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266372 WHI7E - CIT CLERK ���A�^ PINK - FI ANCE COUCICll d� �� CANqRY - . PA TMENT IT �OF SAINT PAITL File NO. �A ~ BLUE - AYO� ~ u il Resolution = Presented By � Referre o Committee: Date Out of Committee By Date RESOLVED by the City Council of the City of Saint Paul that Thomas J. Stearns, Assistant City Attorney, shall represent the City of Saint Paul in opposing Rule MCCC 121 (q) now pending before the Cable Communications Board, a copy of which rule is attached to this resolution, such opposition to be expressed in public hearings involving the rule and in the ultimate disposal of it throughout the administrative process; BE IT FURTHER RESOLVED that Thomas J. Stearns, Assistant City Attorney, may cooperate with the Cable Communications Board and assist it in developing its recommendations for changes in the Minnesota state law on cable communications insofar as such changes provide a fair consideration of the right of municipalities to own, purchase, operate or construct cable companies for the benefit of their citizens and in connection with the furtherance of the development of cable communications within the State of Minnesota. =:�, COULVCILMEN Requested by Department of: Yeas Nays Christe sen -Kea$&�l�T� In Favor Levine � �k` Against BY Sylvester Tedesco President I�ktn�� �fi�� �� � ��j Form Approved by City Attorney Adopted by C i : Date Certi ' Pas ouncil Secretary � BY By Approv by Mayor: Date � � Approved by Mayor for Submission to Council By By Pi�t.sSMi� N QY �`�� 397.��� . �. � Cl T y' O�. t`'.,;.. �� s � , e . �� n � ..-a//� � ,c�6����. Caaa 9595uaa9a■ "3 . a�8 093S9J3f8! �� �9 sa=��3d ,'C . � . . � .� � ; � ,.; ^ CITY OF SA1NT PAUL - y�s hC _ - -a.Q- OFFICE OF THE ClTY ATTORNEY November 7, 1975 PIERRE N. REGNlEK MEMOR.ANDUM TO: David H. Hozza, and Members o� the City Council FROM: Thomas J. Stearns, Assistant City Attorney �� For over a year I have been appearing before the Minnesota Cable Commission in hearings about the rules and regulations that it was to establish under riinnesota law. The rules are now eomplete, except in one regard. That is a proposed rule on compen- sation for value of assets at the termination of a franchise. This occurs either by the municipality failing to renew the franchise or by its revoking it- for a breach. I made several appearances opposing the. rule and submitted repeated arguments on. its � im.practicality, and on its outright disregard of munici�al determination of franchis� holders. Nevertheless, the Cable Commission adopted the rule in the early part of 1975 and forwardecl it to the Attorney General for his rejection or apnroval. At that time, I was permitted to file a brief on the questian and after doing so, I was advised that the Attorney General had, finally, rejected the rule because the enabling statute did not permit the Commission to extend its supervision over l�cal franchising to such an extent. Rec2ntly, T was advised that the Cable Commission wished to proceed with another form of a compensation rule. Cable companies had insisted that such a rule be adopted regardless of the earlier ruling. In _ City Hal1, Saint Paul, Minnesota 55102 612 2�8-.512� • Dav id H. Hoz za and ��" -� / � Members of the City Council Page Two November 7, 1975 reviewing what was proposed, I considered the new rule to be just as objectionable as the one before. Thereafter, I attended a meeting of the Cable Commission at which testimony by a repre- sentative of the companies, Mr. Richard Plunkett, was to the effect that he was not satisfied with the new proposals. He insisted upon having a somewhat private meeting with the Cable Commission at which industry would provide alternatives to be added to the phrasing. He recommended that the reviewing authority of the Attorney General' s office be present. Mr. Plunkett insisted that the only way industry could obtain what it wanted was to get a prior clearance befare any public hearings began. Following his suggestion, the chairn�an of the 'Cable Commission related in the hearing that he was doing everything he could to please industry and that he would set up a subcommittee meeting consisting only of inembers of industry,- himself, ancl a representative of the Attorney General' s office. At that meeting in September, industry submitted some amendments to the rule in question, and such were adopted unequivocally �ay the Cable �ommiss ion. As it now stands, the rule covering compensation for value of assets means that at the termination of' a franchise, both the municipality and any subsequent franchisee it wishes to have replace the earlier one would have an option to purchase all, part or none of the assets. However, if the purchase is made oi part or all of the assets, the rule directs that the price would have to be based on a market value, which is described as "the value of the system as a going business concern less the market value of the assets not purchased. " I find this language objectionable because it places an artif icially high value on assets and deprives the parties of what they might negotiate in �the area. As a further consequence of the rule, the language tends to prevent the municipality from franchising whomever it wishes. Tt forces a buyer to pay more than he is receiving in return. On its part, municipal purchase is allowed by state law, and in some circumstances that type of purchase may prove to be a very proper way of running a cable operation. Again, under the rule the city purchase of a franchise system, in part or in whole, would have to be paid for at a price based upon a market value of the system "as a going business concern" , too. I believe this latter condition is actually unconstitutional. � � �; f„ � ��b�;_� l� David H. Hozza and Members of the City Council Page Three November 7, 1975 Another problem with the proposal is that a municipality cannot discontinue the operation of the system upon its own choosing. Oddly enough, in paragraph 3 of the rule the only one who can decide upon discontinuing it is the franchise holder whose fra�chise has been revoked because of a serious breach of contract, or the franchise holder whose franchise has terminated because of unsatisfactory services at the end of a term. As I stated earlier, this particular proposal was drafted in conjunction with the chairman of the Cable Commission and repre- sentatives of industry. I would like to be in a position to request the Commission to allow a hearing officer determine the propriety of the rule and the legality of the rule. Under the new law, the State Office of Hearing Examiners� is going to have someone appointed to preside at the public hearing involved. I think he should not only preside over the hearing, but determine an ultimate approval or disapproval of the rule in the form it now stands. This delegation of authority by the Commission to a hearing officer is permitted by the state law and it seems to be a proper time for it to be exercised. TJ5/g f f� . ----- - ------ - .;. � �f�6�'�� COr�ENSATION FOR VALUE OF ASSETS r MCCC 113 Before a municipality may issue a franchise to a subsequent franchisee selected to replace �the original f�-anchisee or to itself in the event of a municipal purchase authorized � by Chapter Eighteen of these Rules, -of all or a portion of the system of an original franchisee, the parties to the transaction shall fix a selling price for the property of � the first franchise vtilized by the second franchisee in � accordance with Rule 121 (q) . 9/18/75 - ". , -...- -- -- -;�:,-. :. . - -- . - .- � . --- � - - � - , . . . . • . ._ , . . .. : , . .. • . - --- --- . — - -----_ . __ _ -_ - � --- __ .-- _ �_.__� __...---.__ __�.�_._. .�. – -._.: _. _ .--___ -- _ __ __...._ . _.:,� . . .y •, . - - - - ��6��� COTiPE1�SATION FOR VALUE OF ASSETS MCCC I21(q) �-p�o�+=`���n-t3�at-n�on-cxpiratsan-o€-thc-franchzac-tcra;-or-Gpan rebhce��on-e=-ti�e-€ra�chise;-ar-a�an-etiier-termine��en-e€-the-€raneh3se-�s-�re- bided-�or-in-t�ese-�tuies-ar-n�en-reee��t-e€-an-eg���c�i�}en-€ar-ag�rada�-e€-an . ass3gn�en�-o£-�Y�e-��aach�sc;-�l�e-n�nn3e�ga�3��-gke��-he�e-the-nea-er.��asy�e-�}�t�� • te-pn�e��se-�h�-s�s�e�.