HomeMy WebLinkAbout1985-07-22 City Council Summary MinutesCITY
COUNCIL
-;;; Z_S
Regular Meeting
July 22, 1985
CITY
OF
PALO
ALTO
ITEM PAGE
Oral Communications 6 0 8 4
Approval of Minutes of May 29, 1985 6 0 8 4
Item #1, Welcoming Enschede Students 6 0 8 5
Item #2, Appointment of Planning Commissioners 6 0 8 5
Consent Calendar 6 0 8 7
Referral 6 0 8 7
Action 6 0 8 7
Item #3, Regional Water Quality Control Plant 6 0 8 7
Roofing Project
Item #4, Matadero and Adobe Creek Storm Drainage 6 0 8 7
Pump Stations - Amendment to Consultant Agreement
Item #6, Evergreen Park/Southgate Residential 6 0 8 8
Permit Parking Program
Item #7, Professional Services for Alcohol Tests 6 0 8 8
Item #8, Park Equipment Repair and Maintenance 6 0 8 8
Contract
Item #9, Fire Compensation Plan and Memorandum of 6 0 8 8
Understanding
Item #10, Termination of Local Emergency 6 0 8 8
Item #11, Continuation of Agreement for
Subscription to Lexis Computer Assisted Legal
Research Service
Item #12, Ordinance re 37''2-3724 Ortega Court (2nd
Reading)
Agenda Changes, Additions and Deletions
Item #13, PUBLIC HEARING: Planning Commission
recommendation re denial of the application of
Alice and Valerie Glickman . for preliminary parcel
map for property located at 1347 Alma and 103
Kellogg
Item #15, Designation of a Community
Organization_. for Cable Communications
Item #16, Cable Television Franchise Selection
6 0 8 8
6 0 8 9
6 0 8
6 0 8 9
Access .6 0 8 .9
ITEM P AGE
Recess 6 1 0 7
Item #14, Repor* from Council Legislative 6 1 1 8
Committee
Adjournment: 12:05 a.m. 6 1 1 9
Regular Meeting
duly 22, 19d5
The City Council of the'City of Palo Alto met on this date in the
Council Chambers, 250 Hamilton Avenue, at 7:35 p.m.
PRESENT: Bechtel, Cobb, Fletcher, Klein, Levy, Renzel,
Sutorius, Woolley.
ABSENT: Witherspoon absent
Mayor Levy announced that a Closed Session re Personnel was held
in the Council Conference Room at 6:15 p.m.
ORAL COMMUNICATIONS
1. Bill Armstrong, 363 Whi tcl em Place, was one of the three
neighbors sharing property lines with the flag lot at 4293
Wilkie Way. The lot was substandard and had only 4,200 as
opposed to 7,200 square feet as required by ordinance, and it
had a 10 --foot easement rather than a 50 -foot easement. The
lot never existed as .a res ienti ai lot and it was not designed
to be a residential. lot. ',he setbacks in the early 1950s were
25 feet both front and back as opposed to 20 feet now. It was
always a pumping site for a private water company, and the
existing subdivision was designed around it. It was specific-
ally excluded from the subdivision because of its nature as a
public facility. It should have been zoned public facility
when the area was annexed to Palo Alto in 1955. Sometime in
the 1960s the water quality of the well deteriorated such that
it was rendered unusable. He submitted a petition (which is
on file in the City Clerk's office) requesting a hearing on
the matter. Palo Alto did not require a variance to build on
a substandard lot so they had no appeal process short of liti-
gation. The thrust of Horn v. County of Ventura was that when
their property values started to be affected, they had a right
to notice about the determination as to the legal status of
the lot. Their petition called for a negative declaration of
environmental impact. He spoke with Bob Brown who advised it
was a ministerial matter not adjudicative and not subject to
the California Environmental Quality Act (CEQA) regulations.
He requested a hearing.
Mayor Levy clarified Mr. Armstrong had previously discussed the
matter with staff and advised that his comments were recorded.
MINUTES OF MAY 29, 1985
Coufcilmember Renzel had the following corrections:
Pale 5830, third paragraph; fourth line from bottom, delete the
word "ate," and '°whatever should be "whenever."
Page , 5833, fourth. paragraph,., last line, '°would„ should
Wcould." T
Councflmember Fletcher had the following correction
Page 5814, comments of Peter Taskovich, last three lines should
read: "...explore other options using whatever mode was recom-
mended, be i t light rail , BART, or electrified rail. Room should
also be set aside for a rail system through the new ...a"
NOTION: Cooac i l weber Renzel moved, seconded _ by Woolley,
approval of the Ni estes of Nay 29, 1985, as corrected.
NOTION PASSE!) u animoesly, Witherspoon absent.
ITEM #1, WELCOMING ENSCHEUE STUDENTS (PRE 2••1-3)
Mayor Levy said cultural exchange resulting from people -to -people
communication was the foundation of the Sister City Program which
attempted to further international understanding, and the City of
Enschede was Palo Alto's Sister City in The Netherlands, and
honored Palo Alto by sending its representatives to visit the
City. The City of Palo Alto welcomed Willem Mijnarends, Max van
Dam, Nadia Kafu, Gi js de Rooi ji , Loes van Dam, Christine Brusse,
Peter Cohen, Dennis Loep, Patrick van Eijck, and Joop Teekamp.
Participation in the cultural exchange exemplified the mutual ob-
jectives of the two cities, namely to promote, encourage, and cul-
tivate understanding between the people of Enschede and Palo Alto.
Because the opportunity to welcome the Enschede visitors to Palo
Alto has proven to be mutually beneficial, the Council of the City
of Palo Alto recognized the presence of the Enschede visitors and
expressed its appreciation on behalf of the people of Palo Alto to
the City of Enschede and its representatives for their significant
contribution to the. Sister City Program.
MOTION: Mayor Levy moved, seconded by Cobb, approval of the
resolution.
RESOLUTION 6411 entitled *RESOLUTION OF THE COUNCIL OF
THE arr-orwro ALTO RECOGNIZING THE PRESENCE OF, AND
WELCOMING TO THE CITY OF PALO ALTO, REPRESENTATIVES OF
ENSCHEDE, THE NETHERLANDS"
MOTION PASSED unanimously, Witherspoon absent.
Mayor Levy presented framed copies of the resolution and a flag
from the City of Palo Alto to each of the visitors from Enschede,
The Netherlands.
ITEM #2, APPOINTMENT OF PLANNING COMMISSIONERS (COU 5-4-2_)
FIRST ROUND OF VOTING FOR TWO TERMS EXPIRING JULY 31, 1989
Mayor Levy said he planned to vote for the incumbents.
Councilmember Renzel said she also planned to vote for the incum-
bents. The existing Commissioners were doing an excellent job
and there were many major planning issues underway on which their
expertise would be needed.
Counciilnember Bechtel concurred with her colleagues. She believed
the experience of the incumbents was excellent and very needed for
the Planning Commission. For the short term seat, she believed
someone was needed who was up to speed and to her that person was
Pam Marsh who served on the Downtown Study Committee.
Vice Mayor Cobb said he intended to vote for the incumbents. At a
time when the City was about to go into a major Comprehensive Plan
review plus complete the work started 0n the Downtown Study, he
believed it was important to have experienced leadership. He
looked forward to their completion of the tasks underway.
RESULTS OF THE FIRST ROUND OF VOTING
Assistant City Clerk Gloria Young announced the results of the
first round of voting:
VOTING FOR CULLEN: Bechtel, Cobb, Fletcher, Klein, Levy,
Renzel, Sutorius, Woolley
,M . 'young said Ms. Cullen received eight votes and was appointed.
RESULTS OF THE SECOND ROJUCJ OF VOTING
Ms. Young announced the results of the second round of voting:
VOTING FOR WHEELER: Bechtel, Cobb, Fletcher, Klein, Levy,
Renzel., Sutorius, Woolley
Ms. Young said Ms. Wheeler received eight votes and was
appointed.
APPOINTMENT OF PLANNING COM'-'ISSIONER TO FILL ONE SPECIAL SHORT
fro PIRINt MARCH 20, 1gB6
Councilmember Renzel concurred with Councilmember Bechtel with
regard to appointing Pam Marsh to the interim position. One of
the major issues before the Planning Commission was the Downtown
Study, and she believed Ms. Marsh had shown herself to be knowl-
edgeable on that issue as well as many other planning issues. She
believed she would be an articulate and .informed person for the
Planning Commission.
Councilmember Sutorius was pleasantly surprised and impressed with
the caliber of the candidates for the position. At the time Coun-
cil determined it would only fill one of the positions, one of the
concerns expressed was that for a short term it; might be difficult
to attract candidates who were willing to serve for the short term
and who would have the important qualifications. There were five
exemplary candidates, and the selection was difficult. He
intended to vote for Bodrell Smith on the first ballot. In the
event he was not appointed, he hoped he and the other candidates
would continue to be candidates for future appointments. He
intended to support Pam Marsh on the second ballot if a decision
was not !wade on the first.
Vice Mayor Cobb concurred with Councilmember Sutorius` observa-
tions about the quality of the candidates. He found the choice to
be particularly difficult because the people were so well quali-
fied. He believed Mr. McMichael would bring some fresh outlook
that would be useful to the Planning Commission. Mr. Maione
served the City well and was currently the Chair of the Visual
Arts Jury. He would also rake a fine candidate for the Planning
Commission and/or the Architectural Review Board (ARB). He would
vote for Pam Marsh on the first ballot because for an eight -month
appointment, he believed Pam was the best qualified to jump in and
get the job done and be up -to -speed immediately particularly- since
she also brought the valuable experience of the Downtown `'Study
which was needed because it was one of the most important things
the Commission would be doing over the next few months,.
Councilmember Klein agreed with most of the things stated by his
colleagues. He believed Council received more comments on the
subject appointment than on the last 20 appoietments which
reflected the difficulty of the choice and the outstanding caliber
of the candidates. He would vote for Rick McMichael on the first
ballot. He l i ked a Planning Commission with a variety of perspec-
tives and 14r. McMichael would provide a perspective and expertise
not seen before. At the same time, he had a clear commitment to
the policy and goals shared by the vast majority of Palo Al tans.
It was a close call for him between Rick and Pam Marsh.
Mayor Levy said he intended to vote for Orlando Malone. He con-
curred with his colleagues about the quality of the applicants.
Despite the fact that everyone i n Palo Alto was more busy and ser-
ving on the various boards and commissions was more time consum-
ing, the level and quality of the candidates rose. It was said
that to accomplish something, the task should be given to a busy
person. Mr4 Malone was on the Visual Arts Jury andwas an archi-
tect by profession. He served Palo Alto for many years and was
knowledgeable in all areas of the City from planning to general
beautification. His perspective would be.., valuable on the Planning
Commission.
RESULTS OF THE FIRST ROUND OF VOTING
Ms. Young announced the results of the first round of voting:
VOTING FOR MARSH: Bechtel, Fletcher, Cobb, Renzel
VOTING FOR McMICHAEL: Klein
VOTING FOR MAIONE: Levy, Woolley
VOTING FOR SMITH: Sutorius
RESULTS OF THE SECOND ROUND OF VOTING
Ms. Young announced the results of the second round of voting:
VOTING FOR MARSH: Bechtel, Fletcher, Klein, Cobb, Levy,
Renzel, Woolley, Sutorius
Ms. Young announced that Pam Marsh received eight votes and was
appointed.
Mayor Levy congratulated all of the appointees.
CONSENT CALENDAR
Councilmember Sutorius noted that Item #5. Sewage Transportation,
Treatment and Disposal was removed from the Consent Calendar and
would be rescheduled for the August 5, 1985 meeting.
MOTION: Councilmember Sutorius moved, seconded by Cobb,
approval of the Consent Calendar.
Councilmember Fletcher advised that she would "not participate" on
Item #12, since she was not present for the first reading.
Councilmember Bechtel said she was listed on the agenda as voting
"no" on Item #12, when she voted `yes and Councilmember Sutorius
voted "no."
Referral
None
Action
ITEM #3, REGIONAL WATER QUALITY CONTROL PLANT ROOFING PROJECT (UTI
1-4) (CMt:4:17:5)
Staff recommends that Council award a contract in the amount of
$53,515 with a $5,000 contingency to Western Roofing .for the
replacement of the incinerator and operations building roofs.
AWARD OF CONTRACT
Western Roofing
ITEM # MATAOERO AN{3 AIIOBE CREEK STORM DRAINAGE PUMP STATIONS -
AME ND. ,
ASSOCIAT , ,. MR:424:5) -
Staff recommends that Council:
1. Authorize the Mayor to execute the amendments to the Barrett,
Harris s & Associates, Inc. agreement for additional design and.
;construction administration services for $47,599; and
Authors a staff to execute change orders to theagreement o
up to $7,000.
AMENDMENT NO, ONE TO -CONTRACT NO 4278
Barrett, Harris and Ass',cirotes, Inc.
6 0 8 7
7/22/85
ITEM #6. EVERGREEN PARK/SOEITHGATE RESIDENTIAL PERMIT PARXING
PROGRAM (PLA 4-1-7) (CMR:433:5)
y
Staff recommends that Council adopt the ordinance which suspends
the Evergreen Park/Southgate residential permit parking program
for a period of two years.
ORDINANCE FOR FIRST READING entitled "ORDINANCE OF THE
COUNCIL -OF THE ALTO AMENDING CHAPTER 10.45
OF THE PALO ALTO MUNICIPAL CODE WHICH ESTABLISHES A
RESIDENTIAL PERMIT PARKING AREA IN CERTAIN PORTIONS OF
THE SOUTHGATE AND EVERGREEN PARK NEIGHBORHOODS TO EXTEND
THE VALIDITY OF THE PARKING PERMITS`"
ITEM #7, PROFESSIONAL SERVICES FOR ALCOHOL TESTS (SAF 3)
(CMR:434:5 )
Staff recommends that the City Council authorize the Mayor to
execute the agreement with Milton Smith, Jr., for FY 1985-86 to
provide services as required by the California Vehicle Code.
AGREEMENT
Milton Smith, Jr.
ITEM #8, PARK EQUIPMENT REPAIR AND MAINTENANCE CONTRACT (PAR 2)
(CMR: 435:5)
Staff recommends that Council:
1. Authorize the Mayor to execute a contract with Zonger
Johnson for $22.00 per hour, not to exceed $17,500
2. Authorize staff to execute change orders for $3,000.
AWARD OF CONTRACT
Zonger Johnson
ITEM #9, FIRE COMPENSATION PLAN AND MEMORANDUM OF UNDERSTANDING
(TER 2-2) (CMiT 44:5)
Staff recommends Council approval of the resolutions to amend
Sects69 1501 of the Merit System Rules and Regulations regarding
the Memorandum of Understanding between the City of Palo Alto and
Local 1319 and adopting a Compensation Plan for the Fire
Department Personnel
RESOLUTION 6412 entitled 'RESOLUTION OF THE COUNCIL OF
THE Cl1'T"'OF PALO ALTO ADOPTING A COMPENSATION PLAN FOR
FIRE DEPARTMENT PERSONNEL AND RESCINDING RESOLUTION NO.
594€ AND RESOLUTION 4152.'
RESOLUTION 6413 entitled 'RESOLUTION OF THE COUNCIL OF`
ALTO AMENDING SECTION 1501 OF THE MERIT
SYSTEM RULES AND REGULATIONS REGARDING THE MEMORANDUM OF
UNDERSTANDING BETWEEN THE CITY OF PALO ALTO AND LOCAL
1319, INTERNATIONAL ASSOCIATION OF FIREFIGHTERS.'
ITEM #10, TERMINATION OF LOCAL EMERGENCY (SAF 2) (CMR:443:5)
Staff recommends Council approve the Proclamation in order to meet
the State regd'irement that a local emergency status be officially
terminated when conditions have returned to normal.
PROCLAMATION OF TERMINATION OF LOCAL EMERGENCY
ITEM #11 INU CONT ATION OF' THE AGREEMENT; FOR SUBSCRIPTION TO THE
EEXIS- O I
C PU R. ASSI , LE AL = REcEARCI SERVICE - MEAD DOW
Staff recommends Council approve the contract, authorizing staff
to continue the agreement.
9/22 8t
ITEM #1'j, OROINANrE RF 3722-3724 ORTEGA COURT (2nd Reading) (PLA
3 1)
ORDINANCE 3623 entitled *ORDINANCE OF THE COUNCIL OF THE
tiTY OF PACT7LTO AMENDING SECTION 18.08.040 OF THE PALO
ALTO MUNICIPAL CODE (THE ZONING MAP) TO CHANGE THE
CLASSIFICATION OF PROPERTY KNOWN AS 3722-3724 ORTEGA
COURT FROM R-2 TO PC" (1st Reading 7/1/85, PASSED 7.1,
Sutorfus "no,* F1,4'cher absent).
MOTION PASSED unanimously, Fletcher not participatipe on Item
112, Ordinance re 3722-3724 Ortega Court, Witherspoon absent.
AGENDA CHANGES, ADDITIONS AND DELETIONS
Mayor Levy wanted to bring forward Items #15 and #16, re cable. A
continuance was requested for Item #13, 1347 Alma and 103 Kellogg,
and he suggested Items #15 and #16 regarding the Cable Television
franchise selection process follow Item #13.
MOTION: Mayor Levy moved, seconded by Klein, to bring forward
Items 15 and 16, re cable, to follow Item 13.
MOTION PASSED unanimously, Witherspoon absent.
ITEM #13, PUBLIC HEARING: PLANNING COMMISSION RECOMMENDATION RE
FOAL 01 THE APPLICATION OF ALICE AND VALERIE GLICKMAN FOR A
PRELIMINARY PARCE HAP FOR PROPERTY LOCATED AT 1147 ALMA AND 103
KELLOGG (Continued from 7/15/85) fPLA 3-1)
MOTION: Counci l member Klein . moved, seconded by Renzel to con-
tinue Item 113, re 1347 Alma and 103 Kellogg, for 75 days.
MOTIOk PASSED unanimously, Witherspoon absent.
ITEM #15, DESIGNATION OF A COMMUNITY ACCESS ORGANIZATION FOR
ABLE COMMWT ATIONS (PIE 7-ij (CMR:(39:5)
Deputy City Manager Larry Moore requested that Council indicate
its intent to designate the Mid -Peninsula Access Corporation
(MPAC) as a community access organization for the cable communica-
tions service area. The action would allow MPAC to negotiate for
funding with the targeted cable companies.
MOTION: Counci l aesaber Klein moved, seconded by Cobb, approval
of the resolution.
RESOLUTION 6414 entitled *RESOLUTION OF THE COUNCIL OF
CITY -0F PALS ALTO OF ITS INTENT TO DESIGNATE A CABLE
ACCESS ORGANIZATION FOR CABLE TELEVISION"
MOTION PASSED unanimously, Witherspoon absent.
ITEM 116 CABLE TELEVISION FRANCHISE SELECTION (CMR:440:5)
(PRE 7
Oeputy City Manager Larry Moore said his presentation would focus
on changes in the cable franchising environment, work of the =Com-
munity Access Organization (CAO), and the proposals of he two
applicants for the franchise, City Cable _:;Partners and the Cable
Co -Op. The CAO would provide a status report on its activities
since Council selected the incorporators on April 22, 1985. The
largest part of the presentation would be by the applicants. Each
would make a 20 -minute presentation on how it proposed to meet. the
City's basic obi cti ves in cable franchf si ng. For the record, the
City's Request for Proposal (RFP) issued in June, 1983, set forth
its 11 basic objectives for cable communication services in the
City and the other Jurisdictions in the service area as follows:
6 0 8 9
7/22/85
1. High penetration of subscriber services at the lnwest possible
cost;
2. Broad diversity of services available uniformly throughout the
service area;
3. Widespread community involvement in local programming, access,
and related communications services by residents, departments
and agencies, institutions, businesses and others within the
service area;
4. Creative uses of technology to foster participation in local
self-government and community activities;
J. Active cooperation between the cable operator and City agen-
cies and departments and institutions within the service area,
including, in particular, educational, cultural, and other
institutions, including Stanford University, Palo Alto Unified
School District, and Foothill College, that may provide cable
programming and services over the system;
6. A technically sound and flexible cable system consistent with
the state-of-the-art of cable technology;
7. Interconnection of the system to cable systems throughout the
region and to external sources of programs and services;
coordinated programming and operational relationships with
cable systems within the region;
8. Timely and orderly construction of the system;
9. Efficient and effective oversight and regulatory mechanisms;
10. An economically viable cable system; and
11. An ownership structure that enhances community participation
and.. maximizes the service and economic benefits of cable
television to the residents of the service area without
unacceptable risks to the City.
Mr. Moore said the City also Histed some suggested requirements
for providing cable television in the service area to inform
interested applicants about the kind of system and the nature of
services the Citybelieved were necessary to meet its basic objec
tives. The companies were requested to respond how they would
meet the requirements; or, to the extent a company did not intend
to meet one or more of the requirements, to explain its
alternatives for meeting the City's basic objectives. Because of
the Cable Communications Act of 1984 and perceived changes in the
cable marketplace, the City could no longer` adhere to some of
those, possible requirements; and, consequently_, it was now more
useful to judge the applicants proposals in terms of the basic
objectives.
In October, 1984, as the City was about to release a draft fran-
chise agreement to the two targeted cable companies, Congress
passed the Cable Communications Act of 1984. The major effect of
the new law was to allow local jurisdictions to impose certain
standards on cable franchisees that were in the public interest,
but the law . also limited the regulatory power over cable.
franchisees by - local jurisdictions. While the City could now
enforce provisions of the franchise which affected the Maintenance
of broad mix quality and the level of cable services, it could no
longer specify those services, nor could the City regulate the
rates charged to subscribers for receipt of programs or services,
including installation charges and other related services While
the City could require ° a franchisee to provide services,'
facilities and equipment related to public, educational and
governmental use of channel capacity on the cable system, it could
not —require that the coml►any contribute ,rants, funding or : any
other kind of continuing operational support for community access
programming.
Mr. Moore said cebl e communications and related new technology
were popular targets for litigation. The City's wisdom of pro-
ceeding cautiously .in franchising required more time by both the
City and the applicants than was originally allowed: to reach a
franchise agreement. Staff and consultants needed to carefully
reconsider the City's obligations under the new law and its nego-
tiating posture. Each applicant had similar considerations.
An overhead was presented which listed, by task, targeted comple-
tion date, the actual completion date, and any comments on the
relevant activities which occurred over the past year. The ini-
tial task was to complete the draft franchise agreement and appen-
dices, which were essentially done by the consultants, Arnold and
Porter. The targeted completion date was September 7, 1984, on
the assumption that the task would commence August 1, 1984. The
actual commencement date was August 16, 1984, and the completion
date was October 2, 1984, but the federal legislation was passed
on October 11, 1984, which made the draft agreement outdated. The
draft agreement and the appendices had to be revised to reflect
the new federal -legislation, which was completed on November 21,
1984. The revised draft franchise agreement and appendices were
sent to the applicants on November_ 29, 1984. Staff asked that the
applicants respond to the draft franchise agreement and appendices
on January 14, 1985. Each applicant returned the agreement on
February 4, 1985, but the appendices were not received from City
Cable Partners until April 5, 1985, and the appendices were not
received from City Cable Co-op until May 15, 1985. The draft
agreement was returned to the applicants on June 21, 1985, and
negotiations were completed with both applicants on July 12,
1985.
To complete the franchising award process, several actions were
necessary, which, including the required time line, were as
follows:
1. The revised appendices were due to the City from the appli-
cants on July 24, 1985;
2. Staff expected the agreement and the appendices would be
approved by all negotiating parties on August 9, 1985. Also
on August 9, the City would provide to the applicants finan-
cial update information or the forms for the financial update
information.
3. On August 15, 1985, the agreement and appendices would be sent
to the Palo Alto City Council and the members of the Joint
Powers Agreement (JPA) .
4. Financial updates were to be completed by the applicants and
returned to the City on August 23.
5. Any comments from members of the JPA on the agreement and the
appendices were due to the City on August 29.
6. The staff report, including a .recommendation, would be sent to
the Council on September 5.
7. The City Council would make its decision on September 16.
Mayor Levy introduced the City's Cable Communications Coordinator
Jeanne Moul ton.
Cauncilmember Klein was disappointed with the delays and that
Council would not make its decision in August. He was shocked
that COunci1 was notified of the further delay by newspaper
reporters rather than staff and asked why.
Mr. Moore -said staff negotiated agreements in principle with each
of the cable companies by July 12. Many _administrative activities
were necessary to get a typed document to the Council, which
included review by the attorneys, each .of the applicants, and the
JPA. The uriyi+iai date might nave been overly ambitious and Coun-
cil should have. been notified it was unrealistic.
Councilmember Klein was surprised to learn of the inordinate
delays by the applicants.- He asked if staff expected the appen-
dices would take two to three 'months_ l onger than anticipated from
the two applicants.
Mr. Moore said staff wanted the most complete document possible
which required a lot of time and that the applicants might want to
respond to that question.
Councilmember Klein said the applications were received_ on
February 4, and he asked if staff anticipated the appendices would
be received'aleng with the completed agreement.
Mr. Moore said yes.
Councilmember Klein asked if either applicant advised that the
appendices would be delayed for so long.
Mr. Moore said on or about February 4, each applicant indicated it
needed more time to complete the appendices, but not the amount of
time it actually took.
Councilmember Klein clarified that each; applicant asked the City
to speed up the process.
Mr. Moore said that was correct according to the newspapers.
Councilmember Klein wanted to make a motion before Council heard
from the public because he wanted the ddelays to end. His motion
would put everyone, including staff, the applicants and the mem-
bers of the JPA, on notice that Council would absolutely abide by
the time line outlined by staff. If the applicants could not live
with it, it would be considered when deciding which applicant was
preferred. It was important for everyone to recognize the various
delays went on too long and it was time for Council, as the deci-
sion -making authority, to say no more delays from anyone.
Mayor Levy endorsed Councilmember Klein's proposed motion. He
asked staff to work out an absolute date certain where all of the
documents would be in order for Council, the public, and ready for
a decision.
Councilmember Bechtel concurred with the general discussion. She
was concerned when she saw the agreement proposal was sent out by
staff in November, 1984, but everything was not received back
until the end of May, 1985. Regarding the date proposed by staff,
she was concerned if the members of the JPA only had the last two
weeks in August to go over a 123 -page agreement, plus whatever
materials were attached, it was the only time they would have to
respond. She asked if there was any way the material could be
sent now, at least preliminarily, to the other members of the JPA
in order to give them a .month to respond. She realized Senior
Assistant City Attorney Anthony .Bennetti did not have all the
material, but he had some potion of it, and something should be
able to be sent. She was concerned about the JPA requesting a
delay.
City Manager Bill Zaner said a response from JPA members was
advisory to the City Co.onci l . The authority was delegated to the,
Palo Alto City Council to award a franchise. While it was safe to
say Council wanted to hear their reaction, the agreement was tech-
nical and complicated find would take some time for each of the
cities to go over, but it w,as not one where they would request a-
change to one piece of it in favor of a particular part of, the
agreement ,:in which they had an interest. The agreement was ,
package whi th would be emehasi zed . to the JPA members. Staff would
recommend the JPA make no changes in the agreement, and the same
recommendation would be made to Council. He did not helieve there
would be a problem getting it back from the JPA members An a two-
week period. He believed it was important for them to have an
opportunity to review it, but he did not anticipate a problem from
it.
Councilmember Bechtel said it was fine that staff would recommend
no changes be made, but there were political bodies involved, and'
she asked why the agreement could not be sent now with a cover
memo that it was a package not to be changed. She was concerned
about vacation schedules, etc.
Mr. Zaner said the agreement was now being put in final form.
Negotiations were completed and conclusion was reached on what the
agreement should contain, but the precise wording was being
cleaned up and the attorneys needed to review it and make sure it
said what was agreed would be said. Staff also wanted to give the
cable companies an opportunity to initial the agreement to say
"yes' it constituted the agreement across the table. Then the
document would be available for anyone to review. Prior to that
tune, he believed it was unfair to give the agreement out espe-
cially if the cable companies, in good faith, read the agreement
and concluded that some of the language did not represent what
they believed was said at the table.
Councilmember Fletcher asked when staff realized Council would not
have all the documents in time for the hearing.
Mr. Zaner said a lot of press surrounded a possible delay in the
process. Staff completed the negotiations in much less time than
he anticipated, the entire negotiation process with both companies
having been completed in a five-day period. When the process was
completed and staff looked at the results, it indicated a lot of
rewriting and work to be done. He did not believe anyone could
have guessed the timing until the negotiation process was com-
pleted. Once the process was finished, and staff began to look at
the time necessary to do the tasks indicated by Mr. Moore, it was
obvious that staff would not make an early date and would need at
least until mid -September to put the package together.
Councilmember Fletcher believed a vital ingredient of a public
hearing was missing when Council had no documents for referral or
for the public to speak to. It would have been useful if Council
was notified in advance and had the opportunity to delay the pub-
lic hearing to a later date closer to the time when Council would
make a
decision, She was - shocked when she received the packet
with no information --not even the`; i nformati on about the time frame
under which Council was working.
Mayor Levy suggested that after Council completed the preliminary
discussion and voted on the resolution, Council hear from the CAO,
then Council could hear from the two applicants, the City Cable
Partners and the Co-op. Staff suggested 20 minutes, but given the
nature of the discussion of cable generally, he believed it was
prudent to give each applicant 30 minutes. After presentations- by
the .applicants, he would call on the public. It appeared i t would
be about 10:00 p.m. before Council heard from the public.
Councilmember Woolley was bewildered about why the involvement of
the JPA members, the attorneys, and the applicants were unknown
when the .duly 22 and August 5 dates were originally set.
Mr. Zaner said staff always anticipated the JPA members would have
an interest in the agreement and would want to know its contents.
Staff was concerned they have sufficient time for ti JPA to
review the agreement. As staff now looked At the tip, 4ig, there
was no way foi- itto be done, without submitting it tc,, JPA, giving
then 10 days to two weeks to review it, and return whatever com-
ments they believed were appropriate if any.
1
Vice Mayor Cobh said the cable issue , caused him more embarrassment
on his first term an the Council than any other. He continually
received the question from his children and others about when the
City would have cable television. He supported the comments and
concerns raised by his colleagues, and intended to: support Coun-
cilmember Klein's motion, He read in the paper that the firms
involved did not know there was a substantial reimbursement
involved for the winning company. He asked if that was accurate.
Mr. Zaner said the request for proposal clearly spelled out that
the successful franchisee would be expected to reimburse the City
for its costs.
Vice Mayor Cobb was shocked something that large surfaced so late
in the game. If he read the schedule correctly, in about three
weeks, Council would receive copies of the agreement, appendices
and techical documents. Approximately three weeks thereafter, as
he understood the schedule, Council would receive a staff report
which would presumably analyze the documents and ultimately arrive
at a recommendation. He was concerned as to the efficiency of
having the larger documents without the staff report to help with
the analysis and as to whether the time available to Council from.
September 5 to September 16 would provide adequate time for review
in order for Council to properly evaluate the information. He
asked if there was a way to get the documents closer together in
order for Council to have the benefit of staff's professional
expertise and analysis as it looked at the contract and the amend-
ments.
Mr. Moore said it was intended that Council would receive the
agreement and appendices as quickly as possible in order to have
plenty of time prior to the decision meeting to go through them
carefully. The staff report scheduled for early September would
not be the kind of a: document Council received previously from
Arnold and Porter. The report would essentially look at the dif-
ferences between the two companies and make a recommendation. It
would not contain a lot of the technical information Council pre-
viously received on the topic.
Vice Mayor Cobb asked if the agreement and appendices would con-
tain any technical overview from staff when Council received
them.
Mr. Zaner said a careful technical analysis,.. i .e., an analysis of
the systems themselves were being done by the consultant and their
engineers. The system Council received from each of the companies
was a technically state-of-the-art system. It was not a faulty or
defective system.
Vice Mayor Cobb believed he could do a better job of evaluating
the documents if he had with some of the technical expertise he
knew was going on. Given that Council had no documents before.
they, against which to measure the testimony it received from the
applicants and public, as an individual Councilmember, he strongly
urged both applicants to direct their comments to the l l points of
the basic objectives in order for Council to compare "apples and
apples." He would take notes on the comments and hoped he had 11
points on each side on which to compare as best as possible.
Councilraember Klein asked if staff intended to write their report
before or after they received comments, if any, from the JPA.
Mr. Moore said parts of the report could be `written early and com-
ments from the JPA members would be incorporated into the report.
Counci lmember , Klein agreed with Counci i member Bechtels co ments
that giving the JPA two weeks to respond. was probably not enough
time. He wa►nted to change the date to September 5, and'_change the
Council selection of franchise date to September 23. He asked if
staff wanted their report to go out on September 5 or September
12.
/92,8t
Councilmember Klein suggested Council clarify it was starting the
process of selecting the franchisee on September 23. He believed
Council should set aside as much of that week as possible. He,
expected Council would not necessarily be able to reach a decision
on September 23 since there would be a lot of public input. He
suggested meeting on September 23 and 25 and whatever else was
necessary for Council to arrive at a decision. He would take into
account in his vote any applicant who did not comply with their
portions of the schedule.
MOTION: Councilmember Klein moved, seconded by Cobb, to adopt
Timetable Target Completion dates suggested by .staff with the
following changes:
Task Target Completion Date
Revised Appendices due to City from
Applicants
7/24
Agreement and Appendices approved 8/09
by negotiating parties
Request for financial updates due 8/09
to applicants from City
Agreement and Appendices sent to 8/15
Palo Alto City Council and JPA
members
Financial updates due to City from
applicants
JPA comments on Agreement and
Appendices due to City
City Manager's Report sent to
Council
Council selects franchisee'
8/23
9/05
9/12
9/23
Further, that the Council's starting date for the process of se-
lecting a franchisee is 9/23 and to reserve 9/25 and 9/30 for
additional Council meetings as necessary; and furthers the staff
to adhere to the Timetable set forth.
Councilmember Sutorius asked if the consultants would be available
for tie dates set forth.
Mr. Moore said yes,
Mayor Levy asked if the timetable was something staff could, with-
out question, live with and make sure the JPA partners were also
sensitive to the desire to ensure that September 23 was a date
certain.
Mrs Moore said yes.
Councilmember Klein said if he were one of the other JPA city.
councils, he would appreciate getting as much information as pos-
sible earlier than that being discussed. He asked, that"staff
figure out what they could send to the other cities early that
would start them on the process of getting sufficiently informed
in order to react within _ the three-week time frame being dis-
cussed.
Councilmember Renzel said while she supported the calendar motion,
she believed Council was harsh on staff inasmuch as they had a
major •fire to fight during the time of the negotiations and many
heavy commitments going on at the same time; It was unfair to
fault them entirely on the calendar problem,
5 0 9.5
7/22/85..
MOTION PASSED unanimously, Witherspoon absent.
George Stepanenko, Mid -Peninsula Access Corporation, said he, Zaki
Lisha, and Jawanza Osayimwese were appointed on April 22., 1985, to
incorporate an independent, nonprofit Community Access Organiza-
tion for the service area of the proposed cable television fran-
chise. On June 19, 1985, the MPAC received its charter from the
State, and that evening it was acknowledged as the entity desig-
nated to perform the functions of the CAO when the franchise was
granted. The efforts of the incorporators were three months old,
and despite significant challenges ahead, they believed .they went
a long way in three months. MPAC might have many purposes enumer-
ated in its Articles of Incorporation, but its goal was to provide
the ground work for a superlative CAO committed to the principle
that nondiscriminatory access and community programming were
priceless community resources, which should not be entrusted to
the absolute control and discretion of even the most enlightened
cable operator.
Historically, cable companies promised the world before an agree-
ment was signed, and once the franchise was granted, it whittled
away at those promises until little or nothing remained of com-
munity access. Traditionally, the community was so dispersed and
powerless in the negotiations process that community access was an
easy target when cuts were proposed. It was significant to note
they already experienced an accelerated variation on that theme
even at the preliminary stage of the proceedings. In its response
to the City's RFP, City Cable Partners promised community access
more than $1 million in equipment alone. Now it appeared neither
company was willing to provide even half that amount for equipment
and facilities. MPAC was afraid the City might be willing to
accept such an unacceptable offer. By way of contrast, in 1982 in
El Monte, California, the franchisee, Group W, provided the CAO
with more than $500,000 for equipment and more then $1 mi1liun in
operating capital, including a grant of $100,000 during the first
year of operations alone. Now, three years later, and in one of
the most prosperous communities in the State and in what was des-
tined to become one of the hottest cable properties in California,
the contenders for the Palo Al to cable franchise offered to pro-
vide MPAC with but a fraction of that amount.
The Co -Op offered the CAO a total of -7,000 for operating expenses
in year one, which would barely pay the postage not to mention the
materials and printing costs of one comprehensive outreach mailing
to the residents of the service area. It could scarcely pay for
two events, such as the evening of festivities at Squire House at
which the Co-op solicited support at the cable hearings, but
$7,000 was what the Co-op would have the friends of community
access accept as a reasonable total first year funding contribu-
tion for the entire community access program.
MPAC obtained a commitment from City Cable Partners to work toward
the development of a robust and independent community access
organization. Unfortunately, the specific dollar amounts of that
support were not yet formalized. They hoped to accomplish it in
the near future and would keep Council advised as. to how those
negotiations proceeded. The bad news was the Co -Op preferred a
feeble and dependent, or a company governed CAO. Since Pac-8e1 l
was going to construct and maintain their systel and since
Heritage was going to manage it for them, the ohly activity
remaining for the existing staff of the Co -Op was the community
access or programming production business. The Co -Op proposed to
do that in earnest. They proposed to build themselves a i1 mil-
lion studio, equipped with $500,000 worth of equipment, and he
heard at least $8 million of subscriber revenues for their pro-
gramming efforts. At the, sae time, the CAO was told' the Co- Dp
could not afford to build a dedicated community access facility;
that community access users would share in t{ie use of Co -Op facil-
ities and equipment with governmental and institutional users; and:
that the CAO must be satisfied with less than five percent of the
6 0 9 6
7/22/85
total amount expended nn Co -Op programming activities for its
entire operations and programming budgets. He did not want thei r
concerns to be misunderstood. They were not trying to tell the
Co -0p it should not independently produce programming in and for
the community. If resources were no object, and the CAO had ade-
gaate dedicated facilities, equipment, and funding, they would
rejoice over the prospect that the Co -Op wanted to produce addi-
tional, independent programming in the community. He was con-
cerned that the Co -Op was able to embark on such an independent
programming production venture at the CAD's expense. If the Co -Op
could afford to build itself a fully equipped $1.5 million studio,
why could it not afford to give community access a dedicated
facility for its own equipment. He wonderer; why the Co -Op could
not afford more than $400,000 over the franchise term for commu-
nity access operations when it could afford to spend 20 times that
amount on its programming initiatives. He was troubled that the
Co -Op negotiated with MPCA on the premise that money was so scarce
the Co -Op could not provide dedicated facilities and equipment or
adequate funding for the CAO, while in the same breath, it an-
nounced its proposal to embark on a multi -million dollar indepen-
dent programming production venture.
The real issue appeared to be priorities, and aside fror►m its via-
bility as an ongoing entity, which was not within the purview of
the CAO's examination, the company that deserved to be awarded the
Palo Alto cable franchise should be the one which had, as its
first priority, a sincere desire to provide for community access
and programming which was nondiscriminatory, unbiased, and repre-
sentative of the entire community, not just the perspectives of a
select few. MPCA proposed the test of the broad public interest
focus was how willing the company was to provide adequate, dedi-
cated facilities, equipment, and funding for an independent com-
munity access organization.
The press stated the City would require the successful franchisee
to reimburse it at closing for almost $1 million in consultant's
and attorneys' fees. If the financial status of the contenders
was so precarious that neither company had sufficient resources to
provide adequate dedicated facilities, equipment and funding for a
robust and independent community access organization, then a de-
mand of that magnitude could only bode ill for the future of com-
munity access. When funding was scarce, community access was nor-
mally the first to suffer. They hoped the City and the companies
could arrive at a swift, just, and reasonable resolution of the
serious issue.
Mr. Stepanenko summarized that in comparing the relative merits of
the proposals submitted by the contenders for the Palo Alto cable
franchise,, the incorporators of the MPAC urged. COunc i i be guided
by the following
1. Quality community access and programming required adequate
dedicated facilities and equipment. Neither company's pro-
posal in its present form satisfied that requirement The
community's , facilities needs alone approached $1 . million.
Adequate dedicated equipment needs accounted for an additional
$500.000 to $750,000•'
• Quality community access and programming required adequate
funding. Neither company's proposal satisfied that require-
ment at present. Adequate °funding for a robust and indepen-
dent community access organization required _ mi niaiva of
$150,000 per year for _operating expenses.
• Quality community access programming required a robust and
independent community access _ 'organization. The community
needed, and deserved, an independent community access organi-
zation which was responsible only to the community, not to the
parochial concerns of the cable operator
4. Quality community access and programming required a viable
cable operator. A successful cable operator could be a sig-
nificant asset to community access, and the very existence of
community access and programming might depend on a prompt and
equitable resolution of the consultants' and attorneys fees
issue. -
Mr. Stepanenko said all the incorporators remained committed to
work with both cable companies towards a successful resolution of
the community access and programming issues. They looked forward
to serving the community to the best of their abilities.
Mayor Levy requested the Cable Communications Cooperative of Palo
Alto, and City Cable Partners, Inc. focus their comments on corn-
pany capabilities,, financial, managerial, etc., specifically as.
indicated by Vice Mayor Cobb, they should be related to the objcc-
tives laid out by the Council some time ago.
Tom Passell, President, Cable Communications Cooperative of Palo
Alto, said they just finished a full week's negotiations with the
City's staff and arrived at an agreement on all the substantive
issues. The negotiations were handled professionally by staff and
resulted in an agreement which met the needs of all the citizens
of the mid, -peninsula. They strengthened their original October,
1983 bid in three key ways:
1. A fixed price lease setting a cap on the total construction
cost was negotiated with Pacific Bell to construct and main-
tain the cable;
2. Their second cable, which was formerly a shadow trunk was now
a full shadow reaching all parts of the area so that there was
a less expensive update when they reached the limit of their
first 7O -channel system and required more; and
3. Their financing no longer depended on the time consuming and
somewhat shaky limited partnership market. They were now,
ready to proceed with au 18 -month build upon the signed agree-
ment with the City. -
The Co -Op was founded in July, 1981, and its membership was about
300 people sufficiently dedicated to their objectives to put money
down before they knew they would be an -operating cooperative.
Cable was gradually being de; e' u1 aced. In a deregulated environ-
ment, the only sure way to protect the interests of local citizens
in the local cable system was to establish the consumer as the
owner. The Cable Co -Op did that. He introduced Lisa Van Dusen,
Executive Director of the Cable Co -Op.
Lisa Van Dusen, Executive Director, would address community
involvement, and an ownership structure that enhanced community
participation while maximizing the economic benefit to be returned
to subscribers and members of the community. As indicated by Nr,
Passell, many changes took place in the past year and many further
enhanced and underscored the value of community -controlled cable
and made their ownership structure the most sensible choice for
the mid -peninsula. These approach allowed. Council to make a deci-
sion that would benefit everyone involved --subscribers, investors,
and taxpayers. A second benefit of their approach and of their
ownership structure Specifically was that it provided a key. pro-
tection for both short and 1ong-term community control of the
cable system, which was : distinct from local control. The third,
benefit was it maximized opportunities for local investors, entre-
preneurs, businesses end for many of the community organizations
which Council was alto trying to serve.
Choosing the Cable . Co -Op would help meet the e needs of all the
parties involved because subscribers would be the most affected by
the decision. The . Cable Co -Op believed subscribers should have a
direct say in the oversight and regulation o.f the system.
Ke9ar dory investors, the Co -Op offered opportunities for 1 ocaI
investors to participate in the fi nanci ny of the system at favor-
able rates of return. The Co -Op offered the opportunity in a
situation where they were not required to do so, but had the
opportunity to do so and to structure it so as to take advantage
of the tax decisions that might be made by Congress. They also
offered taxpayers a way to enjoy the economic benefit of the sys-
tem beyond franchise fees with minimal up front risk, John Kelley
would describe those benefits, which were directly due to the Co-
Op's ownership and financing, structure.
Community control provided a key protection. A . lot wa►s in the
news about deregulation and rates, public access, and refran-
chi si ng, and the public, through the cooperative structure, pro-
vided its own regulation. It provided a means of control without
cumbersome federal or municipal legislation. It also insured the
Co -Op could be leaders in setting the direction of the cable sys-
tem. Creative uses, working with many talented companies and
individuals in the area was a clearly stated goal. Heritage would
be rewarded as would other third parties for developing those ser-
vices early on. Long-term community control would provide the Co -
Op a way to keep control for rates and the way the system devel-
oped without being dependent on anyone else's regulations. Those
protections were being lost daily.
The Co -Op was in the best position to provide opportunities to
local investors and businesses, entrepreneurs and other organiza-
tions. The Co -Op already had substantial discussions with many
organizations and institutions, including Stanford and Foothill
College, and the Co -Op provided an opportunity for local investors
to invest and finance the system, play a financing role above and
beyond membership and stockholding which allowed people to get
either a fixed rate of return, or if so desired, a more specula-
tive and ample rate of return. The Co -Op encouraged local busi-
nesses to participate in their system by making lease channels and
public access channels through the CAO and through joint venture
widely available.
As the buying agent for subscribers, the Co -Op had no incentive to
do anything but make the best and the most competitively priced
services available. They would not monopolize any advanced ser-
vices, and she believed it was only to their advantage as sub-
scribers to provide the greatest variety possible.
She believed Council was in a position to make a decision to bene-
fit subscribers, taxpayers, and investors. Council had an oppor-
tunity to maintain some key protection over the long haul, through
community control, and had an opportunity to have a wide open com-
munications highway for consumers to get the best and latest ser-
vices at realistic and competitive prices.
Jim Cownie, President of Heritage, said Heritage was a public com-
pany and had been in business for 15 years. It was always a pub-
lic comppny, a member of the News York Stock Exchange, and one of
the top 20 cable television companies in the business. Seventy-
five percent of their assets and interest was involved in cable
television. They were founded as a cable television company.
Heritage served about 500,000 subscribers, and announced its in-
tent to purchase- a large cable system in Dallas, Texas, which
served about 85,000 subscribers. _ With that acquisition, which
they expected to complete in about six weeks, he believed itwould
put them at the fifteenth largest cable, company. Heritage was
known as a conservative cable company. When Heritage first
started, there was no satellite delivery of television, cable com-
panies were limited to delivering whatever independent stations
they could microwave in or channels that could be picked up with a
400-500 foot tower. Heritage functioned in that environment for.
many years and -it was difficult to sell cable television subscri p-
bans in that environment. _ It lost money and had only been prof-
itable for the last nine years. It learned a lot about operating
in a fiscally conservative fashion. That • experience served
Heritage well and they tried to bring that experience with all of
their ventures including their involvement with the Co -Op.
Heritage became acquainted with the Palo Alto Cable Cooperative
people about two years ago and was immediately impressed by their
enthusiasm. The Cable Co -Op really wanted to serve the Palo Alto
area with cable television. Heritage followed the franchising
process informally and knew there was some interest by toe City of
Palo Alto in municipal ownership at one time. Heritage believed
that interest was somewhat consistent with the idea behind cooper-
ative ownership so Heritage was willing to proceed. The combina-
tion of Heritage's enthusiasm about the people and its slight
knowledge of the interest of the City Council in municipal owner-
ship caused them to proceed. Heritage believed the combination of
local involvement, through cooperative ownership, and the econo-
mies of scale that a company like Heritage brought to the table
might be a good combination for the City of Palo Alto. It was
difficult to operate profitably. There were many good off -air
television stations in the Pala Alto area, and those television
stations caused significant marketing problems for any television
operation in the market. The provision of more television was not
enough regardless of whether they were talking about satellite
television or more broadcast stations that might be available in
the area. It needed community involvement representacive of a
cooperative, which ingredient would help the operation from a
financial standpoint in terms of programming, provision of ancil-
lary services to the fundamental business of cable television, and
the day-to-day, month -to -month, year-to-year direction of Heritage
as a management partner in the entity.
Heritage believed the combination of a larger company with certain
purchasing power, economies of scale, proven management systems,
computer systems, and a rock solid commitment to customer service
would be helpful. The system needed the community involvement
represented by the Cable Cooperative. Heritage served at the
pleasure of the Board of the Cable Cooperative. Everything was
based o.n the production of a written, annual plan. Heritage would
be given the written set of policy objectives at the beginning of
the annual planning process by the Cable Co -Op, and would then
formulate a written proposal for the annual plan. The Cable Co -Op
would review the annual plan directing Heritage to make such
changes as the Cable Co -Op deemed necessary to achieve its policy
objectives. The Cable Co -Op would make the final determination as
to the content of the annual plan, which Heritage would carry out
accordingly. Heritage expected the General Manager of the Palo
Al to area system wculd `report to Heritage, and that it, through
those annual plans and monthly meetings to review those plans and
quarterly formal meetings, would report directly to the Board of
the Cable Co -Op. He believed that ensured the local involvement
essential if the system was going to accomplish its objectives.
Heritage was pleased to be involved in the Palo Alto area. They
liked the people they met at the Cable Co -Op, the City of Palo
Alto, and the citizens of Palo Alto. Cable could succeed in a
special way because there were some unique characteristics exist-
ing .i n Palo Alto which might well make the cable system °one of the
best in the country. It would take a lot of hard work and commu-
nity involvement. Heritage looked forward to participating and
requested Council support in the franchise grant. He promised not
to disappoint the Council and looked forward to becoming a corpor-
ate citizen in Palo Alto.
John kel l ey, vice President of the ' Cable Cooperative, said the
Co -Op intended to build .a shadow cable system which was a cable
system wi tf: two coaxle cables running by every home, business, and
institution in the service area. One cable would initially be.
activated. The Co -Op would use 550 megahertz amplifiers to allow
delivery of over 70 , channels of video programming to each home,
business and institution in the Palo Alto area. It would have the
Capability for doing upstream data communications ona portion of
/i2982
the "A" cable which would probably be the bulk of what was de-
livered to people in the early years of the system. Following
initial completion, the Co -Op would activate approximately 25
miles of the "B" cable to service a semi -purpose institutional
network. The "B" cable would be staggered and completed in the
third and fourth years of operation. The Co -Op believed the
second cable could be used by institutions to deliver specialized
services, and for experimentation in developing innovative cable
services. That was basically the type of hardware the Co -Op would
provide in terms of the cable plant. Perhaps most importantly,
the Co -Op would build studio facilities, head -end facilities,
antenna facilities --everything they needed to run a complete cable
system in the mid -Peninsula. Their intention was to build a sys-
tem to service the community now and in the future and to be in-
dependent of another jurisdiction or system. The Co -Op believed
they had a 50,000 household subscriber base which was more than
enough to justify a complete system.
Regarding how the Cable Co -Op would build the system, they spent a
lot of time working out a firm agreement with Pacific Bell for the
construction and maintenance of the cable plant. It was not an
easy agreement to make, but it was one that would deliver the
finest cable service to the community. The Co -Op would lease the
cable plant from Pacific Bell on a long-term basis. One of the
important guarantees achieved was that the cable facilities would
be obtained for a fixed price and would not be dependent upon some
contractor for cost overruns which might compromise the entire
financial viability of the system. The Co -Up was pleased to have
Pacific Bell as a contractor because of its financial strength and
technical ability. He believed Pacific Bell would do everything
they could to make the system a state-of-the-art system; one that
would be an example for the entire nation. The Co -Op also had a
firm commitment from the National Cooperative Bank to supply
$8,500,000 in financing to build the head -end faciltties, drops,
to establish converters in people's homes, and to provide subsi-
dies for operating losses which the (o -Op expected to experience
in the first couple of years. The money was in place. As Tom
Passell mentioned, the Co -Op no longer had to go to the limited
partnership market; it did not have to go to the venture capital
market to earn more money. It could finance the system out of
what it had from the Co -Op Bank and what it could build them-
selves.
Probably the question most important to Council was how the City
could participate in the system. A couple of years ago, the Coun-
cil was somewhat interested in establishing a municipal system.
In the Cable Co-Op's original system, the City could buy up!to 49
percent interest in the system at fair market value. That propos-
al was changed in two respects. First, to the extent the City
wanted to participate in the management of the system, the'Co-0p
offered to allow the City to participate in the management of the
system, either directly or through an independent nonprofit organ-
ization. Because of changes in the financial structure and the
fact that the Co -Op had the money to begin construction, the Co -0p
could offer the City favorable terrors to participate in the owner-
ship of the system. If the City used some of the money already
committed to the system, the City could essentially match the con-
tributions made by the Co -Op out of the funds to be generated by
the cable system itself. In . other words, the City would not have
to dip into the General Fund, or place special bonds or anything
else to acquire an ownership interest in the system, As a tax-
payer, he believed that was something everyone was concerned
about.
Regarding what the. Co -Op intended to do about community program-
ming and advance services development, Council already heard from
Mr, Stepanenko, but he wanted to set the record straight in terms
of what 'the Co -Op was committed to do. A fair amount of time was,
spent negotiating that point with the City staff, and he was con-
fident they reached a conclusion which reflected all of the needs
of the community. First, the Co -Op would dedicate channel capa-
city for access productions. That was laid out and they were
clear about it. Second, the Co -Op would build a studio in Palo
Alto that would cost approximately $1 million to build, and
another $400,000 to equip properly. That was a substantial finan-
cial commitment, and they were not prepared to build a second
studio of that caliber. One studio could serve the needs of sub-
scribers, independent access producers, and of the municipal
governments and other institutions that might want to produce
their own programming. The Co -Op did not. believe it made sense to
build a second studio, but offered to commit up to 50 percent of
the operational funds for community programming, which would total
over $6 million over the life of the franchise, to support inde-
pendent production by the City, other members of the JPA, and the
CAO. The Co -Op was not simply committing $7,000 a year for access
programming. The $7,000 a year would provide staff support and
administrative aid for the CAO in the first year, and it was
exactly the same amount of money the Co -Op would provide its own
board of directors. The Co -Op believed they had a sensible plan
for developing community programming. Subscribers should have a
voice in what was produced in the community and independent access
producers should also have a voice. The CAO was given the option
of joining forces with the Co -Op, of putting all the facilities
under one joint governance board which could either be elected by
subscribers or appointed by some other means, and that was some-
thing they would be happy to talk about further. The Co -Op
believed the facilities themselves should not be duplicated.
Finally, regarding advance services development, the Co -Op was
somewhat criticized in its original proposal for not having sep-
arated out the money they would put into advance services develop-
ment. They were going to spend nearly $250,000 to equip their
head -end with the equipment necessary to conduct data communica-
tion services to establish links to computing facilities. Prelim-
inary discussions were held with Foothill College and several com-
puting facilities at Stanford University abort interconnecting the
Co-Op's network with their existing computing facilities. It was
essential for the cable operator to work actively with other com-
panies and organizations to develop advance services. There were
many start-up companies in the area with national prominence in
developing and delivering data services. The Co -Op wanted to work
with each of those companies and saw themselves as a communica-
tions broker. They wanted to deliver all the services for their
subscribers. They had Heritage Communications to manage the sys -
tem; Pacific Bell to build and maintain the system; and, most
importantly, a subscriber base of over 10,000 subscribers to con-
trol the management and construction, and ultimately set the poli-
cies for the entire system. The team approach was the best way to
achieve genuine community control of the cable system. The
financing was in place, and they were ready to proceed as soon as
the Council decided the issue. They believed the system could be
constructed in 18 months with a guarantee from Pacific Bell.
Finally, the people of Palo Alto waited a long time for a cable
system, and the Co -Op promised to build the City a complete cable
system.
Lynn Simpson, Director of New Market Development, City Cable
Partners, Inc., said City Cable was concerned about the timing of
the decision and exerted some pressure in that regard. City Cable
was also concerned about large standby fees they were paying for
the financing that was arranged. On the other hand, they had
dealt with complex issues, cumbersome documents, and were encour-
aged by staff to be complete in their responses. Responding to
the appendices mounted to submitting another proposal , `and City
Cable did not get all of that done in the alotted time frame. At
the point the negotiations occurred, City Cable got through nego-
tiating about 200 pages of a document in five days and everyone in
the room agreed it was 4 positive experience and a lot was accom-
plished. At the end of that period, the timetable was discussed
6 1 0 2
7/22/85
and all agreed there. was no way -to turn the papers around in the
established
3 C A e 2 A C 1 r j City } with
L�t�bli�h�d times frame. .�hc cl�� �ficd Cable �.�:; content wiLil
the timetable established, and that their -relationship with staff
was excellent and she hoped it would --continue. -
I n terms of fees, City..Cabl a was to cover the costs, but did not
know the dollar .amount until negotiations. The matter was satis-
factorily resolved.
She introduced Michel Guite and Walter Hewlett, Mr. (quite was in
the cable industry for many years, mostly in consulting capacities
in new technologies having to eo with cable television. He was
the Vice President of New Te :bnology. Israel Switzer was a
director of City Cable and Vice President of Engineering... He was
one of the best-known engineers in the cable television business
particularly designing high capacity, sophisticated cable televi-
sion systems. He won the National Cable Television Association's
highest award for technical excellence. Carroll Harrington was
their Director of Special Projects, and a well-known activist in
the community. She was extremely helpful to City Cable over the
past few months she worked with them. The Ware, Fletcher &
Freidenrich law firm helped with their documents and contracts.
Julie Baigent and Dave Fletcher particularly worked on that part
of the business; Steve Tennis worked on the financial aspects,
arranging the financing; and John Dolan was the General Manager of
the Mountain View Viacom system and was also on the negotiating
team, as were Ms, Baigent and Mr. Fletcher. There was a large
contingent from Viacom, both from headquarters across the Bay in
Pleasanton and from the Mountain View ,stem. Ed Bennett was
Executive Vice President, Garrett Garvin was -Senior Vice President
of California Systems, and Kent Rasmussen was the Regional Vice
President, and there were a number of other people both from head-
quarters and the Mountain View system which gave some idea of the
interest that Viacom had in the project. The Cablemobile was
parked out on the corner of Hamilton and Ramona, and would give
some idea of marketing tools used to promote traditional enter-
tainment cable services, which were the core of City Cable's ser-
vices and might be fun to look at.
It had been a year since City Cable was there last and a lot had
happened both to City Cable Partners and to the cable industry as
a whole. The most important to City Cable Partners was the final
agreement they reached with Viacom which precisely set out their
relationship, and a copy of the agreement was provided for the
City. They finalized their financing plans and had commitments
from two majar investors in cable television properties, TA
Associates and the Bank of America, so that City Cable also had
financing in place and were ready to begin timely construction
which was a Council objective. The cable industry as a whole went
through good times and bad times in the last year. The bad times
started with the knowledge that investors in cable systems were
more sophisticated than they used to be, and City Cable managed to
put together a financial package that suited the sophisticated
lenders who only put money into systems they believed had a chance
of success. The Cable Act passed, the deregulation law that
everyone waited for and predicted was imminent. It had not
affected City Cable's service offering significantly to the Coun-
cil. It helped City Cable be ready to move and change in an
increasingly market -driven kind of business. They learned a lot
in the last year about what i t td k to be responsive to cable
customers, and sometimes they lost sight of their customers as
they went through the processes. They tended to posture them-
selves in ways that appealed to city councils and lost sight of
the basics of appealing to customers. They believed they put
together a system that met the City's first objective and their
own highest priority of high penetration of subscriber services at
the lowest possible cost. They wanted to tell the Council more
about City Cable and what they offered, and she introduced Ed
6 1 0 3
7/22/85
Parker, Chairman of the City Cable Board of Directors. He was a
former Professor of Communication at Stanford University, and his
informational writings on cable television were adopted as stan-
dard resources in the field. Ed was a founder of Equatorial Com-
munications, recently described in Business Week magazine as a
company with $70 million a year in sMs whf experi enced 100
percent growth each year. Ed had a lot to offer City Cable and
would tell the Council more about the financing plans.
Edwin Parker said he was also a member of the first Palo Alto
Citizens' Advisory Committee,. on Cable TV in the early 3970s. He
shared a desire to get to the end of the decision process so they
could get started with the construction and providing of services
process. He believed the issue before the Council was which of
two organizations was most able to . deliver, and fulfill its com-
mitments and obligation to the City and to local subscribers. The.
two keys to that fulfillment were economic viability and manage-
ment
commitment. As a cofounder of a local company that grew in
five years from three people in a small Palo Alto office to 500
employees as a public company located in Mountain View, he under-
stood some of the process and problems in transition from a good
idea to a viable local organization. City Cable had 72 founding
shareholders, men and women from the local community who, by the
time the franchising process was completed, would have invested
almost a million dollars in the start-up operation. In addition
to the equity financing and the debt financing from Bank of
America, there would be an opportunity for additional local com-
munity members to invest up to an additional million dollars so
the local residents who wanted to invest in cable would have the
opportunity. Economic viability did not just mean initial financ-
ing was available. Economic viability meant managing the system
in such a way that costs were under control in order that the
prices users had to pay were affordable. To that end, City Cable
was concerned with the cost and quality of construction. They
signed a letter of intent with PacBeil concerning construction and
maintenance of the system subject to further discussion on prices
and terms. They also received bids from other contractors for a
fixed price construction. They would commit to the construction
technique that would result in the best quality at prices appro-
priate to the kind of necessary services, and to prices affordable
by the subscribers. Another part of economic viability was on-
going management. As Council knew, City Cable entered into an
agreement with Viacom. They saw that bringing two major advan-
tages: Substantial cost savings which translated into lower costs
for subscribers; and management expertise from a major cable com-
pany with substantial experience locally in the Bay Area. City
Cable arranged the local management in a way that did not give up
local control. Local control was maintained by a management board
en which Viacom had a minority vote. He introduced Ed Bennett,
the Executive Vice President of Viacom Cable, to explain how the
management arrangement would work.
Mr. Bennett thanked the Council, on behalf of the Viacom Cable
management team, for the opportunity to discuss Viacom's manage-
ment association with City Cable Partners. Viacom. was a national
company, ,listed on the New York Stock Exchange. They were the
eleventh largest cable television operator in the country with
800,000 subscribers nationally. They operated in 18 major cable
tel evi sior systems from Long Island to California, and currently
had 145 franchises. They had over ,250,000 subscribers in the, Bay
Area, and including Northern California, they had over 300,000.
Viacom was a participant in the cable television future of Palo
Alto for several years and it had long been their hope and inten-
tion to join together and form the Mid -Peninsula cable television
system with their Viacom Mountain View cable system. Viacom's
goal was to provide -high quality customerservice and cable tele-
vision operation at the lowest "possible costs. He believed they
could offer operating efficiencies and economies of scale which
would not be available to the City under other circumstances.
Viacom was once a potential bidder for the Palo Alto franchise,
and believed the favorable demug aphics, 9e09i'dphik.01 lucaiiofi of
Palo Alto, informed City government, staff and Council, created an
environment for a successful cable television system. The reason
Viacom chose not to be an individual applicant in Palo Alto was a
matter of internal financing concerning where to invest its money
as a public company. Palo Alto cable was more ideally suited to
be financed through a combination of local investors and the
limited partnership rather than through a large publicly -held com-
pany with its short-term earnings pressure.. If they added, to that
a new financing of the system which was advantageous to all par-
ties concerned, and if they added Viacom's operating and manage-
ment experience, the Palo Alto franchise would be more financially
viable and economically rewarding for all participants.
He stressed the benefits of being affiliated with a company like
Viacom. They were a large national . firm, and offered the knowl-
edge and experience of a company that had been in business for.
many years and in communities that were contiguous with Palo Alto.
Viacom people operated with a credo, a mission statement of pro-
viding high -quality customer service. Mr- Downie referred to
cable television as not an easy business to operate, and one
reason was because providing quality customer service was a diffi-
cult, but achievable, task. •Viacom's company culture was to try
and do it right the first time. They provided high levels of
quality control and customer service. Viacom was a local national
company, and there was a tremendous benefit to the City having a
national company like Viacom right across the Bay. Viacom had 125
skilled professional staff people in marketing, engineering, MIS,
human resources, and training. Those people who were available to
the Mountain View staff, would be available to the Palo Alto sys-
tem. The proximity of staff people was important to making
effective decisions. He emphasized the management system of
resources which Viacom had in place in Mountain View provided an
immediate opportunity to effect cost savings. They had a fully
staffed operating system there, people who were knowledgeable and
experienced, and the City could avail itself of that. Viacom was
eager and committed to being a partner in the cable television
future of .Palo Alto. They were committed to work with City Cable
Partners and the City of Palo Alto to deliver and operate a high
quality, state-of-the-art, cable television system for the com-
munity. He introduced Israel Switzer who was one of the most
highly regarded design engineers in the cable television industry..
Mr. Switzer would discuss the design of the City Cable system and
the company's research and development projects.
Mr. Switzer was an architect of cable television systems. If one
had a cable franchise, or was looking for one, and needed a design
for a cable system that cost anywhere from $20,000 to $150,000,
he did it. The design and construction responsibilities of a
cable television system were as great as in the construction and
design of major buildings. He had a long-term association with
most of the principals of City Cable Partners. In dealing with
the design of a cable system for Palo Alto, he concluded the major
objectives were to satisfy the expectations of,the City .Cou►fcil,
the expectations of the public because they were the ones expected
to buy and pay for the service; shoul. d be fl nancabi a because cable
was a capital investment sort of business; and the system must be
u ui l dabl a on time and budget. The design he came up with, which
was the model for both proposals before Council that day, was
cal l ei the tree and branch coaxial cable system. If the system
was designed for franchising three years ago, it would have been
designed and committed as a full dual -cable system. The concept
of dual -cable; that is, building two completely duplicated cables
side by side to serve a community, arose a few years ago out of
the frustration of cable designers and engineers with the channel
limitations .of the day.
6 1 0 5
7/22/85
Channel capacity of a system rose through competitive pressures to
provide more than what the single cable of the day could provide.
Consequently, the only way in the early 1970s, was to build two
cables to do the job that one cable should have been able_ to do if
the engineers and designers were given more time to do it.
Technology improved to the point where today a single functioning
cable could be designed with a capacity close to that of the dual -
cable systems of a few years ago. City Cable would undertake what
it called a 550 megahertz coaxial cable system with a capacity of
78 television channels, two-way in its capability, with as a safe-
ty net so to speak. For unforeseen future re}uirements both as to
service and capacity, they would include a "shadow cable." Put-
ting in a shadow cable at the sauce time as the original cable,
would help keep the incremental cost relatively low. If the
shadow cable went in later in order to expand the capacity of the
plant, the cost would be large, and in the case of the underground
plant, the cost would be prohibitive. City Cable believed it was
prudent to offer a high -capacity, cost-efficient, single function-
ing cable for ordinary subscriber purposes, and to include., at a
low incremental cost, a second shadow cable for those future
requirements The second cable would be phased in for nontelevi-
sion type purposes, miscellaneous communications purposes within
the community as required and in accordance with conditions and
time schedules, detailed in the contract being negotiated with
counsel.
Regarding the role of a cable system in the world of advance com-
munications functions, notwithstanding the well deserved reputa-
tion of Palo Alto and the area in the field of communications
technology, a cable system could not drive, compel, or force two-
way communications, interactive services, or advanced services.
The development costs of any particular service ran to tens of
millions of dollars. City Cable intended to provide a reasonable
but generous budget for demonstration projects and to test the
economic and technical feasibility in the community of those kinds
of advance functions for which hardware was available. It
intended to take steps within their corporate means, and within
the means of the community's support through their subscriptions
to cable. They believed the particular program outlined for the
Council, and provided i n _greater detail in the written submis-
sions, was a worthwhile step in a community the size of Palo Alto
and for cable systems in their circumstance. City Cable looked
forward to, several services that could be predicted more firmly,
especially the prospect of digital audio. services. City Cable
believed it would be coming soon, and hoped to be leaders in the
radio equivalent to the popular compact disk, an all digital audio
services distributed by cable. It would provi de a form of radio
complement to .the compact disk systems which were becoming so pop-
ular. He deferred to Ms. Simpson to discuss City Cable's proposed
services and rates.
Ms. Simpson said their relationship with Viacom saved the cable
customers about $1.5 million dollars at the time of construction
for things like the tower and earth station, head -end receivers,
scrambling equipment, and online customer service facilities com-
puters. Those things might; be located in Mountain View, but they
doubted their customers were concerned about where the earth
station was. In terms of operating savings, there was a total
savings annually of approximately $650,000, from joint operations,
management, and spreading costs over a larger subscriber base as
well as the savings Viacom offered in tees of product di.scOunts.
The amount per subscriber per moeth was $2.70 and City Cable
believed that was a significant amount. The savings were immedi-
ately available because the services and relationship were already
in place. It also contributed to the interconnection of the two
systems, a regional system, which was another objective of the
City. There were some substantial facilities, such as thecommu-
nity access equipment facilities including a full studio which
would be available in Palo Alto.
6 1 0 6
7/22/85
COUNCIL RECESSED FROM 10:05 p.m. TO 10:20 p.m.
Jason Berk, 991 Runnymede, East Palo Alto, said on June 28, 1985,
Mayor Barbara Moulton, City, of East Palo Alto, fommunicated by
letter to the Mayor and Councilmembers of the Palo Alto City Coun-
cil (which is on file in the City Clerk's office) the concerns of
the East Palo Alto Cable TV Task Force regarding educational, af-
firmative action, and businese and economic issues related to the
cable franchise award and its subsequent operations. The East
Palo Alto Cable TV Task Force purposes were: a) to provide a forum
for the East Palo Alto residents to better understand the benefits
and implications of cable TV in their community; b) to suggest and
encourage the participation of East Palo Alto businesses to seek
vendor and other business opportunities associated with cable TV;
c) to encourage -the formation of other business that would have a
cable TV related interest; d) alert the City Council of Palo Alto,
City Cable Partners, and Cable. Co -Op of their expectations that
minorities would be afforded employment opportunities at all
levels with the franchise awardee to insure that the multi -ethnic
diversity of the area population be reflected in bilingual employ-
ment and programming; and f) to insure the public access corpora-
tion received sufficient resources and support to guarantee the
meaningful participation of all segments of the East Palo Alto
community and other communities the franchise would serve.
The East Palo Alto Cable TV Task Force identified specific busi-
ness opportunities that were both reasonable and manageable that
could flow to minority firms in East Palo Alto if a policy was in
place with the cable TV franchise awardee. Examples of such
minority business opportunities were pointed out in Mayor
Moulton's June 28 letter. A copy of Mayor Moulton's letter was
sent to City Cable Partners and Cable Co -0p and the task force
recently met with both franchise competi tors. City Cable Partners
agreed .i n principle with the need for a general policy reflecting
the current concerns of East Palo Alto Cable TV Task Force, but
did not communicate in writing any policy reflecting the task
force's general concerns. A similar meeting between the East Palo
Alto Cable TV Task Force and Cable Co -Op was held on July 10,
1985_ The result of that meeting was in the form of a resolution
passed by the Cable Co -Op Board of Directors at its July 15, 1985
meeting generally reflecting the concerns of the. East Palo Alto
Cable TV Task Force. He submitted a copy of that resolution
(which is on file in the City Clerk's office). .As stated in Mayor
Moulton's June 28th letter to the Palo Alto City Council, they
wanted to see the issues raised in her letter reflected in the
criteria the Council used in awarding the cable TV franchise. The
Council's cooperation and concern in this hatter was appreciated.
Mayor Levy clarified to members of the public the Council sought
to award a cable TV franchise for a joint powers area approxi-
mately double the size of the Ci ty< o f Palo Alto alone, and which
included the cities of East Palo Alto, Menlo Park, and Atherton,
some unincorporated areas of San Mateo County, ant' Stanford
University. All other areas delegated to the Council the respon-
sibility for making the decision of selecting a franchisee from
among the applicants. Council acted on all their behalfs, and.
with their concurrence, and kept them informed abort everything
that happened. The area about which Council spoke was not just
the confines of the City of Palo Alto.
Dan Mahoney, 305 Iris Way, tried to keep track of the 11 objec-
tives, and listened to everything that was said by the two com-
panies who made the proposals. Everybody said i t had to be an
economically feasible system to build. Both organizations said it
was economically feasible. It had to be a timely and Orderly con-
struction, and it had to be efficient and effective. The require-
ment to rebuild structures that existed within 15 miles of the
building was a waste and unnecessary. The City. Cable Partners
proposal to share resources with the town •.;next door was a logical
typeof a proposal'. The objective to interconnect the system with
6 1 0 7
7/22/85
other local systems in a regional organization also seemed logical
to him as well to choose a local company as opposed to one in
Des Moines, Iowa to manage the cable system. As far as he was
concerned, running a cable TV was a business and he. preferred to
have experienced businessmen making the decisions on how to run a
cable television business. People who were interested in achiev-
ing a bottom line profit knew the only way to do it was,to offer
the service people would buy. He recommended City Cable Partners
as the cable company.
Mayor Levy asked Mr. Mahoney if he was a shareholder in Cable
Partners.
Mr. Mahoney said no.
Ed Arnold, 1454 Hamilton Avenue, appreciated the opportunity to
speak. The cable situation was kind of a burr under the Council's
saddle for sometime. He followed the cable issue from the finan-
cial aspects and believed cable was now a threshold situation.
As the Council pondered its decision, it seemed important to
secure the best system possible for their constituents who
included neighboring communities as well as Palo Alto. Council
knew everyone would look beyond the operator to the Palo Alto City
Council as they fixed responsibility for the results, financial
and cultural. He was a member of. the Advisory Committee of City
Cable Partners because he was interested in the topic and was fas-
cinated in its development. Council now had almost two months,
and during that time he believed the issues would become pretty
defined and refined and Council would understand and be satisfied
in their own minds so that finally a vote could be taken on the
one franchisee they wanted. Regarding operating experience, both
companies would use national operators of repute. City Cable # s
operator had a quarter of a million Bay Area subscribers, the Co -
Op had none. He compared the experience of Ed Parker, Israel
Switzer and Michel Gu.ite with the zero experience of the Co -Op
founders and officers. Regarding the membership plan, forced mem-
bership for Co -Op with time -delayed refund if you opted out. City
Cable stock was available to anyone who wanted it but immaterial
to subscribers whether they had it or not. Cost savings systems
operations: Co -Op must build a full system, City Cable could
share with Viacom in Mountain View. Cost savings on construction:
Co -Op was locked into Pacific Bell, City Cable could go with
Pacific Bell or a lower -cost partner if there was one. Community
programming: Viacom won 18 national awards for local cable pro-
gramming since 1979 including an ACE award to Viacom in Mountain
View for the best public affairs cable program in the United
States. He respectfully requested the Council carefully study the
comparisons made by both as well \,.as all of the other available
information.
Ralph Levine, 941 College, said within the next few years poten-
tial subscribers would do their own cost benefit analysis There
were approximately 15 channels, over the air presently. Another
alternative available to many was a hor=se satellite receiver. The
three key areas each would weigh against the substantial cost of
cable television was the quality of the picture, sound, and the
additional channels available. One area he did not believe
received sufficient attention • was the quality of sound. When it
came time to look for subscribers and decide whether to get cable
television, there would be at least four TV stations broadcasting
over the air in stereo Channel 4, Channel 5, Channel ?, and
Channel 20. On two occasions he asked the City staff what the
cable system's plans were for transmitting in stereo. Existing
cable systems were generally unable to broadcast in stereo because
they were built before the Federal Communications Commission (FCC)
approved the new stereo transmission. The ;response he received
from City staff was that they did not know. To him that was a key
area as people decided whether it was worth subscribing to cable
television.
Don MacQuivey,_ 743 Gallen Avenue, was a membrr of the Cu -Op and a
stockholder in Coble Partners. If he was in the Council's posi-
tion, he would feel frustrated and a little jaded with cable at
that point. The choice between two excellent local cable bidders
seemed to him more difficult than the choice that faced the FCC
FCC in chosing a builder for the communications satellite system
in 1962. In 1962 the FCC, like the Council, could have chosen one
among many competitors to build the first communications satellite
system. AT&T launched Telstar and were ready to go ahead. it, or
one of the other carriers, could well, have built that first com-
munications satellite system. Instead, Congress passed legisla-
tion -to produce a joint venture of the authorized carriers to in-
clude public participation. Comsat was the result, and was suc-
cessful. It could be a model for them. Comsat earned more than
the return contemplated by the FCC. In 1978, it Ayes required to
return to the carriers some of the excess profits that were held
in escrow. He _could identify particularly with the City staff and
its cable feasibility studies. He was involved with the Senate
Space Committee staff on detail fromthe State Department to work
with them in preparing the Comsat legislation. He prepared a
background study they published, and assured the Council the same
kinds of economic and legal questions they faced now were con-
sidered then and many answers were obtained. Would the system
structure be economically feasible for the carriers and for the
government; did the structure meet antitrust requirements; what
role should the government take both with the carriers and with
other governments. The Comsat Act anticipated and answered the
legal questions. There were no l i ti gati orr issues such as was
raised by Century Federal or others in Los Angeles and Washington.
The FCC and Congress was disposed to relax federal regulation of
local cables. It was inevitable because there were so many local
systems. The issues were local. It was appropriate that local
municipalities assume responsibility for them and authorized local
users. Only .long distance communications needed Federal regula-
tion. The joint power from the money of the local bidders could
be combined in a joint venture with municipal and public particip-
ation from the whole joint powers area. He suggested Arnold and
Porter look ,at the Comsat model,
Denny Petrosian, 443 Ventura Avenue, was not a member or share-
holder of either group. She supported the Cable Co -Op proposal.
Her viewing habits were not the habits of the entire Bay Area, and
she did not want a company that served the entire Bay Area or the
nation. As a Palo Al tan, she wanted to be pertial ly in charge of
the important new service. Community control and financial
stability in the long haul were the most important i ssues . She
was concerned about the possibility of takeovers of'a.noncoopera-
tive company or the sale of the company to other corporations.
She was also concerned about Palo Alto having to absorb losses
from other communities if the City was teed into a company that
served a number of other areas. If the system was truly theirs,
it would bring vitality into the City. The citizens would not
just be passive consumers of another affluent service that was
owned and controlled by an absent someone else. She believed the
Council's choice would profoundly influence the quality of life in
Palo Alto.. It would make a difference as to whether the citizens
were more or less involved with each other. If the system was
controlled by the people in a cooperative, there was the prospect
of civic issues going over the cable systems and being discussed
the next day. The community excitement and involvement could riot
happen ` if it was not the people's system. If the company was
excellent in all technical and financial aspects as was the Cable
Cooperative, she believed it was also important to consider the
humanizing factor.
George Beers, Foothill College, was not affiliated with either of
the bidders. He shared the Council's' frustration in the delays
and particularly with the lack of documents that night to review.
It _ rat difficult to make meaningful comments without = a thoughtful
analysis of both the amended agreement and the appendices He was
6 1'0 9
7/22/85
concerned about the ability of local public institutions to seek
possible modifications in the documents once they were finished
and made public on August 15, if necessary. Foothill College
remained enthusiastic about working with the community to develop
an outstanding local programming effort in the Mid -Peninsula.
Despite some of the things they'heard that night, he believed both
companies offered functional and strong options to make local pro-
gramrning work. He believed both could offer more, and urged that
Council realize both were viable and could work for the com-
munity.
Thomas LaForge,r671 Waverley, was a member of the Cable Co -Op and
Secretary of the Board of Directors. He resided in Palo Alto for
about 25 years and was currently Vice Presi dent and Manager of the
Marketing Information System for the Bank of America where he wa.s
employed for 25 years. During that time he was involved with many
systems and development operations comparable to the system being
installed by the City, both in terms of size, technical com- pl ex-
i ty, costs, vendor relationships, and managing the multiple asso-
ciated contracts. He assured Council the Board of the Co -Op had
sufficient management expertise to manage the complex operation.
He was involved with the planning for the past three years and was
comfortable with its financials, particularly the fact that it did
not rely on the limited partnership, given the uncertain market in
the area. If he were in the Council's position, he would look for
something that offered the least surprises to the City. The pack-
age put together by the Co -Op was the most solid and could be
relied upon to hold up through the duration of the franchising
process. City Partners' financing costs were unknown and they had
not yet firmed up an agreement on what they would do with the con-
struction of the network with Pacific Bell. As a resident of
Palo Alto, he wanted to see a decision they could live with and
know what would happen in the future.
Carroll Harrington, 830 Melville, was a consultant and Director of
Special Projects for City Cable Partners, the applicant she be-
lieved could provide the best cable communication system to the
Mid -Peninsula. In 1973, she became interested in cable television
when the first citizens' report on cable was submitted to the..
City. ` As a member of the Palo Alto branch of the American Associ-
ation o.f University Women (AUW), she planned the first meeting on
the .topic and was glad to know some of them were still around.
Since then, she was involved wi th the Palo Al to AUW, League of
Women Voters, and Peninsula Community Access Association in study-
ing cable - television to assure the maximum public benefit for
their community. She was also a member of the working group of
citizens who prepared a study on the policies regarding program-
ming and governance of the City's proposed cable system. One
recommendation was the formation of an entity such as the Com-
munity Access Organization. That organization was now formed and
would act to protect the public interest for access to the cable
system. She believed City Cable and Viacom could finance, design,
build, and operate the best cable communications system because of
their proven professional expertise, financial capability, and
experience in the cable industry. From the earliest days in the
Mountain View franchise, Viacom lived up to its ambitious commit-
ment: to community programming. Viacom cooperated with her on many
projects over the past four years, and she respected their profes-
sionalism and genembsity. As the Council knew, City Cable
Partners had a m4naggement agreement with Viacom for day-to-day
operation of the proposed cable system. City Cable Partners
actively reached out . to the community to inform the public about
the potential uses of cable to meet regional and local needs.
they had many community workshops, the Video Arts Festival, and
provided major underwriting for the National Federation of Local
Cable Programmers Regional Conference at Foothill in May, City
Cable's proposal was based on several key elements. They offered
channels for transmitting community programming; $400000 "for
state-of-the-art,:.prOdoetion facilities and equipment; a vigorous
-community outreach, program to train residents and groups; $600,000
7/22/85
for research and development of two-way services for insti tutiuus,
businesses, and home subscribers; a strong commitment to the in-
tegration of data communications and interactive services in com-
munity programming; and the experience of Viacom, the winner of 19
national awards in local cable programming. City Cable Partners
was committed to working with Stanford University, Foothill
College, the local school districts, and other entities wishing to
participate in community programming. City Cable would work
closely with the Community Access Organization for the public
interest.
Alison Lee, 1241 Harker Avenue, spoke to the Council many times as
a member of the Standing Committee on the Arts. She also spoke on
the subject of cable TV as an individual and a member of the Cable
Co -Op. She believed the Cable Co -Op offered the best opportunity
for community involvement. Her experience on the Standing Commit-
tee was as an elected representative. The art community long
resisted appointed commissions, and she was shocked that night by
the testimony of the ` appointed leader of the CAO because, while
expressing the frustrations which he might have felt in dealing.
with the Co -Op, which she gathered he did not understand was
basically different from a business, he seemed to her to attempt
to bias the Council in its decision. She believed that was not
representative of her or rtaoy of her ;friends, members and citizens
of the community. The CAO was set up as a buffer for protection
of the citizenry against the primarily economic motivation of a
business, which was what the City Cable Partners was. It related
differently from a co-op, which put as its primary purpose the
satisfaction of the subscribers and consumers of the cable system.
It was extremely important for the CAO appointees to be sensitive
to those differences and be willing to work with whichever deci-
sion the Council made in acting in their stead. Palo Alto needed
a specially tailored system to meet its needs. They needed to be
able to say, 'maybe we'll pay a little bit more for a system that
meets our particular needs and does not fit into the marketing
research of a Bay Area or a national system.." She believed Palo
Altans were capable of making the choice. In many.ef the compar-
isons, the point was not made that membership in the cable cooper-
ative, a vote, was a $lO fee, not a $300 membership equity which
was another option. She believed the Cable Co -Op offered the best
opportunity for community involvement.
Betty McCroskey, 4158 Oak Hill, was not associated with City
Partners or the Cable Cooperative. She was concerned the 11 ob-
jectives were established before the federal legislation last fall
which affected all but one ,point. She believed there should be a
twelfth consideration which would be the meaningful input or con-
trol of the community in l0 years when the contract was up for
renewal, and,how the agreements would be structured to provide for
continued, meaningful community inputthrough the `future years and
at the time of control renegotiation.
Alan Henderson, 565 Arastradero Road, was involved as a Council
member i n the early deliberations on cable television i n the mid -
1970s, and retained his . interest and concern in following the
Council's more recent deliberations on the subject. His interest
was further stimulated by contacts from both the Cable Cooperative
and City Cable Partners asking for his involvement. He decided to
do some personal investigating of the two organizations, their
proposals, backing, personnel, etc. He concluded after all the
time, effort, and money invested in the subject, it was imperative
than Palo Alto and its partner communities make a choice which
provided the greatest possibility for success. He opined the most
important factors in chosi ng the cable television operator were
expertise, financial backing, and staying power, He believed both
bidders were goOd organizations bent on providing a high -quality
system. He supported cooperative efforts in food services, hous-
ing, etc., but his research into the highly technical and special-
ized area of cable television lead ham to conclude ` in favor of
City Cable Partners. He had absolutely no financial interest in
either company, but was sufficiently concerned to take part on an
advisory board for City Cable Partners. The board included two
other former mayors, Ed Arnold and Kirke Comstock, Elie Abel, and
the Chairman of Stanford's Communications Department, Carl
Schmitt. During the early 1970s cable television studies, he
believed Ed Parker was the most knowledgeable and articulate par-
ticipant. He was then a professor in Stanford's Communication
Department. Since then, he became co-founder and chief operating
officer of Equitorial Communications Company, a highly successful
data transmission company, and was Chairman of the Board of
Directors of City Cable Partners. The entire City Cable Partners
organization was composed of ,highly experienced cable television
experts. The people had the stature to secure required financing
to provide the finest system possible for the area. They also had
the resources to provide high quality equipment and facilities for
community programming. To him, it was important that Council
might encounter serious delays, lawsuits, and other problems that
required the ability to hang on, adapt, compete and defend. City
Cable Partners had that ability and backing. He was convinced
City Cable Partners would provide a system for the least cost to
subscribers, which was true in spite of the added costs to install
a dual cable system. No membership would be required, just the
service charges. For construction and maintenance of the system,
City Cable Partners was open to the same proposal from Pacific
Bell as offered to the Cable Cooperative, but it also had the
option of accepting any competitive proposal that was less costly,
but of similar quality. A big savings came from City Cable's use
of Viacom receiving facilities in Mountain View. Only studio
facilities for local programming would be required in Palo Alto --
not an entire receiving facility. Much was made over the subject
of local ownership and he emphasized that many local residents now
owned stock in City Cable Partners. Stock purchases would be
offered to all members of the community. Broad ownership of that
nature assured ample pressure on the company to operate satis-
factorily. Viacom was a successful operator of major systems with
head -end facilities already existing In the area. Heritage Com-
munications was a well regarded operator of smaller systems which
only recently gained its first large urban contract in Dallas.
Heritage had no local , facilities. City Cable Partners consisted
of people with extensive cable television experience. He could
locate no cooperative television organizations in the United
States that could be looked to for experience. There were many
small cooperative systems, but only Davis, California had a coop-
erative -run system of significant size and it was not a system
that would be acceptable in Palo Alto. After the long wait and
the high cost, Palo Alto deserved a well financed, quality system
run by experts.
David Jaffe, Palo Alto Y.A. Medical Center, was a research engi-
neer at the rehabilitation, research and development center and
was responsible for bringing the fruits of technology to bear on
the problems of disabled people. He believed it was to the Cable
Cooperative's credit that they approached the local resource to
bring cable access to the disabled individuals. He supported
their efforts.
Anita Lowney, 922 Rose Avenue, Menlo Park, was not affiliated with
City Cable Partners or the Cable Cooperative. She supported City
Cable Partners and cable television for the area as it pertained
to seniors. Her experience was personal, social and professional
With the senior population, cable television offered greater
access to community events of which they did not partake. It
might encourage them to venture out on their own. Cable televi-
sion would afford greater use of the senior center. A class or
gathering alight be focused around a particular event -on televi-
sion. ,' Evening events might include a dinner or potluck encour=\
aging men and women to watch sports events. Public affairs,
international focus, and local happenings might be shared with
.other facilities such as the library, recreation, ` and educational
planned events. For homebound or institutionalized seniors,
special programs might be focused for them or their families keep-
ing them abreast. Cable television united, advised, and informed
the senior and offered an alternative to commercial television.
It was importanta system be established for concerned and respon-
save people.
Bob Mack, P. C<. Box 814, Palo Alto, was a charter member of the
Cable Cooperative. He was not active for the last several years,
so he took what he believed was an objective outsider's look at
the materials presented by the two bidders. It was notable that
both parties put out comparisons. In both cases a comparison by
the one putting it out was made on the current basis. In both
cases, the comparison dealing with the other party was on about a
two year old set of information. From an engineering, financing,
and management skills points of view, both systems were qualified
and expert. The major difference was that in one case, the com-
petitor was either related to or a part of a profit making organ-
ization; in the other case, not so. Profit was not the goal of a
cooperative, i t was not the goal of the Palo Alto cooperative.
The best possible service at the lowest possible cost to all was
the goal and the bottom line. There was one segment of finance
missing in the Co -Op and needed to be missing and would be missing
if it were a City -run operation. If no one made a profit, it was
an element of cost one did not have to pay. Both had a long
roster of top-notch people, which was not a basis for judgment
between them. Regarding control, if the subscribers were to be
ultimately in control, there were several ways in which that could
be exercised. One was the marketplace, which was not the Palo
Alto historical method. The marketpl ace was competitive in terms
of profit. A cooperative organization could ensure something dif-
ferent would be at the helm rather than the commercially accept-
able profit making type of thing. Cable experience around the
country the past couple of years showed that many of the promises
in the beginning for the special types of things fel 1 by the way-
side when the financial crunch came because that which was most
normal commercially took precedence. The two most striking dif-
ferences between the parties both leaned toward the Cable Cooper-
ative, and he urged the unanimous selection of the Cable Cooper-
ative over the. City Cable Partners.
Robert Smith, 2291 Greer, did not hear what services would be
offered. He was yet to see a definitive 1 i st for each of the ser-
vices to be provided and what the prices would be. Installation
charges and policies, Council would hear about it one day if the
people in the hills found they were two years behind on their
installation schedule because of their distance! from the center of
the population. Some cable systems installed converter deposits
which defeated VCR's. Last year he requested a chart which com-
pared the two systems to be published in the newspaper. The chart
woul d contain cost, price and the features of the systems, and for
$700,000 they should have had one. Charts were published in the
newspapers in other communities where a decision was being made so
people could read it and see what they would get. He called City
staff and expressed his opinion in terms of the comparison chart,
but was yet to see it. He did not believe there was any accept-
able reason for the delays. Council was competing with other
technol ogles i t did not regulate —VCR's for instance. With any
luck, he could buy a satellite system , ade in Japan that would
pick up all the satellites for him for less than two : years of the
cable service. Palo Alto was getting behind faster every day.
Mayor Levy commented that such a chart would be an integral part
of the report to be received.
Pitch Johnson, 1411 Edgewood Drive, said whatever form of organi-
zation the cable system took, . it would be - a start up business,
which meant it must have adequate financing and expert management.
He was a shareholder of. City Cable Partners since its founding and
was struck by the quality of its management _ and fire) _ financing.
in order for the system to be of any use ` i n Palo Alto, it would
have to be well run. With the assembled management team and the
commitments from two major venture capital firms with which he had
no association, and from the Bank of America, the likelihood of
adequate financing being present when needed was high. A start up
business needed some things, and management and finance were key,
and he believed City Cable Partners had that management and access
to finance.
Eli Abbe, 299 Ely Place, was not a member or shareholder of either
organization. He worked in the cable business for a local company
who worked on the development of cable equipment and was generally
aware of many of the problems in cable systems around the country.
He believed both organizations did a good job of formulating their
goals and presenting them. The real issue facing staff and the
Council was which organization had the ability to meet those
goals. He recommended the selection of City Cable Partners
because of their practical experience. Their group was actually
involved i n the 1 ui l di ng and preparation of several cable systems,
and he believed that experience was essential. Further, City
Cable Partners had the financing: He also believed City Cable
Partners had a greater chance of success because they would be
able to provide a lower cost to the consumers without placing a
risk on them. His experience showed it was a risky undertaking,
and he was glad to see that the City did not choose to become a
major owner of the cable system as was earlier proposed because he
believed it was an unwise investment for the City to make. Many
people paralleled the City could do a good job of running the
utilities services which they clearly did at a reasonable price,
but cable was not a regulated monopoly. There was no requirement
for people to subscribe to cable, and there were plenty of signals
available. Success of the company was the important thing to
gauge because he believed that for either company there was a
risk. Whether it was debt financiers or equity financiers, there
was a risk to be borne. Without the success of the system as a
whole, there would be no benefit for anyone.
Bob Moss, 4010 Orme, was a member of the Board of Directors of the
Cable Cooperative, and said one reason negotiations stretched out
was because of the charge of the City Council that the bidders
involve Pac-Tel as a possible vendor of the cable installation.
There were some primarily legal problems with that on the . part of
Pac-Tel and the regulatory agencies that extended the negotiations
more than anyone expected. It was only a few months since Pac-Tel
was allowed by the regulatory authorities to own and invest in
real estate not directly associated with the telephone system. As
a result\of the negotiations, they had in place an agreement with
Pac-Te1 for a fixed price to build the system. City Cable did
not. The Co -Op assured the system would be built on schedule and
on cost because they had the agreement, which was something worth
waiting for. He urged the Council and public in general not to be
mislead by statements about the Cable Co -Op made by the compet-
itor. Council had the document from Lisa Van Dusen which attached
fact sheets on the Co -Op bid. He urged that Council use the
factual data and not misinformation supplied by others. For
example, Council was repeatedly told Co -Op subscribers would be
required to be, Co -Op members, which" was false. Council was told
about a $300 fee, which was for investors. Co -Op membership was
$10, and was voluntary. For that $10, . one got a vote on the Board
of Directors and had a direct say in the operation of the cable
system. In terms of staying . power, the City Cable Partners were
the ones who talked about the urgency of concluding the process so
they would not be stretched on the rack with the high cost of
maintaining their financing. The Cable Cooperative's financing
was in "place and they were not dependent upon tax benefits through
limited partnershtiPs for their financing. It was important the
facilities to service the community be in the community and not be
shared in Mountain View. Palo :Alto. should not be at the end of
thesystem--it should be the heart, of the system. The Cooperative
proposal was for that. The Co -0p acted expeditiously to respond
directly and in - detail and acceptably, to the letter '' from Mayor
Moulton and the East Palo Alto Cable Task Force, and their
requests regarding participation in cable. They met and voted on
it almost as quickly as it was physically and legally possible.
The Co-Op's projections for costs and fees were based on conserva-
tive figures. They had a conservative figure for penetration and
conservative figures throughout for the cost of service. The Co -
Op guaranteed 10 percent of the profits for community access in-
cluding the CAO, but additionally, the Co -Op set a threshold of
penetration above which they would contribute an additional 10 to
20 percent of their net profits depending on the penetration for
community programming and to the CAO. City Cable said it did not
know about the expertise of Heritage or the Cable Co -Op about
local programming. City Cable Partners had a local competition
for video tapes by local producers, and first prize went to Byron
Belitsos, who was in the Co-Op`s producer's group. The only pur-
pose of the Cable Cooperative was to provide quality, low cost,
effirient service to the subscribers.
Jordonna Eastman, 229 Del Monte, Los Altos, was a community access
producer who used the Viacom facilities. She was a parent and
concerned about the future of television programming for the next
generation. She urged that Council closely look at each community
access proposal. The community represented a wealth of talent and
capability to use the community access facilities and she believed
many people in the community were unaware of what they. had avail-
able to them through the community access program. She had a lot
of faith in Palo Alto and the surrounding areas and believed
through the people in the community they could affect the future
programming in television and be models to .which the rest of the
nation could look. As 1 ocal citizens, it could not be done with-
out access to the studios,, equipment, editing facilities, etc.
She enchuraged that Council find out what kinds of things would
be offered to the people regardless of whether they represented an
organization or independent community producers. She also encour-
aged that Council consider which company would be more likely to
go before the Council in five or ten years requesting a decrease
in community access funding as now happened in Mountain View
because the community access was one of the first areas to be cut.
To her, that was one of the most: important areas because it was
where the true talent of the community could be seen. The real
wealth was in whether there would be the dollars, hours, and
facilities available for more people to go in and use the facili-
ties as community members. It was unclear to her from all the
statements exactly what was being offered to community producers.
As a local community access producer, she encouraged careful
review by the Council.
Naomi Nadler, 638 Benvenue Avenue, Los Altos, was an associate of
Jordonna Eastman and was an independent television producer and
director for the past six years. She was inspired to work in the
media because of the need for more positive programming that dealt
with the importance of family. She supported the Cable Coopera-
tive because she believed it gave more access and say to the
individual producers in terms of the type of programming. Also
having dealt with Viacom people, she did not feel there was real
access towards programming decisions. There was definitely a
board which made the decisions and there a was no in -roads towards
the individual producer making policies which dealt with community`
access. She supported the need for community access to upgrade
the media in terms of programming. She was inspired to work with
the Co -Op because of its more cooperative' nature that every person
had a say in terms of the quality of programming _ which she
believed was the essence of the matter. A system more open to
input and the personal direction of the community and -'focal
producers was "the better _, system. She encouraged Council support
of the Cable CoOp because of its more open nature to input from
the community. She also encouraged both systems to give a lot of
access to the community _i n order to work on °upgrading the media.
1
Lynn Simpson, Cable Partners, said regarding the issue of the com-
munity access organizations, in the past one of the first things
that got cut back was the commitment to local programming. Cable
Partners tried to give the City the most realistic offer possible;
one they believed their lenders would accept and one which would
permit them to be a viable operating organization. Their offer to
support community programming was solid and they did not intend to
return to _try and cut it. It was something on which the Council
could count. Palo Alto would benefit from the fact that the hey-
day of franchising was over. There were no more wild-eyed
promises because everyone knew they could not come true. Cable
Partners wanted to maximize the benefits to the community and pay
its bills at the same time. She believed that was the offer
before the .Council, and Cable Partners' commitment to community
programming was total. As the documents became available, she.
believed Council would see more of what it was Cable Partners had
to offer.
Regarding the state of the limited partnership agreement, it was
a more discriminating market than it was a year ago, but she re-
emphasized the Cable Partners' financing was in place_ and commit-
ted. They had two major investors who wrote letters of commitment
saying they were wilding to fund the system.
Regarding the construction proposal from Pacific Bell, she under-
stood it was essentially the same proposal to both operators since
the same system would be built. Cable Partners got construction
bids from other major national contractors in_ ' order to have a
basis for comparison. Those decisions were not normally made
then, but rather when the franchise was awarded because contrac-
tors believed they needed those kinds of commitments to make firm
offers and in that case, all bidders were asked to make fixed
price bids. If there were cost overruns on thesystem, they would
not be borne by the operators, but rather the contractor. Cable
Partners had excellent discussions with Pacific Bell, and what
remained were final discussions of price- and terms. It was also
mentioned to staff that when the time came to look at those bids,.
compare them and make decisions, the City's input would be
invited.
She believed both organizations could say they had a firm, broad
base of local support that in turn would make a difference when it
came time -to how the system was operated. Palo Alto was.:;a unique
community which placed a high value on participation and \quality.
City Cable Partners valued the local people who helped to form and
shape the company andwhat it would be once it operated. She did
not believe there should be any concern it would not be a system
that did not reflect local interests and the uniqueness of the
community.
One of the major precepts in the book In Search of Excellence, was
the idea of being close to the customer. The people in the cable
industry were just now learning how to do that well, but they were
discovering it was the only way they would be successful as a
business. It could be fairly said that any good business, as its
basis, had to keep in mind the satisfaction of the customer, which
was what City Cable Partners intended to do. It was the only way
they could succeed. If they could do it, the City Council would
never be unhappy with the quality of the service provided by. City
Cable Partners in Palo Alto and in the surrounding communities.
Mr. Kelley submitted that community access, management experience
and financing were, all difficult issues. It was appropriate that
Council intended to take the time over the next couple of months
to study them. He knew staff and the bidders worked hard on the
project. Essentially, they all worked for a common goal to build
the best cable system in Palo Alto. Both companies were -basically
committed to that idea. There were some basic differences. City
Cable in its Presentation pointed out the expertise in their per-
sonnet , stockholders, and officers, and they did, have many
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7/22/85
and they had many qualified people working in their organization.
In the original proposal, City Cable indicated it would pay itself
a large management fee as a management company. To his knowledge,
no member of the City Cable board of directors and City Cable
itself as a company ever. managed a cable system. The Cable
Cooperative did not say it was a management company, which was why
it hired Heritage and why they would be paid the five percent
management fee. The Cable Co -Op had no idea of paying itself that
kind of money to manage the system because it required profes-
sional talent. The Co -Op went out and found that professional
talent and it was something they would add to the community. The
experience of the Co -Op was 1i�_ knowing what the community wanted
and what they believed subscribers would want in the future. He
did not believe anyone on the Council got a crash course in manag-
ing the utilities system when he or she was elected to the Coun-
cil. . The important thing was to listen to the people and the Co -
Op intended to be close to its customers because they were elected
by its customers.
Regarding community programming, he c:arified the Co -Op was deeply
committed to the notion of having an independent community pro-
gramming function. The Co -Op believed it was important and part
of its being as a company It intended to spend a lot of money on
community programming --=a total of over $8 million over the life of
the franchise. Contrary to some of the remarks, 50 percent of
their operating budgets --over $3 million --and 50 percent of their
studio facilities --roughly $500,000 in value-- would be reserved
for access and government programming. They believed that commit-
ment was substantial. They believed shared facilities made
economic sense, and if they were a different company, they might
turn the whole thing over to the CAO As the Council itself
struggled with the question forming the CAO, the Co -Op believed
there was a different operating relationship that would evolve
between the subscriber -owned cable cooperative and an independent
access organization. Over the long run, the sensible approach was
to put all of the community programming under one jurisdiction.
So long as the CAO wanted to maintain itself as an independent
organization, the Cable Co -Op would do its best to accommodate
their needs in that respect. Their commitment as a company and as
a subscriber -owned organization was to develop its own progr emmi ng
services that were responsive to the needs of subscribers, which
was something about which they would not compromise.
Some discussion was made of the Century Federal lawsuit. He
believed if Council mulled over ;the City's liab `lity, it was a
tough, issue and difficult to get any sort of straight answers out
of any of the City Attorneys. The Cable Cooperative was not going
to back down and run away because it was afraid of Centur
Federal, and it would not run away because it believed if would
lose a lot of money in the process. The Cooperative was unique in
the context of the Century Federal lawsuit in that it was a com-
pany which existed in some sense to protect the First Amendment
rights of each of its members. They believed Cable Co -0p would
speak on behalf of 10,000 ormore subscribers in the community.
When whatever court decided the issue finally, and looked at the
First Amendment issues as related to cable, he did not believe the
City could have a stronger ally than a cooperative that exerted
those First Amendment rights of those 10,000 or more subscribers.
That was a big difference between ,the two organizations.
Much was said about Pacific Bell and the relationship with both
companies. Ultimately, Council should speak with soate of the
Pacific Bell people. He negotiated with representatives of
Pacific Bell for 300 or 400 hours over the past year. Much time
was spent in meetings gong over incredible details of -the system,
and they ended up with not .only an agreement, but an agreement
over the essential terms of the agreement. They knew what they
were getting, what they would pay for it! what their rights would
be to the system then and in future, and they knew what Pacific
Bell would do. Given the change in the timetable, he _-was prepared
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1
0
1
to tell Pacific Bell : that the Co -Op was prepared to finalize the
terms of the contract to the extent possible between then and the
final City Council hearing. They looked at other contractors and
what people said they could build a system for and they spoke with
subcontractors and made their own estimates in terms of what it
would cost to build. On the whole, he believed one got what they
paid for. Pacific Bell offered a fair price and the incentive, as
a corporation, to do the finest possible job on the system. He
believed it was a unique and historical opportunity for a com-
munity. He was happy to say the Co -Op was enough ofa business to
recognize a good. deal when presented. The entire community was
being offered an extraordinary opportunity by Pacific Bell It
was one they intended to seize upon. The final distinctions
between the companies were basically question of ownership and the
nati're of the system to be built. There were two organizations--
oneothat would sell stock to people on a limited basis. The Co -Op
would be totally owned by people who subscribed to the system.
The Co -Op would also offer opportunities for local investors who
wanted to participate in the organization and could offer up to
$10 million in private equity contributions if people wanted to
participate in the system to that extent. Local investors would
be offered generous and secure rates of return. Because of the
Co-Op's financial structure, they were in a position where it
could guarantee a fixed rate of return for people who wanted to
invest in the system. The Co -Op would not be burdened with going
to the ,venture capital market to secure equity financing for the
system. They did not need it. They had the necessary money to
build the system with Pacific Self's and he saw no reason to go to
the venture capital market where one would pay extraordinary rates
of interest for private equity money. That cost would not be
borne by the Co -Op as consumers, which was reflected in the total
capital costs of the two systems. The Cable Co-Op's system would
be less expensive to build primarily because it was rot being
financed through an expensive limited partnership and it would not
pay the rates of return the venture capital's expected. Palo Al to
could have a part of the Mountain View system or it could build
the unique, self-sufficient, autonomous system to serve Palo Alto
and the neighboring communities. The City went through a lot of
work and spent a lot of time and money in forming the Joint Powers
Association. He did not know what the original negotiations were
with Mountain View, but had they wanted to part of their system,
Mountain View would have been invited to do so. The Co -Op saw no
reason why their system should be tied into Mountain Yiew in per-
petuity. The system could be already clustered with 50,000 sub-
scribers served, or the system could have half that number of
households saying how the system should be run. It was a funda-
mental difference, and he believed the Cable Cooperative stood for
building a complete system in, the community,
Mayor Levy believed Council consideration should be continued to a
later date.
Councilmember Bechtel agreed Council had excellent input, and
believed it needed to receive additional information and the staff
recommendation. She suggested holding off questions and comments
until the September date.
Mayor Levy said throughout the entire process, Council heard words
like "commitments" and _*promises* etc., and .,when it was time on
September 23, 1985 to resume discussion, he wanted a distinction
made between a firm, legally backed commitment and a generalized
good intention.
ITEM #I4: REPORT_ FROM COUNCIL LEGISLATIVE COMMITTEE (LEG A-2)
NOTION: Coenc i lme be r Fletcher moved on behalf or 'the . Council
Legislative Committee to adopt the Council Legislative Committee
recommendation as follows;
1
MOTION CONTINUED
1. Oppose the components of the President's Tax Reform Proposal
which would negatively impact local government, specifically:
the repeal of the deduction of state and local taxes from
individual income; the repeal of tax exemption .income from
many state and local bonds; the denial of the deduction for
interest paid by financial institutions to carry tax exempt
bonds; and the repeal of tax credits for rehabilitation and
restoration of older buildings and qualified historic struc-
tures;
2. Endorse SJR 30 (Roberti), a resolbtion by the State Legisla-
ture supporting retention of the deductibility of state and
local taxes;
3. Withdraw its opposition to SB 115 (Marks) as amended Nay 30,
1985;
4. Support SB 300 (Foran), if amended to reduce the 100 percent
matching funds requirement;
5, Support AB 993 (kl ehs ) and AB 1072 (Molina) which will lessen
the opportunities for absent voter ballot fraud;
6. Support AB 2000 (Davis) establishing a vehicle registration
amnesty program; and
7. Direct the Mayor to communicate the City's positions accord-
ingly to our legislators and others as appropriate.
MOTION DIVIDED FOR PURPOSES OF VOTING
Mayor. Levy said although he generally concurred that Council
should oppose most of the components, there were several compo-
nents'which over the years represented an abuse of what otherwise
should be a tax free prerogative. He -spoke specifically of the
issuance of tax free bonds in order to attract business from other
communities to ones own community. In the past, it was abi.sed and
placed one community in competition with another- and the bene-
fi_,ciary was the enabling of private companies to use tax free
moneys for what -otherwise. should be a legitimate -business expense.
He believed the President's recommendations went toofar in that
regard because housing bonds used to provide .housing for low and
moderate income individuals were a worthwhile use Of tax free
funds. He believed Council should=be aware there were zany abuses
and that local government as a whole suffered when. soe local
governments abused what otherwise should be a legitimate govern-
raent-right.
F IRS3' PART OF NOTION PASSED unanimously, Witherspoon absent.
SECOND PART OF NOTION PASSED unanimously, Witherspoon absent.
!lice .Mayor Cobb believed that AB. 993 which would lessen .voter
fraud bills was not nearlx strong enough.
THIRD, _ FOURTH 1 , FIFTI4 SIXTH AMM- SEVENTH PART OF NATION PASSED
unanimously,' Witherspoop absent.
ADJOURNMEP4T
Council a4Jou ^ned art 2:Q5 a.n.