channels. We must assume that it was the understanding of the signers of the franchise, including ACC, that the franchise required ACC to provide nine activated access channels. After a careful review of the documents pertaining to this matter, it is our opinion that there is no ambiguity in the franchise; that it is incumbent upon ACC provide nine activated access channels as part of its franchise obligations. Therefore, we resolve that the money taken from the access capital budget to activate access channels should be rebated forthwith. Further we resolve, consistent with our prerogatives and our understanding of the needs of the community, that the activation of a second public access channel take place within 60 days from the passage of this resolution. NEW YORK STATE COMMISSION ON CABLE TELEVISION In the Matter of 92-286 Application of Greater Rochester Cablevision, Inc. for approval of the renewal of its cable television franchise for the City of Rochester (Monroe County) Initial Docket No. 10713 ORDER APPROVING RENEWAL DOCKET NO. 30855 (Adopted: April 1, 1992; Released: June 18, 1992) The above -captioned application . was submitted by Greater Rochester Cablevision, Inc. ("GRC") on March 16, 1992. A copy of the application was served upon the City and all local notice requirements have been satisfied. Notice was also published in this Commission's Weekly Bulletin on March 20, 1.992. No comments or objections have been received. The application seeks approval of the renewal of a franchise for the City of Rochester embodied in a franchise agreement executed by the Mayor and GRC on March 12, 1992. The renewal was authorized by Ordinance No. 91-533 passed by the City Council on December 17, 1991 and approved by the Mayor. Also, on December 17, 1991, the City Council passed (and the Mayor subsequently approved) Ordinance No. 91-532 entitled An Ordinance Amending The Municipal Code By The Adoption Of New Regulations Governing Cable Television. Ordinance No. 91-532 adds a new Chapter 4A to the City of Rochester Municipal Code and provides at Section 2 that "this ordinance shall take effect immediately subject to approval by the New York State Commission on Cable Television." (Ordinance No. 91-532 and Chapter 4A of the City Code are herein referred to as "Chapter 4A.") The application is governed by Section 822 of the Executive Law which requires our approval unless we find specific violations of law, the regulations of this Commission, or the public interest. Section 822(4) of the Executive Law provides that we may approve the renewal contingent upon compliance with standards or conditions consistent with the public interest. Having reviewed the application in the context of all applicable statutory and regulatory standards, we have determined to approve the renewal subject to conditions as hereinafter set forth. Tower Building • Empire State Plaza • Albany, NY 12223 3 to subscribers by a franchisee, or receipts from sales or use taxes .or any other tax that a franchisee collects on behalf of any taxing authority." (Emphasis added) The Commission has recently amended Section 595.1(o) of its rules relative to the manner in which franchise fee requirements may be stated in a franchise agreement. (See, Memorandum and Resolution Adopting Rulemaking, Docket No. 90327, Order No. 92-210; released: April 9, 1992) The effect of the new rule is to ensure a minimum content in the revenue base used to calculate municipal franchise fees. Specifically, the rule requires that if a fee is based on a percentage of revenues, the revenue base must include "revenues received by the franchisee directly from subscribers for any cable services purchased by subscribers on a regular, recurring monthly basis." In other words, the rule limits the items of revenue that may be deducted from gross revenues before calculating a franchise fee. The attempt here to exclude "franchise fees" from the gross revenues upon which the fee is based is contrary to Section 595.1(o). A franchise fee is not a separate category of revenue like a tax. (See, e.g., Statement of Policy, Docket No. 90389, released: April 20, 1992) Indeed, the definition itself distinguishes the franchise fee from taxes which "a franchisee collects on. behalf of any taxing authority." Nor is it apparent how an amount that is calculable only upon revenue can be excluded from revenue. Accordingly, we find that so much of the definition of gross revenues as purports to exclude "franchise fees" is preempted. Section 4A-2 would also exclude annual grants for PEG access from "gross revenues." Under Section 622 of the Cable Communications Policy Act of 1984 ("Cable Act"), 47 U.S.C. Section 542, support payments for PEG access (as distinct from capital costs for PEG access facilities) generally are considered to be includible as part of the franchise fee and, as such, would be subject to the same analysis as above. We note, however, that the parties here have agreed that the franchise fee shall not include the annual grant for public access.2 Accordingly, we shall not preempt this aspect of the definition of "gross revenues" in Section 4A-2 in any instance where a franchise agreement approved by the City does not treat the annual grant for public access as part of the franchise fee. Third, Section 4A -14(B) relative to public access requires that use of the public access channels be available only to individuals who are residents of the City and to organizations that have an office located in the City. Section 595.4 of the Commission's rules contains minimum standards applicable to public, educational and governmental access throughout the State of New York. Section 595.4(5) defines local use to mean "noncommercial use by residents of the State of New York," it being the intent of the Commission that public access channels be available to any New York State resident. Accordingly, we find that the residency requirement in Section 4A -14(B) is contrary to the Commission's rules and policy applicable to PEG use and, therefore, is preempted. 2 Section 10 of the franchise agreement provides that "[t]he Grantee shall not charge against the franchise fee in any way the expenses incurred in supporting access programming and in meeting the requirements of this Agreement and the City Code." 5 We shall also approve the option in favor of the City. We note, however, that the existence of such option does not relieve the City of the obligation under Section 591.3 of our rules to exercise due diligence to review the past performance of the cable operator and to consider future community needs and interests prior to acting to extend the franchise. Nor does the existence of an option (in favor of either party) remove a renewal from the requirements of Section 822 of the Executive Law. Given the absence of any time specified in the franchise for exercising the renewal option, coupled with the requirements of Section 591.5(b)(2) that a renewal application be submitted to the Commission six months prior to the expiration date of a franchise, we believe that the City should determine whether to extend by option no later than the beginning of the ninth month preceding the expiration of the franchise, or July 1, 2001. Of course, the existence of the option will not preclude GRC from seeking a renewal of the franchise prior to July 1, 2002 in accordance with Section 626 of the Cable Act, 47 U.S.C. Section 546. Section 7 of the franchise agreement contains various provisions applicable to public, educational and governmental channels. Sections 4A-13 and 4A-14 also include comprehensive provisions generally applicable to public access. Section 4A-13 is specifically incorporated into the franchise pursuant to Section 11. Section 4A-14 is not similarly incorporated. Nonetheless, it appears from Section 7.1 of the franchise agreement as well as from other provisions thereof, that there is an intent to incorporate at least part of Section 4A-14 and we shall so construe the franchise agreement. In addition, Section 7.1 of the franchise agreement provides that a not-for- profit corporation shall administer the public channel and that the corporation shall be appointed by the Mayor pursuant to an annual contract with the City. Section 7.3(b) provides that the not-for-profit corporation shall receive an initial grant "for the administration and operation of the public access channel(s)" from GRC in the amount of $175,000 to be increased annually at least by 5%. The administration of a public access channel by a separate entity is consistent with Section 595.4(c)(1) of our rules applicable to PEG access. As in similar cases, we shall require the City to provide us with documentation that the corporation has been formally designated together with copies of its certificate of incorporation and by-laws and a list of the initial board of directors.4 We also note that the franchise requires separate educational and governmental channels and that pursuant to the agreement the educational access channel shall be jointly administered by the Cable College Educators of Greater Rochester and the Rochester City School District. 4 Since the Commission's vote approving this application, the City has filed this information which shows that Rochester Community TV, Inc. has been formed as a not-for- profit corporation that will administer public access in the City of Rochester. CITY OF ITHACA 108 EAST GREEN STREET ITHACA, NEW YORK 14850 OFFICE OF CITY ATTORNEY FAX: (607) 272-7348 TELEPHONE: (607) 274-6504 January 22, 1992 Barbara L. Lukens American Community Cablevision 519 W. State Street Ithaca, NY 14850 Dear Ms. Lukens: I am in receipt of a copy of your letter of January 15, 1992 addressed to the City in which you advise us that ACC is increasing the rates for basic service from $12.58 to $13.95 with 'a five percent franchise fee to be collected in addition. When the five percent franchise fee is added in, the rate which customers will be paying is actually $14.65, a penny more than the maximum set forth in the franchise agreement. As I read Section 19.1 of the franchise, ACC agrees not to raise the basic rate higher than the $14.64 charge. Section 20.1 states that the City shall be entitled to receive from ACC, not 9 from the consumer, the franchise fee. Therefore,. I would assume that the maximum that ACC can charge the consumer, including the franchise fee, is the $14.64 charge. Accordingly, I believe that the increase you are proposing actually brings your rates over the maximum set forth in the franchise agreement. You further state in your letter of January 15, 1992 that the rates for basic cable service are related to overall increases to ACC for general operating costs. I would appreciate D your forwarding to me a financial statement setting forth your general operating costs for 1990, 1991 and projected for 1992 to demonstrate that the 58 percent increase since December of 1989 is actually related to overall increases for general operating costs. - r I expect that Common Council will be discussing this issue and I would appreciate a response as soon as possible. Ver Guttman City Attorney cc: Mayor Benjamin Nichols Tom Terrizzi, Cable Commission Peter Hess, Cable Commission 'An Equal Opportunity Employer with an Affirmative Action Program' tot Recycled Paper AMERICAN COMMUNITY CABLEVISION March 9, 1992 Mr. Peter Hess. City of Ithaca Cable Commission City Hall 108 E. Green Street Ithaca, NY 14850 Dear Peter: This will respond to your letter of February 17, 1992 and the enclosed resolution of the City of Ithaca Cable Commission. As your letter notes, there have been several discussions between representatives of the City and ACC regarding ACC's responsibility to activate additional access channels and the source of the funds to pay for the equipment required for such activation. We thought that real progress had been made toward reaching a mutually. acceptable resolution of these issues. However, it appears from your letter that some of these issues remain unresolved and we believe it would be in the best interests of the City, ACC and our customers to continue our attempts to resolve them. In an attempt to further those efforts, ACC is willing to agree to activate a second public access channel as soon as practicable, despite our view that• such activation is not required, nor is there an existing need for an additional public access channel. We believe that the alleged need for the activation of this channel arises from the continuing repetition of public access programming and excessive use of access channel time by certain individuals. We doubt that it was ever intended that any individual should have,, in effect, his or her own personal access channel. And certainly the best interests of our customers are not served by such a situation. Any resolution of the outstanding issues regarding access channel activation should include limitations on the repetition of programming and on the use of the access channels by any one individual. While we are willing at this time to activate a public -access channel, we continue to believe that the funds for the equipment required to activate such a channel are properly to be allocated from the 2% of revenues designated for access equipment. under Section 14.1C(3). 5ys_i(b) aclL 519 West State Street Ithaca, New York 14850 607-272-3456 We again urge that, • in _ the interests of reaching an -amicable resolution of these issues,.we continue our -discussions. Sincerely, y Barbara L. Lukens, General Manager enc. BLI;/mkk § 595.4 TITLE 9 EXECUTIVE (c) For purposes of this section, a subscriber shall be deemed to have affirmatively requested a service if (1) the subscriber voluntarily makes payment for such service after an initial free. trial period, and (2) there was included, in the notice or advertising material describing the service, a statement clearly advising the subscriber that he has incurred no obligation to pay for such service and that he need not take any action to avoid incurring any such obligation. Historical Note Sec. filed March 23, 1976. 595.4 Minimum standards for public, educational and governmental (PEG) access. (a) Definitions. (1) The term public access channel means a channel designated for noncommercal use by the public on a first-come, first-served, nondiscriminatory basis. (2) The term educational access channel means a channel designated for use by school districts and not-for-profit educational institutions chartered or licensed by the New York State Education Department or Board of Regents. (3) The term government access channel means a channel designated for use by municipal, county and State government, or agencies thereof. (4) The term public, educational, or governmental (PEG) access facilities means (i) channel capacity designated for public, educational or governmental use; and (ii) facilities and equipment for the use of such channel capacity. (5) The term local use means noncommercial use by residents of the State of New York including school districts and not-for-profit educational institutions and munici- pal, county and State governments, or agencies thereof. (6) The term access cablecast day means a day or part thereof during which public, educational or governmental access facilities are available for PEG use. Designation of channels. Every cable television franchisee shall designate chan- pacity for PEG access as follows: (1) The franchisee of a cable television system with a channel capacity of 21 or more channels shall designate (i) at least one full-time activated channel for public access use; (ii) at least one full-time activated channel for educational and governmental use; and (iii) one additional full-time activated channel for educational/governmental use whenever the first channel so designated shall have been used for such educational and governmental programming on the average of at least 12 hours per day during any 90 - day period; provided, however, that the calculation of such average shall not include any day when the unavailability of PEG access facilities precludes achieving such programming level. In the event that two channels for educational and governmental use are required by this subdivision, one channel shall be designated the educational access channel and one channel shall be designated the governmental access channel; provided, however, that either channel may be used for either purpose if necessary to satisfy the demand for channel time. • (2) The franchisee of a cable television system with a channel capacity less than 21 channels shall designate at least one full-time activated channel for public, educa- tional and governmental use. 230.520b EX 8-31-88 SUBTITLE R COMMISSION ON CABLE TELEVISION § 595.4 (c) Administration and use. The use of the channel capacity for PEG access shall be administered as follows: (1) The public access channel shall be operated and administered by the entity designated by the municipality or, until such designation is made, by the cable televi- sion franchisee; provided, however, that the municipality may designate such entity at any time throughout the term of a franchise by a resolution duly adopted by the legislative body thereof.* (2) The educational and governmental access channel shall be operated and admin- istered by a committee or a commission appointed by local government and shall include appropriate representation of local school districts within the service area of the cable television system and may include for purposes of coordination an employee or representative of the cable television franchisee.** (3) The entity responsible for administering and operating the public access chan- nel shall provide notice to the general public of the opportunity to use such channel which notice shall include (i) a character -generated message transmitted at least hourly on such channel between the hours of 6 p.m. and 10 p.m. each day and (ii) written notice to subscribers at least annually. Notices shall include the name, address and telephone number of the entity to be contacted for use of the channel. All access programming shall be identified as such. (4) Channel time shall be scheduled on the public access channel by the entity responsible for the administration thereof cin a first-come, first-served, nondiscrimina- tory basis. (5) Local use of educational and governmental access channels shall have pre- ferred status in the event of competing requests for channel time. Priority may be afforded to local governments within the service area of the system. (6) Channel time for PEG access programming shall be without charge to the user. The designation of PEG access facilities shall include the provision by the cable t- sion franchisee of the technical ability to play back prerecorded programming and to transmit programming information consistent with the designated uses of PEG access channels. (8) The cable television franchisee shall not exercise any editorial control over any public, educational or governmental use of channel capacity designated for PEG purposes. (9) A municipality shall not exercise any editorial control over any use by the public of a public access channel. (10) The entity responsible for the administration of a public access channel shall maintain a record of the use of such channel which shall include the names and addresses of all persons using or requesting the use of any such channel and which record shall be available for public inspection for a minimum of two years. * If a single public access channel is shared by more than one municipality, a single entity shall be jointly designated by the local legislative bodies of each franchising municipality in the system. If agreement cannot be reached on a single entity, the commission shall arbitrate the issue. ** Where an educational or a governmental channel is shared by more than one school district or local government or. combination thereof, administration of such channel(s) on a cooperative basis is encouraged. - 230.520b1. EX 8-31-88 f Y' 13.4 ACC shall provide free cable drops to locations already provided with free drops, and at any City designated locations in any new or renovated public, educational or public seryice offices or buildings designated by the City at the time of'the rebuild up to a maximum of 50. After the rebuild, ACC shall provide additional drops as specified by the City at the time of building construction or renovation of existing or new public, educational or public service offices or buildings designated by the City. The City shall provide .ACC with reasonable notice of such construction and renovation. The first tier of service, closed circuit channels, institutional, and applicable two-way channels shall be provided free of charge to all of these locations. 13.5 All closed -captioned programming 'retransmitted by'the system shall include the closed -caption signal. 13.6 ACC will make VCR connections available to customers and will provide training in the proper use of VCRs in connection with the cable system and equipment. XIV ACCESS CHANNELS AND SERVICES 14.1 In order to develop and promote public, educational and governmental access programming for the system's access channels and institutional services, ACC hereby agrees to provide the following: A. (1) Nine downstream channels shall be designated for public, governmental, and educational access. The access channels shall be available for use by New York State, local governments, educational institutions, or members of the general public for education and public service programming, municipal services and local expression. (2) The public, governmental, and educational access channels shall be available on a first-come, first- served basis at no charge to any individual, association, or organization desiring to utilize them. (3) Any PEG access channels unused by the City three years after the rebuild is complete shall revert to ACC, provided that if community needs subsequently require the use of any such channel, ACC will return said channel to the City six (6) months after receiving written notice if ACC has a use for the channel and immediately if there is no use for the channel. B. Upon the request of the. City, ACC shall interconnect the access channels of the Cable Communications System with neighboring. cable systems in Tompkins County. -15- C. EQUIPMENT (1) Local Programming Equipment.. In instances, as set forth in Appendix (DI, where the use of local origination equipment is shared with access,this equipment shall be made available to access users free of charge at such times as the facilities are open and where the equipment is not being utilized for local origination productions. All local programming equipment shall remain the property of ACC but shall be made available for access use by the City of Ithaca, local institutions and residents and surrounding ACC System residents. (2) Public, Governmental and Educational Access Equipment. New public, governmental and educational access equipment (PEG) with a purchase value of $165,000 shall be purchased by ACC for additions to existing access equipment inventory listed in Appendix (E]. ACC shall prepare an equipment purchase list for City approval within sixty (60) days of the receipt of the Franchise. 1111 equipment purchased shall be new and shall be purchased and installed by March 1, 1989. (3) Access Equipment Ownership and. Availability. All access equipment shall remain the property of ACC but shall be made available. for access use by. the City of Ithaca, local institutions and residents and surrounding ACC system residents. On. an average annual basis ACC has agreed to provide 2% of Gross City Revenues for capital PEG access equipment replacement and expansion. Any future access equipment replacement and expansion commitments that are made by ACC to municipalities served by the same headend as the City of Ithaca, will be deducted to a floor of one percent of gross City revenues. All access equipment shall be available to access users on a first priority basis before local origination users. (4) Equipment Maintenance. PEG, municipal access and local origination equipment will be maintained and/or replaced by ACC in a manner consistent with good operating practice. Maintenance of that equipment will be done on site, or at any ACC facility, or at a manufacturer's repair facility in a reasonable timely manner. D. ACC shall maintain in its local programming studios in the City of Ithaca the equipment specified in'(B) above. -16- i- :osts. of such engineer if : the .tests performed show that the quality of service is below the standards set forth in this Franchise. 18.4 BOOKS AND RECORDS AVAILABLE TO CITY. A. The City reserves the right to inspect all pertinent books, records, maps, plans, financial statements and other like material, of ACC, upon reasonable notice and during normal business hours. B. If any of such maps or records are not kept in the City, or upon notice ACC is unable to provide the records in the City, and if the City shall determine that an examination of such maps or records is necessary or appropriate to the performance of any of their duties, then all travel and maintenance expenses necessarily incurred in making such examination shall be paid by ACC. 18.5 REPORTS REQUIRED. ACC shall file with the City: A. Upon request all reports required by or voluntarily submitted o e New York State Commission on Cable Television and the Federal Communications Commission (FCC)Je e related to the City oE Ithaca shall be provided to the City. B. An annual report setting forth the physical miles of plant construction and plant in operation during the fiscal year shallbe submitted to the City. Such report shall also contain any revisions to the system "as built" maps filed with the City, and copies of all materials required by this Franchise to be given to subscribers. C. The following financial reports shall be submitted annually to the City. (1) An ownership report, indicating all persons, who at any time during the preceding year did control or benefit from an interest in this Franchise of five percent (5%) or more. (2) A copy of franchisee's annual report. (3) A report on the placement of any. limited partnership offering, ifany, including the amount subscribed and the amount paid in. (4) An annual City -only, certified income statement. (5) An annual list oE officers and members oE.the Board of ACC's and of any parent corporation. -27- D. The following system and operational reports shall be submitted annually to the City: (1) ACC shall provide the City with a copy of its annual performance testing results as submitted to the' FCC. (2) An annual summary of the previous year's activities including, but not limited to, subscriber totals for each category of service offered including number of pay units sold, new services offered, and the character and extent of the service rendered to other users of the system, subject to ACC's need to protect proprietary information. (3) An annual summary of service requests and. complaints received and handled. (4) An annual summary of the number of outages. (5) An annual summary of all reports required by or voluntarily submitted to the New York State Commission on Cable Television and the Federal Communications Commission (FCC) related to the City of Ithaca. E. ACC. shall Furnish to the City such additional information and records with respect to its operation, affairs, transactions or property, as may be reasonably necessary and appropriate to the performance of any of the• rights, functions or duties of the City in connection with this Franchise. 