Form revised December 4, 2006

 

FISCAL NOTE FOR NON-CAPITAL PROJECTS

 

Department:

Contact Person/Phone:

DOF Analyst/Phone:

Department of Information Technology (DoIT)

Tony Perez /386-0070

Matthew Eng/684-8157

 

 

Legislation Title:

AN ORDINANCE related to cable television; authorizing the Mayor or his designee to enter into a renewed Cable Television Franchise Agreement with Millennium Digital Media Systems, L.L.C. (“Millennium”); replacing Millennium’s existing franchises which are due to expire on March 1, 2008; and describing the terms under which this Ordinance will become effective.

 

·        Summary of the Legislation:

This Council Bill renews a ten-year, nonexclusive Cable Television Franchise Agreement (“Renewed Franchise”) between the City of Seattle and Millennium, which will allow Millennium to continue providing cable services in various parts of Seattle, including the Central Area, Beacon Hill, downtown Seattle, and parts of Capitol Hill and Queen Anne.  The Renewed Franchise replaces Millennium’s existing franchises that are due to expire on March 1, 2008, and combines all of Millennium’s current cable franchise service areas into one agreement.  Over the next ten years, Millennium’s Renewed Franchise will provide many benefits, including public education and government channel capacity, funding to purchase equipment for the Seattle Channel, a second public access facility, and an increased low-income cable service discount for seniors and the disabled.  Additional cable-related benefits negotiated between the City and Millennium appear in a separate Council Bill transferring control of Millennium’s franchises from certain previous equity owners to new equity owners (Highland Crusader Offshore Partners, L.P., Suisse International, and Bear Stearns Credit Products Inc.) that will be considered concurrently with this Council Bill.    

 

·        Background: (Include brief description of the purpose and context of legislation and include record of previous legislation and funding history, if applicable):

 

Millennium currently provides cable and other services to approximately 15,000 subscribers in various parts of Seattle, including the Central Area, Beacon Hill, downtown Seattle, and parts of Capitol Hill and Queen Anne.  Millennium holds two cable franchises with the City which are due to expire on March 1, 2008. 

 

The City, through its Department of Information Technology (DoIT), Office of Cable Communications, conducted a study in 2006 and 2007 to determine the cable-related needs and interests of citizens in Millennium’s franchise areas.  A draft of the Needs Assessment Report is available on the Cable Office web site.  Information gleaned from this study guided the City’s negotiations with Millennium, which were completed under the federal Cable Act (47 U.S.C. § 546(h)) informal renewal procedures.  With the renewed franchise, and the applicable agreements attached to transfer legislation to be introduced concurrently under another Council Bill, DoIT has balanced the needs and interests identified in the needs assessment study with the City’s desire to minimize potential increases in costs paid by cable subscribers. 

 

The Renewed Franchise will also result in an increase to the franchise fee rate Millennium pays to the City, pursuant to Ordinance 122087, from an effective rate of 3.5% to 4.2%.  This rate increase equates to more than $80,000 in additional annual revenue to the City which Millennium is allowed under federal law to pass on to its subscribers (approximate $0.35 more per month on a $50 cable bill).  In addition, Millennium’s subscribers will pay a monthly capital contribution fee of $0.12 per month which will be used by the Seattle Channel for future capital expenditures (approximately $21,000 per year).  The cable service discount for low-income seniors and disabled subscribers will be raised by over 25% from $3.00 to approximately $3.80 off of any tier of cable service, which matches Comcast’s discount available in most residential areas of Seattle.  The Renewed Franchise also provides continued and enhanced PEG channel capacity to meet the City’s needs over the next 10 years, a second public access facility location, and other provisions necessary for protecting the City’s rights-of-way, providing for customer service standards, and ensuring continued service to subscribers.  Several other cable-related benefits are included in a Settlement Agreement that is part of a separate Council Bill to be introduced concurrently with this Council Bill. 

 

·        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.)

 

Appropriations:  This table should reflect appropriations that are a direct result of this legislation.  In the event that the project/ programs associated with this ordinance have appropriations that were, or will be, received because of previous or future legislation or budget actions, please provide details in the Notes section below.

 

Fund Name and Number

Department

Budget Control Level*

2007

Appropriation

2008 Anticipated Appropriation

 

 

 

 

 

TOTAL

 

 

 

 

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

Notes:  No budget appropriations will be made at this time.   Appropriations will be made through future legislation.

 

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

2007

Revenue

2008

Revenue

Cable Television Franchise Subfund (00160)

DoIT

Millennium increase in franchise fees

$20,9851

$84,5401

Cable Television Franchise Subfund (00160)

DoIT

Millennium capital contribution fee of $0.12 per sub.

$5,4002

$21,6002

TOTAL

 

 

$26,385

$106,140

Notes: 

1) This amount is an estimate of the increased franchise fees to be paid by Millennium as a result of its franchise fee rate increasing from an effective rate of 3.5% to 4.2% of estimated gross revenues, as authorized under Ordinance 122087 and triggered by the passing of this Council Bill.  Millennium paid approximately $400,000 in franchise fees in 2006.  The 2007 increased revenue is for the last 3 months of 2007.

2) This amount is an estimate based on Millennium’s current basic subscriber base (approx. 15,000) multiplied by the capital contribution fee of $0.12 per subscriber per month.  The capital contribution fee will be paid on a monthly basis during the 10-year franchise term. The 2007 increased revenue is for the last 3 months of 2007.

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

2007

Positions

2007 FTE

2008 Positions**

2008 FTE**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

 

 

 

 

 

 

*   List each position separately

** 2008 positions and FTE are total 2008 position changes resulting from this legislation, not incremental changes.  Therefore, under 2008, please be sure to include any continuing positions from 2007.

 

Notes: None.

 

·        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*

2007

Expenditures

2008 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 this legislation is not implemented, Millennium’s franchise fee will not automatically increase from an effective rate of 3.5% to 4.2% as authorized under Ordinance 122087.  The City will also not be able to collect a capital contribution fee under the renewed franchise, which is estimated to be approximately $200,000 over the life of the franchise.    

 

·        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.)

 

None.

 

·        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.)

 

Yes.  At least one public hearing will be scheduled prior to passage of this legislation.

 

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

 

None.

 

Please list attachments to the fiscal note below: