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HomeMy WebLinkAboutMinutes 82-12-012,82 MINUTES OF A SPECIAL WORKSHOP SESSION OF THE CYPRESS CITY COUNCIL HELD DECEMBER 1, 1982 The special meeting of the Cypress City Council was called to order at 7:00 p.m. on Wednesday, December 1, 1982, in the Cypress City Council Chambers, 5275 Orange Avenue, Cypress, California; Mayor Otto Lacayo presiding. PRESENT: Council Members Coronado, Kanel, Mullen, Partin and Lacayo. ABSENT: None. Mayor Lacayo adjourned the meeting to the Conference Room of the Civic Center. CONSIDERATION OF EXECUTIVE SESSION FOR MATTERS OF PERSONNEL: At 7:05 p.m., all Council Members met with Darrell Essex, City Manager, and staff members Dunn and Powell, for matters of personnel. THE EXECUTIVE SESSION TERMINATED AT 7:30 P.M. CALL TO ORDER: Mayor Lacayo called the special workshop session back to order at 7:37 p.m. in the Conference Room. PRESENT: Council Members Coronado, Kanel, Mullen, Partin and Lacayo. ABSENT: None. Also in attendance at the workshop session were Darrell Essex, City Manager, and staff members Barrett and Dunn, as well as a considerable number of citizens who expressed interest in the topic of cable television. CONTINUATION OF CONSIDERATION OF CABLE TELEVISION JOINT VENTURE FEASIBILITY AND DRAFT REQUEST FOR PROPOSALS--WORK SESSION The Mayor explained that the purpose of the workshop session was to review the cable television proposal. Councilman Coronado, prior to the presentation, raised the question as to whether or not it was a conflict of interest to meet, on a social basis, with representatives of cable television agencies. The Mayor expressed an opinion that any Council Member could meet with anyone that he wished to obtain information. The City Attorney stated that the act of meeting, whether over dinner or otherwise, to discuss a cable television franchise with a potential applicant would not, in and of itself, con- stitute a violation of the law. To Council Member Coronado's second question as to what point in time it would become a violation, the City Attorney noted that, once public hearings begin--if, in fact, the Council chose to go through the public hearing process, that it may be inap- propriate at that time to meet with potential applicants. The Mayor requested the City Attorney to draft a non-conflict of interest statement that will be offered to the entire Council for signature. Special Workshop Session Minutes 2 - December 1, 1982 The City Manager reported that staff has received a number of inquiries; however, before focusing on the Request for Pro- posal that staff has drafted, he suggested that the Council review two schedules showing the timeline requirements for: l) a joint venture, and 2) a private franchise bid. Staff member Dave Barrett highlighted the steps and corres- ponding dates for both schedules. Mr. Essex pointed out that :in both schedules the proposal review step would include public input on construction practices, system design, and any public facilities proposed. A discussion of the time frame for the ordinance took place. Staff advised that the ordinance should not be redrafted until it is known what the Council's direction will be. It was recommended that the ordinance and franchise agreement be ap- proved simultaneously. In response to a question from a member of the audience, a discussion of revenue bonds took place. The City Attorney explained that; basically, in California, a City that is looking at financing a capital improvement, looks to one of two kinds of financing: either a General Obligation Bond (bonds such as the Recreation and Park District sold) where ~he taxpayers' tax bills are repaying the bonds or, Revenue 13onds, the repayment of which is secured solely out of revenues from a revenue-producing enterprise. ]Further discussion took place as to the possibility of the company renting the cable going out of business. It was explained by the City Attorney and staff that, to avoid the possibility of non-payment of rent, the City has required in the Request for Proposal one of two types of security props. 7irst, if the bonds are to be offered to the public, the City ::equires an investment grade rating assigned to the bonds by Moody or Standard and Poors. If the bonds were not being sold publicly, but were being privately placed with a source of capital that knew the lessee of the cable (a bank or insurance company which ordinarily provides the cable operator with :financing), the end result would be a vehicle in which the cable operator's traditional financing source would be capable of making the equivalent of a tax exempt loan. Mr. Murphy addressed the question, "Can we lose the cable? Is there any way that if you don't make such a payment on the cable, that they could take it away from us through the courts?" He stated that this is something that the City may want to negotiate; that it might want to have a pledge of the cable itself. He explained that there is not a great deal of exper- ience in this type of thing, and that a bond underwriter would have to spend some time in considering what kind of security props they would think necessary in order to publicly offer the bonds; or, if there is a private placement, what the bond purchaser will want. Further, even if the City decided that it had to pledge the cable itself, obviously it would retain the right to cure any defaults. A discussion took place of the possibility of the City making a profit from the venture and, in turn, lowering the sub- scriber rates, as proposed by the Mayor. Staff reported that the $3 million bond issue figure was based upon staff's estimated construction cost for installa- tion of all cable lines in the system plus the cost of issuing the bonds. The actual amount of the bond issue will vary slightly depending upon final costs. l~. Hawkins from the audience queried whether there is a stan- dard lease-back formula that a franchiser is prepared to pay, 283 284 Special Workshop Session Minutes 3 - December 1, 1982 or if the lease payment is based on the size of the bond. Staff explained that typical franchise bids offer a city more than a five per cent (5%) franchise fee. Usually, they offer the extra system revenue (or income) in equipment, studios, local programming staff, etc. However, higher rates in future years may be necessary to pay for or support lavish proposals. The City would be seeking, under a joint venture concept, proposals which would, at a minimum, offer a lease payment sufficient to repay the revenue bonds. Anything beyond that in the proposals would be open-ended, but scrutin- ized as to their ultimate impact on subscriber rates. Staff further reported that a lease payment on a $3 million bond issue at thirteen per cent (13%) interest would be appro- ximately $550,000/year. At the end of the first ten years of the fifteen year franchise agreement, the bonds would be paid off in full, and the City would continue to receive the $550,000/year lease payments through the fifteenth year. In addition, the ownership of the cable lines is a City asset. With respect to how the City estimated the cable TV system revenues, staff explained that they based the system revenues for the entire fifteen-year franchise period using today's average rates for the various services available on cable TV. Those services include basic cable service, pay channels (movies, cultural, etc.), data packets for computer services, play cable, security alarm services, energy management systems, and adver- tising. The rate of penetration of Cypress homes was conser- vatively estimated at forty-five per cent (45%). Staff developed an estimate of revenue that indicated a range of $35-$40 million over fifteen years. Discussion of rates for services and installation ensued. Staff indicated that actual fees would depend on the proposals received. Addressing a question relative to need for a converter or control box to get the hundred channels available, staff advised that converters are provided with the basic subscriber rate. A question was posed as to whether the cable would be obsolete in ten years, when it would be paid for. Staff explained that to overcome this potential problem, the Request for Proposal encourages a 100+ channel double cable system. With regard to the end of the fifteen-year franchise agreement, staff explained that the system, at that time, could be leased to another operator; however, that option would primarily provide good leverage for the preferred approach of renegotiating with the existing operator. Staff also indicated that marketing of the cable TV system would be up to the operator whether or not it was a private or joint venture. Mayor Lacayorequested that staff address the Cypress College involvement in the Cable System. Mr. Barrett reported that staff had met with the Cypress Col- lege Cable Committee. Ms. Marsha Jeffries was in attendance at the Workshop Session, representing Cypress College. She reported that the College presently provides telecourses over broadcast channels. The College has indicated a desire to provide these telecourses at more convenient times more frequently during the week over a Cypress cable TV system. It would also have the ability to have an on-camera instructor to answer questions. Also, it is seeking the ability to hook- 285 Special Workshop Session Minutes 4 December 1, 1982 up the library to other libraries for data transmission as well as their health sciences program to hospitals, etc. Finally, staff reported, the College has indicated a willing- ness to consider the use of their land and buildings by the cable operator for its facilities including retrofitting studios for TV production for joint use by the College and con~nunity in the production and cable casting of local programming and local access. A member of the audience asked if there was anyone in the room representing cable--there was no response. A discussion of aerial and underground cable installation took place. AT 9:30 P.M., THE MAYOR CALLED FOR A RECESS OF THE MEETING. THE MEETING WAS CALLED BACK TO ORDER AT 9:40 P.M., WITH ALL COUNCIL MEMBERS IN ATTENDANCE. Council Member Kanel proposed that discussion on the topic of cable television continue for approximately ten more minutes; but, that the workshop be continued at the regular meeting of December 13, setting aside approximately one hour (at 9:00 p.m.) for questioning from the Council and members of the audience. Council Member Kanel requested that staff prepare a handout for the next meeting sur~arizing the questions and answers covered at this meeting. Staff then reviewed Page 3 of the RFP, Systems Design. A member of the audience said that, in November of 1981, there was a special election which included an advisory measure in which the people voted against cable TV being municipally owned, and questioned the validity of the joint venture con- sidering the outcome of the vote. Staff advised that the outcome of the election was an over- whelming vote in favor of having a cable TV system, and there were two other questions asked relating to cable TV: 1) whether or not it should be a municipally owned system in which there was a majority "no" vote, and 2) whether it should then be a privately owned system. Again, there was a majority "no" vote. The joint venture approach is a hybrid between a fully muni- cipally owned system and a fully privately owned system, with the least amount of City ownership and involvement in