HomeMy WebLinkAbout1985-09-23 City Council Summary MinutesCITY
COUNCIL
im0es
ITEM
Ural Communications
CITY
OF
PALO
ALTO
Regular Meetiug
September 23, 1985
Minutes of July 8, 1985
Minutes of July 15, 1985
Item #1, Appointment of three Architectural Review
board Members to fill three terms expiring
September 30, 1988
PAGE
6 2 8 5
6 2 8 5
6 2 8 5
6 2 8 5
Consent Calendar 6 2 8 8
Referral 6 2 8 8
Action
6 2 8 8
Item #2, Matadero/Adobe Pump Station Improvements 6 2 8 8
Item #3, Hazardous Materials Storage Project 6 2 8 8
Item #4, Trench Restoration Testing 6 2 8 8
Item #6, Tree and Stump Removal 6 2 8 8
Item #7, Downtown Park North 6 2 8 9
Item #9, Resolutions approving grant funds under 6 2 8 9
the California Park and Recreational Facilities Act
of 1984, and the Roberti-2'Berg Urban Open Space
and Recreation Program
Item #10, Resolution re Funds from FEMA for Fire 6 2 8 9
Expenses
Agenda Changes, Additions and Deletions 6 2 8 9
Item #11, Selection of a Cable Communications 6 2 9 0
Franchise
,ADJOURNMEN': 11:50 p.m. 6 3 1 1
Regular Meeting
September i3f 1985
The City Council of the City of Palo Alto met on this date in the Council
Chambers, 250 Hamilton Avehue, at 7:40 p.m.
PRESENT: Bechtel, Cobb, Fletcher, Klein, Levy,
Renzel, Sutorius, Witherspoon, Woolley
ORAL COMMUNICATIONS
None
MINUTES or JULY 3, 1985 -
Cowrcilmember Renzel submitted the following correction:
Page 6044, fifth paragraph from bottom, second line, "audience" to read "pub-
lic." - \,
MOTION: -Councilmember Renzel moved, seconded by Sutorius approval of the
Minutes of July 8, 1985 as corrected.
MOTIO4 PASSED unanimously.
MINUTES OF JULY 15, 1985 - -
Councilmember Fletcher submitted the following correction:
Pages 6062-6063, last paragraph, add to the end of the paragraph, "She was also
greatly concerned that a permanent barrier be erected to prevent traffic from
crossing El Camino from Willow Road to Alma Street."
Councilmember Renzel submitted the following corrections:
Page VVJL505n
,
'Audubon."
lOSe.
paragraph, second and third lines, "Audobnp Olnuld
read
Page 6053, first paragraph, first and second lines, "Audobon" should read
"Audubon."
Page 6056, `first paragraph, third line, insert "there" between "remained" and
"was."
Page 6056, first paragraph, next to last line, insert "reasonable is" between
"said" and "whatever."
Page 6056, first paragraph, last line should read, "Council say it is.''
MOTION: Council.eer Renzel moved, seconded by Sutorius, approval of the
Mutes of July 1S, 1985 as corrected, and approval of the Minutes of July 22,
1905 as submitted.
MOTION PASSED unanimously. -
ITEM fl , APPOINTMENT - OF THREE ARCHITECTURAL REVIEW BOARD MEMBERS TO FILL THREE
X 19 (
-r+
Mayor Levy said the City received 11 applicants to the Architectural Review
Board (ARB) for the three ,positions. The quality of applications for the
City's various boards and commission% continued to be high. -
Councilmember Sutorius echoed Mayor Levy's comments. In voting, he would give
weight to the individuals' qualifications, which were high on the part of all
applications, with respect to _ how the indi v y dial s:' background and qualifica-
tions melded into the existing composition of the board and the two members who
continued to serve with the three members appointed that evening. Having been
a member of the -ARB, he understood the interplay among the board, between the
ARB and staff, and the ARO and the dialogue conducted with the public and the
public and applicants. He first intended to voce for Virgil Carter, who
exceeded the Council's highest expectations in service ai ready performed. He
intended to vote next for Aino Vieira-Da-Rosa. Professionals who knew her work
gave it high regard, and he believed design competency was important for the
role she would fulfill on the board. Beyond the design competency, he believed
it was important to be able to communicate about design and to perform the
critique role in a positive and constrecti ve manner and get the point across to
the applicant as to shortcomings and perhaps how they might be rectified. For
the thirst position, he believed it was crucial to have a building architect
available to critique, dialogue among the colleagues, and to add profes-
sionalism in communicating that dialogue to the applicant. He would support
Bodrell Smith.
Vice Mayor Cobb agreed with Ceuncilmember Sutorius. He underscored the com-
ments about Virgil Carter, and hoped Council would join him on the first ballot
and give him a unanimous endorsement for reappointment. He was also inclined
to stick with the three architects to add to the landscape architect and citi-
zen member already on the board. Council received two excellent applications
from citizen members.
CouncilmeWer Klein agreed with the comments of Councilmember Sutorius and Vice
Mayor Cobb with regard to Virgil Carter. He intended to vote for an architect
on theesecond ballot, but his choice would be Rob Steinberg. In terms of the
third position, he believed the City needed a citizen representative, and found
it difficult to believe Councilmember Sutorius did not have the same position.
One problem with the ARS in recent years was a lack of ability to communicate
what it did to the public, which frequently resulted in a language peculiar
only to the ARB. The ARB needed someone who could serve as a filter between
the public and the design professionals in order to facilitate more public con-
fidence in the process. It was also a way to walk the delicate line between
politicizing the ARB, which he was opposed to, and making its decisions more
understandable and acceptable to the public: Council should appoint a non -
design professional to the fifth position on -'the board, and Steve Jarvis and
Jane Goldstein were both well -qualified, and he intended to vote for Jane
Goldstein for the third position.
Councilmember Fletcher sal
ments. She placed a high
concerns of the public.
applicants seemed to feel
choices were the same as
alphabetical order.
d Councilmember Klein expressed many of her senti-
val due en respce i veness of ARB members the
the 1 v. ,. r/Y.�M F 7 \.F.\.JJ of lFfr..FFW 5 .y to dl1{,
it was a public body_ and some of the members and
they wanted to be insulated from the public. Her
Councilmember Klein, but she intended to vote in
Councilmember Bechtel agreed with the comments made earlier about the number of
well -qualified candidates, and the City of Palo Alto was fortunate that so many
people wanted to give up two full mornings a mInth to attend meetings. She
believed Virgil Carter did an excellent job and she intended to support him,
She also concurred with Counci lwembers Fletcher and Klein that Jane Goldstein
and Rob Steinberg would be outstanding choices.
Councilmember Woolley Joined Councilmember Sutorius and Vice Mayor Cobb in
voting for three building architects. From her experience on the Historic
Resources Board (HRB) its composition was three professionals, and during the
past year she was the Council liaison to that board which now had two profes-
sional architects. She saw a difference in that when an application was
received, the load fell on the shoulders of the professional Architects to
interpret the plans, come up with reasonable alternative plans, and to know
what the building code allowed. She noted there was a vacancy on the Historic
Resources Board and she hoped it would get back to having three architects.
Because of that experience, she believed the job of the ARB was primarily
designed and Council should choose the best expertise available from the
standpoint of design. She intended to support Virgil Carter, who she agreed
did an outstanding job already on the ARB, on the first ballot; Ai no
Vieira-Da-R4sa,are the second ballot; and Rob Steinberg on the third ballot,
Councilmember Renzel also supported Virgil Carter. She planned to support Alno
Vieira-Da-Rosa on the second ballot, and Jane Goldstein on the third ballot.
The design professionals tended to get a little into the ,fashion of :the time
and forget the public's viewpoint onwhat happened around them and the perma-
nent changes to the community. She believed it was important to have the view-
point from someone who was competent, bet not a professional architect.
Mayor Levy :,aid the philosophy involved in ,he selection to the ARB was well
articulated by his colleagues. Regarding to what degree the ARB should consist
of professional architects and the ,ieneral public, he believed there should be
a system of checks and balances whitwhith was ghat council was designed to imple-
ment. The Council was the court of last resort; the Planning Commission was
the court primarily of public input where questions of zoning and overall build
up and density should be discussed; and the ARB was the entity to primarily
look at design and how the basic public decisions which should have been
properly made by Council with the help of the Planning Commission were imple-
mented. Unfortunately, in recent years there was substantial build out in the
City --more than most had wished would take place. the fault was often laid at
the feat of the ARB, but it was Council's fault for not having moved more
rapidly to slow the pace of expansion down. He believed the Council was best
served if each realized its responsibility and Council's was one of overall
zoning, density and questions of that nature. The ARB needed to primarily deal.
with design. Current members of the ARO and most of those before the Council
that evening were also residents of the community and wera riti yenc in that
regard. As experienced people dealing in design and architecture, they were -
excellent at articulating the i nt vrel ati onshi p of design to the overall
appearance of the community to scale, and to the scale of the community. All
applicants were outstanding, and he intended to join those who focused pri-
marily on having top notch designers --people not only sensitive to design, but
also experienced in articulating that sense to the public at large and to the
Planning Commission and the Council when necessary. He would support Virgil
Carter on the first ballot; Ai no Vi ei ra-Da-Rosa on the second ballot; and Rob
Steinberg on the third ballot.
RESULTS OF THE FIRST ROUND OF VOTING FOR FIRST POSITION
Acting City Clerk Gloria Young announced the results of the fi-st round of
voting:
VOTING FOR CARTER: Bechtel, Fletcher, Klein, Cobb, Levy, Renzel, Sutorius,
Witherspoon, Woolley
Ms. Young announced that Virgil Carter received a unanimous eepnintment,
Mayor Levy rnn jratul eted Mr, Carter
RESULTS OF THE FIRST ROUND OF VOTING FO^ TdE SECOND POSITION:
Ms. Young announced the results of the first round of voting for the second
position:
VOTING FOR VIEIRA-Da-ROSA: Levy, Cobb, Sutorius, Woolley, Renzel
VOTING FOR STEINiBERG: Bechtel, Fletcher, Klein, Witherspoon
Ms. Young announced that Aino Vieira-Da-Rosa received five votes and was
appointed.
Mayor Levy congratulated Ms. Yieira-Da-Rosa on her appointment.
RESULTS OF THE FIRST ROUND OF VOTING FOR THE THIRD POSITION:
Ms. Young announced the results of the first round of voting for the third
position:
VOTING FOR STE I NBEiG: Levy, Wool l ey, Witherspoon
VOTING FOR SMITH: Cobb, Sutorius
VOTING FOR GOLDSTE IN: Renzel , Bechtel, Fletcher, Klein
Ms. Young announced that none of the cAndldates received five votes and another
round of voting was in order.
6 18..7
9/23/85
RESULTS OF THE SECOND ROUND OF VOTING FOR THE THIRD POSITION:
Ms. Young announced the results of the second round of voting for the third
position;
VOTING FOR GOLDSTEIN: Cobb, Bechtel, Fletcher, Klein, Renzel
VOTING FOR STEINBERG: Witherspoon, Woolley, Sutorius, !.lvy
Ms. Young announced that Ms. Goldstein received five votes and was appointed.
Mayor Levy congratulated Ms. Goldstein.
CONSENT CALENDAR
Mayor Levy said a correction was needed to Item #5, Arastradero Preserve
Parking, and staff requested it be removed from the Consent Calendar and
continued. Mayor Levy removed Item #8, Foothills Fire Facility.
MOTION: Councilmember Bechtel moved, seconded by Fletcher, approval of the
Consent Calendar.
Referral
None
Acti or.
