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; approving the transfer of control, subject to conditions, of the franchises held by Millennium Digital Media Systems, L.L.C. (“Millennium”); repealing Ordinance 122179; approving the transfer of control of Millennium’s franchises; authorizing the Chief Technology Officer to execute a Settlement Agreement, which includes a Town Hall Fiber Construction Agreement, for the purpose of resolving outstanding compliance issues related to the transfer; accepting funds from Millennium; and increasing appropriations in the 2007 Adopted Budget; all by a three-fourths vote of the City Council.

 

·       Summary of the Legislation:

This Council Bill authorizes a transfer of control of the cable franchises held by Millennium Digital Media, L.L.C. (“Millennium”) from three previous Millennium equity owners (TSG Cable Investment Corporation, TSG Cable Investment Corporation III, and Millennium Digital Media, L.L.C.) to three new equity owners (Highland Crusader Offshore Partners, L.P., Credit Suisse International, and Bear Stearns Credit Products, Inc).  Additionally, the legislation authorizes the Chief Technology Officer to enter into a Settlement Agreement for the purpose of resolving outstanding franchise compliance issues with Millennium, repeals Ordinance 122179, accepts funds from Millennium, and increases appropriations in the Information Technology Fund and Cable Television Franchise Subfund.  Transfer of the franchises is subject to execution of the Settlement Agreement, which provides several cable-related community benefits, such as a lower-priced cable service offering, complimentary cable modem service to City-sponsored community technology centers, a video-on-demand (VOD) offering, complimentary advertising for the Seattle Channel on Millennium’s cable system and KIRO-TV, a $20,000 grant fund to be used by SCAN to assist communities underrepresented on the channel, and a commitment by Millennium to various planned customer service and system upgrades.  Attachment 2 to the Settlement Agreement is a Town Hall Fiber Construction Agreement that will allow the Seattle Channel to air live and interactive programming of Town Hall events, which are frequently covered by the Seattle Channel.  A separate Council Bill that authorizes a renewed Millennium franchise and is to be introduced concurrently with this Bill, is conditioned upon authorization of this transfer and execution of the Settlement Agreement in its entirety.  The actual transfer is technical in nature and has no negative implications for subscribers.

 

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

 

Millennium holds two franchise agreements to provide cable television services in various Seattle neighborhoods: the Central Area, Beacon Hill, downtown Seattle, and parts of Capitol Hill and Queen Anne.  Millennium recently restructured its corporate ownership, which resulted in a transfer of control of Millennium’s Seattle franchises.  Pursuant to SMC 21.60.520, Millennium must request the City’s prior consent to transfer its franchises, and the City may not unreasonably deny the transfer.  Federal law requires the City to act within 120 days of a completed application unless an agreement is reached to extend the date, otherwise consent by the City is implied.  Millennium has agreed to extend the federal deadline for a decision on the transfer until December 1, 2007, so that the franchise and transfer legislation maybe considered concurrently. 

 

In 2006, the City Council authorized a transfer of Millennium’s franchises to WaveDivision V, L.L.C. (“Wave Broadband”) under Ordinance 122179.  Ordinance 122179 provided that, in the event the sale of Millennium’s assets to Wave Broadband did not close for any reason or, in the event the sale closed on terms substantially or materially different from Millennium’s FCC Form 394 filing or other information relied upon by the City; then the City’s consent would be null and void, and the City deemed to have disapproved the transfer.  Millennium informed the City on August 2, 2006, that the sale to Wave Broadband had been cancelled  (see Exhibit A to the Ordinance), thereby voiding Ordinance 122179.  This Council Bill formally repeals Ordinance 122179.

 

Millennium subsequently secured financing through a series of transactions that affected the capital structure and equity ownership of Millennium’s parent company, Millennium Digital Media Holdings, L.L.C. (“MDM Holdings”).  These transactions resulted in a transfer of control on or about October 26, 2006 which, according to Millennium’s franchises and federal law, required prior City consent.  To resolve this and other compliance issues, the City and Millennium agreed to enter into a Settlement Agreement (see Exhibit B to the Council Bill), which provides for several cable-related community benefits such as a lower-priced cable service offering, complimentary cable modem service to City-sponsored community technology centers, a vide-on-demand (VOD) offering, complimentary advertising for the Seattle Channel on Millennium’s cable system and KIRO-TV, a $20,000 grant fund, a fiber connection to Town Hall so the Seattle Channel can air live programming from Town Hall events (see Attachment 2 to the Settlement Agreement), and a commitment from Millennium to various planned customer service and system upgrades. 

 

In accordance with SMC 21.60.520, the City may not unreasonably refuse a request to transfer a franchise.  The City Council must make a decision to approve the transfer, approve it with conditions, or deny the transfer within 120 days of receipt of the Application.  In the absence of these actions, the request shall be deemed granted pursuant to federal regulations unless an agreement is reached to extend the date.  Millennium has agreed to extend the 120 day deadline to December 1, 2007, so the transfer and franchise legislation may be considered concurrently.

 

The Office of Cable Communications has conducted a legal, financial, and technical review of the transfer and has provided a report to the City Council.  The Council Bill and Settlement Agreement address certain issues found in the report, and allow Millennium to resolve these issues so that a renewed franchise may be considered by the City Council.  A second Council Bill to be introduced concurrently with this Bill authorizes a renewed Millennium franchise, and is conditioned upon the authorization of this transfer and the execution of the Settlement Agreement. 

 

·       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

Information Technology Fund (50410)

DoIT

D4400 Office of Electronic Communications

$20,000

$0

Cable Television Franchise Subfund (00160)

DoIT

D160B Cable Fee Support to Information Technology Fund

$20,000

$0

TOTAL

 

 

$20,000

$0

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

Notes:  DoIT requires appropriation authority in two different funds to disburse the $20,000 from the Millennium Settlement Agreement.  The $20,000 in funds will first be appropriated from the Cable Television Franchise Subfund (00160) for the Cable Fee Support to Information Technology Fund Budget Control Level (D160B), and then in turn from the Information Technology Fund (50410) for the Office of Electronic Communications Budget Control Level (D4400).  The table above does not total $40,000 because this Council Bill only appropriates $20,000.

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 Settlement Agreement

$20,000

$0

TOTAL

 

 

$20,000

$0

 

Notes:  Under the terms of the Town Hall Fiber Construction Agreement (Attachment 2 to Exhibit B of the Council Bill), the City will incur certain costs (estimated to be approximately $11,000 in 2007/2008) under its existing budget authority, and Millennium will reimburse the City’s costs up to a maximum of $15,000.

 

Total Regular Positions Created Or Abrogated Through This Legislation, Including FTE ImpactThis 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, the City will not be able to collect the $20,000 grant to provide funds for SCAN to assist communities underrepresented on the public access channel or benefit from the installation of a fiber connection to Town Hall.  In addition, issues that are resolved under the Settlement Agreement will remain unresolved, and Millennium will not be in compliance with its current franchises.  The City cannot renew a franchise that is out of compliance, which has other indirect financial implications.

 

·       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: