Form revised March 2, 2004

FISCAL NOTE FOR NON-CAPITAL PROJECTS

Department:	Contact Person/Phone:	DOF Analyst/Phone:
DoIT	Tony Perez/ 6-0070	Aimee Strasko/ 6-4090

Legislation Title:

AN ORDINANCE related to cable television; granting a franchise to Millennium Digital Media Systems, L.L.C. (MDM) for the Central Business Franchise District (CBFD), amending the cable franchise held by MDM (as successor to Summit Communications, Inc.) to include the CBFD and to establish terms and conditions for extending service in the CBFD; and to formally change the name of the grantee from Summit Communications to Millennium Digital Media.

· Summary of the Legislation:

The attached Council Bill grants a franchise to Millennium Digital Media Systems, L.L.C. (MDM) for the Central Business Franchise District (CBFD), establishes terms and conditions for extension of service in the CBFD and amends the MDM franchise agreement for the Central Cable Television District (Central District) to include the CBFD. This Council Bill to serve residents and City buildings in the CBFD where certain conditions are met. Specifically, it requires MDM to make a capital contribution toward the cost of extending its cable service in the CBFD where service has been requested and where such a line extension is necessary. Lower extension costs should encourage more residential building owners in the CBFD to subscribe to cable services, allowing broader access to cable services and potentially increasing franchise fees for the City. In addition, MDM will provide cable television service to City buildings that currently do not have access to cable service.

· Background:

MDM, one of the City’s two cable operators, is currently providing service to the Central Business Franchise District (CBFD) pursuant to temporary, revocable street use permits issued by the City. The City’s transition rule (SMC 21.60.710) requires cable companies operating under permits in the CBFD to obtain a franchise. The City, through its Department of Information Technology, has agreed to grant MDM a franchise for this franchise area, subject to the terms and conditions contained in this Council Bill.

The CBFD has been subdivided into two sub-areas, Area North and Area South, to address certain characteristics of each area. Area North of the CBFD is comprised mainly of multiple dwelling units (MDUs). It is the most densely populated area of the CBFD but also the most costly to serve due to City requirements to place cable underground. Currently, if MDM receives a request for cable service where its system must be extended to provide service, it will only do so if a service agreement is reached with the building owner where some or all of its costs to extend its cable system will be recovered, unless expected returns make it desirable for the company to waive such costs. With this Council Bill, MDM must contribute an amount equal to $1,200, multiplied by the number of residential units, towards the cost to extend its cable system. Area South of the CBFD, including all areas of the CBFD South of Royal Brougham Way, is characterized by mostly industrial development, a relatively low density of residential development, and there are currently no requirements to place cable underground. A density formula, as described in this Council Bill, will be applied to determine MDM’s required contribution amount for extensions of its cable system in this area.

By adding the CBFD to MDM’s existing franchise agreement, the City may request that MDM provide free cable television service to any City building in the CBFD. There are currently 3 unserved City buildings, including the Police Department’s West Precinct, the Park 90/5 Building, and the Seattle Aquarium. Service to these City buildings will result in greater access to the Seattle Channel by City employees, access to future training channels for the Police Department, and use of the cable system for other public purposes. MDM and Comcast will share the obligation to provide service to these buildings, since both cable operators are seeking a franchise for the CBFD. The City will make the final determination regarding the obligation of each operator to serve these buildings.

· Please check one of the following:

_____ This legislation does not have any financial implications. (Stop here and delete the remainder of this document prior to saving and printing.)

__X _ This legislation has financial implications. (Please complete all relevant sections that follow.)

Anticipated Revenue/Reimbursement: Resulting From This Legislation: This table should reflect revenues/reimbursements that are a direct result of this legislation. In the event that the issues/projects associated with this ordinance/resolution have revenues or reimbursements that were, or will be, received because of previous or future legislation or budget actions, please provide details in the Notes section below the table.

Fund Name and Number	Department	Revenue Source	2004 Revenue	2005 Revenue
TOTAL

Notes:

The City is currently receiving franchise fees based on MDM’s gross revenues for cable television services in the CBFD just as it does in its other cable franchise districts. However, the proposed amendments to MDM’s cable franchise agreement will formalize MDM’s requirement to pay franchise fees in the CBFD. In addition, the proposed agreement will provide less costly access to cable services where line extensions are required to provide service. As a result of less costly access, the City believes that more building owners in the CBFD will choose to provide cable services to their tenants, potentially resulting in additional franchise fees to the City.

MDM will also provide free cable television service for up to three (3) City buildings that currently do not have access to cable television services. The actual value of these services and the cost to extend the cable system to the three unserved City buildings has not yet been determined; however, estimates have been provided by both providers and are currently being evaluated. The City will assign obligations to serve these buildings following the granting of franchises for both MDM and Comcast.

Total Regular Positions Created Or Abrogated Through This Legislation, Including FTE Impact: This table should only reflect the actual number of positions created by this legislation In the event that positions have been, or will be, created as a result of previous or future legislation or budget actions, please provide details in the Notes section below the table

.

Position Title and Department*		Fund Name	Fund Number	Part-Time/ Full Time	2004 Positions	2004 FTE	2005 Positions**	2005 FTE**
	TOTAL

* List each position separately

** 2005 positions and FTE are total 2005 position changes resulting from this legislation, not incremental changes. Therefore, under 2005, please be sure to include any continuing positions from 2004

Notes:

N/A

· Do positions sunset in the future? (If yes, identify sunset date):

N/A

Spending/Cash Flow: This table should be completed only in those cases where part or all of the funds authorized by this legislation will be spent in a different year than when they were appropriated (e.g., as in the case of certain grants and capital projects). Details surrounding spending that will occur in future years should be provided in the Notes section below the table.

Fund Name and Number	Department	Budget Control Level*	2004 Expenditures	2005 Anticipated Expenditures
TOTAL

* See budget book to obtain the appropriate Budget Control Level for your department.

Notes:

N/A

· What is the financial cost of not implementing the legislation? (Estimate the costs to the City of not implementing the legislation, including estimated costs to maintain or expand an existing facility or the cost avoidance due to replacement of an existing facility, potential conflicts with regulatory requirements, or other potential costs if the legislation is not implemented.)

If the City does not implement the legislation, the City will not be provided free cable television services for up to 3 currently unserved City buildings, including the Police Department’s West Precinct, the Park 90/5 Building, and the Seattle Aquarium, unless, based on MDM estimates, several thousands of dollars are paid to MDM to extend the service.

There is also the potential loss of additional franchise fee revenues. The City anticipates that MDM’s obligation to pay a capital contribution towards necessary cable line extensions will make cable services more attractive to MDU owners and residents in the CBFD who are not currently served by a cable operator. An increase in cable service subscribers would mean higher gross revenues to MDM, resulting in higher franchise fees for the City.

· What are the possible alternatives to the legislation that could achieve the same or similar objectives? (Include any potential alternatives to the proposed legislation, such as reducing fee-supported activities, identifying outside funding sources for fee-supported activities, etc.)

N/A

· Is the legislation subject to public hearing requirements: (If yes, what public hearings have been held to date, and/or what plans are in place to hold a public hearing(s) in the future.)

The Law department has advised that a public hearing is necessary. DoIT staff and Council staff have agreed to coordinate efforts to schedule a public hearing immediately after this legislation is introduced at Council.

· Other Issues (including long-term implications of the legislation):

Please list attachments to the fiscal note