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HomeMy WebLinkAboutMINUTES - 12191995 - SD6 TO: r130ARD OF SUPERVISORS Contra Phil Batchelor, County Administrator Costaiz County DATE: December 14, 1995 SUBJECT: APPROVE THE TRANSFER OF VIACOM (BAY POINT) TO TCI COMMUNICATIONS, INC. SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS. SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATION: 1. Subject to the following terms and conditions, CONSENT to the transfer of control from Viacom International, Inc. ("Transferor") to TCI Communications, Inc. ("Transferee") of the cable system operated by Tele-Vue Systems, Inc. ("Grantee") in the Bay Point area: (a) On or before January 31, 1996, the Transferor shall pay to the County all license fees due for the period January 1, 1995 through December 31, 1995, and shall deliver to the County the statement of gross annual receipts required under Section 58-6.002(f) of the County Ordinance Code. The Grantee shall be responsible for the payment of license fees accruing after December 31, 1995. (b) The Transferor and Transferee shall be jointly and severally liable for any license fee under-payment that occurred prior to the closing date of the transaction between the Transferor and Transferee ("Closing Date"), including without limitation license fees payable on advertising revenues received indirectly by the Grantee during the period January 1, 1991 through the,Closing Date. CONTINUED ON ATTACHMENT: JLYES SIGNATURE: RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE l APPROVE OTHER SIGNATURE (S): ACTION OF BOARD ON )9 19 9 S APPROVED AS RECOMMENDED OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE JUNANIMOUS(ABSENT ) AND CORRECT COPY OF AN ACTION TAKEN AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN. ATTESTED a� „^^a ,.A� 1 19 1 5 S Contact: PHIL BATCHELOR.CLERK OF THE BOARD OF CC: II—/}-Z7 SUPERVISORS AND COUNTY ADMINISTRATOR BY ,DEPUTY (c) The Transferor and Transferee shall: (i) continue to comply with all provisions of the Accounting Orders issued by the County for the Bay Point system; (ii) promptly comply with any rate order(s) issued by the County as a result of the County's review of regulated rates for the Bay Point system; and (iii) promptly reduce rates and make refunds as ordered by the County for the Bay Point system. After the Closing Date, the Transferor and Transferee shall be jointly and severally liable for any rate reductions and refunds ordered by the County. (d) As provided in the attached agreement, neither the Transferee nor Grantee shall factor goodwill into any cost-of-service showing unless and/or until FCC regulations at the time expressly allow it. Further, the County's approval of the change of control shall not be construed as a rebuttal of the presumption that goodwill is disallowed for the purpose of any proceeding to calculate or determine any regulated rate subject to the County's jurisdiction. (e) TCIC and TCI Pacific, Inc., who will be the indirect and direct parent entities, respectively, of the Grantee as of the Closing Date, shall cause the Grantee to comply with all of the terms, conditions and obligations of the license. To the extent necessary, on or before the Closing Date, the Transferee shall file with the Clerk of the Board of Supervisors updated bonds and insurance, as specified in the license award resolution (Resolution No. 94/368). (f) The Transferor and the Transferee's rights under the license shall be subject to all terms, conditions and limitations presently applicable to the license, including without limitation all provisions of Division 58 of the County Ordinance Code (Ordinance No. 93-55). (g) On or before January 4, 1996, Transferor shall pay to Telecommunications Management Corporation ("TMC") the fees charged for services rendered to the County in connection with the attached agreement. (h) The transfer of control of the license shall not become effective unless the County and TMC receive the items specified in paragraphs (a) and (g) by the applicable deadlines. Should these items not be submitted on time, or should any required items specified in paragraph (e) not be submitted by the applicable deadline, this Resolution shall be of no further force or effect and the application for transfer of control shall be deemed to have been denied without prejudice. 2. APPROVE the attached Change of Control Consent Agreement and AUTHORIZE the Chair of the Board to execute the agreement on behalf of the County. 3. AUTHORIZE the Cable TV Administrator to deposit directly to the Community Access Trust Fund the $20,973.34 check received from the Transferor for underpayment of license fees on advertising revenues and late fees for the purpose of reimbursing that fund for expenses incurred in connection with rate regulation and transfers. FINANCIAL IMPACT: None. BACKGROUND: On August 7, 1995, Viacom International, Inc. ("Viacom" or "Transferor") filed with the County an FCC Form 394 requesting that the County consent to a change in control from Viacom to TCI Communications, Inc. ("TCIC" or "Transferee") of the license for the Bay Point cable system operated by Tele-Vue Systems, Inc. d/b/a Viacom Cablevision ("Grantee"). As described in the application, TCIC is acquiring all of the stock of Viacom, the current parent corporation of Grantee. Thus, TCIC would become the new parent corporation of Grantee, which would then be a subsidiary of TCIC. Section 58-4.028 of the County Ordinance Code (Ordinance No. 93-55) requires that all proposed transfers of control be submitted to the County for review and decision by the Board of Supervisors. Pursuant to Section 617 of the federal Cable Act (47 U.S.C. Section 537), the County has 120 days to act upon any request for approval of a transfer. Following receipt of the FCC Form 394, staff worked with a consortium of cities to review the legal, technical and financial qualifications of the buyer. Telecommunications Management, Inc. reviewed the documents and determined that TCIC is qualified to operate the Bay Point system. Then a compliance review of Viacom was conducted by staff. Viacom (Bay Point) had renewed their license in 1993. A review of their technical and financial qualifications was conducted at that time. Recently, staff has resolved with Viacom certain issues relating to the payment of license fees on advertising revenues and late fees. However, an outstanding issue still remains over whether license fees are payable on those advertising revenues received indirectly by the Grantee (e.g., revenue used for operating expenses of Bay Cable Advertising and revenue received by the parent(s) of the Grantee). This same issue is currently being pursued by the County and a consortium of eight local cities with TCIC's local systems. Appropriate language has been added to this Resolution to enable the County to continue to pursue this issue with TCIC. In addition, there are three rate documents awaiting final review by the County for the Bay Point system. In a preliminary review by Jay Smith of Public Knowledge, he states that "there are several problems in the 1220". Therefore, we have conditioned the transfer on TCIC's and Viacom's agreement to be jointly and severally liable for any rate reductions and refunds ordered by the County in connection with their rate filings. Staff will be meeting with Viacom representatives within the next month to complete review of the rate documents and, when the issues have been resolved, will forward appropriate recommendations to the Board. Finally, staff is aware of another jurisdiction in which a cost-of-service showing submitted for rate increases after a transfer included costs for goodwill related to the transfer of the system. This increased basic rates significantly. Currently, FCC regulations exclude the use of goodwill in rate calculations, although some cable operators continue to include it until their dispute with the FCC over this issue is resolved. To avoid any significant rate increase in basic service rates because of goodwill as a result of this transfer, staff along with the County of Alameda and the City of Pinole had Telecommunications Management, Inc. draft the attached agreement which conditions the transfer on TCIC's agreeing not to include goodwill unless expressly authorized to do so. Staff believes that these conditions are necessary to assure compliance with the County's cable television ordinance and FCC rate regulations. CONSEQUENCES OF NEGATIVE ACTION: If the Board does not take the action recommended above, the application for consent to transfer would be deemed automatically granted. This could potentially limit the County's ability to recover underpaid license fees. CHANGE OF CONTROL CONSENT AGREEMENT This Consent Agreement, dated December 19, 1995, is entered into between TCI Communications, Inc. ("TCIC") and the County of Contra Costa ("Grantor"). RECITALS A. Tele-Vue Systems, Inc. d/b/a Viacom Cable ("Grantee") is the duly authorized holder of a license (the "License") authorizing operation of a cable television system (the "System") servicing the residents of the Grantor. B. Grantee and TCIC have requested that the Grantor consent to the change of control of Grantee from Viacom Inc. to TCIC, all as more fully described the FCC Form 394, filed with the Grantor in this regard. C. Grantor is willing to consent to the change of control of Grantee, upon the condition that TCIC execute this Agreement. D. TCIC is willing to execute this Agreement in connection with obtaining Grantor's consent, with the understanding that this Agreement will become effective upon consummation of the change of control of Grantee from Viacom Inc. to TCIC. IN CONSIDERATION OF THE FOREGOING, and of the obligations contained below, Grantor and TCIC agree as follows: Section 1 The consents of the Grantor to the change of control of Grantee do not constitute and shall not be construed to constitute a waiver of any obligations of Grantee or any of its successors in interest under the License. Section 2 As provided in the Board Order approved December 19, 1995, TCIC acknowledges and agrees that, notwithstanding the change of control, Grantee remains legally responsible for any default under the license not currently known to Grantor, including, but not limited to, any license fees which may be due to the Grantor. Section 3 The Grantor hereby consents to and approves the assignment, mortgage, pledge or other encumbrance, if any, of the License, System or assets relating thereto, or of the interests in the permitted holder thereof, for collateral for a loan. -1- Section 4 As a part of the transfer, TCIC, on behalf of the Grantee, agrees and acknowledges that: a) this approving agreement is not a new license, the granting of a license, or the renewal of the existing license, but rather is exclusively an agreement to the change of control of the Grantee, and neither affects nor prejudices in any way the Grantor's rights thereunder; and b) that compliance with the License, as of the date of the closing of the Transactions, is neither commercially impracticable as the term is used in Section 625 (f) of the Cable Communications Policy Act of 1984 and/or the Cable Television Consumer Protection and Competition Act of 1992 (collectively the "Cable Act") nor economically infeasible upon the closing of the change of control based on (1) any and all debt service incurred, or to be incurred, to directly or indirectly finance the change of control, or (2) any return on equity made, or to be made, based upon the equity portion of the financing relating to the change of control. Section 5 After the closing date of the transaction between Viacom, Inc. and TCIC ("Closing Date"), neither TCIC nor Grantee will factor goodwill into any cost-of-service showing submitted by TCIC or Grantee for regulated rates subject to Grantor's jurisdiction unless and/or until (FCC) regulations at the time expressly allow it. Further, TCIC agrees that the Grantor's approval of the change of control shall not be construed as a rebuttal of the presumption that goodwill is disallowed for the purpose of any proceeding to calculate or determine any regulated rate subject to Grantor's jurisdiction. Section 6 If any section of this Agreement is held by court or by any Federal, State or local agency of competent jurisdiction to be invalid as conflicting with any Federal, State or local law, rule or regulation now or hereafter in effect, or is held by such court or agency to be modified in any way in order to conform to the requirements of any such law, rule or regulation , said section shall be considered a separate, distinct and independent part of this Agreement, and such holding shall not affect the validity and enforceability of all other sections hereof. -2- Section 7 This Agreement shall become effective on the Closing Date. AGREED BY: County of Contra Costa TCI Compiunications, Inc. r r � f By. By: ; Chair, Board of SLIpervisors `Stephen M. Brett Title: Senior Vice President ATTEST: Phil Batchelor, Clerk of the Board of Supervisors and County Administrator Marj M. kjpChesney Title. Assistant Secretary By.. Deputy Jerk RECOMMENDED FOR APPROVAL: Phil Batchelor, County Administrator i Y Patricia Burke, Cable TV Administrator APPROVED AS TO FORM: Victor J. Westman, County Counsel By: r David F. Schmidt, eputy ounty Counsel J -3- Note: For corporations, the contract must be signed by two officers. The first signature must be that of the chairman of the board, president or vice-president; the second signature must be that of the secretary, assistant secretary, chief financial officer or assistant treasurer. (Civ. Code, Sec. 1190 and Corps. Code, Sec. 313.) The acknowledgment below must be signed by a Notary Public. I CERTIFICATE OF ACKNOWLEDGMENT State of GG br'r o ) ss. County of Ar&Ow k o L ) On the date written below, before me, the undersigned Notary Public, personally appeared the person(s) signing above for the above-named corporation(s) , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies) , and that by his/her/their signature(s) on the instrument the person(s) , or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Dated: 2 3 �4 [Notary's Seal] My Commission expires October 8, 1998 Notary Public 5619 DTC Parkway Englewood, CO 80111 —1—