- A provision tnat: � (1) Zf the municipality shall fail to renew the franchise of the present franchisee or lawfully revoke any such franchise, any . subseqvent franchisee selected to replace the original fran- chisee shall be required to compensate the original franchisee . for its system or any portion thereof, actually to be utilized by the second franchisee, based on its market value - that is - the value of the system as a going business concern less the � market value of the assets not purchased. As a condition of - receiving a franchise, the subsequent franchisee shall certify ' what portion of the initial franchisee's property he intends . to utilize. If the parties cannot agree on a selling price for the property to be utilized within 60 days of the expira- tion or revocation of the original franchise,. a settlement � shal.l be effected through arbitration based on com�ercial ap- praisals as follows: each party shall appoint an arbitrator - and the two arbitrators so appointed shall within 15 days after • their appointment select a third arbitrator. Each arbitrator ' , appointed by the parties or selected by the arbitrators ap- . pointed by t}►e parties shall be a r�ember of the American • Arbitration Association. - .' ' — 1 — �,. �_.._. .--k-- .. . ._.---� - -- . . - . , _� . . . , . . .. .. -. -- . . . .: _ _ . _ __ . . .. :. . . - - - - . ___ ---_ _.�_ _ _ ... . . _ _. . __ _ � - . �• � � 1'he arbitra.ters SO ��}>01TlLE:U ���A11 �a.� � ��1�+���6 Y ^"" "-" � ' � . - �`�s����� ' . on market ralue, as hereinbefore defined, for the property' to be utilized by the second franchisee uithin 60 days of their � appointment. If the arbitrators so appointed cannot agree on . a sellins price, the selling price. shall be the arithmetic mean of the three appraisals. Any arbitration required by this sub- division shall be governed by the provisions of riinnesota Statutes, - Chapter 572 so far as the same is applicable. The cost of arbitra- tion shall be borne equally by the parties to the transaction. � (2)(a) Piunicipal purchase of a cable communications system: . . A municipality, upon conpliance with Chapter Eighteen of these Rules, may, if otherwise authorized by law or charter provision, purchase alI or a portion of the assets of a cable co�unications system upon notice to the franchisee as herein provided. Prior ' t� awarding itself a franchise, the municipalit} shall certify � ` what portion of the system it wishes to purchase. The municipalit} shall be requir.ed to co�pensate the franchisee for the portion of its system actually to be utili2ed based on its market value - that � is the value of the system as a going business concern less ttie market value of the assets not purchased. If the parties cannot , agree on a selling price within 60 days of revocation, expiration, or assignnent of the franchise, the selling price shall be deternined � . as provided in subparagraph (q) (1) of this Rule. (b) Municipal procedure; notice; election: , � Any municipality which desires to _acquire the property of a cable • communications system, as authorized by subparagraph (2) (a) of this . Rule and Chapter Eighteen of these Rules may determine to do so by resolution of the governing body of the municipality taken after a public hearing of which at least 30 days published notice��shall be . . - 2 - . . _ _ _ ___ ... _. _...� � �� � � ;��6�r�r� � . . .given as determined by the governing bod}�. The governing body may , in the resolution provide that the determination shall become ef- fective when ratified by a majority of the qualified electors ; voting on the question at a general or special election to be held for that purpose, held either in accordance with applicable charter provisions or not less than 60 or more than 120 days after the reso- lution of the governing body of the municipality. ' (c) Acquisition by eminent domain: � � hothing herein shall be construed to preclude a municipality from acquiring the property of a cable communications system by eminent domain proceedings. � (3) Upon the expiration or revocation of a franchise, the municipality shall require the original franchisee to continue to operate the r: system either until a new franchisee or the municipality begins to . operate the system, or the passage of 120 days from the date of such expiration or revocation, whichever condition sooner occurs. � Al1 provisions of the franchise shall be in full force and effect during said e�:tensian of the franchise. Upon expiration of the 120 day period herein prescribed, if no franchisee has been selected to replace the original franchisee or the municipality has not purchased the - system, the original franchisee may terminate services or shall have a license from the municipality to allow the original franchisee to continue to maintain his wires, cables, amplifiers, and other equipment in the public streets and ways until a subsequent franchisee is selected to replace the original franchisee, the subsequent franchisee -3- , . . . .. ��