COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE ON PUBLIC PROPERTY AND PUBLIC WORKS - - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, February 24, 2005 9:30 a.m. - - - - BILL 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... PRESENT: COUNCILMAN DARRELL CLARKE, Chair COUNCILMAN FRANK RIZZO COUNCILMAN JAMES KENNEY COUNCILMAN MICHAEL NUTTER COUNCILWOMAN MARIAN TASCO COUNCILMAN JUAN RAMOS - - - - 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 041071 PAGE JOSEPH JAMES, Public Property........ 3 02/24/05 - PUBLIC PROPERTY - BILL 041071
Good morning. We are reconvening the Committee on Public Property and Public Works that was recessed from February the 27th. We now have a quorum. Present at this Committee is Councilman Ramos, Councilman Kenney, Councilwoman Tasco and Councilman Rizzo. Let the record reflect also that Councilman Nutter is also at this particular hearing. Will the Clerk please read the title of the 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 transfer the 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.
Good morning. My name 4 02/24/05 - PUBLIC PROPERTY - BILL 041071 is Joseph James, Deputy commissioner for the Department of Public Property. Good morning to the Chair and Members of Council. We completed our testimony from the Department. What we like to do is enter an amendment to the original bill that has an impact on Exhibit C. I would like to read the amended language. The amendment reads, Time Warner Cable executes an agreement substantially in the form attached hereto as Exhibit C with additional provisions to the following effect and specific form and content satisfactory to the City Solicitor. One, within 90 days following execution of this assumption agreement, Time Warner Cable shall be in full material compliance with all terms and conditions of the franchise agreement, the 1999 assumption agreement, and the 1999 supporting agreement or shall pay to the City liquidated damages as provided in the franchise agreement or in the case of terms and conditions of the 1999 assumption agreement and supporting agreement liquidated damages of $250 per day for each 5 02/24/05 - PUBLIC PROPERTY - BILL 041071 day that such noncompliance continues and for each breach and shall be subject to all applicable remedies provided by the franchise agreement. Any imposition of liquidated damages with respect to the terms and conditions 1999 assumption agreement or supporting agreement shall be in accordance with the procedural requirements of the franchise agreement with respect to liquidated damages. Number Two, Time Warner Cable shall submit to the City not later than May 1, 2005, an updated revision of the 15-year projections attached as Exhibit B to the supporting agreement. The revised projections shall provide: One, actual figures for years 1999 through 2004 in each reporting category except as reasonably agreed otherwise by the parties; two, projections for year 2005 in all reporting categories except as reasonably agreed otherwise by the parties, including but not limited to Operating and Capital Budgetary projections for year 2005; and three, further detail in the capital expenditures and 6 02/24/05 - PUBLIC PROPERTY - BILL 041071 investment reporting category by identifying in separate line items projections for investments and projections for capital expenditures for head-in equipment, distribution plant, subscriber equipment and other capital expenditures. Time Warner Cable shall submit such revised projections for year providing actual figures in each reporting category except as reasonably agreed otherwise by the parties for the preceding five years and projections in each reporting category for the upcoming year, including but not limited to Operating and Capital Budgetary projections for the upcoming year. Such revised projections shall be subject to the confidentiality provisions of Article 2, Section 11 of the franchise agreement. The Department asks that the original Bill 041071 be some voted out with a fable recommendation with the amendment, as read.
Thank you. Are there any questions of this witness by members of the Committee? 7 02/24/05 - PUBLIC PROPERTY - BILL 041071 (No response.)
Thank you, Mr. Chairman. No questions for Mr. James. I appreciate his work in this particular matter and also bringing forward the proposed amendments. At the appropriate time, Mr. Chairman, whether in the public hearing or in the public meeting, I would have some additional comments to be made with regard to this matter, but I'll wait until the Chair's direction for that particular moment. But I want to thank Mr. James and the Department of Public Property and the Law Department for their extensive efforts in working on this matter. Thank you.
One clarification. In the amended bill, as we circulated, there's a 8 02/24/05 - PUBLIC PROPERTY - BILL 041071 deletion of the provision that was originally in the agreement, it's on the last page, B. What I read to you replaces that. Of course, we ask that the Rules be waived so that the bill voted at the next hearing.
Could you explain the amendments, why you are amending this in this manner?
Sure. The amendments are being put forthwith with concurrence from Time Warner to, one, kind of clarify that the original 1990 assumption agreement and the supporting agreement when the original transfer occurred did not have any liquidated provisions for nonperformance. So what we've done is made this consistent to the original franchise agreement and attached liquidated in areas where there would be noncompliance as it relates to the supporting agreement and the 9 02/24/05 - PUBLIC PROPERTY - BILL 041071 assumption agreement from 1999. The second part really deals with the issue as far as monitoring the performance of the franchise going forward. When we did the transfer back in 1999, it followed, of course, a renewal of the agreement for Wade Cable Vision for Area II 2. Then we did the transfer to a new entity called Urban Cable Works which had Time Warner as a minority partner. In that original bill, there was a 15-year projection that kind of laid out what they -- kind of a per forma where they thought they would be going in years to kind of 15 give both Council and the Administration a sense of their ability to perform and successfulness going forward. What this amendment attempts to do is to go back and recapture their actual performance year-to-date for the years 1999 through 2004, and it also now requires that they continue to update that 15-year projection as we go from year to year with one-year budgetary numbers as well as a recapture of the actual so that Council and the Administration will have both 10 02/24/05 - PUBLIC PROPERTY - BILL 041071 a working document that tracks their performance from the time that originally started out with the partnership agreement and now tracks it as just the Time Warner entity. And where there are any issues as far as concerns about investments in either capital or equipment, it will be documented as part of this agreement. So this is an attempt to kind of give us a better picture of how they're moving forward and also share that information with Council.
Commissioner, could you explain some process for us? Could you explain the FCC's role in this transaction and the action that Council is taking versus what the Federal Communications Commission does here?
There are federal regulations promulgated by the FCC that tracks the compliance of the cable franchise and the local municipalities in our local areas. And 11 02/24/05 - PUBLIC PROPERTY - BILL 041071 one of the requirements as relates to this particular ordinance is that the new applicant who is planning to acquire a franchise is required to submit form called an FCC 394 which details questions about who they are and in the areas that we are looked to review have to deal with the technical ability, the operating ability, and the financial capabilities of the applicant. That FCC form is submitted to the local jurisdiction for us to review. The local jurisdiction then has the opportunity to ask questions. There is a time-sensitive element to that that says that once the form is submitted to the local jurisdiction, they have 120 days to take action on that. If they do not take any action, then from the federal regs it's deemed approved for the applicant. We received this back in August. We have since asked substantive questions and received additional material. We believe the 120-day clock started in November and that it would expire around March the 9th.
So no matter what 12 02/24/05 - PUBLIC PROPERTY - BILL 041071 we do here, the FCC will approve this transaction; is that correct?
Well, the applicant can take the opinion that if the City takes no 6 action by March 9th, then their application is automatically approved and they can move forward.
Anyone else to testify on this bill? Councilman, would you want to make your statements now before we go into the public meeting?
Thank you, Mr. Chairman. First, I want to thank the Chairman for the incredible flexibility and patience tat he and all the members of the Committee have demonstrated through this process. There have been any number of hearings. They have 13 02/24/05 - PUBLIC PROPERTY - BILL 041071 been extensive. There's been a significant amount of detailed information laid out on this record. And I, for my role in this and as the sponsor of the legislation in conjunction with Councilwoman Blackwell, greatly appreciate the work that has been done in this particular matter. I would, again, say that this Committee has truly done its work in asking the necessary question that are pursuant to the interests of the citizens of this City and certainly the subscribers or potential subscribers in the franchise area in evaluating the qualifications and suitability of the proposed new owner. And while there is also significant testimony and information on this record regarding a variety of issues, we all know that ultimately, as Councilmembers, we must make an individual decision based on our individual judgment of the information provided, the credibility of that information, and the answers provided to the questions that members have asked. That is the standard by 14 02/24/05 - PUBLIC PROPERTY - BILL 041071 which I am sure all of us will look at this particular matter. There are, Mr. Chairman and members of the Committee, I would suggest to you, a number of questions that still, at least for myself, remain questions with information not necessarily answers, questions that have been put on this record by the Public Property Department regarding past noncompliance issues with regard to the franchise agreement, present operational issues that have been used and not completely responded to regarding the number of subscribers and whether subscription rates are, in fact, going down, which they appear to be over the past few years, penetration rates and ratios calculated based on the numbers that have been provided. This morning, I received and I appreciate from Urban Cable Works some information about 20, minutes ago related 22 to minority and female contract participation 23 and possibly employment. I literally have not 24 had a chance to look at it. What is clearly 25 unresolved and is a major issue as we look at 15 02/24/05 - PUBLIC PROPERTY - BILL 041071 franchise Area II, its long history of either minority ownership, participation, investment, opportunity or any other configuration, we know in this particular transaction there is presently any plan for active, direct, and involved minority participation or ownership with regard to the new proposed franchise ownership coming out of this proposed transaction. That is deeply troubling to me, and I know that issue has been raised by any number members of the Committee. With that in mind, and I know based on the statement made by Mr. James in response to Councilman Rizzo's question, I know that some action must be taken by this Committee, but I would only suggest to that for any number of reason, but certainly with regard to the lack of a current minority participation plan involving ownership opportunity, I have still grave concerns about this transaction and I would only ask the Committee take that and other factors into consideration when we talk about issues of qualifications or suitability. I will respect the judgment, of course, of this 16 02/24/05 - PUBLIC PROPERTY - BILL 041071 Committee in conducting the work of the Committee, but I thought it important as a member who represents at least a part of the franchise area that I would lay these views on the record for your review. Thank you, Mr. Chairman. I appreciate the opportunity to speak on this particular matter.
Thank you, Councilman. I concur with your statements. I want to say prior to any action from the Committee on the record that I understand that there are still some outstanding questions as it relates to minority participation, other aspects of the performance levels of the current franchise. I would like to say prior to either ultimate passage or non-passage of the bill if in fact it comes out of Committee -- I'm speculating here -- that any information or any questions that any of the Councilmembers have on this particular issue, please feel free to forward that to the Chair so we can subsequently send that information to the pertinent parties and hopefully get the 17 02/24/05 - PUBLIC PROPERTY - BILL 041071 appropriate responses prior to any final action taken by the full Council. That being said, we are now going from the public hearing to the public meeting. - - - - 18 COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING COMMITTEE ON PUBLIC PROPERTY AND PUBLIC WORKS - - - - Thursday, February 24, 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 041071. PRESENT: COUNCILMAN DARRELL CLARKE, Chair COUNCILMAN FRANK RIZZO COUNCILMAN JAMES KENNEY COUNCILMAN MICHAEL NUTTER COUNCILWOMAN MARIAN TASCO COUNCILMAN JUAN RAMOS 19 02/24/05 - PUBLIC PROPERTY - PUBLIC MEETING
Councilman Kenney can you please give me a motion on the amendment?
Mr. Chairman, I move that Committee approve the amendments to Bill No. 040071.
The amendments have been approved on Bill No. 041071. Councilman Kenney, can I ask for a motion.
Mr. Chairman, I move that Bill No. 041071, as amended, be reported out of this Committee with no 20 recommendation, and further request for suspension of rules to allow for first reading at the next Council Session.
All in favor? (Aye.) 20 02/24/05 - PUBLIC PROPERTY - PUBLIC MEETING
Let the record reflect that Bill No. 041071 is reported out of Committee with no recommendation and request for a suspension of the rules has been granted and will be placed on the next Session of Council. Thank you very much for your time. Have a good day, and be careful going home. (Council adjourned at 9:45 a.m.) - - - - 21 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Thursday, February 24, 2005, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: COMMITTEE ON PUBLIC PROPERTY AND PUBLIC WORKS _________________________ Lisa C. Bradley, RPR