ITEM #2, MATADERO/ADOBE PUMP STATION IMPROVEMENTS (PWK 6-2) (CMR:524:5)
Council recommends that Council:
1. Authorize the Mayur to execute a contract with Wanderer Electric, Inc. in
-the amount of $202,860; and
2. Authorize staff to execute change orders to the contract of up to $30,000.
AWARD Mr CONTRACT -
ITEM #3, HAZARDOUS MATERIAL STORAGE PROJECT (SAF 5) (CMR:525:5)
Staff recommends Council:
1. Authorize the Mayor to execute the contract with Atlas Hydraulic
Corporation in the amount of $352,062; and
2. Authorize staff to execute change orders to the contract of up to $53,000.
AWARD OF, CONSTRUCTION CONTRACT
Atlas Hydraulic Corporation
ITEM #4, TRENCH RESTORATION TESTING (PWK. 2-5) (CMR:519:5)
Staff recommends Council authorize the Mayor to execute the agreement with
Pittsburgh Testing Laboratory for testing services in the amount of $20,000.
AGREEMENT
Pittsburgh Testing Labora ory
ITEM: #6, TREE AND STUMP REMOVAL (ENV 7) (CMR:523:5)
Staff recommends that Council authorize the Mayor to execute a contract with
Arbor Tree Surgery for; $50,000.
VAR® OF CONTRACT
Arbor Tree Surgery
6288
9/23/85
ITEM #7 DOWNTOWN PARK NORTH (PAR 2-5) (CMR:521:5)
Staff recoornends that Council:
1. Authorize the Mayor to execute the contract with Valley Crest Landscape,
Inc. in the amount of $399,223; and
2. Authorize staff to .execute change orders to the contract of up to $50,000.
AWARD OF CONSTRUCTION CONTRACT
Valley Crest Landscape, Inc.
ITEM #9, RESOLUTIONS APPROVING AFPLICATIONS FOR GRANT FUNDS UNDER THE
CALIFORH.�, .. ... .,.,.. ......., .,.......,.. .,... .,. ,,.` .,.�
ROB I-ZTBERG-URBAN OPEN SPACE AND RECREATION PROGRAM (PAR r-1) 'CMR:b26:5)
Staff recommends that Council enact the resolutions approving application for
grant funds under the California Park and Recreational Facilities Act of 1984,
and the Roberti -Z -berg Urban Open Space and Recreation Program.
RESOLUTION 6431 entitled "RESOLUTION OF THE COUNCIL OF THE CITY OF
PALO ALTO 'PROVING THE APPLICATION FOR GRANT FUNDS UNDER THE
REGIONAL COMPETITIVE PROGRAM OF THE CALIFORNIA PARK AND RECREATION
FACILITIES ACT OF 1984 FOR GREER PARK"
RESOLUTION 6432 entitled "RESOLUTION OF THE COUNCIL ' THE CITY OF
PALO ALTO APPROVING THE APPLICATION FOR GRANT FUNDS UNDER THE
ROBERTI-Z'BERG URBAN OPEN SPACE AND RECREATION PROGRAM FOR PALO ALTO
GREER PARK PROJECT'
ITEM #10, RESOLUTION RE FUNDS FROM FEMA FOR FIRE EXPENSES (SAF 4) (CMR:529:5)
Staff recommends Council approve the resolution designating the City Manager as
the City's agent fn applying for reimbursement.
RESOLUTION 6433 enti t1 ed 'RESOLUTION OF THE COUNCIL OF THE CITY OF
PALO ALTO Ik SPORT OF REIMBURSEMENT TO THE CITY UNDER THE DISASTER
RELIEF ACT OF 1984 AND THE PRESLPENT'S DISASTER RELIEF FUND°
MOTION PASSED unanimously, Cobb absent.
AGENDA CHANGES, ADDITIONS AND DELETIONS
City Manager Bill Zaner announced that Item #8, Foothills Fire Facility, would
become Item 11-A.
6 2 8.9
9/23/85
ITEM We SELECTION OF A CABLE COMMUNICATIONS FRANCHISE (!'RE 7.3) (CMR:S17:S)
Mayor Levy said the item was the award of a cable television franchise for the
cities of Palo Alto, Menlo Park, Atherton and for Stanford University. Palo
Alto represented the Joint Powers Agreement (JPA) which included the jurisdic-
tions mentioned. Council would first hear from the PLl o Alto City staff; then
the City's consultants; then from representatives of the JPA. Nett would be
comments froms the two applicants and then comments from the representative of
the Community Access Organization (CAO). In staff's 1ntreductory remarks, a
differentiation between the responsibilities of the City Council in awarding
the franchise and the responsibilities of the CAO should be addressed. Fol-
lowing those comments, the applicants, City Cable Partners and Cable
Communications Cooperative would receive 10 minutes for additional comment.`
Finally, Council would hear from the public. If necessary, Council would con-
tinue the discussion to September 30, and subsequently reserved October 1, 2
and 3 if necessary.
Deputy City Manager Larry Moore s=rid his comments would focus on the cable
franchise and environment, the events which occurred over the past year, and
the staff report which recommended Council award the cable television franchise
to Cable Communications Cooperative of Palo Alto, Inc. In its Request for
Proposal (RFP) issued in June, 1983, the City set forth its 11 basic objectives
of cable communication services for the City and the other jurisdictions of the
:;e vice area as follows:
(1) High penetration of subscriber services at the lowest possible cost;
(2) Broad diversity _ of servt cgs evae 1 eel A uni r
femi v_ throughout
_ vry
area;
4l,y
..,%;11 11,1,50,6;
(3) Wide -spread community involvement and local programming, access and
related communications services by residents, departments and agencies,
institutions, businesses and others within the service area;
(4) Creative uses of cable technology to. foster participation in local
self-government activities;
(5) Active cooperation between the cable operator, City agencies: and depart-
ments and institutions within the service area, including in particular, educa-
tion, cultural and other institutions including Stanford University, the Palo
Alto Unified School District (PAUSD), and Foothill College that might provide
cable programming and services over the system;
(6) Technically sound and flexible cable system consistent with the state-of-
the-art cable technology;
(7) Interconnection of the system te cable systems throughout the region, and
direct sources of programming services, coordinated programming and operational
relationships with cable systems within the region;
(8) Timely and orderly conetrection of the system;
(9) Efficient and effective oversight and regulatory mechanisms;
(10) An economically viable cable system; and
(11) An ownership structure to enhance community participation and maximize the
service and economic benefits of c,` l a tel evi s1 on to the residents of the _ser-
vice area without unacceptable ri sit 'to the City. The purpose of listing the
requirements was to inform interested applicants about the kind of system and
nature of the services the City believed -were necessary to meet its basic
objectives. frhe companies were requested to respond how they would meet the
requirements; or, to the a:tent that the co*pany did not intend to meet one or
More of the requirements, to explain its alternatives for meeting t1e 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 the requirements; therefore, it was not. useful to judge an appllrant's
proposal in terms of the basic objectives. In October, 19044, Congress :passed
.the - Cabe Act of. 1984 as the City was about to release a draft franthl se
agreement to the two targeted table companies, , The law allowed local
jurisdcitions to impose certain standards_on cable franchisees that -were in the
public interest, but it also limited the regulatory= power over the cable
4/I3P8S
fn aii+.:h istes by local jurisdictions. While the City could enforce provisions
of the franchise which affected the maintenance of broad, mixed quality and
level of cable services, it could not specify what those services were nor
could the City regulate the rates charged to subscribers for programs or
services including installation charges and other related services. While the
City could require the franchisee to provide services, facilities and
equipment which related to public_, educational and governmental use of channel
capacity on a cable system, it could not requi,-e. the company to contribute
grants, funding or any other kind of continuing operational support for
community access programming. On July 22, the Council received progresk
reports and presentations on the cable television activities over the past
year. At the same meeting, Council established a time frame for concluding
the cable television franchisee selection process. Included within the' time
frame was the opportunity for JPA members to review and comment on tine
propnsed-cable television franchise agreement and appendices. That evening,
the JPA members would address the Council directly;, In April, Council
selected three people to serve as incorporators of the Community Access
Organization (CAO) The CAO was a spearate, independent organization created
to represent all institutions in the six jurisdictions of the JPA. The CAO
negotiated its own agreements with the Cable Co-op and City Cable Partners.
That evening, the CAO would report to the Council the results of its
negotiations. On September 12, 1985, Council received CMR 517:5 entitled,
"Selection
1-7� �.�-_-__ • 42 -
Je1eciion of a- Cams 4:4— iinications Franchi ee," which included a summary of
the franchisee commitments, obligations in a franchise agreement, a franca ork
for selecting a franchisee, including categories of comparision, a summary of
key differences between the two applicants. In that report, staff concluded
the selection of the Cable Co-op as the franchisee that would best meet the
City's basic oojectnves ror the toiiowing reasons:
1. Cable Co-op was accountable to its members who would be, for the most
part, subscribers to the system. The ownership and structure of Cable Co-op
provided for cor.unity enforcement of standards and guidelines in addition to
the government enforcement prorAed in the Cable Act and the franchise
agreement, which characteristically would become more important if the current
trend toward deregulation continued. The Cable Act severely limited the
City's authority to protect the priblic in many important areas, and t ,;.City's.
authority to regulate both technical and consumer -oriented provisions of the
franchise agreement might be further eroded. As the City's ability to protect
the public by regulating the cable company's operation diminished, the
attraction of a user -controlled system increased.
2. Cable Co-op appeared to have a sound business arrangement with Pacific
Bell for constructon and maintenance of the system. Pacific Bell `demonstrated
an ability and strong incentive to build and operate a show -case cable
communications system in the \area for its own marketing strategies in other
areas. Cable Co-op reached an agreement in principle with Pacific Bell which
allowed it to _'draw on the company's resources and expertise in building a
communications system in the area, and applying its broad communications
expertise to the development of new non -video communication services; and,
3. Cable Co-op demonstrated a commitment to the local community beyond
ownership structure and what the community members chose to do insofar as
participation in the development of the system. For example, Cable Co-op
provided for public participation, i.e. representation from the JPA and the
CAO on its Advance Services ,Development Committee which would guide the
company in its provision of new non-traditional cable services. Staff
believed such opportunities for public participation at the policy -making
level would enhance the system's ability to meet local needs and service the
public interest.
Zaki Lisha, Mid -Peninsula Access Corporation (MPAC), thanked the Joint Cable.
Working Group, City staff and the Palo Alto City Council for 'their' support
during the negotiation. After it's July 22 presentation, MIPAC'smain goal was
to arrive at an agreement with the companies to lay the: foundation for a
strong, independent and financially sound organization. He stressed the
independent aspect of the organization; that it was a separate iZgl.
negotiated. with each bidder; and worked in the public interest to, secure
public access for the service areas. In its negotiations with the companies,
MPAC did not obtain specific responses as related to its needs, and as a
result, MPAC devised a chart which listed the essential requirements to start
run .a. successful Community Access Organization. The chart_ would inform
the bidders and the community of !PAC's logistical needs to operate a
first-class Community Access. Organization. By responding to, the chart, each
company would spell out the level of commitment it would make to caaiwu ini ty
6 2 g.1
9/23/85
access and each company would establish the type of ongoing relationship it
saw after -the grant of a franchise. By identifying the level of commitment to
community programming from each company and .esteel fishing a working
relationship, MPAC could make its recommendation on which bidder it believed
would best serve the community. When MPAC began negotiations, it used the
City's agreement and appendices as a starting point. The incorporators sent
out the chart to both bidders on August 26, 1985, and expected to reach an
agreement with them before the City staff report of September 12, 1985. As of
that evening, MPAC had only reached an agreement with the Cable Communication
Cooperative, and hoped to reach an agreement with City Cable Partners before
the end of that week. The basis or the chart came from looking at other CAO's
in similar demographic areas, and from its own approximation of the needs
specific to the communities it served. In terms of being the community access
organization, the specific categories were most important, included channel
capacity. MPAC requested six downstream channels for the public and one
upstream. For educational users, it requested six downstream and one upstream
channel, which would be on the "AN cable. On the NB$ cable, it requested ten
downstream channels and five upstream. For educational users, twenty-five
downstream and seventeen upstream.
The second category was dial location of the flag ship channel for communi y
access. To insure the public access channel was not locked within the seventy
available channels, MPAC requested the public flag ship channels to be within
the first ten numbers of the dial.
