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HomeMy WebLinkAbout95-58 - Transfer of Control of Cable Television Franchise from Providence Journal Company to Continental Cablevision, IncRESOLUTION NO. 95-58 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA, APPROVING THE TRANSFER OF CONTROL OF A CABLE TELEVISION FRANCHISE FROM PROVIDENCE JOURNAL COMPANY TO CONTINENTAL CABLEVISION, INC. WHEREAS, in 1983 and pursuant to Ordinance No. 83-2, the City Council of the City of Costa Mesa added Title 19 to the Costa Mesa Municipal Code (Section 19-05, et sgQ.) establishing regulations for granting and operating cable communications systems. Since then, Section 19-05, et se�C . has been twice amended pursuant to Ordinance Nos. 84-6 and 93-15. Section 19-05, et seq. will hereinafter be referred to as the "Cable Television Ordinance"; and WHEREAS, pursuant to the Cable Television Ordinance, the City entered into a Franchise Agreement with Copley/Colony Cablevision of Costa Mesa, Inc. (hereinafter referred to as the "Grantee"), effective March 5, 1984, as amended by the Amendment to Franchise Agreement effective June 22, 1989. Grantee is a wholly owned subsidiary of Copley/Colony, Inc. The Franchise Agreement, as amended, will hereinafter be referred to as the "Franchise Agreement". The Cable Television Ordinance and the Franchise Agreement constitute, and will be hereinafter referred to as the "Franchise"; and WHEREAS, Copley/Colony, Inc., is owned by a partnership of Colony Communications, Inc. ("Colony"), a subsidiary of Providence Journal Company ("PJC") and Copley Press Electronics Company ("Copley"); and WHEREAS, the City and Grantee entered in an agreement entitled "Settlement Agreement between the City of Costa Mesa and Copley/Colony Cablevision of Costa Mesa, Inc., regarding Cable Television Franchise Obligations", dated as of June 19, 1995, attached as Exhibit B; and WHEREAS, PJC and Continental Cablevision, Inc. ("Continental") have entered into an Amended and Restated Agreement and Plan of Merger dated as of November 18, 1994 (the "Agreement"), subject to, among other considerations, any required approval of the franchising authorities with respect thereto; and WHEREAS, in connection with the merger and other transactions (hereinafter referred to as the "Transaction") contemplated by the Agreement, the fifty (50%) percent interest in Copley/Colony, Inc., held by Copley will be sold to Colony; and WHEREAS, Continental will be a publicly owned company; and WHEREAS, the effect of the Transaction will be to transfer effective control of the Grantee from PJC and Copley to Continental; and WHEREAS, City Code Section 19-250(c) requires City Council consent to any transfer or change of control of the franchise; and WHEREAS, FCC Regulations (47 CFR Section 76.502(i)(1) require that in order for a cable operator to obtain City approval of a transfer or change in control of the franchise, it must submit to the City a FCC Form 394 and any other information as may be required by the City; and WHEREAS, PJC and Continental have filed a FCC From 394 with the City requesting City Council approval of the transfer of control of the Grantee to Continental (hereinafter referred to as the "Transfer"); and WHEREAS, in support of its Form 394 Application, PJC and Continental have submitted to the City the following documents which are on file with the City Clerk, and are collectively referred to as the "Transfer Documents": 1. Form 394 with six Exhibits, filed with the City on February 10, 1995; 2. Letter with a two volume appendix from Continental to City of Costa Mesa, dated April 17, 1995; and WHEREAS, the Conference Report to the 1992 Federal Cable Television Act, in discussing franchise renewal under Section 626 of the Communications Act of 1934 (47 U.S.C. Section 546) states that transferees of a cable television franchise are not responsible for breaches of the franchise committed by the transferor. Consequently, the City Council finds that it is necessary that all Franchise noncompliance issues be remedied prior to the transfer; and WHEREAS, the City has evaluated the Grantee's compliance with the Cable Television Ordinance and the Franchise Agreement; and WHEREAS, all disputes regarding Franchise compliance have been remedied pursuant to the "Settlement Agreement between the City of Costa Mesa and Copley/Colony Cablevision of Costa Mesa, Inc., regarding Cable Television Franchise Obligations" (hereinafter referred to as the "Settlement Agreement"; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA, DOES RESOLVE, DETERMINE, AND ORDER AS FOLLOWS: SECTION 1. The Costa Mesa City Council finds that, based upon the representations contained in the Transfer Documents, and the terms