18.6 MANDATORY RECORDS. ACC shall at all times maintain: A. A record of all complaints received and interruptions or degradation of service experienced for the preceding period prior to a performance review, consistent with state law and regulation. B. An annual log showing the date, approximate time and duration, type and probable cause of all Cable Communications System outages, whole or partial, due to causes other than routine testing or maintenance. The entries in such log shall be retained by ACC for one (1) additional year and shall be subject to inspection and copying by the City or its designee during ACC's regular business hours upon reasonable request. C. A full and complete set of plants, records and "as built" maps showing the exact location of all cable installed or in use in the City, exclusive of subscriber service drops.. -28- 18.7 RIGHT OF INSPECTION 1.. 'l'lie City shall have the right to inspect all books, records, reports, maps, plans, financial statements and other. like materials of ACC as provided in.this.--Franchise, at any time during normal business hours. See //.4!' ia.ks q-Rec..fir B. The City shall have .the right to inspect all construction or installation •work performed subject to the provisions of this Franchise and to make 'such tests as it shall find necessary to ensure compliance with the terms of this Franchise and other pertinent provisions of law. C. At all reasonable times and for the purpose of enforcement of this Franchise, ACC shall permit examination by any duly authorized representative of the City, of all Cable Communication System and facilities, together with any appurtenant property of ACC situated within the City and outside of the City if it is utilized in the operation of the. City's Cable Communications System. XIX RATE REGULATION J 19.1 City having established its right to rate regulation under applicable law, ACC will not raise basic.rates higher than the following for a five year period. On February 1, 1988 the maximum rate will be $9.00. On March 1, 1989 the maximum rate will be $11.00. On March 1, 1990, the maximum rate will be $12.10. On March 1, 1991, the maximum rate will be $13.31. On March 1, 1992, the maximum rate will be $14.64. Starting on March 1, 1993, and for each and every year thereafter for the term of this Franchise the maximum rate will be the previous year's maximum allowed rate plus 5 percent or that percentage equal to the rise in the Consumer Price Index, whichever is higher. Additionally, ACC will give a need -based senior citizen discount of 10 percent to those who qualify f•or real property tax exemption and others who qualify using mutually agreeable criteria. Effective March 1, 1989, ,ACC will not charge custoemrs for additional outlets or FM service. 19.2 ACC covenants that it will not bring or fund any lawsuit or other proceeding seeking deregulationof the aforementioned rates prior to March 1, 1991 and further agrees to •pay the attorney's fees and other costs of the City incurred in defending any such lawsuit or other proceeding should ACC bring them or fund them prior to March 1, 1991. =..1 .�_ 19.3 Effective March 1, 1991 ACC may seek deregulation of basic cable service rates. If at any time any additional' cable -29- franchises granted by the City, or any additional cable television is authorized to operate within the City, there will be no further regulation of ACC's rates from the date of said grant of any additional franchise or the beginning of construction ofsuch additional system, whichever comes sooner, until the termination of such additional franchise or of the operation of such additional system, whichever is later. 19.4 ACC shall file with the City schedules which shall describe all services offered by ACC, all rates and charges of any kind and all terms or conditions relating thereto. Thereafter, ACC shall file with the City all changes in services, all rates and charges of any kind and all terms and conditions relating thereto thirty (30) days prior to all such changes". No rates or charges shall be effective except as they appear on a schedule so filed. XX FRANCHISE FEE 20.1 The City of Ithaca shall be entitled .to receive from ACC a Franchise fee of five percent (5%) of ACC's Gross City Revenue. 20.2 The Franchise fee established in 20.1 .above shall be tendered as follows: A. Five percent (5%) of ACC's Gross City Revenue for successive three (3) month calendar periods tendered within forty-five (45) days after each such period. 20.3 To the extent necessary to prevent ACC from .diverting revenues from the operation of the Cable Communications System from ACC to Affiliates to the detriment of the City, Affiliates (excluding any affiliate which provides a national or regional programming. service) shall be permitted to utilize the Cable Communications System only if a Franchise fee on City revenues derived therefrom is paid'. 20.4 In the event that the fees herein required are not tendered on or before the dates fixed in this Franchise, interest due on such fee shall accrue from the date due at an annual rate of three percent (3%) above the prime rate or rates of interest, at the City's primary depository bank. 20.5 Tender or acceptance of any payment shall not be construed as an accord that the amount paid is correct, nor shall such acceptance of payment be construed as a release of any claim the City of Ithaca may have for additional sums including interest payable under this Franchise. All amounts paid shall be subject to audit and recomputation, by an independent auditor -30- chosen by the City, which shall be based ona fiscal year and shall occur in no event later than one (1) year after the fees are tendered with respect to such fiscal year. If, after audit and recomputation, an unpaid fee is owed to the City, such fee shall be paid within thirty (30) days after audit and recomputation and ACC shall pay the costs of the audit. The interest on such unpaid fee shall be charged from the due date at an annual rate of three percent (3%) above the prime rate or rates of interest at the city's primary depository bank during the period that such unpaid amount is owed. {XI BONDS, INSURANCE AND INDEMNIFICATION '21.1 PERFORMANCE BOND. A. ACC shall provide a performance bond in the amount of $500,000 (five hundred thousand dollars) until construction is completed and shall maintain a performance bond in the arnount of $25,000 (twenty-five thousand dollars) for the remaining term of the Franchise.. The performance bond shall be provided and regulated in accordance with this Franchise. The performance bond shall be provided within thirty days of the receipt of final operating authority. B. The performance bond shall provide the following conditions: (1) There shall be recoverable by the City jointly and severally from the principal and surety, any and all fines and penalties due to the City and any,and all damages, losses, costs and expenses suffered or incurred by the City resulting from the failure of ACC to: .faithfully comply with the provisions of this Franchise; comply with all lawful orders, permits and directives of any City agency• or body having jurisdiction over its acts or defaults; pay fees due to the City; pay any claims due the City as resulting from judicial action; pay any claims, liens or taxes due the City which arise by reason of the construction, operation, maintenance or repair of the Cable Communications System. Such losses, costs and expenses shall include but not be limited to attorney's fees and other associated expenses. (2) The total amount of the bond shall be forfeited in favor of the City in the event: (a) ACC abandons the Cable Communications System at any time during the term of this Franchise or any extension thereto; -31- (b) ACC assigns this Franchise without the express written consent of the City. C. Upon written application by. ACC, the City may, at its sole option, permit the amount of the bond to be reduced .or waive the requirements for a performance bond subject to the conditions set forth below. Reductions granted or denied upon application by ACC shall be withoutprejudice to ACC's subsequent applications or to the City's right to require the full bond at any time thereafter. However, no application shall be made by ACC within one (1) year of any prior applications. Prior to drawing upon the performance bond for the purpo described in this Section, the City shall notify ACC in writing that payment is due and ACC shall have thirty (30) days from the receipt of such written notice to make a full and complete payment. If ACC does not make the payment within thirty (30) days, the City may, upon determination,of. a breach of this Franchise pursuant to Section 3.6, withdraw the amount thereof, with interest and penalties, from the performance bond. E. Within three (3) days of a withdrawal from the performance bond, the City shall send to ACC, by certified mail, return receipt requested, written notification of the amount, date and purpose of such withdrawal. F. No later than thirty (30) days after mailing to ACC by certified mail notification of a withdrawal pursuant to paragraph D above, ACC shall replenish the performance bond in an amount equal to the amount so withdrawn. Failure to make timely replenishment of such amount to the performance bond shall constitute a substantial violation of the Ordinance and this Franchise. G. The performance bond required herein shall be in a form satisfactory to the City and shall require thirty (30) days written notice to the City of any non -renewal, alteration or cancellation to both the City and ACC. ACC shall, in the event of any such cancellation notice, obtain, pay all premiums for and file replacement bond or policies within thirty (30) days following receipt by the City or ACC of any notice of cancellation. H. To offset the effects of inflation, the amounts of the bond provided for herein are subject to reasonable increases at the end of every three (3) year'period of this Franchise, applicable to the next three year period, upon the reasonable determination of the City. Inflation compensation shall be computed in accordance with the regional:Consumer Price Index. -32- (2) Arising out of any claim for invasion by ACC, its servants, agents or employees of the right of privacy, orfor defamation, of any person, firm or corporation, or the violation or infringement of any copyright, trademark, trade name, service mark or patent,•or of any other right of any person, firm or corporation. (3) Arising out off ACC's failure to comply with the provisions of any federal, state, or local statute, ordinance, or regulation applicable to ACC in its business hereunder. B. The foregoing indemnity is conditioned upon the following: The City shall give ACC prompt notice of the making of any claim or the commencement of any action, suit or other proceeding covered by the provisions oE this Section. Nothing herein shall be. deemed to prevent the City from cooperating with ACC and participating in the. defense of any litigation by its own counsel at its sole cost and expense. XXII BREACH 22.1 In the event that the City has reason to believe that ACC has defaulted in the performance of any provision of this Franchise except as excused by force majeure, the City shall notify ACC in writing of the provision or provisions which the City believes may be in default. ACC shall have•thirty (30) days from the receipt of such notice to: A. Respond to the City in writing, contesting the City's asser ion oE default and providing such information or documentation as may be necessary or; B. �To cure any such default:" in the event that, by nature of the default, such defaul cannot be cured within such thirty (30) day period, to take reasonable steps to cure the default and diligently continue suc e orts until said default is cured. ACC shall report to the City in writing, at thirty (30) day intervals as to ACC's efforts, indicating the steps taken by ACC to cure the default and reporting ACC's progress until such default is cured. In the event ACC .fails to cure the default within the stated period the City shall convene a public hearing on reasonable notice at which hearing ACC may be heard and after which the City shall specify the complaint against ACC; thereafter the City shall appoint an impartial person to act as factfinder who shall -35- fix a date for a hearing at which evidence shall be received and a record kept of evidence of the complaint. The factfinder shall report in writing to both parties with his or her findings of fact. The Common Council shall make a finding of.violation or no violation based'on those findings. In the event that the City after such hearing determines that ACC is in default of any such provision of this Franchise, the City may also determine to pursue any or all of the following remedies: A. Foreclose on all or any part of. the security provided pursuant to this Franchise, including without limitation the performance bond and/or the letter of credit, provided, however, the foreclosure shall be in such amount as the City reasonably determines is •necessary to remedy the default and shall include payment of all City expenses incurred in connection with the factfinding hearing. B. Commence an action at law for monetary damages, including the expenses of the factfinding hearing. C. Declare this Franchise to be revoked and order ACC to commence the removal of the Cable Communications System immediately or to cooperate with the City, or any such agency or person authorized or directed by the City to operate the Cable Communications System for a one year period, in maintaining the continuity of service; and D. Seek specific performance of any provision, which reasonably lends itself to such remedy, as an alternative to damages. ACC may seek recourse as available by law or federal or state regulation. 22.2 For the violation of any of the following provisions of this Franchise, the City shall notify ACC in writing of the violation and ACC shall be allowed not less than thirty (30) days, or such greater amount of time as the City may specify, to correct such violation. In the event ACC fails to correct the violation, the City will be entitled to collect liquidated damages according to the schedule listed below. Such liquidated damages, if not paid by ACC, shall be chargeable, to the extent available, to the. bond tendered by ACC within the aforesaid period of time. These liquidated damages shall be in addition to and not a limitation upon the other penal provision of this Franchise and applicable law, including penalties or revocation, or other statutorily or judicially imposed penalties or remedies. A. For failure to complete constructionand installation in accordance with this Franchise, $100.00 per day. -36- For failure to submit reports or supply data in accordance with this Franchise, $10.00 per day for each day that such noncompliance continues. C. For failure to test, analyze and report on the performance of the Cable Communications System in accordance with this Franchise, $25.00 per day for each day, or part thereof, that such noncompliance continues. For failure to provide the capital equipment, and facile es, and services for public, .educational and governmental access, as specified in this Franchise, $75.00 per day, or part thereof, that such noncompliance continues. The City retains the right, at its sole option, to reduce or 'waive any of the above -listed penalties where extenuating circumstances or conditions beyond the control of ACC are deemed to exist. The Common Council or its designee shall determine the. City's willingness to reduce or waive any of the above -listed penalties. 22.3 No decision by the City to invoke any any remedy under this Franchise or under any statute, law or Ordinance shall preclude the availability of any other such remedy. 22.4 Exclusive jurisdiction and venue over any dispute, action or suit arising therefrom shall be in any court of - appropriate subject matter jurisdiction located in the State of New York and the parties by this instrument subject themselves to the personal jurisdiction of said court for the entry of any judgment and for the resolution of any dispute, action, or suit arising in connection with the entry of such judgment. XXIII TRANSFER OF OWNERSHIP OR CONTROL. 23.1 This Franchise cannot in any event be sold, transferred, leased, assigned or disposed of, including but not limited to by force or voluntary sale, merger, consolidation, receivership or other means without the prior consent of the City. 23.2 ACC shall promptly notify the City of any actual or proposed change in control of ACC. The word "control" as used herein is not limited to major stockholders but includes actual working control in whatever manner exercised. The current ownership of ACC is as listed in Appendix [G]. 23.3 Prior City authorization is required for every change, transfer or acquisition of control of ACC. City consent will not be unreasonably withheld. For the purpose of determining whether -37- 24.6 The parties recognize that it is within their mutual best interests for the Cable Communications System to be operated as efficiently as possible in accordance with the requirements set forth in this. Agreement. To achieve this, the parties agree to cooperate with each other in accordance with the terms and provisions of this Agreement. Shouldeither party believe that the other is not acting timely or reasonably within the confines of applicable regulations and procedures in responding to a request for action, that party shall notify the agents designated for that purpose by the other. The agent will use its best effort to facilitate the particular action requested. 24.7 During the term of this Agreement, ACC shall be liable for the acts or omissions of its affiliates while such affiliates are involved directly or indirectly in the construction, installation, maintenance or operation of the cable television system as if the acts or omissions of such affiliates were the acts or omissions of ACC. 24.8 If by reason of force majeure either party is unable in whole or in part to carry out i.ts obligations hereunder, said party shall not be deemed in violation or default during the continuance of such inability. The term "force majeure" as used herein shall mean the following: acts of God; acts of public enemies; orders of any kind of the government of the United States of America or of the State of New York or any of their departments, agencies, political subdivision, or officials, or any civil or military authority; insurrections; riots; epidemics; landslides; lightening; earthquakes; fires; hurricanes; volcanic activity; storms; floods; washouts; droughts; civil disturbances; and explosions. 24.9 The Mayor or the Cable Commission shall be responsible for the continuing administration of this Franchise. Such designation cannot be changed without prior written notification to ACC. 4.10 Nothing herein shall be deemed to create a joint venture or principal—agent relationship between the parties, and neither party is authorized to, nor shall either party act toward third persons or the public in any manner which would indicate any such relationship with the other. 24.11 Every notice to be served upon the City shall be sent by certified mail, ,postage prepaid, to the City. Every notice to be served upon ACC shall be sent by certified mail, postage prepaid, to ACC at its Ithaca office. . 24.12 The captions to sections throughout this Franchise are intended solely tofacilitate reading and reference to the sections and provisions of this Franchise. Such captions shall not affect the meaning or interpretation of the Ordinance. 2 -40- l • OFFICE OF CITY ATTORNEY CITY 'OF ITHACA 1OS EAST GREEN STREET ITHACA. NEW YORK 14850 MEMORANDUM TO: Dominick Cafferillo, Controller FROM: Chuck Guttman, City Attorney DATE: May 12, 1992 SUBJECT: American Community Cablevision TELEPHONE: (607) 274-6504 FAX: (607) 272-7348 Enclosed please find a draft of a proposed letter from the Cable Commission to ACC. As you can see, there are at least a couple of questions as to the manner in which ACC is calculating its franchise fees. We should review exactly what, in the City's opinion, ACC is using as its figure for gross City revenues and the manner in w is are ca culatin the franchise fee. It appears they may be underpaying us for the two reasons s ated in this draft letter. Please look into this and get back to me at your convenience to discuss it. I am also attaching the Basis of Franchise Fee Payments. In Footnote (4) it says a rate of 5% is applied to the total revenues to determine the franchise fees due. They then subtract .359% and .277% for the NYSCCT Rate. I am not sure what type of subtraction is being done and whether that subtraction is justified. Attachments 6-6-? - 'An Equal Opportunity Employer with an Affirmative Action Program' g- r"' tot Recycled Paper DRAFT City of Ithaca Cable Commission 108 E. Green St. Ithaca, NY 14850 Barbara Lukens, General Manager American Community Cablevision 519 W. State ST. Ithaca, NY 14850 Date DearBarbara, We believe that two aspects of your computation of franchise fees need to be changed to conform to existing laws and regulations: 1. Our franchise establishes the franchise fee to be paid to the City of Ithaca at "five percent (5%) of ACC's Gross City. Revenue" (§2a2 A). According to Executive Law §812(5), which deals with the collection of the statefranchise fee, gross annual receipts are defined as "...any and all compensation received directly or indirectly by a cable company from its operations within the state, including but not limited to_payment for programs received and/ or transmitted, advertising._and any other monies that constitute income...". According to your report BASIS OF FRANCHISE FEE PAYMENTS, submitted at our request, advertising income is not included in your computation of gross receipts for determining the City franchise fee. In discussions with a representative of the NYSCC, he clearly stated that advertising income should be included in the computation of gross city revenue, as it is in the model set by • Executive Law. 2. In a recent Statement of Policy, Docket No. 90389, the NYSCC states the franchise fee "is calculated as a percentage of all revenues received without deduction or allocation for such a portion of the revenues as may ultimately be paid for by the cable company to the municipal government in fulfillment of the franchise fee". To use the NYSCC example, which assumes a franchise fee of 3%, a bill where a franchise fee of $.60 is added to a service rate of $20.00 results in the incorrect payment of a 2.91% franchise fee, as $.60 is 2.91% of 2a60. The correct franchise fee must be calculated on the basis of bottom line of the bill. In reviewing my ACC bill, it appears that ACC is calculating the franchise fee similarly to the incorrect example. Please let us know by our next meeting what actions you plan to take to resolve these discrepancies. Sincerely, DX,. A elf cc C7� re1�cr%/ 72L a ,TJ ! ✓ to i c e cQ ( o a I ! -e (i. •LL,� o� f / r� ' OCG rl vr.(rirlJC e...- A- " t J/ D r DH, c...1/44/., c...1/44/.,C /D,vC ,% c• - AC' Pi/ e re k t...L � 1" A. a 1 r /iDr!/ 7 (/ /� Q --..-L_____#14,4,- L/er,E, e III e/ /rlr..-off 4 4 c 0OP,-„...-- lti 5. (' mft- ,i Gtv Prf _✓••i j res, u_e s %C, e , / o5 e. r_ ,,,_zz-e U e veil u e✓ - f.7-- Fr• 'z A-cee.rr • L,a�/ C.A.... Le_ ,, t i, e Cerci✓ tt fi T o - - /I. 7 .6'c 7-, F - -Tz, CL l J 7 t/ /c r F �/L ✓r �G G ( i� 0 I & G� l (( <_4 e200' • - - -r OFFICE OF CITY ATTORNEY CITY OF ITHACA 108 EAST GREEN STREET ITHACA, NEW YORK 14850 MEMORANDUM TO: Tim FROM: Chuck DATE: June 12, 1992 SUBJECT: ACC TELEPHONE: (607) 274-6504 FAX: (607) 272-7348 At the C & 0 Meeting on Thursday, they went eventually into Executive Session. At that time they gave us full authority to proceed as we deem appropriate. I believe we should write formal demand letters to ACC on as many issues as we can and undertake whatever we should be doing to have New York State Cable Commission do the audit. You should start moving ahead as you see appropriate. DepemL ® A-( Ree- fr Al? Kf a )9e/ia—J Aadif 7/t et// 1%,1- g cGtT�/c dr i1�"ff a --- Fee b"- fee 'o A-t✓elf 4rgk,r41 n "An Equal Opportunity Employer with an Affirmative Action Program" tiat Recycled Paper INDEX TO CABLE DOCUMENTS DATE DOCUMENT 1992 May 18 Franchise Fee Payment Memo, Chuck to Dominick May 12 ACC Response from J. Fogarty to Chuck's January letter giving notice of Fee violation and request for information May 12 Fee Calculation review request of Dominick by Chuck and Draft of letter from Cable Commission to ACC. May 7 Unsent letter from Cable Commission to ACC requesting Channel Activation and Notification of 14.1 A Default Status May 26 Receipt of (April) NYSCCT Policy of "Itemization of Franchise Fees On Subscriber Bills" April 30 Receipt of April 9 Memorandum of NYSCCT on Section 595.1 on "Required Contents of Franchises" GROSS REVENUES are set forth per 599 of 9 NYCRR 4000.0-4230.0 Operating Income April 14 Repeat letter from Chuck about Rate calculation of $14.65 to B.Lukens April 6 Basis of 1991 Franchise Fee as submitted to the City March 9 Activation of Second Access Channel and 2% Revenues addressed by B. Lukens to P. Hess "Designating" per 9 NYCRR 595.4 Feb. 11 Resolution of Cable Commission: Channel Activation and Rebate of Capital Funds Jan. 22 Notice to ACC of Rate overcharge and request for financial statement setting forth operating costs from Chuck to B. Lukens. ./Jan. 15 Rate increase notice sent to Cookie from B. Lukens Dec. 20 ACC position declared to Cable Commission on channel activation and 2% revenue funds not as source of channel activation. FRANCHISE AGREEMENT ACCESS CHANNELS 14.1 (A) Designation (B) Equipment Funding BOOKS AVAILABLE TO THECITY 18.4 REPORTS REQUIRED 18.5 AND 18.5 (E) RIGHT OF INSPECTION 18.7 RATE REGULATION 19.1 FRANCHISE FEE 20.1 PERFORMANCE BOND 21.1 BREACH 22.1 FAILURE TO SUPPLY REPORTS 22.2(B) PRINCIPAL -AGENT RELATIONSHIP BARRED 24.10 ( /J / X.jf� t �, % CITY OF ITHACA 108 EAST GREEN STREET ITHACA, NEW YORK 14850 OFFICE OF TELEPHONE: (607) 274-6504 CITY ATTORNEY MEM�R�iNDUM FAX: (607) 272-7348 TO: Dominick Cafferillo, Controller FROM: Chuck Guttman, City Attorney DATE: May 18, 1992 SUBJECT: ACC I am in receipt of a copy ofa letter of May 12, 1992 to Cookie in which ACC enclosed a check in the amount of $30,615.54 representing what they claim to be the appropriate franchise fee for the first quarter of 1992. They attached a statement, copy which I am enclosing, showing gross revenues and the 5 percent fee. My concern is whether they have correctly calculated gross revenues. Questions have been raised as to whether they are including in gross revenues advertising revenues and whether they are including in gross revenues the franchise fee which is separately listed on bills. I believe we should look into this further to make sure that their calculation of gross revenues is correct-. Please get back regarding this at your convenience. Enclosure 'An Equal Opportunity Employer with an Affirmative Action Program' • riot Recycled Paper .May 11, 1992 City of Ithaca Ithaca, New.York Dear Sir: ZZNY 0040 American Television & . Communications Corporation A Time Wamer Inc. Company National Division 160 Inverness Drive West, Suite 300 P.O. Box 6929 (80155-6929) Englewood, Colorado 80112. (303) 799-9599 Enclosed please find a check for $30,615.54 which is payment of franchise fees for the first quarter of 1992 for American Community Cablevision. At this point, we have not deducted the overpayments for the prior periods. However, in the future, we reserve the right to reduce franchise fee payments by the amount overpaid. Computation is as follows: Month Gross Revenues January, 1992 February March $210,066.74 216,262.61 221,892.97 Total $648,222.32 Fee @ 5% - NYCC Rate .277. 4.723% Franchise Fee .$30,615.54 I, Ivy W. Parish, Controller of American Television and - Communications Corporation, National Division, certify that the above schedule summarizes the Gross Revenues, as defined in the franchising agreement, for the period indicated for the -CATV operations in the City of Ithaca, New York. Signed: IWP/jdh Enclosure Parish, Controller Providing entertainment and information choices. To: Members of C & 0 Committee From: Ithaca Cable Commission Re: Impact of billing and accounting of changes recently instituted by ACC Date: June 11, 1992 The following tables summarize the impact of the practice, recently begun by ACC, of treating the city franchise fee as a separate billable item. The city believes that this is counter to state regulations and will have a significant adverse impact on the city's revenues, and probably also on customer costs. I. Effect on city revenues This table shows the impact of recent billing and accounting changes on franchise fee revenue that will be collected by the City of Ithaca. Computations are based on actual receipts from 1991 and assume a 10% annual growth in ACC's gross city revenues. The annual revenue growth rate for the industry in recent years has been about 15%. Year Franchise fee Franchise fee Potential 1992 by city method $132, 672 by ACC method $126,370 Toss to City 1993 1994 1995 1996 1997 $145,939 $160,533 $176,586 $1 94,245 $213,669 $139,007 $152,908 $168,199 $185,019 $203,521 1998 1999 $235,036 $223,873 $258,540 $246,260 ($6,302) ($6,932) ($7,625) ($8,388) ($9,226) ($10,149) ($1 1,164) ($12,280) Loss to City over term of franchise ($58,832) II. Effect on subscriber costs This table shows potential costs to subscribers from ACC's new billing and accounting methods. These costs result from the fact that ACC now considers that the maximum rate for basic service as dictated by the franchise does not include the franchise fee. The following figures are based on 8200 homes subscribing to cable service in the City of Ithaca. ax. Month. ax. Month. Add'I Cost Add'I Cost Total Add'I Basic rate Basic rate ranchise -ACC per month ea subscriber per yr ea Annual cost to subscriber subscribers March '93 - Feb. '94 $15.37 $16.14 $0.77 $9.22 $75,630 March '94 - Feb. '95 $16.14 $1 6.95 $0.81 $9.68 $79,412 March '95 - Feb. '96 $16.95 $17.80 $0.85 $10.17 $83,382 March '96 - Feb. '97 $17.80 $18.68 $0.89 $10.68 $87,551 March '97 - Feb. '98 $18.68 $1 9.62 $0.93 March '98 - Feb. '99 $19.62 $20.60 $0.98 $11.21 $91,929 $11.7 $96,525 Total for the remainder of the franchIS $62.74 $514,430 franchise fee/ xI 11 on fi E, F, , � r, to.✓ Page 1 ICDC/711/ Po Y/e A,[ vt1ei6 f f d- /*1 e h a 0 Fees + AT es A B C D E F 1 2 Cost to residents of the City of Ithaca resulting from ACC's attempt to redefine 3 rate for basic service to exclude franchise fee payments. 4 -assumes 8200 subscribers 5 Max. Month. Max. Month. Add'I Cost Add'I Cost Total Add'I 6 Basic rate Basic rate per month ea per yr ea Annual cost to 7 -Franchise -ACC subscriber subscriber subscribers 8 March '93 - Feb '94 $15.37 $16.14 $0.77 $9.22 $75,630 9 March '94 -Feb '95 $16.14 $16.95 $0.81 $9.68 $79,412 1.0 March '95 - Feb '96 $16.95 $17.80 $0.85 $10.17 $83,382 11 March '96 - Feb '97 $17.80 $18.68 $0.89 $10.68 $87,551 12 March'97-Feb'98 $18.68 $19.62 $0.93 $11.21 $91,929 13 March '98 - Feb '99 $19.62 $20.60 $0.98 $11.77 $96,525 14 15 Total for the remainder of the franchise: $62.74 $514,430 16 17 Cost to City of Ithaca resulting from ACC's attempt to redefine "total city revenues" 18 to exclude franchise fee payments. • 19 -assumes 10% annual growth in subscribers and rates 20• . 21 Franchise Franchise Annual Loss to • 22 fee - City fee - ACC City 23 1992 $132,672 $126,370 ($6,302) 24 1993 $145,939 $139,007 ($6,932) 25 1994 $160,533 $152,908 ($7,625) 26 1995 $176,586 $168,199 ($8,388) 27 1996 $194,245 $185,019 ($9,226) 28 1997 $213,669 $203,521 ($10,149) 29 1998 $235,036 $223,873 ($11,164) 30 1999 $258,540 $246,260 ($12,280) 31 32 Loss to City over term of franchise: ($58,832) 11 on fi E, F, , � r, to.✓ Page 1 ICDC/711/ Po Y/e A,[ vt1ei6 f f d- /*1 e h a 0 Fees + AT es 2�° (JJl2 S� fr�rr= Fee Air cl-c „c 74, Nee. s L Y. c To f ori e Cc J'' `3 A Ju 227 ' 2 Jer /-A kc el a lloC rfC/\ Of cc e`rr C,jT °'-, err 1,3,4 kr Lv�ft@Gf (\ CA.4 e[1' `2.. 14 2 1-1 a/x. •'- -e-1Pa 1 at- ¢ Culp@�T DRAFT City of Ithaca Cable Commission 108 E. Green St. Ithaca, NY 14850 Barbara Lukens, General Manager American Community Cablevision 519 W. State ST. Ithaca, NY 14850 May 7, 1992 (A. 01 Dear Barbara, sAtdr) We have received your letter of March 9th responding to our resolution. of February 1 l th; 1992, regarding activation of access channels, Our position:continues to be that our franchise and state regulations require the designation of nine active access channels. Activation of these channels should have been provided initially as part of the fulfillment of your franchise obligations. By not activating the channel called for in our resolution of February 1 1 th and by not restoring the money spent from Access Capital Equipment funds for the activation of two of the existing channels, as called for in that resolution, we find that ACC is in default of its franchise obligations under section .14.1 A. If you continue to be unwilling to comply fully with the terms of our resolution, the City will seek redress.. We await your reply and look forwardto putting this difficult issue behind us. Sincerely, Peter Hess, Chair City of Ithaca Cable Commission OFFICE OF CITY ATTORNEY CITY OF ITHACA 1 08 EAST GREEN- STREET ITHACA, NEW YORK 14850 April 14, 1992 Barbara L. Lukens American Community Cablevision 519 West State Street Ithaca, NY 14850 Dear Ms. Lukens: TELEPHONE: (607) 274-6504 FAX: (607) 272-7348 I wrote to you on January 22, 1992 advising you that I was in receipt of your letter of January 15, 1992 in which you advised us that ACC was increasing the rates .for basic services from $12.58 to $13.95 with the five percent franchise fee to be collected in addition. I calculated that when the five percent franchise fee was added in, the rate was actually $14.65 -- more than the maximum set forth in the franchise agreement. I asked you to respond to me as soon as possible regarding this matter. Some time after that letter, I received a phone call from an attorney for ACC advising me that the matter had been referred to him and I would promptly receive a further response regarding this matter. It is now mid-April, approximately three months after my original letter and significantly after the rate increase has gone into effect. To date I have received no response to this matter. If I do not promptly receive a response regarding this matter I will have no choice but to advise Common Council that ACC is not responding and request direction from Council as to how to respond to what, in my opinion, is a charge of more than the maximum set forth in the franchise agreement. Please get back me or have your attorney get back to me regarding this matter at your earliest convenience. Very truly yours, Charles Guttman City Attorney 'An Equal Opportunity Employer with an Affirmative Action Program' to) Recycled Paper 17. Y�/-1TS 0 JAN 2 I AMERICAN COMMUNITY CABLEVISION January 15, 1992 Ms. Callista Paolangeli, Clerk City of Ithaca City Hall. 108 E. Green Street Ithaca, NY 14850 Dear Ms. Paolangeli: American Community Cablevision would like to inform the City of Ithaca of rate changes which are being instituted as. of March 1st, 1992. Basic Cable ACC =is` increasing the ..rate•-for-7basic -service 'to=' -$13 :'95 -which is less than the :_,$14.6°^maximum :- set forth in _ the—franchisee agreement:„ The,5%,'franchise fee will be' collectedin:`addition' 'to the $13'.951 �:. ,.. Since December of 1989 until now our total basic channels have actually increased by 58% while the cost per channel has decreased by 16%. 1989 customers paid 87 cents/channel for 12 channels @ $10.48 1991 customers paid 75 cents/channel for 17 channels @ $12.68 1992 customers will pay 73 cents/channel for 19 channels @ $13.95. The basic cable service "crew" in 1991. An educational access channel was added along with SCOLA (Satellite Communications for Learning). The latter was a cooperative effort between Cornell University, Ithaca College and ACC. Rates for basic cable service are related to overall increases to ACC for general operating costs. Not unrelated is the demand for better programming and cable's response to those demands. For example, CNN's unequalled coverage of the Gulf War. ESPN's spectacular sports coverage, including exclusive NFL games and Major League Baseball games. a1Q W .. Ct,is Cfirm.. C-SPAN's and CNN's continuing coverage of the presidential race ( while the big three nets consider cutting back on their coverage!.) In :addition, ACC has responded to customer 'expectations' for service. For_example, We continue to be in compliance with strict National Cable Television Association customer service standards (Self-imposed standards!) We continue to invest in upgrading to provide still our phone system quicker response times. Continual training and supervision has resulted in more efficient staff members! Their proper handling of customer calls and service and installation, response has resulted in an overall "good" to "excellent" rating by 92% of those customers surveyed. Remote Control The monthly fee for a remote control will be increasing from $3.00 per month to $3.95 per month. This fee has not been increased since we began offering a remote. The 5% franchise fee will be collected in addition to the $3.95. ACC has plans to offer a universal remote control both for rent and/or for purchase at some time during the first quarter of 1992. We are announcing this to our subscribers via our annual newsletter which is being mailed now. In addition, ACC makes its remotes available in the cable store for the programming of customer owned "learning" remotes. Non-payment Customers who are disconnected for non-payment have been charged $20.00 for reconnection. Beginning April 1, 1992 these customers will be charged the standard $40.00 (plus tax and franchise fee) connection rate. As always, if our technician collects the customer's payment when s/he arrives to disconnect service, (thereby eliminating the need to physicallydisconnect and/or reconnect the cable) a $20.00 collection fee is charged. ACC has made an effort to work with customers who are having difficulty paying their cable bills by setting up limited payment plans and by reducing their current service to the basic cable service level. After the deficit is paid off and the customer is able to maintain the payments, the customer is allowed to upgrade his/her service level. Other In order to make fee structures more equitable among communities, franchise fees for pay-per-view movies and events and for converter rentals will be added tohe stated rates for those services where applicable. Hotels and motels will be charged the basic rate for their first television set and a nominal fee per additional set. This is not `really a departure -from our past practice but more clearly states the rate to be paid for the initial set. (ACC has not always increased :.the . fee .for -the first 'set as the basic rate has increased). American Community Cablevision has an outstanding offering of television programming for its customers and charges reasonable rates for the same. In comparing ACC to other New York communities' rates, I believe you will find that Ithacans enjoy a higher level of viewing at more reasonable rates. cerely, ar-bara 'L. Lukens, General Manager cc: The Honorable Benjamin Nichols, Mayor Mr. Tom Terrizzi, Chair, Ithaca Cable Commission BLL/mkk . MEMORANDUM TO: Chuck Guttman, City Attorney FROM: Tim Roulan, Intern DATE: June 10, 1992 SUBJECT: ACC There are four issues facing our relationship with ACC that require response by the City: AUDIT Ithaca should initiate an audit of ACC's accounts. This it will demonstrate how Gross Cit whethermont or not y. Revenues are determined, and will how venurs. the City is receiving its fair shade of the Revenues fit within ACC Gross Revenue calculations.to learn clearly set forth the Advertising Franchise and the 2° ACC calculations that It will also ofFr ACC's Feeoa from thec City Fundin generate the 5% Funding. Inaddition, a history dealings.Y prove invaluable in future In January 1992, you requested a :financial forth ACC general operating costs for 1990, statement setting 1992 to demonstrate that the 58 1991 and service since December of percent increase fobasic projected cable service for 1989 is actually related to overall determine,increases this neral operating costs. of the Franchise Agreements been denied, in° violation of1far as I am 8b5e (A)° the5 (A) may of t ito 18.4 ACC) books, AND RECORDS AVAILABLE TO THE CITY, s, records, financial statements and other like material of ACC upon reasonable notice and gbusiness hours. 18.7 sets forth the City's RIGHT OF INSPECTIONal Accord - to City's ing t18.5(A), City at din Cy's REPORTS REQUIRED, ACC is to provide to NYSCCT. quest, with all reports ACC filesorsubmits 18.5 (C)(2) requires ACC's annual report and (C)(4) re ires an annual certified income statement. not disclose either the To date, these statements is do information requested. Theyrare too ion the City audit would shed light on exactlygeneral and inconclusive, the 18.5 (E) requires ACC to how the numbers are crunched,An information necessary and appropriate provide the City with the rights, functions or dues the tCity in Gonne any and all thn with the enrighe.Performance of any of The City is entitled to and deserves information that Memo to Chuck Guttman 2 June 10, 1992 • is more specific and informative as to ACC's business practices and acceptable accounting practices. Initially the City should request the assistance of the State. NYSCCT will provide Ithaca with an Auditor, free of charge. Don Buckelew can be contacted at NYSCCT. Mr. Cafferillo should be asked to contact Mr. Buckelew, and provide him with all information received from ACC since the last Franchise renewal. RATE REGULATION Section 19.1 of the Franchise limits the March 1, 1992 rate to $14.64. Since March 1, 1992, the Rate has been $14.65, one cent' over. This was caused by an increase of the basic rate from $12.58 to $13.95, with the 5% Franchise Fee tacked. on.. Section 20.1 states that the City shall be entitled to receive from ACC, not from the consumer, the Franchise Fee. The maximum ACC can charge the consumer, including the Franchise Fee, is the $14.64 charge. A refund needs to be made to the .consumers. An adjustment to the City's Revenue is also in order. ACC is in default. FRANCHISE FEE Two aspects of ACC'scomputation of Franchise Fees mustbe changed to conform to existing laws and regulations. 1. Section 20.1 states that the City is entitled to receive a Franchise Fee of 5% of ACC's Gross City Revenue '(20.2 A). Advertising income is not included in ACC's computation of gross receipts for determining the City Franchise Fee. The model of gross city revenue as set by Executive Law, Section 812(5) includes advertising income. According to this same law, gross annual receipts are defined as "...any and all compensation received directly or indirectly by a cable company from its operations within the state, including but not limited to payment for programs received or transmitted, advertising...and any other monies that constitute income." 20.3 provides that ACC Affiliates must pay a Franchise Fee in order to utilize the Cable System. This needs to be more clearly accounted for so the City can assure that no revenues are being diverted from the City. Merely listing commercial/bulk accounts in the Basic Service Revenue does not serve the City's right to know. The timing of the NYSCCT Rate of .359% and .277% that is being deducted from the 5% also requires an explanation. We do not know why one is applied for three months and the other for nine months. Memo to Chuck Guttman 3 June 10, 1992 2. ACC is calculating the Franchise Fee incorrectly. You questioned ACC about this back in January but they did not respond till May. The NYSCCT issued a Statement of Policy one month after the new ACC Rate went into effect. This Policy (Docket No. 90389) concerns the Itemization of Franchise Fees on Subscriber Bills. It states that the Franchise Fee is calculated "as a percentage of all revenues received without deduction or allocation for such portion of the revenues as may ultimately be paid for by the cable company to the municipal government in fulfillment of the franchise fee." ACC is listing the Franchise Fee as a separate line item in addition to its rates. This transforms the Fee from correctly placed as a component of doing business calculated on all revenues to an incorrect separate add-on charge imposed directly on City subscribers. It is important to note that this practice of ACC transforms the method by which the City's Franchise Fee is calculated thus modifying ACC's Franchise Fee obligation. An audit will describe the loss of revenue to the "City. "Franchise Fees cannot be stated as a separate line item on subscriber bills as direct charges on subscribers." The NYSCCT Statement provides an example: Assuming a franchise fee of 3%, "a bill where a fee of $.60 is ;added to a service rate of $20.00 results in the incorrect payment ,of a 2.91% fee, as $.60 is 2.91% of $20.60. The correct fee must be calculated on the basis of the bottom line of the bill, or $20.60. The amount collected by ACC in Franchise Fees are to be treated as part of ACC's gross revenues and subject to the 5% fee. In its letter of May 12, 1992, responding to your letter of January 1992, ACC incorrectly claims Franchise Fees are not part of its revenues. In addition, ACC clearly violates Section 24.10 of the Franchise Agreement when it claims to be acting as an agent for the City in collecting the fee and transferring it on to the City. ACC is expressly prohibited from doing this. Furthermore, ACC is not allowed by state policy to 'utilize a "pass-through" practice whereby ACC passes on to the City subscribers the increase of its basic rate that surpasses the rate amount ($14.64) set forth in the Franchise Agreement. (Docket No. 90389, April 1992). This was done by ACC causing the rate to reach $14.65. 20.4: In the event that the proper fees are nottendered, interest shall accrue on the due date. The City should consider imposing a due date for proper payments and refunds. To insure accuracy and disclosure: 20.5: All amounts paid shall be subject to audit and recomputation, by an independent auditor chosen by the City. Memo 'to Chuck Guttman 4 June 10, 1992 Performance Bond The City has an ACC Performance Bond of $25,000 available. See 21.1. According to 21.1(B) the Performance Bond is recoverable to the City for any and all damages, losses, costs and expenses suffered or incurred by the City resulting, from the failure of ACC to: faithfully comply with the provisions of the Franchise; comply with all lawful orders,... directives of any City agency; pay fees due to the City; pay any claims, liens or taxes due the City which arise by reason of the ...operation... of the System. Such losses, costs and expenses shall include but not be limited to attorney's fees and other associated expenses. 21.1(D) states that the City must notify ACC that payment is due and ACC shall have 30 days to make a complete payment. After 30 days the City may use the Performance bond. 21.1(1) states that the City shall not seek recovery from the Performance Bond until it has provided ACC with 30 days to cure any default. Breach Upon Breach of the Franchise Agreement, Section 22.1 provides ACC with 30 days to: (A) respond to the City in writing, contesting the City's assertion of .default and providing, such information or documentation as may be necessary or; (B) cure any default and/or prove due diligence in curing any default. A public hearing and fact finder report is then available to the Common Council to aid the Council's response. The Council, may then (A) Foreclose on any or all of the Performance Bond and/or Letter of Credit; (B) Commence an action at law for monetary damages; (C) Declare the Franchise to be revoked; (D) seek Specific Performance of any Franchise provision as an alternative to damages. Possibly the issues with Access and Equipment might be addressed here. For the failure of ACC to submit reports as have been requested by the City, or as may be requested, Section 22.2 requires the City to notify ACC of ACC's violation. After 30 days or an amount of time the City may specify, the City will be entitled to recover damages. 22.2(B) states that these damages may include $10.00 per day for each day that failure to submit reports or supply data continues. 22.4 allows the City to bring ACC to any appropriate court in New York. ACCESS The calculation of Gross Revenues, as requiredand set forth above, will also provide the City with a correct calculation as to funding of Access equipment with 2% of Gross Revenues. In addition, advertising revenues should be accounted for. Memo to Chuck Guttman 5 June 10, 1992 The Resolution of the Ithaca Cable Commission, dated 2/11/92, regarding the Activation of Access Channels should be submitted to ACC for ACC compliance. ACC is in default of 14.1(A). ACC should be notified that it is to adhere to the Franchise Agreement and provide all nine activated access channels, or any lesser number as may be set by the City. In addition, ACC should rebate any money taken from the Access Capital Equipment funds. New York State Cable Regulations are clear concerning the cost of designating new channels as being borne by ACC. Furthermore, 14.1(C)(3) asserts that the funds are for equipment, not for designating channels. A second public access channel should be activated within 60 days of the filing of the City's demand. CONCLUSION The City appears to be in a very good position to assert that ACC is in default of the Franchise Agreement. ACC should formally be put on notice. Otherwise it may continue to ignore our requests and/or forestall suitable response. ACC is in violation of the City Franchise Agreement, New York State Regulations Policy, and is .improperly calculating monies due the City and cable subscribers. The City stands to recoup an as yet unknown amount of revenue. This amount .may be substantial. An audit of ACC coupled with.a demand for proper fee payments and adjustments, along with a demand for ACC compliance with the Resolution of the Cable Commission must be time -framed by the appropriate authorities. The City should also inquire of other Cable Companies how their respective calculations are made and how they respond to requests such as we have made of ACC. For example, we could contact: Cablevision Industries, Inc. Six Wierk Ave. Box 311 Liberty, New York 12754 This company provides service to Canandaigua, N.Y. A copy of its Franchise Agreement is now in the Correspondence File for 1992 in our office. Resolution of the Ithaca Cable Commission Regarding Activation of Access Channels • Passed unanimouly, 2/11/92 The cable franchise adopted by the City Council of Ithaca on June 8th 1988, submitted to the NYSCC on December 20th 1988 and approved by NYSCC on September 12, 1989 contains the following language: 14.1 A. (1) Nine downstream channels shall be designated for public, governmental, and educational access. The access channels shall be available for use by. New York State, local governments, educational institutions, or members of the public for education and public service programming, municipal services and local expression. The City and ACC have been arguing over whether the word designate means to set aside space in the spectrum (ACC) or to provide activated channelsfor PEG access use (the City). The following language is found in the NYSCC rules "setting minimum standards for the designation and use of channel capacity for public access". Notice of these rules was released on February 24, 1988, and they became effective on September 8, 1988: 595.4 (b) (7) The designation of PEG access facilities shall include the provision by the cable franchisee of the technical ability to playback prerecorded programming and to transmit programming information consistent with the designated use of PEG channels. We have every reason to believe that the drafters of our franchise were familiar with the proposed access rules and the way they construed designation of channels. We must assume that it was the, understanding of the signers of the franchise, including ACC, that the franchise required ACC to provide nine activated access channels. After a careful review of the documents pertaining to this matter, it is our opinion that there is no ambiguity in the franchise; that it is incumbent upon ACC provide nine activated access channels as part of its franchise obligations. Therefore, we resolve that the money taken from the access capital budget to activate access channels should be rebated forthwith. • Further we resolve, consistent with our prerogatives and our understanding of the needs of the community, that the activation of a second public access channel take place within 60 days from the passage of this resolution. ^(I OE^ 3 I uu .AMERICAN COMMUNITY CABLEVISION December 20, 1991 Mr. Peter Hess, Chairman Access Advisory Board City Hall, 108 E. Green Street Ithaca, NY 14850 Dear Peter: I just watched the tape of your meeting with the Charter and Ordinance Committee, and I'm concerned about the impression that was left with them that access negotiations have been held up by ACC. If my memory serves me, we left the June meeting with 2 expectations:. one, that we needed to write a letter to the City stating what equipment was required for transmission of a video channel and 2) that the City would make a. recommendation on the point at which additional channels should be activated based on the use of and/or actual cablecasting needs of the community. ACC wrote to the City, however the City has not yet made its recommendation to ACC. In the more recent meeting, which took place without our respective attorneys, you and Tom wanted to agree on what equipment ACC should buy in addition to the equipment purchased with the 2% of revenues dedicated to the purchase of access equipment under the terms of the franchise, but did not want to address the issue of when additional PEG access channels would be activated. I believe you know that my reluctance to add access channels is that I do not believe it is in the interest of customers to have channels which have inadequate programming or no programming content. Channel 13 programmed less than 50% of the time with original programming. 'It is not the best use of anyone's money to activate more channels ')which will not be programmed simply to be able to say they have L been activated. In response to your most recent letter, ACC will agree to the following if and only if we can reach agreement on 1) at what point it is appropriate to add a channel or channels and 2) at what point I -Net sites become activated. ACC will pay for a modulator for the activation of an access channel along with racks, 1 "v -a pkg"(video and audio amps) and 1 SVHS playback VTR. This will be paid for out of monies other than the 2% fund. Because ACC has a requirement to provide off-site local 519 West State Street Ithaca, New York 14850 607-272-3456 • . !IE330 origination_from-the-_following list of places, and also because these -sites are on the I -Net, ACC will provide a modulator and a demodulator for each site as it is needed. L/O sites as designated in the franchise agreement City Hall Cornell Ithaca College Tompkins County Library GIAC Ithaca Youth Bureau The Alternative School Boynton Junior High School Ithaca High School There is no requirement for ACC to route programming from one source to a choice of several outputs. Therefore, since the CAAB and Ithaca Cable Commission desire this routing option, equipment needed to accommodate the request will be paid for out of the 2% money. ACC provides weekly routine equipment maintenance and replaces minor individual parts as needed out of repair and maintenance monies. Major equipment refurbishment which requires dismantling of equipment and major parts replacements are paid for out of the 2% fund. The reason for this is that such major refurbishment do extend the life of a piece of equipment and are less costly than equipment replacement. In this way we are able to buy more new equipment each year with the 2% funds. ACC stands on its original proposal which was made at the June 12th meeting regarding the addition of PEG access .channels. That position is .that existing channels must be utilized 75% of the time with original (defined as first play) programming before an additional PEG access channel would be added. I hope this is acceptable to you. Sincerely, Barbara L. Lukens, General Manager cc: Lauren Stefanelli BLL/mkk C0NFI0ENTIAL MEMORANDUM TO: Cable File ,i• FROM:: - . 'Pat DATE: July 9, 1991 SUBJECT: Meeting with ACC and Attorney ader 1,1,(e 6'' ' o (1;''' t M` f D 1,1" r' T On June 12, 1991 I met with John Fogarty, the attorney for ACC, Barbara Lukens, the Manager of the local franchise, Peter Hess of our City Cable Access Advisory Board, Loren , Access Coordinator, Dave Roberts and Jim Ferwerda and Tom Terrizzi of the Cable Commission, to attempt to resolve some of the issues which have been creating a problem for administering the cable franchise. The topics we discussed were: designation, the First Amendment, recordkeeping of the 2% money, auditing, duty to report/rate increases and installation fees, studio space, not-for-profit administration of cable, franchise, access capital expense procedure. Designation: Ofthe nine access channels promised under the franchise agreement, two are currently on line: Channel 13 (public access) and Channel 53 (government access). A third educational channel is being discussed for the fall. There is a lot of impetus from Ithaca College and other educational facilities to get the channel online. The cost of equipment to "turn on" any channel runs between $11,000 and $13,000. This figure covers equipment like modulators and demodulators needed for each channel. ACC's position is that the City should be purchasing the "head end" equipment necessary to turn a channel on out of its 2% revenue. The Cable Commission's position is that New York State Cable Regulations require a franchisee to "designate" new channels and that designation includes the equipment necessary forthe channel to be operative. After some discussion, ACC proposed that they would pay the entire cost of the equipment necessary to activate a channel so long as no channel would be activated without demonstrated need. Need for a channel would be designated when there was sufficient first -run programming over a one-year period so that 75% of the available programming time was being occupied. When that level of programming was reached, ACC would provide the equipment to activate a new channel. ACC also wants a recovery provision. 1 That is, ACC could recover the channels for other uses if the channel was used less than 25% and there was a second channel which had a less than 50% use demand. First run programming equals live or recorded programming which is being shown for the first time plus one rerun in any given year. The problems with this proposal are the 75% figure, the • limitations created by the limited studio space, changing patterns of demand over a one-year period and ACC's reluctance to agree that, if the City wanted more channels, it could pay to turn them on itself. The other problem. had to do with specificity of equipment to be purchased. Peter Hess provided a list of the equipment necessary to activate a channel. Barbara Lukens. took Peter Hess's copy of the equipment because:. they could not agree on what equipment ACC was specifically agreeing to purchase. Barbara Lukens was to get back to us within a week (by June 19) with a list of specific equipment. At the time of the dictation of this memo, that has not occurred. First Amendment: ACC agrees to permit the Cable Commission to participate .in access regulations having to do with procedures for ensuring that protected speech is permitted. We all agreed that obscenity could be prohibited but that profanity and discrimination on the basis of content could not occur. • ACC is willing to recognize the City's authority to control programming content and has backed off from its "after ten" policy regarding profane speech. Recordkeeping for the 2% money: It was agreed that the current system,'that is, what is shown in the last quarter's report for 1990, would be satisfactory to the Cable Commission so long as a Cable Commission member could also review invoices. Auditing: ACC agreed that there would be no problem in requesting the New York State Cable Commission to conduct an audit of the franchise fee reporting. Duty to report/rate increases and installation charges: Tom described the problem of the rate increase for an installation which occurred in September of 1990. ACC's basic position was that installation rates are not regulated by the, agreement or by New York State, regulation, that installation rates can be raised and that the raising of installation rates is not a criteria which should negatively impact on the renewal of their license. 2 § 595.4 TITLE 9 EXECUTIVE (c) For purposes of this section, a subscriber shall be deemed to have affirmatively requested a service if (1) the subscriber voluntarily makes payment for such service after an initial free trial period, and (2) there was included, in the notice or advertising material describing the service, a statement clearly advising the subscriber that he has incurred no obligation to pay for such service and that, he need not take any action to avoid incurring any such obligation. Historical Note Sec. filed March 23, 1976. 595.4 Minimum standards for public, educational and governmental (PEG) access. (a) Definitions. (1) The term public access channel means a channel designated for noncommercal use by the public on a first-come, first-served, nondiscriminatory basis. (2) The term educational access channel means a channel designated for use by school districts and not-for-profit educational institutions chartered or licensed by the New York State Education Department or Board of Regents. (3) The term government access channel means a channel designated for use by municipal, county and State government, or agencies thereof. (4) The term public, educational, or governmental (PEG) access facilities means (i) channel capacity designated for public, educational or governmental use; and (ii) facilities and equipment for the use of such channel capacity. (5) The term local use means noncommercial use by residents of the State of New York including school districts and not-for-profit educational institutions and munici- pal, county and State governments, or agencies thereof. (6) The term access cablecast day means a day or part thereof during which public, educational or governmental access facilities are available for PEG use. (b) Designation of channels. Every cable television franchisee shall designate chan- nel capacity for PEG access as follows: (1) The franchisee of a cable television system with a channel capacity of 21 or more channels shall designate (i) at least one full-time activated. channel for public access use; (ii) at least one full-time activated channel for educational and governmental use; and (iii) one additional full-time activated channel for educational/governmental use whenever the first channel so designated shall have been used for such educational and governmental programming on the average of at least 12 hours per day during any 90 - day period; provided, however, that the calculation of such average shall not include any day when the unavailability of PEG access facilities precludes achieving such programming level. In the event that two channels for educational and governmental use are required by this subdivision, one channel shall be designated the educational access channel and one channel shall be designated the governmental access channel; provided, however, that either channel may be used for either purpose if necessary to satisfy the demand for channel time. (2) The franchisee of a cable television system with a channel capacity less than 21 channels shall designate at least one full-time activated channel for public, educa- tional and governmental use. 230.520b EX 8-31-88 i�. SUBTITLE R COMMISSION ON CABLE TELEVISION § 595.4 (c) Administration and use. The use of the channel capacity for PEG access shall be administered as follows: (1) The public access channel shall be operated and administered by the entity designated by the municipality or, until such designation is made, by the cable televi- sion franchisee; provided, however, that the municipality may designate such entity at any time throughout the term of a franchise by a resolution duly adopted by the legislative body thereof.* (2) The educational and governmental access channel shall be operated and admin- istered by a committee or a commission appointed by local government and shall include appropriate representation of local school districts within the service area of the cable television system and may include for purposes of coordination an employee or representative of the cable television franchisee.** (3) The entity responsible for administering and operating the public access chan- nel shall provide notice to the general public of the opportunity to use such channel which notice shall include (i) a character -generated message transmitted at least hourly on such channel between the hours of 6 p.m. and 10 p.m. each day and (ii) written notice to subscribers at least annually. Notices shall include the name, address and telephone number of the entity to be contacted for use of the channel. All access programming shall be identified as such. (4) Channel time shall be scheduled on the public access channel by the entity responsible for the administration thereof on a first-come, first-served, nondiscrimina- tory basis. (5) Local use of educational and governmental access channels shall have pre- ferred status in the event of competing requests for channel time. Priority may be afforded to local governments within the service area of the system. (6) Channel time for PEG access programming shall be without charge to the user. (7) The designation of PEG access facilities shall include the provision by the cable television franchisee of the technical ability to play back prerecorded programming and to transmit programming information consistent with the designated uses of PEG access channels. (8) The cable television franchisee shall not exercise any editorial control over any public, educational or governmental use of channel capacity designated for PEG purposes. (9) A municipality shall not exercise any editorial control over any use by the public of a public access channel. (10) The entity responsible for the administration of a public access channel shall maintain a record of the use of such channel which shall include the names and addresses of all persons using or requesting the use of any such channel and which record shall be available for public inspection for a minimum of two years. * If a single public access channel is shared by more than one municipality, a single entity shall be jointly designated by the local legislative bodies of each franchising municipality in the system. If agreement cannot be reached on a single entity, the commission shall arbitrate the issue. ** Where an educational or a governmental channel is shared by more than one school district or local government or combination thereof, administration of such channel(s) on a cooperative basis is encouraged. 230.520b1 EX 8-31-88 / froPr‘ PC 4,-- /k s • Ac-ecih. - I/67 co-a/cL. P. 1-, c.t, Ace_ sit) ant4 #7- 14 co t# CJ(.Q fee.- See c•e-a-01-t. g4 cP/c.a _S 56K9 74.) / CC_ r-e,s p)..te... rca G. eer.A • b c_ //et ch Im A y/y/12_ Dock4, 632') 17-c,e, evy36c7 6/ CL-e.s-5 dt74 Ch 6 Hz,- J.,„„ v2e) 6(.5 h ;ley • /74,e"‘ CC.,e2;y0_11C. hCA.S.-e-CA 66". '‘e5 0/0170•7.N Pt.-tLIj..f franchise fee/ xI Page 1 A B C D E F 1 2 Cost to residents of the City of Ithaca resulting from ACC's attempt to redefine 3 rate for basic service to exclude franchise fee payments. 4 -assumes 8200 subscribers 5 Max. Month. Max. Month. Add'I Cost Add'I Cost Total Add'I 6 Basic rate Basic rate per month ea per yr ea Annual cost to 7 -Franchise -ACC subscriber subscriber subscribers 8 March '93 - Feb '94 $15.37 $16.14 $0.77 $9.22 $75,630 9 March '94 -Feb '95 $16.14 $16.95 $0.81 $9.68 $79,412 10 March '95 - Feb '96 $16.95 $17.80 $0.85 $10.17 $83,382 11 March '96 - Feb '97 $17.80 $18.68 $0.89 $10.68 $87,551 12 March '97 - Feb '98 $18.68 $19.62 $0.93 $11.21 $91,929 13 March '98 - Feb '99 $19.62 $20.60 $0.98 $11.77 $96,525 14 15 Total for the remainder of the franchise: $62.74 $514,430 16 17 Cost to City of Ithaca resulting from ACC's attempt to redefine "total city revenues" 18 to exclude franchise fee payments. 19 -assumes 10% annual growth in subscribers and rates 20 21 Franchise Franchise Annual Loss to 22 fee - City fee - ACC City 23 1992 $132,672 $126,370 ($6,302) 24 1993 $145,939 $139,007 ($6,932) 25 1994 $160,533 $152,908 ($7,625) 26 1995 $176,586 $168,199 ($8,388) 27 1996 $194,245 $185,019 ($9,226) 28 1997 $213,669 $203,521 ($10,149) 29 1998 $235,036 $223,873 ($11,164) 30 1999 $258,540 $246,260 ($12,280) 31 32 Loss to City over term of franchise: ($58,832) Page 1 John E, Fogarty Associate General Counsel 203 328-0629 May 12, 1992 Post•It'" brand fax trar%mIttal memo 7671 te Charles Guttman, Esq. City Attorney City of Ithaca 108 East Green Street Ithaca, New York 14850 RE: City of Ithaca - Franchise Fees Dear Mr. Guttman: 0.....—.I Television & Communications Corporation A Time Warner Inc. Company Corporate Headquarters 300 First Stamford Place Stamford, CT 06902.6732 203 328-0600 This will respond on behalf of American Television & Communications Corporation, d/b/a American Community Cablevision ("Cablevision") to your Letter of January 22, 1992. I appreciate your patience in waiting for this response. In your letter you object that Cablevision's gate for basic service increased beyond the maximum 5% permissible without regulatory approval. Your calculation, however, as your letter explains, is based on including within the rate charged for basic service the amount attributable to the franchise fee paid to the City of Ithaca. Your position would seem to be that the franchise fees are part of the rate charged by Cablevision and therefore part of Cablevision's revenues. For the reasons set forth herein, it is Cablevislon's position that monies collected from subscribers and paid as franchise fees are not revenue to Cablevision and are not part of the rate charged for Cablevision's services. Cablevision, as required by the terms of its cable television franchise agreement with the City of Ithaca, collects and remits to the City of Ithaca five percent of its "gross City revenues" (as detbied in the Franchise) as a franchise fee. Cablevision lists the appropriate amount of the franchise fee on each customer's bill as a separate item distinct from the charge for the cable television services the subscriber receives. On a quarterly basis, Cablevision pays to the City the exact amount it has received in franchise fee payments from its customers. Thus, Cablevision is, in effect, acting as agent for the City of Ithaca in collecting the franchise fee from its customers and remitting it to the City. In accordance with generally accepted accounting principles, Cablevision reflects such franchise fees on its books as nonrevenue liabilities collected from the subscriber and payable to the City. Cablevision does not treat the franchise fees collected from subscribers as gross revenues of Cablevision and, thus, does not collect or pay five percent of these monies as franchise fees. Put succinctly, Cablevision does not pay a fee on the amount it collects as franchise fees. Providing entertainment and Information choices The City claims that, contrary to Cablevision's practice, the amount collected by Cablevision in franchise fees should be treated as part of Cablevision's gross revenues and subject to the five percent fee. es��f It is Cablevision's position, as detailed below, that (1) the funds it collects as franchise fees are not "gross revenues" as defined in the Franchise; (2) Cablevision's treatment of the franchise fees which it collects as nonrevenue liabilities is in accord L C Q with generally accepted accounting principles; and (3) under the .provisions of the Cable Communication Policy Act of 1984 ("the Cable Act"), monies collected as franchise fees and paid to the. City are not gross revenues and imposing a franchise fee on these monies would violate the franchise fee limitation set in Section 622(b) of the Cable Act. 1/ 4 1 1 .. uy 1 .4 r% .1 1 The Franchise at Section 1.18 defines "gross City revenues" as follows: "Gross city revenues means all revenue derived directly or indirectly by the Grantee and by Grantee's affiliates from services provided within the City via the Cable Communications System." The definition of "gross City revenues" is limited expressly to revenue derived from services provided on the cable system. Linder a fair reading of the Franchise, money collected as franchise fees should not be included within this definition. A franchise fee which is simply passed through to the consumer cannot be said to derive from the services provided by a cable operator to its customers via its cable system. It is not part of the consideration paid for cable services or for the operation of the cable system by customers. That consideration is set by Cablevision and is separately indicated on the bill. Franchise fees should not qualify as revenues derived from services provided by Cablevision. II. lam, 1 ' 1 r.f. 1 11, L' ! +' �'! 1 . 1 1.. As previously indicated, Cablevision's accounting treatment of the monies it collects as franchise fees is in accord with its view of the meaning of the Franchise. Cablevision records these monies as liabilities and does not recognize them as revenues. In so treating these monies, Cablevision -is acting in accord with generally accepted accounting principles. Attached isa letter of November 9, 1989 from accountants Ernst & Young so stating. m. n - pot "gross renues," 2 Section 622 of the Cable Act provides, in relevant part, that: (b) For any twelve --month period, the franchise fees paid by a cable operator with respect to any cable system shall not exceed 5 percent of such cableoperator's gross revenues derived in such period from the operation of the cable system. (c) A cable operator maypas through to subscribers the amount of any increase in a franchise fee, unless the franchising authority, demonstrates that - the rate structure specified in the franchise reflects all costs of franchise fees and so notifies the cable operator in writing. (e) Any cable operator shall pass through to subscribers the amount of any decrease in a franchise fee. (f) A cable operator may designate that portion of a subscriber's bill attributable to the franchise fee as a separate item on the bill; - Section 622(b) allows the franchise fee to be assessed only on"gross revenues derived .., from the operation of the cable system." As argued with respect to similar language in the Franchise, money collected as .franchise fees is not derived by Cablevision from the operation of the system; rather it is money collected by Cablevision on behalf of the -City. Thus, the terms of the Franchise, which do not include money collected as franchise fees within gross revenues, are consistent with Federal law. Other provisions of Section 622 are consistent with the position that franchise fees are a pass-through charge assessed by the franchising authority and notpart of the consideration received by the cable operator from operation of the system. Section 622(0 authorizing cable operators to separately itemize franchise fees on customer bills evidences the view implicit in the Cable Act that a franchise fee is a charge passed through to the subscriber which is in addition to and not a part of the charge a customer pays for cable services. Separate itemization is, of course, the way sales taxes are generally treated on consumer bus and Section 622(0 indicates that franchise fees are to be regarded as a sir charge. Section 622(c) and (e) further indicate that franchise fees are to be directly passed through to customers by the cable operator and are not to be treated as part of revenue received in payment for cable services. It should be noted that these provisions are relevant only in circumstances where there is regulation of the rate charged for cable services. Section 622(c) would be meaningless where the cable operator is exempt from rate regulation, since the franchise would not specify a rate 3 structure, or if it did, such language would be preempted. Similarly, the requirement in subsection (e) that mandates a pass throw of any decrease in the franchise fee can only have meaning in a rate regulated environment since an unregulated operator would always be free to raise its rates. Both sections make clear the intent of the Act that the portion of the customer's bill attributable to franchise fees and the portion attributable to the charges for cable services are distinct and that the portion attributable to the franchise fee is indeed a straightforward pass through which directly rises or falls as the franchise fee increases . or decreases. The use of the term "pass through" in the Act itself emphasizes that the franchise fee revenues collected from customers are the funds of the City and the cable operator's function is merely to collect these funds on the City's behalf. Subsection (e) ensures that the rate regulated cable operators can pass through any subsequent increase in the franchise fees without having to seek permission for a rate increase from the franchising authority in those limited situations where a rate regulated cable system has voluntarily chosen not to pass through its franchise fee in place on the effective date of the Cable Act. In short, in enacting a provision which allows even a rate regulated cable operator to pass through any franchise fee increases on top of the fixed rate, subsection (c) evidences Congress' intent to protect the general right to pass through the entire franchise fee by ensuing the availability of the pass through in a situation where the practice might be interpreted to conflict with local rate regulation. Similarly, the purpose of subsection (e) is to ensure that the franchise fee reductions are passed on to subscribers, rather than being absorbed by the cable operator as profit, in those limited situations where a rate regulated cable operator voluntarily had chosen not to pass through its existing franchise fee. In sum, Section 622 of the Cable Act strongly supports Cablevision's practice. The franchise fees are in addition to, distinct from, and not a part of the rate charged for cable services; the monies paid as franchise fees are not consideration for any cable service and therefore not revenue to the cable operator. To treat the portion of the subscriber's bill attributable to franchise fees as revenue on which franchise fees must be paid would not only be inconsistent with the intent of the Cable Act, it would in the case of the Ithaca franchise violate the prohibition of Section 622(a) on the payments of franchise fees in excess of five percent of gross revenues. Since the portion of the customer's payment attributable to franchise fees is not part of Cabievision's gross revenues and Cablevision already pays five percent of its gross revenues as franchise fees, payment of any percentage of the money paid as franchise fees would result in a payment in excess of five percent of gross revenues in violation of Section 622(b). 