The third category vas the main studio. Its vision of community access was
that programming should be encouraged in the community. It wanted
state-of-the-art equipment. It also wanted to foster the ability of the
community to produce high quality programming to show -case the best from the
cultural and educational events in the community. For that reason, it
specified a complete state-of-the-art production studio to serve the needs and
specifications listed on the chart. Based on current construction costs, MPAC
estimated it would cost between $800,000 and $1,200,000 to accomplish it. It
also requested the studio be located in a 1.5 mile radius of the intersection
of Melbourne and Middlefield, in order to be centrally located to all the
service areas.
The fourth category was equipment. MPAC requested up to $750,000 in equipment
to cover the following: Studio equipment and facilities; a mobile van and
porta-pack; and, editing equipment to be strategically located throughout the
outlying areas.
The fifth item was control of studio
on its observations of other service
community access service, it needed to
MPAC would manage the studio facility.,
facilities, staff and equipment. Based
areas, MPAC concluded to best provide
have the management of the studio, i.e.
staff na equpment,
The sixth item was start-up capital. In order to get the organization on
solid footing, a rigorous program of community outreach and demonstration in
addition to fund-raising efforts would be necessary, which required start-up
capital. In addition, set-up costs in terms of office space, mailing and
printing would also be necesssary. MPAC estimated such costs to be $60,000
within the first 30 days; $190,000 within the next 210 days; and, $250,000
within 390 days.
The seventh item was annual operating capital. To manage the facilities, it
needed an executive director, engineer, technical help, producer and trainer.
It also needed an operating budget for supplies and maintenance. The figure
it arrived at was $250,000 or five percent of the gross revenue, in the first
five years; $350,000 or five percent of the gross revenue, in the next five
years; and, $50,000, or five percent of the gross revenue in the next ten to
fifteen years after that. MPAC also -sought fro. the companies specific
assistance in fend -raising. It F talked about a community programming
development fund to assist the community in getting high quality productions.
MPAC discussed a $500,1= equipment replacement fund to replace equipment
commencing in the sixth year of operation of the studio.:
The last item was institutional drop and converters for the institution
users. In terms of determining its status with cc-apAhies, MPAC believed
it was important to see how they responded to the chart. .MPAC wanted a
company that was supportive land helpful in its efforts in community access.
After the charts were amaile&`on August 26 the Cable Co-op began negotiating an
agreement, and within two weeks, they came to terms. On the other hand, City
Cable Partners chose not to respond to the chart, and stalled efforts to reach
6 2 9 2
9/23/85
an agreement. lhey informed MPAC the Communication Act of 1984 precluded them
from answering the chart. After repeated talks with City Cable Partners to
resolve the issue, there w.'S still no agreement. After the City staff
recommendation on September 12, City Cable Partners expressed a willingness to
discuss an agreement. However, the only thing 1t had as of that night was a
proposal from City Cable Partners received on September 20. Since the
proposal was not a legal document, MPAC could not regard it as an agreement.
In terms of the agreement. with the Co-op, regarding channel capacity, it had a
maximum of seven channels during the life of the franchise. On the dial
location of the flag ship, the Co-op assured aicommunity •access channel on
Channel 6. In terms of the stdio, MPAC committed 3,700 square feet and a
token amount including equipment of $600,000 Co-op committed $400,000 for
equipment in the first three years, and an additional $250,000, upon request,
to be available by the sixth year. In terms of control of the studio, MPAC
would control the studio with 25 percent usage reserved for the Co-op. There
would be no start-up capital. There would be an annual operating budget of
$200,000, plus five percent of the next profits in the first five years;
$300,000, plus five percent of the net profits in the next five years; and,
$400,000, plus five percent of the next profits in the next five years. There
would be no programming development of funds, but there would be a replacement
fund of $460,000. In terms of the institutional dropand converters, there
would be the equivalent of about $75,000 or 500 drops.
In terms of City Cable Partners MPAC, could only depend on what was agreed
neon with the City regarding the agreement and the appendices. In terms of
the chart, City Cable Partners only committed three access channels and
$350,000 for studio and equipment. Basedonthe commitment it received from
both companies and the willingness of each company to work with MPAC toward
successful community access, it concluded the company that would best serve
the interests of the community was the Cable Communication Cooperative of Palo
Alto. The incorporators strongly supported the City staff recommendation to
award the cable communications franchise to the Cable Communication
Cooperative of Palo Alto. They were convinced only through a close
cooperation among the City of Palo Alto, , the JPA, the CAO, the cable company
and, the educational institution of- the entire service area, could they
achieve a communication system .,t h the potential of being the envy of the
cable industry. The Incorporators thanked the City Council for the honor of
serving the community in the cable franchising process.
Vice Mayor Cobb referred to the chart and the numbers regarding operating
capital. He asked for clarification that it was "plus five percent" rather
than "or five percent." �.
Mr. Lisha said it was plus five percent.
Vice mayor Cobb asked to have a copy of the chart in order to have the
comparison of what was requested and received.
Mayor Levy said he was concerned through the process that there seemed to be a
difference between firm commitments and promises later negotiated out. Mr.
Lisha said the commitments received to date from the Co-op were firm
commitments. He asked if those commitments were legally binding on the Co-op.
Mr. Lisha said there was A legally binding agreement.
George Stepaneko, Mid -Peninsula Access Corporation, was also one of the three
incorporators. My first job cat of law school was with the Federal
Communications Commission, (FCC) and in those pre -deregulation days, the FCC
required broad band and cable casters to do something called "ascertainment."
Ascertainment was Ordinarily done by hiring someone to survey local
communities and determine what kinds of public service programming would
suffice to bring the operator into compliance with the public, interest
requirement of the Communications Act. Licenses- were r routinely .lost 'or
granted, renewed or not renewed almost entirely on ascertainment grounds.
Ascertainment was a costly and cumbersome process both for the -applicant and
for the commission, probably not all that revealing of what was in the
communicator's heart-ofhearts.. Eventually, "ascertainment" was proclaimed to
be a: sham and that responsible communicators would still serve the needs of
the community with or without an ascertainment requirement. He mentioned 1t
because on Friday, Sept20, at around 6:00 p.m. he received, via City
Cable Partners messenger, an unsigned letter, dated September 6, 1985, from
Partners' attorneys directing his attention to certain provisions of -the Cable
6 2 9 3
9/23/85
Coe mrnications Act of 1984. The 1984 Cable Communications Art was the
deregulators latest offering. The letter spoke to keeping the franchising
process as clear as possible and was geared to prevent MPAC from negotiating
with City Cable Partners for community communications resources prior to the
award of the franchise. He said MPAC's negotiations with the Cable Co-op were
not always amicable. MPAC never once met Cable Co-op's lawyers; in fact, he
asked Lisa Van Dusen which firm represented them to satisfy is curiousity.
The Partners' lawyers were ever present, even when they were not needed. They
were always willing to advise both Partners' management, the Incorporators and
MPAC how they should not discuss community access, lest they ran afoul of the
1984 Cable Policy Act. He was not cnmfortable with the attention MPAC
received from Partners' attorneys. He did not know what the Legislators in
Washington intended when they drafted the 1984 Cable Reform Act, but he knew
they did not repeal, in its entirety, the Communications Act of 1934,
therefore, he contended that its overall guiding philosophy was that public
communications should be administered in the public interest, which meant more
than just lower initial subscriber rates and M -TV. From the outset, Cable.
Ce-op voluntarily offered to support community access and programming_. In
fact, he differed with the Cable Co-op as to what extent .and under whose
auspices it should be accomplished, but i+ever on the basic premise that
community needs must be served adequately. He submitted the kind of cable
operator the service area wanted, needed and deserved was oneconcernedand
committed to the cosh i ty. Such a cable operator would be active in, and
would freely volunteer its support for comunity communications. Compare the
objective criteria, and the Cable Co-op was such a cable operator. If the
Council compared the objective and subjective criteria, At eoUlduon.ly:conclude
that Cable Co-op should be awarded the franchise.
Councilmember Klein clarified that in July, Mr. Stepanenko was equally as
critical of the Co-op as he was now of City Cable Partners.
Mr. Stepanenko said that was correct.
Councilmember Klein asked for an explanation of the 180 degree turn -around,
but fArst wanted to hear from the City's consul rant. as to. what.,coeld Jandeeould
not be-Jone with regar to cable access organizations, financing, agreements,
etc.
Norm Sinel, Arnold and Porter, said before the Cable Act, cities frequently
negotiated on behalf of the public, facilities and support for access
organizations to serve the public, and would charge .the cable system
franchise. It was a key issue in the cable negotiations, and was resolved
when the Congress of the United States felt it was not inappropriate for a
city to charge a cable operator five percent of the gross revenues as a
franchise fee. They went through a series of issues to determine what would
and would not be part" of the five percent, and the way the compromise fell
out, a city could charge five percent of the gross revenues as a franchise
fee, and to have capital costs related to the construction of facilities for
the dedication of channels not be an offset agaiist the franchise fee.
However, ongoing financial support of access entities, whether voluntarily
offered through the franchise agreement itself or required by the
municipality, was the same thing as a franchise fee in the eyes of the
Congress and, therefore, would be subtracted frmn: the frfanchise fee. To the
extent Council created a requirement that each company support, onan annual
basis, the access organization, which was clearly a decision Council could
make, the decision would impact on the extent of the franchise fee the City
could charge in the franchise agreement. The sum total of those two could not
exceed five percent. . From the CAO standpoint or from *AC's standpoint, they
preferred to negotiate an arrangement with an applicant, and he assumed with
other people whc were prepared to make grants to 501.23 organizations for
their support. In ter:as of the City's responsibility, if the City determined
it wanted to have five percent franchise fee go. ..to. the City, .4t could -then
determine how to spend it on cable -related matters. It would be important for
the City tr focus on the capital assets and channell capacity which .staff
already negotiated, but essentially to leave the CAO and applicants to discuss
what they wanted and not focus on the end result of those discussions in the
decision -making.
Councilmember Klein asked if that was done so far.
6 2 9,.
9/23/85
Mr. Sinel said yes.
Couhcilmember Klein asked whether the agreement either one of the applicants
negotiated with MPAC was enforceable under the law.
Mr. Sinel assumed the document was structured properly with consideration from
MPAC to the cable operator. For example, MPAC could do thins the cable
operator wanted them to do, and in exchange, the cable operator paid MPAC.
Those two would have a contract between each other, but the City itself would
not be party to it and would not be concerned whether the parties honored
their contract, since there were courts to enforce contracts,
Councilmember Klein asked if there was anything under the Cable Communications
Act which prohibited an agreement such as the one the Co -up entered into with
MPAC.
Mr. Sinel had not seen the agreement, but the corporate.entiti.es in California
could enter into agreements not in violation of public policy of making grants
in exchange for some services. Paying money in exchange for services to
ascertain public needs or serve public needs should be a relevant area of the
contract.
Councilmember Klein clarified the letter City Cable's attorneys sent to the
CAO's apparently stated it was somehow in violation of the Act.
Mr. Sinel had not seen the letter but would not be surprised. if the lawyer
tried to explain that under Section 622 of the Cable Act, if the City wanted
to get a five percent franchise fee, t,e city could not also mandate annual
support to the CAO which would be in violation of the law. If that was their
conclusion, it was appropriate.
Councilmember Mein asked Mr. Stepanenko why the incorporators were so
critical of using much the same harsh language with regard to the Co-op 60
days ago and now made a 180 degree turn.
Mr. Stepanenko said the CAO never heard from the Coop on philosophical
grounds. The problem initially was a question of level -of support and who
would control the facility or support for communityaccess and programming.
The difficulty with City Cable Partners and the constant intervention of their
attorneys was that City Cable Partners would not allow additional levels of
channel capacity, or capita expenditures for equipment and facilities. At
least, they would not negotiate any of those things until after the franchise
award was granted. He understood the City, and the CAO and the potential
franchisee could negotiate any of those things prior to, or after, the teard
of the franchise.
Councilmember Klein asked Mr. Sinel if Section 622 of the Act said the City
could not ask or demand a potential franchisee to negotiate with a community
access organization or with the City for that matter, and could not require
them to do things in addition to the five percent, was it proper for Council
to know one applicant had a better package for the CAO than the other, and to
make it part of the Council consideration in the decision making process;;
Mr. Sinel said it was alright to take public testimony from the CAO as to who
they recommended Council chose. It was proper for Council to determine - what
the facilities and channel capacity would be and for the CAO to tell Council
Council what they were offered in terms of grants. It was appropriate for
Council_. to select the franchisee that would best serve the community based on
its understanding of the public and its connection to the community. For
example, what offers were made. Ten percent of net profits, after everything
was paid, might not be an enormous amount of money, so Council needed to look.
very carefully at the offers. Council should be cognizant of the facts, but
it was just one of many of factors Council would look at as it looked through
the companies in terms of who would best servethe community.
Councilmember Klein clarified it was no moreor no less than if one of the
applicant's said it would give ten, percent of profits to the little league or
United Way each year.
Mr. Sinel said that was correct.
Councilmember Sutorius asked for an overview of how the CAO proceeded with
ascertainment and how the shopping list was determined.
Mr. Stepanenko said some of the requirements were plagiarized from the City
requirements, and from offerings made by one or the other of the
participants. It was also plagiarized from City Cable Partners' response to
the RFP, and whi ;e it was a nice proposal, it was watered down to the extent
it followed the RFP. The CAO determined it would probably be in the public
interest to have control in an entity with no leanings one way.or the other
and no reason to not dedicate the funds for pub is 'use. Other requirements
were obtained from surveying comparable communities and CAO's in the State,
what they obtained from either the franchise operator or in some other way,
and looking at the type of operation they ran. El Monte, Californt;a ran a
nice community access program, and the CAO asked them how much they utilized
for the program. The CAO tried to structure a chart of necessary personnel to
figure out what would be needed in operating capital to provide the kind of
service Cl Monte, for ex -pie, provided its community.
Councilmember Sutorius asked whether the process included community -type input
which might not have been advertised broadly as a community outreach. He
noted the chart indicated an initial items of $100,000 or 1,000 free drops and
convertees, which was a good round number. The CAO must have had some
locati,ris in mind and how many drops were required to service those
locations. For example, the number of channels and the uses to which the
channels would be put was another area where there must have been input within
the community.
Mr. Stepanenko spoke to the channel capacity and said its requirements were
seen by the educational community as somewhat insufficient, and the number of
channels offered by the bidders would be substantially less.
Mayor Levy said many of the comments that evening affected bother the Cable
Co-op and City Partners, and he suggested hearing from representatives of the
two applicants at that time. He asked each applicant to comment on its
relationship with the CAO at that point.
John Kelley, Vice President, Board of Directors of'the"Cable Co-op, said in
the beginning, there was a strong difference of opinion with the CAO, mainly
over who would control the facility and make the decisions regarding hiring
and firing of staff. He was satisfied the CAO was the best representative of
an independent community access spirit for programming the community, and thus
the organieaton and its Board were satisfied they could discharge the
responsibility fully and completely. Therefore, the Co-op changed its
original proposal, and struck the agreement with the CAO. On the other hand,
the Co-op believed in providing resources, facilities and monetary support for
an independent access organization, something needed to be balanced against
the needs of the subscriber who wool d pay for the , system, which was why their
proposal did not give the CAO everything it asked for. The Co-op tried to be
prudent, and responsible to its shareholders, and he believed the agreement
reflected sound business judgment on its part. The agreement provided for an
indeptendent voice in programming and responsible access to the programming
facilities. By the sari token, the agreement would not burden its subscriber,
and it was an`agreement the Co-op could live with as an ongoing profitable
business.
Councilmember Klein asked if the numbers referred to as being part of the
agreement with the CAO were part of the financial projections.
Mr. Keiley said that was correct.
Michel Guite, City Cable Partners, Inc., said he was winning a political
victory in a City Council Chamber, however, City Cable Partners really cared
about making a cable system that worked. For City Partners,, the, fundamental
issue was what would really work, and whether it° would make sense on a
television screen. It was a commitment of between $4,000,000 and $6,000,000
in long term support. It was about $500,000 in initial equipment and another
$400,000 several years down the road. In order to use the money; well meant
being careful who it was given to, how it was used, and to ensure everyone
worked hard for the subscriber. City Partners entered into discussions with
the CAO in good faith, but continued to be concerned about ongoing operating
6 2 9 6
9/23/85
support being used by a City Council to distinguish between cable applicants.
City Partners needed to ensure the people they gave millions of dollars to, on
behalf of the subscribers used the funds well. For that reason, they proposed
r requirement for ongoing support of the CAO whereby they ,set up in
approximately year four or five, a board to be elected by the subscribers.
The board would then decide how to continue ongoing support, whether more or
less support was needed, but the decision would be bases on the success of the
CAO as a venture.
Councilmember Klein asked if City Partners expected to reach an agreement with
the CAO before next week.
Mr. Guite did not believe so. He was not confident the CAO as a group,
welcomed subscribers having a decision -making capability in continuing
funding. He believed if it was an available alternative, and City Partners
was the cable operator, they would nonetheless welcome it. He believed it was
a good policy and mae sense.
Councilmember Klein said if the position was as suggested by City Partners,
would their financial support proximate that to which the Cable Co-op agreed,
or whether those numbers were out of the picture in terms of City Partners.
Mr. Guite believed the numbers were close, although he could not say they were
identical.
Councilmember Klein clarified the issue for City Partners was not the dollars,
but subscriber participation.
Mr. Guite said that was correct.
Councilmember Klein
type of agreement or
Mr. Guite said yes.
operator should do,
subscriber directing
asked if City Partners was willing to put that in some
letter in the same way the Cable Co-op did.
Public access was an important part of what a cable
but it was important for all to see a sense of the
what went over his own TV screen.
Vice Mayor Cobb said if City Partners and the CAO did not have successful
negotiations, he wanted to know precisely what City Partners proposed, and
where it differed so Council could make a line -by-line comparision.
Councilmember Bechtel clarified if City Partners was the cable operator, in
yeae four or five, it would have a vote of the subscribers as to who would be
the CAO. She asked what would nappen between start up and year four or five,
and whether there would be public access.
Mr. Guite said Partners would guarantee funding to the CAO based on the
amounts shown in its financial pro formas which essentially started at
approximately 1200,000 a year and went up for the first four years. At the
end of that period, Partners would seek to have three members of the community
put themselves forward and be authorized to represent the subscribers to
determine where to go next with regard to public Access and the CAO. City
Partners initially proposed that the subscriber could vote on continuing
support. ke', and the CAO members believed a direct relationship of the
subscribers simply voting yes to spend an extra dollar or two or three a month
or to have a cut back was a brutal way to deal with an entity made up of human
beings_ An alternative method would be a group of well-known community
leaders perhaps, or whoever the subscribers voted for, who would take on the
Assue with its principal goal being to represent what the subscribers wanted.
That day by telephone City Partners said it would guarantee the' CAO to
maintain a minimum funding level of no less than $100,)00 a year so the
citizens group could to assured there would be continue to he a CAO and public
access activity, but they could additionally increase the amount up to
5O0,00e a year if thatwas what subscribers wanted to do. He provided a copy
of the written proposal.
Mayor Levy commented both applicants indicated goodwill in its outlook toward,
the community access concept. He said Council considered both applicants
because of this goodri l l , but he believed goodwi l i was subject to f l uxuati on
as the years went by, and he preferred hard agreements.
6 2 9 7
9/23/85
Cuunc i lme ben Woolley said last April or so Councl l approved the Bylaws of the
CAO, which did not mean the Bylaws were in concrete because the CAO had the
power to write its own Bylaws. As she remembered the composition of the Board
of the CAO, Council strove to ensure it represented the subscribers. She know
the Bylaws were not yet adopted, and esked if a change in the composition of
the Boa made City Partners concerned the subscribers: would not be
sujfieiently represented, and therefore, it wanted the additional agreement.
Mr. Guite said:no, but when it looked at"the hundreds of public access
situations and models across the country, and which ones worked,`the key to
making a public ezeess entity such as the CAO work was accountability. He
believed they needed a way to ensure accountability was there so the goal oe
having to ultimately respond to the subscribers and please them in a tangible
way would lead to tangible feedback. The subscriber could not be heard in any
entity with carital going in the door but without accountability.•
Councilmember Woolley clarified the compositon the Board was suggested that
each jurisdiction would appoint one member except Palo Alto who would appoint
two, which accounted• for the seven members. The seven members in turn
appointed the other six.
Mr. Moore said that was correct. The seven would appoint the remaining six,
who would represent the predominent users of the health, educational
organizations and the subscribers at large.
Councilmember doolley clarified Partners wanted an additional check at year
four or five to verify the subscribers were satisfied.
Mr. Guite said one needed a check noint back and forth all the time, and the
process of feedback between the ;:eeele being served and the people doing the
serving needed to go on all the time. The more ways to make it happen, the
better.
Councilmember Renzel asked what process City Partners envisioned for
subscriber participation in the nomination and election of the proposed
governing board to be established in the five year interval.
Mr. Guite said it was not yet addressed. Their objective was to find a
fair-minded way to make it happen.
Vice Mayor Cobb said if an agreement between the CAO and Partners was not
reached by the end of the week or before Council's decision was made, then the
board issue remained something without the force of law, out with goodwill
behind it. He queried how such a board would be estabilished. He asked Mr.
Sinel how Council could bring the force of law behind the situation to assure
it happened.
Mr. Sinel said the City concluded it wanted to designate a CAO to basically be
in charge of the facilities and access capacity negotiated. The CAO would be
given a series of rules it had to abide by in terms of making access to the
system open and non-discriminatory. Council had the right to redesignate the
CAO if the CAO did function properly. It was possible the end of Council's
responsibility was to ensure the facilities, and capacity, to ensure the
organization responsible for the facilities and capacity did it in an hones,
fair and open way to ensure the way they got their funds and how . many funds
they got and whether they were healthy. If they were not healthy they would
return to the City and ask for grants. They would ask anybody else they could
for grants, but it might well be unless. Council was prepared to dedicate part
of its franchise fees, it did not have a capacity to enforce the creation: of a
board by the company that would tnen tell the company how Ouch money the
company would pay to the access organization.
Harry Hagey, .Mayor of Atherton, said the town of Atherton willlnely allowed
Palo Alto to go through the complicated procedure and thanked Council for
takingthe time to do so. The Town of Atherton would rely on Palo Alto's
judgment on the final decision. For the record, he thasnked Council for the
opportunity to present the views of the Town of Atherton City Council
concerning the award offranchisefor cable television. For some time, the
Atherton Council : was concerned with the pl anno; xtens i on policy of the two
finalists in the franchise process. Due to a c.1;nge in proposal from City
Cable Partners as outlined in the letter dated\September 19, 1985, the
3 ht
'Atherton City Council felt either of the -organizations could be awarded the
franchise without detriment to the Atherton community. lA letter from City
Cable Partners indicated they would modify the franchise agreement language
prior to that day to reflect the planned extension policy to serve all homes
in the areas of at least 40 hemes per mile. Atherton requested such language
be included in aay franchise agreement awarded by the Council. He thanked
Council for its efforts An the area and -was sure whichever organization was
chosen, each household within the franchise area would receive equal service
treatment.
Councilmember Fletcher believed the new agreement they received that evening
from City Cable Partners differed somewhat from the Cable Co-ops proposal in
that their might be charges for the homes less than a certain density. She
asked if that discrepancy was a concern.
Mayor Hagey understood the homes with at least 40 hcmts per mile would not be
treated differently in the two agreements. If there were substantial
increases in costs, it appeared to be against the intent -of the original JPA
which was to treat all the communities equally. It was one of the complicated
issues, and Palo Alto had to take all those things into consideration. He
needed to read the language before commenting further.
Councilmember Fletcher asked about the general density among the domese.1n_,.
Atherton.
Mayor Hagey believed the 40 homes per mile requirement would cover almost all
the town. He believed the. a was an averagoe of 43 in most of the areas on the
bigger lots only. There were some areas where there were many homes .more than
that and a few where there were greater than the 40 mile requirement where
they intended to charge more, which was fine.
Councilmember Sutorius said Councilmember Fletcher inquired into the area he
was going to ask about so rather than take more time on it, he alerted staff
and the applicants regarding the line extension subject he would be interested
in knowing how it impacted their proposal both from the standpoint of
construction costs and revenues and the balance of the area. He asked how
many homes at the 40 -mile limit in Atherton would be accounted for, and how
many of the homes in Palo Alto in the present proposal were phase two
locations which would be affected by the charge in the proposal.
Joseph Brooks, Consulting Economic Development Specialist, East Palo Alto, was
assigned to watching the process some months ago. In February and shortly
thereafter, they began an interaction first with City Cable Partners and then
with the Cable Cooperative. 0n July 22, Jason Burke read a statement on
behalf of East Palo Alto which outlined its concerns. As a result and
following several more meetings with both competitors, and one meeting with
both preseet, staff recommended the Cable Cooperative to East Palo Alto's City
Council, which was unanimously approved on September 16. In May, a task force
representing a broad interest in .East Palo Alto was formed, and in addition to
requesting that the Cable Cooperative be the,franchise awardeg,.he,requeete4,
close attention be paid to provisions of adequate resources as was discussed
that evening, and facilities for the community access organization. It was
important the franchise awardee give serious consideration to the location of
any facilities or equipment to the rity of East Palo Alto. The franchise
awardee should provide priority charne! access for educational institutions.
There should be bilingual sensitivity in all programming and staffing, and the
City Council . should appoint members from the service area to a cable TV
adivisory committee- to assist the City Manager in monitoring the franchise.
East Palo Alto believed it was an ongoing proposition given the level of
debate; quality of the competitors, acid the serious issues being discussed.
East Palo Alta concluded it was educated about cable during the, Zest. several
months by getting to know -both of the competitors and doing some things on its
own. As a result of several meetings, it rated the techeicasl management,
financing, etc .essentially the same. It went down to the-- timely
responsiveness of the Cable Cooperative. It had to do with what they
requestedand received, what they were convinced was a commitment not only
from the Cable Cooperative itself, but from the folks it would use in the
management and even the installation of the system, Pacific Telephone. They
concluded to recommend to its Council, the Cable Cooperative.
b 2 9 9
9/23/85
Mr. Moore said it was important to note as part of the process that Palo Alto
had a letter (on file in the City Clerk's Office) from the City of Menlo Park
which in essence stated confidence in the decision -making process the City of
Palo Alto City Council was undergoing and expressed no preferen-e about the
cable company selection.
Mr. Kelley believed Council should carefully consider what each applicant
proposed in terms of the system they would build; whether each applicant could
deliver on its promises; and the role of the community in relating to each of
the systems. The Cable Cooperative was a local consumer cooperative, with 300
membeee, and the support of a considerable number of people in the community,
but it was not a cable communications company yet. In making its proposal to
Pala Alto, it decided to work very closely with two other companies who
provided strong support for its ability to carry out the promises it made in a
p p J f h• 9 t I t pp J} The Cu -up se 1 C(: f.CU
f"u u�CU l l'alll;fl ! �C d f'rCC111Cf11, and III the d Cf1U IL:C�.
Heritage Communications because of its strength and track record as an
operating company and a multiple system operator, but most importantly for its
track recordd for delivering superior customer service. The Cable Co-op also
negotiated a lease agreement with Pacific Bell to build and maintain the
system it would provide. He believed the Cable Co-op had a unique opportunity
to seize upon the strengths and resources of Pacific Bell to build a showcase
system for the community and to ensure the system delivered what the Co-op
promised in the franchise agreement. The system was a state-uf-the-art,
interactive system, which would provide for two-way data communication
services in the cable itself. The Co-op committed over $1,000,000 in addition
to building the basic cable input structure to develop advanced services
during the first years of the systems operation. It also committed ten
percent of net profits throughout the term of the franchise to further develop
the advance services. The Co-op w uld provide 100 percent service to the
homes and businesses in the area; there would be no red -lining; the system
eou1d be built once, and with Pacific Bell's assistance, would be built
right. All staff and facilities were in the service area, And they would not
have to call outside the service area to gain additional support from other
companies. They predicted stable rates throughout the term of the franchise.
In its financial projection;, it showed its rates growing only with
inflation. If the assumptions in the forecast were correct, it would stick to
those rates. The Co-op did not assume an unreachable, optimistic penetration.
level for its basic service. If one looked carefully at the financial
projections of each comany, he believed the difference in basic penetration
rates would make the ultimate difference in whether eit per company fulfilled
the promises it made. The Co-op had the support of the community, and to have
a viable and profitable cable system, to serve the people, the people needed
to be involved. Cable Co' -op believed the management for the entire system,
not just the access operation, should be accountable to subscribers, which was
what it promised.
Rod Full, Executive Vice President, Heritage Communications Telecommmmunications
Group, said Council should make certain the financing was there. The National
Cooperative Bank made a substantial commitment, and Heritage had the
documents, Pacific Bell committed to build a system with its resources.
Heritage had the commitment for financing and the commitment on the franchise
terms it proposeu'. He pointed out there were cities all across the country
that let franchises only to find out they could not be financed. The National
Co-op Bank was stable and able to fulfill its commitments. It was suggested
it was not possible to operate the system at the level proposed by Heritage,
but in cable systems it operated used bench marks exactly as described in the
proposal. It was real, and Heritage was proud to say of was recognized by
Wall Street as one of the most efficient operators in the United States. In
being efficient operators, Heritage eever sacrificed _: customer :service.
Recently, Heritage agreed to acquire the Dallas, Texas cable television
system. Dallas co 4'icted the most °intensive due diligence any cable company
ever under went en a transfer process. Dallas talked to Heritage's
subscribers, the communities in which it operated, and the city officials, and
Heritage received excellent ratings im customer service and commitment.
Heritage intended to bring that commitment to Palo Alto. Wall Street advised
that Heritage was a responsible company financially, efficient, and would do
what it said it would. The Co-ops proposal combined the strength of a local
consumer based organization which was important. It also provided the
strength of an experienced MS0 cable operator rated high on efficiency, sound
financial performance and good customer service. It involved Pacific Bell, a
company which could not be questioned for its sophisticated high tech
6 9/ 3/85
coirtanication capability. It a i,o afforded Palo Alto as a city, an
opportunity to be meaningfully involved in the process then and in the
future. Council had an opportunity to make communications history in granting
the franchise. -The kind of -joint- venture was never proposed and he -was
excited to be part of it. •
e
Mr. Guite clarified the relationship between City Cable and Pac Bell. City
Cable Partners had a letter or intent with Pac Bell for construction and
maintenance of the cable plant for approximately three months. A draft
contract was being drawn up by Pac Bell. In that regard, Partners and Cable
III Co-op were identical. Pac Bell offered to build identical cable plants for
Partners and the Co-op at the sane base cost; i.e. Pac Bell would build, own
and maintain exactly the same cable plant from the Palo Alto originating point
to the start of the house drop for each company. pac Bell offered two options
for lease of its cable plant. One option was called the "C&P" model, named
after the model proposed by the chesapeek & rolum i c Telephone Couipaiiy for
construction of a cable plant in Washington, D.C. Under the C&P model, the
lessor paid through the cab Ie p l ant at time of construction. Th _ n he
the me The other
option called "convention lease pack" required annual payments over the life
of the cable franchise. City Cable preferred the first option to pay Pac Bell
at the time of construction at a total cost of $11,300,000. The Co-op chose
the second option and paid nothing at the -time of construction but paid an
annual lease plus a $14,000,000 balloon payrhent in the eighth year of
operation, which brought the total cost to $33,000,010. the cost difference
between the C&P model and the convention lease pack model translated into
$6.60 per subscriber every month, which helped to explain the Co-op's higher
monthly revenue requirements. City Cable Partners could go to option number
2, which would reduce its need for capital perhaps to the $8,500,000 level
e proposed by the Co-op. Partners' share -holders stood ready to provide
approximately $3,200,000 in equity to support the financing, but did not
believe it was the best option for the community. the Co-op's financing plan
was based on 100 percent debt; some of which was at a floating rate from the
Co-op National Bank and some of which was y: a fixed rate for leasing sources,
prinripally,' Bell, which meant an average interest c.st alone of $14.90 per
subscriber per month. Cable Partners' financing plan involved only 60 pe" ent
III debts, which translated into an average interest cost of $7.75 per subscriber
per month. City Cable Partners' lower interest costs meant lower revenue
needs. Lower revenue needs meant lower rates for the subscriber. Lower rates
meant higher penetration and a mere successful company. Regarding average
revenues per subscriber per month across the country and those projected by
the two bidders in Palo Alto, in Boston, which was a new build, the average
revenue per subscriber ran at approximately $27 a month. In the prosperous
Milwaukee suburbs, now owned and operated by Viacom Cable, average revenues
were $27 a month. In Mountain View, in the fourth year of operations
following the recent rate increase, average revenue recently rose from $25 to
$27 per subscriber per month. The Los Altos Cable TV system now under
construction projected $25 a month. City Cable's projected revenue per full
basic subscriber is $27 per month. By contrast, its competitor's average
revenue per full basic subscriber was $32 to $38 per month, which reflected
what an average Palo Alto household would pay if they factored out Stanford
dormitories end the negligible number of people taking universal service
only. The $32 to #38 per month projection was out of line with the experience
of the cable industry and Partners did not believe was achievable. Regarding
whether the Co-op's higher monthly prices were a result of their lower
penetration estimate, the answer was no at least for the first seven years.
The average number of homes taking full basic service projected by each
company for the first seven years were identical. The totals were $99,000
versus $100,000. The City Cable financing plan called for 50 percent debt and
40 percent equity. As the stff report correctly pointed out, Partners entire
debt portion of $18,250,000 was already in place. He introduced Kevin McMahon
III from the Bank of America, Palo Alto Office, and Ed Means feom the Bank of
America, San Francisco Investment Banking Group, who were part of the City
Cable Partners' group. In addition to the $18,250,000 from Bank of America,
they had $1,100,x'00 in equity already in place. An additional $1,000,000 in
equity to be sold to Palo Alto and JPS residents was underway. The remaining
equity would be sold as limited partnerships. TA Associates and Berg Company,
the two most respected purchases of cable television private placement limited
partnerships in the United States together have over $550,000,000 to invest.
Both offered to take up the full amount of City Cable limited partnership
units. TA Associates, was based in Palo Alto as well as Boston ano invested
on behalf of Stanford and Yale Universities. Ron Full said Partrers'
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9/23/85
relationship with its investment bankers was not binding, but he pointed out
the binding contract between Partners and Payne Weber, included in their
financial plan. $1.75 billion in capital for the cable industry in the last
seven ;;ears, while it and others sold over $400,000,000 in cable limited
partnerships in 1985 alone. Furthermore, City Cable and the individuals
behind City Cable committed $450,000 to Palo Alto at contract signing to
guarantee all financing commitments were met. As stated previously, City
Cable could fall hack onto the Co-op's financing plan to be the use of Pac
Bell for example, which would greatly reduce its need for risk capital, but it
would also result in higher costs to the subscriber. Some believed Pac Bell
was a major source of support for the Co-op's operations and he suggested even
with the strength of that corporation, Partners made up for ceelain weaknesses
on the part of a local cable system. Pac Bell's maintenance of the cable
plant from the Palo Alto signal source to the house drop represented only six
percent of operations, and it could not undertake a much larger part cf cable
Tv operations. He pointed out Pac Bell could not pick up the pieces of a
failed cable TV system in Palo Alto. The other 94 percent was performed
cxclusively by the cable operator: Within the 94 percent the largest category
was maintenance of house drops followed by customer service, and then
marketing. The Co-op's personnel chart did not provide for a single service
technician to perform the cable operator's duties there. It showed only four
customer service representatives compa'ed to nine that ` served fewer
subscribers in Mountain -View and it included Rio marketing manager. Ron
Phillips said Heritage could work with those numbers, but he suggested a visit
to the Heritage system in Concord, California. By contrast, City Cable's
ration of personnel to subscribers was nearly 40 percent more than that of its
competition, and it considered the economic scale for larger operations which
was the reason for its relationship with ViaCom in the first place.
Tom Clements, President of Foothill College, said Foothill College was
interested in working together with other public education groups and non
profit areas within service areas to develop educatinal programming for the
cable system. He was concerned over the outcome of the franchise process. He
was convinced that educational institutions in and around Palo Alto would be
the main users of access facilities and channels in years ahead, and believed
Foothill; -Palo Alto Unified School District and others would provide 50 to 100
hours of programming per week easily using one-half two-thirds of the time and
resources dedicated to public use. During the past monthhe sensed public
education had not received sufficient attention in the final cable contracts.
Geginning in winter of 1982, George Beers began working with a Wednesday
working group and several members of this grop authored the original report on
community programming,: City staff used many of its recommendations in
structuring active parts of the initial RFP. At the same time, Foothill
organized a workshop about education and cable which was held at 25 Churchill
Street. As scheduled, some drop of service areas atended and discussed
potential uses of the cable system. Out of that was developed a comprehensive
plan for educational uses which the City passed through its RFP as an
appendix. Further, Foothill met several, times with Arnold and Porter during
the initial stages of the process to discuss its interests and comments on the
franchising documents as they emerged. Foothill was convinced of the City's
interest to include the public education community in its negotiations with
the applicant. At the beginning of September, 1985 Foothill organized a
meeting with the new Palo Alto Unified School District Superintendent, Julian
Crocker, Newman Walker, Jack Gibiney and the three incorporators from the CAO
to review the public outcome of the negotiatins with each applicant. In its
view, the facilities and resources allocated to CAO during the negotiations
were limited for the size franchise area and they were concerned about the
community and how it would work within the constraints. The CAO was given the
impression to not negotiate the public, education or institutions, but their
draft charter clearly said they had not included educational needs in the
scope of their plans. Subsequently, a meeting was held with the CAO and City
staff to discuss the situation. Staff indicated they should work with the CAO
to work with each applicant to negotiate educational benefits. They presently
had a firm commitment to work with the resources within the CAO and develop a
general educational program, but did not believe the CAO could accommodate
some of the sophisticated and resource -intensive needs of a an educational
system. Each applicant concurred and were willing to meet with he and Julian
Crocker to develop the side bar agreement. Both were positive and went along
ray in working with Foothill and the Palo Alto Unified School District.
9/Z398i
City Cable Partners offered a binding agreement to: 1) initially activate ten
miles to the "B" cable for educational use and to provide a $10,000 grant to
plan installations and applications; 2) provide prodecton equipment to the
schools valued at $50,000; 3) provide additional educational channels on the
"A" cable if needed; 4) provide T50,000 for a microwave or hardware two-wya
interconnect with Foothill's main campus; and 5) work with Foothill to ensure
all educational institutions who needed them received free drops.
The Co-op, in two separate letters of intent, offered to: 1) provide
additional upstream and downstream capacity on "A" cable for education is
needed; 2) 'rovide a minimum of ten percent of their total community
programming operations for educational use; 3) provide capital for interactive
demonstration projects; 4) build �a two-way interconnector to foothill's main
campus; and, 5) work with Foothill to ensure all educatio`ial institutions
mentioned in the contract received free drops.
Both applicant's offered significant opportunities for education. Copies of
both agreements were distributed to Council for review. He hoped, since the
agreements were negotiated after the fact and as a side -bar agreement, City
staff would incorporate whatever parts were legally possible into the contract
finally signed with the winning bidder. He believed leaving something as
important as education to side -bar agreements was inappropriate and
potentially dangerous. He knew the technology would help to better serve the
constituency in the years ahead He pledged their -commitment to work
hand -in -hand with the CAO, school staff, Council, and City staff to ensure it
happened.
Julian Crocker, Superintendent of the Palo Alto Unified School District
(PAUSD), represented the interests of the PAUSD relative to installation of a
cable television in the Palo Alto service area. All the district schools and
centers, 20 in number, were within the proposed service area. He shared the
view expressed by Dr. Clements about the needs of public education and also
had reservations concerning how adequately the needs were addressed in the
current proposal. The PAUSD discussed concerns with City staff, the CAO, and
with both bidders. Their interest was to ensure the cable system approves by
the City recognized the needs of the institutions serving the children and
young people in the community, then and in the future. He asked Council to
insure the following in addition to the current proposal: 1) At least one
interactive or upstream channel be allocated fc- use only by public education
when the system was activated; 2) The equipment provision be made for the
exclusive use of the PAUSD for the remote prod -action of programs, specifically
two porta-pace and editing equipment; 3) All PAUSD sites be included as drop
locations with interactive cable, and there be a provision to connect
additional locations,• i.e., classrooms within the schools, within a site, at
cost. The PAUSD supported the concept of the CAO managing the non commercial
uses of cable, but asked that the final membership of the CAO incluc'. a
significant number of representatives from the public education area. He
believed adequate representation on the CAO would provide for the needs of
public education for Palo Alto's children and youth, then and in the future.
Michael Kimball represented the San Mateo County Community College District
which o6ned and operated Channel 60 KCSM TV, and the growing portion of its
350,000 viewers who resided in the central mid -peninsula area. Their
television channel was devoted primarily to telecourse, and they broadcasted
open circuit from Mt. San Bruno with a 1,500,000 watts of power. Because of
certain features of the UHF signal, it was important they and similar stations
be included in the cable service contract to be awarded. Public'Broadcasting
System (PBS) stations were not interchangeable parts, their station was a PBS
affiliate, but the majority of its programming during the day consisted of
credit courses, and college transferable credit offered primarily over
television. Student participation involved viewing video segments, reading
college level textbooks, performing examinations and doing projects as
directed by an on -campus instructor, and. interaction with the instructor
through telephonic office hours, orientation, mid -terms and finals. At the
conclusion of the activity, students received two or three college
transferable credits. Access to the opportunity was particularly important
for homebound students. The typical student at the College of San Mateo for
telecourses was older, less mobile, often disabled or homebound for another
reason. He believed access to the service was particularly important for Palo
Altos constituents. He requested, as Council awarded the contract, to
provide in the contract for maximum encouragement .to the franchisee to observe
the needs of distant learners.
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9/23/85
Isabelle Valdez represented the Interagency Communications Network (ICNET),
and Northern Mid-Peninsual Planning Committee although it was the parent
organization to ICNET. She supported the City staff recommendation to the
City Council to grant the cable TV franchise to Cable Co-op. She was
enthusiastic about the recommendation because the goals and philosophy of
Cable Co-op were compatible with those of ICNET. ICNET was a community
telecommunications project, .chose long-term goals were to facilitate
collaboration and coordination of services amoung the growing number of human
service providers ane organizations in the mid -peninsula with the community at
large. It's second long-term goal was to provide -access to a large growing
number of public interest ddta bases. ICNET hoped to achieve those long-term
goals by providing electronic mail communication capabilities, electronic file
transfer, data base access and search capabilities, telecommuting, community
bulletin boards, forums and other electronic needs. ICNET was composed of a
consortium of agencies and directed by a board who represented a wode
cross-section of population segments and mid -peninsula cities. Among its
board members were on-line participants by representatives from the Senior
Coordinating Council of Palo Alto, Inc., Peninsula Volunteers, Little House
from Menlo Park, Stanford University Hospital, Palo Alto Medical Foundation,
the Community Development Institute from East Palo Alto, Mid -Peninsula Health
Services, Alexian Services Corporation, the VA Hospital and others. ICNET
recently ' finalized its testing period using computers and the rublic
Telecommuhication Network phone lines with the participation of over 20
institutions. Currently, it sought funding for a three year demonstration
project to explore, among other :.rings, the use of correctional cable to
interconnect the residential area. Cable Co-op ownership and structure would
allow ICNET the opportunity to participate in the decision -making process.
Cable Co-op's well-known commitment to the local community was reflected in`,
several components of its proposal, i.e., the commi tmet to provide not only
high -quality entertainment programming, and advanced data and video
communication services. Cable Co-op committed to make available a general
fund to feed, demonstrate and develop community projects,' -in additional to the
500 drops and converters to be placed at institutions determinedby the City
which she hoped would also be members of ICNET. The Co-op was committed to
serve the whole area regardless of population density; to build a two-lane
drop with two-way cable system which would broaden the horizon of the disabled
and homebound community, and the human service sector that served them; to
become a successful, sound, self -supportive community service.
Frank Cady represented the Standing Committee for the Arts and Sciences which
was a citizens advisory group to the Director of the Division of Arts and
Sciences in Palo Alto, comprised of eighteen members. The Standing Committee
wanted to ensure a local origination channel to provide ample access to the
cultural and artistic life of the community. He pointed out there were many
writers, painters and sculptors in the community, in addition to the Division
of Arts and Sciences with a strong cultural center and community theater
operation in addition to the children's theater, junior museum and Baylands.
With the talent in Palo Alto, in conjunction with the Division of Arts and
Sciences, it was reasonable to expect, within several years, there would be
ample arts programming. At, its September 17, 1985 meeting, the Committee
voted to support the Cable Co-op's bid because it believed it would best serve
the'-- needs. Both bids were technically viable and they were unable to
discern any significant differences in the financing. Their decision was
based primarily on two factors. First, was what they believed was the greater
responsiveness of the Cable Co-op to their needs and the responsiveness, not
only to them, but to the CAO as reflected in .the agreement worked out between
the Cable Co-op and the CAO.
Regarding the latest proposal from City Partners, they believed it might be an
attempt to make the arts arts, program and community access programming a
popularity contest. Lastly, the primary reason for their support was the
ownership issue, and they believed the Cable Co-op offered the strongest
chance for local . control, in an era of deregulation, to meet the needs and
desires of the local arts community. On November 2, the Standing Committee of
the Arts would hold its annual arts forum, and would have workshops and
explore the possibility of the various uses of cable TV for arts programming.
Judith. Dresch, represented the Manhatten Playhouse, which had operated for
almost 22 years and served for many as a educational cultural organization.
Through the years, it tried to bring the community not only entertainment, but
educational and cultural plays, concerts, opera, andmanyplans which many
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9/23/85
other the thers in the arca would not touch and classics. Tts last play wes
Master Harold and the Boys which dealt with the situation in South Africa.
She believed the community needed an orgainziation like Cable Co -p. It seemed
to represent the people of the community, and she believed it would be
responsive to its educational and cultur&l= needs. She believed it was
important to talk about what the Cable -Co-op or City Cable could do for the
community educational needs. City Cable Partners seemed to dwell on the
monetary end of the system. Council heard a lot of pro and con mainly good
reports about the Cable Co-op, and she urged a vote to benefit the whole
community.
Ann Evans, Mayor of the City of David said the City of Davis long looked to
the City of Palo Alto for \its leadership in many areas. She had tremendous
regard and respect for the decision Council was about to make, raving made it
with her Council three years ago. Her purpose wasto address the Council on
the public policy concerns three yearssince that detision. In December 1982,
the City of Davis awarded its franchise to a cable cooperative, and started
the first Urban Cable Cooperative System in the country. It had an excellent
track record with cooperatives in its community, was well acquainted with
them, and believed the Cable Co-op of Palo Alto would also he successful.
Davis' needs were difference than Palo Altos's but their Co-op did everything
they said they would with respect to infrastructure and the franchise
agreement on a timely basis. The City of Davis looked fur ae good working
relationship with the cable franchisee. If one could not call and get needs
and questions or constituents' needs and questions answered, there were
problems because once the franchisee had what it needed, one could only rely
upoil their goodwill. the City of Davis had access to decision -makers, both
management and policy, at anytime, its questions were always answered as were
the Council's on a timely ,basis, and she believed it was largely because it
was structually built into` -the cooperative system. Their Council received
almost no complaints, the largest issue before them was the type and
configuration of the "little green things," which were part of the
state-of-tne-art system, and they were able to work it' out. Community
programming was excellent, they had staff, and live taping. The Davis'
Cooperative fulfilled its commitment in every way, and more importantly, it
had not reneged on any aspect. The City of Davis was protected by a review of
performance built into the franchise agreement. Its first review was next
year. The City of Davis gave the franchise to a business and not a
philosophy. The business was corporately structured to be responsive to its
users. . The City wanted the protection built in, and did not want to rely on
the word of someone who when trying to get a. franchise would say just about
anything. The City of Davis awarded the franchise to a communications system,
not an entertainment system. It was conscious of the future :possibilities
with the system which made it more imperative to have the communication system
user -owned, not investor -owned. The City of Davis and its users were
satisfied with their Cable Cooperative,
Councilmember Fletcher said Council received a letter from one of the bidders
regarding the Davis Co-op system, which said, "When projecting the projected
operating expense:, we adjusted for inflations, the system into the depths of
spiraling year five of operation and there was no recovery. Time has borne
this out, penetration levels projected by the Cable Co-op and Co-op Bank have
not been achieved and revenues are substantially below those expected, the
company is reported to experience cash flow short falls beyond the budget."
She asked for comment.
Mayor Evans responded she was on the Council Subcommittee which was liaison to
the cable system. To her knowledge, the Cooperative was meeting all its
financial obligations. It was successful in its day-to-day operations,
certain penetration levels were ,lower than expected, certain others were
higher than expected and they rearranged marketing plans to accommodate for
that. With regard to anything that could happen to the system, she referred
Council to their City Manager or banker, but she did not share the concerns
expressed in the letter.
Counciimember Klein referred to the responsiveness of the Co-op in Davis and
whether users participated in the management of the system. he was concerned
the Co-op situation had the appearance Of democracy, but not the reality; that
people who were really the sponsors ended up being on the board and there was
really no change except to those appointed by the ones who were originat and
became self-perpetuating.
6 3 0 5
9/23/85
Manor Evans said the City of Qavis' experienee was not the rubber --stamp boar=d
and its experience also was same changeover. It was a voluntary position,
people had other commitments, but Davis was surprised. Its community was used
to cooperatives and people serving on boards.. The City of Davis had a high
caliber of interests on the particular board, and she believed the turnover
was healthy.
Councilmember Klein asked whether there were any contested elections, and aout
the voter turnout in selecting the directors.
Mayor Evans contested, the system was in its third overall year since December
of 1982. Voter turnout was not as high as anybody would like, but there was
participation in the annual meetings which was where the original vote
occurred and it was also by mail. The ability to notify people as to when the
election occurred and how one participated was excellent. The greatest area
of participation was in the community access system. The City of Davis was
working to return some of its five percent, franchise fee. Davis also wanted
to core ribute to increased community access which was where the greatest
participatir was. There was a good spirit in the town about being a member of
the community cable cooperative, and from all political spectrums in town, it
had representatives on the board. It did ones heart good to hear the various
spectrume stand up proudly and talk about the democratic representation they
wanted to provide on the cable cooperative and the philosophy of the
cooperative as one they embraced.
Councilmember Klein asked about what the average subscriber paid for service
in Davis.
Mayor Evans said the average was $24 and added to it usas the $4.95 service
fee or equity investment. Equity investment was made by the memebers, and
service fee was made by the don -member.
Councilmember Klein asked about the penetration with the percentage of homes
passed subscribed.
Mayor Evans said the City of Davis was influenced more than Palo Alto by its
student population so the penetration rate in the summer was lower than it was
in the other nine months; _f the year. As of last month, the penetration rate
was around 33 percent. It had been as high as about `40 percent. The
penetration rate in single-family homes was higher than anticipated, the
penetration rate among the student communities was lower than anticipated.
Stewart Plock, 917 El Cajon Way was a member of the Board of Directors of the
Cable Co-op since its inception two years ago. His comments would focus on
the Cable Co-op's entrepreneuring approach to management, its commitment to
private and public schools in the service area. The Co-op Board had the
entrepreneural zeal and persistence to build a successful and profitable
service company. Its business planning, marketing and advertising,
negotiations with prospective partners and suppliers, soliciting of community
sepport, and success in raising fends for development and operation, were good
examples of its entrepreneuring track record to date. The board was decisive
while sensitive to desires of a wide range of potential subscribers, with the
solid marketing technical administrative backgrounds represented on the board,
it would continue to successfully manage the direction and performance of its
business partners. Werking with its cable research foundation, Heritage and
Pac Bell, it would bring basic as well as advanced services to its subscriber
base. At the same time, as entrepreneurs, _they recognized the importance of
continuing to invest in the physical plant while it maintain ed an aggressive
growth plan for the franchise. Its board was comprised of people from
business, both large and small. Regarding how Co-opboards got teastituted
and the competition, he was on the transitioncommittee to sustain some of the
members into the next couple of years of operation of the , cable franchise.
Its board members had three-year terms, and several fibers whose terms were
expiring were returning so there were old and new members. There was a
rotation pattern. Regarding the needs of the educational community4- he
stressed the Cable Coop's commitment to serve the public and private schools
in the service area. He joined the Cable Co-op with a interest in serving the
needs of the schools. He had three students in local schools and personal
interest in seeing Palo Alto's cable franchise deliver hick -quality TV and
computer services to all schools on the peninsula. As an active member of the
Co-op committee that would serve the needs of 'educators, he ° would help the
6.3 0 6
9/23/85
1
franchisee obtain and offer programming and software already in use in other
communities in other regions of the world and the United States. He planned
to assist in creating and implementing educational programming experiments in
the school district and local colleges. With the paid and volunteered
resources the Cable Co-op could bring to bear on important projects, they
could make things happen in the mid -peninsula that had lesser degrees o:'
success elsewhere. One such experiment might have a positive impact on the
use of school facilities and the closure issue. He believed through the use
of interactive cable TV and computing services, schools could offer a wide
range of desired course electives. One of the major reasons for merging
schools in the past was so the districts could continue to offer several
quality electives. Technology presently being offered by the Caulk Co-op
would give administrators and teachers a cost-effective method for delivering
those needed courses. The Cable Co-op was and would continue to be run as an
entrepreneurship; and one of its highest priorities was to serve the needs of
the schools.
Frances Price, 764 Marion Avenue, was a member of the Standing .Committee in
the Arts and Sciences. She represented the music area, and access for
musicians. Music ensembles were important and she believed the Cable Co-op
was committed to access from the community.
Duane Bay, 2261 Columbia Street was .a 23 -year resident of Palo Alto, and
currently the Superintendent of Schools in Mountain View, California. He was
on the Board of Directors of the Cable Co-op, and volunteered to serve a
number of years ago because of his concern about community control and
educational access. He was not completely familiar with ,the franchising
agreement with ViaCom and Mountain View four years ago, but in`the four years
since the franchise agreement was received, the services to the public schools
in Mountain View were zero. He tried a couple of years ago to get something
going with them, and it took three months to get a response. Although
Mountain View had drops in each of its scho^ls, it took much more than that to
make anything happen. A lot of money was necessary before anything could
happen with public education and cable television. As a member of the Cable
Co-op Board, he sepported actions to bring about access to public education
and to the general community in the City of Palo Alto.
Edward Arnold, 1454 Hamilton Avenue, said he was not the Ed Arnold who wrote
letters to the editor. He was a member of the Advisory Board of the City
Cable. He suggested Council satisfy itself on two basic factors, financing
and management. The staff report, as reported to the press, dealing with
financing, said each e!escriber could purchase up to $300 worth of shares,
total number equity `:gas projected to exceed $1,000,000 in 1990 and ;3.8
million in 199:1. He suggested Council look carefully at some figures Mr.
Schmitt would submit. In Mr. Schmitt's opinion, the equity would be extremely
thin at that time. national Cooperative Bank would loan cable $8.5 million in
years one through three and an additional 20 percent in contingency funds.
Staff commented Cable Co-op's primary financing approach was a highly
leveraged combination of Pacific Bell and debt financing from the National
Cooperative. Bank. Without additional equity, however, .contingency funding
arrangements would further increase and an already highly leveraged financial
structure. Pacific Bell, in its lease agreement, indicated a willingness to
reschedule its payments up to 30 percent for one year. Cable Co-op had higher
revenue requirements than City Cable due to higher construction and financing
costs and a higher inflation projection. The Co-op's revenue plan called for
relatively low. penetration with relatively high rates and revenue per month.
Regarding management, he suggested thoughtful consideration of management
depth and experience. Compare Ed Parker, Israel Swizer and Michel Guite's
training and experience with the other applicant, and financial backgrounds of
City Cable Advisors Alan Anderson and Carl Schmitt. Since the ultimate
responsibility rested with the Palo Alto City Council, it should be assured as
to the competence of the people it chose to do the job.
Doug MOunt, 631 San Benito Avenue, Menlo Park, was a member of the Cable
Co-op. At its first meeting in 1981, he attended in 'the hopes the cable
service would be extended to the Menlo Park area. The Cable Co-op was formed
to provide a technicological advanced communication service to a diverse
community including Atherton, Palo Alto, Menlo Park and Stanford University.
To involve the widest range of community involvement, Cable Co-op held open
public meetings at 7:30 on Mondays, sometimes once -a -month, sometimes
twice -a -month since 1981. It attracted a wide variety of individuals from
throughout the service area. Many individuals who dropped by the meetings to
6 3 0 7
9/23/85
check it Out; returned time and again. Cable Cc -op asked its first group of
volunteers to formulate the structure of a community -owned and operated cable
communication system. It was recommended and adopted by the committees the
Cable Co-op customers be given the opportunity to become members and
investors. The $10 lifetime membership included voting privileges to elect a
Board of Directors to create an annual operating plan which included quarterly
reviews. They were open meetings designed for member input. The elected
Board of Directors selected Heritage Communication along with Cable Co-op's
Executive . Director Lisa Van Dusen, and her assistant. Arleen Muleno to
implement the annual plan. A lot of emphasis was placed on developing
computer services for the cable system. Cable Co-op held annual meetings and
community get togethers, such as Squire Hop celebration, to introduce
themselves to the community. Hundreds of community members chose to become
paid members of the Cable Co-op to make a community -owned and operated cable
co-op a reality. The loyal and enthusiaticmembers of the Cable Co-op were
the people who went to the City Council meetings over the last two years to
support the Cable. Co-op effort. In the era of deregulation, the Cable Co-op
urged the members�of the City Council to select a community -owned and locally
managed cable communication service, Cable Co-op.
Sarah Taylor, 559 Mercy Street, Mountain View, was a producer and director.
She was concerned about what was censored. ViaCom would not let her work on
her film at ViaCom because it dealt with the homosexual lifestyle and how it
affected the children. ViaCom did not believe it affected the Mountain View
communities because it was not made in Mountain View. She was told to edit`it
in San Francisco. She was a resident of Mountain View, and had no access to
San Francisco. She believed it was important for the Council to deal with the
issue of censorship and figure out what was important, and relevant to the
community. She believed there were many social issues parents needed to deal
with.