the cable system. Staff verified that thiswould not have to be taken to the voters again. Staff explained that if the City does not get any franchise operator to bid on the joint venture, then the City could rebid the Cypress system as a regular private franchise. Mrs. Martha Justice asked, "Who is to be responsible for how the streets are dug up, and for the damage that is done to the streets, sidewalks, yards?" Staff advised that there would be no difference on these issues whether it was a joint venture or a regular private franchise-- the cable company would be responsible for all damages. How- ever, under a joint venture, the City would have more say so as to how the cable was laid in the streets. Council Member Coronado wanted to know the legal implications of being a joint owner. He inquired as to whether the City is open to lawsuits simply by having ownership interest. The City Attorney indicated that any exposure the City would have to real property liability would be protected through indemnification and hold harmless contractual clauses backed by insurance, the same as the City do~ now ~n ~ public works contracts. 286 Special Workshop Session Minutes - 5 - December 1, 1982 The Mayor responded to a question with regard to who will actually award the contract for the construction of the cable lines under the joint venture system. Following discussion, the City Attorney explained that it is entirely possible that the City will award the construction contract and instal- lation of the line itself, and that it might be treated as a traditional Public Works contract. There being no further questions, the Mayor announced that he would move on Councilman Kanel's recommendation to con- tinue this item to December 13 at 9:00 p.m. There being no objections, the motion unanimously passed to continue dis- cussion to December 13 at 9:00 p.m. CONTINUATION OF CONSIDERATION OF CITY COUNCIL APPOINTMENTS The Mayor introduced the subject report and stated that he had received calls of affirmation of acceptance to the suggested appointments from all Council Members, with the exception of Councilman Coronado. Council Member Coronado declined the suggested appointment as alternate to the Santa Ana River Flood Protection Agency. He expressed an interest in serving on the Unified Orange County Cities Disaster Organization. The Mayor, however, stated that the organization had not met as yet, and he wished to remain as representative to that organization. Following discussion, Council Member Kanel expressed an interest in serving as alternate to the Santa Aha River Flood Protection Agency; Council Member Partin to serve as repre- sentative. Council Member Mullen moved to accept the Mayor's recormmenda- tions for changes in appointments to the various organizations as amended from the report. Seconded by Council Member Kanel, the motion carried unanimously. Appointments are as follows: Orange County Sanitation District: Mayor Lacayo - representative Council Member Mullen - alternate (meets second Wednesday of the month) League of California Cities, Orange County Division: (meets second Thursday of the month) Mayor Lacayo - voting representative Council Member Kanel - representative Santa Ana River Flood Protection Agency: (meets last Wednesday in June and November) Council Member Partin - representative Council Member Kanel - alternate Unified Oranse County Cities Disaster Organization: (meets as needed) Mayor Lacayo - representative AWARD OF CONTRACT FOR THE PURCHASE~ RELOCATION AND INSTAL- LATION OF THE TELEPHONE COMMUNICATIONS SYSTEM IN THE NEW POLICE DEPARTMENT FACILITY Mr. Essex advised the Council that the amount of the contract that was accepted by the Council was $17,634, and this was awarded at the City Council meeting of November 22 to Western Tel Comm. for installation of the Police Department telephone system. As of December 1, representatives of. Western Tel advised staff that they would not be able to obtain the necessary materials 287 Special Workshop Session Minutes - 6 - December 1, 1982 to complete the job by December 31, 1982, and they would have to withdraw their bid. Mr. Essex stated that staff had checked out the low bid, which proved to be unsatisfactory, and the only remaining bid is ITT Corporation, the highest at $31,538. The Western Tel Company, the City Manager reported, indicated that they are also not capable of performing the maintenance agreement and are talking about subcontracting, which is the main reason staff did not want to go with the other company. The City Attorney made the Council aware that, if this were an ordinary Public Works contract, staff would have received a bid bond matching with each of the bids and these would be forfeited. This is not a public works contract--it is a con- tract for services. Therefore, no bid bond is required. Following discussion of the pros and cons of taking legal aoC~On, Council Member Mullen expressed disappointment that the Council has to do this, and moved to accept staff's recom- mendation that: the City Council approve an appropriation of $13,904 from the fund balance of the general fund to Account #11-4189-41024; and, o authorize a cancellation of the award of contract to Western Tel Comm. and award the contract to ITT Terryphone Corporation for the relocation and installation of the Police Department telephone system; and authorize staff to continue the City's telephone system maintenance agreement with the ITT Terryphone Corpor- ation. The motion was seconded by Council Member Kanel, and passed unanimously. ADJOURNMENT: ATTEST: The Mayor, at 10:15 p.m., adjourned the special workshop session until the meeting of December 13, 1982. M~YOP>/OF ~ CT~Y OF CYP~SS CITY CLERK DF THE~CITY OF CYPRESS