HomeMy WebLinkAboutItem 06.cCITY OF LAKEVILLE
SPECIAL CITY COUNCIL MEETING MINUTES
November 4, 2013
Mayor Little called the meeting to order at 5:30 p.m. in the Marion Conference Room.
2.
Members present: Council Members LaBeau, Anderson, and
Members absent: Council Member Swecker
Also present: City Administrator Steve Mielke;
Moss & Barnett; Tom Bordwell, Director of Goi
LeeAnn Herrara, Charter; Carol Sindt, Charter;
Charter; Char Friedges, City Clerk's
Steve Mielke provided background regarding the pns
Communications is requesting renegotiation of their
Lakeville in conjunction with its renewal Counc
with Moss & Barnett on a thorough review of the
technical and legal issues
EG fees. In spite of sever
counsel for the Cityyand t
participate in the public]
educational and governmi,
Mayor lsittle opened the pc
City of Lakeville as outside
be presented and 14 suppo
Grogan stated tha
believes there has
brought to lig
Mines and dis
2r; as well as n
e, after which
had
and Mayor Little
Attorney; Brian Grogan,
rter Communications;
Iaw, representing
Agreement with the City of
1y authorized staff to work
rent Charter Franchise Agreement. Both
cult; including nonpayment of required
this issue has not been resolved. Legal
of the public, will have the opportunity to
i ask Council to provide direction.
ter Charteri0-Able Partners, LLC is in violation of its Cable
Lt th the City of Lakeville due to the nonpayment of
(EG)'access fees as required by the Franchise
earing.' Brian Grogan stated that he had been retained by the
counsel. He asked that a copy of the PowerPoint which will
attachments be entered into the public hearing record.
the Franchise provides a procedure for the City to follow if it
I violation or a breach in the Agreement. In determining
whether the violation'limaterial, Council needs to consider five factors as defined in the
Franchise:
1) The reliability of the evidence of the violation or breach;
2) The nature of the violation or breach;
3) The damage, if any caused thereby to the City, the City's residents or subcontractors;
4) Any justifying or mitigating circumstances; or
5) Such other matters as the City may deem appropriate.
Special Council Meeting, November 4, 2013
renewal in Fe
Cable regulations are governed by Title 3, Chapter 11 of the Lakeville City Code. The
Franchise was originally granted to Marcus Cable Partners, L.P; however, control of the
Marcus Franchise was transferred to Charter Communications in 1998. By accepting control,
Charter agreed to be bound by the terms which had been negotiated by Marcus. The City
adopted Resolution 98 -236 on by November 2, 1998 which approved the transfer. Marcus
continued to be the underlying business entity, doing business as Charter Communications.
The fundamental issue is the Educational and Governmental
the Franchise guarantees access to educational and goverrum
Franchise service area at no charge. This section also require
subscriber per month to fund EG access - related expenditure:
whether the EG fee was collected by Charter as required anci
When Charter submitted their request for Fj
Federal law, the City conducted a review of (
compliance, as well as possible future needs,
payments. The Franchise fee of 5% of gross
Franchise agreement is not in dispute. A let
asked for data in order to conduct the Franc
City had been remitted. A second letter
no record of any EG fee payments. Sub;
Charter and the City addressed noncom
were
reduces
there is not an inter
gum rate of 6 %. At t
7.33; making a total
Page -2-
Access Fee. Section 6.2 of
within the
to collect $.50 per
is the question of
e City.
las required by
including a review of Franchise fees and EG
revenues that is submitted by Charter under the
ter from the City to Charter dated May 23, 2012
hise fee review to verify that all fees owed to the
voveniber 16, 2012 ngtified Charter that there was
ent correspondence~'and meetings between
.ce issues reuardine the EG fee.
tpaidfor 14 years, the State Statute of limitations is applicable
ion Co six years, which is calculated to be $469,341. In situations
rate specified in a contract for unpaid fees, the State sets a
rate, the non- Pompounded accumulated interest would be
$.565,928.33 in unpaid EG fees and interest due to the City.
Grogan explaiiaed that a Franchise is comparable to a contract. In exchange for Charter's use
of the City's rights m way, the Franchise mandates collection and payment of the EG fee to the
E. r
City. A review of all available records did not find any evidence that the Franchise was ever
amended to modify the obligation for payment of the EG fees.
The City entered into a second contract with Marcus Fiberlink, LLC, referred to as a
Telecommunications Capacity Lease Agreement (CLA) for the purpose of constructing a
telecommunications network for City data transmission. Following approval of this
agreement the payment terms were amended to allow two lump sum payments. This did not
in any way amend the Franchise Agreement. This contract is not in dispute.
Special Council Meeting, November 4, 2013
Page -3-
For the following reasons, the City believes that Charter has committed a material violation of
the Franchise by failing to remit payment of the required EG fee:
• The evidence of the violation is reliable
• The unpaid fees represent a substantial sum of money over the life of the Franchise
• The City incurred damage through the loss of valuable funding for educational and
governmental programming, resulting in the City funding through other sources
• There is no justification or mitigating circumstances for Charter's failure to comply with
the requirements
Tom Bordwell stated that Charter values their partnership with the City and is proud of their
accomplishments and annual Franchise fees that are paid to the City, and is committed to
findimz an amicable solution to this issue.
Jane Bremer, Bremer Law, stated that the teleebramunications industry has seen many changes
in the 15 years since Charter acquired the cable system. Charter has grown` ,ith the City and
spent millions of dollars expanding products and services not required by the Franchise, such
as broadband to residents and businesses, building a fiber network, and maintaining 1999
broadband rates for City buildings. Cbarterhas a positive business impact and employs 69
people at their Lakeville office. They are aTortune 500 company serving six million customers
and believe they have complied with the Franchise. ' darter has np incentive not to collect the
EG fee and was surprised that the oversiglit had not been detected earlier by the City.
Charter's staff spent a significant amount of time'going through their own records but found
no exp"lanatinir for why EG fees were not,heing paid:, Charter then searched City records and
discovered a discussion that was held at the Apri112, 1999 Council work session (Exhibit i)
regarding possible deferment of EG fee implementation and collection, and recommending
forth discussions at a future meetin . — Tivre are no records that indicate subsequent
discussions were ever held Charter believes this discussion constitutes the Council's decision
to defer EG fees and the decision was never modified, revoked or terminated. Over the years,
as the City hasacquired EG equipment, held monthly meetings of the Telecommunications
Commission, and - conducted audits, the EG fee has never been discussed. Bremer submits that
because of the April 12, 1945 work session minutes there is no evidence of noncompliance.
She stated that the Franchise Agreement gives the City the right to increase, decrease or waive
the EG fee, and such action would not be required to be in writing.
Charter is asking Council to choose one of two options:
• Dismiss consideration of Charter being in noncompliance with the Franchise Agreement
due to the discussion by the Lakeville City Council in 1999; or
• Continue the public hearing to allow time for further research of City records.
Special Council Meeting, November 4, 2013
Page -4-
Mayor Little asked if EG fees had been paid by Charter from November 1, 1998 to April 12,
1999. Bremer stated that Charter took control of the Franchise in January 1999 and she does
not believe EG fees were paid from January to April 1999. Bremer referred to the March 9,
1999 minutes of the Telecommunications Committee (Exhibit 2) which ask staff to make a
recommendation of whether to implement the EG fee. Little asked if there is any contention
that the Franchise had been amended in any way as a result of staffs recommendation.
Bremer stated that the issue involves Council's authority to defer implementation of the EG
fees and the contract can be amended in ways other than in
understanding that municipal law is different from general
authorized by ordinance cannot be amended except by an a
to comment without reviewing the case.
Bremer maintained that the City had the authority to verl
opposed to amending the agreement in writing, and their
decision was never modified. Knutson stated that rea
session but official Council action must be made at a
vote indicated in the work session in
Anderson asked if there had been an
actually collected the fee from their s
2011 had been auditedand there ww
There was no andit forth
that there were no EG fees collecteds
firm to coniluct'an audit in 2005 for
also done in 2000. Bremer asked if, v
decision at the work ses4cm and sug;
since these minutes were I f discovf
Grogan stated it is his
.t a City contract
Roger Knutson declined
defer implementation as
which constituted that
can be made at a work
egular Council meeting. There was no
of Charter to determine if they had
well stated that the period from 2010-
no revenu °e" "from EG fees recorded in the general ledger.
period from 1998 to 2010; however Charter contends
Bremer stated that the City had hired an independent
he hree to four previous years. A compliance review was
ould have been reasonable for Charter to rely on this
ested that more time be taken for research of records,
re&WY November 1
Little stafe4 that Charter has had a year to review the records and questioned if additional time
would be beneficial. Bremer stated the time would allow them to research Council minutes
back to 1999 as well as do legal research. Grogan stated that City staff has thoroughly
reviewed all applicable materials and is confident there were no amendments or further action
taken by the Council. The contract language clearly requires that an EG fee be collected and
submitted to the City and a discussion between staff and Council does not change the terms.
Bremer asked if the City was aware of these minutes before or after the violation notice was
sent to Charter. Mielke stated that staff was aware of the work session discussion; however it is
irrelevant as it does not constitute Council action. The other cable- related agenda item at the
work session was brought to Council for consideration at a later regular meeting, but the EG
fee item was not.
Special Council Meeting November 4, 2013
Page -5-
Regarding additional contributions by Charter, LaBeau stated that these are appreciated, but
are not in lieu of any part of the contract. LaBeau asked if the results of the 2005 audit are
being used as a starting point for calculating the amount due. Bremer stated that subscriber
numbers are not available. Bremer believes Charter relied on the discussion of the Council
since the EG fees were apparently never implemented.
Little asked if Charter has ever paid EG fees to the City of Lakeville and if so, how much.
Bremer said yes, beginning in August 2013 approximately $10,900 "Was paid based on $.50 per
subscriber. This was implemented at the request of the City- Bremer stated that when it was
learned that the EG fee had not been collected, a decision was riiade to begin collecting it on
August i, 2013 and the City `v'v'as inforimed. -
Davis referred to Item #9 of the Telecommunications Commission minutes March 9, 1999,
stating that the commission had voted 6 -2 to recommend implementation"ofthe EG fee as of
June 1, 1999 in the amount of $.45 per subscriber. Davis reiterated that a work session is for
the purpose of further discussions amongst Council members and is not an action meeting.
He asked if the decision to begin paying YhieEG fees was the'result of the Franchise or due to
the contact by the City. Bordwell stated it -was due to conversations with the City. Bremer
stated that due to claims that Charter was in breachof the contract they felt it was better to be
begin making payments while tl, ey were researching why the EG fees had not been paid.
Little stated that Anderson had prompted him with, a note to see if there were members of the
publiq�n,atterdauce who would hke to speak The note will become part of the meeting
materials. There was no one inaitendance who wished to speak.
closed by saying the contract isuambiguous and states that the fees should have been
implemented and should bein effect todaij. Although a portion of the time is limited by State
Statute, a substantial amount is due. He does not see a need for further continuation of the
public hearing'andbelieves adequate information is available for the Council to make a
decis . pu b li c h ear i ng X
Sion. He r rommends Coigi�u � close the pu li � caring an uuec
staff to prepare
Findings of Fact, either that Charter is not in compliance, or that Charter is in noncompliance
due to a material violatnn of the Franchise. Findings of Fact will be considered by Council at
their next Council meeting.
Bremer stated that the work session minutes make it reasonable to assume that the parties
agreed to defer implementation of the EG fees, and the law would support that conclusion.
Charter is recommending that the public hearing remain open for one to two weeks to allow
time for further research of Council meeting minutes after the April 12, 1999 work session.
Special Council Meeting, November 4, 2013
for
Anderson asked if that research has already been completed. Staff confirmed that it had and
that no further documentation had been found which pertains to amending the Franchise.
Little asked for comments from Council regarding closing the public hearing. Davis believes
that ample time has been provided for research and would be in favor of closing the public
hearing. Little agreed and believes both sides have adequately researched the issue. Anderson
expressed his appreciation for the positive open dialog and would also favor closing the public
hearing. LaBeau believes it is unfortunate that this situation has occurred; however, she is also
in favor of closing the hearing. There were no other comments
Motion was made by Davis, seconded by Anderson,
D,.11 71 t..Lo., ., mot A..... Anderson
t \VLt l.all VV aJ t0.1\lii on «1. "L1 1ttV LLV11. Ayl:. ,
Little asked for comments from Council on e liet
material violation or breach of the Franchise due
in the Agreement.
LaBeau believes there has been adequate d
Fact reflect a material violation of nonpayi
LaBeau that the purpose of any contract is
believes there has been "a material
adequate opportunity has been pr)
Davis, 3
act that
Franchise
EG'fees and to present the
R oll call was taken on the n
3. Adjourn
Mayer Li rde adjourned the
Respectfully
Page -6-
LIuxc,
hearing.
to find Charter Communications in
tonpayrient of EG access fees, as required
for research and suggested Findings of
EG fees by Charter. Little agreed with
i obligations of both parties and he
uired with�LaBeau and Little and believes
Anderson also concurred.
led by LaBeau to duct staff to work with the attorneys to
:er Communicafions has committed a material violation of
with noncompliance with respect to nonpayment of the
s of Fact at the November 18, 2013 Council meeting.
Aye:.;Davis, Little, LaBeau, Anderson
at 6:45 p.m.
Char Friedges, City Clerk
Matt Little, Mayor