Linda Ballard, 729 Colorado 'venue, managed Bob's Donuts in Palo Alto. She
through a party open to the public and was introducted to City Cable by a
mutual acquaintance. A representative of City Cable Partners discussed
helping them with publicity and flyers and, to get the ball rolling so the
public could get to know about them. Because a movie was shot by ViaCom in
their donut shop and since Palo Alto did not have cable, she wanted to give
everybody in Palo Alto a chance to see it. Nothing more happened, and they
had to call newspapers and send invitations to reporters, etc. All the
notices in the newspaper were her effort and all promises or partial promises
made to her from ViaCom were never done. If ViaCom could riot keep a promise
to a small business, she did not see how they could keep a promise or
commitment to the entire community. She met and talked with Cable Co-op
representatives, and to her they seemed like sincere, reliable and honest
people. She had a child and wanted to know that if she switched on the set,
she would have control over what she watched.
Bob Mack, Greenhouse II Condominums on San Antonio Road, Palo Alto, was a
resident of Palo Alto since 1960. He spoke on behalf of the Cable Co-op. He
was involved in cooperative enterprises for about 40 years and was involved in
private enterprises in a profit making nature for about the same lengthof
time. From the point of view of public opinion, he believed the philosophy of
Cable Cooperative was better than the philosophy of investor -controlled rather
than a consumer, private enterprise. He emphasized the credibility of who
could best represent on an ongoing basis the wishes and desires of the
community as a whole, would be a group controlled by the uses, not the
investors; a gropu controlled by the people who were the customers of the
system, rather than people who were financially inclined, and, therefore, used
to slightly different judgment as to what the users wanted, which tipped the
scale in the favor of a cooperative rather than an investor -controlled
enterprise. He believed 'some of the comments by the Cable Partners people
that evening were some of the best arguments in favor of Cable Co-op.
Donald Wilkins, 2142 8eliview Drive, Palo Alto, was not a member of either of
the biddrs, but urged Council to select Cable Co-op to operate the cable
television franchise. Council was currently dealing with issues that were the
culmination of that which ,was "planned ten, fifteen and twenty years ago. The
staff raconmrendationi to consider Cable Co-op was fitting. He hopped Council
would select Cable Co-op because in five years, they would be looking at cable
television and considering if the wait was worth it. Television was a tool of
communication, but was strickly one dimension. Cable Co-op said the
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possibility existed that a cc unity -controlled cable television could serve
as a two-way process of coalwiunicdtion. He believed.. the possibility would
better serve the needs of his children, their children and the future.
Claude Barber, 3379 Bryant Street, Palo Alto represented an organization
called the Public Access Theater, (PAT). He was an actor, producer, and long
time theather buffs Anyone who believed they could fill five channels of
public access with any kind of programming at all needed to produce one once.
PAT was organized with the sole purpose of giving the artistic community,
writers, singers, dancers, etc. a platform from which to operate. It was hard
to get creative people to go out and do something. Palo Alto was going to
supply a few more possibly than Mountain View, but he did not think Council
would be overwhelmed. He believed public access was completely
overestimated. There was nothing that went on in the television set up that
could not have more impact than public access programming. Presently, public
access was small. There were only a.few producers around, and they ony did a
few hours a year. Home Box Office were the ones who would pay the bills, and
public access was going to be there provided the people wrote their checks out
every month. Without a healthy, _growing company and concern for doing the
cable casting, there would not be any public access at all: He had no doubts
Cable Co-op would do what they said, they would provide public access
facilities. Unless the cable franchisee was economically successful, he was
oat of the public access business.
Elsie Beagle, 1319 Bryant Street, was disconnected from either franchisee, but
was an ethusiastic supporter of City Cable. She was asked to present the
perspective former Councilmember Gary Fazzino. He hoped to be at the meeting
to make his remarks in person but distance and a busy schedule made it
impossible. Much of his time was now being spent in the MBA program at the
University of Washington where he was building on his experience a:, Finance
Chairman of the Palo Alto City Council. For that reason, he appreciated the
importance of the financial issue as the Council made its decision on cable.
Seve-al years ago when Council took up the issue of cable television, it
considered the possibility of a city -owned cable system. Council made it
clear it did not want to place the City at ri* financially. Consequently,
sound financial information was a top priority. When the staff and
consultant's reports returned, it was the recommendation for municipal
system. However, it was also clear to Council the staff started with a goal
of municipal ownership and attempted to back it up, but supporting financial
information was inadequate despite large expenditures for the studies, which
was primary reason the staff recommendation was rejected. Three more years
were spent in review and evaluation and once again Council received what he
believed to be inadequate financial information. He understood the basis for
the financial analysis was an apparent review by Price Waterhouse. After
reading the financial analysis and the staff report, it appeared to him they
only took a cursory look at best. Simply glancing at a balance sheet was not
enough to ascertain financial condition or the potential of a business.
Council needed to know which company had the experience, the track record to
prepare business plans and financial projections which reflected the realities
cf reoperating a sophisticated cable communications business in the market,
and which would be the most serviceable entity offering the City it's own
financial structure, reasonable rates and good sservice. Judgment must be
based on the ability to perform. He was also concerned by . the high fees the
City paid Arnold and Porter. In addition, he understood there were some
unanswered questions involving the relationshipo between Arnold and Porter,
Price Waterhouse and the National Cooperative Bank which was also troubling.
He urged Council not to rely on staff to make the decision because of they
were wrong, Council would take the responsibility. Council needed adequate
financial and technical information to ensure a cost ,effective, technically
sound system that would not cause the Council embarassment. In a few years,
citizens might pay exorbinate rates for inferior service while the Council
sought to discuss how to bail out of an underfinanced system.
Mayor Levy said Council would resume ,discussion of Item 11 on Monday,
September 30, 1985. He suggested Council put their questions in writing to
staff and through staff to the applicantsso they might be prepared for any
specific questions.
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ITEM i11A (OLD ITEM OR' FOOTH1! I S FIRF FACILITY(SAF 4-5/PAR 2-15) (CMR: 522:5)
Mayor Levy said he removed Item i8 off the consent agenda because he was
troubled by the cost of the project as related to the cost Council u.uthorized
of $123,200. CMR 522:5 indicated Council was authorizing an additional amount
of up to $15,000 for exchange orders and additional work. He was not clear as
to the amount or the source of the funding.
City Manager, Bill Zaner, said that Mayor Levy was correct; the budget
authorized by Council was approximately $123,000. The current responsible low
bidder was $125,000, so the entire budget allocation was used up plus a few
dollars just with the base bid. Staff believed two other parts of the project
needed to be done, Alternates 1 and 3, which could be included in the funds
Council allocated at that point. It was staff's recommendation that those be
covered by using funds allocated to other projects Aich would not be done at
that time and also by absorbing some of those costs within the operating
budget itself. He added that the project had been "languishing" in the
Capital Improvement Program for about four years. Staff prepared a Foothill
Fire Management Plan in 1980, xhich Council approved and cne of the key
elements was the seasonal Fire Station. One of the problems staff ran into
every year the project was delayed, it ended up costing the City more money
and the project had been -.'elayed two or maybe three times, in the last round
just going back and forth between Council and the ARB. Each time that was
done,the cost of the project tended to rise. He recommended Council award the
contract for $125,899 and charge staff with the responsibility, as it had in a
number of other cases, of finding the funds within the existing budget to
complete the project as Council indicated it wanted it done. Staff would not
cause other services to suffer but would do some inventive work at the
administrative level as. a way to get the project done within the budget
Council provided without asking for additional funds.
Mayor Levy asked about the total cost of the project with the two add ons.
Mr. Zaner said the engineers total cost estimate was $137,000. If the two
alternates that the then responsible low bidder had given were added, that was
another $65,000 or $68,000. When the City did the work itself there were some
savings as the City did not end up paying the overhead the contractor paid.
They did not pay for the profit as it got done within the City's own forces
and that cost was cut. He did know hoe much the material cost was nor how
much the labor would be. In any event, the City would not anticipate
returning to Council for an amendmet to the budget, and would not take any
funds out of unappropriated reserve to complete the project.
Mayor Levy clarified staff was asking for a budget amendmet of $125,000.
Mr. Zaner said no. Staff was not asking for any budget amendment at all.
Council had $123,000 and staff was saying that; while that project exceeded
that amount, staff could find the funds within the existing operating budget
tc complete the project without having to return for a budget amendment.
Funds were appropriated. Staff did not need to go to the unappropriated
reserve.
Mayor Levy expressed concern about being so far over budget, but took Mr.
Zaner's word that staff could find the funds by judicious administration
without suffering in any area.
MOTION: Mayor Levy moved, seconded by Renzel to adopt staff recommentation
to:
1. Authorize the Mayor execute a contract with Schmaltz Construction,
Incorporated, in the amount of $125,899.
2. Authorize staff to execute change orders to the contract of up to $15,000,
AWARD Of CONSTRUCTION CONTRACT
SCHMALTZ CONSTRUCTION INCORPORATED
Councilmember Woolley asked staff what the original estimate was that Council
turned down.
Mr. Zaner believed it was close to $150,000 for the structure itself.'
Councilmenber Woolley clarified the $160,000 was just the structure and did
not include the landscaping.
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She knew knew they had nu firm estimate for the cost of the work being done by
Public Works, staff and it sounded like they were going back to just about
that figure which Council turned down originally, although it was being
absorbed in house.
Mr. Zaner did not have the number with him as to what was included in the
$160,000. His recollection was that the sturcture was substantially more
expensive than the one seen there.
CouncilmemLer Sutorius said his recollection; were subject to the same
checking that the City Manager referred to, but he recalled they talked at
that time of $160,000 as the estimate for a site -built facility and that it
included the landscaping and site preparation and irrigation. His
recollection was, and he believed he was correct, that Councilmembe Klein
raised the issue about the cost questions and that it was very thor:iughiy
discussed at Council and the concept of the prebuilt facility wa introduced
with the lower budget direction at that time. He believed Councilmember
Woolley was correct they were approaching what was quoted as the probable
total cost of a site -built facility including those features. In fairness,
with the passage of time that $1609,000 would have increased somewhat, perhaps
proportionally, as in the case of the prefabs.
Councilmember Klein said, Council's discussion was only nine months previously
and inflation had not run all that significantly so it could not be said there
was a huge increase in inflation which raised those prices significantly at
all. He asked staff if the cost for add-ons Items 1 and 3 was $60,000.
Mr. Zaner replied yes. If Council looked at the last page of the bid summary,
Alternative No. 1, the apparent low bidder at present, which was Schmaltz
Construction, was quoting $65,000, If one took the Alternates 1 and 3 from
the original low bidder -- the one w'io could not get his bonds --his figure was
$25,000. He said it was not uncommon for bidder to load some parts of the bid
and unload others, Aso it was hard to tell what the amount was, which was why
he did not want to quote a staff figure because he was not sure what it would
cost, but obviously it would be somewhere between the two.
Councilmember Klein said if Councilmember Sutorius' was correct, if those
numbers were added to the $125,000, they were at $185,000 or $190,000 which
meant they were above what Council discussed just nine months ago and that
concerned him.
Mr. Zaner indicated the engineer's estimate on the bid sheet showed the cost
was about $13,000 or $14,000. That was why he was very hesitant about quoting
a figure because the bidders tended to load one item and unload another and it
was difficult for staff to tell where they were putting in their profit and
where they were not putting in their profit. That was the nature of the
bidding game.
Councilmember Klein continued that was fair enough, but getting back to the
idea that the City was going to find the resources and do it elsewhere in the
budget, that was still real money. If Council took the staff engineer's
estimate, $13,500 and added it to $125,899, the total was $140,000.
Mr. Zaner said that was correct.
Councilmember Klein said that was at least $20,000 under where they were nine
months ago, which was at least palatable.
Councilmember Bechtel did not like spending that amount of money anymore than
the rest of her colleagues, and yet, as she looked at the alternatives, she
believed staff did a good job of getting the simplest plan for a facility as
possible. They had certain basic requirement. Council's choices were; to
turn it down altogether, to delay the whole project by six months and rebid,
and she did riot believe that was appropriate. Council had already delayed the
project for at least a year-and-one-haaf and it was worthy of moving ahead at
that point.
MOTION PASSED unanimously.
Adjournment at 11:50 p.m.
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APPROVED:
6 3 1 2
9/23/85.