COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE ON PUBLIC PROPERTY AND PUBLIC WORKS - - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, January 26, 2005 11:20 a.m. - - - - BILL 040995 BILL 041000 BILL 041081 BILL 041071 (See transcript for title of the bills.) PRESENT: COUNCILMAN DARRELL CLARKE, Chair COUNCILWOMAN MARIAN B. TASCO COUNCILMAN JACK KELLY COUNCILMAN FRANK RIZZO COUNCILMAN JUAN RAMOS COUNCILMAN FRANK DICICCO COUNCILMAN MICHAEL A. NUTTER COUNCILMAN JAMES KENNEY - - - - V A R A L L O Incorporated Litigation Support Services Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 I N D E X BILL 041081 PAGE KEN SIPOS, Public Property........... THOMAS DALFO, PIDC and PAID.......... 9 BILL 040995 KEN SIPOS, Public Property........... 11 PAUL DEEGAN, PIDC.................... 17 BILL 041000 KEN SIPOS, Public Property........... 27 PUBLIC MEETING ON BILLS 040995, 041000, 041081........................... 30 BILL 041071 JOSEPH JAMES, Public Property........ 34 EDWIN SHIRLEY, III, Inner City, Urban Cable Works................ 41 ERIC HOLDER, ESQ., Inner City........ 61 GERALD WALDRON, ESQ.................. 62 JOHN FOGARTY, ESQ, Time Warner....... 76 REGINA MARTIN, Time Warner........... 78 WENDY HYATT.......................... 92 SALVATORE DEBUNDA, ESQ., PhilaComm... 103 3 01/26/05 - PUBLIC PROPERTY - BILL 041081
Good morning. This is the Committee on Public Property and Public Works. Will the Clerk please read the title of the first bill.
Bill No. 041081, an ordinance authorizing the Commissioner of Public Property to execute and deliver to the Philadelphia Authority for Industrial Development a deed conveying, for nominal consideration, fee simple title to certain tracts of City-owned land located at 324-332 North 13th Street, with the buildings and improvements thereon, for further conveyance at fair market value.
Let the record reflect we have a quorum with Councilman Rizzo Councilman Kelly, Councilman Ramos, and Councilwoman Tasco. Is there anyone to testify on this bill?
Mr. Chairman, Members of the Committee, my name is Ken Sipos from the Department of Public Property. I am here to 4 01/26/05 - PUBLIC PROPERTY - BILL 041081 testify in support of Bill 041081, an ordinance authorizing a deed conveying fee simple title to the tracts of City-owned land, 334 to 332 North 13th Street with the buildings and improvements for further conveyance by the Philadelphia Authority for Industrial Development at fair market value with the net proceeds to be returned to the General Fund. This bill will allow the sale of surplus City-owned property through the Philadelphia Authority for Industrial Development with the proceeds returning to the General Fund. The Department supports this measure, and accordingly, I ask the Committee approve Bill 041081. I also ask the Rules be suspended so the ordinance may be passed on the second reading of Council.
Thank you. Any questions of this witness by Members of the Committee? Councilwoman Tasco.
The location, 5 01/26/05 - PUBLIC PROPERTY - BILL 041081 the 300 block of North 13th Street, what cross street is that?
If I can interrupt, it's between Vine and Wood Street.
Thank you, Mr. Chairman. I'll be brief. I want to take this opportunity to thank a number of people who were very helpful in putting this deal together. The Administration worked with me along with the Office of Department of Public Property, the MDO's Office, the Managing 6 01/26/05 - PUBLIC PROPERTY - BILL 041081 Director Office and others. This will allow the Roman Catholic High School to continue with its plan to expand its campus. Roman Catholic is probably the only Catholic high school that I can think of in the City of Philadelphia which is actually having growing pains. Many of these parochial schools over the years have -- except St. Joe's Prep. I wanted to take this opportunity to thank everyone. Roman Catholic, I think we all know, is the first Catholic parochial high school in the nation. They had some very difficult times about a decade ago. Since then, they've turned the corner, if you will. And their alumnae have been doing some great things. This is just one of many parcels that we've been trying to acquire for the Roman Catholic so they can make a true inner City campus for that high school. They want to literally take from Broad Street where the school is to 13th and to out to Wood and almost kind of cordon that whole section off to make a wonderful facility. 7 01/26/05 - PUBLIC PROPERTY - BILL 041081 Although it is a Roman Catholic high school, they do cater to inner-city children. It's a very diverse population there, and it's doing magnificent things. So again, I just wanted to take this opportunity to thank all parties who are involved in this legislation and make this a reality. It's been a long time coming. Thank you. And I believe that Councilman Kelly, I just found out, is an alumnus.
First, let the record reflect that Councilman Kenney has joined the Committee hearing. Councilman Kelly.
Thank you, Mr. Chairman. I just want to say as a graduate from Roman, it is a great institution. I want to assure my colleagues here that any school that puts a thought or two in my mind can't be all bad, I'll tell you that. I know I am one 8 01/26/05 - PUBLIC PROPERTY - BILL 041081 of the many, many thousands of people who have graduated from Roman and they have done an outstanding job. Of course, they're in all aspects of life, whether it be public or private enterprise. And I think it's a great growing institution, and I would like to see it continue to grow. I know that Father Brant is doing an excellent job there. And I want to assure all the Councilmembers here that Roman, as Councilman DiCicco mentioned, is probably the oldest school in the country, not only in the state. But we want to continue to see that grow. We want to continue to see it thrive in Philadelphia. And I want to thank you and all the people from Roman and all the alumnae members who have been making a great contribution to make sure that this school does thrive in the future. Thank you.
Thank you, Councilman. Any other questions of this witness? (No response.)
Thank you, Mr. Sipos. 9 01/26/05 - PUBLIC PROPERTY - BILL 041081 Anyone else to testify on this bill?
Good morning, Mr. Chairman and Members of the Committee. My name is Thomas J. Dalfo, D-A-L-F-O, and I represent the Philadelphia Industrial Development Corporation and the Philadelphia Authority for Industrial Development. I'm here today to testify in support of Bill No. 10 041081. The bill authorizes the City to convey the former City Morgue, a 17,000 square foot, 2-story property located at 324 through 36 North 13th Street to PAID. After acquisition by PAID, the property will be sold to Roman Catholic High School, a private high school operated by the Archdiocese of Philadelphia located at Broad and Vine Streets, with notable alumnae in attendance. Roman will convert the former morgue into educational facilities. PAID will negotiate an agreement of sale with Roman Catholic High in accordance with the terms and conditions of the Philadelphia Industrial and Commercial Agreement between the City, PAID, 10 01/26/05 - PUBLIC PROPERTY - BILL 040995 and PIDC. This sale will be based on two independent appraisals of the property and the proceeds from the sale will return to the General Fund. I would ask, as Public Property did, that the Committee consider this bill 8 favorably and ask that the Rules of Council be suspended to permit first reading at the next regularly scheduled meeting of Council. Thank you for the opportunity to testify. If you have any questions, I'll be more than happy to answer them.
Thank you. Any questions of this witness? (No response.)
There being none, thank you for your testimony. Anyone else to testify on this bill? (No response.)
There being none, will the Clerk please read the title of the next bill.
Bill No. 040995, an ordinance the Commissioner of Public Property 11 01/26/05 - PUBLIC PROPERTY - BILL 040995 to execute and deliver to the Philadelphia Authority for Industrial Development, for nominal consideration, a deed conveying fee simple title to a certain tract of City-owned land with the buildings and improvements thereon, situate in an area generally bounded by Casper, Carbon, Ontario, and Tioga Streets generally under and subject to the terms and conditions of the Philadelphia Industrial and Commercial Development Agreement between the City of Philadelphia, the PAID, and the Philadelphia Industrial Development Corporation.
Mr. Chairman, Members of the Committee, my name is Ken Sipos from the Department of Public Property. I would like to testify in support of Bill 040995, a deed conveying fee simple title to the tracts of City-owned land in an area generally bounded by Casper, Carbon, Ontario, and Tioga Streets with the buildings and improvements thereon, further conveyance by the Philadelphia 12 01/26/05 - PUBLIC PROPERTY - BILL 040995 Authority for Industrial Development at fair market value with the net proceeds to be returned to the General Fund, generally and subject to the terms and conditions of the Philadelphia Industrial and Commercial Development Agreement between the City, Philadelphia, the PAID and Philadelphia Industrial Development Corporation. The bill will allow the sale of surplus City-owned property through the Philadelphia Authority for Industrial Development with the proceeds returning to the General Fund. The Department supports the measure, and accordingly, I respectfully ask the Committee approve Bill 040995. I also ask the Rules be suspended so that the ordinance may be passed upon the second reading at Council.
Good morning, Mr. Chairman and Members of the Committee. My 13 01/26/05 - PUBLIC PROPERTY - BILL 040995 Thomas Dalfo, and I represent the Philadelphia Industrial Development Corporation and the Philadelphia Authority for Industrial Development. I am here today to testify in support of Bill No. 040995. This bill authorizes the City to convey a parcel containing approximately 8.5 acres of vacant land at an address of 3200 East Tioga Street to PAID. PIDC will market the property for sale to industrial users. The site is an attractive industrial parcel that is located in the heavily industrialized area very near the Tioga Marine Terminal. Over the past several months PIDC has received a handful of unsolicited inquiries to purchase this site for industrial reuse. After credible purchasers of the site has been identified PIDC will recommend a purchaser for the site to the City of Philadelphia. After a purchaser has been selected by the City, PAID will negotiate a sale in accordance with the terms and conditions of the Philadelphia Industrial and Commercial Development Agreement between the City, PAID, and PIDC. 14 01/26/05 - PUBLIC PROPERTY - BILL 040995 This sale will be based upon two independent appraisals of the property and its development as an industrial site. I believe that the development of this property as an industrial site will support and enhance the existing industrial district near the Tioga Marine Terminal. The net proceeds from the sale will go to the General Fund. I will would also ask that the committee consider this bill favorably and that the Rules of Council be suspended to permit first reading at the next regularly scheduled meeting of Council. Thank you for the opportunity to testify. I'll be more than happy to answer any questions you may have.
Thank you. A couple quick questions. One, with respect to the ultimate disposition of this property or any property done through PAID or PIDC, those properties come back to Council prior to the disposition?
If it's approved here at 15 01/26/05 - PUBLIC PROPERTY - BILL 040995 this point in time, it wouldn't. My understanding is this would be the Council's recommendation as to how the property would be sold.
So you're telling me that at this point you're basically being put in the position to market the property and we don't know who, in fact, or entity will, in fact --
At this point, we don't have a specific purchaser identified no; that's correct.
Hopefully find a purchaser and then that particular item does not come back to this Council for disposition?
My understanding, this authorization would be the only authorization required by Council. It's our practice, however, to work with the Department of Public Property and the District Councilperson to 16 01/26/05 - PUBLIC PROPERTY - BILL 040995 make sure that the industrial reuse that's proposed for this site is consistent with the types of uses that are attractive for that particular location near the marine terminal.
Didn't this Council do a bill sometime ago that required ultimate disposition to come back to Council? Actually, I think I was the sponsor of the bill.
So how are you now saying that it does not have to come back?
Because I think that's why we're coming here today, to get Council's approval. If we need to have another --
No. At this point, no. 21 Councilman, if we are required to come back to authorize the final disposition of the property, then that's what we'll do.
That was my understanding. 17 01/26/05 - PUBLIC PROPERTY - BILL 040995 Paul, you want to speak to that? Because there was some concern when we authorized PAID to negotiate a deal involving SEPTA. They negotiated a deal and then subsequently they conveyed the property without the knowledge of the District Councilperson who, frankly speaking, was somewhat embarrassed when I was at a community group and I told a community group that it has not been sold, and it in fact had been sold. And we subsequently did a bill in council to require that ultimate disposition come back to Council.
Paul Deegan, PIDC. I think the bill addressed when we take property from a non-governmental agency, a non-City agency. And since this is City property, it wouldn't have been covered by that bill. I think that's the difference. I think SEPTA is regarded as --
So why wouldn't it now have to come back to the Council if it's a government property?
I think the original 18 01/26/05 - PUBLIC PROPERTY - BILL 040995 bill was phrased in a way that whenever we sell property -- whenever we accept property from a non-City, non-governmental agency, that it would have to come back for ultimate Council approval. Where previously there wasn't any formal sign-off. See, with the SEPTA deal, there really wasn't an ordinance process in place. That's why it fell through the cracks. It was kind of a unique transaction because we don't do that many transactions with SEPTA or other authorities around the City and the State. Most of our transactions are with the City, selling City property, and we've doing that for ages coming here and getting an ordinance 17 authorizing us to sell the property. And before we make settlement, we always advise the District Councilperson who the buyer is. I think that's worked fairly well in the past. I think in your case, because it was kind of a unique transaction, it didn't require any other formal approval that you have now put in place a process where you see both the City transactions which is required 19 01/26/05 - PUBLIC PROPERTY - BILL 040995 by the Charter, the City has to do an ordinance to convey property out, but any property we take in from a non-City agency, you will also see that. That was my understanding of what the intent of that ordinance was.
If you're telling me that now that once we authorize PAID to market the property, that that property upon disposition does not have to come back to Council, there's a strong likelihood that there will be an ordinance in the very near future that will, in fact, require you to do such. I'm somewhat concerned personally -- I don't know about other members of the Committee -- that a parcel of land that has some level of substance would not come back to Council for disposition, having no idea at this point what ultimately this property will be developed into. And I know you said we get a courtesy call, which is nice, but I would like to think that there is a little more substantive process than that. 20 01/26/05 - PUBLIC PROPERTY - BILL 040995
In most cases, and I think with the previous bill, we know who the buyer is going to be. So when we're selling properties, City surplus properties, in most cases we have an idea who the buyer is and we worked with the Council office prior to coming to City Council for formal approval. In this case, there are some properties that -- until they're put on the market, we don't really know who the buyer is going to be, and people are reluctant to bid on properties where they don't know if the City's even going to be willing to dispose of it. I think years and years ago there was a two step process, but -- Go ahead.
Good morning. We just spoke briefly before the hearing about that in terms of having some sense who is coming into the community once you sell the property and convey it. We would like to know just who the buyer is going to be. Sometimes the company is not compatible with the 21 01/26/05 - PUBLIC PROPERTY - BILL 040995 community, and so after the fact doesn't help us, because I'm running into that problem now with a property now in my district on expansion. An expansion took place and it's really a nightmare for the people who live around that business. So as I stated to you earlier, I think it's important that we know who the buyer is and what kind of business it is. Not necessarily who the buyer is, but what kind of business will they operate in that facility to see what impact it will have on the community and at least have some -- either negotiate some provisos or conditions if the business is not compatible with the community.
Well, in this case, if the Committee will hold the bill, the bill 19 could be held until we do market the property. I'm not sure if that's --
Well, the problem is the sponsor of the bill is not present.
We do talk quite often with Chris Creelman in Councilwoman 22 01/26/05 - PUBLIC PROPERTY - BILL 040995 Krajewski's office. And I think between Commerce Department, the City, Public Property, and Councilwoman Krajewski's office, it was mutually agreed on that we should try to get a buyer for this property. But if the bill was held, I don't think it would harm anything if we come back and reconvene the Committee to --
I don't want to take the liberty of holding the Councilwoman's bill without having some discussion with either her or a member of her staff. But I can tell you, I'm a little uncomfortable with the process that somehow before it's disposed of it doesn't have to come back to Council for disposition.
Well, if you have more information on who the company is at the hearing when the bill comes in, I think that would address those concerns. I can see from your point of view, you kind of right, you feel that you're writing a blank check and you don't know when we're going to cash it. So I think we generally try and have as much 23 01/26/05 - PUBLIC PROPERTY - BILL 040995 information about the buyer as possible when we arrive at City Council. I think we work with every Council office on land sales in their district. I don't think we've ever settled with a land sale where the Councilperson -- in my years in PIDC and 8 four years of Public Property, I can't 9 remember any case where we settled, whether we 10 had authorization or not, with a buyer who the 11 District Councilman did not want the 12 transaction to go through. 13
You actually did 14 on the property that I referenced earlier. 15
First you sold 18 it, then you went to settlement even after we 19 had some words. 20
I'm sorry, let me correct myself. That is the one case where we did -- that slipped through the cracks. And that was because that was a very unique situation where we don't sell SEPTA property generally. 24 01/26/05 - PUBLIC PROPERTY - BILL 040995 Councilman Kelly.
Paul, I just have a question. Why is it so important to come here today without knowing who the user is going to be? Is there any reason why you're here today to try to expedite this? This bill 8 wouldn't give you the permission to sell it, you already have it. I just want to know why you would be here today rather than wait until you had a buyer in mind and then come to the Council and then saying that "We want to sell this because someone's really interested in buying it." And you could let us know then or at least inform the District Councilperson who the buyer is.
I think the District Council office has had interested parties calling them and that's why they would like to move the bill along. I think there has been interest expressed in the past.
In order words, you already has some buyers with an interest to purchase this, correct?
That's my understanding 25 01/26/05 - PUBLIC PROPERTY - BILL 040995 from the Councilperson's office, from Councilwoman Krajewski's office. But there are other inquiries.
Then you would go through the District Councilperson at this time?
Thank you, Councilman. One last question briefly. With respect to disposition of property through PAID, traditionally you seek fair market value for the property. Do you have any flexibility in terms of disposing of that property as it relates to its value? Example, if there's a development that's long-term will be beneficial both to the community and the City, the numbers simply don't work in terms of the disposition price/acquisition price to make the development work. Do you have the flexibility within your agency to change the sales price of the property to make the development work, subsequently providing a 01/26/05 - PUBLIC PROPERTY - BILL 040995 better benefit to the City on a long-term basis?
If the Council ordinance 5 authorizing the sale had language in that allowed the sale to occur at less than fair market value or nominal consideration, depending upon how it was phrased, we would have that flexibility. If it is sold subject to the terms and conditions of the Commercial and Industrial Fund, then we'd have to do it at fair market value. There are times sometimes where issues come up and we have to come back to look for a change.
Okay. Thank you. Any other questions of these witnesses? (No response.)
Thank you, gentlemen. Anyone else to testify on this bill? (No response.) 27 01/26/05 - PUBLIC PROPERTY - BILL 040995
There being none, will the Clerk read the title of the next bill?
Bill No. 041000, an ordinance authorizing the Commissioner of Public Property, on behalf of the City of Philadelphia, to grant to the Southeastern Pennsylvania Transportation Authority an easement across a portion of a certain parcel of land in the vicinity of the intersection of Ridge Avenue and Main Street.
Good morning, Mr. Chairman and Members of the Committee. My name is Ken Sipos from the Department of Public Property. I'm here to testify in support of Bill 041000, an ordinance 20 authorizing the Commissioner of Public Property on behalf of the City to grant an easement to the Southeastern Pennsylvania Transportation Authority across a portion of a certain parcel of land in the vicinity of the intersection of Ridge Avenue and Main Street. 28 01/26/05 - PUBLIC PROPERTY - BILL 040995 The bill will enable SEPTA to construct a new passenger waiting room bus shelter as part of their Wissahickon Transfer Center and Improvement Project. The project will revamp the Wissahickon Transfer Center and help ease traffic and congestion on Ridge Avenue. The construction is estimated to take nine days. As part of the negotiated agreement, SEPTA will allow the City to connect a sewer line from the Philadelphia Canoe Club to SEPTA's existing sewer line, alleviating the need to dig up Ridge Avenue in order to connect the line to the City's existing line. The Department of Public Property supports the measure, and accordingly, I respectfully ask that City Council approve Bill 041000. I also ask that the Rules be suspended so the ordinance may be passed upon the second reading at Council. Thank you. I'll be happy to answer any questions.
Thank you. Any questions for this witness by 29 01/26/05 - PUBLIC PROPERTY - BILL 040995 members of the Committee? (No response.)
There being none, anyone else to testify on this bill? (No response.)
Thank you. I'll have a two-minute recess. I'll be right back with you. (Brief recess.)
Thank you for your patience. The Committee on Public Property and Public Works will go into a public meeting. We will be reporting out three bills and then we'll go back into public hearing to hear the cable bill. - - - - 30 COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING COMMITTEE ON PUBLIC PROPERTY AND PUBLIC WORKS - - - - Wednesday, January 26, 2005 - - - - Public meeting conducted by the Committee on Public Property and Public Works, held in Room 400, City Hall, Philadelphia, Pennsylvania, on the above date, to consider action on the following: BILL 041000, 041081, 040995. PRESENT: COUNCILMAN DARRELL CLARKE, Chair COUNCILWOMAN MARIAN B. TASCO COUNCILMAN JACK KELLY COUNCILMAN FRANK RIZZO COUNCILMAN JUAN RAMOS COUNCILMAN FRANK DICICCO COUNCILMAN MICHAEL A. NUTTER
Councilman Ramos, can I ask you to make a motion on Bill 4 No. 041000.
Thank you, Mr. Chairman. I move that Bill No. 041000 be reported out of Committee when favorable recommendation, and further move that the Rules of Council be suspended to permit first reading of this bill at our next Council Meeting. (Duly seconded.)
Bill 041000, a motion on that bill and being seconded will be reported out of Committee with favorable recommendation. I ask for a vote. All in favor? (Aye.)
Bill No. 041000 will be reported out of Committee with a favorable recommendation and request for Rules suspension. Councilman Ramos, can you please 32 make a motion on Bill No. 041081.
Thank you, Mr. Chair. I move that Bill No. 041081 be reported out of Committee with a favorable recommendation, further move that the Rules of Council be suspended to permit first reading at this bill at your next Council Meeting. (Duly seconded.)
So moved. Can I ask for a vote on Bill No. 041081 to be reported out of Committee with favorable recommendation. All in favor? (Aye.)
Bill No. 041081 will be reported out of Committee with a favorable recommendation and a request for Rules suspension. Councilman Ramos, a motion on Bill 23 040995.
Thank you, Mr. Chairman. I move that Bill No. 040995 be 33 reported out of Committee with favorable recommendation, further move that the Rules of Council be suspended to permit first reading of this bill at our next Council Meeting. (Duly seconded.)
Bill No. 040995 will be reported out of Committee with favorable recommendation and request for Rules suspension. Thank you very much. That concludes the public meeting. - - - - 34 01/26/05 - PUBLIC PROPERTY - BILL 041071
We will now go back into the public hearing. Will the Clerk please read the title of the next bill?
Bill No. 041071, an ordinance consenting to the transfer of control of the Area II cable television franchise from Urban Cable Works of Pennsylvania, LLC to Time Warner Cable Inc., and to the transfer and assignment of the Area II cable television franchise from Urban Cable Works of Philadelphia, L.P. to Time Warner Cable, Inc., both under certain terms and conditions.
I'd like to have Mr. Joe James please come to the witness table.
Councilman Clarke, Members of the Committee, I am Joseph James, Deputy Commissioner for the Department of Public Property. , to Time Warner Cable, Inc. Pursuant to the terms of the City's franchise agreements with cable television providers, a transfer of the franchise from one owner to another or a change of control of the franchise requires that the City be notified of the proposed transaction and provide consent by ordinance of Council. The Federal Communication Act also provides that information about the proposed transaction be provided to the local franchising authority and establishes a framework for the review and consent of the locality. In this case, Urban Cable Works notified the City of the proposed transfer and provided the City a copy of the required Federal Communications Commission Form 394. The City requested additional information with respect to the transaction and the franchisee 36 01/26/05 - PUBLIC PROPERTY - BILL 041071 and the transferee responded with additional data which has been reviewed by the departments as well as the Law Department and the City's cable television consultant, TCS International. This information has been concluded in the white binders which were provided to Members of this Committee of Council. Based upon the material submitted and the discussions pursuant to this transfer and recommendations of the City's cable consultant, it its the recommendations that the City Council give its approval for this transaction and the transfer of the cable television franchise for Area II to Time Warner Cable. Bill No. 041071 was introduced December 9th of 2004. Representatives from my department have engaged in continuous discussions with representatives from Time Warner Cable concerning transfer of the franchise as permitted by the bill. Through the franchise transfer process, we have sought terms for an agreement that will best serve 37 01/26/05 - PUBLIC PROPERTY - BILL 041071 the needs of the communities in which Time Warner operates, as well as the needs of the City. Time Warner has agreed to assume the full obligations of the current franchise both pursuant to the terms of the current franchise agreement for Area II which runs through 2014, as well as the side agreements which Urban Cable Works entered into at the time of the last transfer in 1999. This commitment will be documented by an assumption agreement of former which is Exhibit C to Bill 041071. Time Warner is thoroughly familiar with the operations of Area II franchise because it has a history of involvement in the Area II franchise. A Time Warner subsidiary, Wade Cablevision was the Area II franchisee in the 1990s. In 1999, Time Warner joined the Inner City Broadcasting Corporation to create the Urban Cable Works partnership and with the City's consent transfer of the Area II franchise to the new partnership. Time Warner's role has been that of a minority partner, holding only 40 percent of the partnership interest. The majority 60 percent 38 01/26/05 - PUBLIC PROPERTY - BILL 041071 interest, including the greater general partner shares have been held by entities controlled by Inner City Broadcasting Corporation. P. The two-part transaction what is now proposed formally involves both a change of control of the franchise and an assignment of the franchise to a new cable provider. In the first step, Time Warner Cable will acquire all the general and limited partnership interest and Urban Cable Works that it does not yet own. In the second step, Urban Cable Works will be merged into Time Warner Cable which will be the surviving entity and therefor the new franchisee. The Time Warner Cable is a Delaware corporation formed in 2003 in conjunction with the reorganization of the parent company Time Warner Cable Television Holdings. , subsidiary, with the remaining percent stake held 5 indirectly by Comcast Corporation.
Time 6 Warner Cable either operates directly or 7 through subsidiary cable systems in 10,898,000 8 subscribers in 27 states, making it the 9 nation's largest cable operator in terms of 10 subscribers served. 11 According to the form 10-Q filed 12 with the US Securities and Exchange Commission 13 for the fourth quarter of 2004, Time Warner 14 Cable is a single biggest generator of 15 operating income of all Time Warner business 16 segments. The company's three main product 17 lines are video, including both tradition 18 cable television and advanced digital services such as digital video, high definition television, video on demand, subscriber video on demand, and digital video recording, high speed data services and digital phone service being introduced this year. The information provided to the City is sufficient for the Department to determine 40 01/26/05 - PUBLIC PROPERTY - BILL 041071 that the proposed transferee, Time Warner Cable, has the financial, technical, and legal qualifications to provide cable services to the City's franchise Area II. In conclusion, in terms to which Time Warner's commitments are acceptable to the Department, I respectfully ask the Committee that the Rules of Council be waived to allow this bill to be reported out of Committee and have its first reading at the next Council Session. Although, I must now leave to attend a meeting in Harrisburg, I will be available at a later time if the Committee so chooses to adjourn the hearing until another date when I can answer further questions that you may have on the transaction. Thank you.
Any questions of this witness by members of the Committee? Councilman Nutter.
Thank you, Mr. Chairman for this opportunity. I've read there through Mr. James' testimony, I would have, as you can imagine, just a few 41 01/26/05 - PUBLIC PROPERTY - BILL 041071 questions. In light of his request and his pending business in Harrisburg, I will hold those questions. I would ask if the Chair would provide another opportunity in working with the Committee to have a subsequent date for continuance of this hearing.
Thank you, sir. Anyone else to testify on this bill? I believe we have Edwin S. Shirley, III.
Edwin Shirley. Members of the Committee on Public Property and Public Works and concerned citizens, good morning. My name is Edwin Shirley. I am a partner at Fairview Capital Partners, Incorporated, a venture capital fund of funds in Farmington, Connecticut, and a 42 01/26/05 - PUBLIC PROPERTY - BILL 041071 member in Urban Cable Works of Pennsylvania, LLC, through Fairview's investment in City Cable Works, Inc. I want to thank you for the opportunity to appear today to testify on behalf of the bill to authorize the transfer of the Area II cable franchise from Urban Cable Works of Pennsylvania, LLC, and Urban Cable Works General, LLC, to Time Warner Cable, Incorporated. Today, I am representing Urban Cable Works of Pennsylvania, LLC, and Urban Cable Works General, LLC, which are the proposed transferors of the Area II cable franchise. The two Urban Cable Works entities have as their owners or investors Inner City Broadcasting Corporation, Pacesetter Growth Fund, L.P., Mesbic Ventures, Incorporated; Fairview Capital Partners II; and the local partner PhilaComm. In my brief statement, I want to explain Inner City's and its partner's involvement with the Area II franchise and with the proposed transfer. Before turning to 43 01/26/05 - PUBLIC PROPERTY - BILL 041071 the details, however, I want to emphasis that we have all been pleased to have been a part of the Area II cable franchise and honored to serve the residents of Philadelphia. During the past five years, approximately $45 million was spent upgrading the system and its plant which allowed for significant expanded services, including video, internet and other broadband features. This system is one of the most technologically advanced cable systems in the country. Last year, after five years of involvement in the franchise, the Inner City led investor group decided to sell its interest in the franchise to its partner in the franchise, Time Warner Cable, Inc. On June 30, 2004, Urban Cable Works of Pennsylvania, LLC, and Urban Cable Works General, LLC, entered into a purchase agreement with Time Warner Cable to sell their collective 60 percent equity interest to Time Warner Cable.
Councilman 44 01/26/05 - PUBLIC PROPERTY - BILL 041071 Nutter.
Thank you, Mr. Chairman. Mr. Shirley, I hate to cut across your statement, but I just received it a little while ago and I'm trying to get through it. I've seen the organizational structure that's been provided. And unfortunately, I need to better understand the nature of your testimony and your presence here today. So I certainly appreciate that you'd like to get through your statement, but I need to better understand exactly who we're talking to. Now, you're a partner at FAIRVIEW Capital?
So you are not an employee of Urban Cable Works of Pennsylvania?
No, I am not, 45 01/26/05 - PUBLIC PROPERTY - BILL 041071 Councilman.
And what percentage of Urban Cable Works of Pennsylvania does Fairview Capital own or have an investment interest in?
No, I can read the chart. I'm pretty decent at that. Let me understand this then. If you're an 8 percent owner of --
Of City Cable works, Inc.; is that correct? That's what the chart says.
And you're 's part of an investor group that owns 20 percent of City Cable Works, Inc.; is that right?
And then is it that Urban Cable Works of Pennsylvania, LLC, combined with Urban Cable Works General, LLC, 46 01/26/05 - PUBLIC PROPERTY - BILL 041071 which is a 60 percent owner, that entity owns City Cable Works, Inc.? is that the way this works?
City Cable Works, Inc., which is percent owned by -- if 14 you're looking at the chart, sir, 20 percent 15 owned by the investor group to the right, 16 Fairview Capital II, Mesbic Ventures, and 80 17 percent opened by Urban Cable Works of 18 Philadelphia, Inc. City Cable Works owns 80 19 percent of the entity Urban Cable Works of 20 Pennsylvania, LLC --
Well, the reason I cut across your testimony is you identified 47 01/26/05 - PUBLIC PROPERTY - BILL 041071 yourself as representing Urban Cable Works of Pennsylvania, LLC, and Urban Cable Works General, LLC. I'm just really trying to understand that if we're having a representative from Urban Cable Works of Pennsylvania, I would think we would have someone who either works for them or owns City Cable Works, Inc., or someone of that position with one of those companies. You are part of an investor group that owns a certain percentage of a much larger entity.
So how is it that you're now the representative of the company? I'm just trying to understand this.
I was designated as a member of the Board of Directors of Urban Cable Works of Pennsylvania, LLC, one member of the Board --
What are their 48 01/26/05 - PUBLIC PROPERTY - BILL 041071 names?
Louis Wright. Pierre M. Sutton, myself, James Winston, and the late Obra Kernodle.
So those five individuals are the board members of Urban Cable Works of Pennsylvania?
All right. And was there a meeting of the Board to determine who the representative would be today?
In consultation with our attorneys, it was requested that I represent the group today.
All right. I just need to understand who's in what position, who's speaking for whom so I'm clear 49 01/26/05 - PUBLIC PROPERTY - BILL 041071 on who it is I'm dealing with. You can proceed. Thank you, Councilman.
I am almost done with my statement. During the discussion of the pending transfer, we have heard concerns about two issues. Local minority participation in the franchise and concern about some possible sale down the line to Comcast. Both of those issues are more directed at Time Warner Cable than the two Cable Works entities -- please allow me to make two observations. First, as minority-owned businesses, Inner City and its fellow investors strongly support the inclusion of minorities in any and all business opportunities. Secondly, with respect to the issue of whether this transfer would facilitate some future sale to Comcast, I can only tell you what I know. The Inner City investors have no knowledge of a plan to transfer the Area II franchise from Time Warner Cable to Comcast nor has any such consideration influenced its decision to sell 50 01/26/05 - PUBLIC PROPERTY - BILL 041071 its interest to Time Warner Cable. The Inner City investors have no influence on any future sale. Of course, this ultimately is a question for Time Warner Cable and it may be a fair question, but because any future sale has to go through this same Committee, we hope the debate about a possible future sale will be held at that future hearing and will not serve to delay or prejudice our interest in prompt consummation of this pending transfer. In closing, Inner City and its fellow investors would like to express our gratitude to the City for making it possible for us to serve the people of Philadelphia. And we stand ready to answer any questions that Council may have. Thank you.
Let me understand -- first of all, thank you for your testimony. Let me understand the last part of your testimony. Are you suggesting that any concern that members of this Council or this Committee have relating to resale down the line by Time Warner either to Comcast or either to diminish the level of minority 51 01/26/05 - PUBLIC PROPERTY - BILL 041071 participation, those questions should be directed solely at Time Warner and not Urban Cable?
What I'm suggesting, Councilman, is that the Council, because of its oversight, has an opportunity at that point, in fact, has the authority to approve such a transfer. And that we're suggesting that at that point in time Council have an opportunity to address that if indeed that is a concern of the Council he had.
Shouldn't we question that now because this particular proceeding and this action will position the ultimate resale of that property somewhere down the line, that cable franchise somewhere down the line? And were it not for this action today, Time Warner would not be in a position to potentially somewhere down the line resell --
Oh, no, sir. And I agree. We are simply stating that, which is rather obvious, that because you have approval authority that it is at that point in time 52 01/26/05 - PUBLIC PROPERTY - BILL 041071 that you will have an opportunity to approve or not approve a sale by Time Warner to anyone.
We understand that, but we're talking about what's being done today. And we have some concerns today about the potential ramifications of whatever action we end up taking today or what other day as it relates to any other particular matter. So at that time if, in fact, there's some ultimate resale, relates deal with that at that time.
BUT there is an action being taken today that can position whatever will happen in the future.
My only response to that is that if the Council were to approve what we're requesting today, our investment group is not in a position to affect what happens in the future with regard to -- 53 01/26/05 - PUBLIC PROPERTY - BILL 041071
Right, after the fact. And that those questions can be directed to Time Warner.
Any questions from Members of the Committee for this witness? Councilman Nutter.
Thank you, Mr. Chairman. Mr. Shirley, let me -- again, back to the chart. Your testimony would appear to make no reference directly to -- maybe it does. You mentioned almost in passing Inner City. The second paragraph of your testimony, you talk about Inner City Broadcasting Corporation, Pacesetter Growth Fund, and a number of others. Where would I find Inner City on this chart?
At the bottom of the 54 01/26/05 - PUBLIC PROPERTY - BILL 041071 chart, Councilman, you see Inner City Broadcasting. And as you move toward the top of the chart, each of those entities are subsidiaries wholly owned or substantially wholly owned by Inner City Broadcasting Corporation until you get to City Cable Works, Inc., which is, as we said before, 80 percent owned by Inner City through its subsidiaries and percent owned by Fairview Capital, 11 Pacesetter and Mesbic Venture. 12
Can you tell me 13 why there is no one directly from Inner City 14 here today? 15
No, I'm sorry, I 16 cannot tell you. I was the designated 17 representative 18
Was any 19 discussion among the four remaining partners 20 about that? I mean, you've known about this hearing for a little while, right?
And they are one of the major entities involved in this transaction, correct? 55 01/26/05 - PUBLIC PROPERTY - BILL 041071
Well, with all due respect, Councilman, they did send me. And as a representative --
I understand that. But you do not work for Inner City Broadcasting Corporation, right?
So I'm not disrespecting you. I understand what your role is; we've been through that. What I'm asking is why is there no one that works for the company here?
Now, your testimony again makes reference to all of the investor groups, including the local partner 56 01/26/05 - PUBLIC PROPERTY - BILL 041071 PhilaComm. Am I to be left or is this record to be left with the impression that you are speaking on behalf of all of those entities?
Yes, sir. I am speaking on behalf of the collective 60 percent -- the collective group that opens 60 percent of the franchise, which does include PhilaComm which, as you know, is a group formed by local Philadelphia business persons.
And you've been authorized by all of these different investor groups to be here today as their collective representative; is that your testimony?
My testimony is -- if you asking have I been authorized directly by PhilaComm, I have not spoken to anyone from PhilaComm, no. But between Inner City --
You guys are all in this together; is that my understanding?
And did you talk to the folks from Pacesetter or Mesbic Ventures or Inner City Broadcasting Corp.?
We have not spoken to 57 01/26/05 - PUBLIC PROPERTY - BILL 041071 Pace setter Mesbic Ventures which, by the way, are governed by the -- owned by the same general partner. We did speak with --
It's called Pacesetter Growth Fund. Mesbic Ventures is an affiliate of Pacesetter Growth Fund.
All right. So you've had some level of contact with everyone except the PhilaComm Group?
At the current time, we have no -- well, to be begin with, the one representative that I've had contact with has passed away.