and conditions of this Resolution, Continental has the legal, financial, character, technical and public interest qualifications to control the Franchise. The City Council hereby approves and consents to the Transaction and Transfer, subject to the Grantee complying with the terms and conditions of this Resolution. SECTION 2. Upon the close of the Transfer, Grantee shall comply with and be bound by the following documents: 1. The Cable Television Ordinance; 2. The Franchise Agreement; 3. The Settlement Agreement; and 4. This Resolution and the Exhibits attached to it. SECTION 3. Grantee shall comply with all lawful rate regulation orders issued against it pursuant to Section 76.900 gt M. of the FCC Regulations. SECTION 4. Grantee and Continental agree that notwithstanding Section 521 �t mea,. of Title 47 of the United States Code, following the close of the Transfer, the Grantee shall assume responsibility with respect to the Franchise for all prior acts or omissions of the Grantee while under the control of PJC. The City Council hereby finds that the Franchise is presently in full force and effect. The City Council further finds that the Grantee is currently in compliance with the Franchise and its obligations. SECTION 5. Grantee shall continue to operate the existing public access studio located in Costa Mesa, California, and the related facilities required for public educational and governmental ("PEG") access at the same level of effort as currently provided as of the effective date of this Resolution consistent with the Franchise. Said facilities shall be made available for use by City residents. SECTION 6. Grantee and Continental shall apply to the Federal Communications Commission to extend to the City of Costa Mesa the "Social Contract", as set forth at FCC 95- 137. SECTION 7. Grantee shall comply with the Customer Service Standards of the FCC (Section 76.304 of Title 47 of the Code of Federal Regulations) as adopted by the City at Section 19-60(I) of the Cable Television Ordinance. SECTION 8. As part of its approval of the Transfer, the City consents to the transfer or dissolution of the Colony Communications, Inc. Management contract. SECTION 9. Grantee shall reimburse the City for its reasonable administrative, accounting, consulting, and legal costs incurred in processing the application for approval of the Transfer within 30 days of receiving an invoice from the City. The reimbursement amount shall not exceed Ten Thousand Dollars ($10,000.00). Grantee shall reimburse the City said costs regardless of whether the Transaction and the Transfer closes. Grantee shall not treat this obligation as an "external cost" under Title 47, Sections 76.922 and 76.925 of the Code of Federal Regulations. SECTION 10. Failure of Grantee or Continental to comply with any material provision of the Settlement Agreement, this Resolution, or the Franchise, shall be grounds for the City to invoke any of the City's remedies under and in accordance with the Franchise. SECTION 11. The consent herein granted shall be effective upon the closing of the proposed transfer and the City shall be notified by letter directed to the City Clerk promptly upon such closing. SECTION 12. Grantee and Continental shall, within ten (10) days of the adoption of this Resolution, file in the office of the City Clerk, a written Acceptance and Guarantee of this Resolution executed in the form of Exhibit A, attached hereto. By executing and filing the Acceptance and Guarantee, Grantee accepts and Continental guarantees performance of all obligations hereunder, provided, however, Continental's guarantee shall be effective only upon the closing of the Transaction. The Acceptance and Guarantee shall be notarized so as to indicate that the persons executing the Acceptance and Guarantee have the authority to bind Grantee and Continental. Failure of Grantee and Continental to timely file the Acceptance and Guarantee shall void the approval of the Transfer. SECTION 13. Grantee and Continental acknowledge that the City has provided the notice required pursuant to Revenue and Taxation Code Section 107.6. SECTION 14. The City Manager and the City Attorney, or their designees, are hereby authorized and empowered to execute any documents necessary, in their discretion, to implement the approvals contained herein. PASSED AND ADOPTED this 19th day of June, 1995. Mayo f the City of Costa Mesa ATTEST: Deputy Ci Clerk of the City of Costa Mesa PPROVED AS TO FORM /11" 1(*)*6+1'n — CITY ATTORNEY STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss CITY OF COSTA MESA I, MARY T. ELLIOTT, Deputy City Clerk and ex -officio Clerk of the City Council of the City of Costa Mesa, hereby certify that the above and foregoing Resolution No. 95-58 was duly and regularly passed and adopted by the said City Council at a regular meeting thereof, held on the day of 19th June, 1995. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Seal of the City of Costa Mesa this 20th day of June, 1995. 1 Deputyty Clerk and ex -officio Clerk of the City ouncil of the City of Costa Mesa EXHIBIT A Page 1 of 2 ACCEPTANCE AND GUARANTEE OF TRANSFER OF CONTROL OF FRANCHISE Copley/Colony Cablevision of Costa Mesa, Inc. ("Grantee"), hereby accepts each and every term of Resolution No. 95-58 of the City of Costa Mesa, entitled: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA, APPROVING THE TRANSFER OF CONTROL OF A CABLE TELEVISION FRANCHISE FROM PROVIDENCE JOURNAL COMPANY TO CONTINENTAL CABLEVISION, INC. Grantee hereby further agrees to reimburse the City of Costa Mesa's costs in an amount not to exceed Ten Thousand Dollars ($10,000.00) by July 6, 1995, regardless of whether the Transfer referred to in said Resolution has not closed by said date. DATED: 7 -- C - % 5 COPLEY/C Subscribed and sworn to befor Rhode Island. NAME: N OF COSTA MESA, INC. TITLE: me/-�his 6th day of July 1995 in the City of Providence, Name of Notary 7R-1c/f} �• �� Commission Expires: 7-V L 07/05.✓95 WED 10:35 FAX 310 647 3036 CONTINENTAL CABLEVISION CCI EXEC 0 012 EXHIBIT A Page 2 of 2 Continental Cablevision, Inc. ("Continental"), hereby unconditionally guarantees each and every term of Resolution No. 95-58 of the City of Costa Mesa, entitled: A RESOLUTION OF THE CITY COUNCIL OF TI4E CITY OF COSTA MESA, CALIFORNIA, APPROVING THE TRANSFER OF CONTROL OF A CABLE TELEVISION FRANCHISE FROM PROVIDENCE JOURNAL COMPANY TO CONTINENTAL CABLEVISION, INC. Continental hereby waives any right to require the City to proceed first against Grantee or pursue any other remedy in City's power_ This guarantee by Continental shall be effective upon closing of the Transaction. DATED: .7 h S r CONTINENTAL CABLEVISION, INC. BY: lc.-� `J - J " -.L s NAME: %4Bt—A-7- 0-- f r+C f4j TITLE: SR- V i .,, P, , t—� Subscribed and sworn to before me this 6th day of July, 1995 in the City of Boston, Commonwealth of Massachusetts. Debbie Johnson Notary Public My Commission Expires: EXHIBIT B SETTLEMENT AGREEMENT BETWEEN THE CITY OF COSTA MESA AND COPLEY/COLONY CABLEVISION OF COSTA MESA, INC., REGARDING CABLE TELEVISION FRANCHISE OBLIGATIONS. WHEREAS, in 1983 and pursuant to Ordinance No. 83-2, the City Council of the City of Costa Mesa added Title 19 to the Costa Mesa Municipal Code (Section 19-05, et sem.) establishing regulations for granting and operating cable communications systems (the "Cable Television Ordinance"). Since then, the Cable Television Ordinance has been amended on several occasions, including pursuant to Ordinance Nos. 84-6 and 93-15. WHEREAS, pursuant to the Cable Television Ordinance, the City entered into a Franchise Agreement with Copley/Colony Cablevision of Costa Mesa, Inc. (hereinafter referred to as the "Grantee"), effective March 5, 1984, as amended by the Amendment to Franchise Agreement, effective June 22, 1989. Grantee is a wholly owned subsidiary of Copley/Colony, Inc. For purposes of this Agreement, the Cable Television Ordinance, and the Franchise Agreement will hereinafter be referred to as the "Franchise". WHEREAS, Copley/Colony, Inc. is owned by a partnership of Colony Communications, Inc. ("Colony"), a subsidiary of Providence Journal Company ("PJC") and Copley Press Electronics Company ("Copley"). WHEREAS, Copley/Colony, Inc. also does business as Copley/Colony Interconnect ("Interconnect"). Grantee sells advertising time to Interconnect which then sells it to advertisers. Grantee only reports approximately twenty percent (20%) of the net advertising revenues received by Interconnect as gross revenues subject to the City Franchise Fee, although Section 19-10(K) of the Cable Television Ordinance provides that revenues received directly or indirectly by the Grantee are to be included as part of gross revenues. WHEREAS, there is a good faith dispute between the City and Grantee regarding compliance with the Franchise in the area of inclusion of Interconnect advertising sales as part of gross revenues for purposes of payment of the Franchise Fee. WHEREAS, the City has decided to prospectively exercise its Franchise right to collect a payment of up to one percent (1 %) of gross revenue per year for facilities and equipment for an institutional network ("INET") and a public, educational and governmental ("PEG") channel (hereinafter referred to as the "One Percent Access Fee"). This amounts to approximately $90,000.00 per year. WHEREAS, the City has not previously requested payment of the One Percent Access Fee. WHEREAS, Grantee and City desire that there be no further disputes by and between them regarding the above -referenced terms and conditions of the Franchise. NOW, THEREFORE, CITY AND GRANTEE AGREE AS FOLLOWS: SECTION 1. ADVERTISING REVENUE. A. Retroactive to July 14, 1994, and throughout the remaining term of the Franchise, Grantee shall include in gross revenues reported to the City for the purpose of calculating Franchise Fee payments, fifth percent (50%) of the gross revenues for advertising on Grantee's system received by any affiliate of Grantee, which is controlling, under common control with or controlled by Grantee, and which is engaged in the business of selling local or regional advertising on Grantee's system. Gross revenues shall not be reduced by the amount of any commission paid to any advertising agency, regardless of whether the agency is affiliated with or unaffiliated with Grantee. Grantee shall pay the City the currently owed difference between the Franchise Fees paid since July 14, 1994, and Franchise Fees owed pursuant to the foregoing within thirty (30) days of this Agreement. Said payment shall include simple interest calculated at the same rate the Federal Internal Revenue Service applies to delinquent tax payments for the same period of time. B. Grantee shall include as part of gross revenues reported to the City for the purpose of calculating Franchise Fee payments all amounts itemized on subscriber bills, including, but not limited to, the possessory interest tax and public, educational and governmental access fees, unless and until the FCC orders otherwise, and all administrative and judicial appeals of the FCC order are exhausted. Should it ultimately be held that such amounts are not part of gross revenues subject to the Franchise Fee, then Grantee may cease including the itemized amount as part of gross revenues, provided that the City shall have no liability to Grantee for any Franchise Fees previously paid. C. Grantee currently includes the Franchise Fee itemized on subscriber bills as part of gross revenues subject to the five percent (5%) Franchise Fee. The Federal Communications Commission ("FCC") is currently considering whether the Franchise Fee itemized on subscriber bills may be included as part of gross revenues for purposes of calculating the Franchise Fee owed the franchising authority in the proceeding entitled "In the Matter of United Artists Cable of Baltimore", DA 95-737 (decision of Chief of the FCC Cable Services Bureau, released April 6, 1995) ("In re Baltimore"). In re Baltimore is on appeal. Grantee shall continue the practice of including the Franchise Fee as part of gross revenues unless and until all administrative and judicial appeals are exhausted and In re Baltimore holds that the inclusion of the subscriber payment in gross revenues is preempted. Should In re Baltimore ultimately hold that Franchise Fees itemized on subscriber bills may not be included as part of gross revenues subject to the Franchise Fee, then, notwithstanding Subsection B above, Grantee may cease including the itemized Franchise Fee as part of gross revenues, provided that the City shall have no liability to Grantee for any Franchise Fees previously paid. SECTION 2. Access Fees. Beginning July 1, 1995, Grantee shall pay the City, upon demand by the City Manager, up to one percent (1 %) of gross revenues per year for public, educational and governmental ("PEG") access and institutional network ("INET") equipment and facilities, and maintenance and operation of the same. Beginning July 1, 1996, and each year thereafter during the remaining term of the Franchise, payment of the One Percent Access Fee shall be made in a manner and according to a schedule as established by the City Manager. SECTION 3. It is understood and agreed that this Settlement Agreement represents settlement of disputed claims and is not be construed as representing an admission on behalf of either part to this Agreement. The parties, however, intend to buy their peace and to forever resolve their differences regarding the matters more particularly identified hereinabove. SECTION 4. Failure of Grantee to comply with any material provision of this Agreement shall be grounds for the City to invoke any of the City's remedies under and in accordance with the Franchise. SECTION 5. This Agreement shall be binding upon the successors and assigns of the parties. IN WITNESS WHEREOF, the parties hereto certify that they have read and understood all the terms and conditions contained herein and have duly authorized and caused this Settlement Agreement to be executed as of June 19, 1995. ATTEST: DEPUTY ITY CLERK CITY OF COSTA MESA By:jew— MA*PR (� f!PROVED AS TO FORM CITY ATTORNEY COPLEY/COLONY CABLEVISION OF COSTA MESA, INC. BY: NAME: r. TITLE: