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Home My Public Portal AboutA1984-10-16 LYNWOOD INFORMATION INC. � : "`. . � City o�' � �� ` � � � t 11330 BULLIS ROAD I I � LYNWOOD, CALIFORNIA 90262 � (213) 603-0220 E. L. MORRIS, Mayor � JOHN D. BYORK, Mayor Pro-Tem Councilmen ` � � ROBERT HENNING � ' AGENDA.ITEMS FOR CONSIDERATION �qMese.aowe AT THE MEETING OF LOUIS A. THOMPSON LYNWOOD INFORMATION, INC. TO BE HELD OCTOBER 16, 1984 7:30 p.m. CITY HALL COUNCIL CHAMBER � 1. CALL TO ORDER 2. ROLL CALL OF BOARD MEMBERS John D. Byork Robert Henning James E. Rowe i Louis A. Thompson E. L. Morris 3. APPROVAL OF MINUTES: August 21, 1984 September 18, 1984 September 25, 1984 SCHEDULED MATTERS 4. "A RESOLUTION OP' THE LYNWOOD INFORMATION, INC. ALLOWING THE DEMANDS AND ORDERING WARRANTS DRAWN THEREFOR." 5. �40TION TO ADJOURN TO THE NEXT REGULAR MEETING OF LYNWOOD INFORMATION, INC. TO BE HELD ON TUESDAY, NOVEMBER 20, 1984, IN THE COUNCIL CHAMBER OF CITY HALL, 11330 BULLIS ROAD, CITY OF LYNWOOD. � ` • . �� P.EGULAR :�1?ETIDIG P.UGUST.21, 1984 The Lynwood Infon[��ation, Inc., met in a regular session in the City Hall, 11330 Bullis Road, on above date a� 7:54 p.m. Chairman Morris in the chair. Directors Byork, xenning, Rowe, Thompson, and Morris � , answered the roll call. k . i{ Also present were City Manager Gomez and City Attorney jl Yeager. It was moved by Director Thompson, seconded by Director ' Henning, and carried, that'the minutes of May 22, 1984 be approved as written. RESOLUTION.NO. LII 84-7 entitlecl: "A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LYN6�OOD INFORMATION', INC., � ADOPTING THE ANNUAL BUDGET FOR FISCAL YEAR 1984-85." was presented.. , . It was moved 6y Director Henning, seconded by Director Byork, that the resolution be adopted. ,. - ROLL CALL Ayes: Directors Byork, Henning, Rowe, Thompson, Morris Noes: None � ' Absent: None � " RESOLUTION NO. LII 84-8 entitled: "A RESOLUTION OF THE LYNWOOD INFORMATION, INC., ALLOWING THE DEI�ANDS AND ORDER- ING WARRANTS DRATr7N THEREFOR." was presented. It was moved �� by Director Henning, seconded by Director Byork, that the ��' resolution be adopted. � �`:,.� ' \ , ROLL CALL ' - ' _ , Ayes: Directors Byork, Henning, Rowe, Thompson, Morris Noes: None Absent: None - ' . It was moved by Director Byork, seconded by Director Thompson, and carried to adjourn: Secretary . - - , APPROVED OCTOBER 16� 1984 � i�� . . • rJ Chairman - - ,, � _'' � " - �_ . � . -.. _ " ..._.. . �._ . . . .. _._..-. ._._ __. �.. �./ � F . • , . . - REGULAR MEETING SEPTEMBER 18, 1984 The Lynwood Information, Inc., met in a regular session in the City Hall, 11330 Bullis Road, on the above date at 9:45 p.m. Chairman Morris in the chair. Directors Byork, Henning, Rowe, Thompson and Morris answered the roll call. Also present were City Manager Gomez and City Attorney Huebsch. Chairman Morris stated Item No. 3, Update on Cable Television, is intended to update the Board of Directors on the current , status of the City's cable television franchise with Rogers Cablesystems. Staff rec�uested a workshop. By gerieral consent ' the Directors approved a Workshop for September 25, 1984 at S:AO p.m. RESOLUTION NO. LII 84-9'entitled: "A RESOLUTION OF TAE LYNWOOD INFORMATION, INC., ALLOWING AND APPROVING THE DEMANDS AIQD ORDERING WARRANTS DRAWN THEREFOR." was presented. It was moved by Director Henning, seconded by Director Thomoson, that the resolution be adopted. ROLL CALL - Ayes: Directors Byork, Hennin4, 12owe, Thompson, Morris ` Noes: None Absent: None It was moved by'Director Henning, seconded by Director Byork, and carried to adjourn to September 25, 1984 at 5:00 p.m. Secretary � APPROVED OCTOBER 16, 1y84 Chairman I I , � . � � � � o ,� � ADJOURNED REGULAR MEETING SEPTEMBER 25, 1984 The adjourned regular meeting of the Lynwood In£ormation, Inc., was rield in the City Hall, 11330 Bullis Road, on the above ciate at 5:00 p.m. - Chairman Morris in the chair. �. Directors Byork, Henning, Rowe, Thompson and Morris answered ? ' the roll call. ' 4 . i ' !' Also present were City Manager Gomez and City Attorney Yeager. ,;... Attorney Michael r'riedman, Cable Consultant, and Bob Kress, Consortium Attorney, were also present. The City Manager_stated the purpose of the meeting was to update.Council on the cable television status. Stated Council had been sent a letter from staff'they had received from Rogers Cablesystems wherein they were reauesting a meeting regarding changes in the original Franchise Agreement. Staff has met with other member consortium cities. The meeting was then turned over to the Assistant to the City Manager Fraser. � Mr. Fraser stated that Lynwood is a part oP the consortium composed of the Cities of Downey, Santa Fe Springs, Bell ` Gardens and Paramount. The best way for the City to deal with the requested franchise changes is by working within the con- sortium. Mr. Fraser will continue to work within the group ° to achieve the City's objectives. The Board al'so agreed to defer the startup of Access Program- ming,and to cancel future Cable Advisory Board Meetings until the requested franchise changes are resolved. '' ; After a question and answer session which followed the �:y, attached presentation by Mr. Fraser, a motion was made by Director Byork, seconded by Difector Henning, and carried, to adjourn. ` Secretary � - APPROVED OCTOBER 16, 1984 Chairman - �� ' . l�l . � � • ' . � . r � V _ CTT_V nR.T.FCTT_V.F.C_R,_C.T_A.F.T�—nu�.onne�.r,nwmnm.r.�...�.__. .. __ --� - -- ---- - � � CURRENT REGULATORY ENVIRONMENT 1. FCC RULING ON RATE REGULATION A. RATE REGULATION FOR LOWEST TIER ONLY B. ONLY "MUST CARRY" SIGNALS REQUIRED ON TIER 1 ' 2. FCC RULING ON FRANCHISE FEES A. LIMITED TO 3%. WAIVER REQUIRED FOR 5%, AND MUST BE SUPPORTED BY CABLE COMPANY B. VOLUNTARY GRANTS (4�o ACCESS FEE) SUBJECT TO FRANCHISE FEE LIMITS 3. SUPREME COURT DECISION A. FCC CAN PREEMPT STATE & LOCAL LAWS rnniciu TANT�S CONCLUSIONS 1. Rogers' fiscal difficulties are real and acute: Not only in five cities, but also other recently franchised cablesystems. Rogers Corporation lost _ $20 million nine-month period ending May 31, 1984. � 2. Key problem capital cost overruns. Cost per mile of build high. Revenue � and operating costs in range of forecasts. 3. Fiscal data reviewed (sampled) and appears to be accurate and assumptions ; are adequate. 4. Based upon 1985 base year, 6% per annum expense and 5% per annum revenue increases, �ash deficiency $24 mil. by 1994. 5. Cable regulatory environment (courts and FCC) generally favorable to industry. spplies particularly to rate/renewal/franchise commitment areas. 6. Even if all concessions made, fiscal restructuring is necessary. Total cash loss to cities approximately $1 Mil/Yr. � � � ' ; - -- - -__ __ _ _ - - _o�---- City o,f � , ,� y °!�a � �YNwoon , < <�., `O� �� 11330 BULLIS ROAD I I I I LYNWOOD, CALIFORNIA 90262 (213) 603-0220 � CITY OBJECTIVES: 1. PROTECT THE PUBLIC INTEREST BY PROVIDING THE BEST CABLE SYSTEM POSSIBLE 2. PROTECT THE CZTY'S FINANCIAL INTERESTS � RE COMMENDED ACTIONS: 1. NORK WITHIN THE CONSORTIUM TO ACHIEVE OBJECTIVES 2. DEFER START OF ACCESS PROGRAMMING 3. CANCEL CABLE ADVISORY BOARD MEETINGS UNTIL I ISSUES RESOLVED � i i � • FIS('AI_ PROBLEM AS STATED BY ROGERS CONSULTANT/CPA ROGERS fINDINGS 1. Cost.of System Greater than �• Fbrecast Actual Projected (Pico Rivera & Commerce Capital_$20,637,000*.. $22,163,000 Factor). Operating- Losses Approximately as ' Projected. $2.9 Mil. FY 84 Very thinly financed. 2. Number Subscribers Below Projections. 2. Forecast Actual (Pico Rivera & Correnerce Factor) Revenue Down. Basic 36% 34% Pay 46% 65% Subscriber Rev. $18.97 $26.78 Total Rev. Over Forecast $1.6 Mil. 3. Operational Costs Above Projected. 3.$1.5 Mil. -.$2 Mi1. nver forecast. � � �� ' \ �� • ' � SPFrIFIG RELIFF RE�LESTS � 1. Consolidate local origination/access programming to $300,000/Yr. Rogers to deliver. Drop 4% access fundings to non-profit corporations. (Presently $648,544/Yr.) . - 8 Full-time 2 Part-time Positions 2. Reduce performance bonds from $300,000 to $25,000. (Approx $1.5 Mil. Short-term cash) : ' 3. Change formula for franchise fee payment to "Basic" Revenues only or $200,000, whichever greater. In effect reduces from 5% to approximately 2%. ($341,000 FY 83/84) 4. Defer institutionaT network build until economical and integrate with ; residential system. ($1 Mil. - Institutional Network +$1.8 Mil. Interactive) " 5. Chan e renewal and bu out rovisions. Anticipatory renewal and fair market `, va ue as a going concern. WHAT ROGERS SAYS IT WILL DO � 1. Increase revenues Rate Increase: August 1- Approximately " October 1 " 2. Operational efficiencies 3. Defer fixed asset purchases. Mostly replacements and lower cost converters. 4. Refinance. $18.5 Million debt. . � . . '' i • CitS� of � _ � r�� ,,,,�„ �, ..��. �,,. �� 1330 BULLiS ROAD ' ''� � � �' � � � � " LYNWOOD,'CALIFCANIA?0262 � (273) 603�0220 E. L MORRIS, Mayor . JOHN D. BYORK, P.layor °ro-iem � Cour,cifinen � � ROBERT HENNING � JAMES c. ROWE � . � LCUI5A.THOMPSON . AGENDA ITEMS FOR CONSIDERATION AT.THE MEETING OF LYNWOOD INFORMATION, INC. T0 BE HELD SEPTEMBER.18,. 1984 . - 7:30 p.m. \ , CTTY HALL COUNCIL CHAMBERS 1.. CALL TO ORDER 2. ROLL CALL`OF.BOARD MEMBERS � ohn D. Byork l _ Robert Henning '� ames E. Rowe. �'ouis A. Thompson , �E. L. Morris .. __ _ ' SCHEDUIED MATTERS �' 3.:-UPDATE ON CABLE T/V �, , a- Comment: This item is intended to update the Board of �,S-(�r� ��o-^ Directors on the current status of the City's Q� � Cable T/V franchise with Rogers Cablesystems. /"" Recommendation: The Board of Directors sei a date for a work- shop meeting. � 4. A RESOLUTIO � LYNWOOD INPORMATION, ING. ACLOWING AND APPROVING m' � . TNF ❑ S AND ORDERIN6 WARRANTS DRAWN THEREFOR. s �� n 5. ADJOURNMENT y � �9 - � S' ,� � r ' llATS: SEYTEMBER 1S, 1984 ay T0: THE.BOA OF DIRECTORS QF LYNWOOD�FORMATION, INC. � PROM: CHARLES� GOKEZ, CITY M2.NAGER SUBJECT: II°DATE ON CABLE T/V OBJECTIVE• To update the Board members on the curreat status of the City:s Cable T/V fraachise with Rogers.Cablesystems, Iac. Rogers has come to the Southeast Cities Consortium with a proposal that.would make major re- visioas in the fraachise. FACTS S ANALYSIS: This memo is designed to summarize the vast amount of information Which staff has gathered in order to analyze the Rogers.proposal. Attached as background to this item are: -- 1. A report from Car1 PiSaick, the.Consortium.Consultant on Cable T/V, vhich analyzes tfie Rogers.pzoposal in.detail; Z. Tvo letters from &ogers - one whicfi outliaes their fiaancial problems and makes proposals for franchise changes; and the other vhich shows their fiaaacial projections for the sqstem; 3. Bob Rress's aaalysis of'our.legal positioa; 4. The report. from a CPA firm on the results of tfieir analysis of Rogers financial projections. � :, . Listzd below is a matrix showing the major reasons that Rogers believes tha system is in fiaaacial trouble, aad our analysis of their arguments: A. Piscal problem as stated.bg Rogers and analysis: - - - - - - RoQers: - - - _ .- - -,.- - - - - AnalYsis: - - - - - 1. Cost of building the sqstem 1." The company has speat $1.5 was higfier than expected.. • million more_in building the � system thaa expected. This is .,:. without coastruction of the . ... ' " ' - ' institutional network and iater- . �. ., '... , �- ' active capabilfty. Also, with- out Y0:,000 multiple dwelliag :.. � units.. Could cost up $10 �. . - million more. 2. Subscribers are below pro- 2..' Subscribers to basic service jections; therefore, re- " are lower, but this is offset venues are off. '-- by-a higher pay to basic level. • � This does not seem to be a - major problem. 3. Operatiag expenses are high- 3. Operatiag expeases are slightly er than expected. higher, but not significantly. The company projects losses of $9 milTion for the two-year period FY 1983/85, which is double tfieir projected losses of $4.7 millioa. Theq, also, have cash flow problems, with a projected cash deficit of $4.4-million for the period FY 1983/85. It should be kept in mind that the company did eapect to lose money during the early part of the franchise period; however, due to the substantial' cost over r.uns i ia building the system, Rogers projects losiag money through 1994. The major conclusion arising from the analysis is that Rogers` fiaanciai difficulties are real and acute. The key reasoa appears to be capital . cost over runs, since revenues and operating expenses are withia the range of estimates made,ia tha franchise proposal. � °..._ , : ., .:�•�Page I of 2)�. , ... � . � ' � . . . . . . I , . .. ,. '. " `� • B�. ' The Rogers proP�1: ^ . • � Following is a list of the :r?achise changes requested by Rogers:. ° 1. Elimiaatioa of the access fee (currently $117,.000 annuallq), which is paid to Lyawood,Information,.Inc.- to.provide local commuatty"" ° access. The company will-provide.access programmiag, in combiaatiot - with local origination programming. Savings to Rogers would be $570,-000 aanually, consortium wide; Z. Reductioa of the performanca bond from $300,000 to $25,000; 3. Reduction of franchise fees from 5% of g=oss revenues to 5% of basic revenues, or $200,000, whicfiever is greater. This, ia effect, reduces franchise fees to 2�; 4.. Make the institutional network part of the r.esidsatial network, rather than build a separate institutional network. Defer buildiag the iastitatioaal network uatil ecoaomical; 5:. Add. a provision granting "anticipating reaewal. This meaas that whea the fraachise eapires,. Rogers would be renewed unless the cities could prove major niol'atioasof the franchise; 6. Add a.provision requiring the cities to pay fair.market value as a goiag concern, shouSd tfie cities wish to purchase the system when the franchise espires. (Staff will discuss each of these items ia detail and.outline the ramifications of each at.the proposed work- , ahop meeting.) C.. Le8al,Issues: Ia the attachments, there is: a memo from,the Cbnsortium Attorney (Bob Rress) which outlines the current legal environment in which we, as regulators, fiad:ourselves. Recent FCC aad Supreme Court decisioas have substantially weakened our. position in terms of enforcing pro- visions of: the fraachise. These decisions arei ` _ ,. _ I. Aa FCC ruliag that franchise fees cannot exceed 3� without an , • appzoved waiver. Cities must fiYe a waiver which outlines the aeed for a 52 fee. A1so; the CaBle-company must file a sapport- ' � ing waiver which says they caa afford to pay; ' ' 2".. The "Miami° case which basically says that all.eatra fees (read . 4X access fee) are to be coasidered subject to the 32 limitation._ i The importance of these dec3sions is tfiat Rogers wi11 use them as Ieverage against us, should we refuse to negotiate. Ia that case, the. companq will.probably take.�inilateral actioa to change the franchise, uaiag the FCC ruling as its basis. : CONCLIISIONS• It appears that Rogers Cablesystems has ne=y defiaite fiaancial prob- Tems. The City must, therefore, decide oa an approach to take ia re- sponse to Rogers' request. Our options range from refusing to negotiate altogether to negotiatiag any part of the requested changes. . � - —. ..-----' — ---- -------- _.. __ __ ..__:.._..._. Oae overridiag. coacera is that the. Citq coatiaue te operate withia the Consortium. There are numerous reasons to remain withia the Con- sortium, including:. 1. The additional power that accrues to be a part of a larger group; 2.' The ability to share expertise and costs; 3. The need to avoid beiag leveraged against each other; 4. The fact that techaicallq we are a part of oae system. It also vould appear that the Consortium should take a negotiating approach to the problem. If we refuse to negotiate completely, thea xogers will act utilaterallq, using the FCC rullags as its basis. Some movement on the non-economic issues may be a reasonable approach. Staff � is not, however, asking for negotiating authoritq. Rather, this memo and supportiag information is meant as an update to the Roard. Specific � negotiatioa authority can be considered'when Che�'-Board is'fully inform- I ad on the issue. RECOiL*fENDATIO It is recommended that the Board of Directors set a date for a workshop � meeting to discuss in greater detail the information contained in this i memo. An executive session will be required. + F . x __. : ,i � � LYNWOOD INFORMATION INC.. � RESOLaTION NO. A.RESOLIITION OF THE LYNWOOD TNFORN�ATTON, ID1C.. ALLOWING THE DEMANDS AND ORDERSNG WARRANTS DRAWN THERE�'OR: The Board of the Lynwood rnformation Inc., does hereby.. resolve as follows: . • •"'� Sectioa I. That tFie demands presented, having I been regular��ted, are Fiereby allowed and approved, � and that warrants ordered drqwn tfierefor by the eorporation's Treasurer to tfie payees and in.tfie asaounts indscated. � . ;: ; - _ - _ I : ' : , , . ':. , , .CIiECR NO ' PAY� ' " � IIE�IPTTON . ATSOUNT I _ . <: T033 ry Carmen Hernandez Hrd'. Mtg�. 8�2a $15.Oa ' - 1034 Raady-Williams Brd. �ltg. 8.-2Q 15.00 i 1Q35 Mary Wr3g&t Br.d. Mtg. 8..20... : 15 pa I - �, : . _ TOTAL S45.a� � -� t '..: � �: -' : . . � . � ,-Section 2. Tfiat tfie Corporat3on'•s 3ecretary shall � --' deliver a ce=t copy� to tFie. Corporat�on"s_=Treas�urer __ ,.,_� ,and shall retai.a. a. copy thereof for his record. ', � „ , - < . , . � , '� _ : .'(_ � . . ` _ .' �. ' ..�._ ,� ' � . . -' APPROVED A13D ADOPTED T3IS + DAY. OF ' , I9$4. . � , _ _ a ; : . � � _ . , - I � . .. � � :j . : :_ ' ' CHAIRMAN, LYNWOOD INFORMATION. I. . -- �a - ' . . _ . . .. . . � . " � � ti ' '. � . I . _ e ' : . ' . . . . ' . �. , I t I . ATTEST. '. , - . : . . j - _ � � ,. , ,. . . _ , _ .. . . : . , .,_ .....:......:.. �_._. ..,. ... . _ , . . .. : . . .,. . . , ;, , , .. i SECRrTARY � � I ; .. �. . ,, : , s . , . i : :: f - , � I f - y , I r � :, s�,/; ^ f � . . , i �. .. ' . . .. . . . . � _ �.i ' � � � �.,.-:. ",.; ,..,. ..... ... ,. , . . • . . - - .. _ . �'-;;. - ... :. _. . _ . , _: ... . . . �. . ' � . � . : : . . . . .. � . .: "..._ . �� . � . --:. . :.�. �. .. . - ' . . .. : - .: ... , .,. - . � .. .� - . .. . .- � . - � � . . . . . : _ . .. � � � � _ . � � - .r.�l ` . - . . � . ' . _ - . . . ;:, .. . . . - . . . . . . . .. . � .. , .. . .. :. i