4 If, after your review of Cablevision's position, you wish to discuss this issue further we are, of course, willing to do so. Again, my thanks for your courtesy and patience. JF:pg lthaca.fe 5 Very truly yours, Q^arvjl; John E. Fogarty C r OFFICE OF CITY ATTORNEY CITY OF ITHACA 105 EAST GREEN STREET ITHACA, NEW YORK 14850 MEMORANDUM TO: Dominick Cafferillo, Controller FROM: Chuck Guttman, City Attorney DATE: May 18, 1992 SUBJECT: ACC TELEPHONE: (607) 274-6504 FAX: (607) 272-7348 I am in receipt of a copy of a letter of May 12, 1992 to Cookie in which ACC enclosed a check in the amount of $30,615.54 representing what they claim to be the appropriate franchise fee for the first quarter of 1992. They attached a statement, copy which I am enclosing, showing gross revenues and the 5 percent fee. My concern is whether they have correctly calculated gross revenues. Questions have been raised as to whether they are including in gross revenues advertising revenues and whether they are including in gross revenues the franchise fee which is separately listed on bills. I believe we should look into this further to make sure that their calculation of gross revenues is correct. Please get back regarding this at your convenience. Enclosure 'An Equal Opportunity Employer with an Affirmative Action Program' ti4 Recycled Paper .May 11, 1992 City of Ithaca Ithaca, New York Dear Sir: ZZNY 0040 A7 ' i i. mmi. American Television & Communications Corporation A Time Warner Inc. Company National Division 160 Inverness Drive West, Suite 300 P.O. Box 6929 (80155-6929) Englewood, Colorado 80112. (303) 799-9599 Enclosed please find a check for $30,615.54 which is payment of franchise fees for the first quarter of 1992 for American Community Cablevision. At this point, we have not deducted the overpayments for the prior periods. However, in the future, we reserve the right to reduce franchise fee payments by the amount overpaid. Computation is as follows: Month Gross Revenues January, 1992 February March $210,066.74 216,262.61 221,892.97 Total $648,222.32 Fee @ 5% - NYCC Rate .277 4.723% Franchise Fee $30,615.54 I, Ivy W. Parish, Controller of American Television and - Communications Corporation, National Division, certify that the above schedule summarizes the Gross Revenues, as defined in the franchising agreement, for the period indicated for the.CATV operations in the City of Ithaca, New York. Signed: IWP/jdh Enclosure u) Parish, Controller Providing entertainment and information choices. CITY OF ITHACA 1OS EAST GREEN STREET ITHACA, NEW YORK 14850 OFFICE OF TELEPHONE: (607) 274-6504 FAX: (607) 272-7348 CITY ATTORNEY MEMORANDUM TO: Dominick Cafferillo, Controller FROM: Chuck Guttman, City Attorney DATE: May 12, 1992 SUBJECT: American Community Cablevision Enclosed please find a draft of a proposed letter from the Cable Commission to ACC. As you can see, there are at least a couple of questions as to the manner in which ACC is calculating its franchise fees. We should review exactly what, in the Cit 's opinion, ACC is using as 1 s figure or gross City revenues and the manner ill—Whidtrindilculatin the franchise fee. It appears they may be underpaying us for the two reasons s ated in this draft letter. Please look into this and get back to at your convenience to discuss it. I am also attaching the Basis of Franchise Fee Payments. In Footnote (4) it says a rate of 5% is applied to the total revenues to determine the franchise fees due. They then subtract .359% and .277% for the NYSCCT Rate. I am not sure what type of subtraction is being done and whether that subtraction is justified. Attachments 'An Equal Opportunity Employer with an Affirmative Action Program' tel Recycled Paper DRAFT City of Ithaca Cable Commission 108 E. Green St. Ithaca, NY 14850 Barbara Lukens, General Manager American Community Cablevision 519 W. State ST. Ithaca, NY 14850 Date DearBarbara, We believe that two aspects of your computation of franchise fees need to be changed to conform to existing laws and regulations: 1. Our franchise establishes the franchise fee to be paid to the City of Ithaca at "five percent (5%) of ACC's Gross City Revenue" (§2Q2 A). According to Executive Law §812(5), which deals with the collection of the statefranchise fee, gross annual receipts are defined as "...any and all compensation received directly or indirectly by a cable company from its operations within the state, including but not limited to...payment for programs received and/or transmitted, advertising...and any other monies that constitute income...". According to your report BASIS OF FRANCHISE FEE PAYMENTS, submitted at our request, advertising income is not included in your computation of gross receipts for determining the City franchise fee. In discussions with a representative of the NYSCC, he clearly stated that advertising income should be included in the computation of gross city revenue, as it is in the model set by • Executive Law. 2. In a recent Statement of Policy, Docket No. 90389, the NYSCC states the franchise fee "is calculated as a percentage of all revenues received without deduction or allocation for such a portion of the revenues as may ultimately be paid for by the cable company to the municipal government in fulfillment of the franchise fee". To use the NYSCC example, which assumes a franchise fee of 3%, a bill where a franchise fee of $.60 is added to a service rate of $20.00 results in the incorrect payment of a 2.91% franchise fee, as $.60 is 2.91% of 20.60. The correct franchise fee must be calculated on the basis of bottom line of the bill. In reviewing my ACC bill, it appears that ACC is calculating the franchise fee similarly to the incorrect example. Please let us know by our next meeting what actions you plan to take to resolve these discrepancies. Sincerely, DRAFT City of Ithaca Cable Commission 108 E. Green St. Ithaca, NY 14850 Barbara Lukens, General Manager American Community Cablevision 519 W. State ST. Ithaca, NY 14850 May 7, 1992 ( n Dear Barbara, We have received your letter of March 9th responding to our resolution of February 1 1 th, 1992, regarding activation of access channels. Our position .continues to be that our franchise and state regulations require the designation of nine active access channels. Activation of these channels should have been provided initially as part of the fulfillment of your franchise obligations. By not activating the channel called for in our resolution of February 1 l th and by not restoring the money spent from Access Capital Equipment funds for. the activation of two of the existing channels, as called for in that resolution, we find that ACC is in default of its franchise obligations under section 14.1 A. If you continue to be unwilling to comply fully with the terms of our resolution, the City will seek redress.. We await your reply and look forward -to putting this difficult issue behind us. . Sincerely, Peter Hess, Chair City of Ithaca Cable Commission In the Matter of NEW YORK STATE COMMISSION ON CABLE TELEVISION The Itemization of Franchise Fees on Subscriber Bills 92-217 DOCKET NO. 90389 STATEMENT OF POLICY (Released: April 20, 1992) During ,the past months, various cable companies in the state have commenced the practice of including all or a portion of a franchise fee as a separate line item on a subscriber's bill. . The practice is manifest in one of. two ways. In some instances, the franchise fee is one of many items, e.g., basic service, premium service, additional outlets, etc. listed in a single column, the amount for which is included with and added to all other amounts to arrive at a total amount due. In other instances, the bill recites the various services subscribed to and the amounts thereof, sets forth a subtotal of all such amounts and then includes an amount denominated "franchise fee" which, when added to the subtotal, creates a total amount due at the bottom of the bill. In the latter case, the franchise fee is treated in the same manner as a sales tax. In either case, the fee is stated as if it were a direct charge upon the subscriber. Some companies have instituted this practice coincidental . with a franchise renewal or current increase in the amount of the fee or both. For other companies, the practice is unrelated to the franchise term or any change in franchise fee requirements. Because the practice raises fundamental issues concerning the effect of federal law and the relation of federal statute to state statute, Commission regulations and franchise fee provisions in cable television franchise agreements, the Commission has determined that it is appropriate at this time to issue a general statement of policy on franchise fee itemization and "pass-throughs." Itemization of Fee Section 622(f) of the Cable Communications Policy Act of 1984 ("Cable Act") (47 USC Section 542(t)) provides that "[a] cable operator may designate that portion of a subscriber's bill attributable to the franchise fee as a separate item on the bill." Consistent with this section, a cable operator. may include on a subscriber's bill a separate statement indicating the portionof the bill --as a percentage or fixed amount --that will be payable as a franchise fee by the cable company to the franchising authority. This section is not authority for including a franchise fee as a separate billable line item on a subscriber's bill. 2 In this regard, we note that franchise agreements in New York State have traditionally required franchise fees based on a percentage of revenues --either alI oosome portion thereof --received by the company from subscribers and, in some cases, from other sources. In other words, the fee is calculated as -a percentage of all revenues received without deduction or allocation for such portion of the revenues as may ultimately be paid by the cable company to the municipal government in fulfillment of the franchise fee obligation. This practice is fully consistent with Section 817 .of the Executive Law which requires the Commission to impose an assessment upon cable companies calculated on "gross annual receipts. i1 The only exception from "gross annual receipts" recognized in the statute would include sales taxes which are imposed directly on subscribers. (See, e.g., Tax. Law, Section 1131(2)) Neither the municipal franchise fee nor the amount of the Commission's assessment is excluded from "gross an.ual receipts." ThePractice of billing the fee as a se farate line item in addition to rates P transforms the very nature of the fee from a component of doing business calculated on all revenues to a separate add-on charge imposed directly on subscribers. This practice also has the effect of transforming the very method by which the fee is calculated and, therefore, purports to modify the underlying statutory and franchise obligations. A'simple example will illustrate the effect of itemization. Assume a cable company has been charging $20 per monthfor a service under a franchise which requires a franchise fee of 3%. The franchise fee attributable to such bill would be sixty cents. If the company determines to separate and itemize the fee as an add-on in the manner of a sales tax, the bill is likely toread as follows: Basic service rate --- $20.00 Franchise fee --- $0.60 Total $20.60 11 Section 817(2) provides that the Commission "shall...bill and collect. ..[from cable companies]. ..the total direct and indirect costs necessary to operate and administer the commission for the. ..state fiscal year." Each company is required to pay a pro rata share of the commission's costs based upon its gross annual 'receipts when . compared to the gross annual receipts of all companies. "Gross annual receipts" is defined in Section 1812(5) as follows: "...any and all compensation received directly or indirectly by a cabletelevision company from its operations withinthe state, including but not limited to sums received from subscribers or users in 1. payment for programs received and/or transmitted, advertising and carrier service revenue and any other moneys that constitute income in accordance with the system of accounts approved by the commission. Gross annual receipts shall not include any taxes on services furnished by a cable television company imposed directly on any subscriber or user by any municipality, state, or other governmental unit and collected by the company for such governmental Unit." 3 Apart from the fact that this is a rate increase subject to notice requirements (and government approval in the absence of effective competition), it is readily apparent that the company, by its own unilateral act, has purported to change the manner of calculating the fee by reducing the base from the total amount billed to an amount which is artificially described as the "rate." In fact, $0.60 is but 2.91% of $20.60 — the total amount billed. If the fee is calculated as before -- 3% of the full amount billed -- the fee attributable to the bill would be sixty-two cents. We find nothing in the Cable .Act to suggest that Congress intended to transform the nature of a franchise fee or to amend existing franchises by .permitting cable television companies to reduce franchise fee obligations by manipulating thesubscriber's bill in such 'manner. On the contrary, the effect of Section 622(a) was to increase from 3% to 5% of gross receipts the amount of franchise fees which could be required in a franchise. It could be argued that a cable company is free to .bill in this manner without also intending to modify its franchise fee obligation. If so, such a bill would be inaccurate and, therefore, misleading. Nothing in the Cable Act authorizes cable companies to engage in inaccurate and misleading billing practices. We also note the likelihood that some cable companies would argue .that the franchise fee is a tax and, as such, is a separately billable item. We need not finally determine whether the franchise fee is a tax for the simple reason that even if the franchise fee is in the nature of the tax, under New York. State law it would be in the nature of a special franchise or real property tax; but clearly not in the nature of a sales tax.2 The special franchise tax is imposed on the owner of the special franchise property, i.e.. the cable company, and not on the subscriber directly. As such, it is simply a component of doing business similar to other non -sales taxes and business costs. 2 Section 626 of the Real Property Tax Law ("RPTL") provides as follows: "1. (a) When a tax levied on,a special franchise is due in any assessing unit, if the special franchise owner has paid such assessing unit for its exclusive use during the past year under any agreement or statute requiring the same, a sum based upon a percentage of gross earnings or other income, a license fee or other sum of money on account of such special franchise possessed by such special franchise owner, which payment was in the nature of a tax, all amounts so paid for the exclusive use of such assessing unit, except money paid or expended for paving or repairing the pavement of a street, highway or public place, and except in a city having a population of one hundred seventy-five thousand or more according to the latest federal census, car license fees or tolls paid for the privilege of crossing a bridge owned by the city, shall be deducted from the tax based on the assessment made by the state board for purposes of the assessing unit, but not otherwise, and the remainder shall be the tax on such special franchise payable for such propose." 0 •� 4 In sum, it is our determination that franchise fees cannot be stated as a separate line item on subscriber bills as direct charges on subscribers. This policy does not prevent cable companies from informing subscribers on bills, or otherwise, of the fact that franchise fees are paid to government, including the specific amount of the fee attributable to an individual bill. It is consistent with the Cable Act because companies may include a statement on the bill which identifies the franchise fee without imposing a separate and direct charge for the fee itself. Pass Through Provisions We also take this opportunity to express our policy with respect to the so-called "pass through" provisions in the Cable Act. Section 622(c) of the Cable Act (47 USC 542(c)) provides that "[a] cable operator may pass through to subscribers the amount of any increase in a franchise fee unless the franchising authority demonstrates that the rate structure specified in the franchise reflects all costs of franchise fees and so notifies the cable operator in writing." Section 622(c) provides that "[a]ny cable operator shall pass through to subscribers the amount of any decrease in a franchise fee." The issue here is whether these provisions have meaning in a deregulated cable community. We note, initially, that for many years prior to the enactment of the Cable Act the rates for premium cable television services had been deregulated by the Federal Communications Commission ("FCC'). See Brookhaven v. Kelly, (428 F.Supp. 1216 N.D. New York (1977); 573 F.2d 765, 2d Cir. (1978)) We also note that in many, if not all, cable television franchise agreements in New York State a franchise fee is required to be paid based on revenues derived by the cable television franchisee from premium services or some portion thereof. In fact, at the time the Cable Act became law, cable companies could, unilaterally price premium services to account for all costs including franchise fees and increases therein. As a practical matter, the Cable Act did not alter the regulatory status of premium services. Section 623 of the statute provides that "[a]ny franchising authority may regulate the rates for the provision of cable service. . .provided over a cable system to cable subscribers, but only to the extent provided under this section." Section 623(b)(1) required the Federal Communications Commission to "prescribe and make effective regulations which authorize a franchising authority to regulate rates for the provision of basic cable service in circumstances in which a cable system is not subject to effective competition." Under Section 623, only basic cable service can be subject to rate regulation.3 Cable companies remain free 3 Although basic cable service is defined in such a way as it is theoretically possible that single channel premium services could be marketed as part of basic service, we are not aware of any such circumstances and it is unlikely that a cable company which is not subject to effective competition would choose to submit rates for premium service to regulation by such marketing practice. 5 to price "premium" services without the need for governmental review and approval --a right which transcends the more limited language in Section. 622(c) which merely permits a rate increase in the event of an increase in franchise fees. We note, as well, that historically, "pass-through" is used in utility ratemaking to permit a cost or change in cost to be included in the regulated rate borne by ratepayers. It fully appears, therefore, that the pass-through provisions in Section 622(c) of the Cable Act are intended to enable cable television companies to increase regulated rates by an amount equal to any current increase in the franchise fee attributable to the regulated rate.4 Similarly, the obligation imposed by Section 622(e) to decrease rates by any reduction in the franchise fee is only sensible in an environment where rates are regulated. Otherwise, there is no real benefit to subscribers. In sum, the pass-through provisions are redundant in rate deregulated communities. Granting to a cable company the unilateral ability to charge to subscribers whatever rate it wants—as the Cable Act does --transcends and makes meaningless cost pass-throughs which are reflective of a rate regulated environment. SO ORDERED. Commissioners Participating: William B. Finneran, Chairman; Theodore E. Mulford, John A. Passidomo, Barbara T. Rochman, Commissioners. 4 It is important to note here (1) that Congress sanctioned basic rate regulation for a minimum of two years following the effective date of the Cable Act for all cable systems irrespective of the existence of effective competition, and (2) that FCC regulations rather than statutory mandates caused most cable systems to be rate deregulated. CITY OF ITHACA 1 OS EAST GREEN STREET ITHACA, NEW YORK 14850 OFFICE OF TELEPHONE: (607) 274-6504 CITY ATTORNEY FAX: (607) 272-7348 April 14, 1992 Barbara L. Lukens American Community Cablevision 519 West State Street. Ithaca, NY 14850 Dear Ms. Lukens: I wrote to you on January 22, 1992 advising you that I was in receipt of your letter of January 15, 1992 in which you advised us that ACC was increasing the rates for basic services from $12.58 to $13.95 with the five percent franchise fee to be collected in addition. I calculated that when the five percent franchise fee was added in, the rate was actually $14.65 -- more than the maximum set forth in the franchise agreement. I asked you to respond to me as soon as possible regarding this matter. Some time after that letter, I received a phone call from an attorney for ACC advising me that the matter had been referred to him and I would promptly receive a further response regarding this matter. It is now mid-April, approximately three months after my original letter and significantly after the rate increase has gone into effect. To date I have received no response to this matter. If I do not promptly receive a response regarding this matter I will have no choice but to advise Common Council that ACC is not responding and request direction from Council as to how to respond to what, in my opinion, is a charge of more than the maximum set forth in the franchise agreement. Please get back me or have your attorney get back to me regarding this matter at your earliest convenience. Very truly yours, Charles Guttman City Attorney "An Equal Opportunity Employer with an Affirmative Action Program" to/ Recycled Paper BASIS OF FRANCHISE FEE PAYMENTS ****************************************************************** FRANCHISE FEE BASIS 1991 ******************.************************************************ Basic Service Revenue (1) Tier Revenue Equipment Rental Revenue (2) Installation Revenue Pay Service Revenue (3) Pay Per View Revenue Service Upgrade Revenue Home Shopping Service Revenue NOTES: $1,200,601.47 459,043.45 183,819.09 134,013.79 391,381.86 36,314.09 3,042.02 4,001.27 TOTAL REVENUES (4) $2,412,217.04 (1) Basic Service includes commercial/bulk accounts. (2) Equipment Rental reflects remotes and (additional outlet) converters. (3) Pay service includes pay services for commercial/bulk accounts. (4) A rate of 5% is applied to the total revenues to determine franchise fees due. (Less NYSCCT Rate .359% for period 1/91-3/91 and .277% for period 4/91-12/91). Revenues as shown above are taken directly from the billing reports for City of Ithaca addresses. Resolution of the Ithaca Cable Commission Regarding Activation of Access Channels Passed unanimouly, 2/11/92 The cable franchise adopted by the City Council of Ithaca on June 8th 1988, submitted to the NYSCC on December 20th 1988 and approved by NYSCC on September 12, 1989 contains the following language: 14.1 A. (1) Nine downstream channels shall be designated for public, governmental, and educational access. The access channels shall be available for use by New York State, local governments, educational institutions, or members of the public for education and public service programming, municipal services and local expression. The City and ACC have been arguing over whether the word designate means to set aside space in the spectrum (ACC) or to provide activated channelsfor PEG access use (the City): The following language is found in the NYSCC rules "setting minimum standards for the designation and use of channel capacity for public access". Notice of these rules was released on February 24, 1988, and they became effective on September 8, 1988: 595.4 (b) (7) The designation of PEG access facilities shall include the provision by the cable franchisee of the technical ability to playback prerecorded programming and to transmit programming information consistent with the designated use of PEG channels. We have every reason to believe that the drafters of our franchise were familiar with the proposed access rules and the way they construed designation of channels. We must assume that it was the understanding of the signers of the franchise, including ACC, that the franchise required ACC to provide nine activated access channels. After a careful review of the documents pertaining to this matter, it is our opinion that there is no ambiguity in the franchise; that it is incumbent upon ACC provide nine activated access channels as part of its franchise obligations. Therefore, we resolve that the money taken from the access capital budget to activate access channels should be rebated forthwith. Further we resolve, consistent with our prerogatives and our understanding of the needs of the community, that the activation of a second public access channel take place within 60 days from the passage of this resolution. OFFICE OF CITY ATTORNEY CITY OF ITHACA 1 OS EAST GREEN STREET ITHACA, NEW YORK 14850 January 22, 1992 Barbara L. Lukens American Community Cablevision 519 W. State Street Ithaca, NY 14850 TELEPHONE: (607) 274-6504 FAX: (607) 272-7348 Dear Ms. Lukens: I am in receipt of a copy of your letter of January 15, 1992 addressed to the City in which you advise us that ACC is increasing the rates for basic service from $12.58 to $13.95 with 'a five percent franchise fee to be collected in addition. When the five percent franchise fee is added in, the rate which customers will be paying is actually $14.65, a penny more than the maximum set forth in the franchise agreement. As I read Section 19.1 of the franchise, ACC agrees not to raise the basic rate higher than the $14.64 charge. Section 20.1 states that the City shall be entitled to receive from ACC, not from the consumer, the franchise fee. Therefore, I would assume that the maximum that ACC can charge the consumer, including the franchise fee, is the $14.64 charge. Accordingly, I believe that the increase you are proposing actually brings your rates over the maximum set forth in the franchise agreement. You further state in your letter of January 15, 1992 that the rates for basic cable service are related to overall increases to ACC for general operating costs. I would appreciate your forwarding to me a financial statement setting forth your general operating costs for 1990, 1991 and projected for 1992 to demonstrate that the 58 percent increase since December of 1989 is actually related to overall increases for general operating costs I expect that Common Council will be discussing this issue and I would appreciate a response as soon as possible. e Guttman City Attorney cc: Mayor Benjamin Nichols Tom Terrizzi, Cable Commission PeterlHess, Cable Commission 'An Equal Opportunity Employer with an Affirmative Action Program' ci Recycled Paper /2415 JAN 2 11992 AMERICAN COMMUNITY CABLEVISION January 15, 1992 Ms. Callista Paolangeli, Clerk City of Ithaca City Hall 108 E. Green Street Ithaca, NY 14850 Dear Ms. Paolangeli: American Community Cablevision would like to inform the City of Ithaca of rate changes which are being instituted as of March 1st, 1992. Basic Cable ACC=is--increasing_ the=nate=for–basic=sery ce to=$=13-:9"5�which is_ {l=ess ===than– the --$_1.4=._614 m'ax mum_= set--forth=in— =the franchise; eag-r_eeme nt: he 5%franchise fee will be collected in addition; to the $13.95.) Since December of 1989 until now our total basic channels have actually increased by 58% while the cost per channel has decreased by 16%. 1989 customers paid 87 cents/channel for 12 channels @ $10.48 1991 customers paid 75 cents/channel for 17 channels @ $12.68 1992 customers will pay 73 cents/channel for 19 channels @ $13.95. The basic cable service "grew" in 1991. An educational access channel was added along with SCOLA (Satellite Communications -for •, Learning). The latter was a cooperative effort between Cornell University, Ithaca College and ACC. Rates for basic cable service are related to overall increases to ACC for general operating costs. Not unrelated is the demand for better programming and cable's response to those demands. For example, CNN's unequalled coverage of the Gulf War. ESPN's spectacular sports coverage, including exclusive NFL games and Major League Baseball games. 10 ... C-SPAN's and CNN's continuing coverage of the presidential race ( while the big three nets consider cutting back on •heir coverage!). In addition, ACC has responded -to ustomer expectations for service. For_example, We continue to be in, compliance with strict National Cable Television Asso iation customer service standards (Self-imposed s andards!) We continue to invest in u•grading our phone system to provide still quicker response times. Continual training and supervision has resulted ..in more efficient staff members. Their proper handling of customer calls and service and installation response has resulted in an overall "good" to "excellent" rating by 92% of those cus omers surveyed. Remote Control The monthly fee for a remote contro will be increasing from $3.00 per month to $3.95 per month. This fee has not been increased since we began offering a re ote. The 5% franchise fee will be collected in addition to the $3.95. ACC has plans to :offer_ a universal re ote control both for rent and/or for purchase at some time during the first quarter of 1992. We are announcing this to our subscribers via our annual newsletter which is being mailed now. In addition, ACC makes its remotes available in the cable store for the programming of customer owned "learning" remotes. Non-payment Customers who are disconnected for non-payment have been charged $20.00 for reconnection. Beginning Aprp.l 1, 1992 these customers will be charged the standard $40.00 (p us tax and franchise fee) connection rate. As always, if our technician collects the customer's payment when s/he arrives to disconnect service, _.,,a__ (thereby _eliminating the need to physically. , disconnect and/or and/or__ reconnect the cable) a $20.00 collection fee is charged. ACC has made an effort to work with customers who are having difficulty paying their cable bills by setting up limited payment plans and by reducing their current service to the basic cable service level. After the deficit is paid off and the customer is able to maintain the payments, the customer is allowed to upgrade his/her service level. Other In order to make fee structures more e• itable among communities, franchise fees for pay-per-view moves and events and for converter rentals will be added to=th- stated rates for those services where applicable. Hotels and motels will be charged the basic rate for their first television set and a nominal fee per additional set. This is not really a departure from our past practice but more clearly states the rate to be paid for the initial set. (ACC has not always increased the fee .for the first set as the basic rate has increased). American Community Cablevision has an outstanding offering of television programming for its customers and charges reasonable rates for the same. In comparing ACC to other New York communities' rates, I believe you will find that Ithacans enjoy a higher level of viewing at more reasonable rates. Barbara . Lukens, General Manager cc: The Honorable Benjamin Nichols, Mayor Mr. Tom Terrizzi, Chair, Ithaca Cable Commission BLL/mkk In the Matter of RECEIVED APR 30 1992 NEW YORK STATE COMMISSION ON CABLE .:LeVISION Amendment of Section 595.1 of the Commission's Rules DOCKET N MEMORANDUM AND RESOLUTION ADOPTING RULEMAKING (Issued: April 9, 1992) By Notice of Proposed Rulemaking (In the Matter of Amendment of Section 595.1 of the Commission's Rules; Docket No. 90327, Order No. 91-305, released: July 24, 1991; published .in the New York State Register on July 31, 1991), the Commission proposed to amend Section 595.1(o) of its rules relative to cable television franchise fees payable to municipal governments. Following the receipt and review of comments, the Commission authorized a revised proposal which was issued December 4, 1991 and published in the State Register on that same date. Having reviewed all the comments submitted, we have determined to amend Section 595.1(o) in accordance with the changes in the revised proposal. Section 595.1(o) was first amended to include requirements concerning franchise fees in 1988. (Order Adopting Regulations in Docket No. 90327, Order No. 87-191, Released: February 10, 1988.) The rule provided as follows: "Section 595.1 Required Contents of Franchises. Where a cable television franchise is awarded or renewed after April 1, 1973,...the franchise will be confirmed by the Commission only if it contains: (o) A provision stating (1) whether a franchise fee shall be payable by the franchisee to the municipality and, if applicable, (2) the precise amount or method of calculation of such franchise fee which, if expressed as a percentage of the franchisee's revenues, shall be expressed as a percentage of the franchisee's gross revenues derived from the operation of the cable system within such municipality.* * For purposes of this Section, the term "franchisee's gross revenues derived from the operation of the cable system "shall mean all revenues required to be reported to the Commission in Accounts 4000.0 through 4230.0 pursuant toay 599." 4-- 2 The rationale for the rule and the objectives to be ac ieved are set forth in the Order Adopting Regulations at pp. 4-5. (See also Notice of Pr posed Rulemaking in Docket No. 90327, Order No. 91-305, Released: July 24, 1991.) a rule applied to franchise fee provisions contained in franchises granted or renewed a ter February 11, 1988. Notwithstanding the rules, some franchises ubmitted for Commission review and approval after the effective date continued to cont franchise fee provisions which required payment on a revenue base other than as set orth in Section 595.1(o). Upon further review and consideration, we determined that ome modification of the rule to provide flexibility could be achieved without compromise g the underlying objectives of the rule itself. On July 24, 1991, we issued a proposed ame comment which we believed maintained the objective tha and unambiguous but permitted some reasonable flexi revenues" in a less inclusive fashion. dment (the "initial proposal") for franchise fee provisions be clear ility by defining the term "gross We received comments from the Cable Television Association of New York, Inc. ("CTANY"), the Towns of Sand Lake and Saugerties, and a number of parties from Westchester County (See: List of Appearances, attached`A copy of the proposed rule is attached hereto as Appendix A. A copyof the Assessmeit of Public Comment is attached hereto as Appendix B. The majority of municipalities commenting upon the initial proposal opposed it on practical, rather than legal, grounds. They expresse fear that the proposed minimum revenue base for calculating franchise fees would become he starting point for negotiations with cable operators and thereby impair their ability t obtain fees based on all gross revenues including the maximum fee of 5% of "gross revenues derived from the operation of a cable system" as permitted by federal statute (47 UC Section 542). Although it has never been our intent to effect the total dollar amount •f franchise fees payable pursuant to a franchise, we recognize that in many instances the initial proposal might have the unintended effect describ we issued a revised proposed amendment (the "revised p reinstate an all inclusive definition of gross revenues wit parties to exclude some components of revenue in Specifically, the revised rule provided that, absent exclus of revenues must be based on all revenues; and that ni could not be less than a percentage of all revenues recei recurring monthly basis. A list of those parties who co amendment is attached as Appendix C. Having considered all comments and our o franchise negotiations, we conclude that the rule we adop at the same time provide a degree of flexibility to those ees are negotiated and that the d in the comments. Accordingly, oposal") wherein we proposed to language that would permit the expressing the fee obligation. ons, a fee based on a percentage twithstanding exclusions, the fee ed from subscribers on a regular ented on the revised proposed experience with franchises and will preserve our objectives while municipal governments who may 1 3 choose to continue existing exclusions for nonrecurring programming charges or to authorize new exclusions consistent with the requirement that there be a uniform fee applicable to all recurring programming charges. The provisions of Section 202(1) of the State Administrative Procedure Act and Section 101-a(2) of the Executive Law having been complied with, the Administrative Officer shall file with the Secretary of State the attached resolution which adopts the amendment of 9 NYCRR, Section 595.1(o) Commissioners Participating: William B. Finneran, Chairman; John A. Passidomo, Barbara T. Rochman Commissioners. Appendix A TEXT. OF RULE Section 595.1 Required Contents of Franchises. Where a cable television franchise is awarded or renewed after April 1, 1973, or where a franchise was awarded prior to said date but the franchisee had not commenced operations or substantial construction prior to January 1, 1972, the franchise will be confirmed by the Commission only if it contains: o. A provision stating: (1) whether a franchise fee shall be payable by the franchisee to the municipality; and, if applicable, (2) the precise amount or method of calculation of such franchise fee which, if expressed as a percentage of the franchisee's revenues, shall be expressed as a percentage of the franchisee's gross revenues derived from the operation of the cable system within such municipality.1 A municipality may elect to approve certain exclusions from said revenue base, provided that the resultant revenue base shall not be less than revenues received by the franchisee directly from subscribers for any cable services purchased by subscribers on a regular, recurring monthly basis. 1 For purposes of this section, the term "franchisee's gross revenues derived from the operation of the cable system" shall mean all revenues required to be reported to the Commission in Accounts 4000.0 through 4230.0 pursuant to Part 599 of this Title. Appendix B ASSESSMENT OF PUBLIC COMMENT The Commission proposed to amend Section 595.1 0 of its rules concerning P P ( ) franchise fees by a Notice of Proposed Rulemaking released July 24, 1991. The Cable Television Association of New York, Inc. ("CTANY"), Senator Suzi Oppenheimer, Assemblywoman Cecile D. Singer, Assemblyman Richard Brodsky, Assemblyman George Pataki, Rye Community Television, and a number of mgovernments unicipal govements submitted written comments on the proposed amendment. In responsellto these comments and in an effort to further clarify Section 595.1(o), the Commission issued a revised proposed amendment to Section 595.1(o) on December 4, 1991. The revised proposed amendment generated written comments from CTANY and a few municipal governments. The initial proposal provided that any franchise fee expressed as a percentage of revenues must be based on revenues that are "no less than gross revenues received by the franchisee directly from subscribers for any cable services purchased by the subscriber on a regular, recurring monthly basis." This proposal would have relaxed the existing minimum standard in 595.1(o) which required a fee based on reve ues to be based on gross revenues from all sources. Although the proposal would not have required any reduction in fees, the majority of comments were in opposition. CTANY, which opposed Section 595.1(o) when it was first adopted, continues to oppose any minimum standard concerning franchise fees. CTANY contends that the amendment threatened to "harm both cable operators and municipalities." According to CTANY, "expanding the measure of revenues againsthick a franchise fee percentage will be applied" financially hurts those operators who curre tly exclude premium services from the revenue base. CTANY maintained that the proposal would prohibit municipalities from excluding revenues derived from subscription pay channels and consequently denies the municipalities freedom to negotiate. Lastly, CTANY reiterates is position that the Commission exceeded its proper role because the proposed amendment infringed on the municipalities' legal right under Executive Law Section 818 to determine the franchise fee, subject only to federal limits. The Commission has previously determined that it has the jurisdiction to promulgate a minimum franchise standard applicable to franchise fees. In adopting the existing standard, we noted that in accordance with early federal policies franchise fees were often stated as a percentage of revenues from "basic service" and that at least since the Cable Act in 1984 "basic service" depends more or less'upon unilateral marketing strategies of cable companies. We emphasized our concern that franchise fee obligations should be clear and readily ascertainable. We also expressed our concern about the imposition of fees on some, but not all, categories of programming servi?es. Accordingly, we adopted a rule that required any franchise fee based on revenues, to be based on gross revenues as the term is used in our Uniform System of Accounts. At the same time, it should be clearly understood that neither the existing rule nor the re')ised rule requires the payment of a franchise fee, or that a fee be based on gross revenues or any minimum percentage payable • -2- thereon. The amount of the fee remains subject only to federal law and Section 818 of the Executive Law. Correspondence from Assemblymen. Brodsky and Pataki, Assemblywoman Singer and Senator Oppenheimerexpressed reservations about the initial. proposal. They asserted that the proposed amendment would be detrimental to municipalities in that it would place municipalities at an unfair disadvantage in negotiating contracts with cable companies and would, therefore, result in decreased franchise fee payments. Several municipalities voiced similar concerns in their opposition to the first proposed amendment of 595.1(o). In a written comment, the Larchmont-Mamaroneck Cable TV Board of Control ("Larchmont-Mamaroneck"), on behalf of the Town of Mamaroneck and the Villages of Larchmont and Mamaroneck, objected to the proposed amendment. Correspondence from the Town and Village of Harrison, the. Village of Croton -on -Hudson; and the City of Mount Vernon supported the Larchmont-Mamaroneck comment. Larchmont-Mamaroneck based its opposition to the proposal on the premise that the proposed minimum standard would exacerbate a municipality's already disadvantaged negotiating position and become "the standard." Larchmont-Mamaroneck also insisted that the unamended rule assists the municipality in obtaining information regarding the franchisee's total revenue, while the amended rule would make disclosure itself the subject of negotiations. Comments from the Towns of Eastchester and Greenburgh, the Villages of North Tarrytown, Irvington, Ossining, Tuckahoe, Rye Brook, Scarsdale, Bronxville, and the City of New Rochelle expressed opposition to the proposed amendment of 595.1(o). Like the Larchmont-Mamaroneck comment, these municipalities also objected to the establishment of a minimum standard that did not include all sources of revenue. The common threads of opposition in these comments was the alleged resulting . weakened bargaining position of the municipality and the reduction in municipal revenues, particularly lost advertising revenue. - Under federal law, "any cable operator may be required under the terms of any franchise to pay a franchise fee." (47 USC Section 542) Certain limitations, including a ceiling of 5% of gross revenues, are contained in the statute. Although it is our view that a municipality may require a specific fee as an absolute condition of a franchise orrenewal, we concede that the existence of a fee or the precise amount thereof is often subject to negotiation. It is apparent from the comments that many municipalities believed that the effect of the proposed rule would be to favor cable companies during such negotiations by permitting the companies to characterize the minimum standard as a preferred standard. In fact, it was not the intent of the Commission to influence the amount of the franchise fee payable to a municipality. Rather, the Commission's initial proposed amendment was intended to provide a degree of flexibility consistent with the underlying principle that franchise fee requirements be clear and unambiguous and apply uniformity to all recurring programming. o • ti -3- Based on the comments received in response to the proposal, the Commission issued a revised proposed rulemaking on December 4, 1991 designed to achieve the same goals in a somewhat different manner. The revised proposed rule reinstates an all- encompassing definition of the term "gross revenues" to be applicable whenever a franchise fee is to be expressed as a percentage of the franchisee's revenues. "Gross revenues" will continue to be defined as all revenues reported to the Commission in Accounts 4000 to 4230 of 9 NYCRR 599. Municipalities may elect to exclude some components from the revenue base so long as the, resulting revenue base is no less than that derived from regular, recurring monthly subscriber revenues. The revision responds to concerns of some municipalities that the Commission's initial proposal would set a minimum revenue base which would. become the standard in negotiating the franchise fee. Fewer comments were received by the Commission regarding the revised proposal. In contrast to its response to the first proposal, the Town of Greenburgh does not object to the revised proposal. The Town of Scarsdale neither objected to nor supported the revised proposal, but did express continued concern over the effect it would have on the municipality's negotiating power. CTANY .and Larchmont-Mamaroneck reiterated the arguments they advanced in response to the proposed amendment of July 24. A. Thomas Levin, Esq., representing two consortiums of villages in Nassau County, also submitted comments to therevised proposed amendment of 595.1(o). In essence, the Commission and Mr. Levin are in accord. Mr. Levin expresses concern over the municipalities' ability to negotiate for "inclusion in a franchisee's 'gross revenues' any sums which the contracting parties agree are appropriate to include in the franchise agreement? This is exactly what the revised proposal permits. As to existing contract language, the amendment to Section 595.1(o) will vary in its applicability. Many franchises contain a provision obligating the parties to amend their franchises . to reflect changes in the Commission's iules. For these municipalities, the amendment of Section 595.1(o) would become effective in accord with the franchise obligation. For others, Section 595.1(o) would apply at renewal. LIST OF APPEARANCES Comments to First Proposal 1. CTANY 2. Village of Larchmont ) 3. Village of Mamaroneck) 1 letter 4. Town of Mamaroneck ) 5. Town of Saugerties 6. Town of Eastchester 7. Town of Sand Lake 8. Town of Harrison 9. Village of Harrison 10. Village of N. Tarrytown 11. Village of Irvington 12. The Assembly of the State of New York --Rep. Richard L. Brodsky --Rep. George E. Pataki --Rep. Cecile D. Singer 13. The Senate of the State of New York --Sen. Suzi Oppenheimer 14. Village of Croton -on -Hudson 15. Village of Tuckahoe 16. City of New Rochelle 17. Village of Rye Brook 18. City of Mount Vernon 19. Town of Greenburgh 20. RCTV - Rye Community Television 21. Village of Scarsdale 22. Village of Bronxville Comments to Revised Proposal 1. CTANY 2.. Village of Larchmont ) 3. Village of Mamaroneck) 1 letter 4. Town of Mamaroneck ) 5. Town of Greenburgh 6. Village of Scarsdale 7. A. Thomas Levin, Esq. - per 16 Villages in Nassau County ******************************* FRANCHISE FEE BASIS ******************************* .Basic Service Revenue (1) Tier Revenue Equipment Rental Revenue (2) Installation Revenue Pay Service Revenue (3) Pay Per View Revenue Service Upgrade Revenue. Home Shopping Service Revenue NOTES: TOTAL REVENUES (4) BASIS OF ************* ************* FRANCHISE FEE PAYMENTS ********************** • 1991 ********************** $1,200,601.47 459,043.45 183,819.09 134,013.79 391,381.86 36,314.09 3,042.02 4,001.27 $2,412,217.04 Basic Service includes commercial/bulk accounts. Equipment Rental reflects remotes and (additional outlet) converters. Pay service includes pay services for commercial/bulk accounts. • A rate of 5% is applied to the total revenues to determine franchise fees due. (Less NYSCCT Rate .359% for period 1/91-3/91 and .277% for period 4/91-12/91). -72 of `' %7 Revenues as shown above are taken directly from the billing reports for City of Ithaca addresses. CONFIDENTIAL MEMORANIDi7M TO: Cable File FROM: Pat DATE: July 9, 1991 SUBJECT: Meeting with ACC and Attorney On June 12, 1991 I met with John Fogarty, the attorney for ACC,` Barbara Lukens, the Manager of the local franchise, Peter. Hess of our City Cable Access Advisory Board, Loren , Access - Coordinator, Dave Roberts and Jim Ferwerda and Tom Terrizzi of. the Cable Commission, to attempt to resolve some of the issues which have been creating a problem for administering the cable franchise. The topics we discussed were: designation, the First Amendment, recordkeeping.of the 2% money, auditing, duty to report/rate increases and installation fees, studio space, not-for-profit administration of cable franchise,access capital expense procedure. Designation: Of the nine access channels promised under the franchise agreement, two are currently on line: .Channel 13 (public access) and Channel 53 (government access). A third educational channel is being discussed for the fall. There is a lot of impetus from Ithaca College and other educational facilities to get the channel on line. The cost of equipment to "turn on" any channel runs between:. $11,000 and $13,000. This figure covers equipment like modulators and demodulators needed for each channel. ACC's position is that the City should be purchasing the "head end" equipment necessary to turn a channel on out of its 2% revenue. The Cable Commission's position is that New York State Cable Regulations, require a franchisee to "designate" new channels and thatdesignation includesthe,. equipment necessary for the channel to be operative. After some discussion, ACC proposed that they would pay the or' entire cost of the equipment necessary to activate a channel_so - (A, long as no channel would be activated without demonstrated need. vta l�'Need for a channel would be designated when there was sufficient s F first -run programming over a one-year period -.so that .75% of the wow available. programming time was being occupied. .When that level of programming was reached, ACC would provide theequipmentto activate a. new channel. ACC also wants a recovery provision. :.- 11 f ;..,. ti lit =.,+fi r That is, ACC could recover the channels for other uses if the channel was used less than 25% and there was a second channel which had a less than 50% use demand. First run programming equals live or recorded programming which is being shown for the first time plus one rerun in any given year. The[problems7 with this proposal are the, 75% figure, the • limitations created by the limited studio space, changing patterns of demand over a one-year period and ACC's reluctance to agree that, if the City wanted more channels, it could pay to turn them on itself. The other problem had to do with specif purchased. Peter Hess provided a list. to activate a channel. icity of equipment to be of the equipment necessary Barbara Lukens took Peter Hess's copy of the equipment because they could not agree on what equipment ACC was specifically agreeing to purchase. Barbara Lukens was to get back to us within a week (by June 19) with a list of specific equipment. At the time of the dictation of this memo, that has not occurred. First Amendment: ACC agrees to permit the Cable Commission to participate in access regulations having to do with procedures for ensuring that protected speech is permitted. We all agreed that obscenity could be prohibited but that profanity and discrimination on the basis. of content Could not occur. ACC is willing to recognize the City's luthority to control programming content and has backed off from its "after ten" policy regarding profane speech. Recordkeeping for the 2% money: It was agreed that the current system, that is, what is shown in the last quarter's report for 1990, would be satisfactory to the Cable Commission so long as a Cable Commission member could also review invoices. Auditing: ACC agreed that there would be no problem in requesting the New York State. Cable Commission to conduct an audit of the franchise fee reporting. Duty to report/rate increases and installation charges: Tom described the problem ofthe rate increase for an installation which occurred in September of 1990. ACC's basic position was that installation rates are not regulated by theagreement or by New York State regulation, that.. installation rates can be raised and that the raising of installation rates is not criteria which should negatively impact on the renewal of their license. �0 v °ii e4 & e t c O- A c . . 2. J7 i j ,2 °Z. f C,CA„" A --r / e L 1 / r D, e r, 01 vro-.-7 ,e N.r e •-•Pr 18.7 RIGHT OF INSPECTION A. The City shall have the right to inspect all books, records, reports, maps, plans, financial statements and other like materials of ACC as provided in this Franchise, at any time during normal business hours. B. The City shall have the right to inspect all construction or installation work performed subject to the provisions of this Franchise and to make such tests as it shall find necessary to ensure compliance with the terms of this Franchise and other pertinent provisions of law. C. At all reasonable times and for the purpose of enforcement of this Franchise, ACC shall permit examination by any duly authorized representative of the City, of all Cable Communication System and facilities, together with any appurtenant property of ACC situated within the City and outside of the City if it is utilized in the operation of the City's Cable Communications System. XIX.. RATE REGULATION 19.1 City having established its right to rate regulation under applicable law, ACC will not raise basic rates higher than, the following for a five year period. On February 1, 1988 the maximum rate will be $9.00. On March 1, 1989 the -maximum rate will be $11.00. On March 1, 1990, the maximum -rate will be $12.10. On March 1, 1991, the maximum rate will be $13.31. On March 1, 1992, the maximum rate will be $14.64. Starting on March 1, 1993, and for each and every year thereafter for the term of this Franchise the maximum rate will be they previous year's maximum allowed rate plus 5 percent or that percentage equal to the rise in the Consumer Price Index, whichever is higher. Additionally, ACC will give a need -based senior citizen discount of 10 percent to those who qualify for real property tax exemption and others who qualify using mutually agreeable criteria. Effective March 1, 1989, ACC will not charge custoemrs for additional outlets or FM service. 19.2 ACC covenants that it will not bring or fund any lawsuit or other proceeding seeking deregulation of the aforementioned rates prior to March 1, 1991 and further agrees to pay the attorney's fees and other costs of the City incurred in defending any such lawsuit or other proceeding should ACC bring them or fund them prior.-. to March 1, 1991. 19.3 Effective March 1, .1991 ACC may seek deregulation of basic, cable service rates. If at any time any additional cable -29- .. franchises granted by the City, or any additional cable television is authorized to operate within the City, there will be no further regulation of ACC's rates from the date of said grant of any additional franchise or the .beginning of construction of such additional system, whichever comes sooner, until the termination of such additional franchise or of the operation of such additional 'system, whichever is later. 19.4 ACC shall file 'with the City schedules which shall describe all services offered by ACC, all rates and charges of any kind and all terms or conditions relating thereto. Thereafter, ACC shall file with the City all changes in services, all rates and charges of any kind and all terms and conditions relating thereto thirty (30) days prior to all such changes. No rates or charges shall be effective except as they appear on a schedule so filed. XX FRANCHISE FEE 20.1 The City of Ithaca shall be entitled to receive from ACC a Franchise fee of five percent (5%) of ACC's Gross City Revenue. 20.2 The Franchise fee established in 20.1 above shall be tendered as follows: A. Five percent (5%) of ACC's -Gross City Revenue. for successive three (3) month calendar periods tendered within forty-five (45) days after each such period. 20.3 To the extent necessary to prevent ACC from diverting revenues from the operation of the Cable Communications System from ACC to Affiliates to the detriment of the City, Affiliates (excluding any affiliate which provides a national or regional programming service) shall be permitted to utilize the -Cable Communications System only if a Franchise fee on City ,revenues derived therefrom is paid. .. • Roper - 20.4 In_ the -event that theAfees-- herein required are not tendered on or before the dates fixed in this Franchise,~interest` .due on such fee shall accrue from.the-date due_at an annual rate of three percent (3%) above the prime rate or rates of interest,. at the City's primary depository bank. 20.5 Tender or acceptance of any payment shall. not be' construed as an accord that the amount paid is'correct,'nor shall such acceptance -of payment be•construed as a release of any claim the City of Ithaca may have for additional sums including. interest payable under this Franchise. All amounts paid shall'be- /ili(J subject to audit and recomputation, by an independent auditor. -30- chosen by the City, which shall be based on a fiscal year and shall occur in no event later than one (1) year after the fees are tendered with respect to such fiscal year. If, after audit and recomputation, an unpaid fee is owed to the City, such fee shall be paid within thirty (30) days after audit and recomputation and ACC shall pay the costs of the audit. The interest on such unpaid fee shall be charged from the due date at an annual rate of three percent (3%) above the prime rate or rates of interest at the city's primary depository bank during the period that such unpaid amount is owed. XXI . BONDS, INSURANCE AND INDEMNIFICATION 21.1 PERFORMANCE BOND. A. ACC shall provide a performance bond in the amount of $500,000 (five hundred thousand dollars) until construction is completed and. shallmaintaina.performance bond in the amount of $25,000 (twenty-five thousand dollars) for the remaining term of the Franchise. The performance bond shall be provided and regulated in accordance with this Franchise. The performance bond shall be provided within thirty days of the receipt of final. operating authority. B. The performance bond shall provide the following conditions: (1) There shall be recoverable by the City jointly -and-severally from the principal and surety, any and all fines and penalties due to the City and any and all damages, losses, costs and expenses suffered or incurred by the City resulting -from the failure of ACC to: faithfully comply with the provisions 'of this Franchise; comply with all lawful orders,permits and directives of any :City agency or body having jurisdiction over its acts or defaults; pay fees due to the City; pay any claims due the City as resulting from judicial action; pay any claims, liens or taxes due the City which arise byreason of the construction, operation, maintenance or repair of the Cable Communications System. Such'losses, costs and expenses shall include but not be limited to attorney's fees and other associated expenses. (2) The total amount of the bond shall be forfeited in favor of the City in the event:, (a) ACC abandons the Cable Communications System at any time during the term of this Franchise or any extension thereto; -31= • (b) ACC assigns this Franchise without the express written consent of the City. C. Upon written application by. ACC, the City .may, at its sole option; permit the amount of the bond to be reduced .or waive the requirements for a performance bond subject to the .conditions set forth below. Reductions granted or denied upon application by ACC shall be without prejudice to ACC's subsequent applications or to the City's right to require the full bond at any time thereafter. However, no application shall be made by ACC within one (1) year of 'any prior. applications. YD.: 'Prior to drawing upon the performance bond for the purposes described in this Section, the City shall notify ACC in writing that payment is due and ACC shall have thirty (30) days from the receipt of such written notice to make.a full and complete payment. If ACC does not make the payment within thirty (30) days, the City may, upon determination,of. a breach of this Franchise pursuant, to Section -3.6, withdraw the amount thereof, with interest and penalties., from the performance bond. s�� u� T; « 22 ,/ E. Within three (3) days of a withdrawal from the performance bond, the City shall send to ACC, by certified mail, return receipt requested, written notification of the amount, date and purpose of such withdrawal. F. No later than thirty (30) days after mailing to ACC - by certified mail notification of a withdrawal pursuant to paragraph D above, .ACC shall replenish the performance bond in an amount equal to the amount so withdrawn. Failure to make timely replenishment of such amount to the performance bond shall constitute a substantial violation of the Ordinance and this Franchise. G. The performance bond required herein shall be in a form satisfactory to the City and shall require thirty (30) days written notice to the City of any non -renewal, alteration or cancellation to both the City and ACC. ACC shall, in the event of any such cancellation notice, obtain, pay all premiums for and file replacement bond or policies within thirty (30) days following receipt by the City or ACC of any notice of cancellation. H. To offset the effects of inflation, the amounts of the bond provided for herein are subject toreasonable increases at the end of every three (3) year period of this Franchise, applicable to the next three year period, upon the reasonable determination of the City. Inflation compensation shall be computed in accordance with the regional Consumer Price Index. -32- -I. The -City shall not seek - -recovery Froin --the_ Performance Bond until it has provided ACC with thirty (30) days. to cure any default. 21.2 LIABILITY AND INSURANCE. A. Prior to commencement of construction, but .in no event .later then sixty (60) days after the effective date of this Franchise and thereafter. continuously throughout the duration of this Franchise and any extensions or renewals thereof, ACC shall furnish to the City certificates of insurance, approved by the_City, for all types of insurance required under this .Section. Failure to furnish said certificates.oE insurance in a timely manner shall constitute a violation of this Franchise. B. Neither the provisions of this Section or any damages recovered by the City hereunder, shall be construed 'to or limit .the liability of ACC under. this Franchise for. damages. C. ACC shall provide the City with written notice of its intention to cancel or not renew any of the insurance . policies maintained pursuant to this.Franchise. D. The Company agrees to indemnify, save harmless and defend the City, its agents, servants. and employees and each of them against and hold it and them harmless from any and • all lawsuits, claims, demands, liabilities, losses and expenses, including court costs and .reasonable attorney's. fees for or on account of any injury to any person, or any death at any time resulting from such injury, or any damage to any .property, which may arise or which may be alleged to have risen out of or in connection with the work covered by. this Franchise. The foregoing indemnity shall apply except to the extent such injury, death or damage is caused by the negligence or other fault of the City, its agents, servants, or employees or any other person indemnified. hereunder.. E. All insurance policies obtained under the provisions of the. Ordinance or this Franchise shall be written by companies authorized to do business in the State, and approved .by the State. 21.3 ACC shall maintain, and by its acceptance of this Franchise granted hereunder specifically agrees that it will maintain throughout the term of this Franchise, general liability insurance insuring ACC. in the minimum of: -.� A. $500,000 for property damage per occurrence;.. • -33- § 30.3 MUNICIPAL CODE 0. "Accessory Apartment" shall mean a small dwelling unit added to an owner -occupied single-family residential property, which is subordinate to the principal residential use in terms of size and appearance. [Added Ord. #84-15; 9/5/84.] 1. "Accessory building or structure" shall mean a structure, the use of which is incidental to that of the main building and which is located on the same premises. 2. "Accessory use" shall mean a use, occupancy or tenancy customarily incidental to the principal use or occupancy of the main building. Such accessory uses may include, among others, the following: a. offices for the building management. b. dining rooms, banquet rooms, public kitchen, and ballrooms. c. recreation and play rooms. d. laundries for the use of tenants and occupants, related to the management and operation of a residential building. e. maintenance and work shops, storage rooms for linen, bedding, furniture, supplies and tenants' equipment and effects. f. rooms or space for the incidental sale or display of merchandise to occupants and tenants. g. garages within a residential building or on the premises thereof used primarily for the storage of passenger -type motor vehicles. [Adult Day Care - See ¶ 101, infra.] [Adult Day Home - See ¶ 102, infra.] [Adult Day Care Facility, Group - See 4 103, infra.] 3.• "Agriculture" shallmean farming and similar commercial endeavor relating to the land and its use for growing crops for profit. Supp. #12, May 7, 1987 30.2 ZONING § 30.3 --the building. [1(47 amd. Ord #81-2, 4/1/81; Ord. #89-12, 9/6/89.] Ill. III. Height of building. 48. "Home occupation" shall mean a subordinate use of a non- residential nature which is conducted within a dwelling unit, or building accessory thereto, by an occupant of the dwelling unit, which is clearly incidental and accessory or secondary to the use of the property for residential purposes, and which meets the following additional conditions: a. The occupation or activity shall be carried on wholly within the principal building or within a building or other structure accessory thereto. (See definition of "Accessory building".) b. Not more than two (2) persons outside the resident house- hold shall be employed in the occupation. Supp. #15, 5/2/90 30.8-e § 30.3 MUNICIPAL CODE c. There shall be no exterior display or sign except as per- mitted under Chapter 34 of this Municipal Code, no exterio. storage of materials and no other, exterior indication o the home occupation or variation from the residentia character of the lot or' of the surrounding neighborhood. d. No offensive odor, noise, vibration, smoke, dust, heat o: glare shall be produced. (See § 30.40 of this Chapter.). e. The home occupation shall not generate traffic in an: greater volume than would normally be expected in a resi- dential neighborhood, and any need for parking generated b: the occupation shall be met off the street and in accor- dance with the regulations of Section 30.37 of thi: Chapter. In particular, a home occupation includes, but is not limiter to the following: art studio, dressmaking, teaching (with musi- cal instruction limited to a single pupil at a time), and thi professional office of a lawyer, engineer, architect, real estatt broker or insurance agent within a dwelling occupied by the same 49. "Hotel" shall mean a building containing rooms occupied fo: sleeping purposes by guests and where a general kitchen ant dining room are provided within the building or in an accessor: building. 50. "Infestation" shall mean the presence, within or contiguous to a dwelling, dwelling unit, rooming house, rooming unit, o] premises, of insects, rodents, vermin, or other pests. 51. "Junk yard" shall mean a lot, land or structure, or pari thereof, used for the collecting, storage, or sale of waste paper, rags, sciap metal or discarded material, or for the collecting, dismantling, storage or salvaging of machinery or vehicles not it running conditions or for the sale of parts thereof. 52. "Kitchen" shall mean space, sixty square feet or more it floor area, with a minimum width of five (5) feet, used fot cooking or preparation of food. 53. "Kitchenette" shall mean space, less than sixty square feel in floor area, used for cooking or preparation of food. 54. "Landmark" shall mean a natural or manmade feature of the Supp.. #15, 5/2/90 - 30.8—f ZONING - § 30.3 72. "Plumbing system" shall mean the water supply system, the drainage system, the vent system, fixtures and traps. including their respective connectins, devices and appurtenances within the Property lines of the premises. 73. "Potable water" shall mean water which is approved for drinking, culinary and domestic purposes. 74. "Premises" shall mean a portion or parcel of real property including appurte- nances and improvements therein used and devoted to a common use or facility. 75. "Public space" shall mean space within a residential building for public use such as lobbies, lounges, reception, ball, meeting, lecture and recreation roans, banquet and dining roans and their kitchens, and swimming pools. MIN. %B' as z PM tie swig ISO BQUAKE Pt'_CT MW, 6?KZCT Ill. IV. Parking space. 76. "Rooming house" shall mean one or more rooms designed or used for living quarters by one household, which may or may not include separate sanitary facilities, and which must include either com- plete kitchen facilities or a separate entrance from the outside of the building or through a common hall.(See also "Boarding House".) 77. "Rooming unit" shall mean one or more rooms designed or used for living quarters by one household, which may or may not include separate sanitary facilities,, and which must include either complete kitchen facilities.or a separate entrance from the outside of the building or through a common hall. 78. "School" shall mean a public, private or church -affiliated establishment, for the education at all levels of children and/or adults in subjects or skills. [Amd. Ord # 85-14, § 2, 11/6/85.] 79. "Service area" shall mean paved, enclosed or visually screened areas which are used for maintenance or service purposes. 80. "Sewage" shall mean liquid waste containing animal or vegetable matter in suspension or solution, and which may include industrial wastes and liquids containing chemicals. Supp.. #11, 5/7/86. 30.11 § 30.26 MUNICIPAL CODE The.` uses listed under district regulations in § 30.25 which require a special permit from the Board of Appeals are as follows: a. Cemetery in all districts. b. Public utility facilities in all residential districts. . Private school in all residential districts. Nursery School or child day care center in R-2 and R -U districts. e. Neighborhood retail or service commercial facility in R-2 and R-3 districts. f. Hospital or sanatorium in R-3 district. g• In P-1 districts, within two hundred (200) feet of adjoining residential districts, any use other than public recreation, classrooms, or living accommodations. In such P-1 districts, living accommodations within two hundred (200) feet of adjoining residential districts shall conform to the use and area regulations applying to the strictest of such adjoining residential districts. h. Signs in all districts, as . provided in the Sign Ordinance. [Subpar h amd. Ord. # 81-2, 4/1/81.] i. In FH -1 district, all new construction, improvements, alterations and repairs (See § 30.44). j. Home occupations in R-2 districts. [Subparagraph j added Ord. # 81-2, 4/1/81.] k. Towers or structures for the transmission or receipt of radio or other electronic communications signals in any district for commercial or business-related purposes. [Subparagraph k added Ord. # 81-2, 4/1/81.] 1. Towers or structures intended for use in the generation of electricity for the premises on which such tower is located in any district. [Subpar 1 added, Ord. # 81-2, 4/1/81.] m. Community or neighborhood gardens in all districts. Supp. #12, May 7, 1987 30.21-a ZONING _ § 30.26 [Subpar m added Ord # 85-6, § 3, 7/10/85.] n. Residential occupancy by a Functional Family Unit in all districts to the same extent that residential occupancy without a special permit is permitted by a family in all districts. [Added Ord. #87-2, 2/4/87.] n. Group Adult Day Care Facilities in R-2 districts. [Added Ord. #87-13, 5/6/87, second so lettered.] 2. Required plan. (i) A plan for the proposed development of a site shall be sub- mitted with an application for a special permit. The plan shall generally conform with the requirements for presentation of plans set forth in the Subdivision Regulations of the City of Ithaca. It shall show parking areas, traffic areas, landscaping, building arrangement, height and number of stories of building, topography, and other pertinent information that may be required by the Board of Appeals. (ii) In addition to the plan requirements set forth in subsec- tion (1), above, an applicant for a special permit for a school or related use must provide the following information: Information on the nature of the proposed uses to be conducted or facilities to. be located on the premises, including but not limited to courses of study and subjects to be offered, size and composition of the student body to be accommodated, size of faculty and staff required, daily hours of operation and annual periodsof operation, and type and location of support facilities required; information concerning. the type and number of living accommodations which may be required to serve any increase in the institution's enrollment resulting from the proposed action, including the location and availability of those accommodations; documentation of this evaluation of suitablealternative sites for the proposed activity, together with reasoning supporting its preference for the site for which a special permit is sought; detailed information on the occupant load, night operation, and use of chemical, biological or radioactive agents expected in connection with the proposed acti- vity. [Subsec. ii added Ord # 85-14 § 3, 11/6/85.] [Next page is 30.21-b.] Supp. #12, May 7, 1987 30.21-a.1 ZONING § 30.26 3. Standards applicable to all uses requiring special permits. No special permit shall be recommended by the Planning and Development Board or granted by the Board of Appeals unless the proposed use or activity meets the following requirements: a. The location and size of the use, the size of the site in relation to it, and•the location of the site with respect to the existing or future streets giving access to it, shall •be such that it will be in harmony with the existing or intended character of the neighborhood and will not discourage the appropriate development of adja- cent land and buildings or impair the enjoyment or value thereof. b. Operations in connection with any special use shall not be more objectionable to nearby property by reason of noise, fumes, increased vehicular traffic or parking demand, vibration, or flashing lights, than would be the operations of any use permitted without special permit. 4. Specific standards applicable to certain uses requiring spe- cial permits. Certain uses listed in the district regulations in § 30.25 as requiring a special permit must conform to the applicable con- ditions set forth in this subsection. (i) Neighborhood retail or service commercial facility in R-2 and R-3 districts: a. The applicant must furnish information as to the specific• goods or service offered and the nature,, size and hours of operation of the facility proposed, in sufficient detail to enable the Board of Appeals to determine whether the use conforms to the limitations specified in the definition of this category (See § 30.3). b. Before hearing the appeal, the Board must have written response on the proposal from a majority of those notified by the appellant as required in the procedures set forth in § 30.58. This response, as well as that expressed at thepublic hearing, should be a principal factor in the Board's decision to grant the special permit. Supp. #11, 5/7/86. _ 30.21-b '1 r 1 § 30.37 .MUNICIPAL CODE § 30.37 Off-street parking A. General requirements. 1. Location Requirements. All parking spaces provided pursuant to this Section shall be on -the same lot as the building, use or activity that they serve, except that off-street parking in the amounts specified by the Zoning ordinance may be provided on a single lot other than that on which the building, use or activity is located, provided that all of the following conditions are met: a. Off-site parking for commercial uses may be provided within seven hundred and fifty (750) feet along public. pedestrian thoroughfares, measured from property line to property line. b. Off-site parking for residential uses may be provided within one thousand (1000) feet along public pedestrian thoroughfares, measured from property line to property line. c. All off-site parking areas must be located in a zoning district in which the building, use or activity that the off-site parking is intended to serve is a permitted use. d. All off-site parking spaces must be clearly labelled as providing parking only for the building, use or acti- vity which they serve. e. All land which is used to provide off-site parking must be restricted to that use only for as long as the build- ing is occupied by the use which requires off-street parking or until sbustitute* parking is provided for and approved by the Building Commissioner. Evidence of such off-site parking shall be provided in the form of a recorded covenant, long term lease or comparable docu- ment that is approved by the Building Commissioner. No more than two (2) end-to-end parking space shall be per- mitted for the purpose of satisfying the requirements of this Section, unless all spaces have adequate maneuvering space and direst street access. [41 amd. Ord. #87-6, 2/4/87.] *So in original. Supp. #12, May 7, 1987 30.28 § 30.37 Use2 MUNICIPAL CODE PARKING SPACE REQUIREMENTS CHART1 -- Space Per Each Adult Day Care Home, Group Adult Day Care Facility Dwelling unit Cooperative household Rooming or boarding house, rooms let Fraternity, Sorority, Group House Dormitory Church, funeral home, mortuary 1 space for client use, plus 1 space per two supervisory staff or employees not residing on the premises. [Added Ord. #87-13, 5/13/87.] 1 three bedrooms orsleeping rooms or part thereof, plus 1 two additional bedrooms or sleep- ing rooms or part thereof, plus 1 additional bedroom or sleeping room in excess of five such rooms 1 two persons housed 1 three persons housed 1 two persons housed 1 four persons housed 1 ten seating spaces Auditorium, theater, bar, 1 five seats tavern, restaurant (continued) 1See also District ..Regulations Chart. In the case of rental dwelling units, the required number of parking spaces must be provided by the owner without additional charge to the tenant. 2In the case of mixed use of a building or property, the space requirements shall be computed for each use, and -the total requirements for all uses shall be provided in accordance with Subd. A paragraph 1 of § 30.37 of this Chapter. Supp. #12, May 7, 1987 30.30 Use2 ZONING Space Bowling alley_ 3 bowling lane Hotel, motel, tourist home 1 guest room Hospital, nursing or::. 1 five patient beds convalescent home Medical or dental office 1 250 sq. ft. of floor space Nursery school, child day 1 two employees, plus care center, private elemen- tary or secondary school 1 ten pupils enrolled Office or bank building 1 250 sq ft. of office or bank floor Retail store, neighborhood 1 500 gross sq. ft. of floor area commercial facility Wholesale or industry Marina 1.25 berth Boat launch . 8* ramp Yacht club 1 member family Boat Rental 1 500 sq. ft. of lot area Marine sales 3 500 sq. ft. of gross floor area Boatel 1 two employees on maximum shift, plus 1 two sleeping rooms (continued) 2In the case of mixed use of a building or property, the space requirements shall be computed for each use, and the total requirements for all uses shall be provided in accordance with Subd. A paragraph 1 of § 30.37 of this Chapter. *Boat launching ramps shall, maintain 75% of their parking spaces at a size of 10' x 40' to accommodate boat trailers. Consult the New York State Parks. and Recreation Department, on space require- ments for maneuvering. Per Each § 30.37' 1 two employees on maximum work shift Supp. #13, 5/4/88 30.30-a 1 1 1 1 1 1 i § 30.37 MUNICIPAL CODE Use2 Space Per Each Fishing pier Boat storage or repair 1 15 lineal feet of pier 1 two employees on maximum shift, plus 1 500 sq. ft. of gross floor area 2In the case of mixed use of a building or property, the space requirements shall be computed for each use, and the total requirements for all uses shall be provided in accordance with Subd. A paragraph 1 of § 30.37 of this Chapter. 5. Parking in front yards. a. In all districts, no parking parallel to the street is per- mitted within five (5) feet of the sidewalk edge farthest from the street, or if no sidewalk exists, within (10) feet of the edge of the street pavement. b. In all residential districts, parking in. the front yard of lots which have a width at the street line. of fifty (50) feet -or less shall be restricted to parking within a dri- veway that is perpendicular to the street and which is not more than twelve (12) feet wide for the portion that passes through the front yard. c. In all residential districts, parking in the front yard of lots which have a width at the street line of more than fifty (50) feet shall be restricted to an area not greater than twenty-five (25) percent of the total area of the front yard, including turn around and other vehicle maneuvering areas and driveways leading to garages and parking areas. d. All parking areas, including ancillary driveway and maneuvering areas, shall have clearly defined boundaries and shall have adequate provisions to prevent drainage of surface water onto adjoining property under normal conditions. (Next page is 30.31] Supp. #13, 5/4/88 30.30-b ZONING 5 30.37 e. No curb cut shall be made unless a permit has first been obtained from the City Clerk after approval by the City Engineer. f. Curb cuts on adjacent lots may be side-by-side and may be combined whenever possible. g. There shall be no removal of any tree located on City pro- perty unless approval has first been granted by the Board of Public Works. h. Any off-street parking area which has been constructed or is in use without a permit granted in accordance with § 30.56 of this ordinance shall be required to conform to the design standards of this section within eighteen (18) months of the date of enactment of this section. [1( 5 amd. Ord. #88-4, 4/6/88.] NO PARKING PARALLEL TO THE STREET PERMITTED WITHIN 5 FEET OF SIDEWALK EDGE OR 10 FEET OF STREET EDGE. IN ALL RESIDENTIAL DISTRICTS, IF LOT WIDTH IS 50 FEET OR LESS, PARKING IN FRONT YARD PERMITTED ONLY IN A DRIVEWAY NOT MORE THAN 12 FEET WIDE. SEE 5 30.37(A)(5)(b). IN ALL RESIDENTIAL DISTRICTS, IF LOT WIDTH IS GREATER THAN 50 FEET, PARKING IN FRONT YARD MAY NOT COVER MORE THAN 25% OF THE TOTAL AREA OF THE FRONT, YARD. SEE 5 30.37(A)(5)(c) 0 0 r) L 0 ILLUSTRATION XVII PARKING IN FRONT YARDS Supp. #13, 5/4/88 30.31 § 30.37 MUNICIPAL CODE B. Private and neighborhood parking areas in residential districts. Plans shall be submitted for a private or neighborhood parking area for four (4) or more cars and a permit obtained from the ,s:.Building Commissioner prior to construction of said parking area. A. permit for driveway entrance and curb cut and/or drain pipe in the street right-of-way shall be obtained from the Board of Public Works. The plans must conform to the following regula- tions and standards: 1. Parking areas with street frontage. The standards listed below are set up for neighborhood parking areas which face on a public street, and are readily visible to the passing public. On such parking areas there are usually no residences or other buildings. a. Access. Entrance and/or exist drives must be hard -surfaced with concrete from street to sidewalk, and with blacktop material, or equal, from sidewalk to the required building setback line; must be at least twelve (12) feet wide; and must have clear visibility. b. Required front yard. Front yards shall be landscaped in keeping with the surrounding neighborhood and shall be pro- tected from the parking area with a suitable fence or safe barrier. c. Parking area. (1) Run-off water must be collected and transmitted or piped to the nearest storm sewer, in accordance with the Municipal Code, or if storm sewer is not available, then through underground piping to the street gutter, and such piping shall conform to the rules and regula- tions of the Board of Public Works applying thereto, except that for small areas of no more than ten (10) spaces, these provisions may be modified with the approval of the City Engineer. (2) The surface of the parking area must be built up of not less than the following: crushed -run gravel base, compacted at least six (6) inches in, depth and with asphalt -type road oil as a binding agent and covered Supp. #13, 5/4/88 30.32 ZONING § 30.37 with a surface treatment of at least one inch of #1 crushed stone and asphalt -type. road oil. (3) Screening. The entire parking area (except for entran- ces or exits) must be enclosed with landscaping or other safe and attractive barrier, kept to a minimum height of four (4) feet in order to protect adjacent uses from emissions, light or glare from the parking area. The parking area also must be kept free of refuse. 2. Parking areas in the rear yard. Neighborhoodor private parking areas which are developed in the rear yard or at the rear of a residence or several residences adjoining shall conform to the following minimum standards, when they contain no more than fifteen (15) car spaces. In such parking areas which contain sixteen (16) or more car spaces the standards of Subdivision B, paragraph 1 hereof shall prevail. a. Access. Entrance and/or exit drives must be of hard surface with concrete from street to sidewalk, with black -top material from sidewalk to required building set -back line, and with one inch of #1 crushed stone from the required set -back line to the parking area; must be at least twelve (12) feet wide at street and side -walk lines; and must have clear visibility. b. Parking area. The surface of the parking area must have at least six (6) inches of built up and compacted crushed run gravel, graded to prevent drainage of surface water from the area onto adjacent properties under normal conditions. c. Screening. The entire parking area (except for entrances or exits) must be enclosed with landscaping or other safe attractive barrier, kept to a minimum height of four (4) feet, in order to protect adjacent uses from emissions, light, or glare from the parking area. The parking area also must be• kept free from refuse. All neighborhood or private parking areas in Residential Dist— ricts in existence at the time of enactment of this Chapter, must conform to this Subdivision within a period of eighteen (18) calendar months when such lot contains space for four (4) or more cars. - C. Parking areas in business or industrial districts. Supp. #13, 5/4/88 30.32-a ZONING § 30 38' Plans shall be submitted for all employee, customer, and/or public parking areas in Business and Industrial Districts, and a permit therefore obtained from the Building Commissioner prior to construction. The plans shall conform to the following regula- tions and standards: 1. Access. Entrance and/or exit drives must be hard surfaced with concrete from street to sidewalk and to the required building setback line and shall be at least twelve (12) feet wide and shall have clear visibility. 2. Required front yard. Front yards shall conform to the requirements of the district in which the parking lot is located. 3. Draining. Run-off water shall be collected and transmitted or piped to the nearest storm sewer in accordance with this Municipal Code, or if storm sewer is not available, then through underground piping to the street gutter, and such piping shall conform to the rules and regulations of the Board of Public Works applying thereto. 4. Surface. The surface of the parking lot shall conform to standards established by the Building Commissioner. § 30.38 Off-street loading A. Size requirements. An off-street loading space shall have a minimum of four hundred and fifty (450) square feet plus necessary additional space for entrance, exit and aisle space. B. Space requirements. The following off-street loading space requirements shall apply to all business and industrial land uses and multiple dwelling structures having more than twenty-five (25) units: to be made available for each use having three (3,000) to ten thousand (10,000) feet of floor space, (1) additional space, for each additional fifteen (15,000) square feet or major fraction thereof of floor a single occupancy over and above ten thousand (10,000) et. In no case shall more than four (4) spaces be for any use of single occupancy. One space thousand plus one thousand space . in square fe required Supp: #10, May 1, 1985. 30.33 a portion or parcel of land considered as ertain use or occupied by a building or a t are united by a common interest or use, ssories and open spaces belonging to the shall mean a parcel of land occupied or ne or more buildings and any accessory .th such open spaces as are required under Chapter, having not less than the minimum d by this Chapter for a lot in the district situated, and having frontage on a street s of access as may be determined in accor- ons of law to be adequate as a condition of ding permit for a building on such land. icy" shall mean occupancy of a building in use and in part for some other use not shall mean a transportable, single-family Le for year-round occupancy and containing as immobile housing with respect to water power, and waste disposal. A mobile home is Iced and built to be towed on its own chassis „,„and wheels, connected to utilities, and trsanent foundation for year-round living. A 1,that may be folded, collapsed or d expanded later to provide addi- =as two (2) or more separately =be joined into one (1) integral separated into the components for an be designed to be used for travel trailers, motorized trailers. (See also "Trailer ;..aparcel of land under .and improved for the pla- use:consisting of not 5t 'than twenty-five (25) iuilding or group of iI used as individual sleeping p units primarily for transient automo- bile u ombile or boat travelers and providing accessory off-street parking facilities. 62. "Municipality" (or "City") shall mean the City of Ithaca, in the County of Tompkins, in the State of New York. 63. "Neighborhood commercial facility" shall mean a retain or service facility catering to the day-to-day commercial needs of the surrounding neighborhood. Such'facility shall be limited to phar- maceuticals retail sale of convenience goods such as groceries, ersonal service facilities such and sundries, and tself-service laundromat, and dry 1 as barber and beauty shop, I, cleaning establishment. 64. "Neighborhood house or center" shall mean a neighborhood recreation and/or neighborhood service facility open to and pro- viding programs for neighborhood residents. 65. "Non -conforming building, structure or lot" shall mean a building, structure or lot or record legally existing at the time 1 of enactment of this Chapter, or any subsequent amendment, which does not conform to the minimum parking or dimension requirements for the district in which it is located. 66. "Non -conforming use" shall mean a property use of record legally existing at the time of enactment of this Chapter, or any ' subsequent amendment, which does not conform to the use regula- tions of the district in which it is situated. 67. "Nonhabitable space" shall mean space used as kitchenet- tes, pantries, bath, toilet, laundry, rest, dressing, locker, storage, utility, heater, and boiler rooms, closets and other spaces for service and maintenance of the building, and those spaces used for access and vertical travel between stories. (See definitions of "Habitable space," "Public space," and "Exit.") I 68. "Nursery school" shall mean a facility designed to provide daytime care or instruction for two (2) or more children from two 2 to five. (5) years of age inclusive, and operated on a regular basis. i["Occupant", see 4 104, 2nd so numbered, infra.] C ,. IIIIIIIIIIIIIIIIIIHIII1111III111111IIIIII11IIIIIIIII11II111111111111 EMPLOYEE MANUAL OF RULES & REGULATIONS AUGUST 27, 1986 CITY OF ITHACA 108 EAST GREEN STREET ITHACA, NEW YORK 14850 DEPARTMENT OF PUBLIC WORKS IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIpUI,I11111111 CITY OF ITHACA 108 EAST GREEN STREET ITNACA. NOW 'YORK 1.10E10 DEPARTMENT OF PUBLIC WORKS OFFICEOF JOHN A. DOUGHERTY SUPERINTENDENT TELEPHONE:272-1713 CODE607 EMPLOYEE WORK RULES By Comm. Albanese: Seconded by Comm. Gerkin WHEREAS, the need.for uniform work rules fortheentire department has been evidentforsome time, and WHEREAS, the entire administrative staff of the depart- ment has participated totheformation of these rules and the corresponding disciplinary code, and WHEREAS, the Finance, Personnel and Administration Committee has reviewed the manual of rules and regula- tions, NOW, THEREFORE, BE IT RESOLVED That the "Employee Manual of Rules and Regulations" for the Department of Public Works be approved and adopted, and that the Superintendent of Public Works be directed to have this manual available in booklet form, and BE IT FURTHER RESOLVED That, when available, this manual be given to each employee of the Department of Public Works, and the implementation of the rules and regulations be effective atthetimeofdistribution. Carried Unanimously Board of Public Works Meeting of October 23, 1985 EMPLOYEE WORKRULES-Revised The Board of Public Works at its meeting on October23, 1985, adopted an employee manual of rules and regula- tions. A memo of agreement between the City and employee Unions has necessitated that this manual be changed. RESOLVED, That the revised employee manual of rules and regulations be approved and distributed to all employees upon publication. Carried Unanimously Board of Public Works Meeting of August 27,1986 Driver must take the following vehicle pretrip inspection determinatio : 1. Wheel lugs are tigh and rims in good condition. 9 Tires are in good co dition. 3. Exterior and interior fights, horn, oil gauge or signal, water temperature gauge or signal, doors, buzzers, radio, winds ield wipers are working properly. 4. Exterior condition is atisfactory. 5. All emergency equip ent is available and is satisfactory. 6. Copy of registration i available. 7. Air pressure is at leas 100 pounds before moving. 8. Steering and brakes re working properly. 9. Drivers are responsible for keeping vehicles clean at all times, including the interior. 10. Check all fluid level , oil, water and etc. F7. Parking: When leaving the driver' seat, apply the emergency brake and put the gear hift in lowest gear. When leaving the vehicle apply t e same measure and block or curb wheels. Engine mu.t be shut off on any layover of more than three min tes. The vehicle must be properly and legally park d, with the keys removed when left unattended. DISCIPLINARY AITION An employee shall be in ormed of the work rules and that disciplinary action ill be taken in the event of a violation. He shall be pro ptly advised of any violation and of the disciplinary s. nction that may be imposed. These may be formal o informal depending on the circumstances and sev rity of the offense. Informal measures consist of cou seling memoranda, warnings, and oral reprimands. Formal measures include written reprimands, fines, suspensions, and removals. E7. Defensive Driving: Employees shall do everything under their control to prevent or minimize personal injury or property damage at all times. E8. Hazards: Report promptly any serious defect in street, Topic Page highway or City buildings to the supervisor, as well as any hazard potentially affecting operations. A.Introductloo 1 F. EQUIPMENT B. Basic Requirements F1. Tools, Equipment, Vehicles: 1.StartingTime 1 Employees shall obtain tools and supplies before 2. Time Cards 1 start of assignment. 3. Production 1 CONTENTS TABLE OF CONTENTS An employee shall exercise care and diligence in 4.RestPeriods 1 using and safeguarding City property and in protecting tools, equipment and vehicles issued to him from 5. Lunch Period 2 misuse, damage, or loss. Damage or loss of City 6. Quitting Time 2 property shall be promptly reported to the immediate 7.Absences 2 supervisor. All tools, equipment and vehicles are to be returned to their appropriate designated storage area 8.Oral Orders 2 at the end of each shift. 9. Written Orders 2 F2. Knowledge of Equipment: 10. Absenteeism 2 Employees should be familiar with the normal 11. Hygiene 3 functions (sound, feel and appearance) of their vehicle C. Conduct and if anything unusual is noticed locate the cause, if possible and call the Maintenance Supervisor for 1. General 3 further instructions. 2. Conduct in Garage, Paint Shop, Sign Shop 3 F3. Breakdown: 3.Insubordination 3 Employees using any vehicle which becomes 4. Disturbances 3 disabled, shall notify the supervisor or office by radio or 5. Fighting &Altercations 3 telephone, giving full information.as to the nature of the defect, and follow instructions. Extra care must be 6. Exchanging Duties 3 taken in moving any disable vehicle. The, defect or 7. Statements -False 3 damage must be recorded on the equipment defect ,4 g, public Statements 3 sheet by the end of the shift'. F4. Overheated Engine: 9. Appearing Before Authorities 4 Vehicle shall not be operated when water ., i 10. Intoxication and Useof Drugs 4 temperature gauge or hot engine signal indicates "hot 11.Theft 4 engine" unless Maintenance Department approval has been obtained. Never add water to a hot engine. D. Operating Procedures F5. Oil Pressure Indicators: 1. Lost Articles 4 No engine shall be kept running if the oil gauge or low 2. Reporting During Work Shift 4 warning signal indicates a mechanical problem, unless 3. Vehicle Assignment 4 Maintenance Department approval has been obtained. F6. Inspection of Equipment: E. Safety 1. Clothing 5 2. Work Related Injuries 5 3. Written Reports 5 4. Oral Reports 5 5. Traffic & Vehicle Laws 5 6. Hazardous Driving Conditions 5 7. Defensive Driving 5 8. Hazards 6 F. Equipment 1.Tools, Equipment, Vehicles 6 2. Knowledgeof Equipment 6 3. Breakdown 6 4. Overheated Engine 6 5. Oil Pressure Indicators 6 6. Inspection of Equipment 6 7. Parking 7 G. DISCIPLINARYACTION articles, unless given by supervisor. Any article tpun0 should be forwarded to the office bythe end of the work shift. Inquiries should be referred to the office. D2. Reporting During Work Shift: A—During the work shift, employees must notify supervisor prior to leaving or upon returning to work. B—The supervisor must be notified immediately if relief employee fails to show up. E. SAFETY El. Clothing: Employees must wear appropriate clothing anc footwear for the type of job assigned. No shorts allowed. Required safety equipment must be worn at all times. E2. Work Related Injuries: Employee injuries must be reported as soon as possible to the supervisor. "Accident Report" form should be completed as soon as possible and must be submitted within ten (10) days. E3. Written Reports: A vehicle accident report must be filled out as soon as possible, completely and accurately for every accident (however slight) involving a City vehicle, or a pedestrian accident in which a vehicle was involved. A vehicle accident report must be filled out in the following circumstances: damage to vehicle or property other than vehicle accidents. E4. Oral Reports: Any accident, however slight, to persons or property in connection with or near a City vehicle must be reported immediately to the office and Police Department by radio after rendering assistance. The report shall include the following: 1. operator's name and number 2. vehicle number, block number and location 3. description of any injuries and damages 4. request necessary assistance such as police, ambulance, fire department, etc. An employee must not leave the scene of any accident in which they are involved without specific premission from supervisor or police. department. E5. Traffic & Vehicle Laws: • New York State Vehicle and Traffic Laws must be obeyed at all times. E6. Hazardous Driving Conditions: During very hazardous driving conditions, safe vehicle operation should be first priority. C8. Public Statements: Employees are prohibited from making any public statements to the public regarding an accident while on duty. Employees should cooperate fully with the proper authorities at the scene of an accident, but refer all other inquiries to the ranking supervisor at the scene. C9. Appearing Before Authorities: Employees summoned to appear at the police department, district attorney's office, or to court relative to an accident or incident while on duty shall report to the supervisor before their appearance. Generally speaking, the City requires employees not to sign a statement without the advice of the City's legal counsel. However, such requirement does not apply when an employee is ordered to sign a statement by a law enforcement office, or where an employee has a legal right to sign a statement on his own volition. In no event should . an employee sign any untruthful statement, even if he is ordered to do so by City personnel or other authority. C10. Intoxication and Use of Drugs: No employee may use alcohol, marijuana, or any drug that is not prescribed by his doctor while on duty or on City property. An employee who is suspected of being under the influence of drugs and/or alcohol will be asked to submit to a blood test and urinalysis. Such test shall not be an absolute requirement for employees. If any employee refuses such a voluntary test, the City reserves the right (if any) to use such refusal as evidence in a disciplinary proceeding, and the employee retains his or her right (if any) to refuse such test without prejudice to the presumption of his or her innocence. An employee shall not consume intoxicating substances nor consume alcoholic beverages, including beer, during working hours, or any paid rest or paid meal periods. Employees returning from unpaid meal or rest periods are required to be ready to work, and not under the influence of any intoxicant. C11. Theft: Theft by an employee of City property or services regardless of value is prohibited. Theft by an employee of the property or others regardless of value while on duty is prohibited. D. OPERATING PROCEDURES D1. Lost Articles: Under no circumstances may articles found be given to any person nor information given concerning such A. INTRODUCTION The concern for the safety and convenience of the public should be of the utmost importance in performing the duties of a Department of Public Works employee. The employees should conduct themselves in a safe and courteous manner at all time when on duty. All employees whose duties are prescribed within will be furnished with a copy for which they will sign a receipt. Employment by the City of Ithaca, Department of Public Works binds the employee to comply with the Rules and Regulations established by the department whether they are set forth herein or have been or are established independent of this booklet, and ignorance thereof shall not excuse negligence or omission of duty. Nothing contained herein shall prohibit or restrict the department from changing any established rules and regulations or from implementing new rules and regulations. Employees will be notified of all changes. B. BASIC REQUIREMENTS B1. Starting Time: Employees shall be at their assigned work site ready to begin work, in appropriate clothing at 7:00 a.m., or start of shift and not under the influence of any intoxicant. No call, no show and late shows are subject to discipline. This rule is not intended to imply that an employee is required to be on the work site, making preparations to begin work prior to the start of his or her shift, without proper compensation. B2. Time Cards: An employee who is required to use a time clock must punch in and out at the start and end of the work day. No employee may punch another employees time card. Any employee working overtime must punch time clock in and out if required by supervisor. B3. Production: An employee shall render continuous, efficient and i industrious service in performing his assigned duties correctly and within the time allowance prescribed by the immediate supervisor. If insufficient work is assigned to occupy an employee fully, he shall notify his immediate supervisor so that additional work may be assigned. B4. Rest Periods: An employee shall have a 10 -minute rest period no less than one and one half hours after the beginning of his shift and a ten minute rest period no less than one half hour after lunch. He shall work continuously at all other times except for personal relief times, two per shift not to exceed an additional 10 minutes prior to lunch and 10 minutes subsequent to lunch. No rest period or personal relief time can be used to extend the lunch period. The immediate supervisor shall determine when a rest period shall be taken. This rule is not intended to alter any contractually -negotiated agreement between the City and any recognized bargaining unit that shall represent employees within the Department of Public Works. B5. Lunch Period: An employee shall have a 30 -minute lunch period and a 5 -minute wash up period prior to lunch. The employee is free to take his lunch period where and how he pleases, however, he must be at the job site prepared to work no later than 35 minutes after work was stopped prior to lunch. In the' event that the supervisor determines that the crew should return to the central garage for lunch, the employees will be transported to and from the job site in time for a five- minute wash up period and a 30 -minute Iunch period at the central garage. B6. Quitting Time: An employee shall continue to work until the completion of his assigned shift. An employee mus: remain on assigned City premises until quitting time for the shift. B7. Absences: An employee is responsible for notifying the department office each time sick leave is taken and identifying the nature of the illness, whether employee or family illness. Advance notification shall be provided no less than 15 minutes prior to the start of the shift. Sick leave with pay shall be authorized in the event of bonafide illness or disability only, and only when timely advance notification has been given. The Division Head may require satisfactory proof of illness or disability or may require the employee to be examined by a physician designated by the Department. A supervisor or public health nurse may visit the home of an employee absent on sick leave to ascertain the severity of his illness. Failure to provide proper notification, failure to submit such proof of illness or disability as may be required, unsatisfactory evidence of illness or evidence indicating that the physical condition of the employee was such as not to justify absence from work, or any other abuse of sick leave privileges shall be cause for disciplinary action. B8. Oral Orders: Oral Orders given by any supervisor, whether or not in conflict with a previous order, must be obeyed. B9. Written Orders: Employees must be familiar with bulletins :and written orders issued from time -to -time and they must observe and obey the particular requirements of the orders. This includes those posted on the board. B10. Absenteeism: Employees must maintain a satisfactory attendance record. Absenteeism and tardiness will be closely monitored and controlled. B11. Hygiene: Employees must be properly groomed •(neat and clean) at the start of their scheduled shift. C. CONDUCT C1. General: Employees should be polite and courteous to the public. All work-related questions should be answered as knowledgeably as possible. Employee name shall be given on request. C2. Conduct in Garage, Paint Shop, Sign Shop: Employees are permitted in services areas only during the time necessary to take out or+to store equipment. Extreme caution should be exercised in operating in or out of garage or service areas. Inter- ference with garage or shop employees by unnecessary conversation or acts is strictly prohibited. C3. Insubordination: A—Failure to accept valid work orders, disobedience of orders, and neglect of duty is prohibited. B—Threatening or assaulting a supervisor is prohibited. C4. Disturbances: Any trouble or unusual disturbances which occur, must be reported to the supervisor as soon as possible. C5. Fighting & Altercations: A—No employee shall engage in fighting on City property or work sites. B—No employee shall engage in horseplay on City property or work sites. No employee shall use abusive language to the public or another City employee. C6. Exchanging Duties: Employees must not exchange duties without permission from supervisor. C7. Statements - False: Producing false statements for any purpose is prohibited.